Nordson Corporation (NDSN) Q2 2018 Earnings Report, Transcript and Summary

Good day ladies and gentlemen, and welcome to Nordson Corporation Webcast for Second Quarter Fiscal Year 2018. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions for how to participate will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today’s conference, Ms. Lara Mahoney, Vice President of Investor Relations and Communications. Ma’am, you may begin.

Thank you, Jimmy. Good morning. We are pleased to welcome you to Nordson Corporation’s conference call today, Tuesday, May 22, 2018, to report financial results for the second quarter fiscal year 2018 as well as our third quarter outlook for fiscal year 2018. My name is Lara Mahoney, Vice President of Investor Relations and Communications for Nordson. I’m here with Mike Hilton, our President and CEO; and Greg Thaxton, Executive Vice President and CFO. Our conference 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 June 5, 2018, which can be accessed by dialing 404-537-3406. You will need to reference ID number 3797796. 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 filings with the Securities and Exchange Commission that could cause actual results to differ. After our remarks on the quarter, we will be happy to take your questions. With that, I’ll turn the call over to Mike.

Thank you, Lara, and good morning, everyone. Thank you for joining Nordson’s 2018 second quarter conference call. We delivered a record second quarter on many metrics, and I’d like to commend our dedicated global team for their commitment and focus. The resilient performance of our base business coupled with the strategic fit of our recent acquisitions led to improvement in operating profit, diluted earnings per share, and EBITDA as compared to the second quarter a year ago. Our sustained focus on continuous improvement initiatives, product tiering, and providing the best technology solutions, drove solid bottom line performance. I’ll now provide some highlights on our financial results and Greg will offer more detailed commentary in a few moments. Looking at the second quarter, sales, operating profit, diluted earnings per share and EBITDA were all second quarter records. These are impressive results against very challenging comparison, where each segment delivered strong organic growth last year and total Company organic sales growth was 9% in the prior year’s second quarter. Each segment delivered strong operating margin in the current quarter, where excluding one-time charges and the incremental $4 million of intangible asset amortization expense in the current year’s second quarter, total Company adjusted operating margin was 24% and adjusted EBITDA margin improved over 100 basis points as compared to the same period a year ago, reaching 29% in the current quarter, highlighting our solid second quarter performance. Looking ahead to the third quarter, we face very challenging comparisons to the prior year’s third quarter, where each segment delivered strong organic growth and the total Company organic sales growth was 11%. I’ll speak more about our outlook in a few moments, but I’ll first turn the call over to Greg, to provide a more detailed perspective on the second quarter and our third quarter guidance. Greg?

