Q2 2024 Nordson Corporation Earnings Call
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Eric: Thank you for standing by. My name is Eric, and I will be your conference operator today. At this time, I would like to welcome everyone to the Nordson Corporation second quarter fiscal year 2024 conference call. All lines have been placed on mute to prevent any background noise.
Eric: Thank you for standing by my name is Eric and I will be your conference operator today.
Eric: At this time I would like.
Speaker Change: Welcome everyone to the Nordson Corporation second quarter fiscal year 2024 conference call.
Speaker Change: All lines have been placed on mute to prevent any background noise.
Eric: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I'd now like to turn the call over to Lara Mahoney.
Speaker Change: After the Speakers' remarks, there'll be a question and answer session.
Speaker Change: I would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
Speaker Change: I'd like to withdraw your question Press Star one again.
Speaker Change: Thank you.
Speaker Change: I would now like to turn the call over to Lara Mahoney.
Please go ahead.
Lara L. Mahoney: Thank you. Good morning. This is Lara Mahoney, Vice President of Investor Relations and Corporate Communications. I'm here with Sundaram Nagarajan, our President and CEO, and Stephen Shamrock, Chief Accounting Officer. We welcome you to our conference call today, Tuesday, May 21st, to report Nordson's fiscal 2024 second quarter results. 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.nordson.com forward slash investment.
Speaker Change: Thank you Stephanie this is Lara Mahoney, Vice President of Investor Relations, and corporate communications and here with Cinderella Nug erosion, our president and CEO and Stephen Shamrock Chief Accounting Officer.
Speaker Change: Welcome you to our conference call today Tuesday may 21st to report fiscal 'twenty 'twenty four second quarter result.
Speaker Change: You can find both our press release as well as our webcast slide presentation that well 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 website and will be available there for 30 days. Additionally, there will be a telephone replay of the conference call available until Tuesday, May 28, 2024. During this conference call, we will make references to non-GAAP financial metrics. We've provided a reconciliation of these metrics to the most comparable GAAP metrics 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.
Speaker Change: This conference call is being broadcast live on our Investor website and will be available there for 30 days.
Speaker Change: There will be a telephone replay of the conference call available until Tuesday may 28th 'twenty 'twenty four.
Speaker Change: During this conference call, we will make references to non-GAAP financial metrics. Please.
Speaker Change: <unk> provided a reconciliation of these metrics to the most comparable GAAP metrics in the press release issued yesterday.
Speaker Change: 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 <unk> current expectations.
Speaker Change: 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 the second quarter highlights. He 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 end markets and provide an update on the fiscal 2024 full year and third quarter guidance. We will then be happy to take your questions. With that, I'll turn the call over to Naga.
Speaker Change: Moving to today's agenda on slide three Naga will discuss second quarter highlights.
Speaker Change: He will then turn the call over to Steve to review sales and earnings performance for the total company and the three business segments.
Speaker Change: Steve will also discuss the balance sheet and cash flow.
Speaker Change: Now I'll go will then share a high level commentary about our end markets and provide an update on the fiscal 2020 for full year and third quarter guidance.
Speaker Change: We will then be happy to take your questions with that I'll turn the call over to yoga.
Sundaram Nagarajan: Good morning, everyone. Thank you for joining Nordson's fiscal 2024 second quarter conference call. Before we begin, I would like to welcome Dan Hopgood, our new Executive Vice President and Chief Financial Officer, to Nordson. Dan started with us yesterday.
Speaker Change: Good morning, everyone.
Speaker Change: Thank you for joining nordson fiscal 'twenty 'twenty four second quarter conference call.
Sundaram Nagarajan: He brings more than 25 years of financial and operational expertise to the CFO role. Prior to joining Nordson, he held roles of increasing responsibility at Eaton Corporation, a $23 billion multinational power management company. Most recently, he served as Eaton's Controller and Chief Accounting Officer. As I got to know Dan, I was impressed with his robust financial experience, his time as an operational leader, and his passion for developing talent. Today, he will be listening in, and we look forward to introducing him to all of you in the coming months, starting at the KeyBank Industrials and Basic Materials Conference in Boston next week.
Speaker Change: Before we begin I would like to welcome Dan.
Speaker Change: Our new executive Vice President and Chief Financial Officer to Nordson.
Speaker Change: Dan started with us yesterday.
Speaker Change: He brings more than 25 years of financial and operational expertise to the CFO role.
Speaker Change: Brian for joining nordson she held roles.
Speaker Change: Leasing responsibility.
Speaker Change: <unk> Corporation, a 23 billion multinational power management company.
Speaker Change: Most recently he served as controller and Chief Accounting Officer.
Speaker Change: As I got to know Dan I was impressed with its robust financial experience.
Speaker Change: As time as an operational leader and his passion for developing talent.
Speaker Change: Today, he will be listening in and we look forward to introducing him to all of you in the coming months.
Speaker Change: And at the Keybanc Industrials and basic materials conference in Boston next week.
Stephen F. Shamrock: Now let's shift to our second quarter earnings results on slide five. At the outset, I would like to recognize the dedicated Nordson team who have leveraged the NBS Next growth framework to deliver solid second quarter results. Sales of $651 million were within our second quarter guidance range. Growth was driven by the AIRAG acquisition as well as strong performance in our industrial coatings and fluid solutions product line, which offset continued weakness in our electronics product line.
Speaker Change: Now, let's shift into our second quarter earnings results on slide five.
Speaker Change: At the outset I would like to recognize the dedicated nordson team.
Have leverage the NBS next growth framework to deliver solid second quarter results.
Speaker Change: Sales of $651 million were within our second quarter guidance range.
Speaker Change: Growth was driven by the Arrow acquisition as well as strong performance in our industrial coatings and fluid solutions product lines, which offset continued weakness in our electronics product lines.
Stephen F. Shamrock: In addition, our focus on top customers and differentiated products improves product mix. This focus, and strategically adjusting costs, led to improvements in gross margins and top quartile EBITDA margin of 3,100%. In the quarter, we delivered adjusted earnings per share of $2.34, which was at the top end of our EPS guidance for the quarter. Finally, I'd like to highlight our second quarter free cash flow of $108 million, which was 92% of net income.
Speaker Change: In addition, our focus on top customers and differentiated products improved product mix.
Speaker Change: This focus and strategically adjusting costs.
Speaker Change: The improvements in gross margins and top quartile EBITDA margin of 31%.
Speaker Change: In the quarter.
Speaker Change: We delivered adjusted earnings per share of $2 34.
Speaker Change: Which was at the top end of our EPS guidance for the quarter.
Speaker Change: Finally, I'd like to highlight our second quarter free cash flow of $108 million, which was 92% of net income.
Speaker Change: We continue to convert earnings into cash flow and use this cash flow to retire.
Speaker Change: Nearly $100 million of debt within the quarter.
Stephen F. Shamrock: We continue to convert earnings into cash flow and use this cash flow to retire nearly 100 million of debt within the quarter. I'll speak more about enterprise performance in a few moments, but first, I'll turn the call over to Steve to provide a detailed perspective on our financial results for the quarter.
Speaker Change: I'll speak more about the enterprise performance in a few moments, but first I'll turn the call over to Steve to provide a detailed perspective on our financial results for the quarter.
Stephen F. Shamrock: Thank you, Naga, and good morning to everyone. On slide number six, you'll see second quarter fiscal 2024 sales of $651 million. A slight increase in the prior year's second quarter sales of $650 million. This was driven by a favorable 5% benefit from the AIRAG acquisition, partially offset by an organic sales decrease of 4% and an unfavorable foreign exchange impact of 1%. As Naga referenced, strength in our industrial coding systems and fluid solutions product lines was offset by an ongoing weakness in our electronics product line.
Steve: Thank you Naga and good morning to everyone.
Steve: On slide number six you'll see second quarter fiscal 2024 sales were $651 million.
A slight increase to the prior year second quarter sales of $650 million.
Steve: This was driven by a favorable 5% benefit from the <unk> acquisition, partially offset by an organic sales decrease of 4% and an unfavorable foreign exchange impact of 1%.
Speaker Change: As Naga reference strengthen our industrial coating systems and fluid solutions product lines.
Speaker Change: Offset by ongoing weakness in our electronics product lines.
Stephen F. Shamrock: Gross profit performance was strong in the second quarter. We delivered gross profit margins in excess of 56 percent, and approximately a 200 basis point improvement over the prior year. Deploying our NDS Next growth framework, we are focusing on top products, driving a favorable product mix, and product simplification efforts to improve manufacturing efficiency. We also remain disciplined on managing our cost structure and taking actions where necessary.
Speaker Change: Gross profit performance was strong in the second quarter, we delivered gross profit margins in excess of 56% and.
Speaker Change: And approximately 200 basis point improvement over the prior year.
Speaker Change: Deploying our MBS next growth framework, we are focusing on top products driving a favorable product mix and product simplification efforts to improve manufacturing efficiency.
Speaker Change: We also remained disciplined on managing our cost structure and taking actions where necessary.
Stephen F. Shamrock: Evida adjusted for special items in both periods totaled $203 million, or 31% of sales, which was consistent with the priority. However, improved gross margins were offset by higher selling and administrative costs, attributable primarily to the addition of AIRAC. Looking at non-operating expenses, net interest expense increased $9 million associated with higher debt levels and increased interest rates.
Speaker Change: EBITDA adjusted for special items in both periods totaled $203 million or 31% of sales, which was consistent with the prior year.
Speaker Change: Improved gross margins were offset by higher selling and administrative costs.
Speaker Change: <unk>, primarily to the addition of Iraq.
Speaker Change: Looking at non operating expenses net.
Speaker Change: Net interest expense increased $9 million associated with higher debt levels and increased interest rates.
