As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Ms. Lara Mahoney, Vice President, Investor Relations and Corporate Communications. Ma'am, you may begin.
Thank you, Jimmy. Good morning. We are pleased to welcome you to Nordson Corporation's conference call today, Tuesday, May 22, 2018, to report financial results for the second quarter fiscal year 2018, as well as our third quarter outlook for fiscal year 2018. My name is Lara Mahoney, Vice President of Investor Relations and Communications for Nordson.
I'm here with Michael Hilton, our President and CEO, and Greg Thaxton, Executive Vice President and CFO. Our conference call is being broadcast live on our webpage at nordson.com/investors, and will be available there for 14 days. There will be a telephone replay of our conference call available until June 5, 2018, which can be accessed by dialing 404-537-3406. You will need to reference ID number 3797796.
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, Lara, and good morning, everyone. Thank you for joining Nordson's 2018 second quarter conference call. We delivered a record second quarter on many metrics, and I'd like to commend our dedicated global team for their commitment and focus. The resilient performance of our base business, coupled with the strategic fit of our recent acquisitions, led to improvement in operating profit, diluted earnings per share, and EBITDA as compared to the second quarter a year ago.
Our sustained focus on continuous improvement initiatives, product tiering, and providing the best technology solutions drove solid bottom-line performance. I'll now provide some highlights on our financial results, and Greg will offer more detailed commentary in a few moments. Looking at the second quarter, sales, operating profit, diluted earnings per share, and EBITDA were all second quarter records.
These are impressive results against very challenging comparison, where each segment delivered strong organic growth last year and total company organic sales growth was 9% in the prior year second quarter. Each segment delivered strong operating margin in the current quarter, where excluding one-time charges and the incremental $4 million of intangible asset amortization expense in the current year's second quarter, total company adjusted operating margin was 24% and Adjusted EBITDA margin improved over 100 basis points as compared to the same period a year ago, reaching 29% in the current quarter, highlighting our solid second quarter performance.
Looking ahead to the third quarter, we face very challenging comparisons to the prior year's third quarter, where each segment delivered strong organic growth and the total company organic sales growth was 11%. I'll speak more about our outlook in a few moments, but I'll first turn the call over to Greg to provide a more detailed perspective on the second quarter and our third quarter guidance. Greg?
Thank you, Mike, and good morning to everyone. I'll first provide some comments on our second quarter results before moving on to our outlook for the third quarter of fiscal 2018. Second quarter sales increased 12% over the prior year's second quarter, inclusive of a decrease of approximately 1% in organic volume, approximately 7% increase related to the first-year effect of acquisitions, and approximately 5% increase related to the favorable effects of currency translation compared to the prior year's second quarter.
Organic sales volume was in line with our expectations, coming in at the midpoint of our guidance range as we expected moderation against last year's results, particularly in the Advanced Technology Systems segment, where prior year organic growth was 18%. Within the Adhesive Dispensing Systems segment, organic volume was down about 2% against 5% organic growth in last year's second quarter.
Our end market demand remains relatively strong, and we expect this segment to grow organically in the second half of the year. Within the Advanced Technology Systems segment, organic volume was down 1% as compared to the prior year's second quarter organic growth of 18%. Although we did see growth in certain product lines, expected moderation in the quarter impacted performance. Prior year growth included very strong performance in both electronic systems and fluid management end markets.
This segment's acquisitive growth in the current quarter includes a partial month of the 2017 InterSelect GmbH acquisition, two months of the 2017 acquisition of Vention, and the 2018 acquisition of Sonoscan. Within the Industrial Coating Systems segment, outer and container product lines drove this quarter's organic sales growth of 4%.
Moving down the income statement, gross margin for the total company was 55% in the quarter. Operating profit improved 22% to $127 million as compared to the prior year's second quarter, with reported operating margin of 23% in the current quarter. As Mike mentioned, the quarter's results include approximately $4 million of incremental intangible asset amortization expense as compared to the prior year's second quarter.
Excluding a $1 million-dollar charge in the quarter for restructuring, $2 million-dollar charge for step-up in value of acquired inventory, and the $4 million of incremental amortization expense, adjusted operating margin was 24% in the current quarter. As noted in the February earnings call, we did incur incremental costs associated with the adhesive facilities consolidation effort that impacted total company operating margin by approximately 50 basis points or $3 million.
