The conference call is being led by Krista, the operator, and Lara Mahoney, the Vice President of Investor Relations and Corporate Communications. They welcome everyone to the Nordson First Quarter Fiscal Year 2024 Conference Call and provide instructions for the call. Lara is joined by the President and CEO, Sundaram Nagarajan, and the Vice President and Interim CFO, Stephen Shamrock. The press release and webcast slide presentation can be found on the company's website. They will be discussing non-GAAP financial metrics and making forward-looking statements. The agenda for the call includes Naga discussing first quarter highlights.

Naga will begin the conference call by recognizing the Nordson team's efforts in delivering solid first quarter results. He will then discuss the company's sales and earnings performance, as well as the balance sheet and cash flow. Naga will also provide a high level commentary on the enterprise performance and update on the fiscal 2024 guidance. The call will then be handed over to Steve, who will provide a detailed perspective on the financial results, including strong sales and earnings, improved product mix, and record free cash flow. Naga will also recognize the progress of the ARAG integration and the company's excitement for the precision agriculture market.

The company's first quarter sales for fiscal 2024 increased by 4%, driven by the acquisition of ARAG. However, there was a 2% decrease in organic sales due to lower volume, partially offset by price increases. The company's gross profit also improved by approximately 100 basis points, thanks to their NBS Next growth framework and focus on top products. EBITDA, a key profitability metric, increased by 9% due to improved gross margins and cost controls, as well as contributions from the ARAG acquisition. Net interest expense increased, while other net expenses decreased. The effective tax rate for the quarter was 21%, in line with the previous year and the company's guidance for 2024.

In the first quarter of 2024, the company reported a net income of $110 million, or $1.90 per share. Adjusted earnings per share, excluding non-recurring costs, increased by 3% compared to the previous year. This growth was attributed to the successful execution of the Ascend strategy. The Industrial Precision Solutions segment saw a 14% increase in sales, driven by the ARAG acquisition and organic sales growth. EBITDA for this segment also increased by 16%. Medical and Fluid Solutions segment saw a 3% increase in sales, with a significant growth in the medical interventional solutions product line. EBITDA for this segment increased by $7 million compared to the previous year.

In the first quarter of 2023, the company saw a significant improvement in EBITDA margin, driven by factory efficiency gains, cost actions, and growth in medical interventional solutions. However, Advanced Technology Solutions sales decreased by 18% due to weakness in semiconductor end markets. EBITDA was also lower compared to the previous year, but decremental margins were better than expected. The company's balance sheet and cash flow remain strong, with significant available borrowing capacity. In the first quarter, the company generated a record free cash flow and strategically used it to repay debt, pay dividends, and repurchase company stock.

The Nordson team has achieved strong operating performance in the first quarter of fiscal year 2024, thanks to the implementation of the Ascend strategy and NBS Next. This has allowed them to sustain market leading positions in various end markets and prioritize growth opportunities while simplifying processes. Examples of this include working closely with a customer on a new electric battery application and implementing a visual demand based manufacturing system for top products, resulting in improved on-time delivery performance.

The team had a successful quarter due to a large order from a medical device customer and strategic decisions to focus on top products and simplify processes. End markets are performing as expected, with steady growth in industrial and consumer non-durable markets and double-digit growth in medical interventional solutions. The integration of ARAG is going well, but there has been weaker demand in product lines exposed to the semiconductor electronics cycle. However, there are still positive growth opportunities in the electronics industry that are expected to benefit the company in the second half of the year.

The ATS leaders have effectively implemented the NBS Next growth framework and positioned the company for future growth. The backlog for the second quarter is $750 million, and the full-year revenue growth is estimated to be between 4% and 7%. The company has also added two new members to their board of directors, including Chris Mapes who brings valuable experience to the company. The second quarter sales are expected to be between $645 million and $670 million, with adjusted earnings of $2.20 to $2.35 per diluted share.

