Q1 2022 Nordson Corp Earnings Call
Conference call is being broadcast live on our Investor website and will be available there for 14 days.
There will be a telephone replay of the conference call available until Wednesday March 2nd.
During this conference call references to non-GAAP financial metrics will be made.
A reconciliation of these metrics to the most comparable GAAP metric was provided in the press release issued yesterday.
Before we begin please refer to slide two of our presentation, where we note that certain statements regarding our future performance that are made during this call maybe forward looking based upon nordson current expectation.
These statements may involve a number of risks uncertainties and other factors as discussed in the Companys filings with the Securities and Exchange Commission that could cause actual results to differ.
Moving to today's agenda on slide three noncore will discuss first quarter highlights.
He will then turn the call over to Joe to review sales and earnings performance for the total company and the two business segments.
Joe will also discuss the cash flow and balance sheet Naga will conclude with high level commentary about our enterprise performance as well as our updated fiscal 2022 second quarter and full year guidance.
We will then be happy to take your questions.
With that I will turn to slides four and hand, the call over to Naga.
Good morning, everyone.
You for joining nordson fiscal 2022 first quarter conference call.
As we expected the demand environment that we experience.
Second half of fiscal 2021.
Load into the first quarter.
Our teams did an outstanding job delivering for our customers.
In the quarter, we delivered double digit sales growth across most end markets in midst of supply chain constraints and labor shortages.
I'm very thankful for our employees for staying safe.
Managing dynamic market conditions.
The NBS next growth framework.
Ensuring we meet the needs of our customers.
I'll speak more about the business in few moments, but first I'll turn the call over to Joe <unk>.
Provide detailed perspective on our financial results for the quarter.
Thank you, Doug and good morning to everyone.
On slide number five you'll see first quarter 2022 sales were $609 million, an increase of 16% compared to the prior year's first quarter sales of $527 million.
The increase was primarily related to 16% organic volume growth.
And 4% from the MVC acquisition.
Offset by headwinds from currency and the screws and barrels product line divestiture.
This double digit organic sales increase was driven by solid growth in most product lines with particularly strong demand in electronics industrial and medical end markets.
Geographically all regions delivered organic growth in the quarter.
Gross profit for the first quarter of fiscal 2022 totaled $348 million.
Excluding the amortization of acquired inventory step up.
Gross profit totaled $342 million or 56% of sales.
In the quarter compared to $290 million or 55% of sales in the prior year first quarter.
This 100 basis point increase in gross margin was driven by improved sales mix from the divested screw and barrel product line.
Sales volume leverage and process enhancements from our MBS next growth framework.
On a year over year basis inflation pressures contributed to a negative price cost mismatch unfavorably impacting margins by 100 basis points.
As price realization is delayed given the extensive backlog entering the year.
This impact will continue to lessen as we move into the second quarter and the back half.
2022.
On a sequential basis, comparing Q1 2022 for Q4 2021.
Gross margins improved approximately 100 basis points as several of the nonrecurring items experienced in Q4 2021 did not repeat as forecasted.
We continue to take appropriate pricing actions in fiscal year 2022 to respond to inflationary pressures.
Our organization agility, and a disciplined approach to cost control coupled with consistent deployment of the <unk> strategy is allowing us to successfully navigate these challenges and continue to deliver profitable growth.
Operating profit in the quarter was $156 million.
Adjusting for the purchase price accounting related to inventory amortization opt.
Operating profit was $157 million or 26% of sales.
44% increase from the prior year.
Double digit organic growth.
<unk> sales mix and continued cost control measures contributed to incremental operating profit margins of 15, 9% in the quarter.
EBITDA for the first quarter was $183 million or 30% of sales.
Looking at non operating expenses.
Net interest expense decreased $1 million or 21% from the prior year driven by reduced debt levels.
Other net expense decreased to $6 million.
From the prior year first quarter.
$3 million of the decrease is attributable to fluctuations in currency gains and losses.
As the prior year first quarter included a $2 $8 million currency loss.
The remainder of the decrease primarily relates to reduced pension expense attributable to the increased funding in the prior year.
Tax expense was $32 million for an effective tax rate of 21% in the quarter.
Which is in line with our prior year rate and the forecasted full year rate for 2022.
Net income in the quarter totaled $120 million.
Or $2 <unk> per share.
Adjusted earnings per share excluding inventory amortization.
