Ladies and gentlemen, thank you for joining us and welcome to the Nordson Corporation 4th Quarter and Fiscal Year 2025 Conference Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please raise your hand. If you have dialed in to today's call, please press star 9 to raise your hand and star 6 to unmute. I will now hand the conference over to Lara Mahoney. Please go ahead.

Thank you. Good morning. This is Laura Mahoney, Vice President of Investor Relations and Corporate Communications. I'm here with Sundaram Nagarajan, our President and Chief Executive Officer, and Dan Hopgood, Executive Vice President and Chief Financial Officer. We welcome you to our conference call today, Thursday, December 11, 2025, to report Nordson's fiscal year 2025, fourth quarter and full year results. You can find both our press release as well as our webcast slide presentation that we will refer to on today's call on our website at Nordson.com forward slash investors. This conference call is being broadcast live on our investor website and will be available there for 30 days. During this conference call, we will make references to non-GAAP financial metrics. We've provided a reconciliation of these metrics to the most comparable gap metric in the press release issued yesterday. Before we begin, please refer to slide two of our presentation, where we will note that certain statements regarding our future performance that are made during this call may be forward-looking based upon Nordsen'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. moving to today's agenda on slide three naga will discuss fourth quarter and full year highlights he will then turn the call over to dan to review sales and earnings performance for the total company and the three business segments dan also will talk about the year-end balance sheet and cash flow naga will conclude with high-level commentary about our enterprise performance including an update on the Ascend Strategy, as well as our Fiscal 2026 Full Year and First Quarter Guidance. We will then be happy to take your questions. With that, I'll turn to slide four

and hand the call over to Naga. Good morning, everyone. Thank you for joining Nordson's Fiscal 2025 fourth quarter and full year conference call i am pleased to share our solid fourth quarter results sales were up one percent over prior year inclusive of the divest share of our medical contract manufacturing business that closed on september 2nd adjusted earnings per share grew nine percent over the prior year reaching the high end of our fourth quarter guidance notably we achieved record EBITDA of two hundred and fifty six million dollars expanding EBITDA margin to thirty four percent in the quarter we also generated record cash flow of 194 million in the quarter which is a conversion rate to the net income of 128 percent this enabled us to continue repurchasing shares paying dividends and further reducing debt. This is a strong operational result and I want to thank the Norton team for their ongoing commitment to delivering value to our customers and shareholders. As I turn to fiscal 2025 financial highlights on slide five, I want to reflect on the progress we have made since launching the Ascent strategy five years ago. In addition to Norton's legacy strengths of leadership positions in diversified niche and markets, high recurring parts revenues, a direct-to-customer model, and differentiated products built on deep knowledge of our customers' demanding applications, the Ascent strategy has added new capabilities, including the NBS Next growth framework and a division-led structure which have empowered our teams to respond rapidly to changing market conditions. And certainly, we have navigated effectively through significant macroeconomic changes over the last five years. 2025 was no exception, and Knudsen delivered strong results in line with our initial guidance. We achieved record sales of $2.8 billion, up 4% from last year. Despite the macro disruptions, we delivered record-adjusted earnings per share of $10.24, exceeding the midpoint of our initial full-year guidance. We maintained our average gross margins of 55% in an evolving tariff environment, demonstrating the value and differentiation we provide to our customers. Throughout fiscal 2025, we also continue to strengthen our portfolio. The integration of Atrion Medical has been a success and it contributed nicely to sales and EPS growth in the first year. We also strengthened our medical portfolio through the divesture of our contract manufacturing business driving immediate improvement in our margins and increased focus on our remaining differentiated medical businesses all of these actions delivered EBITDA of 900 million dollars achieving our 2025 ascent strategy goal i would also like to highlight our full year free cash flow conversion of 136 percent of net income our strong cash generation enabled us to repurchase about 300 million dollars in shares increase dividends for the 62nd consecutive year and reduce our net debt ending the year at a 2.1 times leverage ratio near the low end of our targeted range. I'll speak more to the enterprise performance in a few moments, but first, I'll turn the call over to Dan to provide more detailed perspective on our financial results for the fourth quarter and fiscal year 2025.

