Q1 2024 Nordson Corporation Earnings Call

Operator: Good morning, my name is Krista, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Nordson first quarter fiscal year 2024 conference call. All lines have been placed on mute to prevent any background noise.

Good morning, My name is Krista and I'll be your conference operator today at this time I would like to welcome everyone to the Nordson first quarter fiscal year 2024 conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session, if you'd like to add.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star, followed by the number 1 on your telephone keypad. And if you'd like to withdraw your question again, press star 1. Thank you. I would now like to turn the conference over to Laura Mahoney. Laura, you may begin.

Ask a question during that time simply press star followed by the number one on your telephone keypad and if you'd like to withdraw your question again press Star one. Thank you I would now like to turn the conference over to Laura Mahoney, Laura you may begin.

Lara L. Mahoney: Thank you. Good morning. This is Laura Mahoney, vice president of investor relations and corporate communications. I'm here with Sundaram Nagarajan, our president and CEO, and Stephen Shamrock, vice president, corporate controller, and interim CFO. We welcome you to our conference call today, Thursday, February 22nd, to report Nordson's fiscal 2024 first quarter results. You can find both our press release as well as our webcast slide presentation, which we will refer to during today's call, on our website at www.nordson.com forward slash invest. This conference call is being broadcast live on our investor website and will be available there for 30 days. Additionally, there will be a telephone replay of the conference call available until Thursday, February 29th, 2024.

Lara L. Mahoney: Thank you. Good morning. This is Lara Mahoney, Vice President of Investor Relations and corporate communications.

Lara L. Mahoney: I'm here with <unk>, <unk>, our president and CEO, and Stephen Shamrock, Vice President corporate controller and interim CFO.

Lara L. Mahoney: Welcome you to our conference call today Thursday February 22nd to report Nordson fiscal 2024 first quarter results.

Lara L. Mahoney: You can find both our press release as well as our webcast slide presentation that we will refer to during today's call on our website at www Dot Nordson dotcom forward slash investors.

Lara L. Mahoney: This conference call is being broadcast live on our Investor Web site and will be available there for 30 days.

Lara L. Mahoney: There will be a telephone replay of the conference call available until Thursday February 29 2024.

Lara L. Mahoney: During this conference call, we will make references to non-GAAP financial metrics.

Lara L. Mahoney: During this conference call, we will make references to non-GAAP financial methods. We've provided a reconciliation of these metrics to the most comparable gap metric 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 may be forward-looking based upon Nordson's current expectations. These statements may involve a number of risks, uncertainties, and other factors, as discussed in the company's filings with the Securities and Exchange Commission, that could cause actual results to materially differ.

Lara L. Mahoney: We've provided a reconciliation of these metrics to the most comparable GAAP metric in the press release issued yesterday.

Lara L. Mahoney: 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.

Lara L. Mahoney: Maybe forward looking based upon north of the current expectation.

Lara L. Mahoney: These statements may involve a number of risks uncertainties and other factors as discussed in the company's filings with the Securities and Exchange Commission that could cause actual results to materially differ.

Lara L. Mahoney: Moving to today's agenda on slide three Naga will discuss first quarter highlights.

Sundaram Nagarajan: Moving to today's agenda, on slide three, Naga will discuss first quarter highlights. We will then turn the call over to Steve to review sales and earnings performance for the total company and the three business segments. Steve will also discuss the balance sheet and cash flow. Naga will then share high-level commentary about our enterprise performance. He will conclude with an update on the fiscal 2024 full year and second quarter guidance. We will then be happy to take your questions. With that, I'll turn to slide four and hand the call over to Naga.

Naga: We'll then turn the call over to Steve to review sales and earnings performance for the total company and the three business segments.

Steve: He will also discuss the balance sheet and cash flow.

Naga: <unk> will then share a high level commentary about our enterprise performance.

Steve: We'll conclude with an update on the fiscal 2020 for full year and second quarter guidance.

Speaker Change: We will then be happy to take your questions.

Speaker Change: With that I'll turn to slide four and hand, the call over to Naga.

Naga: Good morning, everyone. Thank you for joining nordson physical printing 24 first quarter conference call.

Sundaram Nagarajan: Good morning, everyone. Thank you for joining Nordson's fiscal 2024 first quarter conference call. At the outset, I'd like to recognize the dedicated Nordson team, who leveraged the NBS Next growth framework to deliver solid first quarter results. Sales of $633 million were near the top of our first quarter guidance. This was driven by strong performance in our medical interventional.

Naga: All said I would like to recognize the dedicated nordson team.

Naga: Leverage the NBS next growth framework.

Naga: Our solid first quarter results.

Naga: Sales of $633 million.

Naga: We are near the top of our first quarter guidance range.

Naga: This was driven by strong performance in our medical intervention.

Naga: Industrial coatings.

Sundaram Nagarajan: Industrial Coding, and Polymer Processing Product Line, which more than offset continued weakness in our electronics product line. In addition, our focus on top customers and Differentiated Products Improved Product Make. This focus, in addition to simplifying and strategically adjusting costs, led to strong incremental margins, resulting in adjusted earnings per share of $2.21.

Polymer processing product lines.

Which more than offset continued weakness and I would like to.

Naga: <unk> product lines.

In addition, our focus on top customers.

Naga: Appreciate it products.

Naga: Product mix.

Naga: This focus.

Naga: To simplify.

Naga: Strategically adjusting costs led to strong incremental margins, resulting in adjusted earnings per share of $2 21.

Naga: This exceeded our EPS guidance for the quarter.

Sundaram Nagarajan: This exceeded our EPS guidance for the quarter. Finally, I'd like to highlight our first quarter pre-cash flow of $165 million, which was 150% of net income. This was a new first quarter record.

Speaker Change: Finally, I'd like to highlight our first quarter.

Speaker Change: Free cash flow of $165 million, which was 150% of net income.

This was a new first quarter record.

Sundaram Nagarajan: I would also like to recognize the steady progress of our AIRAG integration, which contributed to our sales and EBITDA margin performance in the quarter. We continue to be excited about the technology and precision agriculture and the market, as well as the engagement and energy of our new employees. I'll speak more about the Enterprise performance in a few minutes, but first, I'll turn the call over to Steve to provide a detailed perspective on our financial results for the quarter. Thank you, Naga, and good morning, Debra.

I would also like to recognize the steady progress.

Speaker Change: Our <unk> integration, which contributed to our sales and EBITDA margin performance in the quarter.

Speaker Change: We continue to be excited about the technology and precision agriculture end market as well as the engagement and energy of our new employees.

Speaker Change: I'll speak more about the enterprise performance in few minutes, but first I'll turn the call over to Steve to provide detailed perspective on our financial results for the quarter.

Steve: Thank you Naga and good morning to everyone.

Stephen F. Shamrock: On slide number five, you'll see first quarter fiscal 2024 sales were $633 million, an increase of 4% compared to the prior year's first quarter sales of $610 million. This was driven by a favorable 5% benefit from the RREG Act, partially offset by an orgy.

Steve: On slide number five you'll see first quarter fiscal 2024 sales were $633 million in.

Steve: An increase of 4% compared to the prior year's first quarter sales of $610 million.

Steve: This was driven by a favorable 5% benefit from the <unk> acquisition, partially offset by an organic decrease of 2%.

Stephen F. Shamrock: Subs by www.zeoranger.co.uk Consistent with prior quarters, the organic sales decrease was primarily volume, partially offset by price as we continue to pass through year-over-year cost inflation. As Naga referenced, strength in our industrial and medical product lines was offset by ongoing..., and our electronics product gross profit, excluding non-recurring inventory step-up amortization in both periods, totaled $351 million for the first quarter of fiscal 2024 compared to $333 million in the prior year first quarter. This improvement in adjusted gross margin of approximately one hundred base dollars reflects the combination of factors with our NDS Next growth framework. We are focusing on top products driving a favorable product. During the quarter, we also had higher parts sales and improved factory efficiency, which helped drive the year. As we execute the ASCEND strategy and build scale through strategic acquisitions EBITDA is increasingly important as a key profitability measurement. EBITDA was adjusted for acquisition-related items in both periods. A total of $197 million.

Steve: Consistent with prior quarters. The organic sales decrease was primarily volume partially offset by price as we continue to pass through year over year cost inflation.

Steve: Naga referenced in our industrial and medical product lines were offset by ongoing weakness in our electronics product lines.

