Nordson Corporation Reports Third Quarter Fiscal 2023 Results and Narrows Annual Guidance

WESTLAKE, Ohio--(BUSINESS WIRE)--Nordson Corporation (Nasdaq: NDSN) today reported results for the fiscal third quarter ended July 31, 2023. Sales were $649 million, a 2% decrease compared to the prior year's third quarter sales of $662 million. The decrease in third quarter 2023 sales includes an organic decrease of 5%, partially offset by a favorable acquisition impact. The organic sales decrease was driven by ongoing pressure in electronics, primarily semiconductor dispense applications, and biopharma end markets, offset by strong growth in medical interventional solutions and polymer processing product lines.

Operating profit in the third quarter was $171 million. Adjusted operating profit, excluding $8 million in non-recurring acquisition costs plus severance costs, totaled $181 million, or 28% of sales, compared to prior year adjusted operating profit of $188 million. The 4% decrease in adjusted operating profit was driven by lower sales volume. EBITDA for the third quarter of fiscal 2023 totaled $208 million, or 32% of sales.

Net income was $128 million, or $2.22 of earnings per diluted share. Adjusted net income was $136 million, a $9 million decrease from the prior year earnings of $144 million. Third quarter 2023 adjusted earnings per diluted share were $2.35, a 6% decrease from the prior year adjusted earnings per diluted share of $2.49. The decrease was driven by increased interest expense and lower operating profit.

"During the fiscal third quarter, our team delivered strong profitability with 32% EBITDA and solid cash flow against persisting demand weakness in electronics and biopharma end markets. The team remains focused on the execution of our Ascend strategy to achieve top tier growth with leading margins and returns, as evidenced by the recently announced acquisition of ARAG and the steadfast deployment of the NBS Next growth framework. We are looking forward to the recovery of our cyclical end markets and the related incremental earnings power associated with the growth," said Sundaram Nagarajan, president and chief executive officer.

Third Quarter Segment Results

Industrial Precision Solutions sales of $338 million decreased 1% from the prior year. The decrease was driven primarily by product assembly and nonwovens product lines in Asia Pacific, partially offset by continued strength in the polymer processing product lines. Operating profit in the quarter was $115 million, or 34% of sales, a 4% decrease from the prior year third quarter. The decrease in operating profit was driven by lower sales volume and changes in sales mix.

Medical and Fluid Solutions sales of $171 million decreased 4% compared to the prior year third quarter. The decrease was driven by continued softness in the medical fluid components and fluid solutions product lines, partially offset by strong double-digit demand for medical interventional solutions product lines. Operating profit was $54 million, or 32% of sales, a decrease of 11% compared to the prior year third quarter adjusted operating profit. The decreased segment profitability continued to be impacted by lower sales volume and sales mix changes within medical product lines.

Advanced Technology Solutions sales of $140 million decreased 3% compared to the prior year third quarter, as the favorable acquisition impact of 11% was more than offset by a decrease in organic sales of 13%. The organic sales decrease was driven by electronics dispense products serving semiconductor end markets, predominantly in Asia Pacific, slightly offset by continued growth in test and inspection product lines. Operating profit was $27 million. Adjusted operating profit, which excludes severance costs, totaled $29 million, or 21% of sales, an increase of 3% compared to the prior year third quarter operating profit. The improvement in operating profit was driven by favorable sales mix and realization of cost savings actions.

Outlook

Backlog entering the fourth quarter of fiscal 2023 remains strong at $890 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 expect fourth quarter sales to be the strongest of the year, increasing low-mid single digits over the prior year fourth quarter. This increase includes approximately $20-$30 million of sales from the acquisition of the ARAG Group, which is forecasted to close in late August. On balance, the Company is narrowing its previously issued full-year revenue growth guidance to 0% to 2% over record fiscal 2022 and adjusted earnings guidance to the range of $8.90 to $9.05.

Nordson management will provide additional commentary on these results and outlook during its previously announced webcast on Tuesday, August 22, 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								Nine Months Ended
	July 31, 2023				July 31, 2022				July 31, 2023				July 31, 2022
Sales	$	648,677			$	662,128			$	1,909,319			$	1,906,697
Cost of sales		288,357				296,544				868,007				843,344
Gross profit		360,320				365,584				1,041,312				1,063,353
Gross margin %		55.5	%			55.2	%			54.5	%			55.8	%
Selling & administrative expenses		189,324				180,666				553,590				538,602
Operating profit		170,996				184,918				487,722				524,751
Interest expense - net		(11,486	)			(5,165	)			(30,904	)			(15,292	)
Other income (expense) - net (1)		2,542				752				(2,059	)			(37,720	)
Income before income taxes		162,052				180,505				454,759				471,739
Income taxes		34,161				38,694				95,044				99,885
Net income	$	127,891			$	141,811			$	359,715			$	371,854
Weighted-average common shares outstanding:
Basic		56,989				57,409				57,114				57,782
Diluted		57,530				57,969				57,657				58,392
Earnings per share:
Basic earnings	$	2.24			$	2.47			$	6.30			$	6.44
Diluted earnings	$	2.22			$	2.45			$	6.24			$	6.37
(1) Nine months ended July 31, 2022, includes pension settlement charge of $41,221.

