Good morning. My name is Denis and I will be your conference Operator today. At this time, I would like to welcome everyone to the Nordson Corporation fourth quarter and fiscal year 2022 conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. To withdraw your question, press star, one again. I would now like to turn the conference over to Lara Mahoney, Vice President of Investor Relations and Corporate Communications. Please go ahead.

Thank you, good morning. This is Lara Mahoney, Vice President of Investor Relations and Corporate Communications. I’m here with Sundaram Nagarajan, our President and CEO, and Joseph Kelley, Executive Vice President and CFO. We welcome you to our conference call today, Thursday, December 15, 2022 to report Nordson’s fiscal year 2022 fourth quarter and full year results. You can find both our press release as well as our webcast slide presentation that we will refer to during today’s call on our website at www.nordson.com/investors. This conference call is being broadcast live on our investor website and will be available there for 14 days. There will be a telephone replay of the conference call available until December 29, 2022. During this conference call, references to non-GAAP financial metrics will be made. A complete reconciliation of these metrics to the most comparable GAAP metrics has been provided in the press release issued yesterday. Before we begin, please refer to Slide 2 of our presentation where we note that certain statements regarding our future performance that are made during this call may be forward-looking based upon Nordson’s current expectations. These statements may involve a number of risks, uncertainties and other factors as discussed in the company’s filings with the Securities and Exchange Commission that could cause actual results to differ. Moving to today’s agenda on Slide 3, Naga will discuss fourth quarter and full year highlights. He will then turn the call over to Joe to review sales and earnings performance for the total company and the three business segments. Joe also will talk about the year-end balance sheet and cash flow. Naga will conclude with a high level commentary about our enterprise performance, including an update on the Ascend strategy as well as our fiscal 2023 first quarter and full year guidance. We will then be happy to take your questions. With that, I’ll turn to Slide 4 and hand the call over to Naga.

Good morning everyone. Thank you for joining Nordson’s fiscal 2022 fourth quarter and full year conference call. As I reflect on the past few years and in particular 2022, the Nordson team managed through supply chain constraints, inflation at a 40-year high, increasing currency pressures, labor challenges, and COVID-19 shutdowns, and yet we have achieved a second consecutive year of record results in fiscal 2022. I want to thank our incredible employees who have remained focused on our customers and successfully leveraged our NBS Next growth framework to prioritize their time, efforts and resources on the best growth opportunities during the year. We finished 2022 with a strong fourth quarter performance and carry momentum into 2023 related to the holistic deployment of NBS Next and our Ascend strategy. This is critical as we enter 2023. The environment will likely be as full of macro changes and challenges as the last two years. I’ll speak more to this in a few moments, but I will now turn the call over to Joe to provide more detailed perspectives on our financial results for this quarter and fiscal 2022.

Thank you Naga, and good morning to everyone. On Slide No. 5, you’ll see fourth quarter 2022 sales were $684 million, an increase of 14% compared to fourth quarter sales of $599 million. The increase was primarily related to 18% organic growth plus the NDC acquisition, offset by unfavorable currency impacts of 8%. The 18% organic sales increase was driven by solid 14% volume growth and approximately 4% in pricing as we passed through cost inflation. The growth was in all geographies and most product lines with particularly strong demand in polymer processing, electronics and medical, and headwinds resulted from the U.S. dollar strengthening against the euro, the British pound, the Japanese yen, and the Chinese yuan during the fourth quarter. Early here in fiscal 2023, some of this increased pressure has subsided, moving back closer to the third quarter levels when the year-over-year currency impact on sales was unfavorable 5%. Gross profits increased 10% over the prior year to $363 million or 53% of sales compared to $331 million or 55% of sales in the prior year fourth quarter. The double-digit growth in profit dollars was driven by the strong sales growth while the year-over-year margin decrease of 200 basis points was influenced by several factors. Most significant was the passing through of cost inflation which, while relatively neutral from a gross profit dollar perspective, diluted the margins approximately 140 basis points. Additionally, the significant strengthening of the U.S. dollar pressures the margins of our businesses that have U.S. dollar-denominated manufacturing costs and sell denominated in euros or other foreign currencies. These two factors contributed to the 200 basis point decline in margin percent while delivering a significant 17% constant currency growth in gross profit dollars. Operating profit was $178 million in the quarter or 26% of sales, as…