Total $2 seven per share.
57% increase from the prior year.
This improvement is reflective of the strong double digit year over year increase in sales.
And more importantly, consistent application of the NBS next growth framework, which leads to steady profitable growth with attractive incremental margins.
Now, let's turn to slide six and seven to review the first quarter 2020 to segment performance.
Industrial precision solutions sales of.
$324 million increased 12% compared to the prior year first quarter.
Organic volume growth in the quarter was 12%.
Plus another 8%.
From the MDC acquisition.
This was offset by the divestiture impact and unfavorable currency of 3%.
Different than previously communicated.
<unk> acquisition is now being managed within the Ips segment, rather than advanced technology solutions.
As we've integrated this business over the past three months, it's become clear that MDC has greater alignment with our IPF and markets and sales channels. We believe this is an optimal fit to harness future growth.
IPF was strong 12% organic growth delivered in the quarter was driven by robust demand for industrial coating product lines plus steady growth.
In the consumer nondurable end markets for hot melt adhesive dispensing.
Drove this quarter's results.
From a geographic perspective growth was strongest in Asia and Europe .
Operating profit for the quarter was $104 million or 32% of sales.
Which is an increase of 24% compared to the prior year operating profit of $83 million.
Excluding the acquisition and the divested product line for comparability purposes operating profit grew 15% over the prior year four.
<unk> and their organic only incremental profit margin of 51%.
Moving now to advanced technology solutions.
Sales of $285 million increased 20% compared to the prior year first quarter.
This change included an increase in organic sales volume of 21%.
Offset by a 1% unfavorable currency impact.
Growth was across all major product lines.
But particularly end markets, which grew approximately 40% over the prior year.
Okay.
Medical product lines were also strong growing double digits.
Product line, serving broader industrial markets.
Goods grew in the high single digits.
All geographies contributed to this quarter's growth with particular strength in the international regions.
First quarter operating profit.
62% increase over the prior year operating profit of $47 million was driven by sales volume leverage and the realization of benefits from cost control measures taken in fiscal 2020 and early 2021.
This segment has now been performing at the mid Twenty's in terms of profitability for the last four consecutive quarters.
Deployment of our NBS next growth framework continues to be a key element in the success of this segment delivering profitable growth.
Finally, turning to the cash flow and balance sheet on slide eight.
Free cash flow in the quarter was $106 million.
Or a conversion rate on net income of 88%.
Our strategic investments are being made in inventory to address portions of the current supply chain constraints.
During the first quarter, we acquired MDC for a $172 million.
And paid $30 million in dividends and spent $35 million and share repurchases.
Through our disciplined approach to capital deployment and strong operating profit growth.
We ended the quarter with a healthy balance sheet and abundant borrowing capacity.
Cash totaled $171 million and net debt was $637 million, resulting in a 0.8 times leverage ratio based on the trailing 12 months EBITDA.
During the second quarter of fiscal 2022.
We anticipate successfully <unk> a portion of our pension liability associated with retirees and payment status.
This will have no impact on cash flow in the year as our domestic pension plan is well funded but.
But we will likely trigger a noncash nonoperating charge, depending on the terms of the final new innovation transaction.
For modeling purposes in fiscal 2022.
Assume an effective tax rate of 21% and capital expenditures of $40 million to $45 million.
I will now turn the call back to Naga.
Thank you, Joe, let's turn to slide nine.
Again.
Thank you to the nordson team for delivering this outstanding performance.
I spent a lot of time in our facilities this quarter.
And I am impressed with the caliber of talent and the dedication of our employees.
To meet commitments from our customers despite the constraints of the supply chain.
Labor availability.
During my troops.
Our division demonstrated how does the ongoing deployment of the NBS next growth framework is helping them identify best products and customers and then prioritize capacity to meet the demand of these customers.
For example.
Our medical fluid components Division.
Which had over 40% sales growth driven by its focus on.
<unk> pharma applications.
<unk>.
Injection molding machines to more efficiently meet the needs of the best medical device customers.
Okay.
Joe.
Where we saw the new.
Vantage product.
<unk>.
The main page is our first fully integrated wafer handling system designed for the semiconductor industry.
It is growing at an incredible pace.
We are meeting the needs of our customers with a product that advances automation reduces cost.
At similar rates.
<unk> for our customers.
Before I turn to guidance.
I'd like to share an organizational update.
I am pleased to share with you.
