Nordson(US:NDSN)2025-02-20 20:16Financial Data and Key Metrics Changes - Sales for Q1 2025 were $615 million, down 3% from $633 million in Q1 2024, primarily due to an 8% increase from the Atrion acquisition offset by a 9% organic sales decrease and a 2% unfavorable currency translation [15][16] - Adjusted earnings per share were $2.06, slightly above the midpoint of guidance but a 7% decrease from the prior year adjusted earnings per share of $2.21 [20] - Gross margin was 56%, operating profit margin was 26%, and EBITDA margin was 31%, with free cash flow conversion at nearly 150% of net income [12][13] Business Line Data and Key Metrics Changes - Industrial Precision Solutions: Sales decreased 11% to $300 million, with an 8% organic decline and a 3% unfavorable currency impact. EBITDA was $113 million, a 10% decrease from the prior year [21][22] - Medical and Fluid Solutions: Sales increased 21% to $194 million, driven by the Atrion acquisition, which contributed $53 million. EBITDA was $64 million, an 8% increase from the prior year [23][25] - Advanced Technology Solutions: Sales decreased 11% to $121 million, with a 10% organic decline. EBITDA was $23 million, flat year-over-year, but the segment saw improved order intake [27][29] Market Data and Key Metrics Changes - Order entry rates accelerated throughout the quarter, growing double digits compared to the prior year, with backlog increasing to approximately $670 million [11][42] - The electronics business showed improvement in order intake, indicating potential recovery despite a slow start to the year [28][46] Company Strategy and Development Direction - The company is focused on integrating the Atrion acquisition and leveraging the NBS Next growth framework to enhance operational efficiencies and profitability [35][40] - Continued commitment to product innovation is evident, with new products being launched across various segments, including medical fluid components and polymer processing [39][40] - The company aims to manage costs effectively while balancing investments to support increasing order entry trends [41][63] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a challenging demand environment but expressed confidence in the company's ability to deliver strong profitability [34][62] - The outlook for Q2 2025 anticipates sales in the range of $650 million to $690 million, with adjusted earnings per share expected between $2.30 and $2.50 [42] - Management remains cautious about geopolitical and macroeconomic factors impacting the business but sees positive signs in order entry and backlog growth [62][64] Other Important Information - The Measurement & Control Solutions division has been realigned to the Advanced Technology Solutions segment, with prior year financial information revised for comparability [6][7] - The company repurchased approximately $60 million in shares and paid $45 million in dividends during the quarter, while reducing net debt by $20 million [13][32] Q&A Session Summary Question: What played out in the electronics-related business in the quarter? - Management indicated that the miss in the ATS business was largely due to timing of orders, but order entry and backlog showed strong growth [46][47] Question: When do we start to see year-on-year growth in the interventional side of the medical-related business? - Management expects to see year-on-year growth starting in Q3 and heading into Q4 as destocking trends abate [49] Question: What would organic growth have been excluding the Measurement & Control Solutions move? - Management noted that the MCS business did not significantly impact overall growth, and its contribution was not material to the total segment [55][56] Question: What are the drivers offsetting weaker sales? - Management highlighted strong operational performance and cost management as key factors that would allow the company to meet earnings commitments despite lower sales [60][62] Question: How much of the margin dilution in the medical segment was due to Atrion? - The majority of the margin dilution was attributed to the lower EBITDA margins from Atrion, while the core medical business performed in line with expectations [81][84] Question: What is the outlook for the ARAG business? - Management indicated that the ARAG business is beginning to see modest sequential improvement in order entry and backlog, with expectations for growth in the upcoming quarters [122][156]