Stephen F. Shamrock: Other expenses net decreased $1 million, primarily related to lower foreign exchange losses compared to the prior year. Class expense was $31 million, for an effective tax rate of 21% in the quarter, which is in line with the prior year rate and our guidance range for 2024. Net income in the quarter totaled $118 million, or $2.05 per share. Adjusted earnings per share, excluding $2 million of non-recurring cost reduction actions, and Amortization of Acquisition-Related Intangibles of $19 million. Total revenue was $2.34 per share.
Speaker Change: Other expenses net decreased $1 million, primarily related to lower foreign exchange losses compared to the prior year.
Speaker Change: Tax expense was $31 million for an effective tax rate of 21% in the quarter.
Speaker Change: Which is in line with the prior year rate and our guidance range for 2024.
Speaker Change: Net income in the quarter totaled $118 million or $2 <unk> per share.
Speaker Change: Adjusted earnings per share, excluding $2 million of nonrecurring cost reduction actions.
Speaker Change: And amortization of acquisition related intangibles of $19 million.
Totaled $2 34 per share.
Stephen F. Shamrock: A 4% decrease from the prior year adjusted earnings per share amount of $2.45. The decrease in earnings was driven primarily by higher interest expense due to the AIRAG acquisition. Now let's turn to slides 7 through 9 to review the second quarter 2024 segment performance. Industrial Precision Solutions sales of $367 million increased 9% compared to the prior year's second quarter. Due to the AIRAG Acquisition, as well as increased sales in our industrial coating systems and packaging product lines, organic sales increased 2% over the prior year's second quarter, continuing to build upon a record fiscal 2023 for the segment. Partially offset by an unfavorable foreign exchange impact of 1%.
Speaker Change: 4% decrease from the prior year adjusted earnings per share amount of $2 45.
Speaker Change: The decrease in earnings was driven primarily by higher interest expense due to the Iraq acquisition.
Speaker Change: Now, let's turn to slide seven through nine to review the second quarter 2020 for segment performance.
Speaker Change: Industrial precision solutions sales of $367 million increased 9% compared to the prior year second quarter.
Speaker Change: Given by the <unk> acquisition as.
Speaker Change: As well as increased sales in our industrial coating systems and packaging product lines.
Speaker Change: Organic sales increased 2% over the prior year second quarter.
Speaker Change: Continuing to build upon our record fiscal 2023 for the segment.
Speaker Change: Partially offset by an unfavorable foreign exchange impact of 1%.
Stephen F. Shamrock: This segment has now delivered organic growth in 12 of the last 14 quarters. EBITDA was $132 million in the second quarter, or 36% of sales. This was an increase of 11% compared to the prior year EBITDA of $119 million. The increase in EVDA was driven primarily by the AIRAC acquisition, plus organic sales growth and gross margin improvement in the base business.
Speaker Change: This segment has now delivered organic growth in 12 of the last 14 quarters.
Speaker Change: EBITDA was $132 million in the second quarter or 36% of sales.
Speaker Change: An increase of 11% compared to the prior year EBITDA of $119 million.
Speaker Change: The increase in EBITDA was driven primarily by the <unk> acquisition.
Speaker Change: Plus organic sales growth and gross margin improvement in the base business.
Stephen F. Shamrock: It's also worth highlighting that this quarter marks 13 out of 14 consecutive quarters of even growth. On slide 8, you'll see medical and fluid solution sales of $169 million increase 2% compared to the prior year's second quarter, driven by modest growth in fluid and medical interventional solutions products. This was partially offset by lower sales in our medical fluid components product lines versus last year. However, despite the year-over-year decrease, we did see a modest increase in medical fluid component sales sequentially.
Speaker Change: It's also worth highlighting that this quarter marks 13 out of 14 consecutive quarters of EBITDA growth.
Speaker Change: On slide eight Youll see medical and fluid solutions sales of $169 million increased 2% compared to the prior year second quarter.
Speaker Change: Driven by modest growth in fluid and medical interventional solutions product lines.
Speaker Change: This was partially offset by lower sales in our medical fluid components product lines versus last year.
Speaker Change: Despite the year over year decrease we did see a modest increase in our medical fluid components sales sequentially.
Stephen F. Shamrock: Second quarter EBITDA was $63 million for 37% of sales, which was flat to the prior year EBITDA of $63 million, which excluded $1.5 million of special items for the Cost Reduction Act. This segment has now delivered even a margin greater than 35% in 13 of the last 14 quarters. Turning to slide nine, you'll see advanced technology solution sales were $115 million, a 22% decrease compared to the prior year's second quarter. The decrease in sales was driven by continued weakness across the segment.
Speaker Change: Second quarter, EBITDA was $63 million or <unk>, 37% of sales.
Speaker Change: Which was flat to the prior year EBITDA of $63 million.
Speaker Change: Which excluded $1 $5 million of special items for cost reduction actions.
Speaker Change: This segment has now delivered EBITDA margins greater than 35% and 13 of the last 14 quarters.
Speaker Change: Turning to slide nine Youll see advanced technology solutions sales were $115 million.
Speaker Change: 22% decrease compared to the prior year second quarter.
Speaker Change: The decrease in sales was driven by continued weakness across the segment.
Stephen F. Shamrock: Primarily related to products serving electronics and marketing. Second quarter EBITDA was $24 million for 21% of sales, which trailed the prior year's second quarter EBITDA of $32 million, which excluded special items of $2 million related to cost reduction actions in both periods. While the reduction in EVADOT was tied to the overall decrease in volume,
Speaker Change: Primarily related to products, serving electronics end markets.
Speaker Change: Second quarter, EBITDA was $24 million or 21% of sales.
Speaker Change: Which trailed the prior year second quarter EBITDA of $32 million.
Speaker Change: Which excluded special items of $2 million related to cost reduction actions in both periods.
Speaker Change: While the reduction in EBITDA was tied to the overall decrease in volume.
Stephen F. Shamrock: Favorable mix and cost reduction actions contributed to a 22% decremental margin. This is well ahead of our decremental target of approximately 55 percent. Finally, turning to the balance sheet and cash flow on slide. At the end of the second quarter, we had cash of $125 million, and net debt was $1.4 billion, resulting in a leverage ratio of 1.7 times based on the trailing 12-month EBITDA. We continue to have significant available borrowing capacity and pursue organic and inorganic growth opportunities.
Speaker Change: Favorable mix and cost reduction actions contributed to 22% decremental margins.
Speaker Change: This is well ahead of our decremental target of approximately 55%.
Speaker Change: Finally, turning to the balance sheet and cash flow on slide 10.
Speaker Change: At the end of the second quarter, we had cash of $125 million.
Speaker Change: Net debt was $1 $4 billion.
Speaker Change: Resulting in a leverage ratio of one seven times based on the trailing 12 months EBITDA.
Speaker Change: We continue to have significant available borrowing capacity.
Speaker Change: <unk> organic and inorganic growth opportunities.
Stephen F. Shamrock: Free cash flow was $108 million, or a 92% conversion rate on net income. We strategically deployed this strong cash flow in the quarter. We repaid $100 million of Revolver debt and paid $39 million in dividends during the quarter. For modeling purposes for the full fiscal year, assume an estimated effective tax rate of 20% to 22%. Capital expenditures of approximately $40 million to $50 million, and net interest expense of $74 million to $77 million. In summary, we delivered another strong financial performance in the second quarter, in line with our expectations. We'll now move to slide 11, and I'll turn the call back to Nagarajan.
Speaker Change: Free cash flow was $108 million or 92% conversion rate on net income.
We strategically deployed this strong cash flow in the quarter.
Speaker Change: We repaid $100 million of revolver debt and paid $39 million in dividends during the quarter.
Speaker Change: For modeling purposes for the full fiscal year.
Speaker Change: Assume an estimated effective tax rate of 20% to 22%.
Speaker Change: Capital expenditures of approximately $40 million $50 million.
Speaker Change: Net interest expense of $74 million to $77 million.
Sundaram Nagarajan: I also want to commend the business for delivering strong operating performance under a challenging demand environment in some of our segments. This is a testament to how MBS Next is becoming the way we run our business.
Speaker Change: In summary, we delivered another strong financial performance in the second quarter in line with our expectations.
We will now move to slide 11, and I'll turn the call back Tanaka.
Tanaka: Thanks, Steve.
Tanaka: I also want to commend the business for delivering strong operating performance under a challenging demand environment in some of our segments.
Speaker Change: This is a testament to how NBS next is becoming the way we run our business.
Sundaram Nagarajan: I want to spend a few minutes talking about our end markets and the changes we are seeing as we move into the second half of fiscal 2024, starting with the Industrial Precision Solutions segment. We continue to see steadyness in industrial and consumer non-durable end markets, after two years of record growth.
Tanaka: I want to spend a few minutes talking about our end markets and the changes we have seen as we move into the second half of fiscal 2024.
Tanaka: Starting with industrial precision solutions segment.
Tanaka: We continue to see steadiness in industrial and consumer non durable end markets.
Tanaka: After two years of record growth.
Sundaram Nagarajan: Our full-year guidance implies IPS excluding AIRAG is about flat to slightly up versus prior year. And while the IRAG integration continues to go well, we cannot ignore the impact of weakening agricultural and market conditions. Despite the weakening of this particular agricultural cycle, which is causing customers to pause spending and work through their inventory, we are undeterred in our belief that precision agriculture is a high-growth, high-end market, and this cycle is temporary in nature. Based on the past nine months of integration, we remain excited about AIRAC's differentiated technology and value proposition, which will help customers boost crop yields while sustainably reducing the expensive usage of fertilizers and chemicals.
Tanaka: Our full year guidance implies.
Tanaka: Excluding erg is about flat to slightly up.
Tanaka: Versus prior year.
