As a reminder, this call will be recorded. I would now like to introduce your host for today's conference, Ms. Lara Mahoney. You may begin.
Thank you, Catherine. Good morning. This is Laura Mahoney, Vice President of Corporate Communications and Investor Relations. I'm here with Mike Hilton, our President and CEO, and Greg Thaxton, Executive Vice President and CFO. We welcome you to our conference call today, Thursday, December 13, 2018, to report Nordson's fiscal year 2018 fourth quarter and full year results and our fiscal year 2019 outlook. Our conference call is being broadcast live on our webpage at nordson.com/investors, and will be available there for 14 days. That's nordson.com/investors. There also will be a telephone replay of our conference call available until Thursday, December 20, 2018, which can be accessed by dialing 404-537-3406. You will need to reference ID number 6659799.
During this conference call, forward-looking statements may be made regarding our future performance based on Nordson's current expectations. These statements may involve a number of risks, uncertainties, and other factors as discussed in the company's filings with the Securities and Exchange Commission that could cause actual results to differ. After our remarks on the quarter, we will be happy to take your questions. With that, I'll turn the call over to Mike.
Thank you, Laura, and good morning, everyone. Thank you for joining Nordson's fiscal 2018 fourth quarter and full year conference call. I'd like to begin by recognizing our global team who've delivered another record year of sales, operating profit, GAAP diluted earnings per share, and EBITDA. Our performance highlights our continued commitment to delivering the best technology solutions to our customers and to generating growth through innovation and superior customer service. For the full fiscal year of 2018, sales were $2.3 billion, an increase of 9% compared to the same period a year ago. This included organic sales growth of nearly 2.5% in the current year against two challenging prior fiscal year comparisons, where we generated robust organic sales of 8% and 7% in 2017 and 2016, respectively.
Specific to the fourth quarter and in line with our prior guidance, sales were $569 million, a 1% decrease compared to the prior year's fourth quarter. Operating profit in the quarter was $115 million or 20% of sales. Excluding restructuring charges in the quarter, operating margin was 21%. The fourth quarter's performance included several long-term investments that will ultimately yield benefits to our customers and shareholders. These investments included the previously announced facility consolidation efforts in the Adhesives segment, where we're consolidating facilities in both the United States and Germany. Other notable investments during the quarter included the continued build-out of our centralized shared service center in the United States and an ERP conversion that brings several of our Advanced Technology Systems product lines onto our common operating platforms to support that centralized shared service.
EBITDA for the fourth quarter was $143 million or 25% of sales, or 26% excluding restructuring charges of $3 million. Free cash flow before dividends increased 5% over the prior year to $118 million, which reflects strong cash conversion of 136% of net income. I'll speak more about our fiscal 2019 annual guidance in a few moments, but I first turn the call over to Greg to provide more detailed perspective on the fourth quarter and full year of 2018.
Thank you, Mike, and good morning to everyone. Fourth quarter sales decreased 1% compared to the prior year's fourth quarter. This change in sales included a decrease of 1% in organic volume growth related to the first year effect of acquisitions of approximately 1%, and a decrease related to the unfavorable effects of currency translation as compared to the prior year's fourth quarter of 1%. Within the Adhesive Dispensing segment, organic volume increased 3% over last year's fourth quarter. We are pleased with the pace of our end markets, as well as growth in new applications and within our tiering strategy. Within the Advanced Technology Systems segment, organic volume decreased 2% against challenging organic volume growth comparisons of 4% and 30% in the fourth quarters of 2017 and 2016, respectively.
With the exception of those product lines facing the most challenging comparisons to the prior year, namely dispense and surface treatment product lines serving electronic end markets, demand was robust during the quarter for test and inspection and fluid management product lines, notably medical components. Within the Industrial Coating segment, organic volume declined 7%, mostly related to automotive platform sales that did not repeat from the prior year. Moving down the income statement, gross margin for the total company was 54% in the quarter. Operating profit was $115 million, with reported operating margin of 20% in the current quarter. As Mike noted, we adjusted total company operating margin to exclude restructuring charges was 21%. Mike also talked about other entity level initiatives that impacted spending in the quarter that will provide future performance benefits.
