Nordson : Third Quarter 2020 Results Presentation

INVESTOR

PRESENTATION

August 19, 2020 I NASDAQ: NDSN

Nordson's Test and Inspection division has a robust offering, including x-ray, acoustic imaging, bond testing, and automated optical inspection capabilities. Pictured here is the DAGE Assure™ high speed X- ray component counter which offers live inventory management to increase productivity and minimize component shortage downtime.

Safe Harbor Statement

Under the Private Securities Litigation Reform Act of 1995

Certain statements contained in this release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by terminology such as "may," "will," "should," "could," "expects," "anticipates," "believes," "projects," "forecasts," "outlook," "guidance," "continue," "target," or the negative of such terms or comparable terminology. These 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 conditions, financial, and market conditions, currency exchange rates and devaluations, possible acquisitions including the Company's ability to successfully integrate acquisitions; the effects of changes in U.S. trade policy and trade agreements; the effects of changes in tax law; and the possible effects of events beyond our control, such as political unrest, acts of terror, natural disasters and pandemics, including the current coronavirus (COVID-19) pandemic and the other factors discussed in Item 1A (Risk Factors) in the Company's most recently filed Annual Report on Form 10-K and on its Form 10-Q with the Securities and Exchange Commission, which should be reviewed carefully. The Company undertakes no obligation to update or revise any forward- looking statement in this presentation.

2

A premier industrial technology company focused on precision dispensing,

fluid control and related processes and proprietary technology.

1954		$2.2B		$587M	7,500+	35+
Company Founded		*Sales		*EBITDA		Employees		Countries with
								Direct Presence

3

*Sales and EBITDA for the full fiscal year ended 10/31/19.

Investment Highlights

Strong Average

Annual Sales

Growth

5%

Average

2015-2019

4

Outstanding	Excellent	High Level of	Strong Cash
Gross Margins	EBITDA	Free Cash Flow	Returns to
	Margins	Before	Shareholders
		Dividends

55%	26%	$1.2B	$895M
Gross Margins	EBITDA	100% of	Share
Average	Margin	Net Income	Repurchases &
		Dividends
2015-2019	Average	2015-2019
	2015-2019		2015-2019

Reliable and	Outstanding
Consistent	Long Term Total
Dividend	Shareholder
	Returns

56 yrs	21%
of Annual	TSR CAGR

Increases

2009-2019

24% payout ratio

in 2019

Diversified Sources of Sales

FY2019 Profile - $2.2 Billion

Product Type

Geographies

					7%
23%			Parts and		6%		United States
			Consumables		35%		Europe
			Standard Product	26%
	54%				Asia Pacific
						Japan
23%			Engineered
					Americas
			Systems		26%

High percentage of recurring	Nearly 70% of sales outside USA.
sales from parts and	Direct presence in over
consumables.	35 countries.

5

Diversified End Markets

FY2019 Profile - $2.2 Billion

6%

12%

16%

4%

23%

End markets include:

 Electronic Components: semiconductors, printed circuit boards,

computing, communications/mobile, consumer electronics (i.e.,

gaming, wearables, automotive electronics)

 Consumer Non-Durable: beverage, disposable hygiene, food,

paper, textiles, packaging

 Medical: minimally invasive interventional delivery devices,

catheters, medical balloons, fluid connection components,

	22%
17%
Electronics	Consumer Non-Durable
Medical	OEM
Industrial	Automotive
Consumer Durable

specialty tubing

 Original Equipment Manufacturer (OEM)/Distributors:

Nordson products used to build manufacturing line, not end market

specific

 Industrial: aerospace, chemical, construction, energy, farm and

construction machinery, industrial machinery, rigid container,

metal, transportation

 Consumer Durable: appliance, furniture, lighting

 Automotive: applications for new vehicle platforms

6	*Percentages are for directional use only; may not add to 100% due to rounding.

Nordson Business Segments

INDUSTRIAL PRECISION SOLUTIONS*

55%

Delivers proprietary dispensing and processing technology to diverse end markets. Product lines commonly reduce material consumption, increase line efficiency, and enhance product brand and appearance.

