Nordson Corporation (NDSN) Q1 2019 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Nordson Corporation Webcast for First Quarter Fiscal Year 2019 Conference Call. [Operator Instructions]. As a reminder, this call will be recorded. I would now like to introduce your host for today's conference, Lara Mahoney. Please go ahead.

Thank you. Good morning. This is Lara Mahoney, Vice President of Corporate Communications and Investor Relations. I'm here with Mike Hilton, our President and CEO; and Greg Thaxton, Executive Vice President and CFO. We welcome you to our conference call today, Thursday, February 21, 2019, to report Nordson's fiscal year 2019 first quarter results. Our 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 the conference call available until March 7, 2019, which can be accessed by dialing 404-537-3406. You will need to reference ID number 707-8765. During this conference call, forward-looking statements may be made regarding our future performance 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. After our remarks on the quarter, we will be happy to take your questions. With that, I'll turn the call over to Mike.

Good morning, everyone. Thank you for joining Nordson's 2019 Fiscal First Quarter Conference Call. We entered this year knowing we were facing a challenging comparison against 2018's outstanding first quarter performance, where we achieved organic sales growth of 19%. 2019's first quarter performance was in line with our expectations for the quarter and consistent with the typical seasonal pattern of sequential quarterly sales growth. Spending to support our business, selling and administrative expenses did not vary significantly from quarter-to-quarter. Therefore, segment operating margins in the first quarter were impacted, as expected, by the lower sales volume. We expect sales each quarter to improve in line with our historic seasonality, allowing us to achieve our previously announced fiscal 2019 sales growth and margin guidance. During the quarter, we delivered on various continuous improvement initiatives, including further integration of operations into our North American shared service center and our adhesive facility consolidation within Europe and the U.S. In addition, during the quarter, we continued to execute our capital allocation strategy by investing $102 million for the repurchase of approximately 856,000 shares, and we distributed $20 million in dividends. I'll speak more about our fiscal '19 annual guidance in a few moments. But first, I'll turn the call over to Greg to provide more detailed perspective on the quarter.

Thank you, Mike, and good morning to everyone. First quarter sales decreased 10% compared to the prior year's first quarter. This change in sales included a decrease of 9% organic volume, growth related to the first year effect of acquisitions of 1% and a decrease of 2% related to the unfavorable effects of currency translation as compared to the prior year's first quarter. First quarter's acquisitive growth includes the fiscal 2018 acquisition of Clada Medical Devices and two months of the fiscal 2018 acquisition of Sonoscan. As Mike noted, our first quarter performance was largely in line with our expectations as we were up against an exceptional prior year first quarter. Within the Adhesive Dispensing Systems segment, sales decreased approximately 4% compared to the prior year's first quarter, inclusive of a decrease in organic volume of approximately 2% and a decrease of approximately 3% related to the unfavorable effects of currency translation as compared to the prior year. We did deliver organic growth in most product lines. However, this segment's performance was offset by nonwoven product line sales, where system sales tend to be larger dollar and order patterns can be sporadic depending upon new OEM lines or customer line upgrades. As noted, we were up against very challenging comparisons within the Advanced Technology Systems segment, where prior year first quarter organic sales volume increased 50%. In the current year, first quarter sales decreased approximately 14% compared to the prior year's first quarter, inclusive of a decrease in organic volume of approximately 15%, an increase of approximately 2% related to the first year effect of acquisitions, and a decrease of approximately 1% related to the unfavorable effects of currency translation as compared to the prior year. Double-digit growth within the fluid management product lines and solid growth within test and inspection product lines was offset largely by the difficult comparison for the dispensing product lines associated with electronic end markets. Industrial Coating Systems segment sales decreased approximately 10% compared to the prior year's first quarter, inclusive of a decrease in organic volume of approximately 9% and a decrease of approximately 2% related to the unfavorable effects of currency translation as compared to the prior year. Softer demand for cold material product lines associated with automotive end markets had the largest impact as compared to the prior year. And like other larger-dollar system sales, demand can be lumpy for product lines within this segment. Moving down the income statement, gross margin for the total company was 54% in the quarter. Operating profit was $84 million, with reported operating margin of 17%. Regarding the adhesive facility consolidation initiative that we have talked about in previous quarters, we incurred approximately $1 million of duplicate costs during the quarter. We do not expect duplicate costs to be material for the remainder of the fiscal year. In addition, we incurred restructuring charges of approximately $1.5 million during the quarter, with most of this cost related to the adhesive facility consolidation initiative. As Mike noted earlier, operating margin for each of the segments was negatively impacted by lower sales volume in the quarter. We expect this year's performance to play out in line with historical seasonal patterns, where incremental sales generate significant margin leverage. On a total company basis, net income for the quarter was $49 million, and GAAP diluted earnings per share were $0.83, inclusive of approximately $0.09 per share of charges related to onetime items. These onetime items include nonrecurring restructuring charges of $0.02 per share. Additionally, a net discrete tax charge of approximately $4 million or $0.07 per diluted share was recognized in the quarter, primarily related to the U.S. federal income tax reform legislation. We delivered first quarter EBITDA of $108 million or 22% of sales, inclusive of the $1.5 million of restructuring charges and approximately $1 million of duplicate costs associated with the adhesive facility consolidation. Free cash flow before dividends during the quarter was $43 million or 89% of net income. This cash conversion ratio is typical for our first 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. From a balance sheet perspective, net debt to EBITDA was approximately 2.3x trailing 12 months' EBITDA at the end of the first quarter, where we maintained adequate capacity for strategic priorities. I'll now turn the call back over to Mike for a few closing comments.