Thank you, Naga, and good morning to everyone. I'll start on slide six, which summarizes our overall results for the fourth quarter. Fourth quarter 2025 sales were $752 million, up 1% compared to the prior year's fourth quarter sales of $744 million. Organic sales decreased 1% compared to the fourth quarter of 2024, with growth in our medical segment being offset by softness and selected industrial and advanced technology systems product lines during the quarter. Currency translation had a positive impact of 2% during the quarter, and we saw a small net positive from a combination of both the Atrion acquisition, which anniversaried in late August, and the divestiture of the medical contract manufacturing business, which we completed in early September. Adjusted operating profit increased 6% year-over-year to $218 million, reflecting both strong gross margin performance and improved SG&A leverage during the quarter. EBITDA was also up 6% year-over-year at $256 million and reached 34% of sales. This represents a 160 basis point improvement over the prior year fourth quarter. Adjusted operating profit and EBITDA margins benefited from solid operational performance, improved portfolio mix as a result of the divestiture of our medical contract manufacturing business, and the restructuring actions that we announced earlier in the year, which have now been substantially completed. It's worth highlighting that this is our third consecutive quarter of improving EBITDA margin amid the dynamic trade environment. This is a testament to our ability to execute and deliver operationally in dynamic times while also creating value through strategic M&A activity. If we look now at non-operating income and expense during the quarter, interest expense improved $4 million year-over-year, driven by reduced leverage and a stable-to-declining rate environment. This benefit was essentially offset by an increase in other non-operating expenses during the quarter. Tax expense was $31 million in the fourth quarter for an effective tax rate of 17.1%. This brings our full year tax rate to 18.9%, which is slightly better than our original guidance range for fiscal 2025. All of this resulted in gap net income that totaled $152 million or $2.69 per diluted share, excluding non-recurring acquisition and restructuring related expenses, as well as charges associated with the exit of the medical contract manufacturing business. Adjusted earnings per share totaled $3.03 per share, a 9% increase over the prior year, and 8 cents above the midpoint of our quarterly guidance, reflecting our strong operational performance during the period. Not only was this a strong year-over-year improvement in earnings, but on a dollar basis, it also represents a quarterly record for the company. Now let's turn to slides 7 through 9 to review our fourth quarter segment performance. Industrial precision solution sales of $362 million decreased 2% compared to the prior year fourth quarter. Organically, IPS was down just under 4% in the quarter with currency providing a favorable impact of about 2%. Although it was another quarter of improvement sequentially, year-over-year declines in our polymer processing product lines and some smaller reductions in our industrial coating systems outpaced solid growth in precision agriculture and packaging product lines. For both polymer processing and industrial coating systems, we see continued signs of stabilization and improvement in our backlog and order rates. So these areas should no longer be a drag on results heading into the first quarter of fiscal 2026. EBITDA for the quarter was $137 million, or 38% of sales, reflecting consistent and strong operational performance on slightly lower sales volumes during the quarter. Turning to slide 8, you'll see medical and fluid solution sales of $220 million increased 10% compared to the prior year's fourth quarter. Organic sales volume was up nicely at 7%, driven by broad-based demand across all of our product lines. I think it's fair to say that the de-stocking that was impacting our interventional product lines is now fully behind us, and we see good, stable demand in our order books heading into the new year. The final acquisition impact from Atrion, net of the sales reduction from divesting our medical contract manufacturing business, added a net 2% to sales during the quarter. After a successful year one integration, it's also worth noting that Atrion is now contributing nicely to organic growth that we achieved during the quarter. Finally, currency had a modest favorable impact on the overall sales versus the prior year. EBITDA for the quarter was $88 million or 40% of sales, which is an increase of 21% compared to the prior year EBITDA of $72 million or 36% of sales. This was a fantastic result with EBITDA margins up 380 basis points versus the prior year. While a big part of the margin improvement in the quarter is driven by the divestiture of our contract manufacturing business, our teams also continue to execute quite well and are now fully benefiting from the normalization in demand. Turning to slide 9, you'll see advanced technology solution sales of $171 million decreased 4% compared to the prior year's fourth quarter. This change included a decrease in organic sales volume of roughly 5% with a small positive currency benefit. The year-over-year organic sales decline was driven by weakness in X-ray systems demand. We continue to see strong growth in electronic dispense product lines and stable demand for optical, acoustic, and other product lines, but these were overshadowed by near-term weakness in X-ray systems during the quarter. As a reminder, our ATS revenue tends to be a bit lumpy quarter-to-quarter based on systems delivery. That said, we continue to see strong underlying momentum in our ATS end markets despite the lower year-over-year result in the fourth quarter. Fourth quarter EBITDA was $43 million, or 25% of sales, a decrease of 10% from the prior year fourth quarter EBITDA of $48 million, or 27% of sales. The decrease in EBITDA margin was reflective of lower sales volume and some unfavorable product mix during the quarter with stable underlying product line performance. Now, turning to slide 10, I'd like to make a few comments on our full year results. As Naga mentioned, fiscal 2025 full year sales were a record $2.8 billion and an increase of 4% year on year. Our acquisition and divestiture activity added a net 6% to sales for the year, while organic sales were down roughly 3%, and currency was a modest benefit. Looking back at the full-year sales result, organic sales were really weighed down by three specific areas. Polymer processing systems, our automotive-related systems, and selected x-ray inspection applications. In all cases the core fundamentals of these businesses remain strong and as we exit the year we see good stability in our backlog and order rates, meaning we've seen the trough. EBITDA for the full year increased 6% to a record 900 million dollars or 32% of sales. This reflects a full year incremental EBITDA margin of 49% and marks the fifth consecutive year that the Ascend strategy has delivered strong EBITDA growth. This results in GAAP diluted earnings per share of $8.51 for the year and adjusted diluted earnings per share of $10.24, both up 5% from the prior year and representing a new record for adjusted diluted earnings per share. In a year that's been full of surprises, we're quite proud of these results and we like where we're positioned heading into fiscal 2026. Finally turning to the balance sheet and cash flow on slide 11. At the end of the fourth quarter we had cash on hand of 108 million and net debt was approximately 1.9 billion resulting in a leverage ratio of 2.1 times a significant reduction from where we started the year. While we did benefit from roughly 30 million dollars in net proceeds from the contract manufacturing sale, our free cash flow really enabled this debt reduction. And our free cash flow generation remains quite strong, an annual record of $661 million and a cash conversion rate of 136% on net income. This strong cash conversion was primarily driven by targeted improvements in working capital, which is an area that we remain focused on. As a result of our strong free cash flow during the year, we were able to repurchase approximately $300 million in shares, reduce our net debt by about $224 million, and pay $179 million in dividends while continuing to invest approximately $60 million in capital projects to drive organic growth. This positions us quite well heading into 2026 for continued returns to shareholders, with plenty of firepower to continue to add attractive assets to the portfolio. In summary, we had another strong operational quarter, and we finished the year strong, exceeding our original profit commitment for the year, despite a very dynamic macro environment. We closed fiscal 2025 with a strong balance sheet while returning value to shareholders due to record-free cash flow generation, and we took action to optimize our medical portfolio, positioning us for continued profitable growth. As we enter fiscal 2026, with our key market headwinds behind us, we're well-positioned to capitalize on profitable growth opportunities, and we're confident in our ability to convert those opportunities to bottom-line results and value. With that, we'll now turn to slide 12, and I'll return the call to Naga.