Tanaka: And while the Iraqi integration continues to go well, we cannot ignore the impact of weakening agriculture end market conditions.
Tanaka: Despite the weakening of this particular agricultural cycle, which is causing customers to pause spending and work through inventory.
Tanaka: We are undeterred in our belief that precision agriculture is a high growth end market and this cycle is temporary in nature.
Based on the past nine months of immigration, we remain excited about Eric's differentiated technology and value proposition that will help customers boost crop yields while sustainably, reducing the expensive usage of fertilizers and chemicals.
Sundaram Nagarajan: Within our medical and fluid solution segment, we are continuing to see modest order entry pickup in our fluid components business, which is returning to growth following last year's Biopharma destock. Similarly, our fluid solutions product lines, which have exposure to the electronic cycle, are turning positive. Medical Interventional Solution product lines, which grew double digits in fiscal 2023, driven by the trends in minimally invasive therapies and the aging population. We have tough comparisons in the second half of the year.
Tanaka: Within our medical and fluid solutions segment, we're continuing to see modest order entry pickup in our fluid components business, which is returning to growth following last year's Biopharma destocking.
Tanaka: Similarly, our fluid solutions product lines, which have exposure to the electronic cycle are turning positive.
Tanaka: Our medical interventional solutions product lines, which grew double digits.
Tanaka: In fiscal 2023.
Tanaka: Women by the trends in minimally invasive therapies.
Tanaka: And the aging of population, we have tough comparisons in the second half of the year.
Sundaram Nagarajan: In the ATS segment, we continue to see positive early indicators of the electronic cycle inflection, but we're not seeing order entry pickup that would support the implied ramp in our prior second half guidance. Keeping in mind the semiconductor sub-segment, Nordson applications are largely positioned at the back end of the manufacturing process with a focus on advanced packaging of semiconductor chips. However, currently, investments are being made in the front end of the semiconductor manufacturing process related to fabrication and processing of silicon wafers, as production shifts towards converting their wafers to individual chips and advanced packaging of these chips. Customers will invest in Nordson electronics dispense and test and inspection technology. Overall, we will benefit from the increasing demand for chips in support of AI, automotive electronics, on-shoring, the Shipps Act, and more.
Tanaka: In the Ats segment, we continued to see positive early indicators of the electronic cycle inflection.
Tanaka: But we're not seeing order entry pick up that would support the implied ramp in our prior second half guidance.
Tanaka: Keeping in mind.
Tanaka: Semiconductor subsegment nordson applications are largely position at the backend of the manufacturing process with a focus on advanced packaging of semiconductor chips.
Tanaka: Currently investments are being made in the front end of the semiconductor manufacturing process.
Tanaka: Related to fabrication and processing of silicon wafers.
Tanaka: As production shifts towards converting the wafers to individual chips and advanced packaging of these chips customers will invest in nordson electronics defense and test and inspection technology.
Tanaka: Overall, we will benefit from the increasing demand for chips in support of AI.
Tanaka: Automotive electronics onshoring.
Tanaka: Chip's Act and more.
Sundaram Nagarajan: While our test and inspection businesses are positioned to improve the yields and ensure quality of these critical and expensive chips, our x-ray business, which experienced double-digit growth in fiscal 2023, is dealing with challenging comparisons in the second half of the year. Our ATS leaders continue to do an excellent job of implementing the NBS Next growth framework and positioning themselves for future growth. This includes positioning operations closer to the customer, introducing differentiated new products, and Making Strategic Cost Adjustments. ATF's ability to outperform its decremental targets again this quarter is a testament to this work. Turning now to our outlook on slide 12. We enter the third quarter with approximately $700 million in backlog.
Tanaka: While our test and inspection businesses are positioned to improve the yields and ensure quality of these critical and expensive chips.
Tanaka: Our X ray business, which experienced double digit growth in fiscal 'twenty to 'twenty three is dealing with challenging comparisons in the second half of the year.
Tanaka: Our Ats leaders continue to do an excellent job of implementing the NBS next growth framework.
Tanaka: And positioning themselves for future growth.
Tanaka: This includes positioning operations closer to the customer.
Tanaka: Introducing differentiated new products and.
Tanaka: And making strategic cost adjustments.
Tanaka: <unk> ability to outperform the decremental targets again this quarter is a testament to this work.
Tanaka: Turning now to our outlook on slide 12.
Tanaka: We enter the third quarter with approximately $700 million in backlog.
Sundaram Nagarajan: This backlog remains concentrated in our systems businesses, while customer order entry patterns have returned to historical norms in the rest of the business. Based on the current visibility I just shared, an order entry trend, we are updating our previously issued full year revenue guidance, in the range of flat to up 2% over record fiscal 2020. Full year fiscal 2024 earnings are forecasted to be in the range of down 5% to down 1% per diluted share.
Tanaka: This backlog remains concentrated in our systems businesses, while customer order entry patterns have returned to historical norms in the rest of the businesses.
Tanaka: Based on the current visibility I, just shared and order entry trends.
Tanaka: We are updating our previously issued full year revenue guidance.
Tanaka: In the range of flat.
Tanaka: Two up 2% over our record fiscal 2023.
Tanaka: Full year fiscal 2024 earnings are forecasted to be in the range of.
Tanaka: Down 5% to down 1% per diluted share.
Tanaka: Yeah.
Sundaram Nagarajan: This four-year guidance assumes a neutral impact from FX rates and the ARAG acquisition contributing approximately 3.5% growth at the midpoint of our guidance. Investors should keep in mind that we anniversary the acquisitive growth impact of AIRAG in the fiscal fourth quarter, for the third quarter of fiscal 2024. Sales are forecasted to be in the range of $645 to $670 million, with adjusted earnings in the range of $2.25 to $2.40 per diluted share. Third quarter guidance considers weaker electronics and agriculture and consumer electronics markets.
Tanaka: This full year guidance assumes a neutral impact from FX rates.
Tanaka: And the <unk> acquisition contributing approximately three 5% growth at the midpoint of our guidance.
Tanaka: Investors should keep in mind that we anniversary the acquisition growth impact of Iraq.
In the fiscal fourth quarter.
Tanaka: For the third quarter of fiscal 2024.
Tanaka: Sales are forecasted to be in the range of.
Tanaka: 645 to 670 million.
Tanaka: Adjusted earnings in the range of $2 25.
Tanaka: Two $2 40 per diluted share.
Tanaka: Third quarter guidance considers weaker electronics and agriculture end markets.
Sundaram Nagarajan: Even as we face more challenging market conditions, Nordson's core strengths remain a diversified portfolio, close to the customer business model, and a high level of recurring revenue. NBS Next Growth Framework and the Commitment to Innovation. All of this positions Nordson well to deliver the long-term ascent strategy goals. As always, I want to thank our customers, shareholders, and the Nordson team for your continued support. With that, I will pause. And Steve and I will take your questions.
Tanaka: Even as we face more challenging market conditions.
Tanaka: <unk> core strengths remain a diversified portfolio close to the customer business model.
Tanaka: High level of recurring revenue.
Tanaka: NBS next growth framework.
Our commitment to innovation.
Tanaka: All of this positions nordson, well to deliver long term SME strategy goals.
Tanaka: As always I want to thank our customers shareholders.
Tanaka: And the Nordson team for your continued support.
Tanaka: With that we will pause.
Speaker Change: And Steve and I will take your questions.
Operator: At this time, I would like to remind everyone, in order to ask a question, please press star followed by the number one on your telephone keypad. Your first question comes from the line of Mike Halloran, with Baird.
Speaker Change: At this time I would like to remind everyone in order to ask a question. Please press star followed by the number one on your telephone keypad.
Speaker Change: Your first question comes from the line of Mike Halloran.
Speaker Change: Baird.
Michael Patrick Halloran: Please go ahead.
Michael Patrick Halloran: Hey, good morning, everyone.
Unknown Speaker: Morning. Good morning, Mike.
Speaker Change: Good morning, Mike.
Michael Patrick Halloran: Couple of questions here.
Maybe you can just talk to what's assumed in guidance as you as you work through the year from an end market recovery.
Sundaram Nagarajan: A couple questions here. You know, Naga, maybe you could just talk about what's assumed in guidance as you work through the year from an NMARC recovery. You know, I certainly understand the electronics piece and the ag piece. But when you look at the implied fourth-quarter ramp, it's still probably a little off seasonality. So wondering if you still have some of those systems and projects hitting in the fourth quarter or if that's been pushed to next year and thoughts about any sustainability of the packaging piece and how you think the biofarm is going to recover. So basically, just maybe lay out how you think the end markets are going to track as we work through the remainder of the year and let's assume the guidance. Yeah,
Speaker Change: I certainly understand the electronics piece and the AG piece.
Speaker Change: You look at the implied fourth quarter.
Speaker Change: Ramp, it's still probably a little above seasonality. So wondering if you still have some of those systems and projects hitting in the fourth quarter or if that's been pushed to next year and thoughts about any sustainability.
The packaging piece and how you think the biopharma can recover so basically just maybe lay out how you think the end markets track as we work through the remainder of the year and what's assumed in guidance.
Sundaram Nagarajan: Yeah, let's get started with IPS. The guidance really, you know, maybe start with the first two big hits, and then we'll go through the end markets, Mike. So the first two factors that you highlighted are that we're not seeing the pickup in orders for electronic systems that we had expected with the implied second half rank. So that's number one.
Speaker Change: Let's.
Speaker Change: Let's get started with Ips.
Speaker Change: The guidance really.
Maybe start with the first two big hits and then we will go through the end markets. Mike. So the first the two factors, which you highlighted is that we're not seeing the pickup in orders for electronics systems that we had expected with the implied second half right. So that's number one number two is the agricultural cycle.
