Nordson Q2 2025 Earnings Report

Nordson EPS Results

• Actual EPS: $2.42
• Consensus EPS: $2.36
• Beat/Miss: Beat by +$0.06
• One Year Ago EPS: $2.34

Nordson Revenue Results

• Actual Revenue: $682.94 million
• Expected Revenue: $671.36 million
• Beat/Miss: Beat by +$11.58 million
• YoY Revenue Growth: +5.00%

Nordson Announcement Details

• Quarter: Q2 2025
• Date: 5/28/2025
• Time: After Market Closes
• Conference Call Date: Thursday, May 29, 2025
• Conference Call Time: 8:30AM ET

Nordson (NASDAQ:NDSN) engineers, manufactures, and markets products and systems to dispense, apply, and control adhesives, coatings, polymers, sealants, biomaterials, and other fluids worldwide. It operates through three segments: Industrial Precision Solutions; Medical and Fluid Solutions; and Advanced Technology Solutions. The Industrial Precision Solutions segment provides dispensing, coating, and laminating systems for adhesives, lotions, liquids, and fibers to disposable products and roll goods; automated adhesive dispensing systems used in packaged goods industries; components and systems used in the thermoplastic and biopolymer melt stream; precision agriculture spraying solutions; fluid components, such as nozzles, pumps, and filters; and product assembly systems for use in paper and paperboard converting applications, and manufacturing roll goods. It also offers automated and manual dispensing products and systems for cold materials, container coating, liquid finishing, and powder coating, as well as ultraviolet equipment used primarily in curing and drying operations. The Medical and Fluid Solutions segment offers medical devices, including cannulas, catheters, and medical balloons; single-use plastic components; precision manual and semi-automated dispensers; minimally invasive interventional delivery devices; and plastic molded syringes, cartridges, tips, and fluid connection components. The Advanced Technology Solutions segment provides automated dispensing systems for the attachment, protection, and coating of fluids, as well as related gas plasma treatment systems for cleaning and conditioning surfaces; and bond testing and automated optical, acoustic microscopy, and x-ray inspection systems for use in semiconductor and printed circuit board industries. The company markets its products through direct sales force, as well as distributors and sales representatives. Nordson Corporation was founded in 1909 and is headquartered in Westlake, Ohio.

Nordson Q2 2025 Earnings Call Transcript

Key Takeaways

• Second quarter sales of $683 million rose 5% year-over-year with adjusted EPS of $2.42 and 32% EBITDA margins, driven by strong integration of the Atrion acquisition.
• Advanced Technology Solutions segment delivered 18% revenue growth, supported by robust semiconductor and electronics order entry and a 5% backlog increase since last quarter.
• Signed an agreement to divest select medical contract manufacturing lines (about 4% of segment revenue), which will be accretive to margins and sharpen focus on higher-value proprietary medical components.
• Organic sales declined 2% amid continued weakness in industrial systems—particularly industrial coatings and polymer processing—and ongoing destocking in interventional medical product lines.
• Third-quarter guidance calls for sales of $710–$750 million and adjusted EPS of $2.55–$2.75, with management stating current tariff levels are manageable and full-year expectations unchanged.

Presentation

[Operator]

Thank you for standing by, and welcome to the Nordson Corporation Second Quarter Fiscal Year twenty twenty five Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer Thank you. I'd now like to turn the call over to Laura Mahoney. You may begin.

[Lara Mahoney, Vice President of Investor Relations & Corporate Communications at Nordson]

Good morning. This is Laura Mahoney, Vice President of Investor Relations and Corporate Communications. I'm here

[Lara Mahoney, Vice President of Investor Relations & Corporate Communications at Nordson]

with

[Lara Mahoney, Vice President of Investor Relations & Corporate Communications at Nordson]

Sundaram Nagarajan, our President and CEO and Dan Hopgood, Executive Vice President and Chief Financial Officer. We welcome you to our conference call today, Thursday, May 29, to report Nordson's fiscal twenty twenty five second quarter results. You'll find both our press release as well as our webcast slide presentation that we will refer to during today's call on our website at www.nordson.com/investors. This conference call is being broadcast live on our website and will be available there for thirty days. There will be a telephone replay of the conference call available until Thursday, 06/05/2025.