Thank you, Dan. In October 2024, we announced our 2025 to 2029 performance targets. In 2029, when we look back on our financial performance for that period, we expect to to deliver an average annual growth of 6% to 8% in revenue, balanced between organic and acquisitive growth, and 10% to 12% in adjusted EPS growth. In 2025, we managed effectively through some dynamic macroeconomic conditions and made progress towards our goals. Turning to slide 13, I'd like to talk about what we are seeing in our end markets as we enter fiscal 2026 starting with our industrial precision solution segment we continue to see sustaining investments in packaging and product assembly and markets precision agriculture demand is sustainable in europe and south america given the strengthening demand for increasing yields and quality in these regional markets. Demand in auto and polymer processing end markets has stabilized. Through it all, aftermarket parts remain a stable part of the IPS revenue portfolio, contributing to growth and delivering attractive margins. Overall, we expect the IPS segment to return to more normal growth rates of low single digits in medical customer destocking is behind us and our core business is returning to mid single digit organic growth the demand drivers fueling this end market such as the aging of the population and shift towards non-invasive surgeries remain consistent and our medical team has a healthy pipeline of customer projects. In ATS, our semiconductor applications are well positioned to benefit from investments in the semiconductor cycle. We remind our investors of semiconductor applications account for approximately 50 percent of ATS revenue. While timing of orders remain lumpy, our team is winning share based on our ability to deliver innovative new products in short lead times. This is possible because we have holistically applied MBS Next. In addition to being located close to the customer our products deliver leading productivity and quality in complex advanced packaging applications of semiconductors used for ai cloud computing and more the remaining exposures within ats are automotive and general electronics where the demand is stable but dampening the higher semi-growth rates. Encouraged by our end market demand trends and being prepared to operate in a range of macroeconomic environments, we are entering 2026 optimistic to deliver solid growth. Now turning to the financial outlook on slide 14. We are fiscal 2026 with approximately 600 million in backlog, up 5% from the prior year end, excluding backlog associated with the divested business. Based on the combination of order entry, backlog, current foreign exchange rates, and anticipated end market expectations, we anticipate delivering full-year sales in the range of 1% to 6% above fiscal 2025 sales. This sales guidance assumes 1% benefit from foreign exchange rates, which will be offset by the divested medical contract manufacturing business. Importantly, this implies a midpoint of 3.5%, demonstrating solid progress towards our long-term organic growth annual target. Full-year 2026 adjusted earnings are forecasted to be in the range of 6% to 12% growth per diluted share, with a midpoint of 9% adjusted earnings growth is also progressing well toward our annual adjusted EPS growth algorithm. For monitoring purposes, in fiscal 2026, assume an estimated effective tax rate of 18.5% to 19.5%, capital expenditures of approximately $55 to $65 million, and interest expense of approximately $85 to $95 million. Based on seasonality, we expect our fiscal first quarter to start modestly, growing nicely over prior year. As you will see on slide 15, first quarter fiscal 2026 sales are forecasted in the range of $630 to $670 million and adjusted earnings in the range of $2.25 to $2.45 per diluted shares. The Knudsen team consistently delivers operational excellence and strong cash flow due to our unique competitive advantages. Coupling with our expectations for end market growth, we are looking forward to a solid fiscal 2026. As a growth compounder, we will continue to reinvest in the business while returning cash to our shareholders. Again, I want to thank our employees, customers, and shareholders for your continued support. We will now open the phone lines for questions.

