Nordson Corporation Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Fiscal 2025 Results: Record sales of $2.8 billion, up 4% from the prior year. Record adjusted earnings per share of $10.24, record EBITDA of $900 million (32% of sales). Strong cash flow with $661 million in full year free cash flow, enabling share repurchases, dividend payments, and debt reduction.
• Ascend Strategy: Launched 5 years ago, adding capabilities like the NBS Next growth framework and division-led structure. Optimized the medical portfolio by divesting the medical contract manufacturing business and integrating Atrion Medical.
• Fiscal 2026 Outlook: Expecting full year sales growth of 1%-6% above fiscal 2025 sales, adjusted EPS growth of 6%-12%. First quarter fiscal 2026 sales forecasted in the range of $630 million to $670 million, with adjusted earnings per share in the range of $2.25 to $2.45.

Segment Performance

• Industrial Precision Solutions: Sales were $362 million, a 2% decrease compared to the prior year's fourth quarter. Organically, IPS was down just under 4% in the quarter, with currency providing a favorable impact of about 2%. EBITDA for the quarter was $137 million, or 38% of sales.
• Medical and Fluid Solutions: Sales were $220 million, an increase of 10% compared to the prior year's fourth quarter. Organic sales volume was up nicely at 7% driven by broad-based demand. EBITDA for the quarter was $88 million, or 40% of sales.
• Advanced Technology Solutions: Sales were $171 million, a decrease of 4% compared to the prior year's fourth quarter. Organic sales volume was down roughly 5% with a small positive currency benefit. Fourth quarter EBITDA was $43 million, or 25% of sales.

Guidance

• Fiscal 2026 full year sales guidance: 1% to 6% above fiscal 2025 sales. Adjusted EPS growth expected to be 6% to 12%.
• First quarter fiscal 2026 sales: $630 million to $670 million. Adjusted earnings per share: $2.25 to $2.45.
• Capital expenditures: Approximately $55 million to $65 million. Interest expense: $85 million to $95 million. Effective tax rate: 18.5% to 19.5%.

Risks

• Macro-economic uncertainties that could cause actual results to differ from forward-looking statements.
• Lumpiness in orders for the Advanced Technology Solutions segment due to delivery timing.
• Potential downside scenarios considered in guidance planning to account for unforeseen market changes.

Question and Answer

Q: On the ATS segment semi side, is there broadening of semiconductor applications?

A: Strength continues in semiconductor AI, cloud, etc. Automotive is stabilizing, general electronics is decent. 50% of ATS revenue comes from semiconductor, ~15% from automotive, rest from electronics.

Q: What is the margin trajectory for 2026?

A: IPS and ATS margins are in line with historical performance. Medical business is expected to maintain upper 30s margins, with the 40% margin in Q4 being strong due to portfolio changes and operational tailwinds.

Q: Why is there hesitation in the low end of the guidance?

A: Guidance is a range of potential outcomes, planning for both upside and downside. There's a strong first quarter start, but prudence is exercised to account for potential market outcomes.

Q: Review of NBS Next over 5 years?

A: NBS Next focused on growth and strategic discipline. It's halfway in implementation, with a focus on commercial excellence for future growth, aiming for average annual revenue growth 6%-8% and adjusted EPS growth 10%-12% by 2029.