[Lara Mahoney, Vice President of Investor Relations & Corporate Communications at Nordson]

During this conference call, we will make references to non GAAP financial metrics. We've provided a reconciliation of these metrics to the most comparable GAAP metric in the press release issued yesterday. Before we begin, please refer to Slide two of our presentation, where we note that certain statements regarding our future performance that are made during this call may be forward looking based upon Nordson's current expectations. These statements may involve a number of risks, uncertainties and other factors as discussed in the company's filings with the Securities and Exchange Commission that could cause actual results to materially differ. Moving to today's agenda on Slide three, Naga will discuss second quarter highlights.

[Lara Mahoney, Vice President of Investor Relations & Corporate Communications at Nordson]

He will then turn the call over to Dan to review sales and earnings performance for the total company and the three business segments. Dan will also discuss the balance sheet and cash flow. Naza will then share a high level commentary about our enterprise performance and provide an update on the fiscal twenty twenty five third quarter guidance. We will then be happy to take your questions. With that, I'll move to Slide four and turn the call over to Naga.

[Sundaram Nagarajan, President and CEO at Nordson]

Good morning, everyone. Thank you for joining Nordson's fiscal twenty twenty five second quarter conference call. We started the second quarter with increasing momentum in order entry and backlog, enabling us to outperform the midpoint of our sales and earnings guidance. This was driven largely by strength in our advanced technology system and parts sales where order entry continues to be solid due to ongoing customer demand within semiconductor and selected electronic applications. We also experienced solid growth in nonwoven systems and medical fluid components and our precision agriculture business previously referred to as ARAG posted solid double digit year over year growth.

[Sundaram Nagarajan, President and CEO at Nordson]

Our Atrion integration is going well and results continue to perform above our valuation model expectations. I'm very pleased with the customer adoption of Atrion's differentiated products as well as our new employees who have adopted the NBS Next framework, driving operational efficiencies and delivering solid growth results. The sales growth in the second quarter was partially offset by year over year weakness in select industrial system sales, reflecting lower overall market demand. That said, industrial systems improved sequentially compared to the first quarter as expected. Operational excellence during the quarter drove strong profit performance resulting in 32% overall EBITDA margins.

[Sundaram Nagarajan, President and CEO at Nordson]

This was driven by operational execution in our core businesses and strong contribution from the Atrion acquisition that exceeded our expectations. As a growth compounder, we are executing a balanced capital deployment strategy, buying back $85,000,000 in shares during the quarter. In addition, we paid $44,000,000 in dividends and maintained our debt leverage ratio at 2.4 times comfortably within our targeted range. Let's turn to Slide five. As investors know from our Investor Day presentation, NBS Next, we hold our product portfolio to a high standard.

[Sundaram Nagarajan, President and CEO at Nordson]

We regularly assess the strategic fit of our businesses and product lines from a market attractiveness and product differentiation perspective as well as their relative financial performance in the company's portfolio. On May 28, we signed an agreement to divest select product lines within our medical contract manufacturing business. Exiting these product lines will increase focus on higher value growth opportunities within the $800,000,000 medical and fluid solutions segment, namely within our growing portfolio of proprietary medical components, including devices from the recent Atrion acquisition. The transaction is expected to improve our growth profile going forward and will be accretive to our margins post sale. We expect this deal to close in the fourth quarter of fiscal twenty twenty five.

[Sundaram Nagarajan, President and CEO at Nordson]

I'll speak more about the enterprise performance in few moments. But first, I'll turn the call over to Dan to provide a detailed perspective on our financial results for the quarter.

[Daniel Hopgood, Executive VP & CFO at Nordson]

Thank you, Naga, and good morning to everyone. On Slide number six, you'll see second quarter fiscal twenty twenty five sales were $683,000,000 up 5% from the prior year second quarter sales of $651,000,000 This growth was driven by an 8% increase from the Atrion acquisition, offset by an overall organic sales decrease of 2% and unfavorable currency translation of a little less than 1%. Gross profit in the second quarter was $374,000,000 a healthy and consistent 55% of sales. SG and A leverage improved year over year, leading to EBITDA adjusted for restructuring and integration costs in both periods of $217,000,000 or 32% of sales. This is an increase of 7% compared to the prior year.

