Good day ladies and gentlemen and welcome to the Nordson Corporation webcast for the third quarter fiscal year 2016. At this time, all participants are in a listen-only mode. Later we will conduct a question and answer session, and instructions will follow at that time. If you require operator assistance during the program, please press star then zero on your touchtone telephone. As a reminder, today’s conference is being recorded. I would now like to introduce your host for this conference call, Mr. Jim Jaye. You may begin, sir.

Good morning. This is Jim Jaye, Senior Director of Investor Relations. I’m here with Mike Hilton, our President and CEO, and Greg Thaxton, Senior Vice President and CFO. We welcome you to our conference call today, Tuesday, August 23, 2016 to report on Nordson’s FY16 third quarter results and our fourth quarter outlook. The conference call is being broadcast live on our webpage at nordson.com/investors, and will be available there for 14 days. There will be a telephone replay of our conference call available until August 30, which can be accessed by calling 404-537-3406. You will need to reference ID number 58265387. During this conference call, forward-looking statements may be made regarding our future performance based on Nordson’s current expectations. These statements may involve a number of risks, uncertainties and other factors as discussed in the company’s filing with the Securities and Exchange Commission that could cause actual results to differ. After our remarks, we’ll have a question and answer session, but now I’ll turn the call over to Mike for an overview of our FY16 third quarter results and a bit about our fourth quarter outlook.

Thank you, Jim, and good morning everyone. We’re very pleased with our performance in the third quarter. We delivered record performance for any quarter in our history in terms of revenue, operating profit, net income, and diluted earnings per share. My thanks go out to our global team for their continued hard work and customer focus. Greg will provide a bit more of the financial details shortly, but first I’d like to mention just a few of the highlights for the quarter. On the top line, we grew the business by 6% in the quarter compared to the prior year, slightly above the high end of our guidance and inclusive of 4% organic growth. This is very solid performance in a challenging macroeconomic environment. The diversity of our end markets continues to be a strength and our team is capturing growth opportunities in a variety of niches where customers are responding to our value proposition and our new product offerings. Growth was especially strong this quarter in electronics, medical, and consumer non-durable end markets. We also generated growth across most of our geographies. We leveraged the revenue growth and our continuous improvement efforts to increase total company operating profit by 20% and operating margin by 3 percentage points, both as compared to prior year’s third quarter. Incremental operating margin was 77% in the quarter and diluted earnings per share grew by 28% compared to the same period last year. As we look to our fourth quarter, we are forecasting mid-to-high single digit organic growth compared to a year ago. Our backlog and order rates are very solid, and customer project activity in all three segments is steady. We expect volume leverage in our ongoing operational initiatives to drive operating margin improvements as compared to last year’s fourth quarter. At the low end of our fourth quarter guidance, we’re on track for a record full-year performance. I’ll speak more about our outlook and current business trends in a few moments, but first let me turn the call over to Greg for a more detailed commentary on the current results and our fourth quarter guidance. Greg?

Thank you and good morning to everyone. As Mike noted, we increased sales by 6% in the quarter over the prior year’s third quarter, with sales of $490 million. This change in sales included a 4% increase in organic volume, a 2% increase related to the first year effective acquisitions, and a less than 1% decrease related to the unfavorable effects of currency translation as compared to the prior year third quarter. Looking at sales performance for the quarter by segment, organic sales volume in adhesive dispensing increased 4% compared to the prior year with additional volume growth of 1% related to the first year effect of the WAFO acquisition. Strength in consumer non-durable and general product assembly markets in the current quarter helped drive solid organic growth in this segment. Geographically, Europe and the U.S. led the growth. Organic sales volume in the advanced technology segment increased 6% compared to the prior year third quarter, with additional volume growth of 5% related to the first year effect of the Liquidyn and MatriX acquisitions. The organic growth was driven by strong demand for automated and semi-automated dispense equipment in electronic end markets and fluid management components for medical end markets. Geographically, Japan, Asia Pacific, and the United States led the growth. Sales volume in the industrial coatings segment decreased 3% compared to the third quarter a year ago. Sales were impacted by very challenging comparisons to the prior year where volume growth was 23% at this time last year. Strength in powder and liquid coating product lines was offset by softness in other product lines. Growth in Europe and the United States was offset by other geographies. Moving down the income statement, gross margin for the total company in the third quarter was 56%, a 2 percentage point improvement from…

