Q4 2024 Earnings Summary
- Nordson's Advanced Technology Solutions segment achieved a best-in-class EBITDA margin of 27% even at the bottom of the electronics cycle, demonstrating strong operational performance and positioning the company for growth when the market recovers.
- The company's recurring revenue has expanded to approximately 57%, providing stability and predictability to revenues, with a significant portion being 'book and ship', supporting ongoing performance regardless of backlog fluctuations.
- Strategic investments, including a new manufacturing and distribution location in India to support customers' 'China plus one' strategies, and significant R&D investments of 14% to 15% of revenues in the ATS segment, are expected to drive future growth and capitalize on emerging opportunities.
- Nordson's Polymer Processing business, a significant growth contributor in recent years, is expected to decline due to reduced investments in recycling in Europe and virgin polymer production in Asia, particularly China.
- The Medical and Fluid Solutions segment is experiencing weakness in the Interventional Solutions product line, which accounts for approximately 47% of the segment's sales, due to customers being more cautious with inventory purchases. The company anticipates growth in this segment to come primarily from the Atrion acquisition rather than organic growth.
- A decreasing backlog, especially in large system businesses like polymer processing and industrial coatings, may indicate a slowdown in future sales. Excluding the Atrion acquisition, the backlog stands at $550 million.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +4% (from $719.29M to $744.52M) | The increase was driven by acquisitions (e.g., ARAG) and cyclical recovery in electronics, partially offset by unfavorable currency translation. Forward-looking indicators suggest that electronics and biopharma markets may continue to rebound by mid-2024. |
Medical and Fluid | +19% (from $168.62M to $200.22M) | The improvement was mainly due to reduced destocking in single-use components for biopharma and strong demand for medical interventional solutions; however, unfavorable product mix could keep margins constrained. |
Asia Pacific | +8% (from $219.38M to $236.01M) | The region benefitted from electronics market recovery and nonwoven demand, although the semiconductor downturn remained a headwind. Ongoing supply chain rebalancing and China’s gradual rebound may further support growth. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Sales Growth | FY 2025 | no prior guidance | 2% to 7% | no prior guidance |
Adjusted Earnings Growth | FY 2025 | no prior guidance | 0% to 8% | no prior guidance |
Effective Tax Rate | FY 2025 | no prior guidance | 19% to 21% | no prior guidance |
Capital Expenditures | FY 2025 | no prior guidance | $50M to $60M | no prior guidance |
Interest Expense | FY 2025 | no prior guidance | $90M to $100M | no prior guidance |
Foreign Exchange Impact | FY 2025 | no prior guidance | -1.5% | no prior guidance |
Atrion Acquisition Contribution | FY 2025 | no prior guidance | 6% | no prior guidance |
Sales | Q1 2025 | no prior guidance | $615M to $655M | no prior guidance |
Adjusted Earnings | Q1 2025 | no prior guidance | $1.95 to $2.15 | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Adjusted EPS (Full Year) | FY 2024 | $9.45 – $9.65 | 8.11 (sum of quarterly Diluted EPS: Q1 1.90, Q2 2.05, Q3 2.04, Q4 2.12) – note this is GAAP EPS, as adjusted EPS was not individually reported | Missed |
Base Business Revenue Growth | Q4 2024 | Flat to 2% YoY | $744.48M(3.51% YoY increase vs. $719.31MIn Q4 2023) | Beat |
Atrion Acquisition Impact | Q4 2024 | ~$30M incremental sales in Q4 from acquisition | ~$25M increase in Q4 revenue vs. prior year (from $719.31MTo $744.48M) | Missed |
-
Conservative Outlook and Guidance
Q: How are you thinking about growth and guidance for the year?
A: We are taking a conservative approach due to an uncertain macro environment, expecting flat organic growth for the year with sales following typical seasonality. If end markets recover more strongly, particularly in semiconductor, electronics, and general industrial sectors, we could reach the higher end of our guidance. As Q1 and Q2 progress, we'll have a clearer view of the second half. -
EPS Growth Amid Flat Sales
Q: With flat organic growth expected, how will EPS increase?
A: Despite anticipating flat organic sales, we expect EPS to grow through cost actions and efficiency improvements. We've taken restructuring actions to improve our cost base and will benefit from deleveraging and a lower tax rate throughout the year. -
Atrion Acquisition Performance
Q: How is the Atrion acquisition impacting your business?
A: The Atrion acquisition is performing well, slightly ahead of early expectations. Atrion added about $35 million to our backlog, bringing it to approximately $550 million excluding the acquisition. Atrion's EBITDA margins are in the upper 20% range, and we're confident in achieving Nordson-like margins over the next two years. -
Advanced Technology Solutions (ATS) Outlook
Q: Can you discuss the performance and outlook for ATS?
A: ATS delivered 4% organic growth in Q4, and order patterns support ongoing growth. The team repositioned the business during the downturn, achieving 27% EBITDA margins even at the start of the cycle. We've opened a new manufacturing location in India to meet customers' China plus one strategy and are investing in new products. -
Backlog Normalization
Q: Is backlog normalization largely complete, and which businesses were impacted?
A: Backlog normalization is largely done. Atrion added about $35 million to the backlog, bringing it to around $550 million excluding the acquisition. The reduction mainly affected our system businesses, including plastic processing, industrial coatings, and parts of our adhesive business. -
Interventional Business Destocking
Q: What is the status of destocking in the interventional business?
A: We're midway through addressing supply chain changes in our interventional business. We expect normalization after another quarter or two. We're investing in new growth areas to support future demand. -
Polymer Processing Challenges
Q: What factors are affecting the polymer processing segment?
A: The segment faces tough comparables after two record years. There's reduced investment in recycling in Europe and in virgin polymer production in Asia, especially China. -
Efficiency Gains and NBS Next
Q: How are efficiency gains contributing to performance?
A: Deploying NBS Next has improved efficiency, enabling us to make higher volume products more efficiently and significantly improve on-time delivery. In ATS, NBS Next helped reposition the business and invest in new products, contributing to strong margins. -
Customer Hesitancy and Uncertainties
Q: What's causing customer hesitancy and macro uncertainties?
A: Factors like changes in EV battery investments, solar, and geopolitical issues contribute to an uncertain macro environment. Customers are hesitant, leading to cautious investment decisions. -
Chinese New Year Impact on Q1 Sales
Q: How will the Chinese New Year affect Q1 sales?
A: The Chinese New Year will impact our first quarter, causing a sales impact typically in the $10 to $20 million range. This shift means Q1 will be slightly weaker, with the effect usually in Q2.