Steve: Gross profit, excluding non recurring inventory step up amortization in both periods totaled.

Steve: Total of $351 million for the first quarter of fiscal 2024 compared to $333 million in the prior year first quarter.

Steve: This improvement in adjusted gross margin of approximately 100 basis points.

Steve: Reflects a combination of factors.

Steve: With our NDS next growth framework, we are focusing on top products driving a favorable product mix.

Steve: During the quarter, we also had higher part sales and improved factory efficiencies, which helped drive the year over year improvement.

Steve: As we execute the strategy and build scale through strategic acquisition.

Steve: EBITDA is increasingly important as a key profitability metrics.

Steve: EBITDA adjusted for acquisition related items in both periods.

Steve: <unk> totaled $197 million or 31% of sales.

Stephen F. Shamrock: 31% of sales, a 9% increase over the prior year of 181, driven by improved gross margins and cost controls, as well as contribution from the RRAG Act. Looking at non-operating expenses, net interest expense increased $10 million, associated with higher debt levels and increased interest rates.

Steve: 9% increase over the prior year EBITDA of $181 million.

Steve: Driven by improved gross margins and cost controls as well as contribution from the <unk> acquisition.

Steve: Looking at non operating expenses.

Steve: Net interest expense increased $10 million associated with higher debt levels and increased interest rates.

Stephen F. Shamrock: Other net expenses decreased $3 million, primarily related to lower foreign exchange losses compared to the prior year. Tax expense was $29 million for an effective tax rate of 21% in the quarter, which is in line with the prior year rates and our guidance range for 2020. Net income in the quarter totaled $110 million, for $1.90 per share. Adjusted earnings per share, excluding non-recurring acquisition costs and amortization of acquisition-related intangibles of $23 million. Total revenue was $2.21 per share.

Steve: Other net expenses decreased $3 million, primarily related to lower foreign exchange losses compared to the prior year.

Steve: Tax expense was $29 million for an effective tax rate of 21% in the quarter.

Steve: Which is in line with the prior year rate and our guidance range for 2024.

Steve: Net income in the quarter totaled $110 million.

Steve: Or $1 90 per share.

Steve: Adjusted earnings per share, excluding nonrecurring acquisition costs and amortization of acquisition related intangibles of $23 million.

Steve: Totaled $2 21 per share a 3% increase from the prior year adjusted earnings per share amount of $2 14.

Stephen F. Shamrock: 3% increase from the prior year adjusted earnings per share amount of $2.14. This improvement continues to demonstrate the benefits of our successful execution of the ASCEND strategy. Now let's turn to slides six through eight to review the first quarter 2024 segment performance. Industrial precision solution sales of $355 million increased 14% compared to the prior year first quarter. Driven by the R.I.G.U.C., as well as increased sales in our industrial coatings, polymer processing, and nonwoven systems, organic sales increased 2% over the prior year first quarter, continuing to build upon a record fiscal 2023 for this sector.

Steve: This improvement continues to demonstrate the benefits of our successful execution of the strategy.

Steve: Now, let's turn to slide six through eight to review the first quarter 2024 segment performance.

Steve: Industrial precision solutions sales of $355 million increased 14% compared to the prior year first quarter driven.

Steve: Driven by the <unk> acquisition.

Steve: As well as increased sales in our industrial coatings polymer processing and nonwovens businesses.

Steve: Organic sales increased 2% over the prior year first quarter.

Steve: To build upon our record fiscal 2023 for this segment.

Steve: EBITDA, excluding <unk> acquisition related costs was $126 million in the first quarter.

Stephen F. Shamrock: Even though excluding RRAC acquisition-related costs was $126 million in the first quarter, for 36% of sales, an increase of 16% compared to the prior year of 109%. The increase in EBITDA was driven primarily by the R.E.G.A.C., plus the organic sales growth of the baby. It's worth highlighting that this quarter marks 12 out of 13 consecutive quarters of EBIDTA growth and 11 to 13 quarters of organic year-over-year sales. On slide 7, you'll see medical and fluid solution sales of $160 million, increased 3% compared to the prior year's first, driven by another quarter of double-digit growth in our medical interventional solutions product line, offsetting softness in our medical fluid components and fluid solutions products. During the quarter, we started the anniversary of the weakness of last year's biopharma DSTAR, which was a significant headwind for this segment in fiscal 2020.

Steve: 436% of sales.

Steve: An increase of 16% compared to the prior year EBITDA of $109 million.

Steve: The increase in EBITDA was driven primarily by the <unk> acquisition.

Steve: The organic sales growth of the base business.

Steve: It's worth highlighting that this quarter marks 12 out of 13 consecutive quarters of EBITDA growth.

Steve: And 11 of 13 quarters of organic year over year sales growth.

Steve: On slide seven Youll see medical and fluid solutions sales of $160 million increased 3% compared to the prior year's first quarter.

Steve: Given by another quarter of double digit growth in our medical interventional solutions product line.

Steve: Offsetting softness in our medical fluid components and fluid solutions product lines.

Steve: During the quarter, we started to anniversary the weakness of last year's Biopharma, Destocking, which was a significant headwind for this segment in fiscal 2023.

Steve: First quarter, EBITDA was $60 million or 37% of sales.

Stephen F. Shamrock: First quarter EBITDA was $60 million, or 37% of the total, which is an increase of 7 million compared to the prior year. The 300 basis point improvement in EBITDA margin over the first quarter of 2023 is due primarily to a combination of factory efficiency gains and cost action, coupled with leveraging the organic growth in medical interventional. Turning to slide 8, you'll see advanced technology solution sales of $119 million, an 18% decrease compared to the prior year. The decrease in sales was driven by weakness across the sector.

Steve: Which is an increase of <unk> 7 million compared to the prior year EBITDA of $53 million $4, 34% of sales.

Steve: The 300 basis point improvement in EBIT margin over the first quarter of 2023 is due primarily to a combination of factory efficiency gains and cost actions.

Coupled with leveraging the organic growth in medical interventional solutions.

Steve: Turning to slide eight.

Steve: Youll see advanced technology solutions sales were $119 million.

Steve: An 18% decrease compared to the prior year first quarter.

Steve: The decrease in sales was driven by weakness across the segment.

Stephen F. Shamrock: Primarily electronic dispense products serving semiconductor and marble. First quarter EBITDA was $22 million, or 19% of sales, which trailed the prior year first quarter EBITDA of $31 million, excluding acquisition-related costs. The reduction in EBITDA was tied to the overall decrease in volume, while favorable mix and cost reduction actions contributed to 32% decremental margins on adjusted operating profits. This is ahead of our decremental target of approximately 55. Finally, turning to the balance sheet and cash flow on slide. At the end of the first quarter, we had cash of $136 million, and our debt was $1.5 billion.

Steve: Primarily electronics defense products, serving semiconductor end markets.

Steve: First quarter, EBITDA was $22 million or 19% of sales.

Steve: Which trailed the prior year first quarter EBITDA of $31 million <unk>.

Steve: Excluding acquisition related costs.

Steve: While the reduction in EBITDA was tied to the overall decrease in volume favorable mix and cost reduction actions contributed 32% decremental margins on adjusted operating profit.

Steve: This is ahead of our decremental target of approximately 55%.

Steve: Finally, turning to the balance sheet and cash flow on slide nine.

Steve: At the end of the first quarter, we had cash of $136 million and net debt was $1 5 billion.

Stephen F. Shamrock: Resulting in a leverage ratio of 1.8 times based on the trailing 12-month period. We continue to have significant available borrowing capacity to pursue organic and inorganic growth opportunities. I also want to highlight our strong cash flow. Free cash flow was $165 million, a first quarter record and $51 million improvement from the prior year. As a percentage of that income, free cash flow was 150% in the quarter.

Steve: <unk> and a leverage ratio of one eight times based on the trailing 12 months EBITDA.

Steve: We continue to have significant available borrowing capacity to pursue organic and inorganic growth opportunities.

Steve: I also want to highlight our strong cash flow performance.

Steve: Free cash flow was $165 million.

Steve: First quarter record and $51 million improvement from the prior year.

Steve: As a percentage of net income free cash flow was 150% in the quarter.

Stephen F. Shamrock: We strategically deployed this strong cash flow in the past. We repaid $107 million of debt, paid $39 million in dividends, and spent $3 million on share repurchases under our 10B51, buying back approximately 15,000 shares of company stock at an average price of $212.00, for modeling purposes for the full fiscal year. Assume an estimated effective tax rate of 20 to 22 percent.