Thank you, Greg. Before taking your questions, I’d like to provide a few summary comments. Clearly Nordson is outperforming the current macroeconomic environment. We are benefiting from the diversity of our end markets and capturing growth with innovative products, tiering new applications, emerging market penetration, and recapitalization of our installed base. We’re leveraging that growth to widen margins and increase profitability. Independent of volume, we’re also continuing to use tools in the Nordson business system to drive improvement across the enterprise. We’re on track to deliver full-year records for revenue, operating profit, and diluted earnings per share. At the midpoint of our guidance, full-year organic sales growth would be approximately 5% compared to the prior year. We expect full-year operating margin to improve compared to the prior year, given volume leverage on this growth and the benefits of this year’s margin enhancement initiatives. At this point, we’d be happy to take your questions.

[Operator instructions] Our first question comes from Allison Poliniak with Wells Fargo.

Hi guys, good morning.

Good morning, Allison.

Could you give us maybe a little bit more color on the performance of advanced technology this quarter in terms of--you know, I know you mentioned medical as well as the technology, but was it weighted one over the other this quarter more so, or were they fairly balanced?

Well, I’d say this quarter both elements of the business were strong. Obviously in the segment, the non-medical piece is probably three-quarters of the segment, so that’s had a significant effect. What we’ve seen is a couple of things: a continuation of what we saw last quarter in terms of new products creating new opportunities for us, but also it took up on the mobile side of the business across both the semi-automated and the automated dispense and then the ensuing inspection-related activities. So I’d say certainly a lot of weight in this quarter coming from the mobile side of things and the broadening of our applications base and opportunities related to new products, while medical continued to be strong.

That’s great. Then just looking at the core sales growth range for Q4, it’s pretty wide. Is it relative to maybe some projects that might, just given timing, get pushed into the following quarter? Can you just help clarify that a little bit, the wide range there?

Yes, we take a look at the mix of projects that we have in, and for some of our businesses there are deliveries that stretch a little bit longer based on when they come into orders. So you’re exactly right thinking that some of those could end up being in the fourth quarter--or I mean, the first quarter.

Perfect, thank you.

Our next question comes from Matt McConnell with RBC Capital Markets.

Thank you, good morning.

Good morning.

Just wanted to touch on the guidance for the margin next quarter. You’ve pretty handily beaten your expectations a couple quarters in a row, and the 22% you’re guiding to would be a pretty big sequential step-down and probably bigger than you would typically see from 3Q to 4Q. So is there something in the mix or is that just conservatism? Again, I know you’ve been exceeding your expectations. Really just hoping to understand that step down.

Yes, I would say part of it is just looking at overall volume expectations, but in actuality also the mix. So if you look at it as an example, this is a strong quarter with order entry on the coatings business, which has been a little softer against tough comps for most of the year, and so the mix of that business will have an effect coming into the fourth quarter for example. So really when we look at it, it’s really more a function of volume mix than anything else, and that’s our best estimate at this point in time.

This is Greg. I’d just add to Mike’s comments where we may see some segment mix, we may see some product line mix within the segments as well, that although still good margin would be dilutive to what we delivered in the third quarter. So it’s primarily mix.

Okay, great. Thanks. Then maybe switching gears, product assembly has been quite strong for a number of quarters now. Can you just give us a sense of the markets that are driving that? I know that’s an area within adhesive dispensing where it’s a bit more wide open with respect to your growth opportunities, so how do you prioritize those growth opportunities going forward, and maybe what’s been the recent driver of that product assembly growth?

Yes, there are a number of different applications that fall into that. Certainly some of them fall into the category driven by housing and construction, some of them relate to industrial machinery that are related to really consumer non-durable demand and the step-up in consumer non-durable demand. I think some of it also is a function of a nice set of tiered offerings that we’ve put in place to take advantage of some new opportunities, particularly in emerging markets. I’d say we have a variety of things there that are picking up. Our focus is really around particular opportunities where we can create value and ultimately obviously get paid for the value we create.

Okay, great. Thank you.

Our next question comes from Matt Summerville with Alembic Global.