Sundaram Nagarajan: Number two is that the agriculture cycle is having a greater impact on ARAG than our own expectations. So timing is just right; there is not enough time here to achieve the ramp we had originally. In terms of end markets, if you think about IPS and Non-ARAG, our expectation is going to be flat to slight growth following record, to hear. Eric continues to contribute to the growth of the business. In terms of ATS, you know, certainly, the growth is below our long-term growth rates. We're not seeing the pickup as we talked about.
Speaker Change: Having a greater impact on <unk> than our own expectation. So timing is just there is not enough time here to achieve the ramp we had originally expected.
Speaker Change: Yeah.
In terms of end markets, if you think about it.
Speaker Change: Yeah.
Speaker Change: P S non reg.
Our expectation is going to be flat to slight growth following record two years.
Speaker Change: In terms of.
Speaker Change: <unk> continues to contribute.
Speaker Change: To the growth of the business.
Speaker Change: In terms of Ats.
Speaker Change: The growths are below our long term growth rates, we're not seeing the pickup as we talked about.
Speaker Change: In terms of medical fluid solutions.
Sundaram Nagarajan: [inaudible] in terms of medical fluid solutions. You know, our expectation is that our fluid components business will be slightly up. Our fluid solutions business would also be slightly offset by tough competition on the interventional components. In summary, you're going to have IPS flat to slightly up, ATS down, and MFS returning to growth slightly.
Speaker Change: Our expectation is that.
Our fluid components business will be slightly up or.
Speaker Change: Our fluid solutions business will also be slightly.
Speaker Change: Offset by tough comps on the interventional components. So.
Speaker Change: In summary.
Speaker Change: Have ips flat to slightly up.
Down MFS returning to growth slightly.
Sundaram Nagarajan: So thanks for that. And following up on that, then, are you assuming any sort of pickup in some of those stress markets or any sort of backlog let out in any of those stress markets in the fourth quarter? In other words, just trying to understand how de-risked some of those stress points are in the guidance as we work through the rest of the year?
Speaker Change: So thanks for that and following up on that then or are you assuming any sort of pick up on some of those stressed markets or any sort of backlog, let out in any of those stressed markets in the fourth quarter in other words, just trying to understand how derisked. Some of those stress points are in the guidance as we work through the rest of the year.
Speaker Change: Sure.
Speaker Change: Yes.
Sundaram Nagarajan: Yeah. What, excuse me, what I'll tell you is that if you think about our fourth quarter, does not expect, you know, does not require electronics to come back; does not expect air right to come back. So if you think about those two stress markets. But what is expected, though, is sequential, continued improvement in both these markets. So we saw that in the second quarter, both electronics and ATS are sequentially up. And so that's our expectation.
Speaker Change: But excuse me what I will tell you is that if you think about our fourth quarter.
Speaker Change: It is.
Speaker Change: Does not.
Speaker Change: But it does not recur.
Speaker Change: Require.
Speaker Change: Electronics to come back.
Speaker Change: They expect to come back. So if you think about those construct markets.
Speaker Change: But what is expected, though is sequential continued improvement in both these markets. So we saw that in second quarter.
Speaker Change: Both electronics and.
Speaker Change: Sequentially up and so.
That's our expectation.
Stephen F. Shamrock: So, in other words, the sequentials from here are relatively stable versus a normal sequential pattern in your mind in those markets.
Speaker Change: So in other words the sequential from here are relatively stable versus a normal sequential pattern in your mind in those markets.
Sundaram Nagarajan: Yeah, what we're seeing is order entry. Yeah, go ahead, Steve, maybe provide some more. I was gonna say, Mike, that I think you're spot on there. Because if you also look at sequential growth, we had 11% growth last year from Q3 to Q4. And our midpoint basically implies around 8% growth this year. As you know, Q4 is usually seasonally our strongest quarter. So I think that aligns with how we're thinking about it.
Speaker Change: Yes.
Speaker Change: What were seeing is order entry, yes go ahead, Steve maybe provide some more.
Michael Patrick Halloran: Up to I was going to say, Mike that that I think you're spot on there because if you also look at sequential growth, we had 11% growth last year from Q3 to Q4 and our midpoint.
Speaker Change: Basically implies around 8% growth. This year. So Q4 is usually seasonally our strongest quarter. So I think that aligns with how we're thinking about it.
Operator: Great. I really appreciate that. Thank you.
Speaker Change: Great really appreciate that thank you.
Operator: The next question comes from the line by Saree Boroditsky with Jeffreys: please go ahead.
Speaker Change: The next question comes from the line of Saree Verbinski.
Speaker Change: With Jefferies.
Saree Emily Boroditsky: Go ahead.
Unknown Speaker: Good morning, this is James. I'm for Saree.
James: Good morning. This is James on for <unk>, Thanks for taking my questions.
Sundaram Nagarajan: Thanks for taking questions. I just wanted to kind of follow up on Eric, so can you kind of provide more color on kind of increased pressure because I know you guys said that you guys have high recurring revenue? And when do you expect to see an inflection point in the ag markets?
Speaker Change: I just wanted to kind of follow up follow up on the Eric. So can you kind of provide more color on kind of increased pressure because I thought you guys said that you guys said about high recurring revenue here.
Sundaram Nagarajan: Thank you.
Speaker Change: And kind of when do you expect to see an inflection point in fact market. Thank you.
Speaker Change: [noise].
Sundaram Nagarajan: In general, this market is expected to be down this year. And you know, we expect this turnaround sometime in 2025, but we're not really giving any guidance on 2025. So it's difficult to tell you exactly when that will happen. But our guidance does not imply any pickup in the ag. Agriculture Market this year.
Speaker Change: In general this market is expected to be down this year.
Speaker Change: And.
Speaker Change: We expect this turnaround sometime in 'twenty five, but we're not really giving any guidance on 25, so difficult to tell you exactly when that will happen, but our guidance does not imply any pick up in <unk>.
Speaker Change: Agriculture markets this year.
Speaker Change: Yeah.
Sundaram Nagarajan: Got it, and kind of wanted to follow up on the like the strong gross margin performance here despite like flat revenue growth. So how should we think about the like gross margin for the remainder of the year? Thank you.
Speaker Change: Got it and kind of wanted to follow up on the like the strong gross margin performance here or despite flat revenue growth. So how should we think about the gross margin for the remainder of the year.
Stephen F. Shamrock: Yeah, no, so what I would tell you, and that really kind of ties back to our, what I would call, very strong Q2 performance, right? Basically, you know, from a sales standpoint with Q2, we came in really where we expected from a sales standpoint. We came in with 651 million in sales in Q2. And that was when we gave the guidance for Q2, we assumed currency neutral.
Speaker Change: Yes.
Speaker Change: No. So what I would tell you and that really kind of ties back to our what I would call very strong Q2 performance rate base.
Speaker Change: Basically from a sales standpoint with Q2, we came in really where we expected from a sales standpoint, we came in with 651 million of sales in Q2.
Speaker Change: And that was when we gave the guidance for Q2, we assume currency neutral. So if you add back about a $5 million unfavorable impact of FX. We basically came in spot on near the midpoint of our guidance and we actually were at the high end of our guidance in Q2, because gross margin performance that you referenced there and the way I would think.
Stephen F. Shamrock: So if you add back about a $5 million unfavorable impact of FX, we basically came in spot on at the midpoint of our guidance. And we actually were at the high end of our guidance in Q2 because of the gross margin performance that you referenced there. And the way I would think about that is we really had a strong performance and margins for a number of factors in Q2, right? We had a very strong mix, I would tell you in Q2, whether it was, you know, parts versus sales. That was very strong.
Speaker Change: About that as we really had strong performance in margins for a number of factors in Q2 right.
Speaker Change: <unk> had a very strong mix I would tell you in Q2.
Speaker Change: Whether it was parts versus sale that was very strong we had good customer mix and even mix within product lines.
Stephen F. Shamrock: We had a good customer mix and even mix within product lines. And also had, you know, as we referenced in our earlier comments, manufacturing efficiencies and cost controls. How I would think about, you know, gross margins going forward, you know? I think I mentioned this on a previous call; we're not focused on gross margin expansion. You know, our long-term focus is really to maintain the gross margins that we have. So I do think what you saw in Q2 was mixed and normal. So, you know, that's how I would think about that going forward. I wouldn't expect as favorable of a mix in, you know, the balance of the year.
Speaker Change: And also had we referenced in our earlier comments manufacturing efficiencies and cost controls.
Speaker Change: How I would think about gross margins going forward.
I think I mentioned this on our previous call were not focused on gross margin expansion. Our long term focus is really to maintain the gross margins that we have so I do think what you saw in Q2 was a mixed than normal.
Speaker Change: So that's how I would think about that going forward I wouldn't expect as favorable of a mix in the balance of the year. So.
Unknown Speaker: Got it. Thanks for taking the questions.
Speaker Change: Got it thanks for taking the question.
Speaker Change: Okay.
Operator: Your next question comes from the line of Matt Summerville with DA Davidson.
Your next question comes from the line of Matt Summerville with D. A Davidson.
Go ahead.
Unknown Speaker: Thanks. Just a question on ARAG. I remember back to when you did the call; is it related to the acquisition? You seem pretty convinced that this business would be less impacted by a down agricultural cycle, and clearly that's not the case here. So, what I guess you have learned over the last couple of quarters about ARAG and how indeed tied to the cycle that business seemingly is? And to that point, you mentioned inventory de-stocking. I assume that's at the OEM level, but correct me if I'm wrong. How long do you think that de-stock will last? Yeah.
Speaker Change: Thanks.
Matt J. Summerville: Just a question on ore Ida I remember back to win.
Speaker Change: You did the call as it related to the acquisition machine pretty convinced that this business would be less impacted by a down AG cycle and clearly that's not the case here. So what I guess have you learned over the last couple of quarters about Reg and how indeed tied to the cycle.