Thank you. We will now begin the question and answer session. If you would like to ask a question, please raise your hand now if you have dialed in to today's call please press star nine to raise your hand and star six to unmute please stand by while we compile the q a roster your first question comes from the line of mike halloran from baird your line is open please go

ahead hey morning everyone morning mike hey thanks for taking the questions and thanks for the color So, you know, first questions on the ATS segment, specifically the semi-side, you know, in the past, the higher growth areas have been driving the strength in that piece. Are you seeing any broadening out across the semiconductor applications yet, or is it still concentrated in some of the areas, you know, data center, wherever, AI, where you've seen strength traditionally? In other words, have you seen that broaden out to some of the more traditional electronic applications, auto, wherever else you want to talk to?

Yeah, I would say, you know, the strength continues and remains in the semiconductor space for the AI applications, cloud computing and such. But automotive is certainly starting to stabilize for us. And general electronics has been pretty decent through all of it. It's just lower growth, Mike, when compared to the semiconductor growth rates. Just for color, 50% of the revenues come from the semiconductor space, about 15 or so in the automotive, and the rest is in electronics.

So, okay. And then on the margin side of things, maybe just some help on trajectory into this year, very robust margins, particularly MFS this quarter. Is this the right zone to think about sequentially as we work through the year next year or any one-offs? In other words, are these the right margin levels to build off of? Are these the representative margins to build off of adjusting for revenue levels as we work through 26?

Yeah, no, it's a good question, Mike. I would say, as I look at IPS and ATS, I think, you know, certainly the right jump off point and in line with historical performance. On the medical side, we had a really strong quarter. I don't know that, you know, 40% plus is the right way to think about it. I think we're very comfortable maintaining the upper 30s in our medical business. they had a really strong performance this quarter. Certainly, I wouldn't expect a lot of degradation, but there were some strong benefits associated with the portfolio changes that we made, as well as some operational tailwinds that we had. And so I think the upper 30s in the medical is certainly sustainable. 40% is a bit of a notable achievement this quarter.

You know, one thing I would add, Mike, is that, you know, think of a hundred basis point improvement for the segment margins with the action of the divest share is maybe a way to think about it.

Yeah. Okay. That's super helpful. Thanks, everybody.

Your next question comes from the line of Jeff Hammond with KeyBank. Your line is open. Please go ahead.

Nope. Jeff, we can't hear you if you're there. I think we might have had a technical difficulty.

just not coming through you guys can you hear me yeah we can sorry about that this is a mitch moron for jeff um just uh within ips it seems like polymer processing weakness has been you know masking some of the more stable growth in other parts of that business yeah um just as we look to 2026 what are you expecting from the polymer processing um versus kind of the rest of the business and if you could talk about order intake there and how much that's contributing to backlog and expectations for the year?

Yeah, for polymer processing, what I would tell you is what we have seen in order entry and backlog buildup, we're at the bottom and our expectation is going into the year that things improve from where we are, certainly not getting any more difficult than being a drag on IPS.