Specific to the Adhesive Dispensing facility consolidation initiative, we incurred approximately $1 million of duplicate costs during the quarter and approximately $8 million for the full fiscal year. We expect to be mostly complete with this project by the end of the calendar year, with minimal duplicate costs of about $1 million during the first quarter of fiscal 2019 for both the U.S. and Germany consolidation efforts. On a segment basis, Adhesive Dispensing delivered strong operating margin of 27% in the quarter, or 28% when excluding restructuring charges of $2 million related to this facility consolidation. This adjusted fourth quarter margin performance was equal to the prior year's fourth quarter. Within the Advanced Technology Systems segment, operating margin was 20% in the fourth quarter.
As compared to prior year's fourth quarter margin, lower sales volume, acquisition dilution, product mix, and higher spending contributed to the margin decline. Industrial Coating segment operating margin was 24%, an improvement of 200 basis points despite a decline in sales volume. This is a result of product mix and the segment's continuous improvement initiatives. On a total company basis, net income for the quarter was $87 million, and GAAP diluted earnings were $1.47 per share. The current quarter included restructuring charges of $0.04 per share and discrete tax benefits of $0.07 per share. Adjusted EPS to exclude these one-time items was $1.44. A reconciliation of GAAP earnings per share to non-GAAP adjusted earnings per share is included in the financial exhibits of our press release.
We delivered fourth quarter EBITDA of $143 million, or 25% of sales, inclusive of $3 million of restructuring charges. As Mike noted previously, free cash flow before dividends during the quarter was $118 million or 136% of net income. Our press release includes financial exhibits reconciling net income to free cash flow before dividends and adjusted free cash flow before dividends, as well as EBITDA and adjusted EBITDA. I'll now share a few comments on our full year results. Sales for the fiscal year were $2.3 billion, an increase of 9% compared to the same period a year ago.
This change in sales included organic volume growth of nearly 2.5%, a 5% increase related to first year effect of acquisitions, and a 2% increase due to the favorable effects of currency translation as compared to the prior year. Full year operating profit was $495 million, which is an increase of 8% compared to the prior year. Reported operating margin was 22% or 23% on adjusted basis to add back $10 million of incremental intangible asset amortization expense related to our fiscal 2018 and 2017 acquisitions, and adding back $10 million of one-time charges for restructuring and a step-up in value of acquired inventory.
This performance is equal to the prior year's adjusted operating margin to add back charges of $20 million associated with the Vention transaction cost, the step-up in value of acquired inventory, and restructuring charges. Net income for the full year was $377 million, and GAAP diluted earnings per share were $6.40. Adjusted diluted earnings per share increased 11% compared to the prior year, $5.94. A reconciliation between GAAP earnings and adjusted earnings per share is included with the financial exhibits to our press release. EBITDA for the full year increased 11% to $605 million, and adjusted EBITDA increased 8% to $609 million, both compared to the prior year. EBITDA margin and adjusted EBITDA margin were both 27% of sales.
From a balance sheet perspective, net debt to EBITDA was 2x trailing twelve months EBITDA at the end of the fiscal year. In addition to funding organic and acquisitive growth initiatives with our strong free cash flow, Nordson returned value to its shareholders by distributing $72 million in dividends in fiscal year 2018 and investing $19 million for the repurchase of shares during the fourth quarter. I'll now turn the call over to Mike for a few closing comments and our fiscal 2019 annual guidance.