Steve: Strategically deploy the strong cash flow in the quarter.

Steve: We repaid $107 million of debt.

Steve: Paid $39 million in dividends.

Steve: And spent $3 million on share repurchases under our <unk> one plan.

Steve: Buying back approximately 15000 shares of company stock at.

Steve: At an average price of $212 per share.

Steve: For modeling purposes for the full fiscal year.

Steve: Assume an estimated effective tax rate of 20% to 22%.

Stephen F. Shamrock: Capital expenditures of approximately $40 million to $50 million, and net interest expense of $0.74 to $0.78. I want to thank the Nordson team for all of their efforts in delivering another strong, We'll now turn to slide 10, and I'll turn the call back. Thanks, Steve. The Nordson team is getting off to a good start to the fiscal 2020, as I travel to our site. I have the privilege of witnessing.

Steve: Capital expenditures of approximately 40 million to $50 billion.

Steve: Net interest expense of $74 million to $78 million.

Speaker Change: I want to thank the nordson team for all of their efforts in delivering another strong quarter.

Speaker Change: We will now turn to slide 10, and I'll turn the call back to Naga.

Naga: Thanks, Steve.

Naga: <unk> team is getting off to a good start to the fiscal 2024.

Naga: As I travel to our sites.

Naga: I had the privilege of witnessing the impact of our <unk> strategy and building a stronger nordson that is delivering robust operating performance.

Sundaram Nagarajan: The impact of Ascent's strategy in building a stronger Nordson that is delivering robust operating performance. Nordson is sustaining market-leading positions in diversified end markets through its close-to-the-customer business model and differentiated precision technology. Now, NBS Next has become a new core strength and is manifested in how we operate our business. Using data, our teams have a crystal clear view of the profitable growth opportunities in each division, coupled with an entrepreneurial owner mindset. They are making choices on where they should prioritize growth, as well as where they must simplify, for example. The Industrial Coatings team worked with a significant automotive customer on a new electric battery application.

Naga: Nordson is sustaining market leading positions in diversified end markets through our close to the customer business model and differentiated position technology now.

Naga: Now NBS next has become a new core strengths and as manifested in how we operate our businesses.

Naga: Using data.

Naga: Just kind of a crystal clear view of the profitable growth opportunities in each division, coupled with an entrepreneurial owner mindset.

Naga: They are making choices on where they should prioritize growth as well as they have been.

Naga: <unk> simplified.

Naga: For example.

Naga: Industrial coatings team worked with a significant automotive customer on a new electric battery application.

Sundaram Nagarajan: They worked closely with the customer and were able to meet its needs with a standard product. Our efforts to standardize top product configurations and eliminate complex customization drove agile execution, shortening lead times, and allowing them to be more responsive to the dynamic changes in customer needs. Our medical interventional solutions team has identified its top products and implemented a visual demand-based manufacturing or Kanban-based manufacturing system for their products. This has led to a significant improvement in their on-time delivery performance over the last six months. The team had a big win when one of our medical device customers placed a large order, and the team was able to respond quickly, serving dynamic changes in demand and delighting this top customer. As I mentioned at the beginning of the call, the decisions our teams are making to focus on top products serve our customers well, enhance our product mix, and improves our gross margin.

Naga: It worked closely with the customer and we're able to meet its needs with a standard product.

Naga: To standardized top product configurations, and eliminates complex customization drove <unk>.

Naga: Execution.

Naga: I mean lead times.

Naga: Allowing them to be more responsive to the dynamic changes in customer needs.

Naga: Our medical Interventional solutions team has identified its stock products and implemented.

Naga: Visual demand based manufacturing, our kanban based manufacturing system for their products.

Naga: This has led to significant improvement in their on time delivery performance over the last six months.

Naga: The team had a big win with one of our medical device customers placed a large order.

Naga: And the team was able to respond quickly.

Naga: Serving dynamic changes in demand and delighting this top customer.

Naga: As I mentioned at the beginning of the call the decisions our teams are making to focus on top products.

Naga: Serves our customers well.

Naga: Enhances our product mix and improves our gross margins.

Sundaram Nagarajan: In addition, their work on simplification resulted in strategic cost actions that contributed to our profitability in this. It is exciting to see NBS Next becoming a competitive advantage for Nordson and how the steady deployment across Nordson is positively impacting our financial performance. Our end markets are performing as expected at the start of our fiscal year. Industrial and consumer non-durable end markets are steady.

Naga: In addition, their work on simplification resulted in strategic cost actions that contributed to our profitability in this quarter.

Naga: It is exciting to see MBS mix, becoming a competitive advantage for nordson and how the steady deployment across nordson is positively impacting our financial results.

Sundaram Nagarajan: The ARAG integration is going well, and the team contributed to our sales and EBITDA margin performance in the quarter. Our medical interventional solutions product lines continue to grow double digits buoyed by trends in non-invasive surgery and the aging population. We have now anniversaried the negative impact of biopharma destocking that was a headwind in fiscal 2023.

Sundaram Nagarajan: We're seeing modest pickup in order entry within the fluid components product line, which we are monitoring closely. Our guidance does not expect any significant pickup in biopharma growth short-term, and product lines exposed to the semiconductor electronic cycle experienced weaker demand as expected in the first quarter. We remain very positive about the growth opportunities driving the next electronic cycle, including AI. Automotive Electronics.

Naga: And Biopharma growth short term.

Naga: Our product lines exposed to the semiconductor electronic cycle.

Naga: <unk> we.

Naga: Weaker demand as expected in the first quarter.

Naga: We remain very positive about the growth opportunities driving the next electronic cycle, including AI.

Naga: The motive electronics.

Sundaram Nagarajan: Onshore outsourcing, the CHIPS Act, and more. While we fully expected to see benefits of those opportunities in the second half of calendar 2024, we now realize it may be closer to the end of the year. As the year progresses, we plan to provide investors with better visibility into what we are seeing in the market. Through all of this, our ATS leaders have done a very good job of implementing the NBS Next Growth Framework and positioning themselves for future growth. This includes positioning operations closer to the customer, focusing on differentiated product innovation, and making Strategic Cost Adjustments.

Naga: I'm sharing ships act and more.

Naga: Wildly fully expected to see benefits of those opportunities in the second half of calendar 2024.

Naga: We now realize it may be closer to the end of the year.

Naga: As the year progresses, we planned to provide investors with better visibility to what we have seen in the market.

Naga: Through all of this are atheists leaders have done a very good job of implementing the NBS next grope framework and positioning themselves for future growth.

Naga: This includes positioning operations closer to the customer.

Naga: Focusing on differentiated product innovation and.

Naga: And making strategic cost adjustments.

Naga: A T S ability to outperform their detrimental targets in the quarter.

Sundaram Nagarajan: ATS' ability to outperform their decremental targets in the quarter is a testament to this work. Turning now to our outlook on slide level, we enter the second quarter with approximately $750 million in value.

Naga: Testament to this work.

Naga: Turning now to our outlook on slide 11.

Naga: Re enter the second quarter with approximately $750 million in backlog.

Naga: This backlog remains concentrated in our systems businesses.

Sundaram Nagarajan: This backlog remains concentrated in our systems businesses. However, customer order entry patterns have returned to historical norms in the rest of the business, based on current visibility and order entry trends. We are narrowing our previously issued full-year revenue growth forecast to 4% to 7% over record fiscal 2020. Full-year fiscal 2024 earnings are forecasted to be in the range of 2% to 7% growth per diluted share. This full-year guidance continues to assume a neutral impact from FX rates and the AIRAG acquisition, contributing approximately 5% growth at the midpoint of guidance, while we have raised the low end of our guidance. The lower midpoint of the range is now assumed. Recovery of Semiconductor Electronics, NMARC, begins in the fourth quarter of fiscal 2024.

Naga: Well customer order entry patterns have returned to historical norms and the rest of the businesses.

Naga: Based on current visibility and order entry trends.

Naga: We are narrowing or previously issued for me your revenue growth.

Naga: Two 4% to 7% over a record fiscal 2023.

Naga: Full year fiscal 2000, 2004 earnings are forecasted to be in the range of 2% to 7% growth.

Naga: Diluted share.

Naga: This full year guidance continues to assume a neutral impact from FX rates.

Naga: Eric acquisition, contributing approximately 5% growth at the midpoint of guidance.

