NORDSON CORP 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is management's discussion and analysis of certain significant factors affecting our financial condition and results of operations for the periods included in the accompanying condensed consolidated financial statements. Throughout this Quarterly Report on Form 10-Q, components may not sum to totals due to rounding. Overview Nordson is an innovative precision technology company that leverages a scalable growth framework expected to deliver top tier growth with leading margins and returns. We engineer, manufacture and market differentiated products and systems used for precision dispensing, applying and controlling of adhesives, coatings, polymers, sealants, biomaterials, and other fluids, to test and inspect for quality, and to treat and cure surfaces and various medical products such as: catheters, cannulas, medical balloons and medical tubing. These products are supported with extensive application expertise and direct global sales and service. We serve a wide variety of consumer non-durable, consumer durable and technology end markets including packaging, electronics, medical, appliances, energy, transportation, precision agriculture, building and construction, and general product assembly and finishing. Our strategy for long-term growth is based on solving customers’ needs globally. We were incorporated in the State of Ohio in 1954 and are headquartered in Westlake, Ohio. Our products are marketed through a network of direct operations in more than 35 countries. As of July 31, 2025, we had approximately 7,700 employees worldwide. We have principal manufacturing operations and sources of supply in the United States in Ohio, Georgia, California, Colorado, Connecticut, Illinois, Michigan, Minnesota, Pennsylvania, Rhode Island, Tennessee, Florida, Texas, Alabama, South Carolina and Wisconsin; as well as in the People’s Republic of China, Germany, Ireland, India, Israel, Italy, Mexico, the Netherlands and the United Kingdom. Critical Accounting Policies and Estimates A comprehensive discussion of the Company’s critical accounting policies and management estimates and significant accounting policies followed in the preparation of the financial statements is included in Item 7 of our Annual Report on Form 10-K for the year ended October 31, 2024 (the "2024 Form 10-K"). There have been no significant changes in critical accounting policies, management estimates or accounting policies followed since the year ended October 31, 2024. Page 23 Table of Contents Nordson Corporation Results of Operations Below is a detailed comparison of our results of operations for the three and nine months ended July 31, 2025 and July 31, 2024. As used throughout this Quarterly Report on Form 10-Q, geographic regions include the Americas (United States, Canada, Mexico and Central and South America), Asia Pacific and Europe. Consolidated Financial Results Consolidated financial results for the three months ended July 31, 2025 and July 31, 2024 were as follows: Three Months Ended (In thousands except for per-share amounts) July 31, 2025 July 31, 2024 Change Sales $ 741,509 $ 661,604 12.1 % Cost of sales 334,992 292,603 14.5 % Gross margin 406,517 369,001 10.2 % Gross margin % 54.8 % 55.8 % (1.0) % Selling and administrative expenses 206,539 201,943 2.3 % Divestiture and related charges 12,211 — 100.0 % Operating profit 187,767 167,058 12.4 % Interest expense (26,258) (18,803) 39.6 % Interest and investment income 560 1,027 (45.5) % Other - net (2,945) 152 (2037.5) % Income before income taxes 159,124 149,434 6.5 % Income tax expense 33,340 32,107 3.8 % Net income $ 125,784 $ 117,327 7.2 % Consolidated financial results for the nine months ended July 31, 2025 and July 31, 2024 were as follows: Nine Months Ended (In thousands except for per-share amounts) July 31, 2025 July 31, 2024 Change Sales $ 2,039,867 $ 1,945,439 4.9 % Cost of sales 923,550 862,134 7.1 % Gross margin 1,116,317 1,083,305 3.0 % Gross margin % 54.7 % 55.7 % (1.0) % Selling and administrative expenses 606,642 588,196 3.1 % Divestiture and related charges 12,211 — 100.0 % Operating profit 497,464 495,109 0.5 % Interest expense (79,389) (60,354) 31.5 % Interest and investment income 2,054 3,625 (43.3) % Other - net (5,380) (971) 454.1 % Income before income taxes 414,749 437,409 (5.2) % Income tax expense 81,909 92,293 (11.3) % Net income $ 332,840 $ 345,116 (3.6) % Page 24 Table of Contents Nordson Corporation Net Sales Net sales for the IPS, MFS and ATS segments were as follows: Three Months Ended Variance - Increase (Decrease) Jul 31, 2025 % of Total Jul 31, 2024 % of Total Organic Acquisitions Currency Total IPS $ 350,784 47.3% $ 348,997 52.8% (2.0) % — % 2.5 % 0.5 % MFS 219,465 29.6% 166,737 25.2% (0.4) % 31.0 % 1.0 % 31.6 % ATS 171,260 23.1% 145,870 22.0% 14.6 % — % 2.8 % 17.4 % Total $ 741,509 $ 661,604 2.1 % 7.8 % 2.2 % 12.1 % Nine Months Ended Variance - Increase (Decrease) Jul 31, 2025 % of Total Jul 31, 2024 % of Total Organic Acquisitions Currency Total IPS $ 970,079 47.6% $ 1,031,717 53.0% (5.7) % — % (0.3) % (6.0) % MFS 615,883 30.2% 495,229 25.5% (7.1) % 31.5 % — % 24.4 % ATS 453,905 22.2% 418,493 21.5% 8.0 % — % 0.5 % 8.5 % Total $ 2,039,867 $ 1,945,439 (3.1) % 8.1 % (0.1) % 4.9 % Three Months Ended July 31, 2025 The IPS organic sales decrease of 2.0 percent was driven by weaker systems demand in polymer processing partially offset by broad based growth in most other product lines. MFS organic sales decreased 0.4 percent inclusive of the contract manufacturing business that is held for sale. Excluding the pending divestiture in both periods, organic sales increased 4 percent driven by medical fluid components and fluid solutions product lines. The inorganic growth of MFS is due to the acquisition of Atrion. The ATS organic sales increase of 14.6 percent was driven by robust growth in electronics dispense product lines, offset by weakness in x-ray inspections systems. Nine Months Ended July 31, 2025 The IPS organic sales decrease of 5.7 percent was driven primarily by weaker systems demand in polymer processing and industrial coatings product lines, which was partially offset by broad based growth in most other product lines. MFS organic sales decreased 7.1 percent inclusive of the contract manufacturing business that is held for sale. Excluding the pending divestiture in both periods, organic sales decreased 2.3 percent driven by lower demand and tough year-over-year comparisons in medical interventional solutions product lines, where customer destocking trends continued to impact demand. The ATS organic sales increase of 8.0 percent was driven by robust growth in electronics dispense product lines and electronic processing and optical sensors, partially offset by weakness in x-ray inspection systems and the measurement and control product line. Net Sales by region were as follows: Three Months Ended Variance - Increase (Decrease) Jul 31, 2025 % of Total Jul 31, 2024 % of Total Organic Acquisitions Currency Total Americas $ 314,568 42.4% $ 287,016 43.4% (3.2) % 13.0 % (0.2) % 9.6 % Europe 186,620 25.2% 179,370 27.1% (6.1) % 4.8 % 5.3 % 4.0 % Asia Pacific 240,321 32.4% 195,218 29.5% 17.4 % 2.9 % 2.8 % 23.1 % Total $ 741,509 $ 661,604 2.1 % 7.8 % 2.2 % 12.1 % Nine Months Ended Variance - Increase (Decrease) Jul 31, 2025 % of Total Jul 31, 2024 % of Total Organic Acquisitions Currency Total Americas $ 874,868 42.9% $ 855,456 44.0% (10.0) % 13.1 % (0.8) % 2.3 % Europe 526,878 25.8% 540,750 27.8% (8.7) % 5.0 % 1.1 % (2.6) % Asia Pacific 638,121 31.3% 549,233 28.2% 13.1 % 3.1 % — % 16.2 % Total $ 2,039,867 $ 1,945,439 (3.1) % 8.1 % (0.1) % 4.9 % Page 25 Table of Contents Nordson Corporation Operating Profit Operating profit for the IPS, MFS and ATS segments were as follows: Three Months Ended Jul 31, 2025 % of Sales Jul 31, 2024 % of Sales % of Sales Change Increase (Decrease) IPS $ 116,720 33.3% $ 115,023 33.0% 0.3% $ 1,697 1.5 % MFS 52,500 23.9% 48,374 29.0% (5.1)% 4,126 8.5 % ATS 36,877 21.5% 26,032 17.8% 3.7% 10,845 41.7 % Corporate (18,330) (22,371) 4,041 18.1 % Total $ 187,767 25.3% $ 167,058 25.3% —% $ 20,709 12.4 % Nine Months Ended Jul 31, 2025 % of Sales Jul 31, 2024 % of Sales % of Sales Change Increase (Decrease) IPS $ 308,153 31.8% $ 340,043 33.0% (1.2)% $ (31,890) (9.4) % MFS 150,241 24.4% 143,467 29.0% (4.6)% 6,774 4.7 % ATS 86,558 19.1% 65,029 15.5% 3.6% 21,529 33.1 % Corporate (47,488) (53,430) 5,942 11.1 % Total $ 497,464 24.4% $ 495,109 25.4% (1.0)% $ 2,355 0.5 % Three Months Ended July 31, 2025 IPS operating margin increased 30 basis points on flat sales volume, driven by lower restructuring costs . MFS operating margin declined 510 basis points. Excluding restructuring, costs related to the Atrion acquisition and charges associated with the exit of the medical contract manufacturing business, operating margin increased 80 basis points reflecting increased leverage of selling and administrative expenses in the core business, as well as contribution from the Atrion acquisition . ATS operating margin improved by 37 0 basis points driven by strong conversion on increased organic sales and the benefits of strategic cost reduction actions and manufacturing footprint optimization . Nine Months Ended July 31, 2025 I PS operating margin declined 12 0 basis points due to lower sales volumes . M FS operating margin declined 460 basis points. Excluding restructuring costs related to the Atrion acquisition and charges associated with the exit of the medical contract manufacturing business, operating margin decreased 140 basis points reflecting lower organic sales demand partially offset by the impact of the Atrion acquisition . ATS operating m argin improved by 360 basis points driven by strong organic sales growth and the benefits of strategic cost reduction actions and manufacturing footprint optimization . Interest expense and Other-net Interest expense for the three months ended July 31, 2025 was $26,258, compared to $18,803 in the comparable period of 2024. The increase, compared to the prior year period, was primarily due to higher average debt levels, driven by acquisitions. Other-net for the three months ended July 31, 2025 was expense of $2,945 compared to income of $152 in the comparable period of 2024. Included in