NDSN - Earnings call transcript Q2 2019

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Operator

Good day, ladies and gentlemen. Thank you for standing by and welcome to Nordson Corporation Second Quarter Fiscal Year 2019 Conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded. would Mahoney. turn I over conference time, Lara to this like the to call At

begin. may You

Lara Mahoney

Thank second you, I May today, morning. and We Corporate Nordson’s Mike Olivia. welcome Good report our XX, Greg Communications quarter President Mahoney, Hilton, year our President fiscal and XXXX of Thaxton, Vice you Executive to Investor and and to Tuesday, Relations. President am results. Vice with This here XXXX CEO is CFO. Lara call conference

on a live XXXX be call broadcast webpage of being at XX dialing will is call June which conference conference and our available by accessed days. XXX-XXX-XXXX. nordson.com/investors Our X, the be until available There telephone for can there will be replay

You will the ID need reference number XXXXXXX.

Exchange made our Nordson’s over number based with questions. and future company’s I maybe Securities During other take regarding uncertainties our current Commission the your turn results These With a involve cause the actual this be Mike. as upon conference to will of call the may risks, on the factors we will filings statements remarks differ. happy could After and performance forward-looking in to that, that expectations. to call, discussed quarter, statements

Mike Hilton

conference Nordson joining for fiscal morning, Thank everyone. quarter. Good you team solid XXXX call. second second Nordson’s a quarter The delivered

call second in second execute Nordson’s I of on we I One as But a more to fiscal growth contributing to initiatives. about all is our annual on sales end will organic over in guidance quarter ability quarter. our the company the greatest provide our Greg growth first, growth. the perspective segments some more moments. speak to strengths was detailed markets organic three turn with of the will diversity few of XXXX achieved and our X% sales This total evident

Greg Thaxton

Thank you, everyone. good morning and Mike to

quarter decrease to This of of change the organic volume X% year’s included decreased a Second year the than currency and X% of first the effect effects translation. to to acquisition compared XXXX was Medical not unfavorable quarter increase in the an sales of Clada of prior Devices related the X% XXXX less related second quarter. fiscal significant. Growth

Adhesive to the as volume the year’s organic where to offset translation of quarter. year’s X% year’s compared second product decrease for related X% compared inclusive Industrial of and within of prior solid effects prior end-markets. quarter. approximately prior in again growth quarter, second lines to across decreased sales translation reduction unfavorable increase by was currency to volume growth of Systems lines. X% X%, serving an of the compared Fluid X% lines as and These all electronics year. decrease Within year. of sales results of the Technology effects Management to prior the prior to compared increased approximately X% growth lines to system was segment, year. translation the the X% compared currency X% Double-digit Growth currency Dispensing to by organic a product the most unfavorable Organic a included product related solid second of prior unfavorable Advanced sales Systems as to compared was X% offset the volume growth the the a of product effects most was coating related decreased

operating company operating margin XX% quarter. reported was the was basis, Operating the XX% $XXX delivered Adhesive of strong Dispensing in income with margin in a margin profit million the for statement, segment of quarter. Systems On XX%. down Moving gross total the

$XX as in Industrial Within year with with increase Nordson all quarter second $XX million $X.XX, diluted conversion share volume of by per line compensation. GAAP of is EBITDA on benefit income prior inclusive and mix. segments, And segment’s in the the Technology Business operating also dividends We the net delivered to income. of this XX%, leverage of on the XXX% operating emphasis quarter, reported improved the a was compared performance a company reported earnings the result related second which sales. segment prior share-based XXX driven per quarter continued XX% of an Free quarter Systems total lower cash for before million $XXX discrete during the cash in of basis, System. of margin Advanced segment, net year, sales. margin points or in XX% of flow sales coatings was $X.XX basis resulting to share was the tax million was were performance and On

net perspective, EBITDA the now will turn was second closing EBITDA XX-month trailing to X.Xx of to exhibits, the for financial cash dividends adjusted net Mike From to and before end balance EBITDA sheet debt few a free includes as approximately as I well cash quarter. before release comments. press at the and flow EBITDA. over income flow free Our adjusted reconciling dividends a call

Mike Hilton

Thank Greg. you,

We continue with business, our including growth along allow and on targets. initiatives applications ability innovate and growth diversity, diversity end-market us to the geography, deliver will achieve to believe to long-term of our our

ability the of outlook, margin over improvement of the EBITDA compared to approximately suggests XXX effects sales rates, the remain points and the As year to likely be year, our in low currency unfavorable year our the basis organic single-digits expect XXXX. Based prior fiscal we still the at remainder on prior the we as we continue for fiscal continue year. though the improvement exchange businesses. of operating we current growth impact continuous organic macroeconomic in translation to growth on throughout of this confident to generate we X% look focus With forecast for trend will

our support. employees to With shareholders your that, and will and take you continued thank we pause always, customers, for As questions. your

Operator

question our Chris of And Instructions] with Longbow Dankert [Operator Research. coming line first the from is

open. now is line Your

Chris Dankert

Hey, taking question. good morning my Thanks for guys.