Thank you, Greg. As I mentioned earlier, our first quarter was in line with our expectations, where sales are typically the softest. Our spending is generally consistent from quarter-to-quarter, but we typically see an increase in the first quarter due to compensation increases. We expect to increase sales volumes sequentially as the year progresses, and we remain committed to our annual organic sales guidance -- growth guidance of 3% to 5% for fiscal '19. We've forecasted unfavorable currency effects of 2%. While we continue to monitor macroeconomic challenges and the ongoing trade discussions, our customer conversations are encouraging. The strength of our diverse end markets and our ability to execute on our growth initiatives across emerging markets, product innovation, new applications and tiering give us confidence in our target. The team also remains committed to achieving the operational improvements that support our previously announced operating and EBITDA margin enhancement target of 100 to 150 basis points over the fiscal 2018 performance. As always, thank you to our customers, employees and shareholders for your continued support. With that, we pause and take your questions.

[Operator Instructions]. And our first question comes from Allison Poliniak with Wells Fargo.

I just want to get back to Adhesive Dispensing. You talked about some project volatility there. Is it your sense? Is it just seasonality? Or does it still -- like there's something bigger with all the trade and macro concerns out there? Any thoughts?

Yes. I'd say it's just typical, maybe not even seasonality, but just order patterns can vary year-to-year. Particularly, when you think of nonwovens or larger systems orders within that part of our core Adhesives business, when you look at it, our product assembly, our packaging and our polymer businesses were up and that one happened to be down, and that tends to be lumpy. So I wouldn't say it's necessarily seasonality, it's just a function of order patterns for our customers, and I wouldn't say it's related to any sort of larger macroeconomic trend.

Okay, great. And then kind of similarly with the technology piece or particularly electronics. Obviously, a really tough comparison. As you think about your -- how the year progresses, conversations relative to last year in terms of projects, are we still in a similar level there?

Yes, we have good ongoing discussions. And as you know, we have development projects with a lot of our customers on the electronics side of things. We're getting to the point where in the next month or 2, we'll see whether those projects turn into real opportunities this year. It's kind of the time frame where customers make those decisions. I'd say, as we've talked in the past, we're seeing nice growth in things like the electronics area. The thing that's been the swing factor has been the mobile piece, and that's still not clear yet what this year looks like. But if you look outside the electronics business within that segment, we had a really strong first quarter in both our traditional EFD business and a very, very strong quarter in our medical business. We expect that to continue as we go throughout the year.

And our next question comes from Charlie Brady with SunTrust Robinson.

[Indiscernible] on that last point on medical. Can you quantify how strong medical was in the quarter?

Well, we expected that business to grow on a long-term basis, high single digit, low double digits, and it's -- it did that and a little bit more in the quarter.