NORDSON CORPORATION
CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands)
	July 31, 2023			October 31, 2022
Cash and cash equivalents	$	143,138		$	163,457
Receivables - net		533,793			537,313
Inventories - net		439,741			383,398
Other current assets		60,249			48,803
Total current assets		1,176,921			1,132,971
Property, plant and equipment - net		350,735			353,442
Goodwill		2,110,780			1,804,693
Other assets		558,596			529,269
	$	4,197,032		$	3,820,375
Current maturities of long-term debt and notes payable	$	110,643		$	392,537
Accounts payable and accrued liabilities		417,966			441,666
Total current liabilities		528,609			834,203
Long-term debt		727,455			345,320
Other liabilities		361,162			346,477
Total shareholders' equity		2,579,806			2,294,375
	$	4,197,032		$	3,820,375

NORDSON CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(Dollars in thousands)
	Nine Months Ended
	July 31, 2023				July 31, 2022
Cash flows from operating activities:
Net income	$	359,715			$	371,854
Depreciation and amortization		80,637				75,242
Other non-cash items (1)		18,523				54,928
Changes in working capital		19,197				(162,333	)
Net cash provided by operating activities		478,072				339,691
Cash flows from investing activities:
Additions to property, plant and equipment		(24,244	)			(39,373	)
Acquisition of businesses, net of cash acquired		(377,843	)			(171,613	)
Other - net		91				415
Net cash used in investing activities		(401,996	)			(210,571	)
Cash flows from financing activities:
Net issuance of long-term debt		73,956				22,905
Repayment of finance lease obligations		(4,769	)			(3,726	)
Dividends paid		(111,547	)			(88,675	)
Issuance of common shares		18,449				8,845
Purchase of treasury shares		(78,163	)			(233,767	)
Net cash used in financing activities		(102,074	)			(294,418	)
Effect of exchange rate change on cash:		5,679				(5,937	)
Net change in cash and cash equivalents		(20,319	)			(171,235	)
Cash and cash equivalents:
Beginning of period		163,457				299,972
End of period	$	143,138			$	128,737
(1) Nine months ended July 31, 2022, includes pension settlement charge of $41,221.

NORDSON CORPORATION
SALES BY GEOGRAPHIC SEGMENT (Unaudited)
(Dollars in thousands)
	Three Months Ended						Sales Variance
	July 31, 2023			July 31, 2022			Organic			Acquisitions			Currency			Total
SALES BY SEGMENT
Industrial Precision Solutions	$	338,257		$	341,215		(1.5	)%		-	%		0.6	%		(0.9	)%
Medical and Fluid Solutions		170,871			177,840		(3.9	)%		-	%		-	%		(3.9	)%
Advanced Technology Solutions		139,549			143,073		(12.8	)%		10.7	%		(0.4	)%		(2.5	)%
Total sales	$	648,677		$	662,128		(4.5	)%		2.4	%		0.1	%		(2.0	)%
SALES BY GEOGRAPHIC REGION
Americas	$	290,515		$	279,205		2.2	%		1.2	%		0.7	%		4.1	%
Europe		167,536			151,659		5.7	%		1.4	%		3.4	%		10.5	%
Asia Pacific		190,626			231,264		(20.0	)%		4.3	%		(1.9	)%		(17.6	)%
Total sales	$	648,677		$	662,128		(4.5	)%		2.4	%		0.1	%		(2.0	)%
	Nine Months Ended						Sales Variance
	July 31, 2023			July 31, 2022			Organic			Acquisitions			Currency			Total
SALES BY SEGMENT
Industrial Precision Solutions	$	985,610		$	981,582		2.6	%		-	%		(2.2	)%		0.4	%
Medical and Fluid Solutions		491,683			508,836		(2.4	)%		-	%		(1.0	)%		(3.4	)%
Advanced Technology Solutions		432,026			416,279		(6.6	)%		12.2	%		(1.8	)%		3.8	%
Total sales	$	1,909,319		$	1,906,697		(0.7	)%		2.6	%		(1.8	)%		0.1	%
SALES BY GEOGRAPHIC REGION
Americas	$	834,125		$	792,859		3.2	%		1.9	%		0.1	%		5.2	%
Europe		498,379			479,900		4.3	%		1.6	%		(2.0	)%		3.9	%
Asia Pacific		576,815			633,938		(9.7	)%		4.4	%		(3.7	)%		(9.0	)%
Total sales	$	1,909,319		$	1,906,697		(0.7	)%		2.6	%		(1.8	)%		0.1	%

