• Revenue: $615 million, down 3% from the prior year first quarter sales of $633 million.
• Gross Margin: 56% of sales.
• Operating Profit Margin: 56%.
• EBITDA Margin: 31% of sales.
• Adjusted Earnings Per Share (EPS): $2.06, slightly above the midpoint of guidance.
• Net Income: $95 million or $1.65 per share.
• Free Cash Flow: $138 million, with a 146% conversion rate on net income.
• Net Debt: $2.1 billion, leverage ratio of 2.4 times.
• Share Repurchase: Approximately $60 million in shares repurchased during the quarter.
• Dividends Paid: $45 million.
• Industrial Precision Solutions Sales: $300 million, a decrease of 11% compared to the prior year.
• Medical and Fluid Solutions Sales: $194 million, increased 21% compared to the prior year.
• Advanced Technology Solutions Sales: $121 million, an 11% decrease compared to the prior year.
• Backlog: Increased by approximately $85 million, ending at approximately $670 million.

• Warning! GuruFocus has detected 4 Warning Sign with NDSN.

Release Date: February 20, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Nordson Corp (NASDAQ:NDSN) reported a strong operational performance with a 56% gross margin and a 31% EBITDA margin, despite weaker sales.
• Order entry rates accelerated throughout the quarter, growing double digits above the prior year, leading to an $85 million increase in backlog.
• The Atrion acquisition performed well, contributing $53 million in revenue and exceeding initial performance targets.
• Nordson Corp (NASDAQ:NDSN) repurchased approximately $60 million in shares and paid $45 million in dividends, demonstrating a balanced capital deployment strategy.
• The company maintained a strong free cash flow generation with a 146% conversion rate on net income, allowing for strategic investments and debt reduction.

Negative Points

• First quarter sales of $615 million were at the low end of guidance due to soft demand in key end markets, particularly electronics and industrial, and unfavorable foreign exchange impacts.
• Organic sales decreased by 9%, and overall sales were down 3% from the prior year, driven by weaker demand in selected systems and medical businesses.
• The Medical and Fluid Solutions segment experienced double-digit declines in medical interventional product lines due to ongoing destocking trends.
• Advanced Technology Solutions sales decreased by 11% compared to the prior year, with significant declines in electronics processing and x-ray product lines.
• Net interest expense increased by $5 million due to higher debt levels tied to the Atrion acquisition, impacting overall profitability.

Q & A Highlights

Q: Can you explain the performance of your electronics-related business in the quarter and the outlook for semi/electronics? A: Sundaram Nagarajan, President and CEO, explained that the timing of orders, particularly in x-ray and electronic processing product lines, affected the quarter's performance. However, order entry improved significantly, and they expect strong sales and shipments in the ATS segment throughout the year, with order entry and backlog both up double digits.

Q: When do you expect the medical interventional product lines to return to year-over-year growth? A: Daniel Hopgood, CFO, stated that the destocking trends began in the second quarter of fiscal 2024, impacting year-over-year comparisons. They expect the inflection point for growth to start in the third quarter and continue into the fourth quarter.

Q: What was the rationale behind moving Measurement & Control Solutions from IPS to ATS? A: Sundaram Nagarajan explained that while there is customer overlap with IPS, the technology and product perspective aligns more with test and measurement, making it a better fit for ATS.

Q: Are there strategies in place to achieve at least the midpoint of EPS guidance despite a slower start to the year? A: Daniel Hopgood mentioned that despite the slow start, they are confident in delivering on earnings commitments by managing operations and cost structures effectively. They are not changing the guidance range yet, as the environment is dynamic, and they will reassess after the second quarter.

Q: How do you view the potential for margin improvement in the Medical segment, particularly with Atrion's integration? A: Daniel Hopgood noted that Atrion's margins are lower than the core MFS business, but they have a clear path to improve margins to high 20%s to low 30%s. The core MFS business's decrementals were in line with expectations, and they are confident in long-term margin improvement.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.