Okay, good. And then I guess, just if I look -- I know you guys don't disclose the orders any longer, but as sort of our back-of-the-envelope calc, it looks like orders in the quarter were down about 2% on a maybe a 25% tough comp. Can you give any commentary and color? I suspect a lot of that was due to the -- on the ATS side. But just kind of order patterns or what you're seeing going into the current quarter, is that anything really -- as things flipped around particularly on the lumpiness of the nonwoven stuff.

Yes. I would say for most businesses, we saw year-on-year order increases. Overall, probably, in the sort of low single-digit kind of rates. Our backlog is up 9%, but not all that's is going to get delivered in the quarter. So I'd say we're generally encouraged by what we see and are being consistent with the overall guidance that we provided. As you know, the system orders can be lumpy, not only in things like nonwovens, but also in some of our Industrial Coatings businesses and -- so that could vary quarter-to-quarter. But overall, we don't see anything that's inconsistent with what we think the overall top line should be for the year.

Okay. And then just to get one more from me. On the -- you commented about the automotive sector being a little bit weaker. Is that a function of just what we're seeing in North American auto market in terms of sales? Or is it just broader overall CapEx going into the plants themselves?

Well, I would say, certainly, what you're seeing in North America is kind of a slowdown. But I'd say even around the world, you've not seen significant growth on the auto side. I think China in particular is probably a little bit flatter than it may have been over the last couple of years. So I'd say it's a sort of a global sort of auto story, not a -- necessarily a global investment story.

And our next question comes from Chris Dankert with Longbow Research.

Looking at the guide, you guys reiterated that today. Kind of assumes to get back to double-digit growth in ATS organically kind of through the rest of the year. Could you kind of walk us through kind of what gives you confidence? What the key drivers are there? Some of the new applications, maybe, automotive? Just kind of walk through what really gives you confidence in that guide in ATS.

Well, I think if you look at the total segment, over half the segment now is nonelectronic. A significant portion of that is medical, which is growing very substantially. And even the general industry's piece is growing nicely, and we expect that to continue to grow. Within electronics, even though I made the comment just previously about auto electronics -- or about autos, the auto electronics piece is growing nicely. And if you saw the comments that Greg made around our test and inspection business, which hit a broader market in the electronics business compared to just the mobile segments, that was up nicely as well. So we're seeing some good opportunities that come from our diversification effort in the electronics and in the segment, in general, our broader diversification into medical. So we feel pretty good about the pace of business that we see here. As I just said to Allison, the sort of development work on the mobile piece is not as clear, but that's typically where we are at this time of the year.

Got it. Got it. That's helpful. And I guess, given some of the headwinds we saw in the first quarter, is the target for the year still to get to that 30% margin within the Adhesive Dispensing, that ADS chunk of it?

I think as I said last quarter, we think, ultimately, we can get to 30%. We didn't really commit that we'd get there this year because I think we needed to complete the restructuring efforts we were talking about and then ramp up the business and improve the efficiency in the polymer side. So I think ultimately, that's our goal to get there. I'm not committing that we're going to get there this year.

And our next question comes from Matt Summerville with D.A. Davidson.

So just a question on -- I guess, Mike, do you have a line of sight -- I heard your prepared remarks. But do have a line of sight at this point at all towards whether or not you think mobile innovation will be more of an on-year in fiscal '19 versus what was maybe a little bit more of an off-year in fiscal '18? And can you put the context in as to sort of what's embedded in the 3% to 5% organic guide for the year? Is it more of an on-year or more of an off-year, if you will?

Yes. So what I would say, if you recall in some of the last conversations we talked about what would be sort of the next more significant driver in the mobile business, and we talked about things like 5G. In our mind, 5G is something that people are looking at this year, but probably won't see a broader implementation till next year. And that's kind of what we planned for, so not a significant step-up as associated with 5G. As far as other innovations that customers are working on, there are a number of things they're working on. We don't have a clear line of sight about which ones they're going to implement into sort of mass production for the next set of mobile opportunities. And that's why we continue to diversify across semi and across the auto electronics piece and generally across our test and inspection business as well. And we've been pretty successful in tiering to capture some of the other parts of the market. So I'd say it's not as clear yet on what degree of innovation our customers are going to see this year. There's announcements starting to come out, but it's really not clear yet in terms of what's going to go to mass production.

And just as a follow-up. Across any of your businesses at this point, have you seen delays or deferrals in customer capacitization decisions, particularly in Asia due to either weak local demand in China or just due to the general trade uncertainty out there?