The paragraph discusses the recent appointment of Annette Clayton to the board of Nordson and the company's plans for growth through their Ascend strategy. It also mentions the delay in the expected inflection point for their ATS business due to weaker order entry. The company remains confident in their outlook for the year.

The speaker discusses three important things to keep in mind for the second half of the year. First, the comps will get easier for the business. Second, there is expected customer shipments in the backlog. Third, there are early indicators of growth in niche businesses such as supplying UV lamps and electronic adhesives. The speaker also mentions a robust opportunity pipeline for projects with customers. The speaker then responds to a question about potential weakness in the test and inspection investment cycle, stating that there has been strong growth in the past but it may be difficult to maintain.

The speaker is discussing the cyclicality of the test and inspection business, which is less volatile than the dispense business. They mention that MFS has returned to growth and there are no structural changes in their position or the market. The medical fluid components had a decline last year due to biopharma exposure, but there is a modest pickup in order entry from other end markets. They expect MFS to return to high single-digit growth and the fluid solutions business has a diversified exposure beyond medical.

The company's IPS business is showing steady growth, with order entry patterns returning to pre-COVID levels. The industrial coatings and polymer process product lines have strong backlogs, and the ARAG segment is expected to contribute 5% to organic growth. The MFS segment is also expected to return to growth, while the ATS segment is expected to recover in the fourth quarter. Book-to-bill was below 1 this quarter, but the backlog is higher than normal for this size of business.

The company expects a historic normalized level of $600-650 million and has seen a return to normal order patterns with no customer anxiety about supply chain constraints. The backlog has also been consumed at a normalized pace. The impact of the Chinese New Year in the second quarter is estimated to be around $10-15 million, contributing to a negative organic growth of 4%. This is half of the negative organic growth in Q2, with the opposite effect seen in Q1.

During a conference call, Michael Halloran from Baird asks about the seasonality of the company's performance and the impact of Chinese New Year and a shift in semiconductor recovery. Stephen Shamrock responds that the second quarter is also impacted by weakness in the electronics end market, but the company expects an uptick in the third and fourth quarters. Halloran also asks about the trends within ARAG and Sundaram Nagarajan responds by making broad comments.

The speaker is confident that he will answer all the questions and talks about the successful integration of a new technology and team, which has contributed to sales and margins. He expects the business to continue to perform well, with a 5% contribution from ARAG. The business mainly sells aftermarket parts for implements used in farming, which are essential for efficiency and cost savings. It is not dependent on tractor sales, and even during a decline in capital expenditures, customers still invest in updated implements for productivity and efficiency. The business is expected to be accretive to Nordson's EBITDA and EPS. The question is about current demand trends in the market.

The speaker confirms that the European market downturn is having a small impact on their business, but not as much as it would on larger manufacturers. They are seeing an increase in orders for UV lights and electronic packaging barrels, which are good indicators of future business. This increase is due to manufacturers increasing their usage of existing lines rather than buying new ones.

The company sells to smaller businesses in the front end of the semiconductor market, which is a new opportunity for them. They have customer orders in place for shipments in the third and fourth quarter, giving them confidence for those periods. The company's margins have been strong due to their growth framework, and they believe there is still room for growth as they continue to implement it across the company. Currently, three or four divisions are delivering leadership level performance based on specific metrics.

The company is seeing positive results from its NBS Next and Ascend strategies, with four divisions at leadership level and six or seven closely following. The impact is particularly evident in the IPS segment, where the Chinese New Year is expected to have a significant impact. The biopharma sector is recovering from destocking, but there is still uncertainty about when orders will pick up. The company is focusing on organic growth and expects a 40% increase, which could lead to margin expansion.

The speaker discusses the current state of their company's orders, noting a change in ordering patterns from biopharma customers. They also mention growth in patient care and surgical applications and the long-term trends that are favorable for their business. They are unable to predict when this will change. The speaker thanks their employees and emphasizes their commitment to the Ascend strategy for long-term growth. The call concludes.

This summary was generated with AI and may contain some inaccuracies.