Speaker Change: That business seemingly is and to that point, you mentioned inventory Destocking I assume that's at the OEM level, but correct me if I'm wrong, how long do you think that destock west.
Sundaram Nagarajan: Yeah, you know, Matt, in that our expectations that this business would have been less muted because of the precision ag exposure certainly did not play out the way our expectations were. But look, what is really important to remember is we still like the technology, we like the people we have added to the organization, and certainly a very interesting end market. You know, if you look at the expectations of some of the OEMs, precision agriculture itself is down or expected to be down 20-25%.
Speaker Change: Yeah.
Speaker Change: Yes.
Matt: Youre right Matt in that.
Speaker Change: Our expectations that this business would have be less muted because of the position AG exposure.
Speaker Change: Certainly did not play out the way our expectations were but look what is really important to remember is we still like the technology like the people. We have added to the organization certainly a very interesting end market.
Speaker Change: If you look at the expectations of some of the Oems. The precision AG itself is down are expected to be down 20%, 25%. So even if you think about our expectations with position AG was going to continue to grow through the cycle that does not worked out the way it is.
Sundaram Nagarajan: So even if you think about, you know, our expectations where precision ag was going to continue to grow through the cycle, that has not worked out the way it is. In terms of inventory de-stocking, remember 40% of this business is aftermarket parts, and those aftermarket parts go through distribution; they're not direct sales. So they don't go through the OEM; they go through a distributor. And there is some level of inventory de-stocking that is going on in Iraq.
Speaker Change: In terms of inventory Destocking, you remember, 40% of this business is aftermarket parts and those aftermarket parts go through distribution. They are not direct sale. So they don't go through the OEM. They go through a distributor and there is some level of inventory destocking that is going on.
Speaker Change: In Iraq so.
Sundaram Nagarajan: Got it. With respect to, you know, you mentioned on the last conference call the canary businesses, and I mean that in a positive light with respect to electronics, showing some signs of life. Are you concerned that maybe those are no longer good leading indicators for a broader upturn on the electronics side? And could you maybe just put a finer point on how those businesses, those canary businesses, if you will, performed in the second quarter and how inbound order activity has been looking there? Thank you. Yes. Both the business and
Speaker Change: Got it.
Speaker Change: With respect to you'd mentioned kind of last conference call the Canary businesses, and I mean that in a positive way with respect to electronics showing some signs of life or are you concerned that maybe those are no longer good leading indicators for a broader upturn in the electric.
Speaker Change: <unk> side and could you maybe just put a finer point on how those businesses. Those carried addresses if you will performed in the second quarter and how inbound order activity and spend looking there. Thank you yes, yes.
Sundaram Nagarajan: Yes, both businesses continue to strengthen in the trends that we mentioned in our first So we're continuing, we remain convinced, both those are very good leading indicators. And the reason I'll tell you is that those are two separate indicators. For example, the one we talked about was the UV lamp business and the niche product line in one of our businesses.
Speaker Change: Both the businesses continued to strengthen in the trends that we mentioned in our first quarter.
Speaker Change: We are continued we remain convinced.
Speaker Change: Both of those are very good leading indicators and the reason I'll tell you is those are two separate indicators. For example, the one we talked about was the UV lamp businesses in niche product line in one of our businesses.
Sundaram Nagarajan: That is in the front end of the semiconductor process, where we sell to large machine builders. That continues to strengthen the forecast of an actually increase that lines up with what you see front end semiconductors growing nicely.
Speaker Change: That is in the front end of the semiconductor process, where we sell to large.
Speaker Change: Machine builders.
Speaker Change: That continues to strengthen the forecasts are actually increase that lines up with what you see front end semiconductors growing nicely. So you see that.
Sundaram Nagarajan: But you also see on the finished electronic product. You're continuing to see greater usage of existing lines. So this is the consumables from EFT, those continue to strengthen. So both those are still strong. I think what is not getting translated is that you would immediately see a system Business Pickup. And that's the translation that is getting delayed.
Speaker Change: But do you also see on finished electronic products.
Speaker Change: Continuing to see greater usage of existing lines. So this is the consumables from <unk> those continue to strengthen so both of those are still strong I think what it is not getting translated is that you would immediately see as system.
Sundaram Nagarajan: We're not concerned that this is, You know, this doesn't indicate that the cycle is going to turn. It is more uncertainty in this CapEx spend on electronics that we are seeing. So it is more related to the CapEx investment rather than whether or not the cycle has not turned. Hopefully that helps you.
Speaker Change: Business pick up.
Speaker Change: And Thats the translation that is getting delayed we're not concerned that this is.
Speaker Change: This doesn't indicate that the cycle is going to trend. It is more an uncertainty Kansas Capex spend.
Speaker Change: In electronics that we are see so it is more related to the capex investment rather than just the cycle has not turned on that so hopefully that helps you.
Speaker Change: Got it appreciate it thanks David.
Speaker Change: Yes.
Operator: Your next question comes from the line by Christopher Glynn with Oppenheimer. Please go ahead.
Speaker Change: Your next question comes from the line of Christopher Glynn with Oppenheimer.
Unknown Speaker: Yep, thanks. Good morning. Good morning.
Speaker Change: Please go ahead.
Unknown Speaker: Wanted to follow up on a little different cross section for the electronics cycle. I'm curious if you could speak directly to the differences you're seeing in electronics processing versus T&I broadly, and then if there are any interesting nuances in the different test and inspection modalities.
Speaker Change: Yes.
Speaker Change: Thanks, Good morning.
Speaker Change: Good morning wanted to earning what you wanted to follow up on a little different cross section.
Speaker Change: For the electronic cycle I'm curious if you could speak directly to the differences youre seeing in electronics processing versus TNI broadly and then if any interesting nuances in the different <unk>.
And then inspection modalities.
Sundaram Nagarajan: Okay, all right. I think if you
Speaker Change: Okay, Alright, I think if you, let's just first start with EPS.
Sundaram Nagarajan: Think if you let's just first start with EPS and TNI. EPS systems continue to be in the quarter continue to be lower in line with the ATS levels, right? So down 20% or so.
Speaker Change: P&I.
Speaker Change: EPS systems continue to be in the quarter continued to be.
Speaker Change: Lower in line with the Aps levels, right, so down 20% or so and in the P&I business.
Sundaram Nagarajan: And in the T&I business, I'll remind you that last year, we had some significant growth in that business. So what we're facing in our x-ray business is a tough con. Among the other T&I business in our optical business, we have our sensors that go into the front end of the market, which is called a WaferSense product line that is continuing to grow nicely. It is a small part of the business, but it is growing nicely.
Speaker Change: I'll remind you that last year, we had some significant growth in those business. So what we are facing on our X Ray business is a tough comp.
Speaker Change: Among the other TNI business on our optical business, we have our sensors.
Speaker Change: That go into the front end of the market, which is called the <unk> product line.
Speaker Change: That is continuing to grow nicely. It is a small part of the business, but it is growing nicely the acoustics.
Speaker Change: Test and inspection part of the business is also growing which is more on the front end and on some new memory applications.
Sundaram Nagarajan: The acoustic test inspection part of the business is also growing, which is more on the front end and on some new memory applications. The optical side, the parts are fine, but the systems are behind. So, you know, we fundamentally still believe the test and inspection business will have lower declines when compared to our dispense business. You know, what you've got mixed in there are some tough coms in our X-ray.
Speaker Change: The optical side. This parts are fine the systems that are behind.
Speaker Change: <unk>.
Speaker Change: We.
Speaker Change: Mentally still believe the test and inspection business will be lower declines when compared to our dispense business.
Speaker Change: What you've got mixed and there is some tough comps in our X Ray business.
Sundaram Nagarajan: In all of these cases, the teams are doing an incredible job doing three things. One, they are certainly strengthening their delivery and quality performances. They're moving manufacturing closer to our customers. So we've got a new manufacturing and distribution location coming up in India to support our electronic customers who are shifting their focus to India. Third, we have very exciting new products that are being released by a testing inspection business. Our new MXI lineup products are well received in the marketplace.
Speaker Change: In all of these cases the teams are doing an incredible job doing three things one.
Speaker Change: They are certainly strengthening their delivery and quality performance as they are moving.
Speaker Change: Manufacturing closer to our customers. So we have got a new manufacturing and distribution locations coming up in India to support our electronic customers, who are shifting focus into India.
Speaker Change: Third we have very exciting new products that are being released by our test and inspection business, our new Amex side lineup products are well received in the marketplace.
Sundaram Nagarajan: We've got new updated software for our AXI business that is hitting the market. And in our dispense business, you certainly see our Vantage product as well as new coding product lines, again, all hitting the market. So we're using this time to really position the business.
Speaker Change: Got a new updated software for our <unk> business that is hitting the market.
Speaker Change: And in our.
Speaker Change: Defense business, you certainly see our vantage product as well as a new coating product lines again all.
Speaker Change: Hitting the market. So we're using this time to really position the business for growth.
Sundaram Nagarajan: Great, thanks. And then a similar one in IPS, Martin, if you could go into the state of, you know, you know, phasing of demand and comparisons for the polymer and adhesives general assembly pieces. I think coating stood out as maybe the strongest piece in the quarter for non-ARAG IPS. Yeah, our coatings business is doing incredible, thanks to market demand and really delivering on the growth opportunities. So we're very happy about the performance there.
Speaker Change: Great. Thanks.
Speaker Change: And then a similar one in Ips were and if you could go into the.
Speaker Change: Stay tuned.
Speaker Change: Phasing of demand and comparisons for the polymer in adhesives General Assembly.
Speaker Change: He says I think coding stood out as maybe the strongest piece in the quarter for <unk>.