I would say we haven't seen any kind of significant order cancellations or anything like that. I'd say there is some concern with regard to trade, particularly the trade discussions with China. And I would say that's top of mind for a lot of our customers. That said, the most recent news is encouraging. We'll see if that -- how that plays out. But I'd say there's -- we haven't seen anything significantly canceled, but I'd say there is a concern both in the U.S. and China on that. But to this point, it's not having a big impact on customer decisions.

Got it. And then just a follow-up on medical. You indicated to answering another question that, that business was sort of growing organically above what you would otherwise normally expect. Can you talk about perhaps what's driving that? Is it market share related? Is it expanding that business internationally? Can you just provide some more granularity on that?

Yes. It's really around kind of the heart of what drives all of our business, which is innovation. There is a lot of new products that are coming out in concert with new product introductions of our customers. And so across the -- most of the businesses, particularly the catheter businesses, the cannula and catheter businesses, we're seeing significant launches of new products to support customer growth, and it's a continued pipeline of innovation there. And as we've made the number of acquisitions that we've made, we've expanded our portfolio, which is giving us more access to customers that they look to have a more complete [indiscernible] to support them. So we're certainly seeing the benefit of that. So I'd say it's around innovation or is in customers, and it's around broadening that product portfolio and being able to take advantage of more opportunity.

And our next question comes from Christopher Glynn with Oppenheimer.

It's nice to see that diversification reading through the electronics. I did have a question on coatings actually. In terms of the automotive exposure there, some companies are talking about reviving new platform launches in the industry after a slower 2018, independent of production. Just wondering if you concur? And to what degree that's a driver of your coatings automotive business?

Yes. I would say to this point that hasn't translated into significant systems orders. I know there's a fair bit of discussion on that. But I'd say at this point, it's not translated into orders now. Just to keep in mind, this first quarter, particularly for a lot of the coatings customers, is a time frame where sort of at the end of January, they're finalizing all their capital plans. So it's not atypical for us to not see anything launched yet because they typically are calendar year and finalize their plans at the end of January or so.

Okay. But that does play to what -- how you serve those markets?

Yes.

Okay, great. And then overall, you commented on the quarterly was -- the first quarter was in line with your view of the year. But obviously, our sell-side models were -- uniformly didn't quite capture the seasonal deleverage all that well. So just wondering if any fine point considerations on how we view the split of the first half and second half? And really any wisdom on how the second quarter bridges to the full year, given that we kind of didn't quite manage all that well the first quarter with the change from quarterly to annual guidance?

Yes, I would say that -- just a couple of things. First of all, I think the one thing -- I'll get to the top line comment in a minute. But the one thing that just to think through is knowing that we have sort of a seasonal business, our sort of sales and administrative costs don't typically vary tremendously throughout the year. So that's -- maybe it varies a few million quarter-to-quarter, maybe it's a little higher ultimately in the end of the year depending on how the year plays out. But it doesn't typically vary that much, which is great when we look at incremental volume and the incremental margins are going up. And obviously, if the volumes going down, unfortunately, that -- we see that as well. So I would say that's one thing to focus in on. Now on the top line, we would expect the second half of the year to be stronger than the first half. Obviously, first quarter is down, but we would expect to see seasonal growth in the second half of the year that would be stronger than we see in the first half. Our backlog, as I said earlier, is up 9%, but all of that's not going to go out in the quarter. So obviously, we expect to see improvement in the second quarter but more improvement in the second half of the year.

And our next question comes from Matt Trusz with Gabelli Research.

So within the mobile phone exposure, can you get a little more granular about what changes trigger a customer need for new Nordson equipment? So like for example, with waterproofing or 5G, there's a new hardware feature, or a fundamental change to form factor requires new gear. But when we're thinking about iterative type of model updates, does that really require much new Nordson equipment?

So if you think about the things that drive it, it's change in general. So it could be shape factor in there, it could be something like making it thinner or expanding battery size, which squeezes everything else. That's been a benefit in the past. It could be features, things like the thumbprint recognition or any other type of sensing technology. Or it could be process changes, so waterproofing would fall into a process change. With 5G, the reason that we point to that is that it'll leave more antennas within the phone, and as a result of that, you're going to have less space. But as I said earlier, we don't really expect that to be a significant change until the -- until 2020. So it could be all of those things, including process changes in the way our customers manufacture the phones. So we have a variety of different things that we're working on there.