We're estimating the incremental costs for this initiative will be about $2 million in the third quarter and $1 million in the fourth quarter. On a segment basis, Adhesive Dispensing delivered strong operating margin of 29% in the second quarter, or 31% to exclude one-time restructuring charges of approximately $1 million and the $3 million incremental costs related to the facility consolidation effort.
Within the Advanced Technology System segment, reported operating margin was 23% in the second quarter, or 26% when excluding $4 million of incremental intangible asset amortization expense and the $2 million of short-term purchase accounting charges related to the step-up in value of Sonoscan acquired inventory. The Industrial Coating segment delivered operating margin of 18% in the second quarter, which is up 70 basis points from the prior year due to volume leverage.
On a total company basis, net income for the quarter was $91 million, and GAAP diluted earnings were $1.55 per share, a 40% increase over the prior year GAAP diluted earnings per share. The $4 million of incremental intangible asset amortization charges reduced earnings per share by $0.05 per diluted share.
The $2 million for short-term purchase accounting related to step-up in value of acquired inventory and the $1 million of non-recurring restructuring charges reduced earnings per share by $0.04 per diluted share. Additionally, a tax benefit of $2 million, or $0.04 per diluted share, was recognized in the quarter for excess tax benefits related to share-based payment transactions, which are credited to income tax expense.
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 strong second quarter EBITDA of $157 million, or $160 million on an adjusted basis to exclude the step-up in value of acquired inventory. Adjusted EBITDA margin improved approximately 100 basis points over the prior year's second quarter to 29% of sales.
From a balance sheet perspective, net debt to trailing 12 months EBITDA was 2x at the end of the second quarter. 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 turn to the outlook for the third quarter of fiscal 2018.
As in the recently completed second quarter, we are facing very difficult comparisons in our third quarter, where prior year third quarter organic growth was 11%, driven by strong organic growth in all three segments, including 18% organic growth in the Advanced Technology Systems segment.
We are forecasting sales to be in the range of up 1% to down 3% as compared to the third quarter a year ago. This outlook includes organic volume to be in the range of down 2% to down 6%, 1% growth from the first year effect of acquisitions, and a positive currency effect of 2% based on the current exchange rate environment as compared to the prior year. We are forecasting solid organic growth in most all product lines in each segment, with softness in the dispensing product lines serving electronic and automotive end markets.
At the midpoint of this outlook, we expect third quarter gross margin to be about 55% and operating margin to be approximately 23%. We're estimating third quarter interest expense of about $12 million and depreciation and amortization expense of about $28 million, resulting in third quarter forecasted GAAP diluted earnings in the range of $1.47-$1.63 per diluted share.
We expect EBITDA to be in the range of $155 million-$168 million. Consistent with our comments in the February earnings call, our effective tax rate for the third quarter and full year, based on current tax law and our jurisdictional mix of income, is estimated to be approximately 25%. With that, I'll turn the call back over to you, Mike.
Thank you, Greg. Again, I'd like to express my appreciation to our outstanding global team for helping deliver record second quarter results. Organic growth in 2017 was exceptionally strong, which means we're up against challenging comparisons during 2018, particularly in the Advanced Technology Systems segment.
We do, however, expect to generate total company organic sales growth in the low single digits on a full year basis for fiscal 2018. Our team is committed to leveraging the tools within the Nordson Business System to drive operating efficiencies and bottom-line results while delivering the best technology solutions and customer service experience.
Our capital deployment objectives remain consistent, and we've continued to target high-quality opportunities in the marketplace that will help drive our strategic vision for the long-term growth. With that, we'll pause and take your questions.
Thank you. Ladies and gentlemen, if you'd like to ask a question to our speakers, please hit star, then the number one key on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, you may hit the pound key. We ask that once you've asked your question, to please mute your line to prevent any background noise from coming through. Again, that is star, then one to ask a question. Our first question comes from Allison Poliniak with Wells Fargo. Your line is now open.
Hi, guys. Good morning.
Good morning, Allison.
Could you talk about any change that you might be experiencing in terms of customer tones or conversations? I mean, are you seeing anything like that, or is it pretty consistent with your expectations?
I would say the second quarter was certainly pretty consistent with our expectations. I'd say when we look at current business, we're not seeing any particular change in tone from our customers.
Great. Then on adhesive dispensing, I think, Mike, you said organic growth in the back half of the year. I think I'm just trying, Greg, to kind of back into your comments. Should we assume organic growth in adhesive dispensing in Q3? I guess, I mean, do you just have the visibility into that side? Any color there?