Naga: While we have raised the low end of our guidance.

Naga: The lower mid point of the range now assumes.

Naga: Recovery of the semiconductor electronics and markets begins in the fourth quarter of fiscal 2024.

Sundaram Nagarajan: For the second quarter of fiscal 2024, sales are forecasted to be in the range of $645 million to $670 million, with adjusted earnings in the range of $2.20 to $2.35 per diluted share. Second quarter guidance considers weaker electronics and markets and the impact of the Chinese New Year shutdown. Before we open our call for questions... I wanted to recognize two new additions to our board of directors. In January, we welcome Chris Mapes, Executive Chairman and recently retired President and CEO of Lincoln Electric Holdings, as well as a director at A.O. Smith and the Timken Company.

Naga: For the second quarter of fiscal 2024.

Naga: Forecasted to be in the range of $645 million to $670 million with adjusted earnings in the range of.

Naga: $2 22.

Naga: $2.35 or diluted share.

Naga: Second quarter guidance.

Naga: Considers reeker electronics and markets and the impact of the Chinese new year shutdown.

Naga: Before we open our call for questions.

Speaker Change: I wanted to recognize two new additions to our board of directors.

Naga: In January we welcome Chris Mapes Executive Chairman and recently retired President and CEO of Lincoln Electric Holdings.

Naga: As well as director add Aerosmith, and the Timken company.

Naga: Chris brings a wealth of global operations.

Sundaram Nagarajan: Chris brings a wealth of global operations, M&A, and industrial experience to our board. Throughout his career, he has demonstrated a track record of operating performance improvement and shareholder value creation. Earlier this week, we announced the appointment of Annette Clayton to our board, effective April 1st.

Naga: Mmk and industrial experience to our board.

Naga: Throughout his career, Chris has demonstrated track record of operating performance improvement and shareholder value creation.

Naga: Earlier this week, we announced the appointment of Clayton to our board effective April 1st.

Sundaram Nagarajan: And that is the chairwoman and former president and CEO of Schneider Electric North America. Her career grew from production floor experience at General Motors to global operations and supply chain leadership. Dell Technologies, to her leadership at Schneider, focused on digital automation and energy management.

Naga: And that is the chairwoman and former president and CEO of Schneider Electric North America.

Naga: Courier grew from production flower experience at General Motors to global operations and supply chain leadership at Dell technologies.

Naga: To her leadership at Snyder, which focused on digital automation and energy management.

Operator: In addition to her global operations and technology industry experience, and having direct familiarity with Nordson's differentiated products and value proposition, both Chris and Annette will bring unique insights and value to our Board of Directors. We look forward to benefiting from their counsel as Nordson continues to grow and scale according to the ASCEND strategy. As always, I want to thank our customers, shareholders, and the Nordson team for your continued support. With that, we will pause and take your questions. As a reminder, if you would like to ask a question, please press star followed by the number one on your telephone keypad. Your first question comes from the line of Matt Summerville from D.A. Davidson.

Naga: In addition to a global operations and technology industry experience.

Naga: And that has direct familiarity with nonsense differentiated products and value proposition.

Naga: Both Chris and then that will bring unique inside and value to our board of directors.

Naga: We look forward to benefiting from their counsel as nordson continues to grow in scale to the SSN strategy.

Naga: As always I want to thank our customers shareholders and the notes and team for your continued support.

Naga: That we will pass and take your questions.

Naga: As a reminder, if you would like to ask a question. Please press star followed by the number one on your telephone keypad. Your first question comes from the line of Somerville from Ta Davidson. Please go ahead.

Matt J. Summerville: Please go ahead. Thanks. A couple of questions. First, on the ATS business, what sort of transpired in the last, you know, since the last call? That has kind of prompted you to push out, Naga, if you will, a quarter or so of the inflection that you've been talking about in electronics and semiconductor. And similarly, what gives you confidence that we're going to see something materialize. Yeah, thank you

Somerville: A couple of questions first.

Somerville: T S business.

Somerville: What sort of transpired in the last since the last call.

Somerville: That has prompted you to push out longer if you will.

Somerville: Quarter so.

Somerville:

Somerville: Inflection that <unk>.

Somerville: Talking about with electronics in the semiconductor Similarly, what gives you confidence that we're going to see something materializes us here.

Speaker Change: Thank you Matt.

Sundaram Nagarajan: A couple of things, what we would tell you is the demand for or shipments for ATS in the quarter was as expected, you know, weaker than we had expected, but the order entry has not picked up as we had hoped. The inflection in order entry, this is sort of the precursor to having shipments in the following quarters. So, that is really what has happened in our thinking is that this cycle inflects maybe a quarter later than we had hoped. But a couple of other things I will add to this that are really important to keep in mind, first and foremost. You know, being the back half of the year, clearly, comps get much easier for them.

Speaker Change: And a couple of things what we would tell you is the demand our shipments for Ats in the quarter was as expected weaker SBA had expected, but the order entry has not.

Speaker Change: Picked up as we had hoped the inflection in order in case, it just sort of the precursor to having shipments in the following quarters. So.

Speaker Change: That is really what has happened and I was thinking is that this cycle in flex maybe a quarter later than what we had hoped but.

Speaker Change: Couple of other things I will add to this that is really important to keep in mind.

Speaker Change: First and foremost.

Speaker Change: The back half of the year, clearly commscope much easier for the business.

Sundaram Nagarajan: The second thing I would also... We have backlogs, which are, you know, expected customer shipments, you know, customer designated shipments in the second. And then the third thing I would note for you is that we are beginning to see in a very small way in some niche businesses where we supply UV lamps to some front-end semiconductor manufacturing customers. Order of Entry is very nicely up when compared to last year. You know, it is a small part of the business, but it's a good early indicator. In the same way, if you think about our electronic adhesives packaging businesses where we sell the barrels, we also see some pickup in business there, order entry, and shipment. So, a couple of early indicators. And finally, what I will tell you is that our opportunity pipeline for projects with conversations with customers still remains robust. Nothing really has been shelved or put away.

Speaker Change: Second thing I would also note.

Speaker Change: We have backlog.

Speaker Change: Which have.

Speaker Change: Expect a customer's shipments customer designated shipments in the second.

Speaker Change: And then the third thing I would note for you is that we are beginning to see in a very small way in some niche businesses, where resupply UV lamps too.

Speaker Change: Some front end semiconductor manufacturing customers.

Speaker Change: Order entry.

Speaker Change: Very nicely upland compared to last year, you know does this small part of the business, but it's a good early indicators.

Speaker Change: Same way if you think about our.

Speaker Change: Electronic.

Speaker Change: Packaging businesses by resale the barrels we also see some.

Speaker Change: Pick up in business, there order entry and shipments so a couple of other indicators and finally, what I will tell you is that our opportunity pipeline for projects with conversations with customers still remained dramatic robust nothing really has.

Speaker Change: Being shelved or put away.

Sundaram Nagarajan: So, you know, order entry is not turned yet. That is probably the takeaway you could have. But we have enough evidence in the business to feel strongly about how the second half plays out for this business. So, maybe I'll stop there. Yeah, yeah, thanks for the color Naga and just is a follow up sticking with ATS.

Speaker Change: So.

Speaker Change: Order Antaeus not turned yet that is probably the takeaway you could have but we have enough evidence in the business to feel strongly about how the second half place up for this business.

Speaker Change: So maybe I'll stop there.

Speaker Change: Yeah.

Speaker Change: Thanks for the colored lager, and just as a follow up sticking with Ats it sounded like and they're prepared remarks that you saw maybe a fairly broad request across the segment, maybe implying that the test of inspection investment cycle, you been seeing last 18 months or so is starting to roll over is that the proper conclusion.

Matt J. Summerville: It sounded like in their prepared remarks that you saw maybe a fairly broad weakness across the segment, maybe implying that the test and inspection investment cycle you've been seeing the last, you know, 18 months or so is starting to roll over. Is that the proper conclusion to be drawing here? Thanks.

Speaker Change: Can be drawing here. Thank you.

Sundaram Nagarajan: Yeah, in terms of the custom inspection, you know, we have had some very robust growth in the last cycle and past our dispense business. So what you're really seeing is some strong comparisons that are difficult to keep up with. What I would tell you and what has been our experience is that the test and inspection business's cyclicality is much more muted when compared to our dispense business. That is a distinct difference.

Speaker Change: Yeah in in terms of the testing and inspection we have had some very robust.

