Good day, and welcome to Bruker Corporation's Second Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Joe Kostka, Director of Investor Relations. Please go ahead.

Good morning. I would like to welcome everyone to Bruker Corporation's Second Quarter '25 Earnings Conference Call. My name is Joe Kostka, and I'm the Director of Bruker Investor Relations. Joining me on today's call are our President and CEO, Frank Laukien; and our EVP and CFO, Gerald Herman. In addition to the earnings release we issued earlier today, during today's conference call, we will be referencing a slide presentation that can be downloaded from the Events and Presentations section of Bruker's Investor Relations website. During today's call, we will be highlighting non-GAAP financial information. Reconciliations of our non-GAAP to GAAP financial measures are included in our earnings release and are posted on our website at ir.bruker.com. Before we begin, I would like to reference Bruker's safe harbor statement, which is shown on Slide 2 of the presentation. During this conference call, we will make forward-looking statements regarding future events and the financial and operational performance of the company that involve risks and uncertainties, including those related to acquisitions, geopolitical risks, tariffs, foreign currency, market demand or supply chains. The company's actual results may differ materially from such statements. Factors that might cause such differences include, but are not limited to, those discussed in today's earnings release and in our Form 10-K for the period ending December 31, 2024, as updated by our other SEC filings, which are available on our website and on the SEC's website. Also, please note that the following information is based on current business conditions and on our outlook as of today, August 4, 2025. We do not intend to update our forward-looking statements based on new information, future events or for other reasons, except as may be required by law prior to the release of our third quarter 2025 financial results expected in early November 2025. You should not rely on these forward-looking statements as necessarily representing our views or outlook as of any date after today. We will begin today's call with Frank providing an overview of our business and updated thoughts and assumptions around the U.S. and global funding environment and tariffs. Gerald will then cover the financials for the second quarter of 2025 in more detail and share our updated fiscal year '25 financial outlook. Now I'd like to turn the call over to Bruker's CEO, Frank Laukien.

Thank you, Joe. Good morning, everyone, and thank you for joining us on today's Second Quarter 2025 Earnings Call. Life Science research instruments markets are under pressure at the moment with expected U.S. academic funding headwinds and China stimulus delays for high-end research instrumentation. In addition, global tariffs, pharma pricing and economic uncertainty in the second quarter have delayed biopharma and industrial research instrumentation investments. This resulted in lower-than-anticipated bookings and revenues in the second quarter. Our Bruker Scientific Instruments, or BSI, segment book-to-bill ratio was in the mid 0.9 range in the quarter, which was not great, but also not too bad. We anticipate that the third quarter will bring additional visibility on U.S. NIH and NSF funding, both for the remainder of fiscal year '25 as well as for fiscal year '26 federal research budgets. We are encouraged by several recent settlements of disputes between major universities and the federal government, and we anticipate additional settlements to allow the resumption of grants for important scientific and medical research. On academic and disease biology research, we believe that our unique post-genomic tools will be in significant demand in all geographies and in particular, also when China releases its stimulus budgets for high-end medical research instrumentation. Moreover, as U.S. tariffs for many major countries and trade blocks get settled in early August, we believe that global biopharma, industrial and semiconductor companies will accelerate their investments in next-generation drug discovery and development systems as well as in research and quality control tools for advanced materials, clean tech and semiconductor research and production. We are observing where U.S. tariffs on Swiss imports will settle, and we anticipate that ultimately, it will not be at 39%, the rate communicated last week. In a worst-case scenario for Switzerland, we intend to leverage our other…