Thank you Joe. Again, thank you to the Nordson team for another strong year. I want to re-emphasize Joe’s comments - we achieved record results with all segments contributing to both sales growth and operating profit growth for the quarter and year. That’s quite an accomplishment. Beyond the financial results, I’m very pleased with our steady deployment of the NBS Next growth framework. NBS Next has evolved from an aspiration to a working model within the business. This data driven segmentation framework drives choices, focus and simplification. We now have two divisions that have achieved market leading business performance. They use the framework as a competitive advantage to deliver on time quality products to their top customers, winning the business and growing market share. Leaders from these divisions are now sharing their lessons learned internally by hosting facility tours and teaching at our Nordson accelerated training programs. Earlier this month, I visited several sites in Europe and I’m excited by the progress I observed. The questions that were asked as well as the progress that was shared during the manufacturing facility tours clearly demonstrates the engagement and adoption of the framework as the way we do business. NBS Next is becoming a competitive advantage for Nordson moving into 2023 and beyond. This new capability combined with the core elements of the Nordson business model has positioned us to deliver results through more challenging economic demand environments. First among the core elements of Nordson’s business model is the fundamental focus on our customers. Our intimate customer relationships allow us to add value by solving critical customer problems, whether that is enabling their new product ideas or helping them operate more efficiently. This customer partnership has been further strengthened over the past two years as we worked through numerous challenges to consistently…

[Operator instructions] Your first question is from the line of Matt Summerville with DA Davidson. Please go ahead.

Thanks. A couple questions. First Naga and Joe, can you maybe talk about the order cadence you saw over the course of fiscal Q4 and what you’ve seen thus far in the fiscal ’23? Maybe talk about some of the pluses and minuses you’re seeing across the business and how that informs your view on what you’re calling a bit of an uncertain second half in the fiscal year, and then I have a follow-up.

Yes, thank you Matt. A couple of things. Let’s go by our major end markets. If you think about ATS, the backlog is pretty strong going into Q1 and first half. For the full year, we expect single digit organic growth for the year. Both T&I--you know, both our test and inspection and our dispense business are expected to grow in the year. If you look at our industrial business, or IPS, end markets remain solid. A couple of our system businesses are expected to deliver and are expected to grow double digits, while our consumer non-durables are expected to sustain their current record levels. If you think about MFS, our forecast is again this segment is also expected to grow in single digits. What you see is our interventional components, the medical fluid components, if you think about the interventional side, which is our balloons and catheters, this business is returning back to pre-COVID levels of high single digit growth. Our fluid components, which is approximately 20% of this business, had a great two years of double-digit growth, and what we understand, and we watch this end market with some caution as some of our customers have built up some excess inventory, but important to remember this is 20% of our MFS segment. Hopefully that gives you some color, and this is what is embedded in our guidance for the quarter and the year.

Maybe Matt, I would just add--

I appreciate--sure?

Yes, I’d just add, as we said, as it trended throughout the year, we saw strong performance in ’21, ’22 - most of the quarters, we were running with a favorable book to bill, and in Q4 some of that started to moderate. The book to bill was slightly unfavorable.

Understood. Maybe if you can just comment a little bit more on M&A, and even CyberOptics - you know, what are you incorporating into the guide as it relates to EPS accretion from CyberOptics, and what are you seeing looking forward in terms of actionability within your current M&A pipeline? Thank you.

Maybe Naga, I’ll handle the first part of that and you can take the second. As it relates to CyberOptics, we are very pleased, everything is on track. Just a reminder, it’s about a $100 million business, we’re integrating it into our test and inspection division. We paid about 18.5 times EBITDA and as we execute synergies over the next year or so, we’re going to take that to roughly 14.5 times EBITDA. Everything that we’ve got in CyberOptics is what we expected and we’re very pleased with it, and that’s--. As it relates specifically to our guidance, what it will be, when you look at our full year guidance, the assumption is that that is slightly accretive for the full year.

