NDSN - Earnings call transcript Q3 2019

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Operator

Good morning. My name is Lisa and I will be your conference operator today. At this time, I would like to welcome everyone to the Nordson Corporation Third Quarter Fiscal Year 2019 Conference Call. [Operator Instructions] Thank you. Lara Mahoney, you may begin your conference.

Lara Mahoney

Lisa. you, Thank Good morning. President Vice Corporate and Mahoney, Communications of Relations. Lara Investor is This Former Nagarajan, joined Advisor President and and am and I Vice Nordson’s Thaxton, to and Executive Greg by company Senior Today, CFO. Hilton, Sundaram new President CEO; Mike and the President CEO; report you to our XX, to XXXX year welcome call today, fiscal We August third Wednesday, conference XXXX Nordson’s quarter results.

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

ID will to reference number You need XXXXXXX.

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

call I to turn the over that, With Mike. will

Mike Hilton

Good call. for fiscal joining morning, quarter third everyone. Thank XXXX you conference Nordson’s

the like Naga the President ago. He to Naga XX-year with results, we following to career X, as financial Officer ITW. and joined about welcome us on Executive three weeks Before call. Chief August discuss just I’d XXXX joins us

have pleased very to join him the are We company.

Sundaram Nagarajan

growth to And the position. now with years. business to passion talented on Thank to to on career, growth market travel strong XX prioritizing and leadership to you, in my our resulted am talent focused have opportunity the of a colleagues lead team meet the as Directors I and profitability by of Board innovation margin. the the your profit first starting Nordson. individually and thank with listen the have I an and appreciate Throughout of on opportunity driving to customer opportunities drive customer behalf want thank while record I’m of for that over Nordson’s and I I members join thrived track the enterprise, focusing It’s know trusting I Nordson’s innovation get to had also team. world, leadership sites using shareholders leading XX in for solid me and Mike this this chapter you our next our meeting Similarly, will Mike. days, the developments. to understand look and growth. honor of around my our and Nordson with to I analysts. forward to and past

Mike Hilton

Thank you, Naga.

We’re very glad to the have team. you on

Now disputes turning the customer environment international lasting uncertainty and quarter, capital. trade investments our new it’s to as expected than have within most and delayed third anticipated. our organic result a continuing we longer serving product within and Advanced macro have and third attention related projects capital The non-electronics in the the is technology ongoing those the This Coatings challenging to influence solid been quarter than economic we lines originally Adhesives Technology. electronics growth end had segment the a and weaker in offset Dispensing from Industrial product markets Segment lines to softness

Segment, Also fourth move quarter the quarter. customers Industrial during into some within deliveries the Coating

improvement this has been So top team segment a on costs. and expect results quarter. our focused period strong line initiatives Throughout we deliver for continuous the to this managing in fourth executing

during company operating but from well they the one-time third to held decline in tariffs. as prior the the years. and adjusting quarter total in equal sales both result, margin, pressure as quarter Despite the for distraction a charges As year,

the more third perspective to on to Greg a detailed over now I will turn the quarter. call provide

Greg Thaxton

and good morning Thank to you, Mike everyone.

decrease of the decrease acquisition Optical of effect the XXXX significant. the of X% quarter quarter. X% of Control of This and a to Third to unfavorable in Devices related change year’s prior to organic the the first-year decreased a sales related the fiscal was Growth third XXXX compared of not included currency acquisition quarter volume effects XXXX and Medical translation. X% Clada

Dispensing compared compared to of quarter effects in across currency and the X% most the X% lines. segment the was volume prior to a of inclusive product sales the year. translation Within prior Systems increased all solid third decrease related Adhesive X% of organic increase year’s Growth of an as unfavorable to

of inclusive unfavorable lines the organic a prior effects in of Advanced by quarter. in compared in minimal softness and a These serving a sales Coating of dispute. XX% X% year. product markets. lines related compared to include trade effects and product decreased related Industrial customer organic again, to results translation This third the in electronics prior coming to of unfavorable a result currency translation, to X% to Technology decreased as tension Systems the decrease prior as of XXXX, quarter as compared volume XX% the end decrease the innovation the currency the in is to was of the as market decrease ongoing of year’s the to year’s growth X% well medical largely compared year. third decrease related of sales volume X% to Double-digit Systems offset prior

growth and system timing volume Mike can expect within As segment. fourth of the quarter impact we shipments results this quarterly strong noted,

charges. against the segment. year’s quarter On exclude the reported drive margin up this operating for Operating income margin these of margin XX%. charges include quarter. margin in acquired of gross to strong the results a million Adhesive third team pleased adjusted the Adjusted operating XX% Systems one-time was also charges $X.X delivered we’re making one-time segment is the to with see value the progress for the million These was XX% Again profit down the operating strong for a the total equal Moving performance one-time and within the is for excluding of environment. operating one-time XX% macro $XXX,XXX company to operating prior was in this the margins quarter, charge of challenging margin restructuring inventory. step Dispensing $XXX statement, in basis in the quarter quarter,