Thank you, Greg. Once again, I want to thank our team for delivering solid full year results. In a very challenging prior year sales growth comparisons, we were able to hold operating margins steady after adjust for incremental intangible amortization expense and certain one-time charges. We also grew EBITDA by 11% over fiscal 2017, inclusive of the strategic investments I spoke about earlier, which we believe will allow us to deliver improved performance going forward. In addition to executing on our financial targets, we took another step forward in growing our medical expertise by acquiring Clada Medical Devices in October. Clada is a Galway, Ireland-based design and development operation primarily focused on medical balloons and balloon catheters. Its technologies are used in key applications such as angioplasty and the treatment of vascular disease.
Clada has a successful track record of innovation, quality, and customer focus, which makes it a great fit within our medical product portfolio. We also continued our legacy of investing a portion of our success into the communities where we live and work, and we reached significant milestones in 2018. Since its inception, Nordson has given more than $100 million through a variety of charitable initiatives, and our employees have volunteered nearly 100,000 hours. That's quite an impact and something we're very proud of. Now I'll turn to our focus to fiscal 2019. After much thought and external benchmarking, we made the decision to transition from providing quarterly guidance to annual guidance.
There's certainly a growing consensus in the market about the positive effects of doing so, and we believe investors are best served by focusing on our longer-term performance where quarterly guidance can create noise that distracts from the overall strength of the business. To emphasize our long-term annual growth, we have added a new exhibit to our press release that illustrates the company's consistent annual organic sales growth. For the full fiscal year 2019, where organic sales volume is expected to increase in the range of 3%-5% compared to fiscal 2018, offset by an unfavorable currency translation effect of 2% based on the current exchange rate environment as compared to the prior year. We recognize that we'll face a challenging comparison in the first quarter.
However, we are forecasting the strength and diversity of our end markets, and our ability to execute on our growth initiatives will enable another year of solid organic sales growth. With this sales growth and our focus on executing the Nordson Business System, we expect to generate an increase in both operating margin and EBITDA margin between 100 and 150 basis points over fiscal 2018 performance. To be clear, this improvement will be over adjusted fiscal 2018 results, to add back charges of $3 million related to short-term purchase accounting for the step-up in the value of acquired inventory and approximately $7 million of restructuring charges. For fiscal 2019, the company expects interest expense to be approximately $45 million and maintenance capital expenditures to be approximately $50 million.
The company's forecast and effective tax rate is approximately 23%. Our strategic priorities for the year remain consistent with prior years. We are focused on accelerating organic growth, diversifying our end markets through acquisition, and optimizing Nordson for the future. As always, thank you to our customers, employees, and shareholders for your continued support. With that, we'll pause and now take your questions.
Thank you. Ladies and gentlemen, if you have a question at this time, please press the star, then the one key on your touch-tone telephone. Again, if you would like to ask a question, press the star, then the one key on your touch-tone telephone. Our first question comes from Allison Poliniak with Wells Fargo. Your line is open.
Hi. Good morning.
Good morning, Allison.
Greg, you had called out a number of, you know, headwinds to margin on ATS. Could you maybe help us understand or bucket or if you think can quantify what was the biggest impact there?
Yeah, Allison, I'd say the bigger impact, if you know, take a point out related to the dilution from our acquisitions, the larger impact would have been the margin mix, where what was down in sales in this quarter versus a robust prior year for our dispensing product lines that tend to carry higher gross margins than some of the other product lines do. That was a big impact in the quarter. To be clear, the other product lines were up.
Mm-hmm.
Right.
Got it.
There was also some spending that was up over the prior year. Some of the initiatives that we called out, like the conversion onto one of our common platforms were product lines within that segment. During the quarter, we had some readiness for that conversion, which took place at the beginning of this fiscal year. There was some spend, incremental spend that also impacted it, but I'd say that the larger items were those first two.
Great. Within the context of your full year organic guide, just given the comparisons in the first half, should we assume this is a much more, second half-weighted growth story for Nordson?
Yeah, Allison, if you look at that, we expect this year to be more of the typical seasonal year we'd see with sort of the softer first quarter picking up in the second and the stronger second half. You know, the momentum in the business is encouraging, but I'd say that's the typical seasonal pattern that we would expect.
