Ladies and gentlemen, thank you for standing by and welcome to the Nordson Corporation Third Quarter Fiscal Year 2020 Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to Ms. Lara Mahoney. Please go ahead.

Thank you. Good morning. This is Lara Mahoney, Vice President of Investor Relations and Corporate Communications. I'm here with Sundaram Nagarajan, our President and CEO; and Joseph Kelley, Executive Vice President and CFO. We welcome you to our conference call today, Thursday, August 20, 2020, to report Nordson’s fiscal year 2020 third quarter results. Our conference call is being broadcast live on our audio 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 September 3, 2020. During this conference call, references to non-GAAP financial metrics will be made. A complete reconciliation of these metrics to the most comparable GAAP metric has been provided in the press release issued yesterday. Additionally, 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 Naga.

Good morning, everyone. Thank you for joining Nordson’s fiscal 2020 third quarter conference call. With me today is Joe Kelley, the new Chief Financial Officer of Nordson. I'm pleased to welcome Joe to the call this morning. Joe joined Nordson on July 6 and brings over 25 years of financial and operational expertise to Nordson. Most recently serving as Chief Financial Officer of Materion, a global advanced materials company. I'm very excited to have him on board. He's already bringing great energy and perspective to our leadership team. First, I want to thank our Nordson employees for their continued flexibility, resilience and commitment as we have navigated 2020. They remain focused on protecting the health and safety of our employees and responding to the needs of our customers. Nordson products serve a very diverse set of end-markets, including medical, electronics, consumer non-durables and general industrial. This diversity has helped drive the relative stability of our results to this point in the year. By maintaining new safety measures, our team has risen to the challenge and continue to meet the needs of our customers who depend on us to help them drive efficiencies, enhance innovation and continuously supply aftermarket parts and consumables that keep their manufacturing lines running smoothly. While we remain focused on managing this dynamic environment, the Nordson leadership team and I are equally committed to making progress towards our strategic priorities of accelerating organic growth, diversifying through acquisitions, leveraging that Nordson Business System, and building winning teams. On June 1, we announced the acquisition of Fluortek, a precision plastic extrusion manufacturer in the medical device industry. Fluortek brings highly differentiated PTFE medical tubing expertise, which is complementary to our current value-added component offering for minimally invasive therapies such as heart valve replacement. Growing our Nordson Medical business continues to be a priority of our capital deployment strategy. We're pleased to have the Fluortek employees as part of the Nordson team. Also during the quarter, we continue to develop the next generation of the Nordson Business System, which we're calling NBS Next, Nordson's growth framework. Our new segment realignment, which unleashes an owner mindset at the division level, allows our teams to make decisions as close to the customer as possible. Using critical insights created by segmentation tools in NBS Next, our division leaders were empowered to prioritize investments and simplify non-value added tasks to deliver best-in-class product quality and delivery. Staying invested in what makes Nordson strong, our customer centric business model and precision technologies will position us to accelerate profitable growth when the economy recovers. I'll speak more about the business in a few moments but first I'll turn the call over to Joe to introduce himself and provide a more detailed perspective on our financial results for the quarter.

Thank you, Naga, and good morning to everyone. I am very pleased to join Nordson, which has a long-established reputation as a high quality company that consistently delivers top-tier financial results. I look forward to partnering with Naga and the leadership team to drive the next chapter of profitable growth for Nordson. We have an extremely solid and rich foundation on which to build and I am honored to be part of the team. With that in mind, let's turn our attention to the fiscal third quarter financial results. Third quarter 2020 sales decreased 4% compared to the prior-year third quarter. The decrease was primarily related to organic volume as unfavorable currency effects were offset by the benefits from the Fluortek acquisition. The company's diverse end market and geographic exposure, as well as broad product applications contributed to the relatively strong commercial performance in these challenging times. Our combined Asia region led the way by delivering 3% growth in the quarter. Gross margins totaled $281 million or 52% of sales in the quarter compared to $303 million and 54% of sales in the prior year. The 200 basis point decrease in margins is attributable to $1.2 million of inventory step-up amortization related to the Fluortek acquisition, unfavorable sales mix, and COVID-19 manufacturing inefficiencies and COVID-19 manufacturing inefficiencies. As our factories addressed employee safety needs in this challenging time with precautionary quarantining of employees, implementing social distancing, rotational staffing, etcetera, a combination of these three factors contributed to the lower gross margin percentage in the quarter. We anticipate the majority of these headwinds to be temporary in nature and forecast returning to our historical gross profit margin levels. Operating profit in the quarter was $112 million or 21% of sales, excluding nonrecurring items in the quarter related to cost reduction actions…