[Daniel Hopgood, Executive VP & CFO at Nordson]

EBITDA growth was driven by improving incrementals in our ATS segment as well as strong contribution from the Atrion acquisition, which continued to perform above expectations from both a sales and margin perspective. Importantly, the impact of tariffs was not material to the company's operating financial performance in the quarter. Looking at non operating expenses, net interest expense was $26,000,000 an increase of $7,000,000 versus the prior year, driven by higher debt levels tied to the Atrion acquisition. Other expenses increased a nominal $3,000,000 primarily reflecting higher foreign exchange transactional losses compared to the prior year. Tax expense for the quarter was $26,000,000 or an effective tax rate of 19%, in line with our guidance range for fiscal twenty twenty five and one hundred and eighty basis points lower than the prior year.

[Daniel Hopgood, Executive VP & CFO at Nordson]

Net income in the quarter totaled $112,000,000 or $1.97 per share on a GAAP basis. Excluding nonrecurring costs related to restructuring actions and integration as well as amortization of acquisition related intangibles, adjusted earnings per share totaled $2.42 per share, slightly above the midpoint of our quarterly guidance and a 3% increase from the prior year adjusted earnings per share of $2.34 This improvement in year over year earnings reflects the strong overall conversion on higher sales and favorability in our tax rate, modestly offset by higher acquisition related interest expense. Now let's turn to Slides seven through nine to review the second quarter twenty twenty five segment performance. Industrial Precision Solutions sales of $319,000,000 decreased 8% compared to the prior year second quarter, down 7% organically and 1% due to unfavorable currency impacts. Growth in nonwoven systems, precision agriculture and packaging product lines were offset by weaker system sales in our industrial coatings and polymer processing product lines, where we're seeing lower end market demand versus 2024.

[Daniel Hopgood, Executive VP & CFO at Nordson]

Also, you may recall that we initiated the transition of our primary industrial coatings manufacturing site to a new South Carolina plant at the start of the fiscal year. That transition is now substantially completed as we move into the third quarter. We expect to see continued sequential sales improvement in our IPS segment as the year progresses. EBITDA was $114,000,000 in the quarter or 36% of sales. This is a decrease of 12% compared to the prior year EBITDA of $128,000,000 driven by lower sales volume in the quarter.

[Daniel Hopgood, Executive VP & CFO at Nordson]

Turning to Slide eight, you'll see Medical and Fluid Solutions sales of $2.00 $3,000,000 increased 20% compared to the prior year's second quarter. Growth was driven by the acquired Atrion business, which delivered $51,000,000 in revenue during the quarter. This was offset by double digit declines in our medical interventional product lines. The year over year decline in interventional volumes includes the contract manufacturing business that we have intentionally rationalized to prepare for the pending sale. Excluding these medical contract manufacturing product lines, organic sales for the remainder of the segment were down about 4% compared to the prior year, reflecting continued destocking trends in our Interventional products.

[Daniel Hopgood, Executive VP & CFO at Nordson]

We expect the impact of destocking trends to continue to lessen as the year progresses, and we continue to see sequential improvements that validate this. EBITDA for Medical and Fluid Solutions was $77,000,000 or 38% of sales, which was an increase of 22% from prior year EBITDA of 63,000,000 The increase was driven by strong conversion on Atrion sales during the quarter and solid execution to minimize decrementals on lower organic volumes. Turning to Slide nine. You'll see Advanced Technology Solutions sales were $161,000,000 or an 18% increase compared to the prior year second quarter. The growth in sales was driven by broad based demand, notably in electronics dispense, optical and x-ray inspection systems, all growing double digits over the prior year.

