Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Nordson Announces Agreement to Acquire ARAG Group conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. Thank you. Lara Mahoney, you may begin your conference. Thank you, Rob. Good morning. This is Lara Mahoney, Vice President of Investor Relations and Corporate Communications. I'm here with Sundaram Nagarajan, our President and CEO, Joseph Kelley, Executive Vice President and CFO, and Jeff Pembroke, Executive Vice President of the Industrial Precision Solutions segment. We welcome you to our conference call today, Monday, June 26th, 2023, to discuss this morning's announcement of our agreement to acquire ARAG, a global market and innovation leader in precision spraying technology. A press release about the transaction was issued earlier today. You can find a copy of the release, as well as the webcast slide presentation that we will refer to during today's call, on our website at investors.nordson.com. This conference call is being broadcast live on our investor website and will be available there for 14 days. There will be a telephone replay of the conference call available until Tuesday, July 3rd, 2023. Before we begin, please refer to slide three of our presentation, where we note that certain statements regarding our future performance that are made during this call may be forward-looking 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. We'll now turn to slide four, and I'll turn the call over to Naga. Thank you, Lara. Good morning. Thank you for joining us today. Earlier today, we announced our intention to acquire ARAG, a global market-leading provider of dispense technologies in the precision agriculture end market. This is an exciting transaction, which represents a new milestone in our Ascend strategy to achieve top-tier growth with leading margins and returns. Precision technology is core to Nordson. Over nearly 70 years, we have expanded that expertise beyond our beginnings in industrial application to dispense for packaging, product assembly, nonwovens, electronics, medical, and more. Through it all, we adhered to disciplined strategic acquisition criteria, differentiated technology, generating Nordson-like gross margins, high growth end market applications, and a customer-centric business model. The acquisition of ARAG meets all of these criteria and expands our expertise into the high-growth end market of precision agriculture. When I toured ARAG's headquarters in Rovereto, Italy, I immediately recognized many Nordson-like qualities. First, the employees were passionate about their technology. We were able to see ARAG's high-quality precision ag spraying solutions in action. It was very interesting to learn about their process for testing solutions on customer tractors and sprayers in the land near the facility. In their customer-centric business model, ARAG's employees are solving unique problems for customers by improving crop yields and reducing waste of high-priced fertilizers and chemicals. Nordson-like, is the fact that ARAG's fluid components are primarily injection molded, which is another core capability of Nordson, and the product portfolio itself lends itself well to a high level of recurring revenue. ARAG will be a division in the Industrial Precision Solutions segment. I will now turn the call over to the IPS segment leader, Jeff Pembroke, to share more about the end market growth drivers and ARAG's product portfolio. Thank you, Naga. Echoing what Naga shared, I'm very pleased that ARAG's employees, technical capabilities, and product portfolio will become part of Nordson's IPS segment. On slide five, you'll note the addressable market for ARAG's technology today is approximately EUR 1.4 billion, with an attractive growth rate of high single digits. The precision agriculture spraying market is showing attractive growth due to secular drivers, including population growth and rising demand for food, lack of arable land, requiring an increase in productivity, environmental policies and regulatory trends to minimize pesticide and chemical usage across geographies, and the increasing demand for technology to support customer profitability through precision spraying systems that boost crop yields and reduce fertilizers and chemical costs. ARAG's superior customer proposition has allowed the company to consistently outperform the market. ARAG has one of the broadest and deepest portfolios in the precision agriculture spraying and control systems market, divided into three product families, as seen on slide six. First is fluid components. These injection molded components, including valves, filters, fittings, and nozzles, are placed on the implements or attachments of sophisticated farming vehicles. These products facilitate flow and control the dispense location and volume of a variety of materials. These components have a high level of recurring revenue through aftermarket and replacement parts. The second area of the product portfolio is smart components, which include electric valves, flow meters, sensors, and control units. These products adjust the flow and improve the efficiency of its customers' spraying operations. Finally, ARAG produces control systems, including control devices for spray and flow rate, which are connected to GPS location tracking and supported by proprietary software. ARAG's software capabilities are highly differentiated. For example, its sensors detect plants, and it can adjust the spray based on each plant's specific location and