Thank you, Frank, and thank you, everyone, for joining us today. I'm going to go through more detail on Bruker's second quarter and first half 2025 financial performance, starting on Slide 11. In the second quarter of 2025, our results came in below our expectations on both the top and bottom lines. In the second quarter of 2025, Bruker's reported revenue decreased 0.4% to $797.4 million, which reflects an organic revenue decrease of 7% year-over-year. Acquisitions contributed 3.7% to our top line, while foreign exchange was a 2.9% tailwind, resulting in constant exchange rate, revenue decline of 3.3% year-over-year. Geographically and on a year-over-year organic basis in the second quarter of 2025, our Americas revenue declined in the low double- digit percentage. European revenue also declined in the low double-digit percentage while Asia Pacific revenue grew in the low single digits percentage despite a low single-digit decline in China. For our EMEA region, revenue was up high single digits percentage. BSI organic revenue declined 7.2% in the second quarter of 2025 with organic declines in all groups. [ CSI ] Systems declined roughly 10% and BSI aftermarket revenue was flat organically year-over-year. Our order book performance in the BSI segment was down organically in the high single-digit percentage year-over-year, with softer academic government research orders in most geographies and a significant decline in biopharma orders in the U.S. Non-GAAP gross margin decreased 270 basis points to 48.6%. Q2 2025 non-GAAP operating margin was 9.0%, impacted by weaker volume leverage, unfavorable mix, tariffs and foreign currency. On a non-GAAP basis, Q2 '25 diluted EPS was $0.32, down 38.5% from the $0.52 we posted in the second quarter of 2024. Our EPS performance was significantly impacted by the decline in the U.S. dollar in the quarter, which resulted in a $0.06 headwind.…

Thanks, Gerald. We will now begin the Q&A portion of the call. As a reminder to allow everyone time for questions, we ask that you limit yourself to one question and one followup. Operator?

[Operator Instructions] The first question comes from the line of Puneet Souda with Leerink Partners.

First one on the guide. I understand the magnitude of cut. But maybe just given the backdrop of the market, could you parse out why is the backlog, which has been strong, why is that not helping this year? And how should we think about -- you talked about book-to-bill, but how should we think about the recovery here in the fourth quarter, given that's an important quarter for -- from an instrumentation perspective? And then on fiscal '26, Gerald talked about the recovery there? How should we think about fiscal '26? I know it's a bit early, but I would love your thoughts there.

Thank you, Puneet. So backlog, we are using our backlog to some extent, obviously, you can't accelerated it at will, as in delivery times, production and delivery times are very much planned and locked in by the customers also. Our backlog has come down slightly from 7 months to 6.5 months. So we are leveraging -- using that. Yes, we think it's actually our Q4. I know Q4 has a bit of a ramp, but we're actually feeling pretty comfortable with that with all of our financial planning. I think that looks doable. And as we -- as Gerald had cautioned, Q3, we think, will be still somewhat weak. A little too early to talk about '26. We just wanted to make sure that even in a no-growth scenario, we can deliver very significant margin expansion and EPS growth whether next year will be no growth or a partial recovery of a few percent growth. We don't have the visibility yet and we hope to gain that in the next 1 or 2 quarters. Obviously, a lot of things -- a lot of moving pieces still, especially when it comes to U.S. federal budgets.

Got it. And then on the UHF magnets, I didn't -- apologize if I missed this. I would love to know if you're expecting that any in the third quarter or the fourth quarter? And there was a recent acquisition in the space of the BB assets. That channel sells your MALDI Biotyper? Do you expect any impact on the MALDI and the sales from that, obviously, that's an LC-MS company that acquired those assets.

So, presently, ultra-high field, we don't expect an ultra-high field revenue recognition in the third quarter. We do expect one in the fourth quarter on that topic. Then you're talking about the BD microbiology business being in an acquisition process is that what -- yes. So obviously, we'll -- yes. I don't know because, obviously, if Waters closes that in early '26, we'll see what their intentions are. Keep in mind that in these diagnostics businesses, quite honestly, the little benchtop MALDI off, that's 10% and 90% is the all the assays, all the content, all the regulatory approvals and all. So we can only observe that when Danaher, which has the SCIEX mass spec divisions, when they acquired Siemens Microbiology, they continue to work with us on the Beckman Coulter Diagnostics business in an excellent manner going forward and weren't tempted by, hey, we can build a mass spec. Anybody can build a mass spec, but the MALDI Biotyper franchise that has worked extremely well with BD, hopefully, that will continue. But we don't have any -- until that closes we will see in '26, I guess. If someone -- if someone wanted to develop something like this, it would be a very, very large 5-year investment. And by that time, of course, we're moving on. So anyway, but it's -- it would be speculative. Quite honestly, we don't expect it, but we don't know. I would point out that we obviously sell more than how our MALDI Biotypers ourselves directly. So if at some point, a channel was no longer available, I think we could handle that very well. .