It's helpful. And then just on 1Q and ATS, looks like there's some pretty healthy growth implied in 1Q. Just if you could help us walk through how much of that is comps, how much of that is underlying markets getting better, or timing of shipments. Just if you could help us

help me walk through that. Thanks. Yeah, no, happy to add some color. Yeah, I would say from a demand standpoint, we see good underlying stable demand and growth, as Naga mentioned, particularly in the semi-space, but also good stable ongoing growth in the electronics, automotive, and general electronics space. As you think about first quarter, as you'll recall, we did have a slow start to the year in ATS last year. And so there are some favorable comps year over year, and that's driving part of the performance in Q1. As we sit here today, entering the year, we're in a much stronger position from a backlog standpoint from where we started the year last year. So we're off to a good start, I would say, certainly for the first quarter. Some of that is the prior year comp, but really it's really driven by ongoing demand and a stronger backlog entering the year is really the big driver. Great. Thank you. Your next question comes from

the line of Matt Somerville with DA Davidson. Your line is open. Please go ahead. Can you guys hear

Okay. Yep. Yes, we can. Okay. Perfect. So can you put a little bit of a finer point on what you're seeing with respect to x-ray inspection in the sense that I would imagine if a lot of the semi-driven growth is being steered by AI cloud, kind of the more technologically rich chip architectures, I would think the pull through and almost more of a real-time pull through on x-ray would be more pronounced maybe than what you're seeing so can you kind of talk about why the two pieces of the business may be decoupled whether you think that's sort of temporary just kind of walk me through that again specifically focused on x-ray and then i'll follow up sure

on the x-ray side you know think about x-ray it has great exposure to our semiconductor but it also has a pretty solid exposure to automotive. So some of these differences you're seeing in X-Ray when compared to EPS, you also can attribute to some of the automotive exposures we have in that business. We certainly like the trends that we're seeing in the business right now. We've got a number of new products that are launching. And so we are pretty excited about going into this year, I think X-ray begins to contribute to ATS's growth. One other point that I would make for you on X-ray is that if you think about these composite structures that people are building, where you have both logic as well as memory on that, you know, there are parts of that structure cannot be inspected with x-ray right there are parts that that needs to be inspected with x-ray and there are parts that cannot be and you know for noughtson's position we have both those technologies so you typically use acoustic for memory and you use more x-ray for you use x-ray for logic chips right so if you think about those two we certainly benefit from them. But there is a transition in technology that is happening in testing as we speak. And we have some new technologies that we are testing right now, which certainly will have an impact, but probably not in 26, probably in 27. So overall, the x-ray business is in a good spot. You know, certainly did not contribute last year. Some of that is automotive exposure. but we feel like our X-ray business is in a good spot going into this year and will contribute to growth in the 80th sector.

And then just as a follow-up with Atrion seemingly in a good spot, maybe just talk in a little bit more detail about M&A actionability from here on out at 2.1 times net leverage and whether or not at, you know, 250-ish, wherever your stock's going to trade today,

are you still a buyer in the open market? Yeah. I'll wait for that. I'll pass that part of that question to Dan. But first, let me take the M&A piece of it. Just as a reminder, Matt, you know this about us. Our goal with M&A remains the same as what we shared during our investor day, which is really adding highly differentiated businesses that are additive to the growth of the portfolio. That's while remaining strategically and financially disciplined. So that is the strategy. Nothing really has changed. We have a pretty healthy pipeline. We continue to be in part of processes. Obviously, in some cases, we are not successful because we choose to exit the process or in some cases, you know, we just, that the project ideas did not meet our financial criteria or strategic criteria, right? So we continue to have a robust pipeline. We continue to work the pipeline. You did not see any actionability in 25 primarily because we didn't have projects that met both those things. And clearly, stock price was very favorable for us to be supportive of our stock by buying back share. So Dan, let me have you address the last part of Matt's question.

Yeah, yeah. And just to add maybe some color on the capital allocation thinking, our goal, and frankly, one of the strengths of the company with our strong cash flow, is the ability to be balanced. And so you're going to continue to see us not just do one or the other, but continue to do both, meaning returning cash to shareholders and continuing to identify and bring in high quality assets to the portfolio. So, you know, let's say I like your thinking. Let's say that we're in a 250 range today. We think there's still upside to our stock. We've just authorized late last year an increase in our authorization that gives us coverage in the near term. And I would say we're going to continue to be balanced in deploying the strong cash that we generate, both continuing to work our acquisition pipeline and balancing that with shareholder returns. Understood. Thank you,

guys. Yep. As a kind reminder, if you would like to ask a question, please raise your hand now using the raise hand button in your bottom toolbar. If you have dialed into today's call, please press star nine to raise your hand and star six to unmute. Please ensure that you are unmuted locally to ask your question. Your next question comes from the line of Andrew Buscalia from BNP. Your line is open. Please go ahead.