Jeff Pembroke Exec.
Executive Vice President and segment leader Advanced Technology solutions.
Assuming the segment leadership role.
Industrial positioned solutions.
Fact of March 1st.
Jim began his career in.
In our industrial coatings and adhesives businesses. So he interest this rule with a strong understanding and appreciation of.
Excellent position of the Ips divisions and leaders in their end markets.
He will build upon that by empowering and accelerating the progress of our MBS next growth framework.
Yes.
I will assume leadership upfront Ats segment.
While we evaluate long term demand.
We are fortunate to have strong division leaders throughout the company and I look forward to working more closely with them.
Now, let's turn to our updated fiscal 2022 outlook on slides 10 and 11.
Order entry remained strong throughout the first quarter.
With the favorable book to Bill ratio.
Growing backlog to over $900 million.
This growth in backlog is related to the ongoing extended shipment request.
Our large customer orders from electronics.
<unk> and medical end markets.
And this strong demand environment.
We expect supply chain and labor availability to remain as constraints into the second half of this year.
Based on these factors.
We expect sales growth to.
To be in the range of <unk>.
6%, 10%.
As compared to fiscal 2021 second quarter.
Adjusted earnings per diluted share in the range of $2 20.
$2 30.
This guidance means that our teams will deliver the fourth consecutive quarter.
Round above.
$600 million in revenue, despite our capacity constraints.
This is a great credit.
Through our winning teams and their commitment to our customers.
Based on the strong performance of the first quarter.
We are focusing on full year 2022 guidance.
On the high end of the reach that we provided in December .
We now expect full year revenue growth in the range of 7% to 10%.
And adjusted earnings per diluted share growth in the range of 14% to 18%.
Our fiscal 2021.
This growth is forward and record.
Fiscal 2021.
Our financials.
Customer centric model.
And diversified end markets.
Additionally.
Our leadership team is advancing the input limitation of DSM strategy.
Which is fine.
Emily She envious next as our growth framework.
And entrepreneurial.
Utilization and a deep diverse team to drive sustainable profitable growth.
As always I want to tanker customers shareholders and the nordson team.
For your continued support.
With that we'll pause and take your questions.
At this time I would like to remind everyone in order to ask a question press star followed by the number one on your telephone keypad.
First question comes from the line of Allison <unk> with Wells Fargo. Your line is open.
Hi, good morning.
Just wanted to go back to the comments around sort of that price cost spread is there any color you can give us in terms of how you think that Kate answered it sequentially I am pretty rare.
Because of our favorable in the back half for you just trying to understand the context to that.
Yes, Thank you Alison excuse me.
So yes, when you think about our price increases.
In Q1 that will improve so if you think about a 100 basis point negative in Q1, I think that will probably cut in half as we go into Q2, and then it should be neutral by the time, we get into the back half.
Great and then.
Hygiene and labor shortages.
I know you said.
Inventory to kind of help smooth that to some extent I guess in a run.
Within the backlog do you see or are you able to look at that from a long term perspective and is that getting better for you is it easing somewhat underneath those I know, it's still constrained but.
Getting a little bit more visibility on that sort of the labor and supply challenges that are currently out there.
Allison, let me take that.
If you think about our.
Supply chain constraints these amount across all of our businesses. So I think you want to.
Those particular businesses.
Many of them related to electronic components.
In some businesses that are some casting issues, but we do see those supply chain issues continued to.
Get better as we progress along the year.
In terms of labor shortages I would tell you. The 70 had an issue related to the omicron.
And here in the first quarter.
<unk> has improved.
But in general I think about it we're going to.
Our forecast is we're going to ship pretty close to 636 and $40 million in the second quarter.
And that is now.
Four quarters was though.
Four quarters of.
Over $600 million in revenue.
So it constrains.
On an elevated level is probably the way I would put it.
No that's fair and just one last question from me just on the backlog piece of it.
I know your customers are probably facing similar issues are you getting any push outs of some of that accept those product projects here.
Manageable yes.
Yes, no. It has been manageable what what they have pretty much many of our customers are planning for it.
<unk>, which are beginning to see as we have indicated in the past that.
Our orders are being requested shipment dates extending out more than we normally see I think people are ordering at that time, anticipating not only problems with their own supply chain, but hedging their bets with us as well.
Great. Thanks, I'll pass it along.
Your next question comes from the line of Mike Halloran with Baird. Your line is open.