Speaker Change: Non <unk> Ips.
Speaker Change: Yeah.
Speaker Change: Our coatings business is doing an incredible.
Speaker Change: Market demand and really delivering on the growth opportunities.
Speaker Change: So we're very happy about the performance there if you think about already as a business in general.
Sundaram Nagarajan: If you think about our adhesive business in general, You know, 12 out of 13 quarters or 12 out of 14 quarters, we have been growing pretty strong growth; our expectation is still, as we finish the year, we will be flat to slightly up. So that has been a good spot, particularly our packaging part of our business is doing incredibly well. If you think about our plastics business, again, you had record growth in those businesses for the last two years. And this year, they will face some tough competition, and so that would be slightly lower.
Speaker Change: A lot of 13 quarters of 12 out of 14 quarters, we have been growing so.
Speaker Change: Pretty strong growth our expectation is still as we finish the year, we would be flat to slightly up so that is in a good spot, particularly our packaging part of our business is doing incredibly well.
Speaker Change: Think about our plastics business again, you had record.
Speaker Change: Growth in those businesses for the last two years and this year they would face some tough comp and.
Sundaram Nagarajan: You know, we don't talk about sales by individual divisions, but generally speaking, what I will tell you is our plastic business is slightly lower, slightly lower than their record for the last two years. So hopefully, that gives you enough color around the different businesses. Yeah, terrific. Thank you, Naga.
Speaker Change: So that would be slightly lower.
Speaker Change: Talk about sales.
Speaker Change: Sales by individual divisions, but generally speaking what I would tell you is our classic business is slightly lower slightly lower than the record last two years right.
Speaker Change: So hopefully that gives you enough color around the different businesses.
Speaker Change: Terrific. Thank you.
Sundaram Nagarajan: And one last thing I would add, you know, at each of those, parts are significantly up when compared to our system businesses. This is some of the, you know, this is one of the reasons when we talk, when Steve talks about sales mix, this is very helpful. Yeah, you're saying that less system sales in the quarter was sort of neutralized by really strong recurring revenue growth? Yes.
Speaker Change: And one last thing I would add in our adhesive business certainly parts are significantly up.
Speaker Change: Great.
Speaker Change: Our system businesses. This is some of this.
Speaker Change: This is one of the reasons when we talk Steve talks about.
Speaker Change: Sales mix certainly this was very helpful.
Speaker Change: You are saying.
Less system sales in the quarter was.
Speaker Change: Sort of neutralized by really strong recurring revenue growth yes.
Speaker Change: Yes.
Sundaram Nagarajan: Recurring Revenue Growth
Speaker Change: Revenue growth.
Speaker Change: Okay.
Speaker Change: Yeah.
Operator: As a reminder, if you would like to ask a question, please press star followed by the number on your telephone keypad. Your next question comes from the line of Chris Dankert with Loop Capital.
Speaker Change: As a reminder, if you'd like to ask a question. Please press star followed by the one on your telephone keypad.
Speaker Change: Your next question comes from the line of Chris Dankert with loop capital.
Please go ahead.
Unknown Speaker: Hey morning, thanks for taking the question. I guess just return to AIRAG, just return to AIRAG for a moment. Given that agriculture markets kind of come off peak here, is there any risk around the expected synergies for that deal? And maybe just how do we think about the cost structure of that business in the context of the current slowdown here?
Christopher M. Dankert: Hi, good morning, Thanks for taking the question.
Speaker Change: I guess, just trying to Eric just returning to <unk> for a moment given that agricultural market has kind of come off peak here is there any risk around the expected synergies for that deal maybe just how do we think about the cost structure of that business in the context of the current slowdown here.
Sundaram Nagarajan: Yeah, I think there are, you know, if you remember when we acquired Airrag, this is a completely new division for the company. Hence, there were no cost synergies baked into our valuation model. It was mostly based on our ability to continue to grow with the market. You know, clearly, you know, with the market being down, and our own expectations that it wouldn't follow the market not panning out the way we had expected, certainly puts the sales part of our plan behind us, but I'd still remind you great technology, a great end market with precision agriculture, long-term solid growth opportunities for us as a company, market leader in Europe, market leader in South America, two big geographies.
Yeah.
Speaker Change: I think there are.
Speaker Change: If you remember when we acquired.
Speaker Change: Acquired <unk>. This is a complete new division for the company and there were no.
Cost synergies baked into our valuation model it was mostly based on our.
Speaker Change: The ability to continue to grow with the market.
Speaker Change: Clearly.
Speaker Change: With the market being down and our own expectations.
Speaker Change: <unk> that didn't follow the market not panning out the way we had expected certainly puts the sales part of our plan behind it but I would still remind you great technology, great end market position agriculture long term solid growth opportunities for us as they come.
Speaker Change: <unk> market leader in Europe market leader in South America, two big geographies.
Sundaram Nagarajan: You know, certainly, we have opportunities as we think about North America. We fully acknowledge that our existing competitors do a nice job in North America, but we do believe that is an opportunity for us to continue to think about it.
Speaker Change: We have opportunities as we think about North America.
Speaker Change: We fully acknowledge that our existing competitors, who do a nice job in North America, but we do believe that as an opportunity for us to continue to think about it.
Sundaram Nagarajan: I think that was just kind of the crux of my question. You know, when you brought it on board, there was no expectation of a slowdown. There was no cost side to the economics there, I guess, has that doesn't, it doesn't sound like that has changed. It sounds like we're just going to kind of manage through here. We're not contemplating any sort of decrementals on that business. No.
Speaker Change: I think that was just kind of the crux of my question here. When you brought it on board there was no expectation of a slowdown there was no cost side too to the economics. There I guess has that it doesn't it doesn't sound like that has changed it sounds like we're just going to kind of manage through your we're not contemplating any sort of known.
Speaker Change: Rentals on that business.
Sundaram Nagarajan: No, if you think about this business, even with the reduction in revenue, their profit margins are north of the
Speaker Change: No. If you if you think about this business even with the reduction in revenue their profit margins are north of the company's margins.
Sundaram Nagarajan: Got it. Got it. Perfect. Thank you so much for the color there.
Speaker Change: Got it got it perfect. Thank you so much for the color there and I think just.
Speaker Change: For my follow up on the electronics side of the business, particularly in the electronic processing within within Ats. The shorthand at least for me. It's always kind of that's the handset cycle is there anything else that's kind of weighing down that business right now beyond handsets or is that still kind of the the main driver there.
Unknown Speaker: And I think just, you know, for my follow-up on the electronics side of the business, particularly the electronics processing within within ATS, the shorthand, at least for me, has always kind of been that it's the handset cycle. Is there anything else that's kind of weighing down that business right now beyond handsets? Or is that still kind of the main driver there? Yeah.
Christopher M. Dankert: Yeah, Chris I mean over over the last four five years, we certainly have moved away from the handset as important driver in that business and so it is still a small part of the business, but really semiconductor advanced packaging is where this business is growing and and income.
Sundaram Nagarajan: Yeah, Chris. I mean, over the last four or five years, we certainly have moved away from the handset as an important driver in that business and said it's still a small part of the business. But really, semiconductor advanced packaging is where this business is growing. And, in components such as camera modules and things like that, automotive electronics has also become a bigger part of the business. So it's no longer just a handset business; it is semiconductor automotive electronics, and there are still small handsets.
Christopher M. Dankert: Components, such as camera modules and things like that automotive electronics also has become a bigger part of the business. So it's no longer just the handset business. It is semiconductor automotive electronics.
And a small handset present still.
Unknown Speaker: Got it. Well, thanks so much for the call, Lara. Thank you.
Speaker Change: Got it thanks, so much for the Colorado.
Speaker Change: Thank you.
Operator: Your next question comes from the line of Walter Liptak with Seaport Research.
Speaker Change: Your next question comes from the line of Walter Liptak with Seaport Research.
Speaker Change: Please go ahead.
Unknown Speaker: Hi, thanks for taking my question. And yeah, I just want to try a couple of follow-ups on AIRAG. You know, you talked about the market in Europe, Latin America, and all the markets getting cooked the same way by the cycle.
Walter Scott Liptak: Hi, Thanks for taking my question.
Speaker Change: Yeah, I was just trying to try a couple of follow ups.
Speaker Change: On Iraq.
Speaker Change: You talked about the market.
In Europe, Latin America are all of the markets.
Speaker Change: Getting kicked in some way by the cycle.
Sundaram Nagarajan: Yes, if you, you know, if you look at some of the market reports that are out there, pretty much across the world, the market cycle seems to be down 20 to 25%, and that is North America, that is Europe, that is South America, and even Precision Act, which was typically a cooperative engine.
Speaker Change: Yes.
Speaker Change: If you.
Speaker Change: You look at some of the market reports that are out there.
Speaker Change: Pretty much.
Speaker Change: Across the world.
Speaker Change: The market cycle seems to be in that down 20% to 25%.
Speaker Change: And that is North America that is Europe, South America, and even precision AG.
Speaker Change: Which was deliberately and growth engine so.
Sundaram Nagarajan: Okay, thanks for that. And the follow-up.. is that the precision ag market is, you know, what's different about this cycle? Yeah, as long as it's related to like the stocking or something.
Speaker Change: Okay. Thanks for the follow up.
Speaker Change:
Speaker Change: Yes.
Speaker Change: The precision AG market is what's different about this cycle.
Speaker Change: Yes.
Speaker Change: As long as I related to Destocking or something.
Sundaram Nagarajan: I think there is some amount of destocking, but there is also You know, we are, you know, I tell you, our knowledge of agriculture when compared to our knowledge of electronics or industrial non-durables is sort of, you know, obviously, we've been in this business for a short period of time, so our knowledge is not as deep as we would have in other end markets, but our understanding is that there is some amount of destocking And so that is what you're seeing is that reduction in OEM, and this is unique because as we looked at this business and evaluated it, one of the things we were doing a lot of work on was to understand the relationship between cycle and this business's performance.