Yeah. We expect to see organic growth in the adhesive segment in Q3. You know, I think as we've talked about in the past, the headwinds we're really up against are around the mobile electronics, the dispensing piece and some platform work in the automobile segment. Beyond that, the rest of the business looks solid, and we expect, as we mentioned, to see solid growth in those business product lines.
Great. Thanks so much.
Thank you. Our next question comes from Jeff Hammond with KeyBanc Capital. Your line is now open.
Hi. Good morning, guys.
Morning, Jeff.
Hey. As I look, you know, the backlog grew nicely and is, I think, at record levels, you know, up 10% core. It seems like historically there's pretty good correlation between that and your next quarter out. I'm just trying to kind of reconcile the backlog growth versus the, you know, the weaker 3Q guide and maybe how that, you know, plays out into fourth. I don't know if there's some timing in the orders. Thanks.
Yeah. Jeff, so if you look at the current backlog, we do have some larger projects, some of which will get delivered in the fourth quarter. You know, I'd say, at this point, order rates are kind of flattish to last year. The biggest challenge, again, is in the electronics dispense piece, which we saw dramatic increase in orders last Q3.
As we look at this year, you know, the guidance we're putting out there reflects a view that we're not gonna be able to operate in that particular product line at the same level that we saw last year, and that's really what's coloring our expectations for the third quarter.
Okay. The automotive platform, is that a function of tough comps, or are you seeing some slowing in automotive, there?
I'd say from an operating rate standpoint, you know, which would affect sort of our parts business and so forth, that continues to be solid. The platform piece is really model changeover related, and we've seen that slow down. If you look at the overall global statistics from the automakers, you know, last year was a little softer than the year before, and this year is a little softer yet.
You know, platform work generates larger business, and that's the comp that we're up against in that particular business. If you look at the other parts of the Industrial Coating business, we're seeing some nice growth there.
Okay. Just finally, can you talk about how you think the medical business grows in the second half of the year, you know, kind of relative to normal growth rates? Thanks.
Yeah. We expect to see solid growth in the medical business in the second half of the year, sort of high single digit kind of growth in that business, really along the lines of what we expected. All the different parts of that business are performing well, and we're very pleased with what we see in that business.
Thank you, guys.
Thank you. Our next question comes from Matt Summerville with D.A. Davidson. Your line is now open.
Thanks. A couple questions. First, just with respect to adhesive dispensing, the non-restructuring hits you're taking, I think you said $3 million in Q2, then it steps down to $2 million, then $1 million. I don't have the number in front of me, but it's, I remember, a $4 million-$5 million number in Q1 of this year. Let's just call it $10 million in fiscal 2018. Does that all go away in fiscal 2019? I guess on top of removing those inefficiencies, what do you gain from an efficiency standpoint? Can you help bridge that?
Yeah. Let me comment. If you recall on that business, we're going from three facilities to one in the U.S. in our core components part of that business. Right now, we have four facilities operating as we do the transition. That'll continue throughout the year. In Europe, we're going from two to one.
Those are really the fact that we're operating more facilities than we expect in the long run are contributing to those sort of duplicate cost. As part of that, we've been investing in new technology to improve efficiency. You know, the duplicate cost should go away, you know, in 2018. We should be finished by the end of the, I'd say, the calendar year here this year.
We would expect to see over time efficiencies. You know, obviously, that's a function of volume loading as well, but we expect to see improved efficiencies over time in that business.
I'm sticking just with adhesives. You typically provide a little bit more granularity in terms of business trends by key product category. Can you talk about more specifics around what you're seeing in plastics processing versus nonwovens versus rigid product assembly? Can you give a little more detail there, please?
Yeah. I'd say in the various product lines on the plastic side, we're seeing solid order intake and expectations of growth for the remainder of the year. I'd say the encouraging sign is that the OEMs are ordering in a variety of different end markets that we support.
In our core adhesives business, I'd say we're seeing solid growth in our packaging area and some improvements in our product assembly. You know, nonwovens, we expect to be up for the year, but that can vary quarter to quarter just based on projects.
Thank you.
Thank you. Our next question comes from Charley Brady with SunTrust. Your line is now open.
Thanks. Morning, guys.
Morning, Charley.
Just a quick one on, you know, raw material price cost, kind of any impact you're seeing on that or maybe might be seeing down the road here rest of the year?
Yeah, just a couple comments there, Charley. I'd say the area where we're seeing some push is in the metal side. We have some protection with our agreements and a strong sourcing strategy there. So I'd say it's not really translated into any significant effect at this point. We think we'll be able to manage that through our sourcing activities as well as any pricing we can pass on there.