Mike Hilton

Good morning, Chris.

Chris Dankert

of consolidation. kind we the kind of beyond costs? move just plant those benefit million costs into it’s of of you know duplicate maybe I $X kind of some and kind reduction any as breakout have fiscal removing half the the can I the on but just ‘XX, of got synergistic into here guess back synergistic just from is what the we year ‘XX benefit

Mike Hilton

I see expect expect improvements we to equipment new as said this XXXX. lined necessarily efficiency into them to we see We of some didn’t we as Well, the year think before, have all go as out we there.

yet. put haven’t that number We on a

expect And so as consolidation. optimizing efficiencies I coming would think a see do to operation some result XXXX that, of we we from are really ready not but in to the

Greg Thaxton

the this we expect see we Chris, is the fiscal part current wind And the of Greg, margin would to consolidation of benefit efforts, year. to we is of add that down in is XXXX, as some expect expansion that kind I in see

Chris Dankert

guys Got you organic I on upward kind had particularly guide? we it. of to the guidance Got see the of last an and are what’s that guess call, just kind mentioned new thinking the then within necessarily it, about you didn’t need mobile baked range range. hit in into prior mobile inflection thanks. And how of to kind

Greg Thaxton

of the Yes, bit one say, affect innovation particular of I affected customers phones. introduce significant cycle in level really little is the any we our and would of us haven’t into this will seen of things quarter in sort this QX that’s a

year and moving the bit. forward that on our frankly counting down going the not are that a we of rest forecast for quite and that So impacted has

the any counting of in of customer we So for related step to really significant kind base. year, our up rest are on the innovation not

Chris Dankert

kind helpful? impacts Got in, have from so, expect If you I one tension, that any it. any but of could it. sneak guess seen Got be Huawei comment just I of would just top on I there don’t the

Mike Hilton

catch said what I of... the there on did you didn’t last – of the what part, Chris, impact you

Chris Dankert

relates as of kind the from Huawei? just China impact and to tension Apologies, between the U.S. it

Mike Hilton

think electronics general, equipment I in slowness is some say, trade business the function our current of would tension. just of I a the in

off people some think holding I are So investment. on

in we across step segment the focus board down. think will again, and I the out. Huawei, that key of we the for a a will guidance But so to been we said not how out. Chinese have innovation wait we are to any players our see relates how are and that the Obviously, in of our that’s of up it plays see customers, significant that need to year expecting before rest that kind have mobile plays As bringing

Chris Dankert

queue. much Understood. hop I’ll so Thanks in back guys.

Mike Hilton

Okay.

Operator

Our the is line from coming Davidson. D.A. next of question Matt Summerville from

Your line open. now is

Drew Haroldson

Drew on Matt. This Haroldson for is good morning. Hey,

off, First wondering... I am

Mike Hilton

morning, Drew. Good

Drew Haroldson

Good morning.

First it’s off, buckets and what am main the outlook performance wondering I in was four ADS quarter in second is? forward go between the what

Mike Hilton

well. business, adhesives I of would performed the most core businesses across the say

You know improvement some from are little non-wovens order the softer, starting we there. to but an see perspective was still

we those the the of product encouraged, year for I’d half So say second across of all are lines.

of an in in longer quarter. like those lead it our fourth projects will more TPS some And area, have of the the impact

Drew Haroldson

whole individual Got segments how second I low-single organic am off, for wondering three compared the to it. the company? digit then And the outlook

Greg Thaxton

of year, aren’t we year. some some likely still grow. segments for marginally and product expect grow the to the a lines bit to Individual them still but more, For all we little all expect to grow the

is So be down. to for systems our electronic example, line likely product

Drew Haroldson

Got it. Thank you.

Operator

question KeyBanc the Our coming of from is with next Capital. line Hammond Jeff

Your open. is now line

Jeff Hammond

morning good Hi, guys.

