NORDSON CORP (NDSN Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Highlights: Started the quarter with increasing order entry and backlog, outperforming sales and earnings guidance. Strength in ATS parts, nonwovens systems, medical fluid components, and precision agriculture. Atrion integration going well, with results above valuation model expectations. Operational excellence led to 32% EBITDA margins. Bought back $85 million in shares, paid $44 million in dividends. Divested select Medical Contract Manufacturing product lines to focus on higher value growth opportunities.
• Segment Details: IPS had sales decline due to select industrial systems but improved sequentially. MFS grew from Atrion acquisition but offset by medical interventional declines. ATS grew due to broad-based demand in electronics and related applications.

Segment Performance

• Industrial Precision Solutions (IPS): Sales were $319 million, down 8% year-over-year, with 7% organic decline and 1% due to unfavorable currency. EBITDA was $114 million, 36% of sales, a 12% decrease from the prior year. Sequential improvement expected as the year progresses.
• Medical and Fluid Solutions (MFS): Sales were $203 million, up 20% year-over-year, driven by the Atrion acquisition ($51 million revenue). EBITDA was $77 million, 38% of sales, an increase of 22% from the prior year. Destocking in interventional products is lessening.
• Advanced Technology Solutions (ATS): Sales were $161 million, up 18% year-over-year, driven by broad-based demand in electronics, optical, and x-ray inspection systems. EBITDA was $40 million, 25% of sales, a 43% increase from the prior year.

Guidance

• Fiscal 2025 Q3 sales expected in the range of $710 million to $750 million. Adjusted earnings per share forecasted in the range of $2.55 to $2.75 per diluted share.
• Confident in managing current tariff levels, with no material impact expected on Q3 results. Monitors potential end market demand impact from trade uncertainties but remains agile with action plans.

Risks

• Geopolitical and trade policy uncertainties.
• Potential impact on end market demand from trade uncertainties.
• Tariff-related cost increases, though managed with targeted price increases and supply chain adjustments.

Q: Mike Halloran asks about trends in ATS and MFS destocking.

A: Sundaram Nagarajan states ATS has solid order entry driven by semiconductor and electronics investment, MFS destocking is lessening with Atrion contributing and fluid components growing. Dan Hopgood adds most ATS growth is from Asian customers.

Q: Andrew Buscaglia inquires about ATS consistency and MFS destock line of sight.

A: Sundaram Nagarajan says ATS is lumpy but order entry supports growth, MFS destocking is reducing gradually with fluid components growing. Dan Hopgood mentions Asian market growth and ongoing customer investment.

Q: Saree Boroditsky asks about ATS margin and Precision Ag performance.

A: Sundaram Nagarajan says ATS margins have structural improvements, Precision Ag (ARAG) is growing with Europe and South America strength. Daniel Hopgood adds ATS margin profile has improved structurally.

Q: Christopher Glynn asks about ATS center of gravity and Atrion dynamics.

A: Sundaram Nagarajan says ATS benefits from customer semiconductor investments, Atrion integration is strong with innovation opportunities. Daniel Hopgood mentions Atrion aligns with Nordson's innovation playbook.

Q: Matt Summerville asks about tariff exposure and ATS business breakdown.

A: Daniel Hopgood states tariffs are manageable with in-region manufacturing, ATS ~50% driven by semiconductor high-power computing, with Asia being a key growth area. Sundaram Nagarajan adds North American investment impact is early.

Q: Walter Liptak asks about ATS growth expectation and pricing.

A: Sundaram Nagarajan says ATS through-cycle growth expected, pricing is regularly assessed with decentralized adjustment. Daniel Hopgood mentions pricing is ongoing with phased impacts.

Q: Christopher Dankert asks about European machine builders and nonwovens growth.

A: Sundaram Nagarajan says European machine builders are positive, nonwovens and packaging businesses are doing well, though IPS industrial systems face headwinds from automotive.