Hi, good morning, everyone. Good morning, Andrew. You know, so maybe a high level question on your guidance to start out um you know you you know dan you you kind of mentioned these tougher markets seem to have troughed so that's that's interesting comment yet the low end of your guidance really doesn't assume much growth this year and it seems unreasonable if some of these tougher markets you know you're past the worst so what's giving you the hesitation to to guide at the low end such a low range and can you walk through maybe where you're where you see some risk and you don't want to stick your neck out just yet? Yeah, no, it's a good question, Andrew.

And again, I would say, you know, put the guidance in perspective. It's a range of potential outcomes, right? And we think it's important as a company to plan for both the upside and the downside. Yeah, I think at this point in time, obviously, with our first quarter guide, we're going to have, you know, we're expecting to have a strong start to the year. We think it's prudent to, you know, plan for kind of our midpoint guidance. And on the downside, I would say that contemplates something happens this year. Now, certainly sitting here today, I would tell you, we don't see a lot of indicators of any downside, but we still think it's prudent to plan for any potential outcome. And as the year plays out, we'll continue to update our guidance based on what we're But, you know, sitting here today, we feel very good. But we think it's still important to make sure that we're, you know, as we've learned if nothing else this year a lot can happen in a year and being you know prepared for any potential outcome in the marketplace is important that said where we sit today we feel quite good we're going to have a strong start to the first quarter which is implied in our guidance and we'll see how the

rest of the year plays out yeah does that make sense yeah no it's fair yeah that's fair um yeah And, you know, maybe focusing on your IPS market for a second, you know, there's some enthusiasm amongst investors around, you know, improving industrial production, PMI factors this year, especially if we don't have another tariff situation. But I would think that, you know, can you talk about your IPS segment as it pertains to that? I mean, it's weak and it's been tracking that, somewhat tracking that comment of weak industrial factors, but also you have that ARAG weakness that's masking it or exacerbating it. So, yeah, can you talk about how you perceive that business in terms of sensitivity to the industrial economy and your outlook there?

So, if you think about, you know, maybe just for a brief moment, talk about 2025 and then talk about 2026. If you think about 2025, the IPS segment was weighed down. The performance that is published in the print is weighed down by plastic processing and automotive. And that kind of took away most of the progress that the team has been delivering in our core IPS businesses. And Precision Ag grew double digit in the year. So that is 2025. As we look into 2026, we continue to see investments in packaging and product assembly are hot melt adhesive businesses. We feel very good about the order entry and the backlog in our Precision Ag businesses. Now, remember, Precision Ag for us is a European business. It's not a North American business. We are a market leader in Europe and in South America. So we feel good about that. And if you think about our aftermarket parts, which is upwards of 55, 56% of this business revenue comes from aftermarket parts. So we feel really good about stable demand there, right? And then polymer processing is dropped, automotive is dropped. So any nominal recovery there is all upside to this business. So as we sit here today, you know, this business getting back to GDP plus kind of growth is what we're planning for.

Yeah, very helpful. Thanks, Naga.

Your next question comes from the line of Chris Glynn with Oppenheimer. Your line is open. Please go ahead.

Morning, Chris. If you're there, we can't hear you.

Oh, okay. I was showing unmuted and then it prompted me to unmute again and again. Can you hear me? Okay, great. I just want to drill back down into a little bit at the lower end. It sounded like what that contemplates is more the hypothetical versus anything you're seeing. But, you know, I wanted to understand how, you know, the dynamic of lumpiness of electronic processing systems orders might play into it. Does the idea of lumpiness get negated on a 12-year basis and fiscal 26 should, you know, fully participate in what you've often characterized as the beginning of a multi-year run for ATS?