Speaker Change: I think there is some amount of destocking, but that is also.
Speaker Change: Okay.
Speaker Change: We are.
Speaker Change: I'd tell you our knowledge of agriculture, when compared to our knowledge of electronics or industrial non durable is sort of you know obviously, we've been in this business for a short period of time. So our knowledge is not as deep as we would have in other end markets, but our understanding is that there is some amount of destocking, but there.
Speaker Change: There is certainly some hesitancy in investing in large implements even.
Speaker Change: And so that is what you're seeing is that reduction in OEM.
Speaker Change: And this is unique because as we looked at this business and evaluated it.
Speaker Change: One of the things we were we did a lot of work around is to understand the relationship between sites.
Cycle in this business performance and.
Sundaram Nagarajan: And, you know, this seems a little bit unique when compared to their prior performance, so. You know, we're still figuring it out, but I will tell you that it is impacting us more than we had expected, and it is impacting us in that way. That's what our current situation is, and we still like the products, we still like the people, we're still working on continuing to integrate the business, which is going really well, and I think that's kind of where we are at with AIR-AID.
This seems a little bit unique when compared to their prior performance. So.
Speaker Change:
Speaker Change: Okay.
Speaker Change: We're still figuring it out but I will tell you that it is impacting us more than we had expected and it is impacting us and that's.
Speaker Change: That's what our current situation is.
Speaker Change: We still like the products would still like the people.
Speaker Change: Working on.
Speaker Change: Continuing to integrate the business, which is going really well.
Speaker Change: And I think thats kind of where we are at with that right.
Sundaram Nagarajan: Okay, great. Thank you for that color. And just as the follow-up question is, the electronics part of the business, you mentioned that there's a timing issue between the front end and the back end. Can you help educate us?
Speaker Change: Okay, great. Thank you for that color and just as the Pablo.
Speaker Change: Follow up question.
Speaker Change: The electronics part of the business.
Speaker Change #100: Mentioned that Theres, a timing issue between the front end and the back can you help educate us just how long is that.
Sundaram Nagarajan: Just how long is that? Is it measured in months or years? How should we think of that? Yeah.
Speaker Change #101: The months or years.
Speaker Change #101: Should we think of that.
Sundaram Nagarajan: Yeah, I, you know, we don't. By now, right? Look, based on our expectations in the first quarter, we had expected that this would follow quickly or thereafter. That did not happen.
Speaker Change #101: Yes.
Speaker Change #102: We don't.
Speaker Change #102: By now right look based on our expectations in the first quarter, we had expected that this would follow quickly.
Speaker Change #102: Thereafter that has not happened.
Sundaram Nagarajan: So our guidance doesn't imply a significant pickup in the electronic market for the rest of the year. And as we approach 2025, we will be in a better place to provide you with more color as to when it might actually pick up. But I think what is important to remember is that we have de-risked our outlook for electronics for the rest of the year.
So our guidance doesn't imply a significant pick up in electronic market for the rest of the year.
Speaker Change #102: And as we approach 2025, we will we'll be in a better place to provide you more color as to when it might actually pick up but I think what is important to remember is that we have derisked our outlook for electronics for the rest of the year.
Sundaram Nagarajan: Okay, that sounds great. Thank you.
Speaker Change #103: Okay, great. Thank you.
Operator: The next question comes from the line of Andrew Buscaglia with BNP Paribas.
Speaker Change #104: Next question comes from the line of Andrew Buscaglia.
Speaker Change #105: With BNP Paribas.
Speaker Change #106: Please go ahead.
Andrew Edouard Buscaglia: Hey, guys.
Andrew Edouard Buscaglia: Thanks.
Unknown Speaker: I wanted to go back to the ATF segment. Just given the nature of Nordson having a more direct sales model, it gives investors a lot of confidence in what you guys are saying, but what is it that these customers are saying to you that's, You know, making it so difficult to predict when the spend is going to move forward.
Speaker Change #108: I wanted to go back to the Ats segment.
Just given the nature of nordson, having more direct sales model.
Speaker Change #109: I guess the investors a lot of confidence in what you guys are saying well what is it that these customers are saying to you that.
Making it so difficult to predict when the spend is going to move forward.
Sundaram Nagarajan: Yeah, I think it's a great question, Andrew. What I will tell you is that none of the projects we are working on with our customers have had somebody come to us and said, Look, this is all off the table. It isn't. That is not the case.
Speaker Change #109: Yes.
Andrew Edouard Buscaglia: I think it's a great question Andrew.
Speaker Change #110: I will tell you is that none of the projects, we're working on with our customers that somebody's gifts come to US and said look this is all off the table it is canceled.
Sundaram Nagarajan: We continue to work with our customers on Projects and Opportunities as they bring on new technologies for AI, as they bring on more technologies for much smaller, much more complicated chips than we have. That work, the project work, continues. But what it has not translated is from that project work into system orders; it is not translated yet, nor have people completely canceled projects either. Right, so we are sort of in this middle time, you know; call it uncertainty.
Speaker Change #110: That is not the case, we continue to work with our customers.
Speaker Change #110: On projects and opportunities as they bring on new technologies for AI as they bring on more technologies for much smaller much more complicated chips then react so.
Speaker Change #110: That work the project work continues.
Speaker Change #110: But what it does not translate it is from that project work into system orders. It has not translated yet.
Nor have people completely canceled projects either.
So we are sort of in this middle of time call it uncertainty.
Sundaram Nagarajan: And, you know, I can only talk to you about what we're seeing in terms of customer, sort of actions, rather than, you know, what is the broader trend here? There seems to be a reluctance in translating work that they're doing into systems, sales assistance orders. We continue to do well on our part, but there seems to be some reluctance, and I'm, you know, not, not exactly, understanding the core reasons as to why our customers have reluctance, but there is reluctance.
Speaker Change #110: <unk>.
Speaker Change #110: I can only talk to you about what we're seeing in terms of customer.
Speaker Change #110: Sort of actions rather than what is the broader trend here.
Speaker Change #110: There seems to be a reluctance.
In.
Speaker Change #110: Translating work that Theyre doing into.
Speaker Change #110: Systems.
Speaker Change #110: Sales of systems orders.
Speaker Change #110: We continue to do well on our parts.
Speaker Change #110:
Speaker Change #110: But.
Speaker Change #110: There seems to be some reluctance in them.
Speaker Change #111: Notch not exactly.
Speaker Change #111: I understand the core reasons as to why our customers have reluctance, but there is reluctance.
Speaker Change #111: Maybe two.
Sundaram Nagarajan: Digging a little bit deeper, is there something unusual going on regionally? Like it is one region worse than the other. And I'm thinking China here. Yeah, I don't know. What are you seeing? You know, by geography, I guess. Yeah, we were not seeing significantly different results.
Speaker Change #111: Digging a little bit deeper as well.
Speaker Change #112: Regionally is there something unusual going on.
Speaker Change #112: As one region worse than the other and I'm thinking China here.
Speaker Change #113: Yeah, I don't know just.
Speaker Change #114: What are you seeing by.
Speaker Change #115: By geography, I guess.
Sundaram Nagarajan: Yeah, we're not seeing significantly different behavior from geography, geography. We still, you know, we work with all of the major, major semiconductor manufacturers. There are, you know, there are, it's not like, obviously, we continue to sequentially grow. And sequentially, we have better order entry.
Speaker Change #116: Yes, we're not seeing significantly different behavior from geography, geography, we still we work with all of the major.
No.
Speaker Change #116: Major semiconductor manufacturers.
Speaker Change #116:
Speaker Change #116: There are.
Speaker Change #116: It's not like you know obviously, we continue to sequentially grow sequentially, we had better order entry. So it is not like we are continuing to decline or we are not just flat in Nevada. We are starting to come out of it is just not as fast as we had or I think that as <unk>.
Sundaram Nagarajan: So it is not like we're continuing to decline, or we have not, we're just flat on the bottom; we're starting to come out. It is just not as fast as we had hoped. I think that is probably what we need to take away is that our reduction in guidance is mainly because we had a far steeper implied ramp in our second half. That's not, And that is not happening because the orders we are getting are not at the same rate as we had hoped. It is at a, you know, a little flatter rate than we had hoped for.
Speaker Change #117: <unk>, what do you need to takeaway is that our reduction in guidance is mainly because we had a far steeper implied ramp in our second half that's not happening and that is not happening because the orders. We're getting are not at the same rate as we had hoped it.
Speaker Change #117: At.
Speaker Change #117: Little flatter rate than we had hoped for and we.
Sundaram Nagarajan: And we don't see a whole lot of difference between regions. You know, clearly, when compared to last year, activity in Asia has picked up. That we can tell you. Certainly, Southeast Asia is better than China for us, and that's just for us. Certainly, you know, our automotive electronics customers in Mexico are significantly better for us. Europe is okay, so that's it. You know, broad, broadly, that's how we think about it.
Speaker Change #117: We don't see a whole lot of difference in regions clearly when compared to last year activity in Asia has picked up but we can tell you right.
Speaker Change #117: Suddenly southeast Asia is better than China for Us and Thats just for us.
Speaker Change #117: Suddenly.
Speaker Change #117: Our automotive.
Speaker Change #117: Electronics customers in Mexico are significantly better for us.
Speaker Change #117: Europe is okay. So.
Speaker Change #117: So that's.
Speaker Change #117: Brian.
Speaker Change #117: Broadly that's how we think about the Ats business.
Speaker Change #118: Okay. Thanks, Matt.
Speaker Change #119: Thank you.
Speaker Change #119: Okay.