Components are used for dispensing adhesives, coatings, paint,

finishes, sealants and other materials.

	Targeted organic growth rate:
7	1.5x Global GDP

ADVANCED TECHNOLOGY SOLUTIONS*

45%

Integrates proprietary product technologies found in customer

production processes, such as surface treatment, precisely controlled

dispensing of material and post-dispense test and inspection.

Components include single-use plastic molded syringes, cartridges, tips, fluid connection components, tubing, balloons and catheters.

Targeted organic growth rate:

2-3x Global GDP

*Segment mix for the full fiscal year ended 10/31/19

Industrial

Precision

Solutions

2015-19 Average

Annual Sales Growth

Organic Acquisitive Currency

3.1% 0.1% (2.1%)

2019 Annual

Operating Margin

27.2%

What We Do

Product lines reduce material consumption, increase line efficiency, and enhance product brand and appearance. Components are used for dispensing adhesives, coatings, paint, finishes, sealants and other materials. This business primarily serves the industrial, consumer durables and non-durables markets.

1.5X GDP Growth Driven By:

• Increased use of disposable hygiene products (diapers, feminine care, etc.) and packaged convenience foods and plastics; demand increase driven by growing middle class
• Recapitalization of large installed base
• Productivity and efficiency investments
• New applications, including electric battery and fabric bonding
• Material, machinery and process innovations
• Emerging markets and product

tiering

8

Industrial Precision Solutions

FY2019 Profile - Diverse end markets

6% 5%

7%

40%

18%

24%
Consumer Non-Durable	OEM
Industrial	Automotive
Consumer Durable	Electronics

End markets include:

• Consumer Non-Durable:beverage, disposable hygiene, food, paper, textiles, non-wovens,packaging
• OEM/Distributor: Nordson products used to build manufacturing line, not end market specific
• Industrial: aerospace, chemical, construction, defense, energy, farm and construction machinery, industrial machinery, rigid container, metal
• Automotive: applications for new vehicle platforms; upgrades of current vehicle lines
• Consumer Durable: appliance, furniture, lighting
• Electronics: electronic products (i.e. wearables), printed circuit boards, UV curing of semi-conductor wafers and other electronic components

9	*Percentages are for directional use only

Advanced

Technology

Solutions

2015-19 Average

Annual Sales Growth

Organic Acquisitive Currency

5.2% 8.3% (0.9%)

2019 Annual

Operating Margin

20.9%

What We Do

Precision dispense, fluid management, test, inspection, surface treatment and proprietary solutions for medical, electronics and general industrial markets.

2-3X Global GDP Growth Driven by:

• Medical - Aging population, trends toward non- invasive surgical techniques and medical OEM outsourcing
• Broad product use across the electronics supply chain from integrated circuit to printed circuit board to end product assembly
• Circuit shrinkage / new architectures / flip chips
• New applications including automotive electronics, electric batteries, and flexible circuits
• Emerging markets
• Product tiering

10

Advanced Technology Solutions

FY2019 Profile - Diverse End Markets

1% 1%

4%

5%

6%

37%

7%

15%

24%

End markets include:

 Medical: minimally invasive interventional delivery devices,

catheters, medical balloons, fluid connection components, specialty

tubing

 Electronics: electronic components (i.e., computing;

communications/mobile; consumer electronics - gaming, wearables;

automotive electronics), semiconductors, printed circuit boards

 OEM/Distributor: Nordson products used to build manufacturing

line, not end market specific

 Industrial: aerospace, construction, defense, energy, industrial

machinery

 Consumer Durable: general applications (i.e., furniture, lighting)

Medical Semiconductors

Printed Circuit Boards

Automotive

Consumer Durable

Electronic Components

OEM

Industrial

Consumer Non-Durable

 Consumer Non-Durable: disposable hygiene, food, textiles

11	*Percentages are for directional use only

Strong Culture & Values

We have a long and proud history of investing in the communities where we live and work.

We invest approximately five percent of domestic pretax earnings to human welfare services, education and other charitable activities.