Good morning, a couple questions. If you could just talk about or maybe calibrate, dial in if you will, the three segments around that 5% to 9% organic growth expectation you have in Q4, maybe which you expect to be within that bandwidth, above or below that, and just kind of--I guess I’m trying to tie that back into some of the big order numbers you’ve put up in two of the three businesses, please.

Yes, if you look at it and just look at the order entries across the business, Greg talked about the two in particular that have stepped up significantly in this quarter - the advanced tech piece and the coatings piece, where the adhesive piece has been more steady. So I would say when you look at the quarter going out, you’re going to see more of the contributions coming from advanced tech and the coatings, and I guess on an order entry basis, I’d make a couple of comments. Particularly in the coatings business, I think a lot of those are going to consumer durable type applications. Some customers, given the macro scenario, were hesitant early in the year, and they’ve released some funds now, so we’re seeing a relatively strong push towards year-end. I’d say on the advanced tech side, our peak can shift from third quarter to fourth quarter from year to year, and it’s a little bit later this year as well, so that’s contributing to the order step-up. In both of those cases, some of those orders could conceivably get pushed into the first quarter, so that’s kind of a reflection. The adhesives business is more steady, and as Greg mentioned, in the fourth quarter we’re up against tougher comps from a year ago - still ahead of those, but up against tougher comps.

If you look at the average duration of how long an order is staying in backlog, is that number materially different now than it has been in prior years? And I guess as your visibility--when you look at that backlog number, up 20% organically, that’s a pretty big number. Do you feel like your visibility today is better than it has been in the past, just given the general shorter cycle nature of your business?

Yes, I would say the average duration hasn’t changed significantly. I mean, we have projects in the coatings business that are significant that could stretch out a little bit. We could have projects in the product assembly area that we just talked about that could stretch out a little bit, and in our plastics business we could have some projects that are a little bit longer, but I would say not dramatically different. I would say what we have seen more recently is some bigger orders coming in and sort of packages with staged deliveries, and some of those things can play out over time, so that’s part of what we’re seeing as well.

Got it, thank you.

Our next question comes from Charlie Brady with SunTrust.

Good morning, guys.

Morning, Charlie.

I’ll ask my standard question on mix of parts and aftermarket consumables in the quarter. Any skewing one way or the other? I mean, the margins were pretty good. I’m wondering if that was helped at all by the mix of that aftermarket component.

Yes Charlie, this is Greg. Not materially different, but I will say as compared to the prior year third quarter, that mix actually hurt us a little bit, where parts revenue was down from where it was 41% of the mix last year, it was 39% in the current quarter. So not materially different, but would be a slight drag on gross margins.

Okay, that’s helpful, thanks. In the release, you talked about Europe was actually up in industrial and in adhesive dispensing. Can you just talk about--you know, obviously with all the Brexit discussion going on out there and some of the growth expectations, you’re still seeing growth in Europe. Can you talk about how you saw that through the quarter, and really more importantly, exiting the quarter and kind of given the timing of when your fiscal year ends, what you’re seeing out of Europe, any material change or hesitancy on customer order patterns.

Yes, I’d say if you look at across most of the businesses, I’d say we saw Europe as modestly up, probably most solid in our traditional kind of adhesives business. Now remember, also in Europe we’ve got large OEMs that export elsewhere, so that’s one of the positive things that is affecting our business and might be a little different than what you might see in some other businesses. But I’d say generally speaking, pretty solid, modestly above year-on-year, and when you look at our coatings business in particular, we’ve had solid powder opportunities in Europe and we’re starting to see that pick up more globally for the coatings business. So I would say the combination of the OEMs and key adhesive applications and some pick-up in the coatings business is what’s really been driving the revenue. Now when you look at the orders going forward, Europe looks a little bit weaker and maybe more in line with what you’ve seen with some other companies there. I’d say for us, it’s really more of a function of timing of some large projects year-over-year and not so much an underlying trend. So we haven’t seen a Brexit effect at this point in time. It doesn’t mean something couldn’t come down the road, but we haven’t seen that at this point.

Thanks Mike, appreciate it.

Our next question comes from Walter Liptak with Seaport Global.

Hi, thanks. Good morning, guys.

Good morning, Walt.