So I don't see that as a big issue. I'd say, you know, the other part of our cost stack is around, you know, around labor, and we're seeing increases there, but that's the focus of our continuous improvement activity, is to help offset those. So nothing I'd say out of the ordinary at the moment.
Can you give me the breakdown of the sort of the aftermarket piece of it, the parts component of it? You know, generally that runs pretty high for you guys. I'm wondering anything unusual there? Kinda give us some granularity on that.
No. It's about half and half at this point. You know, over time, as things like the medical business grow with the single-use components, that probably will stay or grow a little bit above that. Right now, it's about half and half.
All right. Just one more from me. You guys, particularly in life sciences, have been having a lot of new product development going on. You're actually creating markets you weren't in a few years ago. Can you talk about kind of the growth you're seeing just on a new product development standpoint and kind of where you see that going forward? Does that accelerate going forward?
Yeah. We have had a lot of success with new product development. Quite frankly, that's a critical focus for us in the long run. Across all of our product lines, we're introducing new products, and I'd say we're getting good traction on those.
You know, while this has been a more challenging year from the dispense side in our electronics business, you know, we've seen nice growth in our inspection business as a result of strong new products. You know, we're seeing nice growth in our tiering strategy continuing in our adhesives business, including, you know, probably 100 or so new customers on a lower tier that we haven't served before.
We're seeing some new product introductions in our coatings business and really taking advantage of some new applications. For example, electric battery, which should continue to grow in the long run, you know, is a nice contributor right now. It's not gonna be huge, but it's a nice contributor, and it's related to products that fit specifically certain applications across the electric battery.
I'd say it continues to be the lifeblood of the business. We're continuing to focus on driving new products. Quite frankly, in the long run, that's why we're gonna grow at a multiple of something like 2x global GDP because we can create new products, we get into new markets, new applications. That combination is what helps us grow above GDP in the long run.
Great. Thanks, Mike.
Thank you. Our next question comes from Christopher Glynn with Oppenheimer. Your line is now open.
Thanks. Good morning.
Morning, Chris.
The ADS margins, you know, very strong pro forma, maybe a bigger tick up seasonally than normal. Was there kind of favorable mix or FX impacts, as you moved from the first quarter to the second quarter?
Yeah. I would say certainly the mix of products across the various product lines was favorable. We did get a benefit from the currency as well.
In terms of the non-restructuring bucket hits that I think we're looking at about $10 million for the year, is that better thought of as the pro forma payback than incidental inefficiencies?
Well, certainly year-over-year, you know, that cost should go away, so there should be a step up. Over time, we should see continued improvement in margin in those product lines as we've consolidated, but not only consolidated, but updated the equipment to improve automation. There'll be a combination of both as it plays out over time.
Okay, great. Just curious your relative view of capital deployment for the balance of the year as you toggle between bolt-ons, debt reduction, and share repurchase views?
Yeah, I'd say, you know, number one, we do everything we can to continue to support organic growth, so that's not gonna change, and our dividend approach is not gonna change. From an M&A standpoint, we are focused in the short term with creating more capacity for potential opportunities down the road. We have been focused on reducing the debt-to-EBITDA levels, and we'll continue to do that in the near term.
I think, you know, longer term, it really depends on timing and how the acquisition pipeline plays out. We've got some good opportunities. As you know, we can never fully predict when those are gonna come to fruition. Right now, our near-term focus is on reducing the debt level.
Great. Thank you.
Thank you. Our next question comes from Matthew Trusz with Gabelli & Company. Your line is now open.
Good morning. Thank you for taking my question.
Morning.
Morning.
Have these ADS facility consolidation efforts impacted that segment's growth in any way?
I'd say not in the near term. I think the challenge has been for us is we've had to operate more facilities than we like in the transition because it's largely an engineer to order business, and so we can't really build inventory to accelerate that.
We've been moving products and equipment in a stepwise fashion as we load up the new facility. That's, you know, really translated into more operating costs than we would have in some other businesses where we can build inventory.
Matt, this is Greg. What I'd suggest is, with the investment we've made in technology, we're actually trying to move it in the more positive direction, in a more efficient manufacturing environment, you know, better first pass quality, less touch, so actually providing some capacity.
Okay, thank you. Just following up on your M&A comment that you're building capacity, is there a discrete reason why that you're either seeing larger deals or you're driven to build out a certain niche that would require bigger investment?