Our	$109M+		100K+		$3M	30+
commitment
to giving
back	Overall Giving to Date		Total Employee		Towards		Global Communities
		Hours Volunteered		Nordson BUILD		We Invest In
					Scholarships

12

Why Invest in Nordson?

Our Priorities

Our plan is to deliver top shareholder returns by growing and extending our high value business model in precision dispensing and adjacent technologies.

1 Accelerate organic growth

2 Diversify through

acquisitions

Leverage Nordson

3 Business System (NBS)

for profitable growth

4 Build Winning Teams

14

Organic Growth

We expect to accelerate organic growth by creating our own demand.

Multiple Paths to Organic Growth:

1. New Products
2. New Applications
3. Recapitalize Installed Base
4. Emerging Markets
5. Product Tiering

Reported Organic Sales Growth (2015-2019):

4% Average Annual Growth

15

Key Acquisitions

Additional growth comes through the acquisition of companies that share our business model characteristics and can leverage our global infrastructure.

Key Criteria for Acquisitions:

1. Strategic Fit
2. High Quality Businesses: Strong Performers & Proprietary Technology
3. Growth Rate at or Above Nordson
4. High % of Recurring Sales
5. Sales and Cost Synergies

Sales Growth from Acquisitions (2015-2019):

3% Average Annual Growth

16

Strong Growth: Organic and Acquisitive

On average across the past five years, Nordson has delivered annual sales growth of 5 percent, inclusive of

4 percent organic growth, 3 percent growth related to the first year effects of acquisitions and a

decrease of 2 percent related to the unfavorable effects of foreign currency.

15.0%

13.0%

11.0%

9.0%

7.0%

5.0%

3.0%

1.0% -1.0%-3.0%-5.0%-7.0%

		14.3%
		6.9%
	2.0%	2.0%	9.1%
		7.1%
2.4%		4.6%
6.5%	7.9%
3.4%
	2.5%	0.4%
-0.9%	-1.4%	-0.5%	-1.1%
			-2.0%
-6.7%			-2.7%

17	2015	2016	2017	2018	2019

Organic Growth		Acquisitive Growth		Currency Impact	Total Growth

Leverage Nordson Business System

A growth framework driving the company's next chapter of profitable growth.

The NBS growth framework integrates Nordson's core strengths with new capabilities to drive sustainable, profitable growth of the company:

1. Strategic Discipline - select and invest in the most attractive growth opportunities
2. Customer Passion - sustaining Nordson's "close to the customer" model
3. Product Innovation - delivering market leading precision technology
4. Continuous Improvement - achieving best in class safety, quality, delivery and value in a consistent and repeatable way
5. Organizational Agility - developing world class talent that adapts to dynamic market conditions

18

Build Winning

Teams

Create a deep and diverse pipeline of talent to lead Nordson's next chapter of profitable growth

As Nordson grows, we need to enhance our talent pipeline:

1. Develop talent through divisional leadership opportunities
2. Focus on inclusion and diversity
3. Empower employees to make decisions close to the customer
4. Create an engaging culture that attracts and retains top talent

19

Financial Results

Fiscal 3Q2020 Results

	$538M		$112M		$148M		$82M	$1.49
	Sales		Operating Profit		EBITDA		Free Cash Flow Before		GAAP Diluted EPS
			(21% of Sales)		(28% of Sales)		Dividends
21							(94% of net income)
						Year to date cash conversion is
							119% of net income

Total Shareholder Return Above Our Peers

Comparison of 10 Year Cumulative Total Return

800.00
700.00
600.00
500.00
400.00
300.00
200.00
100.00
0.00
2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019
Nordson Corporation	S&P 500 Index		S&P MidCap 400	S&P 500 Ind. Machinery	S&P MidCap 400 Ind. Machinery	Peer Group

22Assumes Initial Investment of $100 on November 1, 2009 Fiscal Year Ending October 31, 2019

Source: Zack's Investment Research

Industry Leading Gross Margins

Consistently Mid 50s

70%
60%	54.9%	55.1%	54.8%	54.3%
54.1%
50%
40%
30%
20%
10%
0%
2015	2016	2017	2018	2019

23

Strong EBITDA Margins

$000

$700,000

$600,000

$500,000

$400,000

$300,000

$200,000

$100,000

$0

Continuous Improvement Initiatives

5 Year CAGR = 6.6%

26.8%26.7%

26.4%

25.4%

22.7%

*2015

2016

2017

2018

2019

24	*FY15 results impacted by significant negative currency translation effects compared to the prior year.