Next question comes from the line of Tycho Peterson with Jefferies.

Frank, I want to push on the cost outs. And really, the idea is earnings today are 30% below where they were 90 days ago. And then only $0.05 of that is FX. I know you're protecting the P&L now. But a couple of things. I guess, why didn't you initiate some of these cost-outs sooner? And are you committing to the $100 million to $120 million regardless even if the top line does start to come back?

Good questions, Tycho. So we did start earlier. We early in the year when -- before any of the headwinds appeared, we had an initial savings program where we just try to grow our -- expand our margins more than what we had guided to initially. And we had planned an additional $25 million -- a new $25 million cost savings plan. We then when the tariffs began to appear, we expanded that to $50 million plus in a second phase. And which is good because most of the cost savings are kicking in next year, but about $30 million of cost savings are kicking in, in our -- and are part of our guidance for fiscal year '25. So the bigger effect will be in '26 admittedly, but at least we do have 30 -- about $30 million of cost savings in our fiscal year '25 guide. To the last point, Tycho, yes, we are completely committed and dialed in for the $100 million to $120 million in cost savings. We hope to be at the upper end of that, and that's going to -- we expect that to happen independent of market conditions or recovery, if that gives us in a flat scenario of 300 bps of margin improvement next year, that's great. And if the growth comes back, we don't expect it to snap back fully, but comes back partially, wonderful, then we can deliver more margin expansion and EPS growth. But we're completely committed to that, yes.

Okay. And then on the growth side, if I go back to our conference in June, you had effectively committed to 4% growth in '26. Now it seems like you're not wanting to go there. Maybe just talk about what has really changed in the past 2 months here on the growth side? And then maybe just before I jump off, one for Gerald on leverage, over 4 turns, but the covenant is 3.5 turns. Can you maybe comment on that dynamic as well?

Okay. I'll take the first part. So we were indicating at your conference that we didn't expect growth in '26 to come back to more traditional for us, 6% to 8% levels. And at that point, we were a little bit more optimistic that it might be and maybe it wasn't a commitment to that, but we were speculating, it could be 2% to 4% organic growth next year. . What has happened is that somewhat as expected, the U.S. academic and China academic stimulus money is not flowing yet. That was somewhat expected and expected, I think when we saw you at your conference, the additional U.S. biopharma weakness in orders was for high-end drug discovery research instrumentation, I know it doesn't take all companies equally, but for research instrumentation, we saw a significant slowdown there. And we'll see whether once tariffs settle and some of the other political settlements kick in, whether that's additional headwind goes away or abates in the second half of this year. And that will, of course, in part, drive '26. We also saw because of the economic and tariff uncertainty, that's certainly our interpretation. We saw general Europe, U.S. and China weakness in industrial research instrument investments. So that was also something that became clearer in the second half, which is why we're more muted in our -- we don't have growth expectations for '26, but we do want to be realistic and ready for a no- growth scenario. That's not our expectation. We don't have an expectation yet, but I want to make sure that we can do the significant margin expansion and double-digit EPS growth even without growth, at least, my words are even without growth, we hope for some modest growth or partial recovery. We don't know. We don't -- we cannot give guidance for '26 of what that might be.

And Tycho, on your question regarding leverage ratio, we don't comment specifically on ratio dynamics quarter-by-quarter. I mean I can tell you that we have satisfied our debt covenants for the first and second quarters of '25. And we have a target, as I think we've discussed directly in around that 2.7 range, and that's what we're working towards.

Over several years, right now.

Next question comes from the line of Brandon Couillard with Wells Fargo.