Mike Hilton

morning. Good

Jeff Hammond

out the you lower seeing on speak maybe – there within guide other are what that or of revenue automotive are electronics markets? the the of and you softness is clear the guide, of seeing is your isolated be and Europe that piece to to areas just guidance, So out are just that end to

Mike Hilton

say well continue it’s well. expect lines I’d of doing electronics our them Most other largely and to Yes, do product we are the to piece.

and auto of drag net-net of years. kind it the drag couple medical the year. it is in first our The run-rate in particularly of Our business We businesses been although a more EFD businesses effect year, like was see having big choppy. are and for a strong. a It’s part on particular the of packaging don’t a

Jeff Hammond

point your then still the flat XQ a bit of a basis like down And and you margins then XQ, it looks in Okay. were margin margin on think ramp. XXX just little ramp,

incrementals number? can to you how you So to get that talk you where given ultimately get see there just about

Mike Hilton

so would thousand projects look it, related our just polymer category, piece projects working improvement. costs then of a that in we to that would bunch Nordson duplicate performance of our on in Business some Nordson if efficiencies the improving say I year you have that, some Yes, and through several we our is of a at Systems I dollars that so that business – there hundred is the that there. generate a eliminating singles are, of And call are and

maybe up them variety are that things things is significant. to there the that automation of ability a maybe using when outsource, So add you at through that all businesses we our and in-source of each some

with And along our Nordson Business piece so business. polymers improvements it’s System the really in driving

Greg Thaxton

And Greg. then Jeff, this is

volume. that on volume generate that will with course, Of growth generate the an some incremental we

Jeff Hammond

Okay. you tech but just talk And think XQ, about I the really think you in cadence just comps that that the think year? you of half maybe Electronics, business back I comp mentioned look, into had I then tough you get in it the as see into in if XQ, and easier

Mike Hilton

Yeah.

my quarter fourth through fourth of just is year. we overall with the struggle seen quarter side. or looking to really in the piece but the on in company maybe comps, So, the quarter at I some to commentary electronics going earlier the next think maybe comments, some The easier look continue third In on quarter. we rest customer when the the the haven’t is innovation there

that single-digits. a our, the combination gets the business which ultimately medical, things some then I in strength stronger quarter more integrate or year, modestly comfort continued would substantially, QX expect long is a expect revenue from the perspective in-house to piece that EFD low us The and QX run be our business, and we we see piece businesses lead And think and gives so that fourth to already is future. up overall rate from our really us electronics. drag when projects a include you packaging to QX of really that expect QX near in, our have of across function of like We to them that QX we’ll come be the up sort

Greg Thaxton

see just fiscal add it a typically where where I’d Jeff, plays as have being don’t the fourth out commentary. innovation in suggested a the quarter would quarter we stronger, end year in the electronic the And year. markets little In strongest our Mike you

through out that kind in as of continued with likely you’re of see type as the year and it is growth characterized, plays to move Mike we year. this So that line

Jeff Hammond

Okay.

a all in there’s isolated that segments step the So, events? fourth into the up or growth be quarter in would

Greg Thaxton

talked those said run the Key that expect No, our about event it stack, mean, particularly not real strong. be parts mean to I business see we rate in I strong. EFD just strength of we’ve I businesses. been medical we in as has

been Our solid. really packaging business has

in and long are in coatings our orders in polymer non-wovens lead improvement place that have and We business then the comfort us near-term like we business. some things in some our gives our seeing

I So that think the dispense parts electronics helpful. the solid. And business the and of are is side piece; then, combination outside the of other

to So piece probably that’s you is a the when the and still. quarter third strength combination it, the quarter of adds the of the in electronics drag sort a look that at bit fourth

Jeff Hammond

Okay, excellent. Thanks guys.

Operator

Our coming Liptak Walter next of Seaport from question is the line Global. with

now is Your open. line

Walter Liptak

Good thanks. guys. Hi, morning

Greg Thaxton

morning. Good

Mike Hilton

Good morning.

Walter Liptak

important the a sell some ask Chinese you the So, think, I wonder don’t directly, But to into talked what’s Huawei to about companies over us years. I mobile makers become calls ever mobile more customer. one know I the device wanted few we’ve insight of these and you about so give if of can phone happening. some last specific And

You of business that’s impacted of have and that the are on wonder do the quarter lot you know the the in business and press now. obviously quarters. in how trade fair I the China amount might what your a things what and in is out view war a coming right of with that

Mike Hilton

down A I’d Walter, are think in So, say look numbers, at you geographic We we a think, issues forth in Asia. do that some back in if they’re at trade as and part mobile high we’ve in the it’s had a the creating year electronics it From do our level, lot delay of a really a investment the perspective, not lot Asia. the business. played out. been not general, some beginning to with linked said, innovation, where year promise that of in that’s and of

we I and all as support players. the said Chinese think before, of we the larger

of been customer is say there has last as rounds concern significant discussion latest is enough and relates kinds one that But some some the going drive sort relaxation to I’d Huawei. night it even what see we So, of of with there no forward.