Matt, this is Greg. What I'd add to that is, oftentimes, when we see a new feature finding its way into these devices, we get it -- we get the added benefit of we're often working at the module level with those suppliers, either with our dispensing equipment or our inspection equipment. And then working at the assembly level where the module gets integrated into the device.

That said, one of things we continue to try to do, as I mentioned earlier, diversify across different applications, whether it's in the semi side, whether it's on the auto side, whether it's in the electric battery, batteries for electric car space. We're trying to diversify, so we're not as dependent there on the mobile phone space.

That's very interesting. And then just wondering, overall, how you would characterize your general level of business confidence and your sense of your customers' confidence, and whether your answer today would be any different than it would've been two quarters ago.

Yes. I would say it's pretty consistent. I think as we talked last quarter, we expected global growth this year to be a little less than global growth last year. And so I'd say we're still seeing that is consistent. So I'd say it play out with our expectations. I mean, I think somebody asked earlier about trade, that's sort of the one wild card that's out there. If there was a significant trade war, well, then that would have some more implications. If the trade issues, particularly with China, get resolved in a positive manner, we could see some uptick there. But I'd say our view of the macro environment is where we thought it was going to be at sort of the tail end of last year, with growth globally but slower. And that's I think what we see today as well.

And our next question comes from Walter Liptak with Seaport Global.

I wanted to ask -- try one on geographic basis. The Japan market's down. And I just wonder if you could -- if you can talk a little bit about the sectors that led to the decline in Japan. And kind of visibility, what would be the expectation because I think the comps get a little bit easier as you go on throughout the year.

Yes. If you look at Japan, it's all year-over-year comparisons, Walt, and it was largely the significant electronics orders that we got that -- in the fourth quarter really of '17 that -- it also came in, in the first quarter of '18. And that happened to be through a Japanese supplier although the end customers for those products were across the portfolio of mobile as well as some other opportunities. So that's -- that really explains the -- what's going on in Japan year-over-year. And I'd say the first quarter in Japan is more typical than we expect in Japan as compared to last year. So won't read anything more into that other than just what I said now. I think we have said at the beginning of the year that we expect Europe and Japan to grow this year but slower than they did last year, and that's still our expectation.

Okay. Okay, good. And yes, that was the next question, it's just doing the same thing in Europe. I mean, we've heard about European auto slowing, Germany. And I wonder what the visibility was like in Europe. And kind of the expectations. Those comps, I think, stay a little bit more difficult throughout the year. But what are your thoughts on some of the systems businesses in Europe?

Yes. I would say it kind of lines up with the economy in terms of just a slower growth year. I mean, you see it in Germany, you see it in France, it's going to be a slower growth year. We'll see if Brexit has any particular impact. We don't expect it to have a big impact for us. But I think, in general, it's affecting the economies. We talked earlier about nonwovens. One of the big nonwovens OEMs happens to be located in Europe, so you could see some impact there depending on how that project level comes back throughout the year. But certainly, that's had some impact.

Okay. So considering some of these international slowdown issues, when we think about the self-help that you're doing for this year and the margin improvement, what are the factors that provide that range of operating margin improvement? What does it take to get to the high end of that range? And what kind of assumptions go into the low end?

Yes. Well, first of all, I think we've talked about the restructuring efforts we had underway in the polymer part of our Adhesives business. So we're essentially through that in this quarter, and we'll start to see some improvement as we go through the year. We also had some investment in setting up our customer service -- our shared service center activity in the U.S. that'll go away. So there's a -- some -- both expense that goes away and some benefits we'll see from finishing those projects. We have a number of things that we're driving on our continuous improvement activities through Nordson Business System that we think will help from the overall cost side. And then we do expect the volume to come in at the levels that we have talked about, and we'll get the volume leverage on that. So those are the major factors that would drive the margin improvement that we're looking for.

Walt, this is Greg. One way that I'd characterize this is to say there's no one big aspect of this initiative that's going to deliver the bulk of it. It's going to be -- as we see across most of our years, it's a lot of singles and doubles that add up to generate this kind of improvement.