Hey, good morning, everyone.
Good morning, Mike.
So just wanted to follow up on that last comment there Naga. So when you think about the backlog.
When do you think it gets to more normalized levels or when you think about your guidance do you get to more normalized level by year end and.
Obviously, the customer patterns are shifting a little bit and how they're managing their orders.
I'm guessing at some point that goes back to normal and that'll be in conjunction with supply chain normalizing, but any thoughts you have on how youre thinking about that and what's embedded in guidance would be great.
Yes.
Let me have Joe take the part on guidance and maybe I'll start us off with in general what we're seeing is.
The supply chain normalizes.
This thing is going to keep going back and forth a little bit.
And I think.
Spectation on supply chain easing is probably more towards the second half maybe end of the year.
And that's really what what.
<unk>.
Les that changes faster.
I think our guidance sort of takes into account that assumption.
Joe you want to add anymore color to that.
I mean, when you think about the backlog Mike It is different than what I would tell you. These large systems businesses.
75% of our backlog today is tied to these businesses, which have large system orders.
And those orders are booking out until 2023.
And many of those businesses when you look at our.
What I'll call, our normal book and ship type businesses, which includes parts and consumables as opposed to the large systems.
I should say parts and systems.
That I would tell you that order entry and when we look at that in the backlog that kind of supports our guidance as we look out and see the growth rate in Q2, and the back half whereas.
The backlog is inflated to a high level because of those large systems businesses, which are booking way out into 2020 right. So the composition of the backlog has changed and when we look at the normal book and ship business. It does support our growth guidance for the back half.
So Joe it sounds like Youre, saying that.
From a backlog perspective, there is no.
Call it excess backlog catch up embedded in the forward guidance is just kind of how you're slotting out some of those larger systems projects.
Kind of a normal cadence on.
On the non systems businesses is that fair.
That is fair.
Okay.
And then on the capital allocation side.
Or are you thinking about capital usage at this point.
And I suppose two things one.
Interest in buybacks at this point and then secondarily what does the M&A funnel look like.
And action ability perspective.
Maybe I'll take that acquisition first Mike and then Joe can cover the rest of the pieces that you have interest in.
On the acquisition fees, we remain active.
Pipeline is healthy.
We remain disciplined I think that's really important for US is that we are focused on scaling our medical business focused on expanding our P&I capability.
Secondly, add any other adjacent position technologies is the right thing comes along.
So lots of activity healthy pipeline, but remain disciplined.
So we want to remain strategically discipline and financially disciplined.
And so over the long haul.
We are confident we will deliver on the $500 million in acquisitions.
We've committed to it.
Investor Day.
Joe you want to.
Yes.
The remaining capital allocation in terms of dividends and share buybacks.
You know, we increased our dividend last year trying to targeting closer to 1% and.
And on the share buyback over a longer period, we've tried to offset dilution.
And so just systematically buying back in the marketplace to offset dilution given the run in the stock price. We were unsuccessful in doing that last year and so we're working on that this year, we did buyback under the can be 511 hundred 40000 shares approximately here in Q1.
But I would tell you Mike our strategy there has not changed its simply to offset dilution.
Great I appreciate it thanks for the time.
Your next question is from the line of Jeffrey Hammond with Keybanc capital markets. Your line is open.
Hey, guys. This is mitchell on for Jeff.
Just just quickly on the C technologies acquisition.
I know you guys touched on it a bit in the prepared remarks, but I was just wondering if you could elaborate a bit on the decision to include energy technologies, and Ips and maybe what specific opportunities you saw that maybe weren't apparent first acquired thanks.
I think as we spent a little bit more first and foremost the NBC acquisition is coming along very nicely.
Three months into.
Our portfolio.
Really liked the team really like the product technologies like the customer exposure and end market exposures they have.
So yes.
Really spending more deeper dive into the businesses and really thinking through what are the best growth opportunities for the business and what are the end markets that they're most excited about.
You get.
We get some view of it during Dylan.
Diligence, but it is a pretty accelerated process. So after spending more time with it we fundamentally believe that.
Think about the film next solution business that they have they have gauges for that or think about the food and consumer type.
In markets, where they have Io technologies to measure the quality of our food.
We felt that this <unk>.
And market exposure, it aligns very well with our packaging businesses.
Hence the growth opportunities and ability to cover the customer.
