The paragraph is an introduction to the Nordson Corporation's First Quarter Fiscal Year 2025 Conference Call. The operator, Kelvin, introduces the call and mentions that lines are muted to reduce background noise. Lara Mahoney, Vice President of Investor Relations and Corporate Communications, then speaks, welcoming participants and introducing key executives Sundaram Nagarajan and Dan Hopgood. She informs listeners that they will discuss Nordson's fiscal 2025 first quarter results, available on the company's investor website along with a webcast. The call, which will be replayed until February 27, 2025, will reference non-GAAP financial metrics, with reconciliations provided in the press release. Forward-looking statements based on current expectations will be made during the call, and risks are highlighted in the company's SEC filings.

Effective November 1, 2024, the Measurement & Control Solutions division will be realigned from the Industrial Precision Solutions segment to the Advanced Technology Solutions segment following a portfolio reassessment. Segment reporting and prior year financial data have been adjusted for comparison. During a conference call, Naga will present first-quarter highlights, and Dan will discuss company sales, earnings, the balance sheet, and cash flow. Naga will provide an enterprise performance overview and update the fiscal 2025 second-quarter guidance before taking questions. In the first quarter of fiscal 2025, Nordson reported $615 million in sales, at the lower end of expectations due to weak demand in electronics and industrial sectors and unfavorable foreign exchange rates, despite positive contributions from the Atrion acquisition and growth in consumer non-durable products. Order entry rates improved, leading to a sequential $85 million increase in the backlog, reaching $670 million by the quarter's end.

The company reported strong operational performance in their electronics businesses due to improvements in order entry rates and backlog. They achieved high margins and converted free cash flow significantly above net income despite weaker sales. With adjusted earnings per share slightly above guidance and significant share repurchases and dividends, they reduced their net leverage ratio. The sales for the first quarter of fiscal 2025 were $615 million, a 3% decrease from the previous year, impacted by an 8% gain from an acquisition and offset by a 9% organic sales drop and unfavorable currency translation. Demand was inconsistent, with challenges in certain markets and a 2% negative impact from foreign exchange, resulting in sales at the lower end of their guidance range.

In the first quarter, the company saw an acceleration in order entry rates and backlog growth, though revenue declined. Organic growth in various sectors like packaging and optical sensors helped mitigate the decline. Gross profit remained strong at 56% of sales, while adjusted EBITDA was $188 million or 31% of sales, down 4% from the previous year due to lower sales volume. EBITDA margins remained flat year-over-year, including the newly acquired Atrion business. Net interest expense increased by $5 million to $26 million due to higher debt from the Atrion acquisition, partially offset by a $2 million improvement in other income and expense mainly due to foreign exchange variations. The tax expense was $22 million, aligning with the company's guidance and 200 basis points lower than the prior year. Net income was $95 million or $1.65 per share. Excluding nonrecurring costs and acquisition-related amortization, adjusted earnings per share were $2.06, slightly above guidance but down 7% from the previous year's $2.21. The earnings decrease was attributed to lower organic sales and higher interest expense from acquisitions. The paragraph ends by mentioning a review of the first-quarter segment performance.

In the first quarter, the company experienced a sales decline of 11% to $300 million, attributed to an 8% decrease organically and a 3% unfavorable currency impact. The decrease was primarily due to weaker sales in industrial coatings and polymer processing, though packaging and nonwovens saw some growth. The transition of industrial coating manufacturing to a new South Carolina plant is expected to complete in the second fiscal quarter. Segment EBITDA dropped 10% to $113 million, though the margin improved due to a higher mix of parts and consumables. Meanwhile, Medical and Fluid Solutions sales rose 21% to $194 million, driven by the Atrion acquisition, despite declines in medical interventional products due to destocking and strategic adjustments. EBITDA for this segment increased by 8% to $64 million, mainly due to the Atrion acquisition.

The paragraph discusses the financial performance and outlook of a company's business segments in the first quarter. EBITDA margins decreased by 400 basis points due to lower contributions from Atrion, but improvements are expected as integration continues. Despite a decrease in Advanced Technology Solutions (ATS) sales by 11% due to a decline in electronic processing and x-ray products, there were gains in optical sensors and measurement and control areas. Orders and backlog in ATS showed double-digit growth, indicating positive trends for 2025. The EBITDA for ATS was $23 million, maintaining the prior year's level, with an improved margin due to cost management and efficiency enhancements. The company's balance sheet at the end of the quarter showed cash reserves of $130 million, net debt of $2.1 billion, and a leverage ratio of 2.4x.

The paragraph highlights Nordson's financial performance, including a slight improvement in leverage within their target range and strong free cash flow of $138 million with a 146% conversion rate on net income. The company strategically used its strong cash flow to repurchase $60 million in shares, issue a $45 million quarterly dividend, reduce net debt by $20 million, and invest $21 million in capital investments. Despite a slow sales start, Nordson had a solid operational quarter and is well-positioned for growth as demand normalizes. The CEO, Sundaram Nagarajan, acknowledges the Nordson team's strong performance and highlights the positive integration of the Atrion acquisition, noting the promising sales of Atrion's Myocardial Protection System.