[Daniel Hopgood, Executive VP & CFO at Nordson]

We started the quarter with a strong backlog and we continue to see steady order entry as the semiconductor and electronic applications we serve continue to show solid ongoing demand. Second quarter EBITDA was $40,000,000 or 25% of sales, an increase of 43% compared to the prior year second quarter EBITDA of $28,000,000 or 20% of sales. The improvement in EBITDA margin was driven by the organic sales growth and continued emphasis on cost management and improved manufacturing efficiency. These margin enhancements should continue to compound as the segment demand outlook continues to improve. Finally, turning to the balance sheet and cash flow on Slide 10.

[Daniel Hopgood, Executive VP & CFO at Nordson]

At the end of the second quarter, we had cash on hand of approximately $130,000,000 and net debt was approximately $2,100,000,000 resulting in a leverage ratio of 2.4x based on trailing twelve months EBITDA. This is a slight reduction from year end and within our long term targeted leverage ratio of two to 2.5x. Our free cash flow generation was in line with the prior year at $103,000,000 during the quarter, resulting in a 92% conversion rate on net income for the quarter and a year to date cash flow conversion rate of 116. During the quarter, given market dynamics, we prioritized share repurchases over debt reduction, with share repurchases totaling approximately $85,000,000 In addition, we returned $44,000,000 to shareholders through dividends, and we also continued to invest in our base businesses, spending roughly $16,000,000 on capital investments, including the final investment in our new ICS manufacturing facility. All in all, we had a solid operational quarter, and our teams delivered on their commitments despite ongoing uncertainty in geopolitical and trade policies.

[Daniel Hopgood, Executive VP & CFO at Nordson]

While market conditions remain mixed for some of our businesses, we are well positioned to capitalize on profitable growth as the year plays out. With that, let's turn to Slide 11, and I'll turn the call back to Nagat.

[Sundaram Nagarajan, President and CEO at Nordson]

Thanks, Dan. Let's start with the implications of dynamic global tariff policies on the company's performance. Similar to the second quarter, we believe we can manage the current tariff levels and don't expect them to have a material impact on our third quarter results. We continue to monitor potential impact on end market demand as a result of these trade uncertainties. However, we remain agile in our action plans knowing there is still plenty of market uncertainty due to tariffs.

[Sundaram Nagarajan, President and CEO at Nordson]

Given our in region, for region manufacturing strategy, decentralized organizational structure and close to the customer model, we are well positioned to offset the impact of changes in trade policies as they evolve. In the near term,

[Sundaram Nagarajan, President and CEO at Nordson]

we have

[Sundaram Nagarajan, President and CEO at Nordson]

implemented targeted price increases and adjusted supply chains to overcome the to date modest tariff related cost increases. In the medium term, the capital light nature of our businesses allows us to further enhance our in region, for region manufacturing strategy. I am proud of the Nordson team's solid execution in the quarter on multiple fronts in this uncertain environment. Our close to customer model with innovative differentiated products is accelerating our commercial execution and leading to positive order entry momentum in electronics, precision agriculture and select medical product lines. This has resulted in sustained order entry and a healthy backlog increase of 5% since last quarter.

[Sundaram Nagarajan, President and CEO at Nordson]

In businesses where we are experiencing weaker customer demand, we have implemented targeted restructuring to adjust cost structure. These actions will be substantially completed by the end of our fiscal third quarter and are expected to provide ongoing annual benefits of over $15,000,000 by 2026. We also continue to invest in our organic business. To support the medium term growth needs of our U. S.

[Sundaram Nagarajan, President and CEO at Nordson]

And global customers, the industrial coatings business moved into a new greenfield facility in South Carolina at the beginning of this fiscal year. Similarly, we have expanded manufacturing capacity for the electronics process solutions business into India to support growing needs of our customers in the region. Finally, as Dan mentioned earlier, our strong balance sheet allowed us to take advantage of the dynamic market conditions in the second quarter and accelerate share repurchases. Year to date, we have bought back approximately $141,000,000 in shares. At 2.4x EBITDA, we remain within our long term targeted leverage ratio of two to 2.5.