In many ways, sometimes if we go to a let's say a.
Consumer goods.
Manufacturing line.
What we end up finding is that at the back end when the food is package you find other adhesive hot melt adhesive systems.
Front end when you are looking or mentioning the freshness.
The quality of it.
That's getting manufactured.
You'll definitely find a lot of MDC. So this explosion on consumer.
Industries.
Felt that there is a greater alignment between both these sales channels and we decided.
And move that business into.
The idea.
Okay, Great. That's that's very helpful.
Just on medical I think you guys called out Biopharma, particularly positive I just wanted to dig in on that a bit I was just wondering how elective surgeries have trended given the recent spike in <unk>.
And.
Maybe if more people have been delaying surgeries and whether you feel thats led to some pent up demand here that you might be able to capitalize on.
What we find elective surgeries are continues to recover if you remember in this particular surge the hospital capacity was not that strained as it was.
Gearing Delta. So we've continued to see elective surgeries come back up.
See our interventional component businesses, continuing to do fairly well.
But if you think about the Biopharma business is slightly different in that we sell a lot of components to people, who manufacture biopharmaceutical and that business is.
Very strong for us.
It's not only just vaccine production that would resolve the gene and cell therapies that are very.
And in addition, you also have.
Biopharmaceutical expanding capacity to make sure that.
But our more regional availability of vaccines and <unk>.
Got it.
Okay, Great I'll pass along thanks.
Your next question is from the line of Matt Summerville with D. A Davidson your line is open.
Thanks.
Just with respect to kind of looking at the business geographically volume in the U S and Japan only up modestly year on year.
Maybe just talk a little about that is that more comparison related is there something anything to read into with respect to what youre seeing geographically.
Okay.
If you think about the geographies.
What we find is that Youre 70, right that we saw significant strength in Europe , and Asia, and those were particularly high points for us.
Japan is still.
Covering Japan got hit hard with Covid.
I think the Americas is modeled on comps.
So you could think about it.
Americas came out.
First for us and so recently, we don't see.
Anything significant other than I would say, we had a broad based growth in the quarter and Thats our expectation.
With particular strength in Asia and Europe .
Yes.
With respect to the HTS business, if I think about this kind of multiyear capacitance station cycle that we have begun to see and we'll see.
As it pertains to the semiconductor industry when would you expect large sum to see peak benefit from.
That capacity cycle there.
Yes, I mean, the capacity cycled continues to change and remain dynamic, but I would tell you we are seeing significant activity and thats, what you see in the Ats business.
With growth in Acs was primarily driven by electronics and <unk>.
But what you'll see some pretty robust demand right now.
Is that the peak.
I would.
Would be very difficult for me to sort of.
<unk> that this is and as you noted is an extended cycle more extended than we have seen before.
Is this the peak I don't know, but RV working with our customers.
Right now, yes, there is a lot of activity.
And our solutions, so think about vantage, which is the.
Wafer handling system.
<unk> systems.
This is one of the best product that is helping our customers.
Accelerate there.
Units per hour with <unk>.
Great quality.
That has gone well for us at the same time, we also have.
<unk> thousand which is test and inspection.
That goes into semiconductor wafer inspection that is doing incredibly well so.
Look at both of those businesses that value.
Market activity and the demand is pretty strong.
I don't know whether I would characterize it as peak right now are for another few years Idaho.
Difficult to guess.
As you know we have.
Right.
Model that allows us and gives us visibility.
What our customer activities are much more than others in the industry will go through distribution.
Got it thanks, Doug.
Thank you Matt.
Your next question comes from Andrew Buscaglia with <unk>.
Brandenburg Your line is open.
Hey, good morning, guys.
Good morning.
I wanted to ask so you're yet.
Commentary just around.
By chain.
Maybe easing somewhat or packaging.
Not getting much worse and that the commentary is definitely a bit mixed with this.
This earning season across companies.
I guess what are you exactly are you seeing.
Where do you feel like things are maybe.
Yes, easing up a bit.
Yes.
If you would take couple of different pieces of it it is not getting worse.
So I can definitely tell you that is it getting better in some parts is getting better right.
Freight is not as much as an issue before it is getting better.
Tonics components most of it is fine, but there are few areas that still.
It's not so much you don't get.
What you are looking for you just don't get as much as Q1 is maybe the way to describe the supply chain issue, it's not like Oh, I don't have that component could slide.