XX%. segment has reported to sales Within operating sales margin the level down this improvements to operating year the lower from The make segment weaker its worked to are Technology quarter, achieve hard This the to Advanced performance was quarter. sustainable and team XX% Industrial prior delivered despite of third in volume. Coating primarily performance operating pleased we margin due Systems in the Systems of

company On sales. net of EBITDA delivered quarter XX% income was the GAAP share third $X.XX. million or million of were quarter and for We a $XX per diluted earnings total basis, $XXX

exhibits, sheet to as cash of flow the times free dividends well X.X before income net third and was approximately includes EBITDA. release months and end at adjusted free financial reconciling EBITDA flow From press trailing cash XX debt-to-EBITDA balance perspective, as net adjusted quarter. the a Our before dividends, EBITDA

for turn over to Mike few the now will comments. I call And a closing

Mike Hilton

you, Greg. Thank

customers Advanced these well segment within on impact despite As beginning trade as than macroeconomic portion these but anticipated, are continuing cautious expectations recent of end than during more especially most some trends effect had the with I and reflect certainly our the The Many the uncertain investment of our medical such significant capital have up expected. at more has with the Technology time. year. the adhesive held of of dispute had those pressures, longer markets,

now and sales foreign sales prior we compared flat With the approximately effects X% organic currency unfavorable to year. expect as of year, to the growth full on modest

importance EBITDA margin continuous We will and our or of to growth focused costs improve The offset operating the weaker on remain modestly to strategy. the the and year. to improvement margin hold initiatives prior sales underscores diversification expected macroclimate compared

the lines segment growth in that the our with I Advanced the Technology am Despite during end quarter. solid Adhesives the Expect product the in segment to with Dispensing weakness non-electronics and markets, growth electronics continue. pleased organic

quarter expect also Industrial our our a on current We based strong fourth Coating segment from backlog.

Control On automatic X-ray customers. to expands announced look for fully X, we high-speed the welcome systems that of The our end to organic This drive of growth to accounting to using a markets the and forward. Control, diversify technology. the and designer continue product will We opportunities developer test going inspection provider business. we Optical of to confidence capability Nordson us to electronics gives I’d of like position Nordson’s employees diversity valued formally solutions continue for our our with Optical Nordson’s combined acquisition Germany as based a the strength will line team. customers July

to annual remained dividend XX returning on of This increases, also for We our our of our pride us we earlier XX of the increase take We this month focused delivering record shareholders dividend ranking value traded announced cash a dividend year longest-running of consecutive annual increases. in marks companies shareholders. portion publicly among the flow to X%. a

Naga I employees Greg my an torch ten We’ve and is continue community I’m been work the call, values lead Q&A, excellence – thank road meeting last will it I the to into and their to to and like I’d shareholders, To the over Naga move core of this leadership It’s the holding our to a this years. support Lara new company’s energy. this pass and see will honor we legacy. start people with him. take customer grown to customers with is back know to and him past strong team Company. continue to passion great to great the enhance that moment transition. integrity, on analysts, business smooth to Nordson’s and for true for while markets my conference as and ensure entered Nordson’s Before to investment pleased

take With and questions. that, we pause your

Operator

question comes Wells Thank And from you. the Fargo. Allison our Instructions] line Poliniak of [Operator first from

open. is line Your

Allison Poliniak

morning. Good guys. Hi,

Mike Hilton

morning, Good Allison.

