Nordson Corporation Q3 FY2025 earnings call

• Strong sales of $742 million, above midpoint of guidance, with solid organic and inorganic growth. Advanced Technology Solutions had second consecutive quarter of double-digit organic sales growth. - Atrion acquisition performed above expectations, expanding medical portfolio. - Free cash flow reached $226 million, a record quarterly, driven by working capital improvements. - Highlights of new products: Nordson Spectrum S2 for electronics underfill, new controls for powder coating systems, Nordson MEDICAL PharmaLok Zero clamp. - Integration of Atrion ahead of schedule, with operational efficiency gains. Targeted restructuring in weaker demand businesses to adjust cost structure, expected to provide annual benefits over $15 million by 2026. - Plan to divest medical contract manufacturing business, closing in fiscal fourth quarter.

Industrial Precision Solutions: Sales of $351 million, up 1% from prior year third quarter. Organic sales decreased 2% with a 3% favorable currency impact. EBITDA was $130 million, 37% of sales, essentially flat to prior year. Medical and Fluid Solutions: Sales of $219 million, up 32% y/y. Growth driven by Atrion acquisition, which contributed $52 million. Excluding divestiture, organic sales up 4%. EBITDA was $83 million, 38% of sales, up 34% from prior year. Advanced Technology Solutions: Sales of $171 million, up 17% y/y. 15% organic sales growth driven by electronics dispense and other lines. EBITDA was $42 million, 24% of sales, up 35% from prior year.

• Expect to be slightly below midpoint of full year sales guidance, inclusive of medical contract manufacturing divestiture. - Expect to be slightly better than midpoint of full year earnings guidance due to strong operational execution and margin maintenance. - Closing of medical contract manufacturing divestiture in Q4 impacts guidance.

• Dynamic demand conditions in key end markets. - Geopolitical and trade policy uncertainties affecting order momentum and backlog. - Lumpy nature of Advanced Technology Solutions sales. - Continued weakness in polymer processing systems and automotive cold material product lines.

Q: Jeffrey D. Hammond asked about order momentum across businesses, particularly ATS and Medical backlog.

A: Dan Hopgood said not to overreact to backlog decline, as it's timing of shipments; Naga Nagarajan provided color on end markets, noting stable order entry in all segments with IPS seeing stability in packaging, nonwoven, and precision ag; Medical with good ongoing activity; ATS with stable demand though lumpy.

Q: Michael Pesendorfer asked about M&A funnel and share repurchase authorization.

A: Sundaram Nagarajan said balanced capital allocation strategy, share repurchase due to market valuation, M&A pipeline healthy but disciplined; Atrion acquisition is a commercial and operational success, EPS accretive a year ahead of schedule.

Q: Edward Magi asked about sales guidance and tariff situation.

A: Daniel Hopgood said after strong Q3, sales outlook improved slightly, incorporating medical contract manufacturing divestiture closing in Q4; Sundaram Nagarajan mentioned dynamic economic environment with uncertainties but Nordson delivering quarter by quarter.

Q: Walter Scott Liptak asked about AI in ATS and quote-to-order cycle in IPS.

A: Sundaram Nagarajan said AI in ATS is early stages with customer value creation ideas; in IPS, larger system orders have some caution with customers delaying, but majority of business in packaging, nonwovens, etc., seeing good order entry.

Q: Bradley Thomas Hewitt asked about Q4 organic sales deceleration and ATS margins.

A: Daniel Hopgood said Q4 has tough comps for some systems businesses but Q3 to Q4 has modest uptick; Sundaram Nagarajan said ATS EBITDA margin at 24% seems reasonable currently, driven by new products and high R&D investment.