NORDSON CORPORATION
RECONCILIATION OF NON-GAAP MEASURES - ADJUSTED OPERATING PROFIT AND EBITDA (Unaudited)
(Dollars in thousands)
	Three Months Ended														Nine Months Ended
	July 31, 2023							July 31, 2022							July 31, 2023							July 31, 2022
SALES BY SEGMENT
Industrial Precision Solutions	$	338,257						$	341,215						$	985,610						$	981,582
Medical and Fluid Solutions		170,871							177,840							491,683							508,836
Advanced Technology Solutions		139,549							143,073							432,026							416,279
Total sales	$	648,677						$	662,128						$	1,909,319						$	1,906,697
OPERATING PROFIT
Industrial Precision Solutions	$	115,346						$	119,706						$	329,439						$	324,089
Medical and Fluid Solutions		54,019							58,103							141,326							165,510
Advanced Technology Solutions		27,083							28,155							70,136							95,533
Corporate		(25,452	)						(21,046	)						(53,179	)						(60,381	)
Total operating profit	$	170,996						$	184,918						$	487,722						$	524,751
OPERATING PROFIT ADJUSTMENTS (1)
Industrial Precision Solutions	$	-						$	-						$	-						$	1,563
Medical and Fluid Solutions		-							2,498							1,479							2,498
Advanced Technology Solutions		2,049							-							14,304							-
Corporate		7,732							897							7,731							897
Total adjustments	$	9,781						$	3,395						$	23,514						$	4,958
ADJUSTED OPERATING PROFIT (NON-GAAP) (2)					% of Sales							% of Sales							% of Sales							% of Sales
Industrial Precision Solutions	$	115,346			34	%		$	119,706			35	%		$	329,439			33	%		$	325,652			33	%
Medical and Fluid Solutions		54,019			32	%			60,601			34	%			142,805			29	%			168,008			33	%
Advanced Technology Solutions		29,132			21	%			28,155			20	%			84,440			20	%			95,533			23	%
Corporate		(17,720	)						(20,149	)						(45,448	)						(59,484	)
Total operating profit - adjusted	$	180,777			28	%		$	188,313			28	%		$	511,236			27	%		$	529,709			28	%
DEPRECIATION & AMORTIZATION
Industrial Precision Solutions	$	7,036						$	6,347						$	21,166						$	20,705
Medical and Fluid Solutions		14,133							15,021							41,441							42,146
Advanced Technology Solutions		3,834							2,195							11,656							6,705
Corporate		2,099							1,324							6,374							5,686
Total depreciation & amortization	$	27,102						$	24,887						$	80,637						$	75,242
EBITDA (NON-GAAP) (2)
Industrial Precision Solutions	$	122,382			36	%		$	126,053			37	%		$	350,605			36	%		$	346,357			35	%
Medical and Fluid Solutions		68,152			40	%			75,622			43	%			184,246			37	%			210,154			41	%
Advanced Technology Solutions		32,966			24	%			30,350			21	%			96,096			22	%			102,238			25	%
Corporate		(15,621	)						(18,825	)						(39,074	)						(53,798	)
Total EBITDA	$	207,879			32	%		$	213,200			32	%		$	591,873			31	%		$	604,951			32	%
(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								Nine Months Ended
	July 31, 2023				July 31, 2022				July 31, 2023				July 31, 2022
GAAP AS REPORTED
Operating profit	$	170,996			$	184,918			$	487,722			$	524,751
Other / interest expense - net		(8,944	)			(4,413	)			(32,963	)			(53,012	)
Net income		127,891				141,811				359,715				371,854
Diluted earnings per share	$	2.22			$	2.45			$	6.24			$	6.37
Shares outstanding - diluted		57,530				57,969				57,657				58,392
OPERATING PROFIT ADJUSTMENTS
Inventory step-up amortization	$	-			$	-			$	4,306			$	1,563
Acquisition Costs		7,732				-				13,721				-
Severance and other		2,049				3,395				5,487				3,395
NON-OPERATING EXPENSE ADJUSTMENTS
Pension settlement loss	$	-			$	-			$	-			$	41,221
Total adjustments	$	9,781			$	3,395			$	23,514			$	46,179
Adjustments net of tax	$	7,719			$	2,667			$	18,600			$	36,401
EPS effect of adjustments and other discrete tax items	$	0.13			$	0.04			$	0.32			$	0.62
NON-GAAP MEASURES-ADJUSTED PROFITABILITY
Operating profit (1)	$	180,777			$	188,313			$	511,236			$	529,709
Operating profit % of sales		27.9	%			28.4	%			26.8	%			27.8	%
Net income (2)	$	135,610			$	144,478			$	378,315			$	408,255
Diluted earnings per share (3)	$	2.35			$	2.49			$	6.56			$	6.99
(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]