Thank you, Joe. I'm pleased with the performance the team delivered in a very challenging environment. I’d like to make note of few areas. First, I appreciate the strong performance of our teams in Asia Pacific and Japan. They successfully managed through the challenges of COVID-19 earlier this year. Through it all, they remain focused on serving the customer. As a result, they delivered growth in the quarter. Revenue in the Asia-Pac region increased 3% compared to prior year. We had a very productive virtual review of our Asia businesses several weeks ago. Taking our executive team on a virtual tour of the facilities and new product pipeline, it is clear that the regional team is making meaningful progress in broadening in-country new product application and service expertise and resources, to serve our customers in the region. Second, I'd like to acknowledge the strong results of our test and inspection product lines, which are up double digits year-over-year. Test and inspection has been a focus area of our acquisition strategy. And we have built a robust offering of T&I product lines including Xray, acoustic imaging, bond testing and automated optical inspection capabilities. As advanced electronic components and semiconductor technology for 5G AI, and memory applications are becoming increasingly sophisticated. The need for T&I equipment is growing. Nordson’s diverse portfolio of solutions and technical expertise is making us a go-to partner for global customers. In fact, our matrix inline automated Xray, offline DAGE Xray and bond testing, and SONOSCAN acoustic imaging product lines had direct sales in the fiscal third quarter. As I mentioned earlier, I'm encouraged that our teams are beginning to use a data-driven approach with NBS Next Segmentation Tools to prioritize investments to position their businesses for profitable growth and their recovery begins. In July, I participated in…

[Operator Instructions] First question comes from Matt Summerville with D.A. Davidson.

Thanks. A couple of questions. First, on the medical side of the business, can you talk about how much of that is being driven by what is now being defined as elective versus non-elective? I guess I was under the impression that the elective portion was pretty minimal

Yeah. Thanks, Matt. As we entered the quarter, the definition of what is elective and what is selective, as you know, continue to broaden. And so, because of that, we did have some impact in our businesses. But if you look at our medical portfolio product offering, you have a fairly broad and diverse offering that not only serves the minimally invasive surgeries and such as heart replacement or stent placement. We also have a number of surgical, as well as fluid management product offering. And so, what we saw really was a surge in demand for our fluid management product offerings, pulmonary treatments. And so, it certainly helped us come in flat to last year in the medical business, less than what we have experienced, historically, 4% to 5% growth. So, it was lower than that, but it was flat to last year. And probably put it in context, what I’ll tell you is if you take a look at medical device manufacturers, many of them in this environment are down mid-teens. And so, we're really pleased and it is slightly lower than our expectation, but very pleased that the team was able to come in on a flat year-over-year basis for the medical.

Got it. Thank you for that color. And then just as a follow-up, can you maybe provide an update on what you're seeing in fluid dispense as it pertains to more to consumer electronics, 5G project activity and, kind of, what the outlook is there? Thank you.

Yeah. I -- what we see really is early stages of -- we had a good quarter last quarter, if you remember on the fluid dispense side for our electronic businesses. And what we see is continued project activity what you do find is in the electronic side, we're finding a lot of applications for these new complex components that go into AI applications, go into a number of, you know, the advanced 5G-related products be it out of electronics or as well as in mobiles that you have, you know, increased antenna requirements, you have increased camera modules, you have increased number of, you know, aeros as well as micro speakers and such. So, a lot of advanced components and we are seeing a lot of project activity on that. But primarily on the electronics side, where we see strength and had a really strong quarter, was in our test and inspection, which is more geared towards the semiconductor side of the business rather than on the components side of the business..