Speaker Change: Growth in the last you know the.

Speaker Change: The cycle and passed or dispense business. So what you're really seeing is some strong comparisons that are difficult to keep up with.

Speaker Change: What I would tell you in what has been our experience is that.

Speaker Change: <unk> inspection business cyclicality is much more.

Speaker Change: Muted when compared to dispense business that is a distinct difference, but yes. It does go through a cycle and comps are also in its way.

Sundaram Nagarajan: But yes, it does go through a cycle, and comps are also in it. Thanks a lot, guys. Thank you. Your next question comes from the line of Allison Poliniak from Wells Fargo. Please go ahead.

Speaker Change: <unk>. Thank.

Speaker Change: Thank you.

Speaker Change: Yeah. Our next question comes from the line is Alison <unk>. Please go ahead.

Allison Poliniak: Hi, good morning. Good morning. I just want to turn on MFS.

Alison: Hi, good morning good.

Speaker Change: Bonnie.

Alison: Currently I'm at that and.

Sundaram Nagarajan: I guess you know we had a little return to growth here, but there's obviously some headwinds still in that segment. Could you maybe talk to any structural challenges if there are any with that business in terms of maybe even competitive dynamics that would limit it to that kind of returning to that high single-digit growth or nothing in the way it's just sort of cyclical and you expect to achieve that at some point going forward? Just any thoughts there? Yeah. You know MFS is a return to growth. And to your question about whether we see any structural changes in our own position or the landscape? The answer is no.

Speaker Change: I guess we had.

Alison: Alright.

Alison: I'm trying to grow up here, there's obviously some some headwinds tell him that and that segment could you maybe talk to any structural challenges. If there are any with that business in terms of maybe even competitive dynamics.

Speaker Change: That would eliminate that kind of returning to that high single digit <unk> nothing in a way it's sort of technical.

Speaker Change: Can see that complaint claim alright.

Speaker Change: Yeah.

Speaker Change: Mfs's returned to growth.

Speaker Change: And to your question about do we see any structural changes in our own physician or the landscape. The answer is no.

Sundaram Nagarajan: If you look at our medical interventional business, it is growing double digits, and it continues to grow double digits. And we expect this business to continue to grow high single digits. What you have in MFS is this medical fluid component, which had the myofarma exposure last year, a significant decline, right? And so that significant decline essentially put MFS in a negative growth last year. But that is an anniversary.

Speaker Change: If you look at our medical intervention on business. It is growing double digits continues to grow double digits.

Speaker Change: And we expect this business to continue to grow high single digits. Once you have an <unk>.

Speaker Change: This medical fluid components, which had that might biopharma.

Speaker Change: Exposure last year was a significant.

Speaker Change: Right and so that's significant decline essentially put.

Speaker Change: M F as in a negative growth last year.

Speaker Change: But that is anniversary.

Sundaram Nagarajan: So what we are beginning to see is a modest pickup in order entry in this business, not from Biopharma, but from other end markets this business serves. We serve patient care, we serve surgical applications, and we see pretty good order entry there. And so that is what you're seeing in terms of, you know, over time, you're going to find that MFS returns to high single digits.

Speaker Change: And so what we are beginning to see is a modest pick up in order entry.

Speaker Change: In this business not from Biopharma, but from.

Speaker Change: Other end markets. This business serves me, Sir patient care reserves surgical applications, and we see pretty pretty good order entry there and so that is what you're seeing in terms of.

Speaker Change: Over time, what you're going to find us is half.

Speaker Change: <unk> returned to high single digits.

Sundaram Nagarajan: And you have the fluid solutions business in there as well, which has a broad, diversified exposure beyond medical. And so that business is also tied a little bit to electronics, and we're beginning to see some pickup there.

Speaker Change: And you have the fluid solutions business in there as well, which has a broad diversified exposure beyond medical and so that business is also tied a little bit to electronics and we are beginning to see some pick up there.

Speaker Change: Got it and then Ips I think you talked about what about patterns starting to normalize their you know anything that you know everything instead of a red flag or does it seem pretty consistent in terms of what you're seeing in terms of demand for products in that business as well.

Sundaram Nagarajan: And then IPS, I think you talked about order patterns starting to normalize there. Anything that I would say is sort of a red flag, or does it seem pretty consistent in terms of what you're seeing in terms of demand for products in that business as well? IPS, steady.

Speaker Change: Uhm Ips steady.

Sundaram Nagarajan: Order entry has steadied pretty well, but. You know, look, we've been growing in this business for 11 out of 13 quarters, pretty remarkable growth. So, you know, order entries normalized, what we mean is that order entry patterns are similar to pre-cope.

Speaker Change: Order entry is steadied pretty good but.

Speaker Change: Look we have been growing in this business for <unk> about 13 quarters, I mean pretty remarkable growth. So.

Speaker Change: Entries normalized what we mean is that order entry patterns are similar to pre court, that's what we mean by that.

Sundaram Nagarajan: That's what we mean by that. What we also see is that you have a strong backlog in big system business, like our industrial coatings product line and our polymer process product line, that will essentially help us get through this year. And then, you know, it is good to remember that ARAG is in this segment and is going to contribute 5% to our organic growth this year. So we feel really good about IPS. So the way to think about it, you know, if I were to summarize the two questions, one from Matt and one from you, I would tell you.

Speaker Change: Or we also see.

Speaker Change: That you have strong backlog in big system business like our industrial coatings product line and Fatima processed product line dappled essentially helped us get through this year.

Speaker Change: And then you know.

Speaker Change: It is good to remember <unk> as in this segment and is going to contribute 5% organic growth. This year. So we feel really good about Ips. So the way to think about it if I were to summarize the the two questions one format and from you I would tell you.

Speaker Change: Ips steady alright, contributing 5% of the growth.

Sundaram Nagarajan: IPS study, R.I. contributing 5% to the growth, MFS returning to growth, pretty nice growth, and then ATS, we are expecting that we will start to recover in the fourth quarter of this year. So if you put all of that together, that is sort of what we have in terms of at the midpoint, about 5% revenue growth. Great, thanks so much.

Speaker Change: <unk> returned to growth pretty nice growth and then.

Speaker Change: S. We're expecting that we will start to recover in the fourth quarter of this year. So if you put all of that together that is sort of what we have in terms of at the midpoint about 5%.

Speaker Change: Revenue growth in the top line.

Speaker Change: Great Thanks for that.

Sundaram Nagarajan: Thank you. Your next question comes from the line of Sari Boroditsky from Jeffreys. Please go ahead. Hi, good morning.

Speaker Change: Thank you.

Speaker Change: Yeah. Our next question comes from the line of <unk> from Jaffray's. Please go ahead.

Speaker Change: Hi, good morning good.

Sari Boroditsky: I believe Book to Build was below one again this quarter, so when would you expect this to turn positive, and how do you think about backlog levels as you exit this year? Yeah, you know, if you look at our backlog, as we have noted in our release, as well as in our conversations, 750 million, it is higher than where we normally would run for this size of a business. A historic normalized level will be about 600, $650 million, something like that.

Jaffray: Good morning, Sir.

Speaker Change: I agree.

Jaffray: <unk> corner. So when would you expect us to turn positive how do you think about backlog levels actually.

Speaker Change: Sure.

Speaker Change: Yeah, you know if you look at our backlog as as we have noted in a release as well as in our conversations.

Speaker Change: $750 million it is higher than where we normally would run for the size of a business.

Speaker Change: A historic Normalised level will be about $600 million to $650 million something like that.

Speaker Change:

Sundaram Nagarajan: Order entry in most businesses has returned to normal order patterns. What we mean by that is we don't have any anxiety in the customer, right?

Speaker Change: Order entry in most of the businesses.

Speaker Change: Have returned to normal order package. So what do you mean by that is we don't have.

Speaker Change: Any anxiety in the customer.

Speaker Change: Order patterns right. So you could go back.

Stephen F. Shamrock: So, you know, if you go back, even four quarters ago, you still had people who were still concerned about supply chain constraints, and that doesn't exist anymore. So I would say the vast majority of our business's order entry has gotten to historical levels, and the organic growth is based on those order entry rates. And maybe another data point I'd add to, Sarah, as well, just to Naga's comments. I mean, if you think about, you know, the backlog, we consumed about 200 million last year for the full year as we, you know, transition more to a normalized environment. And in 2021, we consumed about 50 million.