I wanted to just drill into the advanced tech a little bit. You called out mobile electronics, and it sounds like mostly in Japan and Asia. What kind of applications, are these for new products, new mobile devices that will be coming out later this year?

Yes, so a couple of things. We--from an application standpoint, I’d say there’s sort of two things that are driving, and maybe three. So we came out with some new technology on the dispense side that will allow us to put more dot smaller size, which widens the application approach to get to the wafer side of things. We talked a little bit about that last quarter, and that’s continued. We’re seeing those new products get traction. We’re also seeing some new applications in the mobile side which one example is more waterproofing or water resistant type of applications that are driving some opportunities. On our inspection side, the three dimensional chips and three dimensional wafers are driving X-ray inspection, and then we’ve done a nice job with tiering. You know, we talked about an acquisition we made about a year and a half ago in Europe that would allow us to get a tiered product that we then incorporated our technology on, and we’re getting nice traction in that tiered product offering on the dispense side. Then we also had an acquisition where we’re getting really good traction in Asia by incorporating our X-ray technology onto an automation platform. So those are some examples of the kinds of things that we’re seeing that are helping diversify the base of applications and customers.

Yes, the diversification sounds great. Is this--you know, your advanced tech orders, because of that mobile part, have been lumpy from time to time because of some of the early stages of the some of the new applications. Do you think there’ll be maybe more consistency as you go? Is there any more visibility going out for your six months on projects?

I would say that unfortunately no, there’s not more visibility going out, and this business will continue to be lumpy. Certainly I think the tiered offering, getting to a different group of customers like, for example, the Chinese mobile players will be helpful because they’re earlier on in the automation curve. But we’ll still see product cycles, and as we look out on the mobile front, we typically see the design cycles from fall through early winter and then orders come through, and based on the degree of change, we’ll see more come through. I’d say what we’re doing to diversify some of these other applications that should be more steady because they apply to a broader set of opportunities, and the tiering should help because it’s earlier on in the penetration curve for some of the folks that are just automating, but there will still be lumpiness with this business.

Okay. All right, understood. It sounds great. On the margins that expanded in advanced tech, you called out mix, volume, and continuous improvement. I was wondering about the medical margins. Are medical there? You’ve gone through some restructuring and I think improvement with those businesses. Are those sustainable margins now on the medical side?

Yes, on the medical side, we’ve grown. First of all, we’ve grown the business nicely across all the three major product lines that we have there, and we have put the new automated facility out in Colorado and that’s ramping up, and we also expanded our facility in Mexico for the cannula catheter business and some other things that we’re doing there, so those are all nice structural improvements that are helping, so the margins are improving in that area as well.

Okay, great. The last thing, you haven’t mentioned the polymers business. The kind of general industrial trends have been bumpy, or maybe improving a little bit. Are you seeing any improvement in polymers?

Yes, I would say it’s been kind of a mixed bag. We’ve seen some improvements, for example in our dies business, which are related more the film, which has been the laggard for the last couple of years. We’ve seen some good performance in our melt delivery, which is the German business. I’d say our core components, which are the screws and barrels, have been a little soft as some of the injection molding applications have slowed a little bit, and the palletizing has been generally solid but it’s bigger project-related, so it can bounce around quarter to quarter. But we’re seeing a pick-up, I’d say in the orders entry in general in the business. I’d say the one softness we’re seeing is around some slowing in the injection molding side with some improvement on the film side, so a mixed bag still.

Okay, great. All right, thank you.

Again ladies and gentlemen, if you have a question or a comment at this time, please press star then the one key on your touchtone telephone. Our next question comes from Christopher Glynn with Oppenheimer.

Good morning. Just building on Walt’s questions, wondering how some of the emergent mix penetration stories are scaling up in terms of maybe quantifying the incremental revenue opportunity? There’s the test and inspection applications, tier 2 mobile, and even Freedom is still a penetration story. I think those are the chunkier ones. If you could kind of quantify how you’re seeing the multi-year market sizes there.