Thank you, Mike, and good morning to everyone. I’ll first provide some comments on our second quarter results, before moving on to our outlook for the third quarter of fiscal 2018. Second quarter sales increased 12% over the prior year’s second quarter. Inclusive of a decrease of approximately 1% in organic volume, approximately 7% increase related to the first year effect of acquisitions and approximately 5% increase related to the favorable effects of currency translation compared to the prior year’s second quarter. Organic sales volume was in line with our expectations, coming in at the midpoint of our guidance range as we expected moderation against last year’s results, particularly in the Advanced Technology Systems segment where prior year organic growth was 18%. Within the Adhesive Dispensing segment, organic volume was down about 2% against 5% organic growth in last year’s second quarter. Our end market demand remains relatively strong and we expect this segment to grow organically in the second half of the year. Within the Advanced Technology Systems segment, organic volume was down 1% as compared to the prior year’s second quarter organic growth of 18%. Although we did see growth in certain product lines, expected moderation in the quarter impacted performance. Prior year growth included very strong performance in both electronic systems and fluid management end markets. This segment’s acquisitive growth in the current quarter includes a partial month of 2017 InterSelect GmbH acquisition, two months of the 2017 acquisition of Vention and the 2018 acquisition of Sonoscan. Within the Industrial Coating segment, powder and container product lines drove this quarter’s organic sales growth of 4%. Moving down the income statement, gross margin for the total Company was 55% in the quarter. Operating profit improved 22% to $127 million as compared to the prior year’s second quarter, which reported operating margin of 23% in the current quarter. As Mike mentioned, the quarter’s results include approximately $4 million of incremental and tangible asset amortization expense as compared to the prior year’s second quarter. Excluding a $1 million charge in the quarter for restructuring, $2 million charge were step-up in value of acquired inventory and the $4 million of incremental amortization expense. Adjusted operating margin was 24% in the current quarter. As noted in the February earnings call, we did incur incremental costs associated with the adhesive facility’s consolidation effort that impacted total Company operating margin by approximately 50 basis points or $3 million. We’re estimating the incremental costs for this initiative will be about $2 million in the third quarter and $1 million in the fourth quarter. On a segment basis, Adhesive Dispensing delivered strong operating margin of 29% in the second quarter or 31% to exclude onetime restructuring charges of approximately $1 million and the $3 million incremental costs related to the facility consolidation efforts. Within the Advanced Technology Systems segment, reported operating margin was 23% in the second quarter or 26% when excluding $4 million of incremental intangible asset amortization expense and the $2 million of short-term purchase accounting charges related to the step-up in value of Sonoscan acquired inventory. The Industrial Coating segment delivered operating margin of 18% in the second quarter, which is up 70 basis points from the prior year due to volume leverage. On a total Company basis, net income for the quarter was $91 million and GAAP diluted earnings were $1.55 per share, a 40% increase over the prior year GAAP diluted earnings per share. The $4 million of incremental intangible asset amortization charges reduced earnings per share by $0.05 per diluted share, the $2 million for short-term purchase accounting related to step-up in value of acquired inventory and the $1 million of non-recurring restructuring charges reduced earnings per share by $0.04 per diluted share. Additionally, a tax benefit of $2 million or $0.04 per diluted share was recognized in the quarter for excess tax benefits related to share-based payment transactions which are credited to income tax expense. A reconciliation of GAAP earnings per share to non-GAAP adjusted earnings per share is included in the financial exhibits of our press release. We delivered strong second quarter EBITDA of a $157 million or $160 million on an adjusted basis to exclude the step-up in value of acquired inventory. Adjusted EBITDA margin improved approximately a 100 basis points over the prior year’s second quarter to 29% of sales. From a balance sheet perspective, net debt to trailing 12 months EBITDA was two times at the end of the second quarter. Our press release includes financial exhibits reconciling net income to free cash flow before dividends and adjusted free cash flow before dividends, as well as EBITDA and adjusted EBITDA. I’ll now turn to the outlook for the third quarter of fiscal 2018. As in the recently completed second quarter, we are facing very difficult comparisons in our third quarter, where prior year third quarter organic growth was 11%, driven by strong organic growth in all three segments, including 18% organic growth in the Advanced Technology Systems segment. We are forecasting sales be in the range of up 1% to down 3% as compared to the third quarter a year ago. This outlook includes organic volume to be in the range of down 2% to down 6%, 1% growth from the first year effect of acquisitions and a positive currency effect of 2% based on the current exchange rate environment as compared to the prior year. We are forecasting solid organic growth in most all product lines in each segment with softness in the dispense product lines, serving electronic and automotive end markets. At the midpoint of this outlook, we expect third quarter gross margin to be about 55% and operating margin to be approximately 23%. We’re estimating third quarter interest expense of about $12 million and depreciation and amortization expense of about $28 million, resulting in third quarter forecasted GAAP diluted earnings in the range of $1.47 to $1.63 per diluted share. We expect EBITDA to be in the range of $155 million to a $168 million. Consistent with our comments in the February earnings call, our effective tax rate for the third quarter and full-year, based on current tax law and our jurisdictional mix of income, is estimated to be approximately 25%. And with that, I’ll turn the call back over to you, Mike.

Thank you, Greg. Again, I’d like to express my appreciation to our outstanding global team for helping deliver record second quarter results. Organic growth in 2017 was exceptionally strong, which means we are up against challenging comparisons during 2018, particularly in the Advanced Technology segment. We do however expect to generate total Company organic sales growth in the low single digits on a full-year basis for fiscal 2018. Our team is committed to leveraging the tools within the Nordson business system to drive operating efficiencies and bottom line results, while delivering the best technology solutions and customer service experience. Our capital deployment objectives remain consistent and we continue to target high-quality opportunities in the marketplace that will help drive our strategic vision for the long-term growth. With that, we will pause and take your questions.

Thank you. [Operator Instructions] Our first question comes from Allison Poliniak with Wells Fargo. Your line is now open.

Hi, guys. Good morning.

Good morning, Al.

Could you talk to any change that you might be experiencing in terms of customer tone or conversations? I mean, are you seeing anything like that or is it pretty consistent with your expectations?

I would say, the second quarter was certainly pretty consistent with our expectations. And I’d say, when we look at current business, we’re not seeing any particular change in tone from our customers.

