Nordson Corporation Reports Second Quarter Fiscal 2023 Results and Updates Annual Guidance

WESTLAKE, Ohio--(BUSINESS WIRE)--Nordson Corporation (Nasdaq: NDSN) today reported results for the fiscal second quarter ended April 30, 2023. Sales were $650 million, a 2% increase compared to the prior year's second quarter sales of $635 million. The increase in second quarter 2023 sales includes an organic increase of 1% and a favorable acquisition impact of 3%, offset by unfavorable currency translation of 2%. The organic sales increase was driven by strong 7% growth in Asia Pacific.

Operating profit in the second quarter was $173 million. Adjusted operating profit, excluding severance costs, totaled $176 million, or 27% of sales, compared to prior year adjusted operating profit of $184 million. The 4% decrease in operating profit was driven by the impact of unfavorable currency translation and sales mix. EBITDA for the second quarter of 2023 totaled $203 million, or 31% of sales.

Net income was $128 million, or $2.21 earnings per diluted share. Adjusted net income was $130 million, a $12 million decrease from the prior year earnings of $142 million. The decrease was driven by lower operating profit and increased interest expense. Second quarter 2023 adjusted earnings per diluted share were $2.26, a 7% decrease from the prior year adjusted earnings per diluted share of $2.43.

"The diversification of our business came through once again in our second quarter performance. Solid growth in our industrials, consumer non-durable and medical interventional solutions product lines helped offset the sales decrease in our products serving the semiconductor and the biopharmaceutical end markets enabling strong profitability of 31% EBITDA. While we remain invested in our direct sales teams and NBS Next training programs, our segments are taking targeted cost actions to address the current business environment. The combination of these choices will continue driving long-term profitable growth," said Sundaram Nagarajan, president and chief executive officer.

Second Quarter Segment Results

Industrial Precision Solutions sales of $336 million represents organic growth of 9% over the prior year, offset by unfavorable currency translation impacts. The growth was driven primarily by robust demand in the polymer processing product lines and for products in the consumer non-durable end market across most regions. Operating profit in the quarter was $112 million, or 33% of sales, a 9% increase over the prior year second quarter.

Medical and Fluid Solutions sales of $167 million decreased 3% compared to the prior year second quarter. Organic sales decreased 2% and currency had an unfavorable impact of 1%. The organic sales decrease was driven by significant softness in the medical fluid components and fluid solutions product lines, offset by strong demand for medical interventional solutions product lines. Operating profit totaled $48 million. Adjusted operating profit, which excludes severance, was $49 million, or 30% of sales, a decrease of 15% compared to the prior year second quarter operating profit. The decreased segment profitability continued to be impacted by meaningful sales mix changes within medical product lines and related factory inefficiencies due to reduced volumes.

Advanced Technology Solutions sales of $148 million increased 1% compared to the prior year second quarter. Sales benefited from the acquisition impact of 12% partially offset by a decrease in organic sales of 10% and an unfavorable currency impact of 2%. The organic sales decrease was driven by electronics dispense products serving semiconductor end markets in the Americas and Asia, slightly offset by continued growth in test and inspection product lines. Operating profit was $26 million. Adjusted operating profit, which excludes severance, totaled $28 million, or 19% of sales, was down 30% compared to the prior year second quarter operating profit. The decline in operating profit during the quarter was driven by the organic sales decrease, partially offset by profitable acquisition growth.

Outlook

Backlog entering the second half of fiscal 2023 remains strong at $950 million and continues to be heavily weighted toward systems and medical interventional solutions. Order entry has been steady throughout the quarter. Based on current visibility, we now expect fourth quarter sales to be the strongest of the year, increasing low-mid single digits over the prior year fourth quarter. We expect third quarter sales to be comparable to the prior year, as a result of the pull forward of certain systems sales into the second quarter. On balance, the Company is maintaining its previously issued full-year revenue growth guidance of 0% to 3% over record fiscal 2022 and narrowing adjusted earnings guidance to the range of $8.90 to $9.30.

Nordson management will provide additional commentary on these results and outlook during its previously announced webcast on Tuesday, May 23, 2023, at 8:30 a.m. eastern time, which can be accessed at https://investors.nordson.com. For persons unable to listen to the live broadcast, a replay will be available for 14 days after the event. Information about Nordson's investor relations and shareholder services is available from Lara Mahoney, vice president, investor relations and corporate communications at [phone] or [e-mail].