Perfect. Thank you.
Thank you. Our next question comes from Christopher Glynn with Oppenheimer. Your line is open.
Hey, thanks. Good morning.
Morning, Chris.
You talked about normal seasonality next year. Picking up on the seasonal trend, the ATS revenue was, you know, pretty moderate within the variable range of seasonality into fourth quarter. Just wondering if the electronics was more resilient than you expected in the quarter.
In the fourth quarter?
Yeah, for ATS. The organic was a little better than we thought.
I'd say electronics came in about as we expected. As Greg mentioned, you know, earlier, still had some tough comparisons on the dispense side. The test and inspection, you know, did well. Our diversification efforts outside of electronics really played out in that segment with both our EFD product lines and especially our medical product lines being particularly strong in the quarter to offset some of that impact. I'd say it was more around the other parts of the segment than the electronics piece.
Okay. I know it's always a tough one to call, but curious your latest thoughts on, you know, kind of the latency period, if that's the right description, into drivers of future change or changes in your field work across the mobile vertical.
I'd say it's still a little.
For kind of the next wave.
Yeah, I'd say it's still a little early. I think as we've talked about in the past, it's usually kind of from November through probably February, even early March, where we do all these development programs and then get a sense of what the change is. As we've talked before, we think the next bigger change is gonna come with 5G. What isn't clear is whether that's a 2019 or 2020 phenomenon at this point. What I would say is, you know, I mentioned it just a second ago, we feel good about the things that we're doing in diversifying both the electronics, so growth in auto, the test and inspection business. Particularly in the, you know, the general industries areas that the EFD product lines support, as well as medical, which is strong.
Outside of that, you know, our typical, you know, focus on innovation in both adhesives and the coatings business to get into new markets and applications. We're using tiering effectively as well to expand our geographic reach in things like, building our business in India and in Vietnam and Thailand and entering Africa. We feel good, I'd say good about all the other things as well, particularly that diversification effort.
Sounds good. Thanks for that.
Thank you. Our next question comes from Mike Halloran with Baird. Your line is open.
Hey, morning, everyone.
Morning, Mike.
Let's start on the margin expansion year over year. Could you just help provide some buckets on how you're gonna get to the 100-150? How much of it is, you know, stranded costs and things you incurred in 2018 that don't repeat in fiscal 2019? How much of it is benefits from things that you implemented in fiscal 2018 that you should see savings or improvement from? Then how much is volume or any other buckets you think I might be missing?
Sure.
Yeah. Okay, Mike, this is Greg. I'll take a stab at that, and then Mike can add comments. You know, certainly a portion of that improvement is gonna come from some of the duplicate costs that we've called out associated with the adhesive facility consolidation. You know, maybe that's 40 basis points, maybe slightly less. We'll have a little bit of some costs here in the first quarter, but call it 40 basis points there.
Beyond that then, we do expect to get benefit out of this transition to our shared service center here in the United States, where you know, we've got a bit of some cost overlap as we've stood up this facility, and we expect to get some of the benefits out of that in 2019 and beyond as we continue to grow and are better able than to leverage these back office costs. That's gonna be part of it as well. Certainly, as you called out, we'll get a bit of volume leverage if we hit these kind of growth targets we're talking about.
It's a lot of blocking and tackling that we do in all of the segments, utilizing the Nordson Business System, whether that's continued focus on low-cost country sourcing, pricing initiatives, you know, the various tools that we leverage, none of those may be, you know, doubles, triples home runs, a lot of singles, but it's the kind of thing that we continue to focus on to help drive margins. You know, I kind of called out the couple of larger buckets, but it's gonna be a lot of this, continued focus on continuous improvement that's gonna help leverage that.