Great. And then, on Adhesive Dispensing, I think, Mike, you said, organic growth in the back half of the year, and I think I’m just trying Greg to kind to back into your comments. Should we assume organic growth in Adhesive Dispensing in Q3? And I guess, you just have visibility into that side, any color there?

Yes. We expect to see organic growth in Adhesive segment in Q3. I think as we’ve talked about in the past, the headwinds were really up against or around the mobile electronics dispense piece and some platform work and the automobile segment. Beyond that, the rest of the business was solid and we expect, as we mentioned, to see solid growth in those businesses -- product lines.

Thank you. And our next question comes from Jeff Hammond with KeyBanc Capital. Your line is now open.

Hi. Good morning, guys.

Good morning, Jeff.

So, as I look, the backlog grew nicely and as I think, at record levels, up 10% core. And it seems like historically, there is pretty good correlation between that next quarter out. So, I’m just trying to kind of reconcile the backlog growth versus the weaker 3Q guide, and maybe how that plays out into 4Q? I don’t know if there is some timing in the orders. Thanks.

Yes, Jeff. So, if you look at the current backlog, we do have some larger projects, some of which will get delivered in the fourth quarter. I’d say at this point, order rates are kind of flattish to last year. The biggest challenge again is in the electronic dispense piece which we saw dramatic increase in orders last Q3. And so, as we look at this year, the guidance we’re putting out there reflects view that we’re not going to be able to operate in that particular product line at the same level that we saw last year. And that’s really what’s covering our expectations for the third quarter.

Okay. And then, the automotive platform, is that a function of tough comps or are you seeing some slowing in automotive there?

I’d say, from an operating rate standpoint which affects some of our parts business and so forth, that continues to be solid. But the platform piece is really model changeover related. And we’ve seen that slow down if you look at the overall global statistics from the automakers. Last year was a little softer than year before, and this year is little softer yet. So, platform work generates larger business, and that’s the comp that we’re up against in that particular business. If you look at the other parts of the Industrial Coating business, we’re seeing some nice growth there.

Okay. And then, just finally, can you talk about how you think the medical business grows in the second half of the year kind of relative to normal growth rates? Thanks.

Yes. We expect to see solid growth in the medical business in the second half of the year, sort of high single digit kind of growth in that business, really along the lines of what we factored. All the different parts of that business are performing well and we’re very pleased with what we see in that business.

Thank you. And our next question comes from Matt Summerville from D.A. Davidson. Your line is open.

Thanks. Couple of questions. First, just with respect to Adhesive Dispensing, the non-restructuring hits you are taking, I think you said $3 million Q2 million, than a step down to $2 million then $1 million. And I don’t have the number in front me, but as I remember, a $4 million to $5 million number in Q1 of this year. So, let’s just call it $10 million in fiscal 2018. Does that all go away in fiscal 2019? And I guess, on top of removing those inefficiencies, what do you gain from an efficiency standpoint? Can you help bridge that?

Yes. So, let me comment. If you recall on that business, we’re going from three facilities to one in the U.S. in our core components part of that business. Right now, we have four facilities operating as we do the transition. That will continue to throughout the year. And in Europe, we’re going from two to one. So, those are really the facts that we’re operating more facilities than we expect in the long run of contributing to those sort of duplicate parts. And as part of that we’ve been investing in new technology to improve efficiency. So, the duplicate costs should go away in 2018, which should be finished by the end of I’d say, the calendar year, here this year. And then, we would expect to see over time efficiencies. Obviously, that’s a function of volume loading as well, but we expect to see improved efficiencies over time in that business.

And sticking just with Adhesives, you typically provide a little bit more granularity in terms of business trends by key product categories. Can you talk about more specifics around what you are seeing plastics processing versus non-woven versus rigid, product assembly? Can you give a little more detail there?

Yes. I’d say, in the various product lines on the plastic side, we’re seeing solid order intake and expectations of growth for the remainder of the year. I’d say, the encouraging sign is that the OEMs are ordering a variety of different end markets that we support. And then, in our core adhesives business, I’d say, we’re seeing solid growth in our packaging area and some improvements in our product assembly and non-wovens we expect to be up for the year but that can vary quarter-to-quarter just based on projects.

Thank you. And our next question comes from Charlie Brady with SunTrust. Your line is open.

Thanks. Good morning, guys.

Good morning, Charlie.

Just a quick one on raw material prices costs, kind of any impact you are seeing on that or maybe might be seeing down the road here rest of the year?