EPS Growth

High gross margins lead to significant volume leverage

			5 Year CAGR = 8.6%
$7.00				$6.40
$6.00					$5.79
$5.00		$4.73	$5.08
$4.00	$3.45
$3.00
$2.00
$1.00
$0.00	*2015	2016	2017	2018	2019

25	*FY15 results impacted by significant negative currency translation effects compared to the prior year.

Strong Cash Generation

Funds Growth and Returns to Shareholders

Strong Cash Conversion: 2015 - 2019

2019 Free Cash Flow Before Dividends

= 95% of Net Income

$450,000 $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000

$50,000 $-

* 2015	2016	2017	2018	2019
		Free cash flow before dividends		Net income

26

*FY15 results impacted by significant negative currency translation effects compared to the prior year.

Disciplined Capital Deployment

37% or $894.5 Million to Shareholders via Share Repurchases and Dividends

100%

80%

60%

40%

20%

0%

-20%

	$37.7	$21.3	$62.5	$3.2							Working	$192.1
	$24.0						Capital 8%
		$63.8					$79.7
												Share Repurchases
		$33.4
												23%	$565.0
										$72.4
	$383.9	$56.4										$120.5			Dividends	$329.5
										14%
				$805.9					$50.6
		$42.7										$82.1			Acquisitions	$987.3
													40%
	$54.8
													$12.5
	$75.6	$64.6							$94.7
											$67.8			PP&E/Leases
															$366.6
	$66.7			$72.8									15%
	2015	2016	2017					$(9.1)			2019						TOTAL
					2018

• Self funding business model generates excess cash
• Low working capital requirements
• Low capital expenditures (approx. 3% of sales)
• Strong free cash
• 56 consecutive years of dividend increases - 14th among publicly traded companies

27

PP&E / Capital Leases		Acquisitions		Dividends		Share Repurchases		Working Capital

ProvenInvestmentFinancial PerformanceSummary

1. Clear Strategy and Goals
2. Strong Execution and Performance
3. Leading Global Businesses
4. Numerous Growth Opportunities
5. Outstanding Culture and Values
6. Committed to Community

Appendix

• Product Innovation
• Historic Financials
• 3QF2020 Financial Exhibits

Appendix:

Product Innovation

Our Electronics Industry Position

Solder paste

inspection

Solder paste

printer

31

Surface Mount Manufacturing

Flux spray	Optical	Inline Systems	Plasma	Underfill,	Optical	X-ray	Conformal
coating	inspection		surface	encapsulation	inspection	inspection	coating
			treatment	or
				precise coating

Component placement

Reflow oven

QA Lab / Island of Automation

X-ray inspection

Acoustic inspection

Bond testing

Our Role in the Semiconductor Process

32

Advanced Technology - Fluid Management

Precision Low-Volume Dispensing	Optimum® Syringe Barrels and Tips

From benchtop dispensers to industry-best	Optimum® components are designed as a
jetting valves and automated dispensing	complete system to help companies
robots, Nordson EFD systems deliver	improve yields and reduce costs.
accurate, repeatable deposits of glues,
greases, and other industrial fluids in	Dispense tips deliver a clean, smooth flow
precise, low-volume applications.	path, free of flash and burrs. In 200+ sizes
	and styles, tips are lot-tracked for process
33	control and traceability.

Life Sciences

Fluid Management Components

From specialty tubing, catheters, medical balloons, quick-connect couplings and couplers, Nordson is an expert in the design, development and manufacture of complex medical devices and component technologies.