During the quarter, Nordson's product lines achieved significant industry recognition. The SpinSAM Acoustic Inspection system received three awards for excellence in wafer inspection, while the QuadraPro X-ray System won the Productronica Innovation Award for its clarity and detection capabilities. The Orion Pro system was recognized for its innovation in precision agriculture at the EIMA 2024 Exhibition. Nordson also received supplier awards from TSMC and Jabil for exceptional product performance and support. The company continues to focus on innovation and customer-specific solutions, launching new products in its medical fluid components and polymer processing lines. Nordson's commitment to innovation and customer intimacy strengthens its position as a growth leader, even in challenging economic conditions.

The organization is maintaining focus on its end markets, managing costs in weaker sales environments, and balancing investments to support rising order trends. They are entering the second quarter of fiscal 2025 with a backlog of approximately $670 million and improving order entry across all segments. They anticipate second-quarter sales between $650 million and $690 million and adjusted earnings per share from $2.30 to $2.50. Due to a slower start to the year and geopolitical dynamics, the company expects full-year sales to be at the lower end of expectations, though they haven't updated their full-year guidance range. The statement ends with thanks to customers, shareholders, and the Nordson team, followed by a Q&A session where Matt Summerville from D.A. Davidson asks about the electronics-related business and incoming orders.

The paragraph discusses the performance and strategy of a company's ATS (Advanced Technology Systems) business. It notes that a miss in the ATS segment was mainly due to the timing of order shipments, especially in the x-ray and electronic processing lines. Despite this, order entry and backlog have shown strong, double-digit growth, suggesting future strength in the segment. On the medical-related interventional side, destocking began in earnest last year, and growth is expected to become more aligned with long-term projections starting in the third quarter. The paragraph also addresses a question from Andrew Buscaglia about the ATS segment's organic growth, excluding the movement of Measurement & Control Solutions (MCS). Sundaram Nagarajan explains the rationale for transferring MCS from IPS to ATS, noting that while there is customer overlap, the nature of MCS as a test and measurement division fits better with ATS.

In this paragraph, Daniel Hopgood and Andrew Buscaglia discuss the performance and outlook of their business segments, specifically focusing on the ATS and MCS businesses. While there has been growth in the MCS segment, it hasn't significantly impacted overall growth due to its relative size. Despite a slower than expected start to the year, causing sales to trend towards the lower end of their guidance range, Hopgood expresses confidence in meeting earnings commitments. The company is adopting a cautious approach, not altering its guidance yet, due to the dynamic market environment. They plan to reevaluate after the second quarter when they gain more insight into their backlogs and order rates.

The paragraph features a conversation where Sundaram Nagarajan expresses confidence in the company's sales and earnings despite a slow start to the year, highlighting positive indicators such as increased order entries, backlog growth, strong operational performance, and successful innovations across various business segments. He mentions specific products contributing to growth like the Harmony applicator and PharmaLok. However, he acknowledges the challenge posed by a volatile geopolitical and macroeconomic environment. The conversation then transitions to a question from Jeffrey Hammond of KeyBanc Capital Markets.

The paragraph discusses the company's sales and earnings performance. Daniel Hopgood explains that, despite hitting the low end of sales guidance for the first quarter, the company exceeded its earnings guidance and aims to replicate this throughout the year. While the sales outlook remains uncertain, historical trends suggest stronger performance in the second half if orders accelerate. The company is confident in maintaining profitability through effective cost management, even with lower sales. Sundaram Nagarajan adds that within the ATS segment, cost efficiencies have offset tough organic revenue growth, resulting in stable income compared to the previous year.

The paragraph discusses the company's performance, highlighting both strengths and areas needing attention. The IPS business is reported to have strong performance with the implementation of NBS Next, while the MFS business experienced a mixed performance due to the integration of Atrion, which has a lower margin. Cost adjustments are being made in areas with weaker sales. Jeffrey Hammond inquires about the impact of Atrion on margin dilution and the status of medical destocking. Daniel Hopgood responds that the core medical business met expectations, with most EBITDA growth attributed to Atrion despite its lower margin. The destocking is anticipated to continue into the first half of the year before improving.

In the paragraph, Sundaram Nagarajan discusses the company's financial performance, focusing on the decremental performance of their core MFS business being in line with expectations. Atrion is adding $53 million at mid-20s EBITDA margins, contributing to a dilution of margins year-over-year. However, the core MFS business has better EBITDA margins than Atrion. Long-term growth prospects for Atrion are positive, aiming to reach high-20s to low-30s margins. Nagarajan also addresses the impact of destocking, which started last year, affecting MFS by 11% alongside strategic repositioning in finished devices programs. Destocking is expected to ease by the third to fourth quarter, with order rates already increasing in their medical interventional component business.