Yes. Just a couple of comments there, Charlie. I’d say, the area where we are seeing some pushes in the metal side, we have some protection with our agreements and a strong sourcing strategy there. So, I’d say, it’s not really translated into any significant effect at this point. And we think we’ll be able to manage that through our sourcing activities as well as any pricing we can pass on there. So, I don’t see that as a big issue. I’d say, the other part of our cost deck is around labor, and we’re seeing increases there. But that’s a focus of our continuous improvement activity as to help offset those. So nothing I’d say out of the ordinary at the moment.

Can you just give break down of the aftermarket piece of it, the parts component of it? Generally, it runs pretty high for you guys. I’m wondering any unusual there. Can you give us some granularity on that?

It’s about half and half at this point. Over time, as things like the medical business grow with the single use components that probably will stay or grow a little bit above that, but right it’s about half and half.

Right. And just one more for me. So, you guys particularly in life sciences having a lot of new product development going out, actually creating markets you weren’t in a few years ago. Can you talk about kind of the growth you’re seeing just on a new product development standpoint and kind of where you see that going forward, does that accelerate going forward?

Yes. So, we have had a lot of success with new product development. And quite frankly, that’s a critical focus for us in the long run. So, across all of our product lines, we’re introducing new products, and I’d say we’re getting good traction on those. While this has been a more challenging year from the expense side in the electronics business, we’ve seen nice growth in our inspection business as a result of strong new products. We’re seeing nice growth in our tiering strategy continuing in our adhesives business, including probably 100 or so new customers on a lower tier that we haven’t served before. And we’re seeing some new product introductions in our coatings business, and really taking advantage of some new applications, for example electric battery which should continue to grow in the long run. It’s a nice contributor right now. It’s not going to be huge, but it’s a nice contributor and related to products that fit specifically certain applications across the electric battery. So, I’d say, continues to be the lifeblood of the business. We’re continuing to focus on driving new products. And quite frankly in the long run that’s why we’re going to grow at a multiple something like 2 times global GDP, because we can create new products and get into new markets and new applications. That combination is what helps us grow above GDP in the long run.

Thank you. And our next question comes from Christopher Glynn with Oppenheimer. Your line is now open.

Thanks. Good morning. So, the ADS margins, very strong pro forma, maybe a bigger tick-up seasonally than normal. Was there kind of favorable mix or FX impact as you move from to the first quarter to second quarter?

Yes. I would say, certainly the mix of products across the various product lines was favorable. And we did get a benefit from the currency as well.

Okay. And in terms of the non-restructuring bucket hits that I think we’re looking at about $10 million for the year. Is that a better thought of as the pro forma payback than incidental inefficiencies?

Well, certainly year-on-year that cost should go away. So, there should be a step up. But over time, we should see continued improvement in margin in those product lines as we’ve consolidated, not only consolidated but updated the equipment through automation. So, it’ll be a combination both, as it plays out over time.

Okay, great. And just curious, your relative view of capital deployment for the balance of the year. You toggle between bolt-ons, debt reduction and share repurchase views.

I’d say, number one, we do everything we can to continue to support our organic growth. So, that’s not going to change and our dividend approach is not going to change. From an M&A standpoint, we are focused in the short-term with creating more capacity for potential opportunities down the road. So, we have been focused on reducing the debt-to-EBITDA levels and we’ll continue to do that in the near term. I think, longer term, it really depends on timing and how the acquisition pipeline plays out. We have got some good opportunities. As you know, we can never fully predict when they are going to come to fruition. But right now, our near-term focus is on reducing the debt level.

Thank you. And our next question comes from Matthew Trusz with Gabelli & Company. Your line is open.

Good morning. Thank you for taking my questions.

Good morning.

Have these ADS facility consolidation efforts impacted that segment’s growth anyway?

I’d say, not in the near-term. I think, the challenge has been for us as we have to operate more facilities than we like in a transition because it’s a largely an engineer to order business. And so, we can’t really build inventory to accelerate that. So, we’ve been moving products equipment in a stepwise fashion as we load up the new facility. So, that’s really translated into the more operating costs than we would have in some other businesses where we can build inventory.

Matt, this is Greg. What I’d suggest is, with the investment we’ve made in technology, we’re actually trying to move it in the more positive direction, in more efficient manufacturing environment, better first paste quality, less touch, so actually providing capacity.