Gerald, just a follow-up there. Could you unpack the free cash flow burn in the second quarter? How much was onetime? And what you -- what are you expecting for operating cash flow in the second half? And why is it CapEx coming down by a larger degree?

Sorry, I wasn't sure, I caught the last part of your question. .

How is the CapEx coming down? Why is the CapEx coming down?

Yes, I think our CapEx -- let me just answer the last part of your question first though. The CapEx is plan to scale down. We have dialed that back for the third and the fourth quarters. I mean we do typically have programs that are already in motion for the first and second quarters, and that's why you see the CapEx levels where they are. And on the cash flow, Brandon, yes, we did have a couple of what I would describe as unusual outflows in the second quarter related specifically to some tax payments, which we highlighted, those we don't expect to recur. So those will -- we expect to get back to a normal cash flow.

And Brandon, those are sizable. Those were $50 million to $60 million, including some tax payments for -- that are prepayments, some of which we expect to recover. But yes, there were some sizable tax payments in that second quarter.

Okay. That's helpful. And then Frank, I think Gerald said BSI aftermarket was flat in the quarter. Can you kind of unpack what you saw between Diagnostics and maybe some A&G customers and just a surprise to see the aftermarket utilization kind of flat in the quarter.

That granularity, we do not have. Obviously, the Diagnostics business has been growing very nicely sort of according to plan, although placements for the ELITech molecular diagnostics business, which you don't see in revenue, placements, new platforms going out there generate future revenues but placements there. That's one of the highlights of the quarter or for the first half of the year are way ahead of our plan. So the ELITech business in placements is doing great. And in terms of growth and margin expansion, it's according to plan. So that gives an indirect partial answer to what you're saying, namely there, of course, 80% or 90% consumable space. And they are as well as the multi-biotyper consumables are doing well. Therefore, aftermarket in other segments was also down partially, but we don't have granular percentages on that. Hope that helps.

Mr. Couillard, are you done with the question?

Yes.

Next question comes from the line of Luke Sergott with Barclays.

Just wanted to talk a little bit about like the underlying dynamics as you think about that more muted growth in the '26, particularly around China because we've heard from peers right now that they're starting to see some of the stimulus flow-through. So have you guys started to see any of that? And then as you think about those dynamics in the '26 on more muted growth, and also following up here on Tycho's question, but kind of -- is that just assuming the current market environment just continues there, just trying to figure out like if China should start getting better, what would -- in that more muted growth scenario, what's getting worse?

Well, a muted growth scenario in our -- maybe a muted growth scenario is still a growth scenario. Right now, we're seeing a decline in our scientific and industrial and biopharma research markets. So a muted growth scenario, even a no growth scenario next year would be better than the headwinds that we're observing right now. We don't mean muted growth scenario, meaning a decline next year, at least at this point, that's not what we're anticipating. So maybe with that clarification, we also do not expect a market growth for us a 6% to 8% organic growth snapback next year. Hopefully, we'll get there by '27, but let's not comment on that one right now. China stimulus, for high-end research instrumentation, we have not seen those releases yet. We've seen reasonable tender activity in China lately, including into July, but that wasn't necessarily the high-end stimulus funding. That was just normal China activity, which maybe is getting a little bit stronger. Our Chinese customers that are looking for shovel-ready large projects that include NMR and mass spec and high-end microscopes remain very optimistic that this is just a question of time until the province is released it, perhaps once there is greater clarity or maybe there is greater clarity there may not -- that there's probably isn't going to be an all-out China- U.S. trade war during that time. We think the provinces held back to see whether they needed a rainy day fund. Anyway, so China stimulus not released yet for our high-end research instrumentation and remarkable optimism by the customers that it's going to happen. We just don't know exactly when. We do also expect that as tariffs settle in and the new economic world order is emerging for trade that CFOs in major industrial and biopharma companies will be less reluctant to release CapEx investments because they do need the research capabilities, whether it's industrial materials, semiconductor or, of course, drug discovery. So in that sense, we expect an improvement in '26 compared to '25, but we cannot quantify it at this moment. Having said all of that, and we don't want to rely on that improvement even with no growth, we expect to deliver the 300 bps or greater in margin improvement. That's the [indiscernible] .