Joe, let me take the question around our acquisition pipeline. Maybe just as a reminder, Matt, we have clear strategic and financial criteria when we look at acquisition ideas and when we consummate deals, and just as a reminder, the strategic criteria really are we’re looking for differentiated position technologies, we are looking for businesses that serve markets with high growth rates, certainly looking for businesses that have a customer-centric business model. On the financial side, we certainly look for businesses that have attractive growth rates and with Nordson-like gross margins, EBITDA margins around 20% with a clear path with expansion opportunities and an ROIC that is ahead of our cost of capital in five to seven years. That’s really sort of our--that’s what informs what deals we pursue and what we consummate finally. Our focus still remains on scaling our medical and test and inspection platforms. We certainly will look at adjacent position technologies if they meet our strategic and financial criteria. Having provided you that background, our pipeline is pretty healthy. We are pursuing a number of different opportunities. Certainly we’ll act on them thoughtfully based on our strategic and financial criteria - that’s really important to remember. We are confident in our ability to deliver on $500 million of acquisitions, which is an important part of us reaching the $3 billion target we set for ourselves in 2021. Again, another reminder, we have acquired about $210 million worth of acquisitions towards that $500 million already, right - we did NDC, CyberOptics and Fluortek, and all of that gives us about $210 million. One other thing I would comment, through what we have done thus far, we have now been opened to many types of deals - for example, CyberOptics was a public company deal, NDC was a carve-out from a public company in Europe, so we feel good about our pipeline. We will remain strategically and financially diligent and disciplined.

Thank you.

Your next question is from the line of Mike Halloran with Baird. Please go ahead.

Hey, good morning everyone.

Good morning.

Morning Mike.

Maybe help me understand some of the comments you had about the seasonality through the year. Obviously the first answer to Matt’s question was very helpful as far as how you’re thinking about the various moving pieces and orders trends; but Naga, you highlighted that the guidance assumes uncertainty around what the second half looked like, so maybe you could talk a little bit about what the seasonal assumptions look like, how the front half compares and the back half compared to what normal seasonality looks like, and what’s behind the uncertainty that you’ve got embedded in the back half. I’m not saying it’s not prudent, I just want to make sure I understand where you guys are coming from.

Sure, maybe again, Naga, I’ll take the front half of that. Mike, if you think about our full year guide, basically the midpoint is 4% sales growth and flat earnings on the full year. The simple way to think about this is acquisitions are roughly 4%, so the organic growth is probably 2% to 3%, and this is offset by our assumption around unfavorable currency impacts. The organic growth is coming in at incremental margins of 40% to 45%. The CyberOptics acquisition, as I mentioned before, is slightly accretive, but what’s embedded in the earnings guidance is there’s a currency headwind of about 3%, so when you think about 1% in sales of currency headwind, it translates to roughly 1.3 to 1.5 headwind on the earnings line. Interest expense is driving an increase given the change in interest rates, plus this year we did benefit from some foreign currency hedge gains, so those are not forecasted to repeat, so that’s about a $0.20 headwind or 2% headwind to earnings. That’s the full year, kind of what we’re thinking about. To your question on timing, we feel pretty good about our visibility into the first half of the year. We’re entering with a billion-dollar backlog, so we see organic growth in the first half of the year of about 4% to 5% - this is following two consecutive years of double-digit organic growth. But when we look at the second half, our guidance assumes that the organic growth is actually relatively flat at the midpoint, and so--and that’s just given our visibility. We have good visibility to the first half, I would tell you, given some of our backlog in systems orders, and limited visibility to the second half. When you think about the first half, it’s actually not evenly split between Q1 and Q2. Your have Chinese New Year last year fell in Q2; this year, it falls into Q1, plus as you know, our systems business has grown nicely and so with that backlog, when we look at the scheduled customer system delivery dates, Q2 will be much stronger than Q3. That’s kind of how we’re thinking about it. When you think about FX, the FX headwind is going to be heavier in Q1 and Q2 at about 4% to 5% unfavorable on sales, where that will moderate to be relatively neutral in the back half provided we stay at forecasted exchange rates. Hopefully that helps.