I don't have.
I have.
Thanks Ike.
I Couldnt give you too.
So that sort of what we are dealing with right now it's not early in the cycle. We were looking for substitution things like that but now it is more about.
How much more can we get and that is really what is governing our capacity to work the backlog down.
Okay, great great.
On the margin a bit better in terms of pricing.
Yes interesting.
It is not significant one of them.
I will not be any further but even more so.
Alright.
Yes.
Supply base has had some labor constraint issues.
<unk> cases, and so that should help to hopefully moderate as the COVID-19 situation improves.
Okay.
Okay and just one other question on the ACS margins were a lot stronger than I was expecting.
I missed this but how much was mix a factor there and then I guess just generally.
What's driving that and the sustainability of margins there.
Yes, so in Ats, I mean, rather that.
53% gross margins is relatively in line with where we've been running for I would say the last three quarters and what you see there is the benefit of volume leverage was 21% organic growth.
And then also recall, we did do some actions I would say at the end of 'twenty two.
To take some cost out of some of those businesses and rightsize the cost structure and so we've been running at that level I would tell you.
Q2, roughly <unk> of last year.
And so it's it's.
The combination of volume leverage.
And some of the cost controls.
Okay. So I guess mixture I count that as a major contributor as well.
Yes, I would tell you mix was favorable, particularly if you look at our medical business, we had some favorable mix benefits there.
Within Ats.
Okay.
Okay. Thanks, Ron.
Okay.
Again, if you would like to ask a question press star followed by the number one on your telephone keypad. Your next question is from Walter Liptak with Seaport.
Your line is open.
Yes.
Hey, good morning, guys.
Good morning.
Good morning, I don't want to good morning, I don't want to beat a dead horse on the price cost thing but.
The companies that we follow I think you guys were doing the best up until this quarter on price cost.
So just so I understand.
The situation that you ran into this quarter it sounds like omnicom.
May have impacted some of your suppliers and so.
I have been delays and maybe you have to have a little bit with absenteeism related to omni crown, but that seems to be going away is that the way that we should read that 100 basis points.
Headwinds from price cost.
Yes, I guess, what I would I would read it as as we implemented our price increases.
At year end and to respond to the inflation pressures that we were seeing.
You combine that with our strong backlog, which was up I think we ended the year was up almost 90% over the prior year and so the price realization of those price increases just take time to take effect.
So a lot of what we were shipping in Q1 was still priced at the old price points. So the price realization.
It wasn't.
As beneficial in Q1 is that it will be in Q2, and it'll be more beneficial I would tell you that in the back half of 2022. So I would tell you is a combination of the backlog.
As opposed to the <unk> issue.
I will say I mean.
Yes.
Despite that Walter I mean, 56, 1% gross margin.
In the quarter.
You'll recall since the divestiture of the screw and barrel business, we've been running.
55% to 57% range, depending on mix in any given month. So I would tell you we were able to largely offset the negative price cost headwinds with the favorable mix and some volume leverage in the quarter.
Okay, great. Okay. So just to be clear, but the price cost you per 100 bps.
Didn't have anything to do with supply chain was there.
Were a headwind to the supply chain issues the constraints youre talking about or was it just people working harder.
The headwind on the supply chain constraints speaks to our topline growth.
Right.
The revenue, we were able to deliver as opposed to the gross margin percentage.
Okay. How much do you think that you were unable to ship this quarter because of that.
Yes.
Art.
Yes, it's hard to put a number on it.
And I would tell you that it got pushed from Q1 into Q2.
I think these issues are going to continue into Q2 as terms as it relates to supply chain challenges, but you could estimate that to be I don't know $10 $10 million to $20 million.
Is kind of a headwind we're looking at.
Okay, alright, thanks for that.
Yes, and then you pointed out the other day.
You have that 100 bps of price cost the operating leverage was still.
Pretty incredible and so youre, saying that thats.
Marginally volume mix or as the Nbn snacks.
Really coming through.
But largely volume mix in Q1, we have the benefit of the screw and barrel product line divestiture.
That in and of itself from a favorable mix standpoint was about 120 basis points.
I think.
Also to remember through all of these with multiple different strains on the company and the teams.
NBS next is really allowing us to be able to.
Deliver on our customer commitments as well as be able to deliver the kind of incremental margins you are seeing in the business now consecutively.
Consecutively for five.
Quarters.