That's the takeaway. Okay. Great. And then for a follow-up, when you -- we talked about this a little bit before about with the NIH and the -- or the U.S. academic funding issues? How you ultimately kind of see this shaking out whether it's more of a democratization from the coast or from the IVs to the high end users of the institutions going more towards like state systems and things like that. So are you starting to see -- do you have an update on how you kind of see this ultimately playing out with the funding releases and over the next few years?

We have -- we can read some tea leaves, yes. So I think -- I don't think NIH budgets will be flat or up. I don't think they'll be down 40% either [ ditto ] for NSF or DOE research or so. We assume that the deal will be that they'll be down and we're -- if they're down 20%, that's not unrealistic from what we're expecting, but maybe they're only down 10%, we shall see. So that's the bigger picture. The other trend that you've mentioned that this is not only temporarily, but longer term, going to be a more level-playing field away from the coast or also investments that aren't primarily in Massachusetts and Northern California. I think that trend -- political trend, I continue to see that. So I think some very excellent universities elsewhere may be able to get a bigger piece of the pie. And this is even after some of the already announced and potentially pending settlements of the government with some very well-known universities. We do see NSF for '25 calling for some final presentations on big-ticket NMR items. I don't know whether -- what they will do with that and whether there is then '25 funding that may still come through even while we're mostly focused on '26 budgets, there are some encouraging signs. We -- a couple of things went through with NIH budgeting and the customers got ordering from us 2 days later. But it's not needle moving yet. So it's early days, and we don't have clear visibility yet. There are some signs that maybe the worst of the academic funding crisis would be over soon, but we do not expect the snapback to the full growth rates we had previously.

Next question comes from the line of Subbu Nambi with Guggenheim.

I had a question on 2025 guide itself. If the cost savings aren't hitting until 2026 and the headwind to EPS is getting worse with FX, how are you thinking about the second half, just given the soft orders in the quarter?

Subbu, good question. So we do think that of our cost savings for the full year '25, about $30 million of cost savings will kick in and will benefit us this year. They are being overwhelmed by the headwinds from the previous M&A from the organic decline of 2% to 3% -- 2% to 4% that we're now projecting as well as currency and tariffs, but they are meaningful. They're just too bigger, they're kicking in to a much greater extent than in 2026. And of course, we've only recently within the last several weeks have expanded our cost-cutting initiative very significantly and more than doubled it from what we had previously already planned to counteract tariffs. Did that answer your question or did I miss something Subbu?

No, that did Frank, I was just hoping for some more granularity in terms of the bridging between revenue and EPS to hit the 4Q ramp, but partially definitely answered the question.

Subbu, it's Gerald. I'll just add, Frank's reference to that $30 million, the bulk of that is going to hit for fiscal year '25 in the fourth quarter. So we're -- and then the remaining larger majority of it's going to hit in fiscal year '26. So we are seeing some improvement in our guide expectations around the fourth quarter versus the third quarter just to help you with respect to that.

Next question comes from the line of Dan Brennan with TD Cowen.

Maybe just on NIH, Frank and Gerald. Frank, you're obviously the largest U.S. academic government player amongst the large tools. So you should have, I think, more skin in the game in a view here. So kind of you're thinking about down 10% to 20%, we'll see where things land in 2026. But I think there's been more optimism. I think, has been raised here given the Senate appropriation, saying up 1% and folks think that CR could be likely. So I'm just wondering when you think down 10% to 20% kind of, a, what's the mechanism to get there? And b, if things were better, would you expect your customers would spend that money? Or what does your commercial team think about? Would they be reticent just given recessions and things like that?

