NORDSON CORP

Results of Operations

Three Months Ended July 31, 2024

Worldwide sales for the three months ended July 31, 2024 were $661,604, an increase of 2.0% from sales of $648,677 for the comparable period of 2023. The increase included a 3.8% increase due to an acquisition and an unfavorable effect from currency translation of 0.9%. Organic sales decreased 0.9%, driven by lower demand in electronics and medical product lines, partially offset by growth in packaging, nonwovens, and optical sensors product lines.

In the Americas region, sales were $287,016 for the three months ended July 31, 2024, a decrease of 1.2% from the comparable period of 2023, consisting of an organic sales decrease of 3.4%, an increase due to an acquisition of 2.4%, and unfavorable currency effects of 0.2%. In the Asia Pacific region, sales were $195,218, an increase of 2.4% from the comparable period of 2023, consisting of an organic sales increase of 4.1% and a 0.8% increase due to an acquisition, partially offset by unfavorable currency effects of 2.5%. In Europe, sales were $179,370, an increase of 7.1% from the comparable period of 2023, consisting of an organic sales decrease of 2.0%, unfavorable currency effects of 0.7%, and a 9.8% increase due to an acquisition.

Cost of sales for the three months ended July 31, 2024 were $292,603, up from $288,357 in the comparable period of 2023. Gross profit, expressed as a percentage of sales, increased to 55.8% from 55.5% in the comparable period of 2023. The increase in gross profit was due to favorable mix overall.

Selling and administrative expenses for the three months ended July 31, 2024 were $201,943, up from $189,324 in the comparable period of 2023. The 6.7% increase was primarily driven by the first-year effect of an acquisition.

Operating profit decreased to $167,058 for the three months ended July 31, 2024, compared to $170,996 inthe comparable period of 2023. Operating profitas a percentage of sales decreased to 25.3% for the three months ended July 31, 2024, compared to 26.4%in the comparable period of 2023. The 1.1 percentage-point decline in operating margin was primarily driven by reduced sales leverage on selling and administrative expenses, partially offset by improved gross margin percentage performance.

Interest expense for the three months ended July 31, 2024 was $18,803, compared to $12,089 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 income was $152 compared to $2,542 in the comparable period of 2023. Included in 2024 other income were pension and postretirement income of $1,028 and $464 of foreign currency losses. Included in 2023 other income were pension and postretirement income of $1,343 and $886 in foreign currency losses.

Net income for the three months ended July 31, 2024 was $117,327, or $2.04 per diluted share, compared to $127,891, or $2.22 per diluted share, in the same period of 2023. This change represents an 8.3% decrease in net income, and an 8.1% decrease in diluted earnings per share. The decrease in income reflects increased interest expense from prior year acquisitions and slightly lower overall operating margins.

Industrial Precision Solutions

Sales of the Industrial Precision Solutions segment were $370,561 in the three months ended July 31, 2024, an increase of 9.6% from sales of $338,257 for the comparable period of 2023. The increase consisted of an acquisition impact of 7.4% and an organic sales increase of 3.6%, partially offset by unfavorable currency effects of 1.4%. The organic sales increase was driven primarily by packaging and nonwovens product lines.

Operating profit as a percentage of sales decreased to 31.9% for the three months ended July 31, 2024 compared to 34.1% 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 $5,786 related to the ARAG acquisition.

Medical and Fluid Solutions

Sales of the Medical and Fluid Solutions segment were $166,737 in the three months ended July 31, 2024, a decrease of 2.4% from sales of $170,871 for the comparable period of 2023. The decrease consisted of an organic sales decrease of 2.0% and an unfavorable currency effect of 0.4%. The organic sales decrease was driven by lower demand in interventional solutions and fluid components product lines.

Operating profit as a percentage of sales decreased to 29.0% for the three months ended July 31, 2024 compared to 31.6% in the comparable period of 2023. The 2.6 percentage point decline in operating margin was primarily due to unfavorable mix.

Advanced Technology Solutions

Sales of the Advanced Technology Solutions segment were $124,306 in the three months ended July 31, 2024, a decrease of 10.9% from sales of $139,549 for the comparable period of 2023. The decrease consisted of an organic sales decrease of 10.2% and an unfavorable currency effect of 0.7%. The organic sales decrease was driven by softness in electronics processing and x-ray and test product lines, offset by growth in optical sensors product lines.

Operating profit as a percentage of sales decreased to 18.5% for the three months ended July 31, 2024 compared to 19.4% in the comparable period of 2023. Thedecrease in operating margin was primarily due to the decline in sales.

Nine Months Ended July 31, 2024

Worldwide sales for the nine months ended July 31, 2024 were $1,945,439, an increase of 1.9% from sales of $1,909,319 for the comparable period of 2023. The increase consisted of 4.5% increase due to acquisitions, partially offset by a 2.2% decrease in organic sales and an unfavorable effect from currency translation of 0.4%. The organic sales decrease was principally driven by the Advanced Technology Solutions segment, partially offset by organic sales increases in the Industrial Precision Solutions and Medical Fluid Solutions segments.

