Q1 2025 Earnings Summary
- Strong Order Entry and Backlog Growth: Nordson is experiencing increased order entries and backlog across all three segments, particularly in the Advanced Technology Solutions (ATS) segment, where orders were up double digits and backlog grew double digits sequentially. This indicates improving demand and positions the company well for future growth. , , ,
- Operational Efficiency and Cost Management: Despite a challenging demand environment, Nordson has delivered strong operational performance with best-in-class profitability. They are effectively managing costs, and in businesses with weaker sales, they are taking actions to reduce costs. This should support earnings even if sales are at the lower end of expectations. , ,
- Product Innovation Driving Growth: Nordson's focus on innovation has resulted in new product introductions across various business lines. The Harmony applicator in the Adhesives business is contributing nicely to growth, the SpinSAM Acoustic Inspection system has won industry awards, and new products are being launched in Medical Fluid Components and Polymer Processing. These innovations are contributing to growth and positioning the company for future success. ,
- Sales are trending towards the lower end of guidance due to a slower start to the year and soft demand in key end markets, particularly electronics and industrial, as well as foreign exchange headwinds. The company acknowledges uncertainty due to a dynamic macro environment and geopolitical dynamics.
- The Medical and Fluid Solutions segment is experiencing double-digit declines in its medical interventional product lines due to ongoing destocking trends, which are expected to continue impacting demand through the first half of the year. This delays the expected recovery in this segment.
- The Advanced Technology Solutions (ATS) segment has seen margins decrease substantially over the last few years, and recovery to previous margin levels depends on sales recovery, which is uncertain. The company's R&D investments, while critical for growth, may continue to pressure ATS margins.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | Declined 3% | Q1 2025 revenue dropped to US$615.42 million from US$633.2 million in Q1 2024. The decline reflects softer organic sales volumes, which appears more pronounced this quarter compared to previous periods that saw acquisition‐driven boosts. |
Europe Revenue | Declined 6.6% | Revenue in Europe fell to US$167.8 million from US$179.31 million. This decrease is driven by weaker organic demand and adverse currency effects, a reversal from earlier periods where acquisitions and favorable currency impacts had supported growth. |
Operating Income | Declined 11.6% | Operating income decreased from US$159.435 million in Q1 2024 to US$140.947 million in Q1 2025. Lower sales volumes combined with rising costs—including increased selling and administrative expenses and continued acquisition-related costs—compressed margins compared to the previous period. |
Net Income | Declined 13.6% | Net income fell from US$109.572 million to US$94.652 million. The drop is attributable to lower overall sales and operating profit, compounded by higher interest expenses and additional costs impacting profitability relative to the prior quarter. |
Basic EPS | Declined 13.5% | Basic EPS decreased from 1.92 to 1.66. This reflects the decline in net income and the impact of increased financing costs, while the weighted-average share count remained stable, continuing a trend from Q1 2024 where increased debt affected per-share profitability. |
Interest Expense | Increased 24% | Interest expense rose from US$21,442 thousand to US$26,559 thousand. This surge is due to higher average debt levels incurred to fund acquisitions, a factor that has intensified in Q1 2025 compared to the previous period. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Sales | FY 2025 | 2% to 7% above fiscal 2024 sales | Trend toward the lower end of the full‐year guidance range | lowered |
Earnings | FY 2025 | Neutral to 8% growth per diluted share | Confidence in delivering on their earnings commitments | no change |
Effective Tax Rate | FY 2025 | 19% to 21% | 19% | lowered |
Backlog Conversion | FY 2025 | no prior guidance | Approximately $670 million expected to ship within the fiscal year | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Sales | Q1 2025 | Forecasted in the range of $615 million to $655 million | 615.4 million | Met |
Adjusted EPS | Q1 2025 | Expected to be in the range of $1.95 to $2.15 per diluted share | 1.65 | Missed |
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Guidance and EPS Outlook
Q: Can you still meet EPS targets despite lower sales guidance?
A: Management expects sales to be toward the lower end of the range due to a soft start to the year, but they're confident in delivering on earnings commitments even with lower sales by managing operations and cost structure. In Q1, they were at the low end of sales guidance but delivered slightly above the midpoint of earnings guidance, which they believe is replicable for the rest of the year. -
Segment Performance and Margins
Q: How are the segments performing, and what about segment margins?
A: The ATS segment is positioned to recover margins as sales rebound, aiming to return to the 23%+ margins seen in 2022. The decremental performance in ATS and IPS was strong, with costs being adjusted where sales are weaker. In MFS, margin dilution was mainly due to Atrion, which has lower margins than the core MFS business, but the core business had strong decremental performance. -
Medical Destocking and Recovery
Q: When will medical destocking abate and growth return?
A: Destocking in the medical interventional business began in Q2 last year, with tough comparisons expected through the first half of this year. An inflection point is anticipated starting in Q3, with growth returning heading into Q4. Order rates in the medical interventional component business are picking up. -
ARAG Business Improvement
Q: Can you provide more detail on ARAG business improvements?
A: There's modest sequential improvement in the ARAG business, with order entry and backlog beginning to improve. The business is expected to return to year-over-year growth in the second quarter, having stabilized and showing strength in order rates. -
Acquisition Outlook
Q: Is the acquisition pipeline still promising?
A: The company remains active and continues to build a strong pipeline of deals, although the number of inbound opportunities may be less. They are strategically and financially disciplined in their approach. -
Atrion's Performance and Lessons
Q: What can be learned from Atrion's performance compared to legacy Interventional?
A: Atrion has performed well organically, serving fluid components and a systems business with successful new product launches. They underwent destocking earlier than the medical interventional business. The company's fluid component business resembles Atrion's component business more than the medical interventional segment.
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