Nordson sees Q2 2025 sales reaching $650M-$690M amid strong backlog growth

Earnings Call Insights: Nordson Corporation (NASDAQ:NDSN) Q1 2025

Management View

• CEO Sundaram Nagarajan noted Q1 2025 sales of $615M fell at the lower end of guidance due to soft demand in electronics and industrial markets, as well as foreign exchange headwinds. However, order entry rates accelerated, with backlog increasing by $85M sequentially to $670M.

• Nagarajan highlighted strong operational metrics, including a 56% gross margin, 26% operating profit margin, and 31% EBITDA margin. Adjusted EPS was $2.06, slightly above the midpoint of guidance.

• The company repurchased $60M in shares, paid $45M in dividends, and reduced its net leverage ratio to 2.4x.

• CFO Daniel Hopgood shared that Q1 sales declined 3% year-over-year, driven by a 9% organic sales decrease and a 2% FX headwind, partially offset by an 8% contribution from the Atrion acquisition. Gross profit remained strong at 56% of sales.

• Hopgood emphasized EBITDA margins of 31% despite headwinds, demonstrating cost management and operational efficiency.

Outlook

• Nordson projects Q2 2025 sales between $650M and $690M, with adjusted EPS guidance of $2.30 to $2.50. Total backlog entering Q2 stands at $670M.

• Management anticipates full-year sales to trend towards the lower end of its prior guidance due to a slower start and ongoing macroeconomic challenges.

• Nagarajan underscored strong order entry momentum and backlog growth, particularly in the electronics and Advanced Technology Solutions segments.

Financial Results

• Q1 2025 sales were $615M, a 3% decline from Q1 2024. Organic sales dropped 9%, offset by an 8% increase from the Atrion acquisition.

• Adjusted EPS for the quarter was $2.06, down 7% year-over-year, reflecting lower sales volumes and higher acquisition-related interest expenses.

• Segment-specific performance included a 21% increase in Medical and Fluid Solutions sales, primarily driven by the Atrion acquisition, while Industrial Precision Solutions and Advanced Technology Solutions experienced year-over-year declines.

• Gross profit margins remained steady at 56%, while EBITDA margins were flat year-over-year at 31%.

Q&A

• Matt Summerville, D.A. Davidson, asked about electronics-related business timing issues. Nagarajan responded that order entry improved significantly during the quarter, with double-digit growth in the backlog.

• Jeffrey Hammond, KeyBanc Capital Markets, inquired about achieving EPS targets despite lower sales. Hopgood explained that operational efficiencies and cost management would support profit delivery.

• Saree Boroditsky, Jefferies, sought clarity on Medical and Fluid Solutions margin dilution from Atrion. Hopgood noted Atrion’s EBITDA margins are in the mid-20% range, with a clear path to improvement over the next two years.

Sentiment Analysis

• Analyst sentiment leaned neutral to slightly positive, with questions focused on operational resilience amid weaker sales. Analysts expressed cautious optimism regarding order entry and backlog improvements, particularly in electronics.

• Management maintained a confident tone during prepared remarks, emphasizing strong operational metrics and improving order trends. However, their responses to analyst questions reflected caution regarding macroeconomic uncertainties.

• Compared to the previous quarter, analysts appeared more focused on short-term challenges, while management reiterated their long-term growth strategy.

Quarter-over-Quarter Comparison

• Q1 2025 sales of $615M marked a decline from Q4 2024’s $744M, reflecting seasonal trends and softer demand in key markets.

• Backlog increased sequentially by $85M to $670M, a significant improvement from Q4 2024, signaling stronger order entry trends.

• Management remained consistent in tone, though slightly more cautious given the slower start to the fiscal year.

Risks and Concerns

• Management highlighted ongoing macroeconomic uncertainties, including geopolitical tensions and foreign exchange headwinds.

• Analysts raised concerns about prolonged destocking trends in medical interventional products and the timing of recovery in electronics-related markets.

• Management emphasized their focus on cost management and operational efficiencies to mitigate these risks.

Final Takeaway

Nordson Corporation started fiscal 2025 with challenges in sales due to soft demand and foreign exchange pressures but demonstrated strong operational resilience. With a growing backlog of $670M and encouraging order entry trends, particularly in electronics, the company projects Q2 2025 sales of $650M-$690M and adjusted EPS of $2.30 to $2.50. Despite macroeconomic uncertainties, Nordson remains focused on leveraging operational efficiencies, integrating the Atrion acquisition, and driving growth through innovation and market expansion.

Read the full Earnings Call Transcript