Okay, thank you. And just following up on your M&A comp and that you’re building capacity. Is there a discrete reason why that you are either seeing larger deals that contribute to build out a certain niche that require bigger investment?

Well, we made four large acquisitions last year and a couple of smaller ones this year. And so, the focus really has been moving from a 3 plus level down to 2 or so. But we do have a solid pipeline. And we want to make sure that we’re not constrained in any way should the opportunities come forward. So in the near-term that’s not a forever comment; that’s in the near term that still our focus.

Thank you. And the next question comes from David Stratton with Great Lakes Review. Your line is now open.

Good morning. Thank you for taking the questions.

Good morning.

What you’re seeing on the foreign basis, are you starting to see or hear anything from your customers regarding the impact of tariffs or just if you can paint some color around what might be going on behind the scenes there and what you are hearing that’d be helpful.

Yes. I would say, obviously certain customers in certain countries are well aware of the dialogue that’s going back and forth. I would say, they are being vigilant, but I don’t think it’s having an impact on any decisions they are making in the near term. So, we are not necessarily seeing any project delays or anything like that as a result of the discussions. Now, we’re pretty balanced around the globe in terms of our manufacturing footprint or ability to supply. So, that’ll be helpful for us going forward. But, in the near term, we are not hearing customers putting off projects as a result of concerns in that regard.

And last year, I remember, I think, there was pretty strong mobile phone growth, especially in China regarding automation and once again regarding -- just what’s going on politically and then also in the cycle? Is that growth still there that lags?

So, last year was a very strong year for the mobile handset market and in particular, there was a lot of new phones introduced and a fair bit of innovation. This year what we’re seeing is a little bit more incremental approach a little bit less innovation, and that’s having an impact on that. I don’t think there is any issues related to politics or anything like that. It’s really just the function of demand. And overall growth in the smartphone area has moderated a little bit. So, a combination of not a lot a new and some moderation in growth is making a little bit more challenging year for us, particularly on the expense side for the mobile handset market. Nothing politically related there.

And then, one final for me. Normally, I think you give some adjusted EPS outlook, and it doesn’t look like you’ve done that in this quarter’s press release. So, I was wondering if there is a reason or if you could comment on what you expect the adjusted results to be for the outlook.

Yes. This is Greg. No, we didn’t provide any guidance for expected onetime cost in the quarter. We did comment on the duplicate cost which is going to be part of the results, but did not guide to any onetime type of charges in the quarter. If we have them, I wouldn’t expect them to be significant.

Thank you. And our next question comes from Chris Dankert with Longbow Research. Your line is now open.

Good morning, guys. Thanks for taking my questions.

Good morning.

I guess, just kind of building off last question a bit here. Any comments -- I mean, you mentioned that in line semi test was growing nicely. I guess any commentary on investments in China’s semiconductor? How that growth is benefitting the technology segment right now?

Well, I’d say, the investment has largely -- in China has largely been in the backend packaging side, which is helpful for us. As far as the semiconductor side, there is certainly a lot of government support for additional investment. But that’s not necessarily leading the way as it relates to opportunities for us. The opportunities for us in semi side are in very advanced dispense and very advanced inspections. I’d say in the inspection side, we’ve seen pretty solid growth. I’d say, on the dispense side, some of the newer technology, we have additional interest in that, but hasn’t necessarily come to fruition yet in the last quarter or so.

Got you. And you said, the organic growth from medical, still looking at high single digit range. I guess, you’ve had Vention convention on board for a year now. Just any commentary on -- did that fully hit target? Is it much better than you expected; just some thoughts on cross-selling, anything on Vention specifically?

Yes. So, I’d say, Vention is meeting our expectations. I’d say, on the cross-selling side, we’re seeing some uplift there. What we did is we organized our overall medical business into a one Nordson platform and really integrated the other components of our business into the Vention structure where there’s a design and development piece, a components -- proprietary components piece and a very focused finished device piece that includes the prior too. And we like that structure going forward. And we think that gets us closest to the critical customers that drive growth in that business. So, I would say, we feel good about the direction that that’s heading. We feel good about the integration, we feel good about one -- the one Nordson medical approach now with the capability that we have.

Thank you. And our next question comes from Walter Liptak with Seaport Global. Your line is now open.

Hi. Thanks. I’ve got just one follow-up on the guidance and then one on the outlook. When you were talking about the GAAP, non-GAAP, EPS in one of the prior questions, so just want to clarify, Greg that in your third quarter you’re not going to have any inventory purchase accounting adjustments or other acquisition costs or severance, anything to adjust the non-GAAP, so the GAAP, non-GAAP should be the same?