Well, we made, you know, four large acquisitions last year and a couple of smaller ones, this year. The focus really has been moving from a three-plus level down to two or so. We do have a solid pipeline, and we wanna make sure that we're not constrained in any way should the opportunities come forward. In the near term, that's not a forever comment. That's in the near term. That's still our focus.
Okay, thank you.
Thank you. Our next question comes from David Stratton with Great Lakes Review. Your line is now open.
Good morning. Thank you for taking the question.
Morning.
What you're seeing on a foreign basis, are you starting to see or hear anything from your customers regarding the impact of tariffs? Or just if you can paint some color around what might be going on behind the scenes there and what you're hearing, that would be helpful.
Yeah, I would say, you know, obviously, certain customers in certain countries are well aware of the dialogue that's gone back and forth. I would say, they're being vigilant, but I don't think it's having an impact on any decisions they're making in the near term. We're not necessarily seeing any project delays or anything like that as a result of the discussions.
Now, you know, we're pretty balanced around the globe in terms of our manufacturing footprint and our ability to supply, so that'll be helpful for us going forward. In the near term, we're not hearing customers putting off projects as a result of concerns in that regard.
Excellent. Last year, I remember, I think that there was some pretty strong mobile phone growth, especially in China regarding automation and once again regarding just what's going on politically and then also in the cycle. Is that growth still there, that leg?
Yeah. Last year was a very strong year for the mobile handset market. In particular, there was a lot of new phones introduced and a fair bit of innovation. This year, what we're seeing is a little bit more incremental approach, a little bit less innovation, and that's having an impact on that.
I don't think there's any issues related to sort of politics or anything like that. It's really just a function of demand. Overall growth in the smartphone area has slowed, you know, it's moderated a little bit. The combination of not a lot new and some moderation in growth is making it a little bit more challenging year for us, particularly on the spend side in for the mobile handset market, but nothing politically related there.
All right, one final for me. Normally, I think you give some adjusted EPS outlook, and it doesn't look like you've done that in this quarter's press release. I was wondering if there's a reason or if you could comment on what you expect the adjusted results to be for the outlook.
Yeah. This is Greg. No, we didn't p rovide any guidance for expected one-time cost in the quarter. We did comment on the duplicate cost, which, you know, is gonna be part of the results, but did not guide to any, you know, one-time type of charges in the quarter. If we have them, I wouldn't expect them to be significant.
All right. Thank you.
Thank you. Our next question comes from Chris Dankert with Longbow Research. Your line is now open.
Good morning, guys. Thanks for taking my question.
Morning.
I guess, just kind of building off the last question a bit here. Any comments, I mean, you mentioned that in-line semi test was growing nicely. I guess, just any commentary on investment in China's semiconductors and kinda how that growth is benefiting, you know, the technology segment right now?
Well, I'd say the investment in China has largely been in the back-end packaging side, which is helpful for us. As far as the semiconductor side, there's certainly a lot of government support for additional investment, but that's not necessarily leading the way, as it relates to opportunities for us.
The opportunities for us in the semi side are in very advanced dispense and very advanced inspection. I'd say, on the inspection side, we've seen pretty solid growth. I'd say on the dispense side, some of the newer technology, we have additional interest in that, but hasn't necessarily come to fruition yet in the last quarter or so.
Gotcha. You said, you know, the organic growth for medical is still looking at high single digit range. You know, I guess, you've had Vention on board for a year now. Just any commentary on, did that, you know, fully hit targets? Is it, you know, much better than you expected? Just some thoughts on cross-selling. Anything on Vention specifically.
Yes. I'd say Vention is meeting our expectations. I'd say on the cross-selling side, we're seeing some uplift there. What we did is reorganized our overall medical business into a one Nordson platform and really integrated the other components of our business into the Vention structure, where there's a design and development piece, a components proprietary components piece, and a very focused finished device piece that includes the prior two.
We like that structure going forward, and we think that gets us closest to the critical customers that drive growth in that business. I would say we feel good about the direction that's heading. We feel good about the integration. We feel good about one, the one Nordson medical approach now with the capability that we have.
Sounds good. Thanks so much, guys.
Thank you.
Thank you. Our next question comes from Walter Liptak with Seaport Global. Your line is now open.
Hi. Thanks. I've got just one follow-up on the guidance and then one on the outlook. You know, when you were talking about the GAAP, non-GAAP, EPS in one of the prior questions, just wanna clarify, Greg, that in your third quarter, you're not going to have any inventory purchase accounting adjustments or other acquisition costs or severance, anything to adjust to non-GAAP. So the GAAP, non-GAAP should be the same.