No, that was great. To paraphrase quickly, first quarter you’ve got some headwinds, second quarter you feel really good about the delivery schedule you see based on the backlog, but maybe some expectations for orders to be somewhat soft, you’re just not sure what the environment look like, so the back half then, you’ve got maybe below normal seasonality 2Q to 3Q and we’ll just see how it plays out as we get closer to that date. Is that a fair, very quick interpretation?

That’s a fair interpretation, yes. The FX is a heavier impact in the first half then the second half, just given the way exchange rates have moved. That’s a fair interpretation.

Thanks for that. Then the second and related piece is on the medical piece, you mentioned the inefficiencies. Could you maybe just help bucket out what kind of an impact that was in the quarter and then when you think the timing of that could get back towards what you think the more normal run rate for margins are in that segment?

Yes Mike, so the reference there is to our MFS segment, which saw--you know, in the quarter had nice 15% growth and the operating profit grew, but it was negatively impacted, I would tell you, by approximately probably $5 million due to some manufacturing inefficiencies. This again was tied to the consolidation of the factories Q3, and so as we look into 2023, that factory as it ramps up to targeted efficiency levels and production levels, that will start to mitigate as we move throughout, I would tell you, the first half of ’23.

Great. Really appreciate the color, that was helpful. Thanks everyone.

Thank you Mike.

Your next question is from the line of Allison Poliniak with Wells Fargo. Please go ahead.

Hi, good morning. Naga and Joe, I want to go back to your comments around the moderating book to bill here. I know lead times have been extended on the order side. Are we seeing some normalization that’s driving some of that as well, or are you seeing specific volatility in certain end markets or geographies? Just any thoughts there.

Yes, if you think about our Q4 contribution and the full year contribution, it was fairly broad-based, all our business lines across all the three segments, and the same can be said for our geographies, so historic two years [indiscernible] organic growth going into [indiscernible]. As Joe said, we have good backlog, and we talked about by those different end markets, so in general we feel very strongly about first half, we have good visibility. I think second half, the best way I would tell you is our assumptions are it is a flat kind of organic growth, is really what we are assuming. Remember, this is flat on historic revenues in second half of 2022.

That’s helpful. Then I know you talked about some timing of deliveries, you know, Q1 versus Q2, but was there any timing deliveries maybe that shifted into Q4 that could have been Q1? I know organic was maybe quite a bit stronger than we had anticipated. Just any thoughts there, thanks.

Yes Allison, I would tell you Q4, particularly on the systems side, came in stronger than anticipated, and so there was a portion of that which you could contribute to timing, perhaps getting pulled into Q4 as opposed to Q1, so that does contribute a little bit to our guidance in Q1.

Thank you.

Your next question is from the line of Jeff Hammond from Keybanc Capital Markets. Please go ahead.

Hey, good morning guys.

Good morning.

Just on advanced tech, it sounds like great finish to the year, kind of in line-ish growth versus the rest. I’m just wondering if you can parse out momentum in test and inspection versus electronics. Any softness around--you know, emerging softness around the consumer-related portions of your business or any of this China regulation noise, either on the core or on CyberOptics?

Yes, I think the way to think about this, our test and inspection business continues to have strong momentum coming into the year, and as we can see it, we feel good about our test and inspection business. We do see some moderation or book to bill that is unfavorable in our dispense side of the business, which has a portion of it is consumer-related, not all of it, because there is still semiconductor. But overall, we feel good that both these product lines will grow in the year and ATS as a segment would have single digit growth in the year, so feel good about that. First half, really good visibility, second half is a flattish kind of assumption. In terms of China regulation, Jeff, is one of the questions you asked, we don’t see any significant impact that we know of today, so we don’t really see that. I know you had another piece there, Jeff, that I may have missed, if I didn’t answer all of yours.