In the Americas region, sales were $855,456, an increase of 2.6% from the comparable period of 2023, consisting of an organic sales decrease of 0.3%, an increase of 2.7% due to an acquisition, and favorable currency effects of 0.2%. In the Asia Pacific region, sales were $549,233, a decrease of 4.8% from the comparable period of 2023, consisting of an organic sales decrease of 3.1% and unfavorable currency effects of 2.4%, partially offset by a 0.7% increase from an acquisition. In Europe, sales were $540,750, an increase of 8.5% from the comparable period of 2023, consisting of a 12.2% increase from an acquisition and favorable currency effects of 0.8%, partially offset by an organic sales decrease of 4.5%.

Cost of sales for the nine months ended July 31, 2024 were $862,134, down from $868,007 in the comparable period of 2023. Gross profit, expressed as a percentage of sales, increased to 55.7% from 54.5% in the comparable period of 2023. The 1.2 percentage point increase in gross margin was primarily driven by improved manufacturing efficiencies and favorable product mix.

Selling and administrative expenses for the nine months ended July 31, 2024 were $588,196, up from $553,590 in the comparable period of 2023. The 6.3% increase was primarily driven by the first-year effect of an acquisition, partially offset by improved cost controls.

Operating profit increased to $495,109 for thenine months ended July 31, 2024 compared to $487,722 inthe nine months ended July 31, 2023. Operating profit as a percentage of sales was 25.4% for the nine months ended July 31, 2024 compared to 25.5%in the comparable period of 2023.

Interest expense for the nine months ended July 31, 2024 was $60,354, compared to $32,532 in the comparable period of 2023. The increase was due primarily to higher average debt levels, driven by acquisitions. Other expense was $971 compared to $2,059 in the comparable period of 2023. Included in 2024 other expense were other pension and postretirement income of $3,085 and $2,411 of foreign currency losses. Included in 2023 other expense were pension and postretirement income of $4,044 and $7,625 of foreign currency losses.

Net income for the nine months ended July 31, 2024 was $345,116, or $5.99 per diluted share, compared to $359,715, or $6.24 per diluted share, in the same period of 2023. This change represents a 4.1% decrease in net income, and a 4.0% decrease in diluted earnings per share. The decrease in income was driven primarily by increased interest expense.

Industrial Precision Solutions

Sales of the Industrial Precision Solutions segment were $1,092,099 in the nine months ended July 31, 2024, an increase of 10.8% from sales in the comparable period of 2023 of $985,610. The increase was the result of higher organic sales of 2.5% and an increase of 8.8% due to an acquisition. Organic sales growth was driven primarily by the industrial coatings and packaging product lines.

Operating profit as a percentage of sales decreased to 31.5% for the nine months ended July 31, 2024 compared to 33.4% in the comparable period of 2023. The 1.9 percentage point decline in operating margin was primarily due to higher intangible asset amortization expense of $17,146 related to the ARAG acquisition.

Medical and Fluid Solutions

Sales of the Medical and Fluid Solutions segment were $495,229 in the nine months ended July 31, 2024, an increase of 0.7% from sales in the comparable period of 2023 of $491,683. The increase was the result of an organic sales increase of 0.9%. Sales growth occurred principally in the interventional solutions product line.

Operating profit as a percentage of sales increased to 29.0% for the nine months ended July 31, 2024 compared to 28.7% in the comparable period of 2023. The 0.3 percentage point improvement in operating margin was primarily due to the increase in sales and improved factory efficiencies.

Advanced Technology Solutions

Sales of the Advanced Technology Solutions segment were $358,111 in the nine months ended July 31, 2024, a decrease of 17.1% from sales in the comparable period of 2023 of $432,026. The decrease was the result of an organic sales decrease of 16.6% and unfavorable currency effects that decreased sales by 0.5%. The organic sales decrease was driven by weakness across the segment.

Operating profit as a percentage of sales increased to 17.0% for the nine months ended July 31, 2024 compared to 16.2% in the comparable period of 2023. The improvement in operating margin was primarily due to improved factory efficiencies and cost controls.

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 including 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 and nine months ended July 31, 2024 was 21.5% and 21.1%, respectively, compared to 21.1% and 20.9%, respectively, for the three and nine months ended July 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 unfavorable 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 July 31, 2024 were translated at exchange rates in effect during the same period of 2023, we estimated that sales would have been approximately $8,000 higher while costs of sales and selling and administrative expenses would have been approximately $5,000 higher. If transactions for the nine months ended July 31, 2024 were translated at exchange rates in effect during the same period of 2023, we estimated that sales would have been approximately $8,000 higher while costs of sales and selling and administrative expenses would have been approximately $5,000 higher.