Speaker Change: Even four quarters ago, you still had people.

Speaker Change: Might be still concerned about supply chain constraints and that doesn't exist anymore. So I would say a vast majority of our businesses order entry has gotten to assess Arctic levels in the organic growth are based on those order entry rates.

Speaker Change: Yeah, maybe another data point I'd add to Sarah as well just in August comments I mean, if you think about the backlog, we concerned about 200 million and last year for the full year as we transition Marcela normalised environment and the one we consumed about 50 million. So we're still on that I'll say normalized pace.

Stephen F. Shamrock: So we're still on that, I'll say, normalized pace. Okay. Thanks for the color.

Speaker Change: Okay. Thanks for the color.

Sari Boroditsky: So you know the impact of the Chinese New Year in the second quarter. I believe in the past you've talked about it being a $15 to $20 million impact. So would that still be the right way to think about the shift for this year? Yeah, no, Sarah. What I would tell you, I think, as I think about, you know, the second quarter and the guidance we gave and, you know, the timing of the Chinese New Year, I'd say, is roughly about a 10 to 15 million dollar impact. That's what we're seeing. And if you really think about that, right, the guidance that we gave for the second quarter here at the midpoint, we've got sales growth of 1%, which would imply, you know, negative organic growth of 4% because, again, we're still expecting our ag to contribute 5% and FX to be neutral.

Speaker Change: No the impact of a tiny here and the second corner operate in a positive talked about it being a kitchen with plenty 99 impact so that's to be the great thing about <unk>. Thanks.

Speaker Change: Yeah, no Sarah what I, what I would tell you I think as I think about the second quarter and the guidance we gave in.

Speaker Change: The timing of the Chinese new year, I would say is roughly about 10 to 15 million dollar impact that that's what we're seeing.

Speaker Change: And if you really think about that right. The guidance that we gave for the second quarter here at the mid point, we've got sales growth of one per plan.

Speaker Change: Which would imply negative organic growth of 4% again, we're still expecting a rag to contribute five per cent and the effects of a neutral.

Sari Boroditsky: If you think about that, that's about half of that negative organic growth coming from the Chinese New Year. So, and obviously, we had the opposite effect in Q1 as well. Right? So, even on a quarter to quarter basis, the organic growth rates in Q2 are not as bad on the surface as they look based on that. Appreciate the color.

Speaker Change: If you think about that that's about half of that negative organic growth is coming from the Chinese new year. So.

Speaker Change: And obviously, we had the opposite effect in Q1 as well right. So even on a quarter to quarter basis. The ORC.

Speaker Change: Ganic growth rates in Q2 or not is is not as bad on the surface as a as a look based on that.

Speaker Change: I prefer to call and thank you.

Speaker Change: Yeah. Our next question comes from the line is not Mike Halleran from third. Please go ahead.

Sari Boroditsky: Your next question comes from the line of Mike Halloran from Baird. Please go ahead. Good morning, everyone.

Michael Patrick Halloran: Good morning, everyone Monday.

Speaker Change: Monday morning.

Michael Patrick Halloran: Just want to follow up on that last comment there. Maybe you could talk about the seasonality as you think of the year here, right? I think this is the first year that I can see in my numbers that wasn't up sequentially, at least double digits. It's not handsomely in the double digit level.

Michael Patrick Halloran: Just wanted to follow up on that last commentary, maybe you could talk about the seasonality as you think of the year here right.

Speaker Change: I think this is the first year that I can see my number is that.

Michael Patrick Halloran: Wasn't up sequentially at least double digit handsomely in the double digit level. So I get the Chinese new year impact I get that you're shifting the semiconductor recovery to the back half of the year, It's just making sure there's nothing else going on with the usual second quarter.

Stephen F. Shamrock: So I get the Chinese New Year impact. I get that you're shifting the semiconductor recovery to the back half of the year, just making sure there's nothing else going on with the usual second quarter. And then when you get to the back half of the year, can you help that cadencing and maybe help us out relative to normal seasonality? In other words, are you shifting that significant kind of sequential uptick into the third quarter? Is this more steady in the third quarter versus 2Q and then a more sizable uptick in the fourth quarter? Yeah, Mike, I'll start with that from that perspective. I mean, if you look at the second quarter guide there, right? What I would tell you is, you know, what you're not seeing, you know, again, is the weakness in the electronics and market. Right? That's also weighing down the second quarter as well in the APS segment, right?

Michael Patrick Halloran: And then when you get to the back half of the year can you help her that he didn't sing and maybe help us out relative to normal seasonality in other words are you shifting that significant kind of sequential uptick into the third quarter is this more steady in the third quarter versus two Q and then a more size will have taken the fourth quarter.

Speaker Change: Yeah, My I'll I'll start with that from that perspective, I mean, if you look at the at the second quarter guide their right what I would tell you is.

Speaker Change: What you're what you're not seeing.

Speaker Change: When is the weakness in electronics and market right.

Speaker Change: Also weighing down.

Speaker Change: The second quarter as well in the I T. S segment right. So from that perspective, if I think about the second half is not a reference earlier you know the cops should get easier for sure from from an a T S perspective.

Stephen F. Shamrock: So, from that perspective, if I think about, you know, the second half, as Naga referenced earlier, the cost should get easier for sure from an APS perspective, particularly with the expected pickup in the fourth quarter, so I think that's what gives us confidence there. And if we talk about, you know, seasonality and how that works from quarter to quarter, at least with respect to ATS. Okay, um... And then, can you just talk about the trends within AARG and what the expectation is there? Less thinking about the kind of impact you're going to get from that, and more thinking about what are the underlying trends you're seeing? How does that compare on more of an organic basis than in a context on the outside? Mike, that was on AIRAG, right?

Speaker Change: Particularly what they expected to pick up in the fourth quarter. So I think that's what gives us confidence Derek if we talk about seasonality and and how that works from quarter to quarter at.

Speaker Change: At least with respect to a T S.

Speaker Change: Okay Uhm.

Speaker Change: And then can you just talk about the terms with an ear ache and what's your what's the expectation is there.

Speaker Change: Let's take a.

Speaker Change: The impact you've already given I'm more thinking what are the underlying trends you see.

Speaker Change: How does that compare on more of an organic basis in any context.

Speaker Change: Well that was an error right you're breaking sir.

Sundaram Nagarajan: You were breaking. Yes, sir. Okay, all right. Thank you. On air, I'm going to, you know, make a couple of blocks. Broad comments. Hopefully, I will answer the questions because I had little trouble hearing you completely.

Speaker Change: Yes, alright, thank you.

Speaker Change: On Iraq.

Speaker Change: Couple of Brian.

Speaker Change: Broad comments, hopefully able to answer the questions because I had little trouble hearing you are completely so if I didn't cause I don't answer all of your questions. Please do follow up.

Sundaram Nagarajan: So if I didn't, if I didn't answer all of your questions, please do follow up. Integration is going very well. Great technology, a great team, contributed to sales and EBITDA margins, the differentiation of their product categories, and the resulting Gross margins, all confirmed during, you know, our ownership of the business here. So pretty excited about the business, how that is integrating all as well. From that point of view, we also expect AIRAG to contribute 5%. There is no change there.

Speaker Change: Integration is going very well.

Speaker Change: Great technology, great team.

Speaker Change: Tribute to sales and the bitter margins the differentiation of their product categories and the resolve things.

Speaker Change: Gross margins all confirmed during that you know.

Speaker Change: Ownership of the business here, so I'm pretty excited about the business how that is integrating.

Speaker Change: All is well from that point of view, we also expect that Eric defense will be at 5% that is no change there.

Sundaram Nagarajan: You know, a couple of things to remember about this business. Approximately 45% of the revenue is from aftermarket parts in this business. So most, many of these parts are short life replacement cycle businesses like nozzles that need to undergo, you know, more periodic replacement. If you think about it, you know, they sell mostly critical low cost components for their customers, which drive efficiency and reduce the usage of materially costly fluids like fertilizers and, And then the next point to remember about this business is. We're not tied to people selling tractors.

Speaker Change: Upload things to remember about this business.

Speaker Change: Approximately 45% of the revenue is aftermarket parts in this business. So most many of these parts are short life replacement cycle businesses like <unk>.

Speaker Change: Nozzles that'd be to undergo more periodic replacement.

Speaker Change: If you think about it.

Speaker Change: Sell mostly critical low cost components for their customers.