No, I think that covers it. Then just on the guide, maybe it’s around macro uncertainty but the range is pretty wide, and maybe outside of the sales range, what are some of the other moving pieces that will inform maybe the wider range, and then if you can just give us an interest expense number so we can kind of fine-tune how to think about the increase there, that’d be great. Thanks.

Yes Jeff, maybe I’ll take the interest expense first. I would think about that going from roughly $20 million to $40 million based on the interest rate movements and our average powering balances ’22 to ’23. As it relates to our guide in terms of the sales range, again I just would go back and share that we have pretty good visibility into Q1 and Q2, and so the first half, the organic growth for the first half is 4% to 5%. You can think about acquisitions as a 4% favorable, and then FX is 4% to 5% unfavorable in the first half. When we go to the back half, it’s really relatively flat - organic sales 4%, acquisition, and then FX starts to moderate and is maybe flat to negative 1%. Then as it relates to the range, I would tell you that--you know, appreciate roughly 50% systems and 50% parts and consumables, and we have pretty good visibility on the systems side. The parts and consumables again is a shorter book and ship time frame, and so we’re just looking at our order entry and monitoring that and being--you know, putting a range particularly on the back half, and so as you see our Q1 guidance is relatively tight and, to your point on the earnings, the interest expense will be a headwind to earnings in Q1 particularly.

Okay, thanks so much.

Your next question is from the line of Connor Lynagh with Morgan Stanley. Please go ahead.

Yes, thanks. A similar line of questioning here. Basically, can you help us think through how much price you’re carrying into next year, and then how much visibility you have on that and how much you’re thinking about upside-downside on that, and sort of similar question on volume.

Yes, so if you think about it, our price, we exited Q4 with roughly 4% realization in price, so as you can appreciate, that impact grew throughout 2022 as we realized inflation and then we took pricing actions to pass that inflation through. As a reminder, our stated strategy was to pass through the inflation, not the inflation plus 55% gross margins, and we were effective on that. It had a diluted impact on the percentage but we were effective. To your point, we’re carrying into Q1, so part of the first half growth, organic growth of 4% to 5%, you can probably think about that as roughly split - half would be pricing given the timing of price realization last year, and half of that would be volume. Then as you can appreciate, as you get then to the back half of next year, the pricing impact on a year-over-year basis will be less simply because we had realized more throughout the year as we experienced the inflation. All that said, we clearly remain in a dynamic environment and responsive. As the cost pressures and inflation change throughout the year, we will be responsive, and again we’re targeting and we’ve been successful in maintaining incremental operating profit margins of 40% to 45% on the organic growth - we delivered that in Q3 at 43, we delivered that for the full year at 55%, which was actually ahead of our target, so that’s how we think about it and, to your point, we’ll continue to manage that.

One thing to add to our pricing effectiveness, there are a couple of things to remember. The gross margins are over 50%, right, that is because we create value for our customers, and this value allows us to get paid for any cost increases that we have, so we’ve been very prudent in managing the cost increases. But you’ve got to remember, we create value and we get paid for it. The second thing I would tell you, from our customers’ point of view, our cost structure in their total cost stack is a fairly small number, so we are a low cost component creating incredible value and critical value, and that allows us to continue to be effective along price increases. But you know, we certainly want to protect our customer relationships and we’re being prudent, and that’s what you’re going to see us do in this environment that we are experiencing.

Yes, understood. Thank you for the context there. Just thinking through the guidance range, maybe just a little bit of a clarifying point, are you--when you think about the high end versus the low end, are there certain end markets that you are risking higher or lower? You made the comment earlier about the systems versus components, but can you just sort of clarify if there is specific markets that you’re particularly watching in driving that wide range or is it just the broad economic uncertainty?