Makes sense. Just to be clear on the cadence of revenue for next year, it sounds like you're just basically assuming pretty normal sequentials as you work through the year, no sharp bounce back, and that when you look at the segments themselves, pretty stable demand levels from here. Is that the thought process?
Yeah. We're expecting all of our businesses to grow next year. I'd say in typical fashion with our longer term views of each of those opportunities. You know, I think, you know, at a high level, we're focused on the economy's growing at, you know, maybe a little less than they've grown this year, but we expect to, as we typically do, to outgrow the markets with all of our focus around innovation and driving new products and applications. We feel pretty good about each of the businesses and where we are and delivering as a result of how we focus on creating our own demand. Plus, we won't have the same headwinds that we had this year, particularly in the mobile dispensing segment.
Makes sense. Just on the industrial coating side, called out the auto side as the headwind in the quarter here. Is that the right base to work off of as we think forward, or is there some capture coming up with the project timing or anything like that?
I would say that's probably the right base to work on. You know, from our perspective, the auto platform business has, you know, been down the last couple of years. We expect it to be kind of more stable at this point. Growth in that business is really gonna come from newer applications. Things like battery work for electric vehicles and some work we're doing in aerospace and some additional work we're doing on coatings for food processing, and then continued strength in our powder-related businesses. You know, we're not expecting any, you know, sort of significant growth on the auto platform side of the business. If you look around the world, particularly in the U.S., you know, the sort of car production has been flat for the last three years.
You know, China, it's flat to maybe slightly down, so we're not necessarily counting on that.
Great. Appreciate the time as always. Thank you.
Thank you. Our next question comes from Matt Summerville with D.A. Davidson. Your line is open.
Thanks. Couple questions. First, can you provide an update as to how U.S.-China trade relations are impacting your business, both from a cost standpoint as well as end demand? I guess, have you seen any customer behavior change over the last, you know, month or two? Is this a consideration that you factored into your fiscal 2019 organic outlook?
Okay. There's a lot of questions there, Matt, but I'll try and address those. On the first part, the sort of impact to date has been pretty modest, not without a lot of effort on our part to make it pretty modest. Given the work we have in our procurement area to mitigate the sort of cost push, and certainly there's vendors trying to push cost in steel and aluminum, for example, and we've been able to mitigate that pretty well. You know, some of the other tariffs that were put in place, you know, had some modest effects, but we've been working the things that you would expect, looking at different sourcing options, you know, moving our supply chain around a bit, driving pricing.
So, I'd say, you know, to date, it's been relatively modest. We have included some impact, you know, more on the cost side than I would say on the revenue side in 2019 to account for sort of continuation of what we're seeing today. We're doing some things to mitigate, you know, the potential step up that could occur if we don't get through an agreement in March with China. That said, that's a pretty big unknown in terms of where that's going, so we're running through our own sort of scenarios. I'd say to date, on the demand side, we haven't seen, you know, any significant change. I would say, both in the U.S. and in China, there's some concerns being expressed about, you know, whether this is gonna be resolved.
It hasn't translated into an impact to an extent on demand to date, but I mean, should things get worse, it potentially could. You know, we're trying to work through all of the potential scenarios to make sure we're positioned as well as possible to mitigate any impact.
Another comment I'd layer in there, Matt. In some of our businesses, if you recall, we locally manufacture for that market. So, I think that will help us avoid some of this impact.
Got it. Just as a follow-up, can you give us a sense, maybe outside of the mobile electronic space, what the pacing has been over the last, you know, three-month period or so? I know you don't exactly give order rates, but a couple of quarters you would say orders are relatively flat, maybe up slightly, down slightly. Can you just give us a sense of how incoming order rates have looked as of late across the businesses at maybe a high level?
I'd say overall for the company, you know, the business is up relative to last year, a few percentage points. I'd say we've seen, you know, particular strength in a number of our adhesives businesses in a variety of areas. We've seen really strong in our fluid management businesses, both our EFD product lines and our medical business in particular. I'd say most product lines we're seeing, you know, momentum that's positive going into the year.