So I think that's the right way to think about it. I mean, A, your initial comment, you know, look, we're planning for a range of scenarios, and certainly part of that range is a downside scenario, right? But sitting here today, I would say that's more of a hypothetical. I think that's a good way to think about it. With regards to ATS, that's kind of exactly how we think about it. And I'll maybe point to 2025 as an example. You know, we had a couple of quarters of 15% growth. that's not necessarily a run rate on a 12-month basis if you look at our full year we grew our ATS segment about four percent and so looking at we expect good mid-single-digit growth over I think to your point maybe a 12-month period is a good way to think about it that said you're going to see some peaks and valleys right over that period based on delivery

timing does that make sense yeah makes sense and um then just the last one on polymer processing obviously you had an excellent fiscal 24 and a pretty steep downturn um in fiscal 25 you've said that is categorically behind you is uh you know are there rumblings customer activity and polymer processing and is that a factor that could you know push you nicely to the uh upside of the guidance range i think last quarter on the call it was referenced a couple times about customer discussions and polymer processing having uh turned decidedly yeah you know look i think the

best way to think about it is we have hit the bottom uh when we look at activity in the marketplace On the system side of the business, we still seem to be in a good place. Order entry is starting to look good, starting to look at backlog building. But there is also a dyes business in there, which is not growing at the same clip as our systems business there. So it's one of those cases where we believe that we have bottomed out. Even in the DICE business, it is bottomed. It is not going any further down. The recovery seems to be different in these two businesses. So now we're getting a little bit more detail, more detail than we normally talk about, Chris. But we're providing this just to help you understand. So the best way to think about polymer processing is we're at the trough. We're expecting some nominal growth is what we are expecting in our guide. Should there have something bigger and better than what we have planned, then that definitely puts us on the upside for that segment.

And I would just add to that similar comments with regards to our automotive businesses. You know, automotive, we're not – we see that that's troughed. stabilized. We're expecting nominal growth, but we're not expecting any big recovery in our

automotive markets. Great. Sorry, Chris. This is why we give a range, particularly this early in

the year. Great. Thanks for the color. Happy holidays. You too. Thank you. Your next question

comes from the line of Brad Hewitt with Wolf Research. Mr. Hewitt, please press star six to

unmute. Hi, good morning. Thanks for taking my questions. Morning, Brad. So you mentioned backlog is up 5% year over year, but can you quantify how backlog trended sequentially? And then any additional comments on the sequential backlog trends by business would be helpful. Thank you.

Yeah, so backlog's up 5% versus where we started last year. Backlog is down sequentially, but that's actually normal, Brad, because Q1 is always seasonally our lowest quarter, given holiday and other schedules. And so that kind of sequential reduction in backlog is a normal trend, is the way that I would think about it. what's more important is I think the comparison year over year starting point standpoint. I think

that's the right way to think about it. Okay, great. And as we think about seasonality throughout the year, in terms of the revenue and EBITDA split, is it fair to assume roughly normal seasonality for 2026? And then in terms of organic growth, do you think that should be similar in first half versus second half? Yeah, I would say, yeah, we're planning

for a normal year from a seasonality standpoint. You know, typically what you see is Q1 is always our lowest start given the timing of the year, the holidays, as well as kind of the year-end timing of shipments and customer activity. And then you see that sequentially improved throughout the year. I would say, you know, we would expect a normal kind of seasonal trend, at least sitting here today across our business.

I mean, there is some Chinese New Year that moves from quarter to quarter, but there's a nominal impact. But yeah, that's true. This year, Chinese New Year will be in the second quarter.

Your next question comes from the line of Walter Liptak with Seaport Research. Your line is open. Please go ahead.

Hi, thanks. Good morning, guys. Good morning. Naga, congratulations on the five years of NBS Next. And so I wanted to ask, you know, as you look back, you know, what what do you think went best for you guys and and what was the toughest? And if I'm recalling, there was a little bit more of like a growth focus on your NBS Next. You know, how do you feel about that now? And, you know, what should we be thinking about over the next five years?