[Sundaram Nagarajan, President and CEO at Nordson]

Turning now to our outlook on Slide 12. Based on current visibility and order entry trends, we expect third quarter fiscal twenty twenty five sales to be in the range of $710,000,000 to $750,000,000 Third quarter adjusted earnings are forecasted to be in the range of $2.55 to $2.75 per diluted share. The third quarter guidance is in line with the full year expectations we set at the beginning of our fiscal year and confirmed in our Q1 earnings call. In the near term, we are comfortable managing current tariff levels and do not expect current policies to have a material impact on our results. Despite these short term uncertainties, the strategic competitive advantages of Nordson that we note on Slide 13 remain unchanged.

[Sundaram Nagarajan, President and CEO at Nordson]

Our strong growth portfolio, high recurring revenues, diversified niche end markets, close to the customer model, proprietary differentiated products and the NBS Next growth framework positions us well for long term growth, including potential opportunities when customers shift or modify their manufacturing footprints. This is why Nordson has continuously demonstrated resilience and the ability to deliver best in class profitability in varying market scenarios from the great recession to the pandemic and beyond. As always, I want to thank our customers and our shareholders for your continued support. In particular, I want to thank our Nordson employees who are passionate about meeting the needs of our customers. Your efforts show.

[Sundaram Nagarajan, President and CEO at Nordson]

With that, we'll pause and take your questions.

[Operator]

Thank you. We will now begin the question and answer session. Your first question comes from the line of Mike Halloran from Baird. Your line is open.

[Michael Halloran, Senior Research Analyst - Associate Director of Research at Robert W. Baird & Co]

Hey, morning everyone.

[Sundaram Nagarajan, President and CEO at Nordson]

Good morning. Good morning Mike.

[Michael Halloran, Senior Research Analyst - Associate Director of Research at Robert W. Baird & Co]

Hey, can we just at a high level just talk about how you see trends playing out through the rest of the year? What's embedded in guidance and specifically talk to some of the major verticals, sustainability of what you're seeing in the ATS, when interventional destock, is behind you and and any other kind of key variables as we think about the back half of the year here?

[Sundaram Nagarajan, President and CEO at Nordson]

Sure, Mike. Let's start with ATS. You know, we experienced solid order entry, in the ATS business across all of our businesses, in that segment. You know, stop and think about where this is coming from. What what you really see is this incredible investment that is going on for computing power, you know, be it for AI, be it for cloud computing or ecommerce, any any of that.

[Sundaram Nagarajan, President and CEO at Nordson]

What you're seeing really is this incredible investment happening. And at at the heart of all of that investment is really complex new generation computer chips and semiconductors, right? And Nordson plays really well to Nordson. So and I think that is playing into our growth. Sustainability based on what we see in the business, we feel really good about the trends we see, the conversations we have with our customers.

[Sundaram Nagarajan, President and CEO at Nordson]

We've been talking about this impending order entry for a couple of quarters here. And I would tell you, we are now seeing it in our businesses, and we're seeing it in our results. Right? So so ATS in general, pretty good, feel pretty good about it going playing out through the rest of the year. On MFS, what you are experiencing really is Atrion contributing to growth, very solid performance above our model expectations.

[Sundaram Nagarajan, President and CEO at Nordson]

Our Fluid Components business, which was down for several quarters, that is now delivering nice growth. So we're seeing some positive order entry momentum there. Destocking continuing to reduce in severity as we go through the year. And also you would see that our a significant part or more than half of our organic decline coming from our contract manufacturing businesses as we have rationalized programs. So that reduces.

[Sundaram Nagarajan, President and CEO at Nordson]

Now coming to IPS, look, ARAG doing really well, double digit organic growth, order entry pretty strong there. Our traditional consumer non durable adhesive business is doing well. Good order entry, steady growth there. Our Industrial Systems business is where we are behind, both Industrial Coating where automotive is the big impact there and our plastic processing business. I would tell you automotive will remain a headwind for the company for another couple of quarters given what is happening in that end market.

[Sundaram Nagarajan, President and CEO at Nordson]

But we do see pretty good momentum in our powder coating business. We see very good momentum in a couple of product lines that are very niche applications. So the industrial coatings business continues to improve and believe that through the year they'll do better. So this is the trends that we are seeing in IPS is largely in line with our expectations. It was largely in line with our expectations in the second quarter, largely in line with what we thought at the beginning of the year.