Just to define that, Matt, that's as we look at orders over the last 12 weeks and compare them to the same period of the prior year.
Very good. Thank you.
Thank you. Our next question comes from Jeff Hammond with KeyBanc Capital Markets. Your line is open.
Hey, good morning, guys. This is
Morning, Jeff.
Brad on for Jeff.
Okay.
Sorry about that. Just on the backlog, you know, it looked like the first total decline in quite some time. Can you just talk about maybe some of the moving pieces there and what that might mean for the, you know, degree of weakness in the first quarter of next year or any, you know, kind of higher level thoughts about the magnitude there? Thanks.
Just to be clear, are you talking about Q3 to Q4 or Q4 versus Q4?
Q4 to Q4.
Okay. Yeah, the sole driver of that is really a large order which we received last year in the electronics area. If you look, you know, past that, you know, things would be up.
Just to expand on it a little bit, you might not have followed this, but during our prior year fourth quarter, in our diversification efforts to expand where we deploy our technology, we had a nice win with an application in that electronic space that both generated upside that we had in our fourth quarter, as well as was a big driver for the volume gain we had in the first quarter of fiscal 2018 in that electronics portion of Advanced Technology. A large portion of that order was still in backlog at the end of the fiscal year last year.
So, that said, you know, we talked earlier about kind of how we'd see the seasonality of the business progress. We still feel we're gonna outgrow the economies that we operate. This year, we feel pretty comfortable about the sort of 3%-5% target we put out there.
Okay, great. That's helpful. You know, just on the capital allocation front, you know, just kinda level setting actually in the fiscal year here. You know, how far would you say we are along with the underlying diversification strategy, specifically building out the medical piece? It looks like this year was a lot of, you know, fewer, smaller deals. Is that what we should expect moving forward, or is there maybe appetite or opportunity for some more, you know, sizable deals?
I think as we've mentioned in the past, the medical area still is fairly fragmented, and there are both small and potentially a few larger opportunities out there. You know, our capital priorities haven't changed as it relates to acquisitions. You know, the timing is hard to predict, but we do see both smaller and a few larger opportunities out there. Should they come to market, we'd hope we'd have an opportunity to be successful there.
Okay, great. Thanks for the time.
Thank you.
Thank you. Ladies and gentlemen, if you have a question at this time, please press the star then the one key on your touchtone telephone. Our next question comes from Chris Dankert with Longbow Research. Your line is open.
Morning, guys. Thanks for taking my call.
Morning.
I guess, forgive me if I missed it, but can you guys give any update or split as far as how polymers versus non-polymers kind of perform within Advanced Dispensing?
For this past year?
Yes, yeah. The fourth quarter in particular.
I'd say they're probably pretty similar in the fourth quarter. No great difference there.
Gotcha. As far as, you know, some of the domestic Chinese handset manufacturers, I guess kind of what are you guys seeing there? Has there been a change in tenor given some of the trade and that type of thing? Just any developments on the front outside of the big two handset manufacturers.
No, I wouldn't say, you know, any change from what we've seen, you know, throughout this year. I think, again, everybody seems to be working on the sort of 5G approach. It was pretty quiet for all the handset manufacturers in terms of the level of innovation in 2018, and everybody seems to be focused on 5G as a big deal. As I mentioned earlier, what isn't clear to us is that gonna translate into handsets in 2019 or is that gonna be more of a 2020 impact. Quite frankly, I don't think we'll have a clearer view on that till probably that February, March timeframe.
That said, we're focused on the other things that I mentioned, continuing to diversify electronics, outside electronics, growing, all of our businesses through, innovation, you know, new products, new applications, and we feel pretty good about where that pipeline is.
Got it. Just one last one, if I could. You know, you mentioned medical was a strong grower in the quarter. I guess, is that still kind of holding in the high single- digit, low double-digit organic rate here?