size. ARAG is differentiated as it offers its customers highly engineered and complete solutions for precision ag spraying, selling systems that cover the full range of fluid management solutions. A family-founded business established in 1976, ARAG serves its customers through seven manufacturing and distribution locations globally, and a sales network serving more than 80 countries. It has market-leading positions in Europe and South America. This is driven by ARAG's robust product quality and reliability, its breadth of product portfolio, which allows customers to work with one supplier, an innovation platform and strong application know-how, as well as design support capabilities that includes tailored customer solutions and a responsive business model. ARAG will maintain its entrepreneurial, close to the customer model as a division in Nordson's division-led organizational structure. Our organization prides itself on an owner mindset with close to the customer decision-making. We will provide them with resources and the NBS Next Growth Framework to continue to differentiate and grow their technology portfolio. We see meaningful opportunity to build ARAG's footprint in North America, where they have limited presence today. We are excited by the opportunity to grow ARAG's technology through Nordson's strong brand and commercial infrastructure in North America, particularly as the United States is one of the largest agriculture markets in the world. During our diligence, I had the opportunity to meet with ARAG's North American commercial team, and I was very pleased with their energy and the expertise they are bringing to the market. Let's turn to slide seven, and I'll turn the call to Joe Kelley to discuss the transaction summary. Thank you, Jeff. ARAG has a strong financial profile that is underpinned by the details that Jeff just reviewed, notably, leading innovation capabilities and favorable secular growth trends in precision agriculture. ARAG's growth rate and EBITDA margin profile is accretive to Nordson. ARAG is expected to generate, full-year 2023 sales of EUR 155 million and EBITDA of approximately EUR 58 million or 37% of sales. With a purchase price of EUR 960 million, the transaction reflects a valuation of approximately 16.5x ARAG's projected 2023 EBITDA, and 13.5x the fully synergized 2025 EBITDA. We expect synergies to come from solid growth in the North America market, combined with modest net cost synergies from leveraging the Nordson global infrastructure. The acquisition of ARAG emphasizes Nordson's disciplined capital deployment strategy, which is focused on high quality niche leaders, serving attractive growth markets that are additive to Nordson's existing lines of business and support long-term shareholder value creation, achieving high single-digit return on invested capital in year five. We will finance this transaction through a combination of cash on hand and financial debt. We expect to close in Nordson's fourth quarter fiscal 2023, and exit the year with a net debt to EBITDA leverage ratio of approximately 2x. I will now turn the call back to Naga. Thank you, Joe. We are very excited to welcome ARAG and its 700 global employees to the Nordson team upon close of this transaction. All of what you have just heard energizes us as we make progress on our long-term Ascend strategy to deliver top-tier growth with leading margins and returns. With that, we will now open the call for questions. At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. Our first question comes from the line of Mike Halloran from Baird. Your line is open. Hey, good morning, everyone. Good morning, Mike. A couple questions here. Can you just frame up the competitive dynamics, you know, in, you know, essentially sales channels and things like that? It seems like you're selling to the big OEs in that space, but then you also have the aftermarket throughput. Is this all through that channel? Does some of it go through distribution? How does that mix work? Maybe just put it in context of what the competitive landscape looks like for the product class itself. Hey, Mike, this is Jeff Pembroke. I'll take that question. The from a competitive landscape, I think we'll step back and start with a comment that ARAG has the broadest portfolio across those... in a full portfolio across those three components that I mentioned, the fluid components, smart components, and controls. The rest of the competitive field is, could be a player, that may be strong in one of those areas, but not all of them. We do feel ARAG has the broadest portfolio, across that. As far as the sales channels go, they do sell directly to the large OEMs. There's sort of a tier one, tier two structure on the OEM side. There's also independent sprayer manufacturers, that they would sell to. They're selling to the OEMs, they're, and they're selling through a distribution network as well, where the spray contractors or farmers themselves would purchase additional components and upgrade their systems. Mike, one thing to add would be on the recurring revenue piece. On the distribution side, it's about 40% flow through distributors for the aftermarket revenue. Think of that as 60% direct OEM, 40% aftermarket through distribution. Great. That's super helpful. Two more. First, how are you guys thinking about the ag cycle? I can certainly see the secular dynamics here. I think that's pretty clear. Would love to get some thoughts on how you're viewing this cycle as we sit here today. Any