NORDSON CORP

Results of Operations

Three months ended January 31, 2024

Worldwide sales for the three months ended January 31, 2024, were $633,193, an increase of 3.7% from sales of $610,477 for the comparable period of 2023. The increase was driven by a 5.4% increase due to an acquisition and a favorable effect from currency translation of 0.5%. Organic sales decreased 2.2% driven by ongoing pressure in electronics product lines, partially offset by growth in medical interventional, industrial and polymer processing product lines.

In the Americas region, sales were $274,012 for the three months ended January 31, 2024, an increase of 3.4% from the comparable period of 2023, consisting of an organic sales decrease of 0.3%, an increase due to an acquisition of 3.1%, and favorable currency effects of 0.6%. In the Asia Pacific region, sales were $179,871, a decrease of 1.5% from the comparable period of 2023, consisting of an organic sales decrease of 0.5% and unfavorable currency effects of 1.7%, partially offset by a 0.7% increase due to an acquisition. In Europe, sales were $179,310, an increase of 10.0% from the comparable period of 2023, consisting of an organic sales decrease of 7.0%, favorable currency effects of 2.8%, and a 14.2% increase due to an acquisition.

Cost of sales for the three months ended January 31, 2024 were $284,766, up from $281,610 in the comparable period of 2023. Gross profit, expressed as a percentage of sales, increased to 55.0% from 53.9% in the comparable period of 2023. The increase was primarily driven by improved manufacturing efficiencies and favorable mix.

Selling and administrative expenses for the three months ended January 31, 2024 were $188,992, up from $184,648 in the comparable period of 2023. The 2.4% increase was primarily driven by the first-year effect of an acquisition and related acquisition costs, partially offset by lower base business costs.

Operating profit increased to $159,435 for the three months ended January 31, 2024, compared to $144,219 inthe comparable period of 2023. Operating profitas a percentage of sales increased to 25.2% for the three months ended January 31, 2024, compared to 23.6%in the comparable period of 2023. The 1.6 percentage-point increase in operating margin was primarily driven by the gross margin improvement.

Interest expense for the three months ended January 31, 2024 was $21,442, compared to $10,530 in the comparable period of 2023. The increase, compared to the prior year period, was primarily due to higher average debt levels, driven by acquisitions. Other expense was $338 compared to expense of $3,196 in the comparable period of 2023. Included in 2024 other expense were pension and postretirement income of $1,025 and $822 of foreign currency losses. Included in 2023 other expense were pension and postretirement income of $1,369 and $4,571 in foreign currency losses.

Net income for the three months ended January 31, 2024 was $109,572, or $1.90 per diluted share, compared to $104,261, or $1.81 per diluted share, in the same period of 2023. This represents a 5.1% increase in net income, and a 5.0% increase in diluted earnings per share. The increase in income was driven by higher operating profit, partially offset by increased interest expense.

Industrial Precision Solutions

Sales of the Industrial Precision Solutions segment were $354,547 in the three months ended January 31, 2024, an increase of 13.8% from sales of $311,546 for the comparable period of 2023. The increase consisted of an acquisition impact of 10.6%, an organic sales increase of 2.3%, and a favorable currency effect of 0.9%. The organic sales increase was driven primarily by industrial coatings, polymer processing and non-wovens product lines.

Operating profit as a percentage of sales decreased to 30.6% for the three months ended January 31, 2024 compared to 32.8% in the comparable period of 2023. The 2.2 percentage point decline in operating margin was primarily due to higher intangible asset amortization expense of $5,923 related to the ARAG acquisition.

Medical and Fluid Solutions

Sales of the Medical and Fluid Solutions segment were $159,526 in the three months ended January 31, 2024, an increase of 3.4% from sales of $154,287 for the comparable period of 2023. The increase consisted of an organic sales increase of 3.1%, driven by growth in the medical interventional solutions product lines, and a favorable currency effect of 0.3%.

Operating profit as a percentage of sales increased to 28.9% for the three months ended January 31, 2024 compared to 25.5% in the comparable period of 2023. The 3.4 percentage point improvement in operating margin was primarily due to improved factory efficiencies and favorable product mix.

Advanced Technology Solutions

Sales of the Advanced Technology Solutions segment were $119,120 in the three months ended January 31, 2024, a decrease of 17.6% from sales of $144,644 for the comparable period of 2023. The decrease was entirely organic as the effects of currency were immaterial. The organic sales decrease was driven by weakness across the segment, primarily electronics dispense products serving semiconductor end markets.

Operating profit as a percentage of sales increased to 16.0% for the three months ended January 31, 2024 compared to 11.7% in the comparable period of 2023. The increase in operating margin was primarily due to fees, severance, and non-cash inventory charges of $10,295 recorded in the prior year associated with the CyberOptics acquisition.

Income taxes

We record our interim provision for income taxes based on our estimated annual effective tax rate, as well as certain items discrete to the current period. Significant judgment is involved regarding the application of global income tax laws and regulations and when projecting the jurisdictional mix of income. We have considered several factors in determining the probability of realizing deferred income tax assets which include forecasted operating earnings, available tax planning strategies and the time period over which the temporary differences will reverse. We review our tax positions on a regular basis and adjust the balances as new information becomes available. The effective tax rate for the three months ended January 31, 2024 was 21.0% compared to 20.5% for the three months ended January 31, 2023.

Foreign Currency Effects

In the aggregate, average exchange rates for 2024 used to translate international sales and operating results into U.S. dollars were generally favorable compared with average exchange rates existing during 2023. It is not possible to precisely measure the impact on operating results arising from foreign currency exchange rate changes, because of changes in selling prices, sales volume, product mix and cost structure in each country in which we operate. However, if transactions for the three months ended January 31, 2024 were translated at exchange rates in effect during the same period of 2023, we estimated that sales would have been approximately $4,000 lower while costs of sales and selling and administrative expenses would have been approximately $3,000 lower.