Next question comes from Jeff Hammond with KeyBanc Capital Markets.

Hey, I just want to really understand, kind of the order trend through the quarter and, you know, you kind of gave some different numbers, you know, 12-week trend, 4-weel trend. Just kind of, really get a better sense of, you know, kind of what the true trend is in terms of, you know, things getting sequentially better. And maybe where particularly you're seeing things get sequentially better. Thanks.

Yeah. No. Thank you, Jeff. And so, what we're trying to do is probably talk to you a little bit about how we entered the quarter, right. We entered the quarter and we provided probably for the first time we talked about order entry rates in the way we’re talking about it now. And I want to provide you some context for that, you know. We feel, you know, given the dynamic environment, it was important for us to provide you with more color than we normally do. So, that was the intent. And so, as we entered the third quarter, if you looked at the 12-week order rate, we think of the 12-week order rate as a little more longer term and suddenly stabilizes near-term environment. But given the current dynamics, we felt that was important for us to look at something shorter term so that we can see what is happening. So, that's why last quarter we provided you a six-week guidance, that's because six weeks was the time period that COVID had really hit in our quarter. So going forward, what we're thinking about is giving you a 12-week and a four-week guidance around how we are seeing ‘til we get out of this dynamic environment. So, with that context, what I’ll tell you is that the best way to think about the current environment is to think about it more sequentially. And we begin to see, as we navigated through the third quarter, sequentially the order trends for the total company was starting to improve, right? So, we entered the quarter, I would say, six-week order trends were more in the range of 11%. The short term was around 11% down. And as we exit the quarter, we begin to see that order trend is more like down 7%. So, that's sort of -- go ahead. Go ahead, Jeff.

Okay. That's helpful. Where do you think you -- where are you seeing the best sequential improvement?

Yeah. So, I think I answered one part of your question and now let's go to the next part of the question, and probably take it two chunks, Jeff, is that, first, give you some color around the regions; and then, give you some color around the trends we are seeing by end market. So, if you think about the geographies sequentially, our order entries are such that from a geography perspective, in the US, the order trends are stabilizing, albeit at a little bit lower level that we talked about. Americas, which is, sort of, Latin America and Mexico, still remains challenged, given all that is going on in Mexico and Brazil, still remains challenged. But it is a very small part of our company. In terms of Europe, what we do see is a meaningful pick up and a trend up sequentially when compared to third quarter. And then in Asia, as you've seen in our third quarter numbers, we have reported a growth in Asia, but when compared to last year. And what we find there in Asia is sequentially that remains flat. It is not accelerating any further than that, but it is remaining flat. So, that's the regional picture. And if you look at about end-markets, what I would tell you is that some of the industrial end-markets remain challenged, right? So, businesses that have industrial exposure like our ICS business or our fluid dispensing in EFD, they remain challenged. Our medical business continues to be flat, order entry rates are flat and we seem to feel good about it. Our fluid dispensing in non-consumer, non-durables is flat to slightly up. And our plastic processing is flat to slightly up. And our electronic business, as we talked about, and test and inspection had a strong quarter and we find that we are flat there. So, hopefully, that gives you -- you know, it’s a range of scenarios is what we're seeing in terms of trends for the various end markets. But essentially, it's a very dynamic environment. And what we find ourselves is managing to that dynamic environment. We're seeing some areas where sequentially things are stabilizing and maybe some improvement, but the industrial parts continue to remain challenged for the company.

Okay, great. That's good color, Naga. Just on Fluortek, can you give us, you know, what kind of the annual revenue contribution, what that business has been growing at, you know kind of how the margin profile looks versus the medical business overall or at least you know the Advanced Tech segment? And just really where -- you know, what's the incremental kind of new product or market that you know this gives you that you didn't have before?