in so, pretty business, year modest And forecast general. is our mobile assuming a from

So, make trying mean, it. could. I we’re potentially but to Does could. account for not on it do counting tensions we’re worse? that, these It it this

Walter Liptak

seems a I about little on XG like the And we’ve deeper okay. is can in wondered about innovation, it Okay, you bit comments and that. if moving the know past, go I talked just XG, what timing of you could parts maybe kind little? of thinking some happening innovation is world. were in What the forward of you that be do out think has the and that other a pushed

Mike Hilton

through typically and work November lot from of a Yes, forward timeframe, you so changes on of we of where in projects a significant year some see February the go models. in typically, the sort those

incremental. being pretty You lot a a where that in of it’s incorporated see year

just think haven’t You in of to sort of see seen as for all say mobile related don’t lower and year, phone. is at I’d we much this a the many. the way I of innovation, demand that’s some

now. trade issues to think, related Some that of the are is, I that ongoing right

haven’t lot investment of a innovation. So, incorporated new into we seen

going XG, news are driver there the to lot infrastructure the more infrastructure XG you to be of the and in and need effectively side it, on side localized a out incorporated really, point. XG But that headline to is The in and capable get much around on phone relates there’s there XG less for place. the phones. not work more at benefits phone it As this for

beyond, you significant the then, short going out the to that’s because XXXX changes. physical outside. so play you need XG within from more is antennas lot, need through ‘XX and of and fairly very a phones, So range And

and infrastructure real more play. be to it’s beyond in So, of somewhat to going broader and having think I the a impact linked terms it’s XXXX

happens; some get like really the these these us that investment hang to is too, there in phone on you’re transmission towers, all it’s lamppost But are high and can but benefit a happen else. on infrastructure you side. necessarily to everything opportunities and until an that play not require Now density that today stuff going for not we have a this has

withdraw say, effect had even of not comments So, U.S. see at you this some point. I’d I because companies to see XG, you while in their the really phone advertised think XG they’re

Walter Liptak

Okay.

And thanks volume last good are the wonder from that if about understand trends one for that. just us on questions can growth going there, talk and could like? of trends then, in by are or I one Europe, we the follow-on either very because EU logs Brexit of the a what segment X.X% that anything Okay, Jeff’s or about looked of front hear and you slowing maybe about orders like any new help on

Mike Hilton

general at bit you be coming thought Yes, we to less pretty maybe into year I going broader in say a look economy. was year, from modest a the year than last European growth if a it would the little

think although encouraging in out playing some was I recently, out what’s most fact news of more there that’s think I Germany.

function For a an Europe that a expect remain from for be to our, specific modest solid. for really we economic continue Packaging growth to overall of like Europe parts us, it’s What of business perspective. year

Walter Liptak

Okay.

Okay, thank you.

Operator

Instructions] is Jason of with Great Lakes line [Operator question our Review. coming next the from And Rodgers

line Your now is open.

Jason Rodgers

back-to-back Yes, wondering, follow-up did past history, so customers on the you’ve next years the side, mobile year, mobile seen mobile innovate, if just about your not just I did have side. thinking on outlook the, on were for the based one

Mike Hilton

Yes.

investment then being is say the being would a tack a I impact. describe this they relatively fairly overall saw for atypical it’s I And and And incremental weak. year because you really as is of and think that we typically year think an it So, trade it. demand side what having I here this taken is little haven’t and last do affecting

XG to be next the I do prior driver think Walt’s So, question is that’s going around around mobile. big think I what’s unusual.

in things, – general the those and the run-rate diversifying within in thing space quarter business auto industry that the the and as been doing the that other the and kind and pieces have doing in non-electronics side is the year, other growth for help driving for in more are certainly will us, semiconductor For and helped as medical example, in overall well our of well. more and segment that side electronic we electronics helped businesses the doing because

Jason Rodgers

thanks. Okay,

Operator

remarks. I questions. Mike conference Thank you. turn further At Mr. showing this closing Hilton no to the am over I like for would call back time, to

Mike Hilton

today’s I And everyone on you. participating Thank for thank call.

Just as single-digits. we this expect We improve low basis grow expect point, said points. to margins we do one to year do have as final summary our XXX

that So, some all challenges macro business there the allow happen. thank of a industry-specific for is diversity going want us of team of making And the despite improve and on margins our are customers and to delighting perspective being out grow and to our year. I to from this focused challenges, some the of that

So thank you.

Operator

concludes and all program your the in for gentlemen, disconnect. you today’s you Ladies thank a Everyone This great day. and conference. have participation may

Nordson (NDSN) 21 May 192019 Q2 Earnings call transcript