We are north of committed 40% to 45% incremental margin in the quarter, we delivered <unk> 59.
So.
Think of all the things that are going on in the business on top of which we're able to deliver the kind of quarter. We delivered I think that is really.
<unk> contribution from <unk>.
Yes.
Yes, absolutely.
And maybe a last one for me on the vantage product.
You were talking about.
How is the commercialized commercialization of that product going do you sell it.
Through your direct sales force or do you go through distribution.
On it is that.
Is it being bundled with other other products and dispensing systems.
No it is.
What we really have very little distribution so.
So we are.
Almost 100% derived less in a region, where we don't have.
Yes.
Sales coverage and remainder of distribution, but mostly direct no. It is not bundled with any other systems.
We sell directly the commercialization is going.
Well.
I don't think.
Yes.
We're.
We're getting governed and Motorola.
The supply chain constraints.
<unk> rather than the demand for the product.
Okay Alright, great.
The vantage product.
I guess it helps you too.
To penetrate some of your customers is that incremental.
And a big increase to the penetration of our customer they start.
Purchasing the vantage product.
This incremental opportunity for applications that we are continuing to grow with those customers. So it is incremental in the existing customers.
So think about our electronic business we acquired.
Our largest customers product roadmap.
So for us to continue to be relevant player in this market, we need to continue to deliver innovations that allow our customers to achieve their product goals.
So vantage is a great example of that.
Our customers have.
Pacific.
Product goes around moving packaging upstream at the wafer level this product investment.
Yes, that's great.
Okay, great. Thank you very much.
Your final question comes from the line of Connor Lynagh with Morgan Stanley . Your line is open.
Yes. Thanks.
Doug you made a comment in regards to M&A.
Maybe it would be financially disciplined.
Over the last year that valuation has been an impediment to doing more.
Jim why you've been sitting on your hands, obviously, you just did a deal but.
Has there been any sort of normalization and value expectations that you can see based on what's been happening in public markets.
No.
There is no normalization yet.
But I think for US we start with strategy to make sure that we are focused on the end markets.
Specific products that are medical and test inspection and those are not.
Evaluation and those markets are high yet we've been able to find deals that we have been able to do in both of those markets.
Because we are very focused on what is the value add nordson brings to that.
Business and can we deliver.
Financial return right so.
We didn't say that.
We had a deal we passed we got passed up because of a valuation that that's not the case.
Indication of it but not not in the recent times.
Got it that's helpful. And then just just to sort of follow up a little bit more on the capital allocation I mean.
Obviously.
As I alluded to you've deployed capital recently, but is there is there a point at which it makes sense to just return more capital than you have been or do you think it's better to sort of build a war chest and wait for.
Markets to be where it makes more sense.
The piece of that.
How are you.
Our M&A pipeline is active and robust and to <unk> point I do believe that there are assets out there where the person is the better owner and we can do.
Deploy capital like we did on the NBC acquisition to create shareholder value and so we're.
We're sitting at a leverage ratio of just under one times debt to EBITDA.
I think we could identify other opportunities to continue to deploy capital.
Through M&A. So we have that balanced approach, where we are a dividend payer and we do do share buybacks to offset dilution, but when we looked at it from a growth perspective, we think there is opportunity where we could deploy capital towards M&A.
To create.
Shareholder value.
We just did.
And deploy the 100.
$272 million and so we hope to be able to do more like that.
Yes.
Kind of what I would add is our focus is growth.
You remember at Investor Day, our focus is profitable growth and acquisition is an equal part of that growth we're committed to acquiring.
Clearly see a pathway through <unk>.
Flatting over $500 million in revenue.
We are in year two.
Our strategy.
We have acquired I wanted to say 120 $530 million in revenue so far.
We see a path to the.
Delivering on the goals, we have for acquisition remain committed.
That is.
Organic growth being our number one priority, but this is a capital light business and so really we don't turn down projects I mean in the quarter. We we spent around $12 million Joe on cap incorrect, but.
Towards.
Organic growth, but acquisitions is a big part of how.
Yeah.
On our capital deployment strategy that has not changed and we will continue to work that.
Yeah makes sense. Thank you.
Thank you.
There are no further questions at this time I will now turn the call back over to <unk> for closing remarks.
Thank you for your time and attention on today's call have a great day.
Ladies and gentlemen, thank you for your participation. This concludes today's conference call you may now disconnect.
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