Speaker Change: Which drive efficiency and reduce usage of material costly fluids like fertilizer and chemicals.

Speaker Change: And then the next point to remember about this business is.

Sundaram Nagarajan: We're not tied to sell people selling tractors.

Sundaram Nagarajan: We're tied to folks that manufacture implements, implements that are used to spray, implements that are used to plant. And so from that perspective, even when you defer a large capex spend, you definitely try to update and continuously have better implements so that you can deliver on productivity and efficiency for an individual farmer or a farm organization. You know, we expect the business to be accretive to EBITDA for Nordson and slightly accretive to EPS when you exclude amortization. Hopefully, that gave you a broad overview of the past. Yeah, no, the broad overview, all that makes sense.

Sundaram Nagarajan: Hi to folks that manufacturer implements implements that are used to spray implements that are used to plant.

Sundaram Nagarajan: And so from that perspective, even when you differ a large capex spend.

Sundaram Nagarajan: Definitely try to update and continuously able to better implement so that you can deliver on productivity and efficiency for an individual farmer auto.

Operator: Organization.

Sundaram Nagarajan:

Sundaram Nagarajan: We expect the business to be accretive on EBITDA to nordson and slightly accretive two EPS venue exclude amortization so.

Sundaram Nagarajan: Hopefully that gave me a <unk>.

Speaker Change: Yeah, I know the <unk>. The proud of you all that makes sense I think the question was a little bit more geared to just current trends and how you're seeing those trends materialized in the market.

Michael Patrick Halloran: I think the question was a little bit more geared to just current trends and how you're seeing those trends materialize in the market. I, in terms of, Demand Trends. Is that what you're talking about, Mike?

Speaker Change: In terms of.

Speaker Change: Demand trends is that what you're talking about Mike.

Sundaram Nagarajan: Yes, sir. Because, you know, I certainly understand the contribution you're expecting from the 5%. Yeah, certainly. Yeah. Fair remarks.

Speaker Change: Yes, Sir because you know I certainly understand the contribution you're expecting to five per cent. Yeah. Certainly are prepared remarks, I understand the longterm component to it. So I I think just for the short term dynamics.

Sundaram Nagarajan: I understand the long-term component to it. But I think just for the short-term dynamics, particularly because you're hearing about Europe and just curious how that's impacting you, knowing that you do have a sizeable, Yeah. Europe is, the market is down. It does impact us a little bit, but not to the same extent as an implement, you know, a big tractor manufacturer or an implement manufacturer, since we are selling components. So it does have an impact, but not to the same extent as you've heard in the street, around 15, 20%. That's not what we're seeing. I appreciate it.

Sundaram Nagarajan: Because you're hearing about some slowdowns in Europe, and just curious how that's impacting you knowing that you do have a side as well.

Sundaram Nagarajan: Yeah.

Sundaram Nagarajan: Europe is the market is down.

Sundaram Nagarajan: It does impact us a little bit, but not to the same extent as an implement.

Sundaram Nagarajan: Big tractor manufacturer and implement manufacture since we are selling components. So it does have an impact but not to the same extent as you have heard in the street around 15 20 per cent, that's not what we're seeing the business.

Sundaram Nagarajan: Mmm.

Andrew Buscaldria: Thank you. As a reminder, if you would like to ask a question, please press star one on your telephone keypad. Your next question comes from a line Andrew Buscaldria from BNP Paribas. Please go ahead. Hey, good morning, guys. Good morning.

Speaker Change: Thank you.

Andrew Buscaldria: So.

Andrew Buscaldria: As a reminder, if he would like to ask a question. Please press star one on your telephone keypad. Your next question comes from the line <unk> <unk> BNP pair of it. Please go ahead.

Andrew Buscaldria: Hi, good morning, guys.

Andrew Buscaldria: Good morning.

Andrew Buscaldria: Just wanted to, you know, confirm the backlog as it relates to ATS. Um, do you see what's coming in Q4 through those orders from UV labs and electronics packaging, or is it something else?

Andrew Buscaldria: Just wanted to.

Andrew Buscaldria: Confirm that backlog.

Andrew Buscaldria:

Andrew Buscaldria: As it relates to Ats.

Andrew Buscaldria: You see you see what's coming in queue for through those orders from U V labs of electronics packaging or is it.

Andrew Buscaldria: Is it something else and just just trying to confirm.

Sundaram Nagarajan: I'm just trying to confirm your confidence that that could work. Yeah, probably two interrelated items that you mentioned, Andrew. So the first is the UV and the electronic packaging barrel. That's happening right now.

Sundaram Nagarajan: Confident that that <unk> that converts.

Speaker Change: Yeah, so so probably too.

Sundaram Nagarajan: Two interrelated items that you mentioned, Andrew so okay. The first on the <unk> and the electronic packaging barrels that's happening right now they are smaller parts of the company.

Sundaram Nagarajan: They are smaller parts of the company, but they're very good early indicators because they serve. So if you think about an electronic manufacturer or a finished device manufacturer, you're going to pick up the slack by increasing your manufacturing consumables, right? If you're not buying new lines, but you're increasing the usage of their existing lines.

Sundaram Nagarajan: But they are very good early indicators because they serve so if you think about electronic manufactured or.

Sundaram Nagarajan: Finish device manufacturer, you're going to pick up the slack by increasing your manufacturing consumables right you know if you.

Sundaram Nagarajan: You're not buying new lines, but you are increasing the usage of <unk> existing lines and so you would normally see that in our.

Sundaram Nagarajan: And so you would normally see that in our consumable barrel packaging businesses. That's what you're seeing, and we're seeing it right now. With the UV lights, it's the same way.

Sundaram Nagarajan: <unk> barrels packaging businesses, that's what you're seeing and we're seeing it right now.

Sundaram Nagarajan: On the UV light is the same way, we sell to people who make.

Sundaram Nagarajan: We sell to people who make equipment that goes in the front end of the semiconductor. Again, a small business, but a good early indicator that our customers, who essentially play in the front end of the market, and Nordson doesn't play much there. It's an early, new opportunity for us, but it is early for us. So those two are early indicators. That's what I meant by that. In terms of our backlog, in a couple of our test and inspection businesses, we have customer orders in place for shipments in the third and fourth quarters. That is in our back pocket.

Sundaram Nagarajan: Equipment that goes in the front end over the semiconductor again, a small business, but a good early indicator that that our customers who essentially played the front end of the market and nordson doesn't play much the Arabs in early new opportunity for us, but it has already put us. So those two early indicators, that's what I meant by.

Sundaram Nagarajan: That.

Sundaram Nagarajan: In terms of our backlog in couple of our test an inspection businesses we have.

Sundaram Nagarajan: Customer orders in place for shipments in third and fourth quarter that is in our backlog.

Sundaram Nagarajan: Those are system backlogs that are in the business that give us confidence for a portion of the third and fourth quarter ship. Okay, and we do still expect Order NT to pick up to fully, you know, fully deliver on the ATS expectations. Okay, okay, that's helpful. And Naga, you know, margins were great.

Sundaram Nagarajan: Those are system backlog that is in the business that gives us confidence for a portion of the third and the fourth quarter shipments right. Okay, and we do still expect order entry to pick up to fully.

Sundaram Nagarajan: Fully deliver on the a T S expectations, we have.

Sundaram Nagarajan: Okay. Okay. That's helpful.

Sundaram Nagarajan: Uhm.

Sundaram Nagarajan: Margins.

Speaker Change: Margins, where have I been great.

Andrew Buscaldria: Yeah, a strong quarter ascend. Ascend has really been successful. It's in the it's in the third year now. And I'm wondering how much more is left in the tank as it pertains to pricing and things like cost savings. Yeah, I think you should think of Ascend and NBS Next as a growth framework rather than a cost play. In terms of where we are, you know, look, when you sort of implement and deploy a growth framework across a company. You know, think about this was all organically put together and built within.

Sundaram Nagarajan: A strong quarter ascend extend has really been successful.

Andrew Buscaldria: The third year now and I'm wondering how much more is left in the tank as it pertains to pricing and things like cost savings.

Andrew Buscaldria: Yeah, I think you're you're not think of us and and N. B S. Next is a grilled framework that rather than a cost play in.

Andrew Buscaldria: In terms of where we are you know look when you <unk>.

Andrew Buscaldria: Sort of implement and deploy a growth framework across the company.