The paragraph discusses the strong order rates in the company's medical fluid components business, which is recovering well after previous destocking in the biopharma and surgical sectors. There is an ongoing sequential improvement in the minimally invasive surgeries (MIS) segment. Daniel Hopgood highlights the contribution of the medical business to both order and backlog growth and notes that year-over-year comparisons will be challenging until the second half of the year. Michael Halloran asks for clarification on revenue guidance, particularly about the factors affecting revenue projection and backlog conversion assumptions. Daniel Hopgood explains that most of the backlog is set to ship in 2025, indicating current year deliveries rather than multiyear orders, distinguishing it from the COVID scenario of taking long-term orders.

The paragraph discusses the company's sales outlook for the year, emphasizing that the first-quarter shortfall may lead to results at the lower end of their sales guidance. However, a recovery is expected in the second half due to normal business cyclicality and increased order intake. The lower end of guidance assumes low single-digit growth, while the higher end predicts more robust recovery in specific segments. The company is not relying heavily on significant rebounds, but is adjusting its outlook based on current observations.

In this paragraph, Michael Halloran asks Daniel Hopgood about anticipated incremental margins recovery in different market segments, particularly the ATS and MFS sides, as the markets normalize. Daniel Hopgood responds, indicating that they expect a 35% blended incremental mix rate, with organic growth contributing more to this rate than acquisitions. This 35% rate is considered a reliable long-term target. Afterward, Saree Boroditsky asks about the ATS segment's margins, which have decreased, and inquires if returning to the 23% margins seen in 2022 is feasible or a one-time occurrence. Sundaram Nagarajan's response is not included in the paragraph.

The paragraph discusses expectations for sales recovery and margins returning to 2022 levels in a business with significant R&D investments. Saree Boroditsky inquires about weaker growth in IPS, questioning if it is due to demand or tough comparables from a previous backlog. Sundaram Nagarajan explains that the primary comparability issues lie in their system businesses due to large previous backlogs. The consumer non-durable and adhesive businesses are growing as expected. Daniel Hopgood adds that the industrial coatings and polymer businesses are experiencing normalization from large past backlogs, which makes year-over-year comparison challenging. However, there is optimism for order strengthening and backlog growth, anticipating sequential growth in the future, despite needing to navigate through previous large system backlogs.

The paragraph discusses improvements in the ARAG agriculture business, noting modest gains in order entry and backlog despite the general market downturn. Chris Dankert from Loop Capital Markets poses a question about Atrion's performance in the medical segment, particularly why they didn't experience destocking like the legacy interventional business. Sundaram Nagarajan explains that Atrion benefits from a new product launch in its Myocardial Protection System and serves two different market segments: consumable components and systems. They highlight that differences in product type and timing in destocking contribute to the varied performance between Atrion and the medical interventional business.

The paragraph is a dialogue from a discussion primarily involving Chris Dankert, Sundaram Nagarajan, and Walter Liptak. Sundaram Nagarajan discusses the company's fluid component business, comparing it to Atrion's component business rather than the medical interventional business. Nagarajan also comments on the company's acquisition pipeline, stating it remains strong despite fewer inbound inquiries and emphasizes a strategic and financially disciplined approach to deal-making. Walter Liptak asks about the 2025 guidance related to sales in different segments, clarifying that MFS could be at the mid-to-high end, while ATS and IPS might be at the low end.

In the paragraph, Daniel Hopgood discusses the company's financial guidance for its various segments. At the lower end of the guidance, the industrial businesses (IPS) and MFS are expected to be down low single digits, excluding Atrion, with a modest recovery in ATS. The upper end of the guidance assumes a stronger recovery in ATS, low single-digit growth in the medical and industrial sectors, and a quicker recovery from destocking in the medical business. Walter Liptak requests more details about the Industrial Precision segment, specifically regarding positive developments in ARAG, the introduction of new products, and observations in sectors like automotive. Daniel acknowledges the question, suggesting a forthcoming detailed response.

The paragraph discusses the progress of the ARAG business, noting that it is evolving with new products and has stabilized after a tough previous year marked by a large backlog. Order rates are showing an ongoing recovery, with expectations of returning to year-over-year growth in the second quarter. The business has been strong on the margin side, partly due to utilizing Italy's short workweek program in the past. Now, ARAG has reinstated its full workforce to meet customer commitments, reinforcing confidence in its growth trajectory. Sundaram Nagarajan adds that these factors support the anticipated return to growth.

The paragraph discusses various aspects of a company's industrial businesses, highlighting new product introductions and market performance. In the ICS business, a manual powder coating product has been successfully launched, and the plastics business is seeing positive market acceptance of its Prodigi die. The nonwovens business is performing well with its new Harmony applicator contributing to growth. The adhesive packaging business is maintaining stability and working on exciting new products expected by the year's end. Overall, order entries have increased across different segments, indicating positive movement despite system challenges.

The paragraph indicates the conclusion of a conference call, with Sundaram Nagarajan expressing gratitude for the participants' time and attention, followed by the operator's instructions to disconnect.

This summary was generated with AI and may contain some inaccuracies.