Allison Poliniak

Mike. ICS Naga go want second. for Welcome, luck to and a of best just to I

and ability color uncommon I I don’t around in QX. Any guess know risk that push they delays You those it. outs, it. quantify any aren’t know, push any in outs execute then customer to And the

Mike Hilton

them go that the had say we’ve is about customers and moved are I’d ready really bit. little large unusual As say I we to there that back in quarter a just projects nothing some

all they’re in be now will delivered quarter. execution So in the and

we strong quarter there. expect to we see said So a as

larger some that the So fourth or there’s unusual orders quarter. nothing underlying movement than into other just of

Allison Poliniak

guess you Okay. target drove some Perfect. reduction, I know down at Fed surprise. that guess year. and growth I of growth I were the electronics, guys looking the area what And the – mobile the not for that’s mobile a the then

Mike Hilton

of electronic all falls the most say, would space. I into that

we out. industry in where on electronics to have working recovery of hold. And back half that’s the grade them been general second specific disputes really not given the we think all that quarter the in a second in were a of is on projects essentially number you put expecting were the mobile If playing

shortfall particularly in affecting around and that delays our in the has the business electronics So has spending been those the I’d dispense say area driven really there. capital

Allison Poliniak

Alright.

Okay. very you much. Thank

Operator

question from comes of Christopher next Glynn Oppenheimer. Our line the from

open. is line Your

Christopher Glynn

thanks. Hey,

been it’s working Mike and Naga, welcome comments, great with Allison’s echo Just you.

the besides in quarter electronics as solid? Or wondering get you’re softening, – Just in But at looking area down, things patterns to any pretty I’m doesn’t real is look starting to like it other tougher frame? still is if the market’s continuing demand other XX Any time. anything really.

Mike Hilton

if I segment, Dispensing look Adhesive expect. our we a you of along running No, pace, at would sort what kind of say would at nice that’s

Our medical business very is strong.

Our business solid. electronic outside is Technology space the Advanced in

we’ll I year a in fourth the think we when coatings this business the recovery look quarter. at nice in end of the see

side even driver one the and inspection the kind short business say its been really key that’s most dispense and is things, within affected in term. electronics been own, significantly the Let’s that’s is test our of holding the of

we’ll run the coatings be general, I’d not say in And strong electronics capital could spending. the improvement – really to it’s next some back pull nothing in see we’re you sorry So I’m rate on if say a overall the worse, expecting the businesses quarter. in piece an quarter, trade are doing so gets else, next see dispute the I’d in drag

that seeing yet. not We’re

Christopher Glynn

the on margins performance makes quarter down the record but first little for for the a each are segment flattish of nine That kind seeing first full-year clear a the sense. wondering with company to Thank because, the year Okay. you’re the of And after implies radius growth months margin have polymer were obviously, and that. better, were organic margin if best year the path that rate you you into near back since outlook? guidance maybe deals,

Mike Hilton

to duplicate improvement talked from we have yes, year. volume fourth the most expect as most across business of seen see this – polymer do in the expected to businesses elimination we we we quarter up the all and of of coming about, we Well, our go cost

operating We the rates, have good next at see some facilities, year but would we running additional to expect improvement.

think we spot I point. in So, segment Adhesive this are good at on a the

Christopher Glynn

Mike. you, Thank Sounds great.

Operator

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

is open. line Your

Matt Summerville

Thanks. Good morning. Couple of questions.

a the First, follow-up you anticipate the the to talk quarters from a that you you’ve savings cost duplicate completed manufacturing sort of Adhesive about, optimization the beyond of of can question. of, or that generate footprint segment Dispensing Chris’ annualized there’s kind you in mentioned, to Mike? The of back couple elimination

Mike Hilton

much efficiency Yes, the what say, for investment this gains. and equipment I technology see we’d year the elimination to we we’ve load we as said and up beyond Matt, equipment as in newer cost, to given facilities, out facility the the our would in didn’t of expect those expect all-lined see some running sort get of we those new

We quantify haven’t that. specifically

basis we historically think questions around, gotten said an we get segments or think can on we’ve XX% above back we we can as back do and annual I – that. to margins

weren’t counting of be would the this. there efficiency – performance that, as on So we to but necessarily due step-up obviously this year lined we improved up that big a part

Matt Summerville

a and two follow-up as things. Just

can or free was cadence quite better the then your performance out the you willing parse And do Thank in specifically, saw even least sort on know ago the worse, I whether regarding order Greg, the what on the past, of that businesses, bit? you’re you. you’ve comment it same. through year numerically, some monthly got versus maybe give three if to perhaps but why quarter got flow just quarter of don’t kind rate, at this stayed a things First, comment lastly, able to and period you cash a down year-over-year incoming color you been