Certain statements contained in this release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by terminology such as "may," "will," "should," "could," "expects," "anticipates," "believes," "projects," "forecasts," "outlook," "guidance," "continue," "target," or the negative of these terms or comparable terminology. These statements reflect management's current expectations and involve a number of risks and uncertainties. These risks and uncertainties include, but are not limited to, U.S. and international economic conditions; financial and market conditions; currency exchange rates and devaluations; possible acquisitions, including the Company's ability to successfully integrate acquisitions; the Company's ability to successfully divest or dispose of businesses that are deemed not to fit with its strategic plan; the effects of changes in U.S. trade policy and trade agreements; the effects of changes in tax law; and the possible effects of events beyond our control, such as political unrest, including the conflict between Russia and Ukraine, acts of terror, natural disasters and pandemics, including the recent coronavirus (COVID-19) pandemic and the other factors discussed in Item 1A (Risk Factors) in the Company's most recently filed Annual Report on Form 10-K and in its Forms 10-Q filed with the Securities and Exchange Commission, which should be reviewed carefully. The Company undertakes no obligation to update or revise any forward-looking statement in this press release.

Nordson Corporation is an innovative precision technology company that leverages a scalable growth framework through an entrepreneurial, division-led organization to deliver top tier growth with leading margins and returns. The Company's direct sales model and applications expertise serves global customers through a wide variety of critical applications. Its diverse end market exposure includes consumer non-durable, medical, electronics and industrial end markets. Founded in 1954 and headquartered in Westlake, Ohio, the Company has operations and support offices in over 35 countries. Visit Nordson on the web at www.nordson.com, www.twitter.com/Nordson_Corp or www.facebook.com/nordson.

NORDSON CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands except for per-share amounts)
	Three Months Ended								Six Months Ended
	April 30, 2023				April 30, 2022				April 30, 2023				April 30, 2022
Sales	$	650,165			$	635,403			$	1,260,642			$	1,244,569
Cost of sales		298,040				277,768				579,650				546,800
Gross profit		352,125				357,635				680,992				697,769
Gross margin %		54.2	%			56.3	%			54.0	%			56.1	%
Selling & administrative expenses		179,618				173,662				364,266				357,936
Operating profit		172,507				183,973				316,726				339,833
Interest expense - net		(9,475	)			(4,942	)			(19,418	)			(10,127	)
Other expense - net (1)		(1,405	)			(39,764	)			(4,601	)			(38,472	)
Income before income taxes		161,627				139,267				292,707				291,234
Income taxes		34,064				29,633				60,883				61,191
Net income	$	127,563			$	109,634			$	231,824			$	230,043
Weighted-average common shares outstanding:
Basic		57,184				57,784				57,177				57,971
Diluted		57,680				58,382				57,721				58,606
Earnings per share:
Basic earnings	$	2.23			$	1.90			$	4.05			$	3.97
Diluted earnings	$	2.21			$	1.88			$	4.02			$	3.93

(1)

Three and six months ended April 30, 2022, include pension settlement charge of $41,221.

NORDSON CORPORATION
CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands)
	April 30, 2023			October 31, 2022
Cash and cash equivalents	$	129,073		$	163,457
Receivables - net		527,851			537,313
Inventories - net		440,179			383,398
Other current assets		58,338			48,803
Total current assets		1,155,441			1,132,971
Property, plant and equipment - net		354,669			353,442
Goodwill		2,110,471			1,804,693
Other assets		572,534			529,269
	$	4,193,115		$	3,820,375
Current maturities of long-term debt and notes payable	$	603,343		$	392,537
Accounts payable and accrued liabilities		387,049			441,666
Total current liabilities		990,392			834,203
Long-term debt		345,899			345,320
Other liabilities		359,822			346,477
Total shareholders' equity		2,497,002			2,294,375
	$	4,193,115		$	3,820,375

NORDSON CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(Dollars in thousands)
	Six Months Ended
	April 30, 2023				April 30, 2022
Cash flows from operating activities:
Net income	$	231,824			$	230,043
Depreciation and amortization		53,535				50,355
Other non-cash items (1)		11,458				51,449
Changes in working capital		(45,857	)			(85,070	)
Other		36,945				(32,276	)
Net cash provided by operating activities		287,905				214,501
Cash flows from investing activities:
Additions to property, plant and equipment		(15,349	)			(24,776	)
Acquisition of businesses, net of cash acquired		(377,843	)			(171,613	)
Other - net		39				15
Net cash used in investing activities		(393,153	)			(196,374	)
Cash flows from financing activities:
Net issuance of long-term debt		184,617				1,654
Repayment of finance lease obligations		(2,775	)			(2,620	)
Dividends paid		(74,463	)			(59,301	)
Issuance of common shares		11,808				7,798
Purchase of treasury shares		(54,365	)			(140,466	)
Net cash provided (used) in financing activities		64,822				(192,935	)
Effect of exchange rate change on cash:		6,042				(4,272	)
Net change in cash and cash equivalents		(34,384	)			(179,080	)
Cash and cash equivalents:
Beginning of period		163,457				299,972
End of period	$	129,073			$	120,892

(1)

Six months ended April 30, 2022, includes pension settlement charge of $41,221.