concerns that ag's towards a peak? Obviously, the secular dynamics are gonna help you either mitigate downside and certainly accelerate good growth long term. Love some thoughts on how you think about ag in the shorter to medium term here. Yeah. I think it is important to draw the distinction between ag cycle in general versus precision agriculture. In our understanding of the market and the work we have done, what we find is that the precision agriculture niche of the market has been growing and will continue to grow, you know, through the cycle, and that's what gives us confidence that it'll be not the same as an ag cycle. That's the number one. Number two, is 40% of the revenue is recurring revenue. That, again, is another way to think about it. Third, think about the secular drivers that this business enjoys. You know, what is going to drive is essentially population growth. On the opposite side, you have arable land, pretty much, you know, constant or is not going to increase, right? Population growth increasing, arable land remaining the same, productivity has to pick up, that's sort of where precision agriculture comes in. The other thing to remember, what Jeff commented about in his opening remarks, is that there is regulatory constraints on farming around- Mm-hmm. chemical usage, fertilizer usage. You know, we fundamentally believe that these great secular drivers, essentially what allows ARAG to continue to grow. You know, if you look at their historical performance, we feel pretty strongly about their growth prospects. Yeah, Naga, I might just add-. Go ahead, sorry. I might just add on to that implements, as far as cyclicality goes, implements are more relevant to the precision ag space than tractor sales. You won't see as much cyclicality as you will. Yes. - perhaps in the tractor. No, that's good. Yeah, that's a good point. That's a good point. Last one, could you just give a little more finer point on what the approach to the North America market is? Obviously. ... You know, there's people playing in that space today. The original equipment manufacturers use whoever they use. Is this more penetrating that piece you just talked about, aftermarket type stuff in any kind of context and how you think you can move the needle in this market when it's already got some level of maturity to it? We're very excited about the North American market. As you can tell, that they've been predominantly in Europe and South America. That was really more by choice of the family owner historically. The North American market, it's about a $500 million market with high growth in the precision ag side. There's still a lot of innovation, there's still a lot of penetration going on in that space. Under the previous owner, the last couple of years, they've entered the North American market, established a U.S. presence. They've been operating for about a year, and they're seeing considerable momentum with the OEMs and the spray system manufacturers. We think it's a great opportunity. Thank you for that. Really helpful, everyone. Appreciate the time. Thank you. Thank you, Mike. Your next question comes from the line of Matt Summerville from D.A. Davidson. Your line is open. Just as a follow-up to the last question and answer. With respect to North America, do you essentially have or does ARAG essentially have OEM design or, you know, wins, any sort of channel capture that's already occurred to the extent, you know, you can talk about growth here that's already, you know, baked at this point into the future? Should we be thinking about it that way? Like, you have a number of wins already in hand, it gives you confidence in your ability to break into the market. Yeah. Yeah, I'll take that, Matt. Like I said, they've been operating in North America with a small growing team, penetrating key OEMs. They've, I think they've sold in now to 20 or 30 customers. They've got a good list of projects they're working on, and without getting too specific, I'll, I'll just at a high level mention there's two innovations that they've worked on directly on new platforms with some of the top OEMs in North America for new systems, for seeding, planting at high speed. Sprayers there and their new flow control valve technology on a new OEM system in North America. They are starting to see nice penetration, and they're working on new platforms. Understood. Then, maybe as a follow-up, can you talk about from a regional perspective between Europe, South America, and North America, what sort of penetration rates are in place with respect to this technology today? Where do you see those going, maybe over the next two to three years? Let me get us started broadly, and then, Jeff, you could add more color to it. You know, the way to think about precision agriculture is, it is in the early stages, both in the United States and Western Europe and in South America. There are other parts of the world where, you know, this is just in infancy in many ways. We feel strongly about the opportunity, in both North America, Europe, and South America, where it is just getting started. It has been around for some time, but it is still in the early days of market development. Asia is still a pretty nice opportunity for us. Yeah, I would just add, Naga, that if you look at the market itself with growth rates, high single-digit growth rates in some geographies, and for some of those product categories, double-digit growth. Again, I think that points to there's still a lot of penetration to be had. I would