Mike Hilton

bit, bit. would Yes, overall little look order as dramatically, a say improved progress the a little quarters rates through you not improved but I

expect the some So, quarter. run I’d confidence and fourth I see but the gives our improvement wouldn’t in we say much volume say in into quarter we the too in orders rate I’d But our business combination of what see. us particular, throughout recent growth our backlog coatings in read businesses plus to modest some that

Greg Thaxton

capital. will conversion Yes, of some different we sales. the in things on working quarters of free combination the during Matt timing It’s the two really quarter when in system year it’s cash larger have the to this ship a related

the in say, gear are end receivables. quarter. related strong So, I’d setting quarter, of it’s they if in inventory fourth occur as so the up we still And to they more expected build back an also, for

back the year, expect the working we capital get conversion and that at rate. related would XXX% that it’s So, when of I to end we’ll be

Matt Summerville

Got it. you, guys. Thank

Operator

from the from of comes Hammond Markets. line question KeyBanc Capital next Our Jeff

Your line is open.

Jeff Hammond

guys. Hi, good morning,

Mike Hilton

Good morning.

Jeff Hammond

Congrats, great Mike, for a tenure and Naga, aboard. welcome

Sundaram Nagarajan

you. Thank

Jeff Hammond

have of from things. can to we a, just back go pin a way the how was we couple XQ. of much a could I quantify XQ there is just to If to revenues move down Coating, So couple trying to

to we Just growth in size try XQ? rate as the the

Mike Hilton

have of in large say, if Not specifically. Jeff, wouldn’t called moving it substantial But some would as shipments. amount it wasn’t I we that was what out revenue

So, it wasn’t incidental.

Greg Thaxton

of this of we’re larger when timing to those sales. have ship, think I it’s some of for but this Jeff, segment would in that system Greg, remember we the about they orders add And often that, talking to is I dollar both terms

that and, the So, we of it’s to timing going also get the orders they’re when in those ship. quarter,

that we and that you demand it’s the expect we’re it’s the we’re to to of segment to it’s, that’s in to flow suggest although quarter, get the you in that comments going trying performance. in really So call suggest down with is fourth the that balance when normalized it to trying what not was, volume alone is the we’re it it seeing back deliver third within that the that quarter direction provide to

Jeff Hammond

Okay.

Greg Thaxton

quarter is in record what But that would be fourth segment. to probably going particular a say the we

Jeff Hammond

more, Mike, expect of you I And then this this then didn’t Adhesive challenging helpful. to fourth quarter. electronics, in a very you kind be said, think little drag That’s and spend, And better the Okay. just is quite year. a

it be So just or uptick you’re to kind that what sense us see a continue drag? that of a confidence of some we that give you seeing gives doesn’t

Mike Hilton

that of comparable part has the there with steady-state frank year Yes, function of, steady. is part of a pretty inspection business, function I part the that business. say, a to be a steady-state test of The is is part of of so business would that last been

it’s that We don’t see it just I’d so looking big any And down say uptick. for really, we’re not a more. going

Greg Thaxton

portion stability the course, the Of of we’ve business non-electronics got segment of the growth. the Advanced Tech within helps that that

Jeff Hammond

driven, close substantially, Okay. And XXX%. the sense [ph] else and said down your margins, that that’s then volume it pretty Or just pretty business the something is last you think decline? is just incremental really I just just away? on were Advanced driving rich you one me going I on give brought Tech. were But The mix but there margin that steeper is to was think going a there

Sundaram Nagarajan

is impact Jeff. term. does Yes, that, all volume What I in I we first short would heard think say an the have the

dispense within tends the business our business margins Issues] business for than because part particularly of components specific [Technical substantially Secondly, the test make to the higher electronics largely business, business and of carry inspection I down the that said purchasing and side. test that more versus is as or on some inspection we

volume say So those I’d biggest mix. seeing what the to two we’re are, piece there, and contributors the

Jeff Hammond

Okay. guys. Great. Thanks

Operator

next line the Baird. of from comes Thanks. from question Mike Halloran Instructions] [Operator Our

is line Your open.

Unidentified Analyst

everyone. Good Pat, This morning, is for on Mike.