NORDSON CORPORATION
SALES BY GEOGRAPHIC SEGMENT (Unaudited)
(Dollars in thousands)
	Three Months Ended						Sales Variance
	April 30, 2023			April 30, 2022			Organic			Acquisitions			Currency			Total
SALES BY SEGMENT
Industrial Precision Solutions	$	335,807		$	316,434		8.5	%		-	%		(2.4	)%		6.1	%
Medical and Fluid Solutions		166,526			172,212		(2.3	)%		-	%		(1.0	)%		(3.3	)%
Advanced Technology Solutions		147,832			146,757		(9.9	)%		12.3	%		(1.7	)%		0.7	%
Total sales	$	650,165		$	635,403		1.3	%		2.8	%		(1.8	)%		2.3	%
SALES BY GEOGRAPHIC REGION
Americas	$	278,731		$	273,753		(0.6	)%		2.4	%		-	%		1.8	%
Europe		167,904			172,256		(2.3	)%		2.1	%		(2.3	)%		(2.5	)%
Asia Pacific		203,530			189,394		7.4	%		4.2	%		(4.1	)%		7.5	%
Total sales	$	650,165		$	635,403		1.3	%		2.8	%		(1.8	)%		2.3	%
	Six Months Ended						Sales Variance
	April 30, 2023			April 30, 2022			Organic			Acquisitions			Currency			Total
SALES BY SEGMENT
Industrial Precision Solutions	$	647,353		$	640,367		4.8	%		-	%		(3.7	)%		1.1	%
Medical and Fluid Solutions		320,813			330,996		(1.5	)%		-	%		(1.6	)%		(3.1	)%
Advanced Technology Solutions		292,476			273,206		(3.3	)%		12.9	%		(2.5	)%		7.1	%
Total sales	$	1,260,642		$	1,244,569		1.3	%		2.8	%		(2.8	)%		1.3	%
SALES BY GEOGRAPHIC REGION
Americas	$	543,610		$	513,654		3.7	%		2.2	%		(0.1	)%		5.8	%
Europe		330,843			328,241		3.6	%		1.7	%		(4.5	)%		0.8	%
Asia Pacific		386,189			402,674		(3.6	)%		4.4	%		(4.9	)%		(4.1	)%
Total sales	$	1,260,642		$	1,244,569		1.3	%		2.8	%		(2.8	)%		1.3	%

NORDSON CORPORATION
RECONCILIATION OF NON-GAAP MEASURES - ADJUSTED OPERATING PROFIT AND EBITDA (Unaudited)
(Dollars in thousands)
	Three Months Ended												Six Months Ended
	April 30, 2023						April 30, 2022						April 30, 2023						April 30, 2022
SALES BY SEGMENT
Industrial Precision Solutions	$	335,807					$	316,434					$	647,353					$	640,367
Medical and Fluid Solutions		166,526						172,212						320,813						330,996
Advanced Technology Solutions		147,832						146,757						292,476						273,206
Total sales	$	650,165					$	635,403					$	1,260,642					$	1,244,569
OPERATING PROFIT
Industrial Precision Solutions	$	111,773					$	102,196					$	214,093					$	204,383
Medical and Fluid Solutions		47,922						58,314						87,307						107,407
Advanced Technology Solutions		26,090						40,144						43,053						67,378
Corporate		(13,278	)					(16,681	)					(27,727	)					(39,335	)
Total operating profit	$	172,507					$	183,973					$	316,726					$	339,833
OPERATING PROFIT ADJUSTMENTS (1)
Industrial Precision Solutions	$	-					$	-					$	-					$	1,563
Medical and Fluid Solutions		1,479						-						1,479						-
Advanced Technology Solutions		1,960						-						12,255						-
Total adjustments	$	3,439					$	-					$	13,734					$	1,563
ADJUSTED OPERATING PROFIT (NON-GAAP) (2)					% of Sales						% of Sales						% of Sales						% of Sales
Industrial Precision Solutions	$	111,773			33%		$	102,196			32%		$	214,093			33%		$	205,946			32%
Medical and Fluid Solutions		49,401			30%			58,314			34%			88,786			28%			107,407			32%
Advanced Technology Solutions		28,050			19%			40,144			27%			55,308			19%			67,378			25%
Corporate		(13,278	)					(16,681	)					(27,727	)					(39,335	)
Total operating profit - adjusted	$	175,946			27%		$	183,973			29%		$	330,460			26%		$	341,396			27%
DEPRECIATION & AMORTIZATION
Industrial Precision Solutions	$	7,285					$	6,916					$	14,130					$	14,358
Medical and Fluid Solutions		13,683						13,578						27,308						27,125
Advanced Technology Solutions		4,010						2,247						7,822						4,510
Corporate		2,122						2,224						4,275						4,362
Total depreciation & amortization	$	27,100					$	24,965					$	53,535					$	50,355
EBITDA (NON-GAAP) (2)
Industrial Precision Solutions	$	119,058			35%		$	109,112			34%		$	228,223			35%		$	220,304			34%
Medical and Fluid Solutions		63,084			38%			71,892			42%			116,094			36%			134,532			41%
Advanced Technology Solutions		32,060			22%			42,391			29%			63,130			22%			71,888			26%
Corporate		(11,156	)					(14,457	)					(23,452	)					(34,973	)
Total EBITDA	$	203,046			31%		$	208,938			33%		$	383,995			30%		$	391,751			31%