Correct. We will not have any more inventory step-up for those acquisition related. If there would be any other one-time like restructuring, I wouldn’t expect it to be material, the timing of when those kind of activities hit is unknown. So, there is -- there are no charges in our guidance for EPS related to restructuring. But, again, we’re past the acquisition related charges. We’ve also anniversaried the Vention acquisition. So, we don’t have the incremental intangible asset amortization expense over the prior year, going forward. But, as I mentioned, we do have the duplicate cost associated with the facility consolidation in the numbers and that charges in the EPS guidance.

Okay. And that was $2 million?

Right.

Okay. And then, when you were -- on the conference call last quarter, you guys were talking about kind of a project funnel in electronics that was pretty full that you said I’m pretty optimistic about. Did something happen during the quarter to make you less optimistic? I think about you talking about your order trends, I think, Mike you mentioned that orders were flat. How are you feeling about electronics in market and the projects funnel going forward?

Yes. I’d say, there are still some project efforts ongoing. I would say, it feels clearly like a talk here though where there’s less innovation going in. And in the third quarter, particularly last year, we had a huge step-up on the dispense side. And I think, what we’re saying is we don’t see that kind of step up. And that’s really challenge in the third quarter, and quite frankly, the biggest challenge for the whole year. Now, if you look at some of the say the inspection side, we’ve got a more diverse end markets. And we’re seeing a lot of good growth in that part of the business, including areas like auto electronics, which have been fairly strong for us. So, it really comes down to a very significant step-up last year in the third quarter that we’re trying to offset with all the other businesses and that’s a challenge in the quarter. And quite frankly, it’s pressure on the whole year.

Okay. So, maybe the way to look at it is that we’re kind of in this flat environment where there with Advanced Tech on the tough comps, so in decline. And then, coatings and adhesives sound like they’re experiencing some kind of low single digit growth.

Yes. I think, if you put it in the perspective for the whole year, we said we expected organically to see sort of that low single digit growth. I think, if you look at the two areas that we called out, sort of spend side for mobile electronics and the auto platform work outside of that and everything else has grown mid single digit plus. So, it’s really the drag associated with those two as a function and particularly largely the electronics dispense piece in a year where there is less customer innovations, so less opportunity for us. So, the other businesses, we expect to have a very solid year.

Thank you. And our final question comes from Matt Summerville with D.A. Davidson. Your line is now open.

A quick follow-up maybe to your last comment, Mike; last year in fiscal ‘17, rough cuts. What percent of revenue would have been driven by the mobile expense and auto platform businesses you mentioned?

Yes. So, I think if you look at just the Advanced Tech segment, the mobile piece could have been close to on the expense side, it’s probably in that sort of 20% range or so. And the auto piece was probably about 20% of the coatings business. So, both of those will see decline this year that will be sort of double digit decline.

And then, just with respect to whether you look sequentially the incremental margin, if you will, on the higher revenue that you’re forecasting, look pretty minimal on a year-over-year basis, decremental on your revenue outlook, looks gigantic. So, just help me understand again the margin implications that maybe this mobile piece is having in ATS. When I look back at your several fiscal Q3s, you have been posting 30% plus margin. What’s implied here today is obviously make the math work, your EPS guidance is considerably less than that? Can you just close the loop on that?

Matt, this is Greg. I guess, what I’d suggest is for the base business, so we’ve got the Sonoscan acquisition that’s incremental that is not going to carry the kind of margins the base Nordson business does. It’s got some non-cash charges for purchase accounting that burden those results. If you then take the base business and look at kind of model the just like we have the incremental on the upside, we’re going to have that same kind of decremental on the down side, impacting our margins. So, I don’t know that I’d say it’s outsized from what we typically incurred historically.

Thank you. And I’m showing no further questions in the queue at this time. I’d like to turn the call back over to Mike Hilton, CEO for any closing remarks.

Thank you. And thank you all for participating in today’s call. The bottom line, I think our core business is strong. We’ll continue to grow. And we have some strategic acquisitions that we’ve made that we’re pleased with. And we have some opportunities going forward to increase both our organic growth and our acquisition growth consistent with sort of our long-term objectives. So, again, thank you to our global team for staying focused in delivering this quarter and into the future. Thank you.

Ladies and gentlemen, thank you for participating in today’s conference. This concludes the program. You may all disconnect. Everyone, have a great day.