Sundaram Nagarajan

morning. Hi, Pat. Good

Unidentified Analyst

moving margins, maybe to get a initiatives. the color little hoping some ICS, with was so going more we back of I bit have the to pieces the cost

of directionally help also expecting nonwovens Could gap takes puts the the it by a into a bit little maybe us, then EPS. feels there? improvement some segment, help little you there we’re bit bridge maybe XQ maybe some us of could like You and and and working

Sundaram Nagarajan

of that thinking Part as improvement Well, the our as quarter we come leverage to to volume to flat in year we’ll volume. what for is I here. modestly say the get and of on expect going up kind that overall, improves be would fourth we’re

run have see our to the we’ll and in tariffs part decline initiatives improvement rate impact As we’ve We’ve some the solid, been continuous issues very offset working play. deal also improvement the been about as that and the well. grade in on into talked our bring with hard try businesses coatings business volume but the of

strong product look growth question solid in aggregate, in in to side, in little So, tougher is segment off that specifically but growing, a packaging overall talked you quarter, and in your at overall a we’ve about the as is around the particularly nonwovens, Adhesive bit when assembly, nonwovens, this macroeconomic.

Unidentified Analyst

I’ll you. on. Thank Great. pass it

Sundaram Nagarajan

Okay.

Operator

Our Chris of question the next from line comes from Dankert Research. Longbow

open. Your line is

Chris Dankert

Good Thanks taking here. for morning, question everyone. my

Sundaram Nagarajan

Good morning.

Chris Dankert

at business when for about advanced lumpy. mind Looking from I bit circuitry technology I is Obviously, a is long-term to at XG beyond in excited high But drive that and from a XG for level? level people. think what driver, guess the obviously, change innovation lot albeit of of top a here, we Nordson, else high revenue that flex, growth flex, going could think and get another

Sundaram Nagarajan

Yes. is with term, about electronics movement associated what driving. from to I perspective in all safety be around it would we lot short particularly, will growth talked measures longer-term that a a we the the past, place the in supports put and that are continued autonomous as say in see of

electric that’s vehicle and going technology long run, the so We’re on although also seeing an is the create penetration to modest, some electric opportunities. improve side in vehicles particularly the but battery of the increase and

to opportunity out see number phone years to a the and term, play the some will on longer gating piece make some so to because do item, we the the will all around that’s of that be the infrastructure that item. think over need won’t Issues] the piece really coming from of is it of we [Technical piece be gating opportunities forth. probably going the build effective there additional then And infrastructure XG, And be

our and a I diversification into different at segment think inspection as the test and markets. is taps we growing lot nicely look in of part it

about And balance that outside then balance. of electronics So, the we obviously good [Technical feel Issues].

of I’d there mobile. drivers, which are lot plan medical So, which some to growth say a longer-term

the So, see drivers. we’ll of some those on horizon

Chris Dankert

what just we in of here? that are inside then Got follow-up kind it. it. on inning of think tearing a do I guys guess And you Technology of terms Got Advanced team

Sundaram Nagarajan

I’m sorry, what they want? Tearing.

Chris Dankert

tearing? The

Sundaram Nagarajan

last if electronics to I’d expense six a the Yes, say, I some And our offering a and portfolio would our of the and but A four being of of in EFD pretty full applies, so. business, to in things possibilities business, valve well. a parts some involves as in like levels got that with say we’ve we’ve mostly at test say that. those tearing just to relatively there side non-electronics if significant are new the got you inspection broad year look stack now. the lot parts at both or we in our probably are look introduced develop continue to I’d portfolio

we’re move very into positioned operation those in think manual I well automated businesses. operation semiautomatic from customers as

we’ve pause positioned I significantly here a ongoing So, the term, seen short well trade think think we’re in I dispute. to the related

Chris Dankert

Got guys. it. Thanks Makes it. Got sense.

Sundaram Nagarajan

you. Thank

Operator

And queue. presenters questions no remarks. further closing the for in have I we to call back turn will the

Mike Hilton

and thank again, on macroeconomic challenges. have allowed about you’ve And your short-term the run our the end our think for rate well talked support. what is growth I and run, see continue opportunities diversity the in the and other have for seen expect But markets, and some to over us our long focus our of done you. some solutions improvement margins businesses to customer have Thank fourth in We’ve we run you quarter businesses. short improved of to

a and our again diversity in call. positioned for the and we difficult Thank market, you time So, we’re, appreciate your on encouraged say us as this I’d support business well. attention of your

Operator

conference call. concludes you. This Thank today’s

You disconnect. may now

Nordson (NDSN) 21 Aug 192019 Q3 Earnings call transcript