[Michael Halloran, Senior Research Analyst - Associate Director of Research at Robert W. Baird & Co]

No. That's that's super helpful. It's and then as far as the contract manufacturing divestiture goes, any way to size the revenue, as well as maybe talk to if there are other areas you're thinking about internally? I know this is the second major one. You had the the screws, the plastics one earlier, which was super successful.

[Michael Halloran, Senior Research Analyst - Associate Director of Research at Robert W. Baird & Co]

You have this one. Are we at the end of that journey, or

[Michael Halloran, Senior Research Analyst - Associate Director of Research at Robert W. Baird & Co]

or do you think that there's a little more

[Michael Halloran, Senior Research Analyst - Associate Director of Research at Robert W. Baird & Co]

to go there as well?

[Sundaram Nagarajan, President and CEO at Nordson]

Let me give you just the top level color first, and then Dan can be working through some of the details. Look, as we said in our Investor Day, building a strong building and sustaining a strong growth portfolio is an important part of our strategy. So to that extent, that portfolio analysis happens every year and we stay you know, true to that process. It is really based on product differentiation relative financial performance of the business within the portfolio. So that's really the criteria.

[Sundaram Nagarajan, President and CEO at Nordson]

Nothing changed there. So it is an ongoing process, and I'll leave it at that. And so Dan?

[Daniel Hopgood, Executive VP & CFO at Nordson]

Yes. Maybe just to add a little more color, Mike. So answer to your maybe direct answer to your question, no, there we are not there are no other ongoing actions. But I think to Naga's point, this is a great example of the small business for us. To size it for you, this is roughly four percent of our year to date sales in the medical segment.

[Daniel Hopgood, Executive VP & CFO at Nordson]

And this is an example of a business that we've been looking at and assessing for a while and ultimately made the decision it's better off in somebody else's hands. Small part of the overall portfolio, but as you look at as you think about margin implications, Naga mentioned on the call that it would be accretive to ongoing margins post sale. And I think the simple way to think about that is this is on a full year basis, roughly 100 basis points accretive to our medical segment margins going forward post sale. But a small business, but one that ultimately we determine is better off in somebody's hands. There are no further you know, we have other active portfolio actions, but this is something that we continue to look at every year.

[Sundaram Nagarajan, President and CEO at Nordson]

Yeah. Dan, one thing I would add to that is, look, the main reason to continue to build the portfolio and keep the portfolio strong is the opportunity cost, right? This action allows our teams in the medical component business to focus on things we are really good at. While this contract manufacturing belongs within Quasar, who is the buyer of this business, and that they are building this into a great home for our teams in that business, and they will do fine. But it allows our teams to focus on what strategically we are positioned to do, which is to grow our medical component business, including the ones we bought acquired through Atria.

[Michael Halloran, Senior Research Analyst - Associate Director of Research at Robert W. Baird & Co]

That's great. Thanks, Naga. Thanks, Dan. Appreciate the help.

[Sundaram Nagarajan, President and CEO at Nordson]

Yes.

[Operator]

Your next question comes from the line of Andrew Buscaglia from BNP Paribas. Your line is open.

[Andrew Buscaglia, Executive Director at BNP Paribas]

Hey, good morning, everyone.

[Sundaram Nagarajan, President and CEO at Nordson]

Good morning, Andrew.

[Andrew Buscaglia, Executive Director at BNP Paribas]

Good morning.

[Andrew Buscaglia, Executive Director at BNP Paribas]

Yeah, I wanted to touch on a couple of the segments. You know, ATS has been really volatile, you know, last couple of quarters. Should we see more consistent growth in that segment going forward? And what's informing, I guess, can you be more specific around, like, where in the orders you're seeing improvement even either on a sequential basis or however you wanna look at it?

[Sundaram Nagarajan, President and CEO at Nordson]

Yeah. Yeah. I yeah. Yeah. Let me let me address sort of your first question, which is sort of the lumpiness of this business.