Yeah. So, I think let me give you some strategic color and maybe give you some update around how things are panning out in the first couple of months here. And then Joe can sort of provide you a little bit of color around contribution and such. So, it's a great little business. It's a niche business for us. It brings to the company PTFE tubing. So, this is the inner lubricious layer of the, you know, think about if you’re trying to place a stent, you have to thread it through a tube that's in the patient. And what you really find is you have a lubricious tubing layer, which is inside that tube and that's really what this is, right? So, that is their major product line is the inner lubricious layer of those tubing that is used to place stents or heart valves and things like that heart valves and things like that. So, it's a very niche product. It's a great complementary addition to our delivery mechanism, core component offering that we have, right. Through Vention, we were able to bring on a very strong position in core components that help us in these minimally invasive therapies and we find this as a real nice add to it. In terms of the integration, we really like the business. The technology is really solid. As we have spent time within the business, it reaffirms our strategic thought about adding this, so we really like it, we like the people. Operations are coming along really nicely. Let me maybe turn this to -- a little bit Joe can add some color around financials. Overall, it’s a value-added business. It's a differentiated business. It adds to the company. It doesn't take away, so.

Yeah. Jeff, just to give a little more color, the annual revenue on this business is approximately, let's say, $20 million. And from a margin profile standpoint, it is comparable to our current ATS business.

Next question comes from Christopher Glynn with Oppenheimer.

Thank you. Good morning. Just wanted to go into the medical piece for a little bit. I'm curious about how you're thinking about maybe pent-up demand for elective products. It’s obviously a pretty important business to you where it had great success over the past. I'm wondering how you're thinking about the prospects for kind of pent-up demand assuming it's not too late for some people in search of elective procedures.

Yeah. Chris, it's a great question. And I think that is -- as difficult as it sounds, but that is really what people are dealing with is that you know, surgeries that are needed are getting postponed and we are hopeful. But we do fundamentally -- to answer your question -- fundamentally believe that is a pent-up demand that that we would enjoy as surgeries come up. We're beginning to see early signs of hospitals opening up and certainly trying to, you know, increase the number of surgeries. It will be a slow ramp up. This environment, as all of us know and experience, is very dynamic. Things are up and down a bit. But in general, we are very convinced that -- remember also that these are specd in products in that these, you know, they have a great amount of stickiness to the sales orders because we are specd in through FDA approvals for medical devices in our customers. So quite frankly, you know, we feel very strongly about the growth drivers are on medical are solid, they have not changed. And in the short term, we would enjoy some meaningful pickup as the surgeries come back. But we, you know, our expectations are this is going to be a slow ramp, not a very fast ramp. You know, as you can imagine. You know, till we get past this next season of flu and get past to some level of normalcy, you know, this is going to be a little bit up and down. But even with those postponement what I really want to emphasize here is that the team came in with a flat revenue year-on-year, which is very strong performance, and that's because we have, you know, our product offering is pretty strong in fluid management, as well as pulmonary therapies, which we really have not talked about a lot but there are pulmonary therapies where our [indiscernible] get used. And so, we really like medical, we continue to invest here, we still see opportunities. So, hopefully, that provides you some color.

That's great. Appreciate that. And then my follow-up is, just, kind of, update on what you're seeing in terms of momentum. You touched along, kind of, the handset features and things like that. But for 5G, both for infrastructure and for handsets, kind of, compare contrast. And you expect that ecosystem around 5G is likely your most robust vector in fiscal 2021 at this early juncture?

Yeah. The 5G activity, the activities remains strong, projects activity remains strong. We get invited to lots of different projects where we're working on. But it is, at least for the moment, it has got a lot of promise, as we have talked about in the last couple of quarters. Lots of promise, a big circular -- secular driver for this business. But not a needle moment -- needle mover at the moment for us. But why we are excited about 5G is not only just the handset, we really want to think about 5G in a broader terms, around the base station infrastructure build out, which is sorely behind. If you read, you’ll really find is a lot of advertisement and marketing around 5G. But really, the usefulness of any of that only depends on -- if you are near the cell tower, right? Remember, these are fairly weak signals. So, you’ve got to really be almost on top of one of these things to experience this awesome technology that has come in. But eventually it'll happen. So, we’re excited about the base station opportunity. It’s slow to roll out, as you know, there a number of geopolitical competitive things going on around that. That suddenly strains it. We certainly like all the advanced components that are getting developed so we really like that. Auto electronics will be a big player 5G because they're going to get incorporated. IoT devices are going to be another big area where 5G is going to get incorporated. So lots of different nuances to 5G beyond just the handset. But handset is probably what takes up most of the press time. So, overall good activity, still continuing to participate in projects, just not a big needle mover at the moment for the company.