Yes, I’d say at this point in time, if you look at sort of the range of mobile-related activities, both on the dispense and the inspection side, we’re seeing revenues that fall in the tens of millions of dollars, maybe 10, 20, $30 million range, not hundreds of millions. So I’d say on the newer technology, we’re still early on in the penetration curve, but as we’ve talked about in the past, we see these things are kind of singles and doubles and not home runs. On the adhesives side, I would say a similar kind of thing in that we’ve seen good sales on the Freedom side. We’ve seen much better sales on the Liberty side, which is more of a drop-in replacement with the same sort of melt-on-demand characteristics and automated feed systems, and that’s been strong for us. A significant portion of those--combinations of those two have been a significant portion of our new orders, probably approaching 50% of our new orders for those type of technologies.

Just to comment there, Chris, a way to think about that particularly with adhesives, is often that’s a reason for a customer to upgrade existing lines.

Right, okay. Then overall, your trends have been so broad-based here, I think with Nordson there’s always some competing concepts of your broad portfolio execution and then some of the streakiness that characterizes some of your businesses. So as we think about the broadening impact, how would you take the recent success in understanding the flow-through into your base run rates to ponder fiscal ’17 and ’18 in an absolute sense, relative to what you’re seeing now?

Okay, let me take a stab at that. I mean, if you go back to the macro here for a second, we still look at the underlying macro for this year of global GDP growth to be in the low 2%, so we’re clearly outperforming the global GDP and that’s really a function of our overall business model and the importance of technology and support and service to that. So if we come in at our expectation for the fourth quarter, we’ll be about 5% organic growth through the year, which is pretty stellar relative to, I think, most other people and above that sort of 2% GDP growth. You’re right that we do have lumpiness in some cycles in some of the business. I think the benefit of our portfolio is when one is a little softer, like the coatings business has been this year, albeit against some tough comps, the other parts of the business have been able to pick that up so net-net we’re ahead. It’s not obvious to us at this point, and it’s early to proscribe, that the global economy is going to look at lot different next year. I don’t know beyond next year, so we’re planning for low growth and we’re going to continue to drive our initiatives that try and go beyond whatever the market is going to give us. So that’s more new products, it’s driving the tiering opportunities across a lot of our businesses, it’s new applications that we’re working on in effect to create our own demand. So that’s the focus of our business, is to outperform the global economy largely through our own initiatives that create demand, and that’s sort of been our success to date and that’s what we’re looking for going forward.

Okay, thanks. Last one here, in your comments, you talked about growth reflecting leveraging your technology, service, and global footprint. I’m interested in the service component of that comment. Are you seeing opportunities for new strategies and opportunities on the service side broadly in your bigger picture business model?

I would say we’re not seeing as much change in the service side, other than to say that’s a critical element of our business. When you look at our customers, the most important thing for most all of our customers is to continue to be up and running. We certainly have the most robust products out there, which helps, but they do go down from time to time and then it’s important to have the robust supply chain to provide the parts, but also the engineers and technicians that can go onsite and help them get up and running as quickly as possible. We do offer various forms of preventative maintenance and other types of programs, but at the end of the day, it’s really about helping our customers maximize their uptime and optimize their performance.

Sounds good, thanks.

Our next question comes from Matthew Trusz with Gabelli.

Good morning, gentlemen. Thank you for taking my question. I guess first, given how strong you guys have been doing on the profitability front throughout 2016, it looks like at your current fourth quarter guidance, you’ll be achieving your 200 basis point margin expansion about a year early. So as we look longer term over the next three or five years, how much more opportunity do you think you have to drive profitability higher, and what do you think the primary sources will be?

Yes, so maybe just a couple of comments. Obviously we do have strong incremental margins, so with volume growth that we’re seeing this year and some mix improvement, particularly I’d say in the advanced tech area or dispense, relative to some of the other applications, we’re getting the benefit that’s influencing that overall, what you’ve calculated, 200 basis points improvement. Our view is based on our sort of constant volume goal to be at 200 basis points by the end of ’17. We’re probably about two-thirds of the way there, assuming we come in in the fourth quarter at expectations. So we’re not 100% of the way there. There’s certainly some more opportunity we need to deliver next year, and we have actions and plans in place to do that, but we’re also getting the benefit of volume leverage. So our commitment was to get to that 200 basis points without the benefit of volume. What we’re seeing this year obviously is improvement on that path but also the benefit of volume and some mix as well. Longer term, we will continue to identify opportunities to improve and we’ve got strong continuous improvement activity, but we haven’t put any other sort of goals out there beyond ’17 from a non-volume related margin standpoint at this point.