So the 10% to 20%, I want to be -- I don't have an expectation. There's been too many surprises to have an expectations of fiscal year '26 budgets. I know the Senate Committee marked it up and had a small increase and the administration was initially setting from a 40% decrease. I just want to be prepared for NIH budgets being down 20% for '26 and deliver the margin expansion. For this year, fiscal year '25, we expect U.S. academic government to be down 20% to 25%. That's what we said last quarter already. So this is a fiscal -- this is our calendar year '25. And that plays out above, as we said, so far, it's down about minus 15% for the first half of the year. And so by for the full year '25 calendar year for us, U.S. academia being down 20%, 25%. It seems like a realistic expectation. I think we -- I don't think it's kind of worse than that. So funding is still flowing. And then for next year, as I said, I have no predictions. I've stopped making predictions there. I just want to be prepared for a 20% fiscal year '26 -- government fiscal year '26 NIH budget reduction. And if it's better than that, I'll be delighted. And we can -- more can flow through our bottom -- top and bottom line in '26. I think customers will spend in a heartbeat. If they get grants, they can't give the grants to the universities who are struggling otherwise financially. When they get specific grants, I think they'll order in a heartbeat.

That's great. And then maybe just 1 on the backlog and kind of bookings. Obviously, the book-to-bill has been weak now for, I think, 4 or so quarters. Can you just remind us in a given year, what percent of your revenue growth comes from that backlog? What's book- and-bill? I think there's been some concern like could Bruker even grow in '26, just given you had 4 consecutive quarters of weak book-to-bills, but obviously, bookings turn up and that would support growth. So can you just walk through a little bit of kind of the visibility and the mix between conversion and kind of new turns?

Yes. I mean we now have aftermarket consumable service software of more than $1 billion. So it's become a significant -- it's become a meaningful part of Bruker. That, of course, tends to flow -- turn into revenue pretty much in the quarter when it gets ordered. We also have smaller benchtop and some hundred thousand dollar scientific instruments that very often achieve revenue in the same quarter within 2 or 3 months after they get ordered. So some things maybe -- there is some part of our revenue that turns more quickly. And then there's, of course, some revenue where sometimes -- order to revenue can be 18 to 30 months or so. So we have that mix. . So our backlog is still elevated at 6.5 months. This is the -- this is the backlog of 6.5 months. We expect that eventually to level out with a new mix as we have more consumables, more ELITech and things like that, more now, we added some metabolomics consumables and some therapeutic drug monitoring consumables with some recent smaller acquisitions. So we expect that 6.5 months eventually to go down to about 5 months of backlog as a new normalized level. So we still have some cushion from backlog for the second half and for next year. But of course, we also need the bookings.

Next question comes from the line of Patrick Donnelly from Citi.

Frank or Gerald, I wanted to touch a little more on the second half cadence. The 4Q step-up still seems pretty steep. I mean, I think if you're talking about 3Q looking at similar earnings, call it, $0.32, it implies around $0.90 in 4Q. And again, the revenue kind of step up with that. So I just want to talk through the visibility into that 4Q number. It did sound like things are maybe getting a little more challenging at the end of the quarter. So can you just talk about the visibility and confidence in that 4Q ramp?

Yes. Patrick, it's Gerald. I'll take this, and Frank may want to add some more color. So just generally, in terms of the scaling or graduating this into the fourth quarter, as you already know, our fourth quarter is really not a quarter. It tends to be more like a 30% of the number on an annualized basis. So we do see a more significant ramp historically. And I -- we have no reason to believe that, that will not happen for 2025. And fundamentally, I would also say, as I mentioned earlier in the comment to Subbu, we do have some cost savings that are going to get kicked into the fourth quarter that's already planned and scheduled. So we're pretty confident that you're going to see a pretty significant lift in the operating margin and EPS performance for the fourth quarter. I think your math, as usual, Patrick, is not terribly far off, what our estimates are for the fourth quarter. So that's kind of the -- I'd say at a high level, our expectations are still some flat to down revenue growth for the fourth quarter given the market conditions, but improved profitability given the scale. We get -- as you already know, we get significant leverage down to the bottom line on higher volume and the expectation is...

And this is just typical for us. We tend to have pretty huge fourth quarters and every year we do and then some -- often, it's even better than what we had anticipated for our fourth quarter pattern. So we feel comfortable with the cadence. Two more questions perhaps.