Yeah, we know it's not now but it sounds like the timing visibility is kind of quixotic, I guess.

Yeah. Yeah. It’s a good word to use.

Next question comes from Mike Halloran with Baird.

A couple of margin questions here. So on the ATS, if you think about the sequential margins going into your fiscal fourth quarter, same mix pressures that appears to be the assumption to the same mix pressures that were there in the fiscal third quarter probably been good for the fiscal fourth quarter?

Yes. I think, similar -- in ATS, the mix pressure will be there, is assumed to be there in the fourth quarter that was there in the third quarter based on some of the market demands that Naga just reviewed.

That makes sense. Then the inefficiencies you referenced for the Industrial Precision business, maybe some context on those and how long do you think they linger?

Yeah. So our factories initially responded during the COVID crisis and, you know, and our efforts to keep the employees safe You know, in our efforts to keep the employees safe but continue to meet customer needs, we had significant factories. While they remained open, we were precautionary quarantining several people. When you think about some of our clean rooms, we also had to put in social distancing. And so our -- some of our manufacturing processes weren't as efficient from a direct labor standpoint. And so, we've been working through that, getting the proper PP&E, the proper staffing and people coming back from quarantine. And so, we're kind of working through those kinks. We've made progress, I would tell you in the quarter. From earlier in the quarter as it relates to manufacturing efficiencies and conversion cost rates. And so, we anticipate as we get used to the new normal to continue to improve as we go out throughout Q4 here.

Thanks for that. And then, last one. The Fluortek piece, obviously, really good that you were able to getting that some M&A done. But maybe just thoughts on the pipeline as it looks from here and what the basically the ability to convert some of that pipeline looks like as we sit here today?

Mike, a great question. You know, as you think about M&A, you know, we've really talked about what is our focus. Our focus really is, you know, two big areas; scaling up medical, scaling up T&I are the two areas that we're very focused on. And if we find things that are very complementary, very next to our core, we wouldn't make some add-on. But it's really important for us to emphasize the context and, you know, our strategic rationale for anything we do will start with what makes Nordson, right, precision technology, customer-centric business model, two things that we look for. So, as we look at the pipeline, our pipeline has a number of opportunities that we continue to stay in touch. But given the environment, think about great companies that we would like to add to the portfolio, this is not particularly the time that they want to sort of transact. Meaning, given sort of reduction in their own outlooks and stuff, they're not particularly interested in acting on any of those and sort of take the wait-and-see approach. So, meaningfully, these opportunities are still existed. We're still sort of cultivating them, is probably the best way to put it. Should some of them happen to come to the market as we have been able to do with Fluortek, we will certainly act on them. But you can expect us to stay disciplined to what we feel are the most important adds to the company in the areas we're interested in.

Great. Thanks there, Naga. Appreciate the time.

Yeah. Thank you.

[Operator Instructions] Next question comes from Andrew Buscaglia with Berenberg.

Good morning. I had a question on -- in Industrial Precision. I was way off on modeling there and my expectations were there, because we've got some tougher markets within there with auto exposure, AND exposure, you have some energy exposure. So, I'm curious why -- did this -- did the trends in those specific businesses surprised you or is the resiliency in that -- in those tougher areas -- can you talk a little bit more about what you're seeing there I guess and your outlook for at least more difficult pieces?