[Sundaram Nagarajan, President and CEO at Nordson]

You know, this is a business inherently lumpy and inherently lumpy because of the industry that we operate in. Right? When we have customers who tend to expand and expand fast and wanted to expand right now. Right? Or wanna, you know, stop buying and wanna change their investment profile right now.

[Sundaram Nagarajan, President and CEO at Nordson]

So that is something the company is difficult to control. But overall, if you think about how we think about the business within the company and that may be helpful is to really say this is a part of the cycle where it is starting to grow. Now it is difficult for us to sort of control customer expectations of shipments and timing of shipments. So things could slip from one quarter to next. But first half, second half is a good way to think about this business in terms of growth.

[Sundaram Nagarajan, President and CEO at Nordson]

We feel and what we see in our order entry is some pretty strong order entry patterns that gives us pretty good confidence that this is the part of the cycle where this business is going to contribute nicely to the company's organic growth. You know, if you put it in perspective, through the cycle, this is a five plus percent organic growth business. Right? And order entry and backlog are building and and are supportive of that for the year. So Maybe one other thing I just

[Daniel Hopgood, Executive VP & CFO at Nordson]

as you about this, just to add one additional flavor. And most of the growth we're seeing right now is really with our Asian customers. And so as you think about some of the announcements being made around investments in The US, frankly, we're not even seeing that yet. And so this cycle does have some legs to it. Most of the growth that we're seeing is with existing capacity or expanding capacity in some of our some of the Asian markets.

[Daniel Hopgood, Executive VP & CFO at Nordson]

But there additional legs to that I think are still at the early stages.

[Sundaram Nagarajan, President and CEO at Nordson]

And the other thing to also think about is these tariff regimes that are being talked about figured out. I think our customers are going to adjust manufacturing footprint. And as they adjust manufacturing footprint, that represents a nice opportunity for Nordson. And if you really think about our expansion in India, that really stems from the fact that some of our customers are diversifying their manufacturing footprint and we will benefit from it. Look, this is who Nordson is.

[Sundaram Nagarajan, President and CEO at Nordson]

We've, have a very close customer direct model. We work with our customers that are, you know, capital light manufacturing business. And so we are able to pivot to the needs of our customers, help them expand, serve their needs in whatever geographies they want to. So as they move, as they expand, as they invest, know, notes and benefits. So hopefully, that gives you some color.

[Sundaram Nagarajan, President and CEO at Nordson]

I know you need you had couple of follow ups. So let's just

[Andrew Buscaglia, Executive Director at BNP Paribas]

Yeah. I you know, maybe switching on MFS. Yeah. Yeah. Question would be the the line of sight on, you know, that the con in interventional medicine has has been surprising due to destocking.

[Andrew Buscaglia, Executive Director at BNP Paribas]

But what's your line of sight on that destock at this point? Seems like it's slowly coming to an end. And then on the other side of that, is there a rate in acceleration or or is this not the type of market where you could see a a pickup? You know, maybe it's more of a gradual pickup. I'm not sure the nature of how that cycle would work in that business.

[Sundaram Nagarajan, President and CEO at Nordson]

Sure. If you had asked me prior to COVID, this is a business that's not cyclical, right? It was a secular 5%, six %, seven % growth every year. If you think about where we are at, in terms of destock, what we are finding is that the destock in this business is definitely reducing, right, definitely reducing because we can see can see our order entry improve. Right?

[Sundaram Nagarajan, President and CEO at Nordson]

So so we feel we feel good about where we are at in terms of the destocking being getting played out. But Fluid Components, which is another part of this business, it is a smaller business, but a smaller part of the business that was down significantly for, you know, to eight quarters almost, it is now delivering growth and we feel really good about where they're at. Longer term, the pipeline projects that we're working on for these businesses, they are they remain strong. You know, in terms of how they would recover, you know, this is not the customer behaviors are not similar to what you see in electronics. Here, this is going to be far more steady growth.