Andrew Buscaldria: [noise] about this was all organically put together and built within the company. So three years in my opinion is still has already so what you're trying to do NB of snakes is now becoming the way we run the company operate the company so.

Sundaram Nagarajan: So three years, in my opinion, is still in it. So what you're trying to do, NBS Next, is now becoming the way we run the company. So you're just beginning to see the benefits of the strategy being effective. So in terms of where we are at in terms of each of our divisions using it, I would say, three or four divisions delivering what we call leadership level performance. You know, these are very specific metrics of quality, on-time delivery, new product vitality, customer growth, and employee engagement. So there are like five metrics within the company, I would say, and we call them leadership level performance. We have about four of our divisions at leadership level in most of those metrics. We have six or seven very closely followed.

Sundaram Nagarajan: So you're just beginning to see the.

Sundaram Nagarajan: The benefits of this strategy being effective so in terms of if you think about where are we at in terms of each of our divisions using it I would say.

Sundaram Nagarajan: Three or four divisions, delivering what we call leadership level of performance Nowadays are made a specific metrics. So.

Sundaram Nagarajan: Quality on time delivery, new product vitality customer growth employee engagement. So there are like five metrics within the company I would say and we call them leadership level of performance.

Sundaram Nagarajan: We have about four of our divisions at leadership level in most of those metrics, we have six or seven very closely following so what you're beginning to see is.

Sundaram Nagarajan: So what you're beginning to see is the impact of NBS Next and the Ascent strategy that is beginning to show up in our business, and IPS is a great example of that. These were some of, you know, a couple of the big divisions in IPS were the first places where we implemented the strategy, and you can begin to see the performance of organic growth.

Sundaram Nagarajan: The impact of N. B S. Next Anderson strategy that is beginning to show up in our business and Ips is a great example of that right. There. These were some a couple of the big divisions, and Ips, where the first places where we implemented this strategy and you can begin to see the <unk>.

Sundaram Nagarajan: <unk> on the organic growth side, so our expectation is.

Sundaram Nagarajan: So our expectation is that we are focused on growing the company organically, innovation, and top customer growth. Clearly, we will have solid income. You know, our expectation for organic growth is 40%. So by virtue of that, you're going to see some margin expansion, but that's not where we start. Got it. Yeah, very helpful. Thanks, Naga. Welcome. Your next question comes from the line of Jeff Hammond from KeyBank Capital Markets.

Jeff Hammond: Via focused on growing the company organically innovation top customer growth.

Sundaram Nagarajan: Clearly, we will have solid incrementals.

Sundaram Nagarajan: Our expectation on organic growth is 40% so by virtue of that you're going to see some margin expansion, but that's not where we start.

Jeff Hammond: Got it and they're very helpful. Thanks.

Jeff Hammond: You're welcome.

Jeff Hammond: Your next question comes from the line is Jeff Hannan from Keybanc capital markets. Please go ahead.

Jeff Hammond: Hey, good morning, everyone. Good morning, Jeff. Hey, just on Beckham's Chinese New Year, is that pretty broad across the segments?

Jeff Hammond: Hey, good morning, everyone.

Jeff Hammond: Johnny Depp.

Jeff Hammond: Just on the back of his Chinese new year is that is that pretty broad across the segments or is that going to be more focused in electronics.

Jeff Hammond: Or is that going to be more focused on electronics? Yeah, Jeff, I would tell you that most of that impact is concentrated in the ITF segment and to a lesser degree in ATF. And then, Naga, just on biopharma, it sounds like the destocking is behind us. I mean, that's what we're hearing, I guess, from some of the people in that space.

Naga: Yeah, Jeff I would tell you that most of that impact is concentrated any ips segment and and to a lesser degree in I T. S.

Jeff Hammond: Okay and.

Jeff Hammond: And then I can just.

Jeff Hammond: Biopharma it sounds like the Destocking is is behind US I mean, that's what we're hearing I guess.

Jeff Hammond: Some of the people in that space, but it doesn't sound like you're seeing any real order intake.

Stephen F. Shamrock: But it doesn't sound like you're seeing any real order intake. As you talk to that customer base, what's the visibility for that to start to inflect? Yeah, I think, you know, the way to think about it is, rather than give you an exact timing, let me tell you what we fundamentally believe about this business.

Stephen F. Shamrock: To the customer base.

Stephen F. Shamrock: It's kind of the visibility for them to start to inflict.

Stephen F. Shamrock: Yeah.

Stephen F. Shamrock: You know I think the way to think about it is rather than give you an exact timing let me tell you what we fundamentally believe about this business.

Sundaram Nagarajan: You're right, the destocking has come to a place where it is pretty much at the bottom of the cycle at a lower demand level, for sure. And that's what we're seeing in our businesses. As we talk to our customers, in general, what we are talking about is for specific components they buy from us, what is their current inventory level, that is a better indicator of their future orders. And we are at that point where, you know, people are ordering more. Their ordering pattern has changed. That is one thing that we see in this.

Stephen F. Shamrock: You're right the Destocking has.

Sundaram Nagarajan: To a place where it is pretty much at the bottom of the cycle at a lower demand level for sure. That's what we're seeing in our businesses as we talk to our customers in general what we're talking about is for specific components day bye from us.

Sundaram Nagarajan: What is their current inventory level that is a better indicator of the future orders and we are at that point, where.

Sundaram Nagarajan: People are.

Sundaram Nagarajan: Ordering their ordering pattern is complete is change that is one thing that we see in this in the past like other medical device manufacturing space. These by most of our Biopharma customers will plays blanket orders.

Sundaram Nagarajan: In the past, like in other medical device manufacturing spaces, most of our biopharma customers would place blanket orders. That has changed. We no longer get blanket orders.

Sundaram Nagarajan: That has changed we no longer get Blanken orders instead, we get more regular.

Sundaram Nagarajan: Instead, we get more regular, you know, book and ship kind of business. So that has changed. So we are still working through this, but the more interesting part is we have some pretty nice growth in patient care. We have some pretty good growth in surgical applications. And so that's where we're beginning to see some pretty good order entry and pretty good shipment. You know, nothing about biopharma has fundamentally changed, single-use plastics transition from, you know, stainless steel to plastic, increased amount of biopharma, biopharmaceuticals, all long-term trends still intact, still favorable for the business. I'd love to be able to tell you when exactly this happens, but I just don't know.

Sundaram Nagarajan: Book and ship kind of business. So that has changed so we're still working through this but the interesting part is we have some pretty nice growth and.

Sundaram Nagarajan: Patient care, we had some pretty good growth in surgical applications and so that's why we're beginning to see some pretty good order entry.

Sundaram Nagarajan: I'm pretty good shipment you know nothing about Biopharma has fundamentally changed.

Sundaram Nagarajan: Single use plastics transition from.

Sundaram Nagarajan: Stainless steel plastic.

Sundaram Nagarajan: Kris amount of bio pharma biopharmaceutical, all longterm trend still intact still favorable for the business I'd love to be able to tell you when exactly this influx.

Sundaram Nagarajan: I just don't know.

Sundaram Nagarajan: Okay. I appreciate the color. Sure. We have no further questions in our queue at this time. I will now turn the call back over to Naga for closing remarks. Our strong operating performance reflects the strength of our diversified end markets, close to the customer model. Differentiated Precision Technology product, and rigorous implementation of NBS Next growth framework. Again, I want to thank Nordson's employees for their commitment, which makes these results possible. The continued deployment of the Ascent Strategy positions us well for long-term growth.

Sundaram Nagarajan: Okay.

Naga: I appreciate the color.

Sundaram Nagarajan: Sure.

Naga: And we have no further questions in our came at this time I will now turn the call back over to knock off for closing remarks.

Sundaram Nagarajan: A strong operating performance reflects the strength of our diversified and markets close to the customer model.

Sundaram Nagarajan: Differentiated position technology products and rigorous implementation of N B S next growth framework.

Sundaram Nagarajan: Gain.

Naga: <unk> not since employees for their commitment, which makes these results possible.

Sundaram Nagarajan: Continued deployment of the ascent strategy positions as well for long term growth.

Sundaram Nagarajan: Thank you for your time and attention on today's call. Have a great day. This concludes today's conference call. Thank you for your participation, and you may now disconnect.

Naga: Thank you for your time and attention on today's call have a great day.

Sundaram Nagarajan: This concludes today's conference call. Thank you for your participation and you may now disconnect.

Sundaram Nagarajan: [noise] [music].