Yeah. So, maybe let's first take the ones that are doing well and you know, so this is -- IPS, you know, traditionally has this is adhesive business that we have always been a very strong part of the company. History and the legacy part of the company and a core part of the company. A strong market leader, served number of recession resilient end markets, food and beverage packaging, nonwovens, and things of that sort. So, if you really think about that business, it has a very strong aftermarket component to it, about 50% of the market. So, really think about that piece of IPS as being very resilient. It has done well. You know, it had some slight down take but in general has done really well up to our expectations. Certainly early in the quarter, definitely helped by nonwovens in terms of masks, mask production. So, some of our customers shifting from diaper production to mask production. That's a great example. So, we benefited from some of our customers making those turns. And in some cases even added more mask manufacturing capacity we benefited from it. In that same -- in IPS, we also have our industrial end market facing businesses and those remain challenged. You know like our -- you know like any other pure industrial businesses as you think about CapEx deferrals, you know significant shut down in the automotive industry. All of that certainly has impacted those businesses. Those remain challenged. But you know, the diversity of end markets and diversity even within the segment certainly helped us perform fairly well.

Right. So, that give you what you’re looking for there Andrew?

Yeah, no. That's really helpful. And you know, and along -- kind of And along -- kind of, like along those lines though -- I mean, it seems the resiliency is there. But I guess in a post COVID world, are you guys thinking about any of these businesses differently? Or is there any, sort of, pruning opportunities that you can make to some of your areas that, maybe, you -- maybe your view had changed? Because it seems as though, I would think…

Yeah. So, certainly, if you think of…

…running in the same pace.

Yeah. And, I think, if you're asking a question around own portfolio and -- so, really our approach to portfolio management is a consistent review of all product lines on a yearly basis. And we really look at it through two lenses. One is take a look at it from a growth potential business. We’re very focused on profitable growth, growth potential being an important lens. And second lens really being, what is the degree of differentiation? Really, what is the profitability of the businesses? So, as you consider those, we make decisions and if you, kind of, look back at the history of the company, when things didn't add up to our expectations in those areas, we did act on some product lines. And so -- so, it’s a annual assessment and something that we do on a regular basis.

Got it. Okay. Thank you.

Next question comes from Walter Liptak with Seaport. Walter?

I wanted to -- hi. I wanted to ask a little bit more about the industrial. And I wonder if you could help us understand any of the trends around -- we saw, maybe, things getting better in May and June, I think. And I wonder if with the virus cases going up again recently, if some of the cars that you're talking about around Industrial's because you see things weaken again.

I think probably, Walt, the best way to think about it is, you know, we don't seem to find industrial strength in much. You know, you either just -- it seems to have stabilized at a lower level than our other businesses, right? So when we say it remains challenged, we're not saying it is going down further. We're saying it has gone down sort of in line with other industrial CapEx businesses but has not gotten back up. If it continues today, it remain challenged probably the better way to do it.

Okay. And that's -- this is for you. I wonder, is it down because the customers are just cautious on their CapEx spending because I thought there was a higher ROI? Or is there a difficulty getting out with sales engineers into the field to sell and spec out systems? I guess is it slower because of this virtual world that we live in now and not being able to get out to customers to solve, new systems?

Yeah. I think it is really the larger CapEx spend where people are trying to sort of, you know, so think about our powder system businesses, right, it’s a good example. In our powder system businesses, these are fairly significant capital outlays. And so if you are an industrial manufacturer and you have some demand issues, this is probably not the time that you're going to sort of put out a capital outlay for large systems. So that's kind of where we're seeing. But what we find ourselves is that, when somebody has in need, like our mass manufacturing, which is not industrial but more consumer non-durable, In that particular case, even in this virtual world, we are able to work with our customers, able to understand their space, able to spec-in what they need. Certain customers have some pretty stringent requirements early on for actual person visit, but that is all changing. We're all learning how to work in this new world. So, some of this -- a lot of the communication with engineers and such has actually picked up because think about -- you have engineers and design folks that have projects that need to complete but now are at home and are virtually working. They have plenty of time to spend time with their salespeople. So, quite frankly, the interaction with our customers have changed and actually have increased from an engineer-to-sales-person conversations, which in the past somebody is in a meeting or somebody is doing something else. But now, you find yourself having greater touch points with your customers. So, hopefully that provides you a color of how we are operating in this environment today.

