September’s cost-cutting efforts at Bruker Bioscience, which included the layoff of 60 of its 1,200 employees and other restructuring moves expected to save $6 million a year, were apparently not enough, CEO Frank Laukien said last week in the company’s quarterly conference call with analysts and investors.
“We are working very hard — not only on cost cutting and restructuring that we will drive further, as far as it takes, but also, of course, on driving revenue and improving our gross margins,” Laukien said. “There is not a magic bullet or a single action that will drive this, but many actions that go hand-in-hand in driving and growing our business as taking the necessary expense control and productivity steps.”
For the quarter ending Sept. 30, Bruker reported total revenues of $66 million, a 5 percent increase over $63 million in revenues for the year-ago quarter, and lowered its total costs and operating expenses to $66 million, compared to $69 million in the year-ago quarter. However, the company’s costs and expenses of $201 million for the year to date are ahead of costs of $197 million for the first nine months of 2003.
Laukien did not specify what steps the company will take in its next cost-cutting moves.
“We will go beyond [what was announced in September], and we will have an announcement before the end of the year,” he said.
Bill Knight, the company’s new chief financial officer, said that Bruker would be examining its working capital expenditures as well.
“We are looking at what we have tied up in working capital,” he said. “That will be a focus on the next few quarters — taking a hard look at receivables and inventory and bringing those amounts back to an industry-standard level,” he said. “It clearly has our attention and we will be looking at it the next few quarters.”
Bruker is expecting revenues of $72 million to $78 million for the fourth quarter — a sequential quarterly high for the company, which in July 2003 was organized as an umbrella over the operating subsidiaries Bruker AXS and Bruker Daltonics. Bruker AXS provides research tools based on X-ray technology, while Daltonics is a provider of mass spectrometry-based tools.
For 2003, Bruker Bioscience saw 18-percent year-over-year growth in revenues, posting $260.6 million in receipts compared to 2002’s $220.6 million. With revenues of $198.8 for the first nine months of 2004, the company is on track for revenues of between $270.8 million and $276.8 million for the full year — and 4 percent to 6 percent year-over-year growth — if Laukien’s revenue projections for the fourth quarter prove accurate.
“We believe we have the drivers in place for a return to double-digit top-line growth in 2005,” Laukien said.
The drivers, he said, are new order backlog and a high booking rate.
“Our new order bookings continue to show us that our end-user markets are healthy and our products are competitive,” he said.
That growth, however, was more fully reflected in the AXS subsidiary than in the Daltonics business for the first nine months of 2004, said Laukien.
New order bookings for AXS were 20 percent higher than for the first nine months of 2003, with an 11-percent increase in revenues over that period, while Daltonics posted “more modest single-digit growth” through the first nine months of 2004, he said.
For the third quarter, revenues for the Bruker AXS business rose to $32.3 million — a 20-percent increase over $26.8 million in the third quarter of 2003. Revenue for Bruker Daltonics, however, decreased 6 percent to $34.2 million, from $36.3 million in the third quarter of 2003. Operating income for Bruker Daltonics was $1.8 million for the quarter, compared to $1.6 million for the year-ago quarter. The AXS segment had an operating loss of $775,000 compared to a loss of $6.9 million for the year-ago period.
For the nine months ending Sept. 30, Bruker Daltonics derived 72 percent of its revenue from life-science mass spectrometry systems, 9 percent from substance detection systems, and 19 percent from after-market sales, the company said.
In October, Bruker Daltonics rolled out its high-end ultraflex II MALDI-TOF and TOF/TOF mass spectrometer and AnchorChip MALDI target for gel-based and LC-MALDI-based expression proteomics applications.
“We think both of these will begin to contribute to our revenue rather quickly,” Laukien said.
Additionally, the company expects to post some $2 million in fourth-quarter revenues for orders not fulfilled during the third quarter because customers were not ready to accept the systems, as well as products announced at the Pittcon and ASMS tradeshows that did not being shipping until the middle of the third quarter, Laukien said. The company recognizes sales as revenue when a customer accepts a product.
NBC Products Growing
Laukien said the company’s products for nuclear, biological, and chemical detection offer growth opportunities. Bruker is currently competing for three contracts — two in the US and one overseas — to provide portable handheld detectors. The US contracts are for the Department of Homeland Security and the Department of Defense.
“We hope to hear the homeland security decision in 2005, but the Department of Defense decision is more likely in 2006,” Laukien said. “Our base business in the [nuclear, biological, and chemical] and homeland defense and security business continues to be one of the nicely growing areas of the company.”
Still, he said, the company does not include potential contracts in its forecasting.
“If they come through, they are gravy for us, but they are not part of the base business plan,” he said. “We don’t know in what quarter an order like this may fall, or even if we will get this order at all. But we are certainly one of the very uniquely qualified companies that have this type of instrumentation.”
Homeland security and defense sales make up approximately 5 percent of Bruker’s revenues, Laukien said, but could grow toward 10 percent and higher.
“Obviously, it will not dominate our business, but we believe that this will be one of the faster growing parts of our business in the next few years from the trends we have seen recently,” he said.
Bruker reported a net loss of $952,000, or $.01 a share, for the third quarter compared to a gain of $487,000, or $.01 a share, for the same period last year.
For the third quarter, the company spent $55 million on product revenues, sales and marketing, and general and administrative costs, up over $54 million for the year-ago quarter.
Bruker spent $11 million on research and development in the quarter, compared to $9.5 million for the year-ago quarter.
The company had cash and short-term investments of $76.6 million on hand as of Sept. 30, compared to $76.8 million as of Dec. 31, 2003.
— Mo Krochmal ([email protected])