other-net for the three months ended July 31, 2025 were pension and postretirement income of $1,008 and $3,041 of foreign currency losses. Included in other-net for the three months ended July 31, 2024 were pension and postretirement income of $1,028 and $464 in foreign currency losses. Interest expense for the nine months ended July 31, 2025 was $79,389, compared to $60,354 in the comparable period of 2024. The increase, compared to the prior year period, was primarily due to higher average debt levels, driven by acquisitions. Other-net was expense of $5,380 compared to expense of $971 in the comparable period of 2024. Included in other-net for the nine months ended July 31, 2025 were pension and postretirement income of $3,042 and $5,909 o f foreign currency losses. Included in other-net for the nine months ended July 31, 2024 were pension and postretirement income of $3,085 and $2,411 in foreign currency losses. Income Tax Expense We record our interim provision for income taxes based on our estimated annual effective tax rate, as well as certain items discrete to the current period. Significant judgment is involved regarding the application of global income tax laws and regulations and when projecting the jurisdictional mix of income. We have considered several factors in determining the probability of realizing deferred income tax assets including forecasted operating earnings, available tax planning strategies and Page 26 Table of Contents Nordson Corporation the time period over which the temporary differences will reverse. We review our tax positions on a regular basis and adjust the balances as new information becomes available. The effective tax rates for both the three and nine months ended July 31, 2025 were 21.0% and 19.7%, respectively, compared to 21.5% and 21.1%, respectively, for the same periods in 2024. Excluding a discrete tax impact related to the divestiture and related charges taken in the third quarter of 2025, the effective tax rates for the three and nine months ended July 31, 2025 were 19.4% and 19.2%, respectively. The effective tax rate for the nine months ended July 31, 2025 is lower than the U.S. tax rate of 21% primarily due to the foreign-derived intangible income deduction. Net Income Net income was $125,784, or $2.22 per diluted share, for the three months ended July 31, 2025, compared to net income of $117,327, or $2.04 per diluted share, in the same period of 2024. This represented a 7.2 percent increase in net income and a 8.8 percent increase in diluted earnings per share. The increase in net income and increase of $0.18 per diluted share was primarily driven by higher operating profit, partially offset by higher interest expense due to prior year's acquisitions and the divestiture and related charges associated with exiting the medical contract manufacturing business. Net income was $332,840, or $5.83 per diluted share, for the nine months ended July 31, 2025, compared to net income of $345,116, or $5.99 per diluted share, in the same period of 2024. This represented a 3.6 percent decrease in net income and a 2.7 percent decrease in diluted earnings per share. The decrease in net income and decrease of $0.16 per diluted share was primarily driven by higher interest expense due to prior year's acquisition and the divestiture and related charges associated with exiting the medical contract manufacturing business. Foreign Currency Effects It is not possible to precisely measure the impact on operating results arising from foreign currency exchange rate changes, because of changes in selling prices, sales volume, product mix and cost structure in each country in which we operate. However, if transactions for the three months ended July 31, 2025 were translated at exchange rates in effect during the same period of 2024, we estimated that sales would have been approximately $13,000 lower while costs of sales and selling and administrative expenses would have been approximately $8,000 lower. If transactions for the nine months ended July 31, 2025 were translated at exchange rates in effect during the same period of 2024, we estimated that sales would have been approximately $3,000 higher while costs of sales and selling and administrative expenses would have been approximately $500 lower. Other Trends Changes in trade policies, tariffs, and other import/export regulations of the U.S. and other nations did not have a material impact on our financial results for the nine months ended July 31, 2025. However, the Company does have sales and purchases that could be negatively impacted by recent tariff actions. The Company continues to actively work to minimize the impact of these changes and mitigate risk. Page 27 Table of Contents Nordson Corporation Financial Condition Liquidity and Capital Resources Cash and cash equivalents increased $31,836 during the nine months ended July 31, 2025. Approximately 82 percent of our consolidated cash and cash equivalents were held at various foreign subsidiaries as of July 31, 2025. A comparison of cash flow changes for the nine months ended July 31, 2025 to the nine months ended July 31, 2024 is as follows: Nine Months Ended July 31, 2025 July 31, 2024 Increase (Decrease) Net Income and non-cash items $ 469,659 $ 460,197 $ 9,462 Changes in operating assets and liabilities 46,605 (385) 46,990 Net cash provided by operating activities 516,264 459,812 56,452 Additions to property, plant and equipment (49,002) (43,786) (5,216) Other - net 4,272 8,896 (4,624) Net cash used in investing activities (44,730) (34,890) (9,840) Payments of long-term debt - net (94,664) (244,355) 149,691 Repayment of finance lease obligations (4,083) (4,505) 422 Dividends paid (133,008) (116,789) (16,219) Issuance of common shares 5,419 29,142 (23,723) Purchase of treasury shares (218,194) (34,105) (184,089) Net cash used in financing activities $ (444,530) $ (370,612) $ (73,918) Additions to property, plant and equipment were largely driven by productivity and growth projects, including a new manufacturing facility. We have a $1,150,000 unsecured multi-currency credit facility with a group of banks that provides for a term loan facility in the aggregate principal amount of $300,000, maturing in June 2026, and a multicurrency revolving credit facility in the aggregate principal amount of $850,000, maturing in June 2028. At July 31, 2025, we had $280,000 outstanding on the term loan facility and $243,000 outstanding on the revolving credit facility. Our operating performance, balance sheet position and financial ratios for nine months ended July 31, 2025 remained strong. The Company is well-positioned to manage liquidity needs that arise from working capital requirements, capital expenditures and contributions related to pension and postretirement obligations, as well as principal and interest payments on our outstanding debt. Our primary sources of capital to meet these needs, as well as other opportunistic investments, are a combination of cash on hand, which was $147,788 as of July 31, 2025, cash provided by operations, which was $516,264 for the nine months ended July 31, 2025, and available borrowings under our loan agreements and unused bank lines of credit, which totaled $824,120 as of July 31, 2025. Cash from operations, which, when combined with our available borrowing capacity and ready access to capital markets, is expected to be more than adequate to fund our liquidity needs over the twelve months and the foreseeable future thereafter. The Company believes it has the ability to generate and obtain adequate amounts of cash to meet its long-term needs for cash. However, the impact of changes in trade policies, tariffs, and other import/export regulations of the U.S. and other nations could negatively impact our cash flow from operations and liquidity in future periods. Page 28 Table of Contents Nordson Corporation Safe Harbor Statements Under the Private Securities Litigation Reform Act of 1995 This Quarterly Report on Form 10-Q, particularly “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements within the meaning of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Private Securities Litigation Reform Act of 1995. Such statements relate to, among other things, income, earnings, cash flows, changes in operations, operating improvements, businesses in which we operate and the United States and global economies. Statements in this Quarterly Report on Form 10-Q that are not historical are hereby identified as “forward-looking statements” and may be indicated by words or phrases such as “anticipates,” “supports,” “plans,” “projects,” “expects,” “believes,” “should,” “would,” “could,” “hope,” “forecast,” “management is of the opinion,” use of the future tense and similar words or phrases. These forward-looking statements reflect management’s current expectations and involve a number of risks and uncertainties. These risks and uncertainties include, but are not limited to, U.S. and international economic and political conditions; financial and market conditions; currency exchange rates and devaluations; possible acquisitions and the Company’s ability to complete and successfully integrate acquisitions, including the integration of Atrion; the Company’s ability to successfully divest or dispose of businesses that are deemed not to fit with its strategic plan; the effects of changes in U.S. trade policy and trade agreements, including changes in tariffs by the U.S. or other nations; the effects of changes in tax law; and the possible effects of events beyond our control, such as political unrest, including the conflicts in Europe and the Middle East, acts of terror, natural disasters and pandemics. In light of these risks and uncertainties, actual events and results may vary significantly from those included in or contemplated or implied by such forward-looking statements. Readers are cautioned not to place undue reliance on such forward-looking statements. These forward-looking statements speak only as of the date made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Factors that could cause our actual results to differ materially from the expected results are discussed in Part I, Item 1A, Risk Factors in our 2024 Form 10-K and Part II, Item 1A, Risk Factors in the Quarterly Report on Form 10-Q.