Core Adhesives Innovative Technology

Auto-fill Tankless	Variable Dispense	Foaming	Jetting	Precision dispense
Technology	Technology	Technology	Technology	technology
Adhesive fill systems	Delivering different	Maintains bond strength	Dispenses adhesive	Increases production
monitor and maintain	add-on rates with one	while reducing volume	using non-contact jetting	efficiency for nonwovens
optimum adhesive levels	applicator	of adhesive required	into channels as small	manufacturing process
			as 0.3mm or 300 micron
			per second

34

Appendix:

Historic Financials

Strong Capital Management

Net Debt to EBITDA*

Strong cash generation lets Nordson de-lever quickly

At 1/31/2020 Net Debt to TTM EBITDA = 1.7 times

	Acquisitions &
3.00	Share
Repurchases
		Vention
2.50			Acquisition
2.00
1.50
1.00
0.50
0.00	2015	2016	2017	2018	2019

36At fiscal years ending 10/31

* Net Debt to EBITDA calculated net of cash

Strong Capital Management

Debt position as of 7/31/2020

$900		Drawn		Available
$800				$850
$700
$600
$500
$400	$405
			$350
$300		$178(b)
$200
$100	$5.5	$134(a)	$110	$86
$0

Term Loan A

NYL

Term Loan A 2012 Private 2015 Private 2018 Private

Revolver

(US) & PNC

(EUR)

Placement

Placement

Placement

Loan

$200M -at 60.0 bps,

Amortizing avg

Maturity 3/31/23

Amortizing avg

Amortizing avg.

Amortizing avg.

Ends April, 2024

maturity 9/30/22

rate: 2.21%

 (a) 75.0 bps over

rate: 3.07%

rate: 3.06%

rate: 3.90%

78.5 bps over

$205M -at 70.0 bps,

Remaining avg.

EUR Libor

Remaining avg.

Remaining avg.

Remaining avg.

USD Libor at

37

maturity 3/31/24

life: 0.09 yrs

 (b) 67.0 bps over

life: 2.58 yrs

life: 4.16 yrs

life: 5.30 yrs

3/25/20

EUR Libor

EUR denominated

Innovation Drives Organic Growth

Steady Stream of New Products

	$60,000						80
	$50,000	62	63				70
thousands)(inSpendR&D		58			GrantedPatentsU.S.ofNumber
					60
	$40,000			51		47	50
	$30,000						40
	$20,000						30
							20
	$10,000						10
	$0	2015	2016	2017	2018	2019	0
38			R & D Spend	U.S. Patents Granted

Currency Impact

Annual Sales Growth and EPS

20.0%

15.0%

10.0%

5.0%

0.0%

-5.0%

-10.0%

2015

2016

2017

2018

2019

Currency Effect Volume Growth

39	FX Impact to EPS:	($0.54)	($0.19)	($0.03)	$0.24	($0.30)

Appendix:

Financial Exhibits

Nordson Corporation

2015 - 2019 Sales Growth

Nordson Corporation

	Organic	Acquisitive	Currency	Total
FY2015	3.4%	2.4%	-6.7%	-0.9%
FY2016	6.5%	2.0%	-1.4%	7.1%
FY2017	7.9%	6.9%	-0.5%	14.3%
FY2018	2.5%	4.6%	2.0%	9.1%
FY2019	-1.1%	0.4%	-2.0%	-2.7%
5 yr avg	3.8%	3.3%	-1.7%	5.4%

Advanced Technology Solutions		Industrial Precision Solutions

	Organic		Acquisitive		Currency		Total
FY2015	1.7%	6.9%	-2.9%	5.7%
FY2016	10.1%	4.6%	-0.8%	13.9%
FY2017	15.1%	18.3%	-0.7%	32.7%
FY2018	3.8%	10.7%	1.3%	15.8%
FY2019	-4.6%	0.9%	-1.4%	-5.1%
41 5 yr avg	5.2%	8.3%	-0.9%	12.6%

	Organic		Acquisitive		Currency		Total
FY2015	4.2%		0.2%		-8.6%		-4.2%
FY2016	4.7%	0.5%	-1.7%	3.5%
FY2017	3.5%	0.0%	-0.3%	3.2%
FY2018	1.4%	0.0%	2.5%	3.9%
FY2019	1.9%	0.0%	-2.5%	-0.6%
5 yr avg	3.1%	0.1%	-2.1%	1.2%

42

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44

45

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