Okay. And it sounds like the swing factor here is the volume leverage that -- a number of these things are within your control, but it's -- where does the revenue come in to get leverage off of that [indiscernible]?

I mean you know our incremental margins are pretty high. So even with the -- sort of the 3% to 5% kind of growth targets that we've talked about, there's pretty good leverage on that. So you're correct.

But some of those comments that Mike made kind of go hand-in-hand with the volume. The point here is as we grow that top line, we believe we're going to do it in a more efficient way because of some of these structural changes that we've made.

And our next question comes from Jason Rodgers with Great Lakes Review.

Just wondering if you could talk a little bit more about the growth expectations by segment to reach your full year guidance. Does the guidance assume that you're going to realize some of these large system orders in nonwovens, in ADS? And then looking at the ATS segment, given that the mobile side possibly may not see robust growth until next year and then some slower growth regionally, I'm just looking for some more detail on areas of growth in addition to medical in that segment that can get you to the levels that you need to reach that 3% to 5%, your full year growth guidance.

Yes. So what I would say is a couple of things: one, we do expect all of our segments to grow this year; two, within those segments, we probably have 25 to 30 different product lines. And in any 1 year, you're not going to have 100% of them grow, and we don't necessarily count on 100% of them growing. But as we look at the various drivers across each of the businesses, we feel confident enough in the things that we're doing with innovation, with new applications and products and taking advantage through our tiering structure of new markets that we're going to be able to generate that kind of growth that we've put out there. So I think all segments, we would expect to grow. But honestly, all product lines, but that's typical of any year that we have.

Okay. And looking at the share repurchase, stepped that up in the quarter. I wanted to get your thoughts on future repurchases.

Yes. Well, let me start sort of the high. Well, our capital allocation priorities haven't changed. It's to support the organic growth of the business. It's to continue our dividend string. It's to look to add to our portfolio with appropriate acquisitions. And it's really done to be more opportunistic on the share repurchase. And that's what we've done in this past quarter in particular, as being opportunistic around the share repurchase. So end of day, that's still our priorities. And we feel like, as Greg mentioned, that we've got capacity to acquire some additional businesses. We've got a pipeline that we're working. But you never can tell when those things are going to come to market. So we maintain these priorities to appropriately allocate the capital for the greatest benefit to the company and our shareholders.

And I'd add that in terms of part of that share buyback, part of our baseline strategy is to offset the dilutive effect of benefit plans. So we've been able to accomplish that with this activity.

[Operator Instructions]. And our next question comes from Jeff Hammond with KeyBanc Capital Markets.

So just wanted to come back to the non -- I guess, the areas where you're seeing lumpiness, I guess the nonwovens and then the pieces of coatings. Can you just talk about what you saw in terms of order activity in coating that kind of give you confidence you'll get maybe some good lumpiness back as you move through the year?

Yes. What I would say is we've got activities going across all of those businesses and product lines around the globe. We just can't necessarily predict when customers are going to place orders. I would say, on the auto side, it's been softer for a while. And so we're not necessarily counting on that to step up in a big way. We have our normal run rate business that comes from our installed base there in the parts and consumables and smaller projects. I'm not sure that we're betting on significant large platforms to come through in the year. And I'd say, on the nonwovens, we've had really strong years over the last 3 or 4 years, and we'll continue to have some opportunities here this year. But it's kind of hard to place the timing on those things because they tend also to be also shorter delivery-type projects as well. What's important -- let me just add what's important is, as we -- as I mentioned earlier, we've got a lot of different product lines going into a lot of different markets and applications and this one is a little softer. We expect some others to pick up, and we've highlighted a few so far.

Okay, great. And then just kind of back on the cadence question. As we head into 2Q, do you find 2Q kind of at least kind of falls into the range of the full year kind of growth guidance?

Yes. So what we've said is we expect, sequentially, for things to pick up and the second half to be stronger than the first half and some improvement in the second quarter. So yes, we expect some positive improvement in the second quarter. But as we -- as I commented earlier, with our backlog up 9%, we don't necessarily expect that to translate into the quarter.

And that does conclude today's question-and-answer session. I would now like to turn the call back to Mike Hilton for any further remarks.

I'd just say thank you to all of those who have participated today and continue to support Nordson. And thank you to our global team for continuing to delight our customers.

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