Yes. Yes, it's very robust.
Got it. Thanks so much, guys.
Thank you. Our next question comes from Matthew Trewhella with G. Research. Your line is open.
Good morning. Thank you for taking my questions.
Good morning.
If we think about, at a high level, what you're seeing in global macro and how it's affecting your business, could you sort of walk through how growth trends contrast between your key end markets like North America, EMEA, China, and rest of Asia? Are there any particular dynamics you're focused on or are you seeing like a China slowdown, Europe slowdown? Any color there would be great. Thanks.
Let me just talk about this year, and then we'll talk a little bit about next year. This year, you know, the U.S. generally from an economic standpoint was better than the prior year, while Europe and Japan still grew, they were less than the prior year. China was about where it has typically been, around that 6.5%. For us going into 2018, that played out the way we thought, sort of high 2% global GDP in the areas we operate. Think about that as, you know, maybe 2.8%. You know, we're expecting next year to be a little lower than that, overall, maybe 2.5%.
We expect that we'll be able to grow at a multiple of that through all the levers that we can pull, whether that's new products or new applications. You know, things that we've started to talk about, like, you know, in athletic wear, replacing taping and stitching with gluing. We've seen some nice wins there. We've talked about batteries for electric vehicles. We've talked a little bit about aerospace. Auto electronics continues to be a strong driver for us. You know, the tiering strategy has helped us grow in India. It's giving us opportunities to grow in places like, you know, Vietnam, Thailand, and through OEMs outside of China going to Africa. We focus on those growth initiatives that allow us to drive growth over and above the GDP.
As I mentioned, you know, we had these tough headwinds in 2018 that shouldn't repeat at the same kind of level going forward.
Matt, I'll just make a couple comments that kind of cut the other way. If you think about some of the end markets that we sell into, like consumer nondurables, like medical, those tend to be you know, more recession-resistant end markets. So, not to say that we're immune to the impacts, but we get some strength because of the underlying drivers of some of these end markets that we sell into.
Great. Thank you.
Thank you. Our next question comes from Charley Brady with SunTrust. Your line is open.
Hey, thanks. Good morning.
Hey, Charley.
I missed part of the call, so if you covered this, let me know, and I'll just circle back with you. I'm just wondering on the guidance, the move to annual guidance from the quarterly guidance. You know, typically you guys have said your visibility just doesn't go out, you know, maybe beyond four months with any, you know, significant certainty. I'm just wondering how that dovetails in with providing annual guidance right now as far as the confidence level doing that. I mean, I understand the reasons behind it, but I'm trying to understand the, you know, really the confidence level of looking out twelve months, as opposed to just next quarter or so.
Yeah, thanks. Thanks, Charley. Yeah, you know, obviously, given our customer intimate model, we're pretty close to customers in the end markets, many of which are stable, particularly on an annual basis and longer. There's some instability in the shorter term, and that's really led to some of the noise that we've talked about. But when you look at things like core adhesives or even our power business where we tend to have longer lead times, we can look at backlog and get some confidence there. If you look at our you know, our EFD product lines and our medical product lines, which are more run rate kinds of businesses, as our mix has changed over time, we feel a little bit more confident in that you know, sort of annual guidance there.
You know, I'd say we also are feeling a little bit more comfortable because we don't have some of these headwinds that we had last year. As we look back historically, one of the reasons we provided some of the additional historical data here is even in a really tough environment like last year, we've still been able to grow organically because of all the levers we're pulling around innovation. That's really given us some more confidence there. In the short term, we can have a lot of stuff moving back and forth, but over a year and longer, we tend to be pretty consistent given some of the stability in the market and our closeness with our customers.
Yeah, that's helpful. Thanks. I'm just wondering, I mean, I know you're not giving quarterly guidance, but advanced tech, obviously, with a 50% comp in Q1, can you just address maybe the magnitude of what that business might look like in Q1?