(1)		Represents severance, as well as fees and non-cash inventory charges associated with acquisitions.
(2)		Adjusted operating profit and EBITDA are non-GAAP measures used by management to evaluate the Company's ongoing operations. Adjusted operating profit is defined as operating profit plus certain adjustments, such as severance, fees and non-cash inventory charges associated with acquisitions. EBITDA is defined as adjusted operating profit plus depreciation and amortization.

NORDSON CORPORATION
RECONCILIATION OF NON-GAAP MEASURES - PROFITABILITY (Unaudited)
(Dollars in thousands)
	Three Months Ended								Six Months Ended
	April 30, 2023				April 30, 2022				April 30, 2023				April 30, 2022
GAAP AS REPORTED
Operating profit	$	172,507			$	183,973			$	316,726			$	339,833
Other / interest expense - net		(10,880	)			(44,706	)			(24,019	)			(48,599	)
Net income		127,563				109,634				231,824				230,043
Diluted earnings per share	$	2.21			$	1.88			$	4.02			$	3.93
Shares outstanding - diluted		57,680				58,382				57,721				58,606
OPERATING PROFIT ADJUSTMENTS
Inventory step-up amortization	$	-			$	-			$	4,306			$	1,563
Severance and other		3,439				-			$	9,428			$	-
NON-OPERATING EXPENSE ADJUSTMENTS
Pension settlement loss	$	-			$	41,221			$	-			$	41,221
Total adjustments	$	3,439			$	41,221			$	13,734			$	42,784
Adjustments net of tax	$	2,714			$	32,450			$	10,877			$	33,795
EPS effect of adjustments and other discrete tax items	$	0.05			$	0.56			$	0.19			$	0.58
NON-GAAP MEASURES-ADJUSTED PROFITABILITY
Operating profit (1)	$	175,946			$	183,973			$	330,460			$	341,396
Operating profit % of sales		27.1	%			29.0	%			26.2	%			27.4	%
Net income (2)	$	130,277			$	142,084			$	242,701			$	263,838
Diluted earnings per share (3)	$	2.26			$	2.43			$	4.21			$	4.50

(1)		Adjusted operating profit is defined as operating profit plus certain adjustments, such as severance, fees and non-cash inventory charges related to acquisitions. Adjusted operating profit as a percentage of sales is defined as adjusted operating profit divided by sales.
(2)		Adjusted net income is defined as net income plus tax effected adjustments and other discrete tax items.
(3)		Adjusted earnings per share is defined as GAAP EPS adjusted for tax effected adjustments and other discrete tax items.

Management uses these non-GAAP measures internally to make strategic decisions, forecast future results, and evaluate the Company's current performance. Given management's use of these non-GAAP measures, the Company believes these measures are important to investors in understanding the Company's current and future operating results as seen through the eyes of management. In addition, management believes these non-GAAP measures are useful to investors in enabling them to better assess changes in the Company's core business across different time periods. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures to other companies' non-GAAP financial measures, even if they have similar names. Amounts may not add due to rounding.

Contacts

Lara Mahoney
Vice President,
Investor Relations & Corporate Communications
440.204.9985
[e-mail]