just add also, the recent increase that we're seeing in fertilizer costs and chemical costs, combined with the environmental pressures and regulations, is really, a growth driver impetus as it relates to the precision in terms of the dispensing of these fertilizers and pesticides. Understood. Thank you guys for the color. Your next question comes from the line of Allison Poliniak from Wells Fargo. Your line is open. Hi, good morning. You talked a lot about what ARAG, you know, can bring here to the market. What about specifically to the IPS segment? Is there any aspects of the technology they have that you could sort of transfer to the other aspects of the IPS portfolio? Yeah. Hi, Allison. This is Jeff. Yeah, we think one of the great things about this business as we looked at it, was how Nordson like it is. If you look at their fluid components, their valves, their control systems, we utilize that technology not only in the IPS segment, but in other parts of Nordson. We do think that there's going to be some ability to transfer that technology both ways, really. We think we can help some of what they're doing, and they've got some really good software capabilities, particularly in their control systems, that we think that we can leverage in other parts of Nordson. Great. You talked about it being a new division. Is this something that you can expand around in terms of M&A longer term, or how should we think about that comment? Thanks. Thanks, Allison. You know- We're just getting started. I think right now, the focus would be, you know, obviously close the transaction. you know, we're very excited about this opportunity and this new end market. We do believe there is opportunities there, but first things first, you know, we wanna, you know, get the ARAG team integrated in the company, go deliver on the commitments we're making. But we do think there is opportunities. There'll be a time where we can, you know, talk more about it. Perfect. Thank you. Your next question comes from the line of Saree Boroditsky from Jefferies. Your line is open. Hi, good morning. Just building on the cycle questions, how has ARAG performed in past down cycles in the ag market? What should we expect if we see that again? I think as we mentioned a little bit earlier, we've taken a look at cyclicality on the precision ag side. It's very muted, and it does not mirror the broader agriculture cycle. If you think about things like tractor sales and those things, you look back in time where those have gone through cycles, you've seen the precision ag products and solutions continue at steady rates and on a nice growth trajectory. I think there's not a strong correlation between the broader agriculture and certainly the tractor side of the market versus the precision ag side. Saree, what also helps that is the recurring revenue piece of it. There's some wear parts and consumables in this product portfolio that help mute that cyclicality. Sari, specifically to the question you asked around, how have they performed? Our analysis of their historical performance is that they have done fairly well and suggests the kind of secular growth that we're talking about. Great. Thank you for that color. Can you talk about the opportunity to expand the margins here using the NBS Next system? Yeah. I would say, Saree, this acquisition comes with a margin profile that's actually accretive to Nordson's existing profile. Really, this is all about using NBS Next as a growth framework to really accelerate the growth of this product portfolio, not a margin expansion story. They're sitting right now at 37% EBITDA margin. The opportunity here is to leverage NBS Next holistically to drive growth, not margin expansion. Got it. Appreciate the color. Thanks. Thank you. Your next question comes from the line of Jeffrey Hammond from KeyBanc Capital Markets. Your line is open. Hey, good morning, everyone. Good morning, Jeff. I just had a couple, you know, kind of finer point question. One, I think you said the market grows high- single- digits. Just maybe give us a sense of what ARAG has grown maybe over the last five years. Also, if you can give us a little more precision on the geographic mix as it stands today. Yeah, Jeff, ARAG has grown at a higher rate than the market over that time period, double digit growth rate over the past 10 years, exceeding the growth rate of the market. As far as the geographic split, Europe is about 58% of their revenue, South America, 25%. You've got a smattering of kind of other geographies, Australia and a few other countries. North America, currently sitting at 5%, and that's where we really see a big opportunity. Okay. you know, back on the North America market, can you just speak to, you know, is Europe and ARAG kind of ahead in precision ag adoption, penetration? maybe just speak to, you know, technology differentiation as you go into this new market and go against kind of the legacy competitors there. Yeah. I would say that, you know, it seems like Europe, maybe a little bit South America, a little bit ahead, there's been a lot of activity in North America, as you imagine, with the size of some of the global OEMs that are here, that's catching up quickly. On the technology side, as I mentioned earlier, all of our analysis showed that while there's competitors for each one of those product categories out there, for ARAG, none of them are really strong across the board in each of those offerings. They tend to be focused, either real high-level generalists without