Correct. We will not have any more inventory step-up or those acquisition-related. If there would be any other one-time like restructuring, I wouldn't expect it to be material. The timing of when those kind of activities hit is unknown. There are no charges in our guidance for EPS related to restructuring, but again, we're past the acquisition-related charges.
We've also anniversaried the Vention acquisition, so we don't have the incremental intangible asset amortization expense over the prior year going forward. But as I mentioned, we do have the duplicate costs associated with the facility consolidation in the numbers, and that charge is in the EPS guidance.
Okay. That was the $2 million?
Right.
Okay. You know, when you were on the conference call last quarter, you know, you guys were talking about kind of a project funnel in electronics that was pretty full, that you sounded pretty optimistic about. Did something happen during the quarter to make you less optimistic?
'Cause I think about you know, talking about your order trends. I think, Mike, you mentioned that orders were flat. You know, how are you feeling about that electronics end market and the project funnel going forward?
Yeah, I'd say there are still some project efforts ongoing. I would say this feels clearly like a tough year, though, where there's less innovation going in. In the third quarter, in particular last year, we had a huge step up on the dispense side, and I think what we're saying is we don't see that kind of step up, and that's really the challenge in the third quarter, and quite frankly, the biggest challenge for the whole year.
Now, if you look at some of the, say, the inspection side, you know, we've got a more diverse end markets, and we're seeing a lot of good growth in that part of the business, including areas like auto electronics, which have been fairly strong for us.
It really comes down to a very significant step up last year in the third quarter that we're trying to offset with all the other businesses, and that's a challenge in a quarter. Quite frankly, it's pressure on the whole year.
Maybe the way to look at it is that we're kind of in this flat environment, where with advanced tech on the top, tough comps, so in decline, and then coatings and adhesives sound like they're experiencing some kind of low single-digit growth.
Yeah, I think if you put it in perspective for the whole year, we said we expected organically to see sort of that low single-digit growth. I think if you look at the two areas that we called out, the sort of dispense side for mobile electronics and the auto platform work, outside of that, everything else has grown, you know, mid-single-digit plus.
It's really the drag associated with those two as a function, and particularly, largely the electronics dispense piece in a year where there's less customer innovation, so less opportunity for us. The other businesses, we expect to have a very solid year.
Okay. All right. Thank you.
Thank you. Our final question comes from Matt Summerville with D.A. Davidson. Your line is now open.
A quick follow-up, maybe to your last comment, Mike. Last year in fiscal 2017, you know, rough cut, what percent of revenue would have been driven by the mobile dispense and auto platform businesses you mentioned?
Yeah. I think if you looked at just the advanced tech segment, the mobile piece could have been you know, close to on the dispense side is probably in that sort of 20% range or so. The auto piece was probably about 20% of the coatings business. You know, both of those will see declines this year that will be sort of double-digit declines.
Just with respect to whether you look sequentially, the incremental margin, if you will, on the higher revenue that you're forecasting looks pretty minimal on a year-over-year basis. The decremental on your revenue outlook looks gigantic.
Just help me understand again the margin implications that maybe this mobile piece is having in ATS. When I look back at your last several fiscal Q3s, you know, you've been posting 30% + margins. What's implied here today is obviously, you know, to make the math work to your EPS guidance, right, is considerably less than that. Can you just close the loop on that?
Yeah, Matt, this is Greg. I guess what I'd suggest is, you know, for the base business, so we've got the Sonoscan acquisition that's incremental, that is not gonna carry, you know, the kind of margins the base Nordson business does. It's got, you know, some non-cash charges, for purchase accounting that burden those results.
If you then take the base business and look at, you know, kind of model the, you know, just like we have the incremental on the upside, we're gonna have that same kind of decremental on the downside, impacting our margins. I don't know that I'd say it's outsized from what we typically incur historically.
Got it. Thank you, guys.
Thank you. I am showing no further questions in the queue at this time. I'd like to turn the call back over to Mike Hilton, CEO, for any closing remarks.
Thank you. Thank you all for participating in today's call. You know, the bottom line, I think our core business is strong. We'll continue to grow, and we have some strategic acquisitions that we've made that we're pleased with, and we have some opportunities going forward to increase both our organic growth and our acquisition growth, consistent with sort of our long-term objectives. Again, thank you to our global team for staying focused and delivering this quarter and into the future. Thank you.
Ladies and gentlemen, thank you for participating in today's conference. This concludes your program. You may all disconnect. Everyone, have a great day.