Yeah, Charley, I'm probably not gonna do that. I mean, obviously, we got a tough comparison in Q1. As you said earlier, you know, we're gonna have a more seasonal year, so we're gonna be down in Q1. I mean, for the year, we feel pretty confident we're gonna be able to deliver what we just talked about in that 3%-5% top line organically.
Are you expecting advanced tech to be up for the year despite the tough comp in Q1?
Yes. You know, as I said, this is where I come back to, you know, it's maybe hard to see underneath all of this, but our diversification efforts are really working within that segment and outside. In particular, you know, we had a really strong year within electronics in our test and inspection, but you can't quite see that given the dispense headwinds. Our EFD product lines and medical, so things outside the electronics, did extremely well, and we expect them, you know, to continue to grow. They'll grow at disproportionate rates relative to other parts of our business. We feel pretty comfortable on how we've been able to diversify within and outside electronics. Yeah, we expect all businesses to be up for the year.
Great. Then one more for me, just on the commentary on the M&A, back to one of the earlier questions on the focus on medical. Just in terms of multiples, any change in any of those multiples on medical? I'm just wondering, given that the fragmentation of that market and a lot of those deals are smaller, more nichier, that maybe the multiples in that space, you know, are a bit less stretched and giving you an opportunity to execute deals, rather than you know, other areas you might be looking into.
I would say the multiples kind of vary a little bit within the medical space depending on the degree of differentiation and the growth prospects around the individual businesses. It's a space that has good growth prospects and high margins, and it's still rich. At the end of the day, it's still rich. We've been benefiting from that the last couple of years with what we've been able to do, and we feel like it absolutely fits well with our business model, our focus around customers, the drive for innovation. We feel pretty well positioned, but there's areas where we'd like to build out our capability, and there are businesses out there that can help us do that.
We don't expect them to be, you know, discounted in any big way. You know, you might have some differences between small and large, but the market is robust in the areas where you have true differentiation, and that's what we're focused on.
Great. Thanks.
Thank you. Our next question comes from Matt Summerville with D.A. Davidson. Your line is open.
Thanks. Just a couple follow-ups. Are you willing to quantify the long-term savings potential you anticipate to see in ADS as a result of, I'm just gonna call it kind of the manufacturing repositioning, as well as the uplift you would anticipate from the shared services implementation here in the U.S. and the ERP consolidation?
I'd say not at this point, Matt. I'd say what we view 2019 on the sort of adhesives piece is, you know, we got past all of the running multiple facilities, and we're back into the right kind of operating framework. I'd say beyond 2019, we should see, you know, both efficiencies but also, you know, capacity with better incremental margins. I think on our shared services piece, that's also where we see the benefit is growing at lower cost. We'll see some efficiency benefits, but the bigger driver is gonna be able to scale with a much lower cost. I'd say not ready to quantify that yet or some benefits in 2019, but more beyond 2019.
Just to follow up on 5G. You know, to your comment, Mike, is it a 2019 or 2020 sort of thing? In that context, I guess, you know, what are you anticipating, what underpins, you know, your ATS, what's embedded in ATS figure guidance in that regard? I guess the question is, do you think this 5G equipment cycle as it pertains to Nordson could be bigger than the last couple of cycles you've seen in your mobile-facing business? Can you frame that up a little bit? Thanks.
On the last part of the question, Matt, it's hard to tell at this point. We know that the approach will drive additional antennas and other types of things that will require a fundamental change in the phones. We don't have a feel yet for what that's gonna translate into in terms of new equipment. It's early. It's early yet on that.
Thank you.
Thank you. I'm showing no further questions at this time. I'd like to turn the call back to Mr. Mike Hilton for any further remarks.
Thank you. I just thank all of you for participating in today's call. Once again, a thank you to the Nordson organization who've delivered another very solid year for us. Appreciate everything. Take care, and have a good holidays, everyone.
Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect, everyone. Have a great day.