Operator: Your next question comes from the line of Jeff Hammond with Key Bank Capital Markets. Please go ahead.
Speaker Change #120: The next question comes from the line of Jeff Hammond with Keybanc capital markets. Please.
Speaker Change #121: Please go ahead.
Unknown Speaker: Hey, good morning, everyone. Good morning, Jeff.
Jeffrey David Hammond: Hey, good morning, everyone.
Speaker Change #123: Good morning, Jeff.
Sundaram Nagarajan: Hey, so, just if we step back and think about, you know, capital allocation, I think you guys have kind of been on the wrong side of cycle timing around CyberOptics and AIRIG now. And I'm just wondering how you think about, you know, cyclicality and timing, you know, as you kind of look at deals going forward.
Jeffrey David Hammond: Yep.
Speaker Change #124: So just if we step back and.
Speaker Change #125: Think about capital allocation I think you guys have kind of been on the wrong side of the cycle timing around cyber Opex and Eric now I'm just wondering how you think about.
Speaker Change #125: Cyclicality and timing as you kind of look at deals going forward.
Sundaram Nagarajan: Yeah, I think it's a fair question, and we have spent time thinking about this. We certainly need to put that into part of our equation as we think about acquisitions and deals. But You know, having said that, I would tell you, the technology behind each of these deals is spot on for us as a company to continue to expand our portfolio position. We certainly have short-term pressure because of the market conditions.
Speaker Change #126: Yes, I think it's a fair question and we have spent time thinking about this we certainly need to put that into part of our equation as we think about.
Acquisitions and deals.
Speaker Change #126: <unk>.
Speaker Change #126: Having said that I would tell you.
Speaker Change #126: The technology behind each of these deals.
Speaker Change #126: Our spot on for Us as a company to continue to expand our portfolio position technologies.
Speaker Change #126: We certainly have short term pressure because of the market conditions, but we believe that the long term drivers in both these basis, a pretty sound and we liked the technologies, we have and the people we have at it.
Sundaram Nagarajan: But we believe that the long-term drivers in both these spaces are pretty sound, and we like the technologies we have and the people we've added. You know, Finally, what I'll tell you, it's not offered as an excuse if you so desire, but it is We really don't control when high quality acids come to mind.
Speaker Change #126: No.
Speaker Change #126: Finally, what I'll tell you there's not offered as.
Speaker Change #126: And excuse if you so well right, but it is.
Speaker Change #126: We really don't control when high quality assets come to market.
Sundaram Nagarajan: We continue to remain focused on our strategy of building a strong precision technology portfolio and continue to deploy NBS next. And we believe in the long-term strategic fit of these businesses, and I know as we get past these market conditions, we're going to be incredibly happy that these are part of Nordson's portfolio. So I think, you know, I think it's a fair question you asked, but, you know, that's what we're
Speaker Change #126: We continue to remain focused on our strategy of building strong positions technology portfolio continue.
To deploy NBS next.
Speaker Change #126: And we believe the wrong long term strategic fit of these businesses and I know as we get past these market conditions.
Speaker Change #126: We're going to be incredibly happy that these are part of nordson portfolio. So I think you know I think it's a fair question you asked but that's what we're working on.
Sundaram Nagarajan: Okay, appreciate the color there, Margot. Sure, just on decremental margins in the second half. I mean, you guys have done a pretty good job with NBN Next, kind of limiting the decrementals, but I think, at least in our model, initially, we have pretty severe decrementals. So just maybe how you're thinking about decrementals and holding the line.
Okay I appreciate the color there.
Speaker Change #127: Just on decremental margins in the second half.
Speaker Change #128: They've done a pretty good job with MBS next.
Speaker Change #129: Eliminating the decrementals, but I think at least in our model initially.
Speaker Change #130: We have we are pretty severe decrementals, so just maybe how youre thinking about.
Speaker Change #130: Okay Decrementals in holding the line.
Sundaram Nagarajan: Yeah, if you think about decrements, I think we think about decrements inside the company mostly for our core businesses. That is probably the best, you know, best apples-to-apples comparison. And if you look at our core business, apples-to-apples decrementals were pretty strong in the quarter. But if you look at the total companies, given ARAG performance, where you have lower sales, yet you have the full load of SG&A, you know, your documents at the total company level will look skewed. But without ARAG, we had some pretty strong documents.
Speaker Change #130: If you think about Decrementals I think we think about the decrementals inside the company, mostly for our core businesses that is probably the best.
Speaker Change #130: Apples to apples comparison, and if you look at our core business.
Speaker Change #130: Apples to apples decrementals were pretty pretty strong in the quarter, but.
Speaker Change #130: But if you look at the total company given our Reg performance, whether you have lower sales yet you have the full load of SG&A.
Speaker Change #131: You're good.
Speaker Change #131: Decrementals at a total company level, we'll look skewed, but without <unk>, we had some pretty strong decrementals.
Stephen F. Shamrock: And if you're looking for a number, you're looking for a number. Sorry, Steve, but you want to go ahead.
Speaker Change #131: And if you have combined number youre.
Speaker Change #132: We're looking for a number sorry, Steve you want to go at that.
Stephen F. Shamrock: Yeah, no, no. I was just going to say, Jeff, what I'd also focus on, too, is just our EBITDA margins, right? I mean, I think we've been very successful in terms of generating, you know, strong EBITDA margins. I mean, even Q2 was the fifth quarter in a row where we had EBITDA margins of 31% or higher. And, you know, in the last three years, we've delivered 30% or more EBITDA margins, and I think we're, you know, obviously well on our way to do that again in 2024.
Yes, no no I was just going to say, Jeff what I would also focus on too is just our EBITDA margins as well right. I mean, we I think we've been very successful in terms of generating.
Steve: Strong EBITDA margins I mean, even in Q2 was the fifth quarter in a row, where we had EBIT margins, 31% or higher and the last three years, we've delivered 30% or more EBITDA margins and I think we're obviously well on our way to do that again here in 2024 or so.
Sundaram Nagarajan: And, and in the core businesses, Jeff, if you're asking for what is a target incremental, it is about 50 to 50. I would use 55, just sort of in line with our gross margins because we want to stay invested in our precision technology innovation.
Speaker Change #133: And in the core businesses, Jeff if you're asking for what is that target decremental. It is about 50 to 55.
I would use 55.
Sundaram Nagarajan: We want to stay invested in our direct customer model. You know, that is what we have done in the past. And that's what we'll continue to do. But if you really put all of this in perspective, right?
Speaker Change #133: Just sort of in line with our gross margins because we want to stay invested in our position technology innovation, we want to stay invested in our direct customer model.
Speaker Change #133: That is what we have done in the past and Thats why we will continue to do but if you really put all of this in perspective right. If you look at our full year.
Sundaram Nagarajan: If you look at our full year, we're still on track with our midpoint, which essentially implies that 1% growth over a record 2020, still expecting that we will deliver 31 plus percent Hibita margins. We will still convert pretty strong on net income to free cash flow. In the quarter, we converted about 92%. So, you know, from an operational perspective, yes, the teams are dealing with some market conditions, but the operational performance of the company is in a pretty good place. We will continue to do that in this environment.
Speaker Change #133: We're still our midpoint is.
Speaker Change #133: Essentially implies a 1% growth over our record 2023.
We're still expecting that we will deliver.
Speaker Change #133: 31, plus percent EBITDA margins, we will still convert.
Pretty strong on net income to free cash flow in the quarter, we converted about 92%. So from an operational perspective, yes. The teams are dealing with some market conditions, but the operational performance of the company is in a pretty good place and we continue to do that in this environment.
Unknown Speaker: Okay, great. I'll leave it there. Thanks. Thank you. I will now turn the call back over to Naga.
Speaker Change #134: Okay, Great I'll leave it there thanks.
Speaker Change #135: Thank you.
Sundaram Nagarajan: I will now turn the call back over to Naga for closing remarks. Please go ahead.
Speaker Change #136: I will now turn the call back over to <unk> for closing remarks. Please go ahead.
Speaker Change #136: Okay.
Speaker Change #136: Yeah.
Speaker Change #136: Yeah.
Sundaram Nagarajan: Our solid second quarter operating performance reflects the strength of our diversified market, close to the customer model, differentiated Precision Technologies, and rigorous implementation of NBS Next Growth Framework.
Speaker Change #137: Our solid second quarter operating performance reflects the strength of our diversified markets close to the customer model.
Differentiated position technologies and rigorous implementation of NBS next growth framework.
Sundaram Nagarajan: We remain focused on the deployment of the Ascent strategy that positions us well for long-term profitable growth. With that in mind, we are excited to announce that we will be hosting an Investor Day in New York on Thursday, October 3rd, 2024. We'll be sharing more information about the details of the event this summer, but please save the date on your calendars for the afternoon of October 3rd.
Speaker Change #137: We remained focus on the deployment of the <unk> strategy that positions us well for long term profitable growth.
Speaker Change #137: With that in mind, we are excited to announce that we will be hosting an investor day in New York.
Speaker Change #137: On Thursday October 32024, we'll be sharing more information about the details of the event. This summer, but please save the date on your calendars for the afternoon of October 3rd.
Sundaram Nagarajan: Again, I want to thank Nordson's employees for their commitment, which makes these results possible. Thank you for your time and attention on today's call. Have a great day. Ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect.
Speaker Change #137: Again, I want to thank nonsense employees for their commitment, which makes these results possible.
Speaker Change #137: Thank you for your time and attention on today's call have a great day.
Speaker Change #138: Ladies and gentlemen that concludes today's call. Thank you all for joining and you may now disconnect.
Speaker Change #138: Yeah.
Speaker Change #138: Yeah.
Speaker Change #138:
Speaker Change #138:
Operator: And you may now disconnect.
Speaker Change #138: And you may now disconnect.