a lot of technology or deep technology in one or two areas. We're really excited about ARAG's technology being deep, competitive, and going across the full portfolio. Okay. If I could just fit in last one. How did you source this deal? Was it kind of on the, you know, on the roadmap, or was something brought to your attention and, you know, I assume it was kind of an auction process with PE? Yes. Jeff, this is Joe. We did acquire this from a PE firm, as we put in the press release, it was brought to us by our investment banking group. You know, as the target came to us, and you look at the dispensing technology, fluid dispensing, and then the growth rate of the end market... From a technology standpoint, it was very close to the core of what we do in IPS as well as in other segments, as it relates to fluid management and fluid dispensing in a precise manner. Then with a margin profile and the growth rate of the end market is what, you know, started to check all the strategic fit boxes for us. Yeah, I would just add that, you know, we constantly look for industrial precision technology, particularly industrial precision tech dispense technology. This particular end market is one that we've looked at for and studied a bit for a number of years, we were sort of ready when this, when this opportunity came. Okay, thanks so much. Thank you, Jeff. Again, if you would like to ask a question, press star, then the number one on your telephone keypad. Your next question comes from a line of Chris Dankert from Loop Capital Markets. Your line is open. Hey, morning. Thanks for taking my question. I guess just to put a finer point on the synergy side. Again, modest cost synergies that you highlighted, but really it sounds like, you know, it's the sales synergies in North America in particular, which are always a little tricky to achieve. I guess you sound very confident in the growth there, but I guess you mentioned there are a couple of deep technology competitors that are in the market. Can you kind of maybe highlight which categories those are or kind of where those harder incumbents to displace might be sitting? Yeah, before Jeff adds, Jeff's gonna add some more color, but let me just clarify. What we're excited about is the growth rate of this market. So if you think about how ARAG has performed over the last several years, and you study the actual growth drivers and behind precision ag, that is what really has us excited about the overall growth rate within precision ag and ARAG's competitive position with its product portfolio and technology to really solve customer problems and solutions in that market. So that's what has us excited. Then, they're well established in Europe, which is a very diverse agricultural market, if you think about the European landscape, and they've done a tremendous job of penetrating that market, have expanded into South America. I think just participating in the North America growth rate of that market, as well as, you know, perhaps expanding some penetration as it grows, is what has us excited. Jeff, you want to add some more? I would just add, in the US market, you know, I think historically, the, you know, the US customers were a bit hesitant to work with them, unless they were direct, you know, they were looking for kind of direct support. This investment they've made over the past year and a half in the US market is proving that out now, as I mentioned earlier, starting to get some wins, starting to work with OEMs on new platforms. That gives us a lot of encouragement. Yeah, I think, Chris, finally, what I would add is, look, as Joe indicated, great high growth market, huge opportunity to solve problems, which they have demonstrated they are really good at. What we find is that strong market, great opportunity to innovate, early wins, suggesting that as they focus in this market, you know, this growth is a really good place for us to be. Got it. Thank you all so much for the color. Much, much appreciated. I guess just my follow-up here. you know, on the software side, it sounds like some interesting proprietary solutions. I'm curious if you can talk to the mode or is there any kind of risk of being displaced by the OEMs on that front? Or how do those software solutions play with the OEM side, perhaps? Yeah, first, on the software side, a lot of what they do is really in a common architecture, an ISOBUS, CAN bus type mode. They can play across the broad industry and all of our customers' applications is probably the first thing. The second thing I would say is they, you know, a lot of the OEMs are focused on autonomous driving, focused on what's going on in the cab with that type of technology, and more looking toward companies like ARAG for outsourcing of the components and some of the controls that drive those components. It's kind of like the OEM focusing on where they play and looking to strategic suppliers like ARAG for the rest. Understood. Thanks again so much for the color, guys. There are no further questions at this time. I will now turn the call back over to Naga for some closing remarks. Thank you for your time and attention on today's call. We look forward to welcoming ARAG's employees, technical capabilities, and product portfolio to Nordson upon the close of this transaction. This is a significant milestone in our Ascend strategy to achieve top-tier growth with leading margins and returns. Have a great day. This concludes today's conference call. Thank you for your participation. You may now disconnect.