I think the way to think about our range is that, first as Joe indicated and reiterated, we are very comfortable because of the visibility we have and because of the system orders we have. There is a split between the first quarter and the second quarter given Chinese New Year timing as well as systems shipments. But second half, Connor, we are assuming flattish growth on some very historic record revenue levels that we were running in ’22. We expect all of our segments to grow in the year, albeit single digits, so. The two end markets we are watching that we’ve talked about is our biopharma fluid components, which is 20% of our MFS segment, it’s a small part of our MFS segment. That is where we have customer inventory is fairly high, from what we understand, so we’ll watch that one. The other one that I indicated was our dispense business in the ATS segment, which has had some incredible growth here in the past two years. What you see--you know, coming into the quarter, there was some unfavorable book to bill trends there, so we’re watching that, so those would be the two we would be watching. Our industrial businesses seem to be remaining pretty solid, our system industrial businesses are actually growing very nicely. Our medical business is back to pre-COVID levels, which is our medical interventional business, I should say, so. Hopefully that gives you some more color.

It does, thank you very much.

Once again, if you would like to ask a question, simply press star then the number one on your telephone keypad. Your next question is from the line of Christopher Glynn with Oppenheimer. Please go ahead.

Thanks, good morning guys.

Good morning.

Good morning.

I have a question. Was interested to hear the call-out on the polymer product lines. I don’t recall if that got a call-out in recent quarters, but curious if you’re seeing some emerging vibrancy in those markets or kind of a recap trend.

Yes, I think that is a business--if you remember, a number of years, a few years ago, we had exited our [indiscernible] barrels business but we kept some parts of the business that we really liked which had some long term trends, and so--and certainly we’ve had to address a number of cost structure issues in that business over the period of time. I have a great leadership team that’s taken us through that and has positioned the business to go after the best growth opportunities there, and so all that work has resulted in a pretty nice growth rate. Again, this is a business that we liked. There were parts of the business we liked and there were parts we did not like, but I think we’re in a place where this is a good business and it is growing nicely for us. I wouldn’t say this is our biggest strategic part of the company [indiscernible] medical growth and test and inspection growth, but it is a solid part of our portfolio. We really appreciate what the team has done in this part of the business to really reposition the business, and now it is growing.

Okay. Is there any different appetite or healthier trends in the end markets?

I would say a couple of things. There is certainly this whole trend around recycling, it’s a trend that is certainly benefiting this business. What we also see is in some parts of the business, there is some specialty film that is used in EV battery manufacturing that they have a pretty good customer base. Again, these are all small opportunities, Chris. I don’t want to make it to be significant, but it really has pretty nice momentum in these two areas and the team is doing--and there is some bio plastic materials also that the team is working on, so. Again, singles and doubles is the way you want to think about [indiscernible]. I think the bigger takeaway should be the company is, you know, with some incredible leadership from our teams, reposition [indiscernible] better place and growing.

Thank you. On ATS--or in MFS, rather, I wanted to look at the non-medical side. I think it’s basically EFD, something over a couple hundred million. Just want to remind what the customers and applications are there, the cyclicality and how that’s positioned.

Yes, that business is--you know, it’s actually one of our most diversified applications. Quite frankly, [indiscernible] fluid dispensing applications to electronics dispensing applications to life sciences. That business wins with applications, so it’s pretty diversified. [Indiscernible] GDP kind of growth is what it typically does, maybe a little bit more if the electronics cycle is going strong for them. It’s a good business but a growing part of it is also life sciences.

Thank you.

This does conclude the Q&A session of today’s call. I will now turn the call back over to Naga for any closing comments.

Thank you for your time and attention on today’s call. Our core capabilities combined with the NBS Next growth framework positions us well for a dynamic environment. This was evidenced in 2022 and we expect it to position us well for fiscal 2023 as well. We remain focused on achieving our long term objective of delivering top tier revenue growth with leading margins and returns. We wish you a happy holiday season.

This concludes the Nordson Corporation fourth quarter and fiscal year 2022 conference call. Thank you all for joining. You may now disconnect.