All right, great. Thanks for the color. Then I guess if we just sort of shift towards M&A, it’s been a while since your last deal. Net leverage continues to come down. How active is your pipeline? Are there any particular areas of opportunity you’re seeing, and how good are you feeling over the next couple quarters?

Yes, so you’re correct - we have consciously worked this year to reduce our leverage to create some opportunity or capability to do some additional acquisitions. I think as we’ve talked in the past, the most fertile areas are in the medical device space, and we’ve got a pretty solid pipeline there. I’d say in the cold material area, there are a number of interesting opportunities, timing is not clear. On the plastic side, we pretty much have what we need for the moment, and we continue to look for opportunities on the test and inspection side in the advanced technology area, but we’ve added some nice complements over the next year through acquisition and through marketing arrangements, so we feel pretty good. I would say there are a number of things that we looked at this year that we were actively pursuing, but we’ve walked away when pricing got to a point that it didn’t make sense for us.

Great, thank you.

Our next question comes from Jason Rodgers with Great Lakes Review.

Good morning. Wondered if there was any benefit from lower raw material costs in the quarter, and if you’re seeing any material change in cost so far in the fourth quarter.

No, nothing that would be material in the grand scheme of things, either in the quarter or looking forward.

What’s the expectation for the tax rate for the fourth quarter, and any kind of early indications for next fiscal year? Thank you.

Yes, we’ve suggested a 30% rate for the fourth quarter.

The next question comes from Matt Summerville with Alembic Global.

Thanks. Just a quick kind of follow-up on the M&A side of things. You mentioned some multiples sort of getting out of control. Can you quantify that? I mean, are you talking about high single to low double digit multiples that have now moved into the low to mid-teens kind of range? And then I guess you were active, I believe, in fiscal Q1 buying back stock. I don’t believe you did any in fiscal Q2, and I don’t recall you mentioning anything in the prepared remarks for fiscal Q3, so what’s sort of the outlook there given your stock’s been up very nicely this year? What’s the outlook there and the prioritization as you’re looking at things? I guess at the end of the day, are you saving up for a bigger deal at this point?

So Matt, just a couple of comments. If you go back probably a couple years and compare kind of where we are today from an M&A standpoint versus a couple years, I’d say in general properties are a turn higher maybe in multiples, maybe a turn and a half, and it’s really a function of very low interest rates and, quite frankly, strategics with a lot of cash on the sideline, so number one. Number two in terms of our overall priorities from a capital deployment, they still remain the same, which is number one, support organic growth; number two, continue our dividend increase approach, which we just recently announced and we’re on a good payout range there; number three, offset dilution from our comp programs, which is pretty modest; number four, look for the appropriate M&A vehicles; and then five would be opportunistically look at additional share repurchase. So in terms of the M&A activity, we do have an active pipeline. It’s probably most active in the medical space, as I mentioned, and we’re looking for opportunities there but we’ve said consciously this year, given the acquisitions we made and the aggressive nature of our share buyback opportunistically last year, that we wanted to work down our balance sheet, so we did modest share repurchase in the first fiscal quarter, we didn’t do any in Q2, we didn’t do any in Q3. The first quarter offsets the dilution piece and some for our comp programs, so the priority is still to work down the balance sheet to give us capacity to make some additional acquisitions.

Got it, thanks.

Our next question comes from Walter Liptak from Seaport Global.

Hi guys. Just wanted to follow up on the fourth quarter bonus comp. Considering the strong third quarter and then what looks to be a good fourth quarter, have you been accruing at the same level throughout the year, or is there going to be a step-up in the fourth?

Walt, this is Greg. We’ve been accruing throughout the year based upon our performance.

Okay, great. Thank you.

Kevin, this is Jim. Maybe we have time for one more question or so, if anybody else is on the line.

Sir, that was the last question in the queue.

Okay, well thank you all for dialing into our call, and I’m available for follow-ups throughout today and the rest of the week. Again, thanks for your interest in Nordson.

Ladies and gentlemen, this does conclude today’s presentation. You may now disconnect and have a wonderful day.