Okay. Yeah, it does. Thank you for that. And then, I wondered, just a couple of things on supply chain. We've heard about some parts shortages. You didn't mention anything about that, but I wonder how you feel about your supply chain or if you've made any changes there. And then, also, in MDS, you mentioned that four plants are doing the segmentation work as sort of a pilot project. I wonder if you could give us some -- a little bit better understanding of which segments that might be in, which factories, and what we should expect over, say, like the next six, nine months in terms of any profit improvement.

So, maybe two questions there. Well, let me first…

Yeah. Two questions, sorry, two questions there.

Right. So, let me first take the question around supply chain. We didn't mention it because, you know, we had no issues, quite frankly. You know, we have a very strong robust supply chain team and process. And we have a great risk mitigation plan. All of that, you know, really played out the way we have anticipated. And so, really, did not have any issues. Early in March, we may have had a few hiccups here and there but they were all more ended up with higher freight cost than anything else. But in the past quarter really is a non-issue for us. And so, so supply chain, no issues, things running. So, everything is good. So, in terms of NBS Next, probably what is important to sort of provide you some context is that we look at NBS Next as a growth framework. And really, our pilot businesses that we have and it's equally spread among both the segments. And our expectation is, you know, we roll them out to really strong businesses. We’ll not roll them out to our weaker businesses. But, you know, really, it's -- the total company is pretty strong. So, among the strong, we took our best businesses because we believe that looking at this from a growth lens is more important than anything else. And so, so what these businesses are really looking at is they're using at the heart of NBS Next is really a data-centric database segmentation process and that's what the teams are working on. We are, you know, the way I would characterize it, we have a proficiency model we look at it within the company and, you know, we think of them as learn to lead and coach. And I would say our businesses are in the learning mode starting to do. And, you know, our expectation is this will play out here over the next 12 to 18 months, and our goals really are not about, you know, how do we increase the profit margin as much as how do we have the best customers facing metrics on products, quality, and delivery so that we are able to accelerate growth when the recovery happens. So really positioning business to capture growth and have a crystal clear view of what are the top-tier growth opportunities for the company and how do we disproportionately invest in those areas. And, you know, with growth we will have incremental margin improvements, you know, that could come. But the exercise is not about taking out cost as much as it is really centered around growth.

Okay. Great. Yeah. Good luck with the project. It sounds very promising. If I could just get one last one in. How are you thinking about pricing in this environment? You know, when do you typically do, you know, annual price increases and are there any businesses where you can get price even, you know, with this slowness going on in the economy?

We typically look at annual price increases. As you can expect, there are input cost increases for the company, you know, just given the environment we're in and maybe the inflation, potential inflationary environment that we might enter in. So we have, in most of our businesses, as you know, our margin profile, our gross margin profile is pretty strong. And that is really because we add a lot of value, we create a lot of value, and we get paid for the value. But we're also mindful of the position where we are. You know, we have you know significant premium for the value we are creating. And so, you would expect us to be thoughtful, focused around growth, you know we are focused around creating value and getting paid for it. So, you know, pricing is not the biggest growth driver for us as much as making sure that we are participating in the growth as it comes. And then not just for inflationary costs should we -- should we encounter any of them.

And at this time, I will turn the call over to Naga.

Thank you. While the near-term demand conditions stabilize at a reduced level, I remain excited about the future of Nordson. We have a solid foundation fortified by the diversity of our business and our strong customer-centric business model. We’ll continue to monitor this dynamic environment to ensure we're taking appropriate action to manage the business, while staying focused on our long-term objective of making a strong Nordson even stronger by accelerating organic growth, diversifying through acquisitions, leveraging the NBS Next growth framework, unleashing on a mindset, and focus on building winning teams. Again thank you for your time and attention on today's call.

This concludes today’s conference call. You may now disconnect.