Yeah, no. Thank you. Thank you, Walt. You know, if you think about NBS Next, and if I were just to sort of go back to where we started, where we started was the company's greatest opportunity was growth. And so really, we structured NBS Next around how do we deliver on that great growth opportunity for Norton. And, you know, it all started with strategic discipline. So if you think about how the company thinks about strategic discipline across all of our divisions that is well potted down, this is how our teams think about how do I resource a new growth opportunity? How do I build a new product line? How do I innovate around a new product opportunity? How do I operationally be positioned for that growth? So, you know, I'm really happy where we are as a company in terms of using segmentation in our strategic discipline. So strategic discipline really is segmentation. And so using segmentation, our teams identify the best growth. We're able, you know, we are now beginning to holistically implement. I would say in terms of leadership level performance, This is sort of the process metrics we use within the company to say where we are at in the effectiveness. I would tell you we are halfway there is probably the best way to think about it. So we still have plenty of room left in terms of continuing to deliver growth with this framework. framework. If you take the five years, take the first two years as the years when we built this framework, deployed it, trained, getting really good at it. And the next three years is really starting to deliver results. If you think about EBITDA margins, we went from 27 to 30 in that first period. And then if you think about the next period where we're beginning to deliver growth results, the expansion from 30 to 32, right? So what you really see is the company using the framework to drive growth. Where we are today and where we have the greatest opportunity is over this period of time, the company's operational excellence have gotten really great. Innovation has gotten stronger. And commercial excellence is sort of where we're spending most of our time today. And so I'm super excited. The team is really working incredibly hard in sort of how we play in the markets we have chosen to play in. And so all of the work in the next couple of years is around commercial excellence, you know, connecting the dots between segmentation, innovation, operational excellence, and commercial excellence.

Okay, great. And, you know, on the profitability side, as you pointed out, the profits were good. Are we, you know, what inning are we at now, do you think, with that, you know, that operational EBITDA part of NBS Next?

Yeah, so I guess what I would say, I'll go back to Naga's comments, you know, growth is our best opportunity as a company. And I think I would say that's where the margin enhancement comes from going forward is continuing to effectively grow the organization and basically throwing off normal incrementals that will lead to natural margin accretion over time. That's our primary focus and I think our best opportunity. That doesn't mean that there aren't things that we can, you know, you can always improve your operations. You can always get better. But I would say our best opportunity is continuing to grow the organization and growing it more aggressively and allowing that to be basically your margin accretion.

You know, one thing I would add to that is just over the long term, Walt, you know, Don't hold us to some short periods of time here. If you think about an average 35% incremental for the company blended between acquisitions and organic growth, a 35% incremental implies over the longer term, our margins start to converge on that number, right? And we're running at 32 today. But that is primarily through growth. And I think that is the key, hopefully, your takeaway is we are solely focused on growth, which is a big part of who we are, but growth in a very profitable way. As you have seen the team demonstrate year in, year out, operationally, pretty darn good incrementals. So if you sort of take that incrementals and sort of project out to the longer term, that's what you would end up. Hopefully that helps you.

Okay, it does.

Your next question comes from the line of Robert Jameson with Vertical Research Partners. Your line is open. Please go ahead.

Hey, good morning. Can you all hear me? We can hear you. Perfect. Well, congrats on the quarter. And all the colors have been very helpful this morning. Just wanted to touch on full-year EPS guidance. And, you know, with the midpoint at 9% growth, you know, in your long-term target range of like 10% to 12%, you know, what bridges you from the midpoint to achieving the upper end of that target range? You know, would you expect that to be primarily operational execution, maybe some help from share repurchases, or are there potential upside scenarios in your end markets? And where do you think that might come from if we did see, you know, that being the top end of the range being achieved?

Yeah, well, relative to 2026, I mean, certainly, you know, that 9% is a midpoint and also based on a midpoint growth. So stronger growth in our base business would be certainly one item to bridge that. The other thing I would point out is the 10% to 12% growth was a combination of organic and inorganic, and we're not factoring in any acquisitions this year. That doesn't mean that we're not actively working on opportunities, and that would be additive to the organization as well. So I think a combination of those two, continuing to grow our base business with our MBS Next formula, that will deliver upside 3.5%. I think it was a good midpoint aiming target. And that's what we kind of factored into our long term thinking. Delivering better than that in certain years will deliver higher earnings growth as well as continuing to add attractive assets to the portfolio.

okay great thank you and then um just you know nice free cash flow conversion last couple quarters um you know can you talk a little bit about the working capital improvements and sustainability there um have there been structural improvements there that would be able to uh for you all to sustain you know conversion above your long-term average rate yeah no it's been our teams have done

some nice initial work. It's been really a targeted focus area for us, simply because we see it as an opportunity to continue to enhance our working capital utilization. I would tell you, not only is it sustainable, we think there's more opportunity ahead of us. And so we are certainly focused on that. And I would expect us to continue to generate strong cash flow performance going

forward. That's great. Thank you for taking my questions. There are no further questions at this time. I will now turn the call back to Naga for closing remarks. Thank you for your time and

attention on today's call. We're making great progress on the Ascent strategy, and we are positioned well to deliver solid growth in fiscal 2026. We wish you a happy holiday season.

This concludes today's call. Thank you for attending. You may now disconnect.