Next question comes from the line of Josh Waldman with Cleveland Research.

Two for you. First, Frank, on the academic, I think Gerald mentioned softer academic orders in most geographies. I wonder if you could comment on what you're seeing in Europe. Is that market getting worse on the academic side? Or -- and I guess, more broadly, are there other geographies that stepped down unexpectedly? And then within the U.S. academic environment, I wondered if you could talk on the timing of potential revenue recovery. I mean how long would it take to kind of work through the softer order book to flush this kind of through the revenue side -- on the academic side, when would you need to see a recovery in orders for that to show up in revenue? And does it [indiscernible].

Yes. So clearly, on the academic orders, the 2 bad guys are the U.S. and China for us. That's where we have the most pronounced reduction in orders in the first half from the academic and academic medical research market. Europe, rest of APAC that just fluctuates up and down. There's really no trend that's discernible there. Q2 wasn't strong, but I don't -- I think that's -- if you look at it then over several quarters, then -- it's the U.S. and China that I think are crucial in academic side. How long -- well, obviously, with less backlog, we can now do faster deliveries. So there are some products, ultra-high field NMR or very large stem microscopes or so that indeed sometimes take 1 or 2 years to deliver. But it's a '26 story even if orders came in, in August, September. And I don't expect a lot of -- I don't expect that necessarily. There could be some U.S. orders that come through before the end of our fiscal year at the end of September. There's a possibility of that. By now, these are higher-end systems. This will go into '26. I don't think there is any step-up to be expected in '25 anymore.

Got it. And then, Frank, on tariffs. I'm curious if you think you're seeing tariffs negatively impact your competitive position and new opportunities at all. I'm thinking on the price or surcharge front. Does it seem like customers are either holding off on placing orders because of price increases or surcharges or maybe even looking to other suppliers?

Yes. If I look at each of our market segments in spatial biology, main competitor is U.S., where U.S. NMR, main competitor is Japanese, where European Union ended up at a level playing field with the new tariffs. In mass spec, a lot of the other mass spec companies manufacture in Europe, also in Germany, in Singapore, et cetera. So -- and you go down the line, X-Ray, et cetera. It turns out that there hasn't been a significant distortion competitively from the new tariff picture. Again, we're still observing Switzerland. That's obviously a somewhat of a pathological number at the moment. We expect that to be less and maybe be more in line with what we have in Europe or from Malaysia and either way, in NMR and MRI, we have the most flexibility to say, okay, I mean, almost immediately could turn a dime and say any of these systems for the U.S. market come from Germany or from France, where we have large factories. So there, we could move very, very quickly if come August 7, that Swiss number was still extraordinarily high for a while. So the short answer would have been, we think it's -- we think there is no competitive shifts based on that. It's just a cost headwind. All right. We'll have one more question, and then we'll wrap things up for today.

Next question comes from the line of Rachel Vatnsdal with JPMorgan.

This is [indiscernible] on for Rachel from JPMorgan. I just wanted to clarify your comments on tariffs just now. What are you assuming in your guide for those tariffs at this point? Are you assuming 39% or something lower? And perhaps more broadly, if you could give more color on your updated tariff assumptions given the changes in Swiss tariffs but also European tariffs?

Yes. We're -- for the European Union and Israel, we're at 15%, where Malaysia, we're at 19%. Switzerland, we're presently modeling at 15%. In a worst-case scenario that we didn't shift supply chain, and it was 39% that could be an additional $10 million hit that we presently don't have here, but we think that's just not going to happen. A, we think the number will be lower; and b, in that case, we'll just not ship from Switzerland. We will build our NMRs and which is primarily an NMR story and make them in Germany or France. So that's why I think our modeling is appropriate.

This concludes our question and ask session. I would like to turn the conference back over to Joe Kostka for closing remarks.

Thank you for joining us today. Bruker's leadership team looks forward to meeting with you at an event or speaking with you directly during the third quarter. Feel free to reach out to me to arrange any follow-up. Have a good day.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.