[Sundaram Nagarajan, President and CEO at Nordson]

People went through COVID, overstocked, destocked, and now it is going to gradually recover to normal demand growth rates rather than a significant uptick or a significant downtick. So our expectations for this business is that we continue to recover on the destocking, fluid components contributing nicely. But don't forget, Atrion is a big contributor to our growth and that business as we have shared is doing very well above our expectations.

[Andrew Buscaglia, Executive Director at BNP Paribas]

Yes. All right. Thanks, Naga.

[Sundaram Nagarajan, President and CEO at Nordson]

Sure.

[Operator]

Your next question comes from the line of Saree Boroditsky from Jefferies. Your line is open.

[Saree Boroditsky, Senior Vice President at Jefferies & Company Inc]

Good morning. Thanks for taking the question. Going on of the stuff you talked about with ATS. Do you think about margin performance And how do you maintain a more steady margin performance if you're going to continue to see some of that volatility with the customer behavior you spoke about?

[Sundaram Nagarajan, President and CEO at Nordson]

Yeah. I think during the last downturn, the teams really did a nice job of restructuring the business. You know, our expectation is that this this industry performance margin performance is different from our other businesses. Right? Because our investments on innovation are significantly higher in this business.

[Sundaram Nagarajan, President and CEO at Nordson]

You have to invest in innovation, which is, you know, four, five times higher than what we have in our other businesses. Because unless you invest, you're not able to participate in the growth cycle. So the margins will be different. But we feel like we have adjusted the cost structure such that in a downturn, the margins would be lower than where it is today, which is right now it is at 25%. And in a down cycle, could it be lower?

[Sundaram Nagarajan, President and CEO at Nordson]

It could be. But it's not going to be a place where we have significantly lower margin performance like, you know, seven years, five years ago, or six years ago. You know?

[Daniel Hopgood, Executive VP & CFO at Nordson]

Terry. Maybe one way to think about it is, you know, with the kind of foundational changes or or changes improvements that we've made in the business model, we we've essentially raised the waterline in this business. Right? So if you look peak to peak or trough to trough, you're gonna see sustained improvement in the margin profile going forward, and that's because of the structural changes that have been made to to to reposition the business.

[Saree Boroditsky, Senior Vice President at Jefferies & Company Inc]

That's helpful. And then maybe turning, the Precision Ag business returned to growth in the quarter as I believe you expected. Could you just talk through what you're seeing in that market? And how what you've seen from a margin performance and how it should perform in an up cycle?

[Sundaram Nagarajan, President and CEO at Nordson]

Yes. The margins in let me just take the margin question first on, ERAG or Precision Agriculture business. Look, even in a downturn, the EBITDA margins in that business was, as good as the company or slightly better. Right? So in the up cycle, there may be some benefits, but, you know, our goal is to continue to grow this business.

[Sundaram Nagarajan, President and CEO at Nordson]

That's where the opportunity is. Where we are seeing the growth, the growth is coming mostly in Europe and in South America. And so if you'd remember, you know, just, know, just refresh all our memories around this is that, remember, this is a European based business. That is where their strength is. They're a market leader in Europe.

[Sundaram Nagarajan, President and CEO at Nordson]

Clearly, we've gone through, you know, an inventory adjustment in the channel in Europe, and we're growing back again. We are super excited about a couple of new products that they have launched. You know, clearly, are at the very early stages of implementing NBS Next. You know, so we are super excited about this business. It is growing.

[Sundaram Nagarajan, President and CEO at Nordson]

Our expectation, it continues to grow.

[Lara Mahoney, Vice President of Investor Relations & Corporate Communications at Nordson]

Thanks. I appreciate the question.

[Operator]

Your next question comes from the line of Christopher Glynn from Oppenheimer. Your line is open.

[Christopher Glynn, Managing Director and Senior Analyst at Oppenheimer & Co. Inc.]

Thanks. Good morning, guys. Good morning. Nice to hear the increasingly assertive pivot on ARAG. And then on your subsequent acquisition to that, Atrion, just kind of curious about the upside, whether that was a conservative initial posture or true surprise.

[Christopher Glynn, Managing Director and Senior Analyst at Oppenheimer & Co. Inc.]

Curious your current thoughts the compound growth over time. Is what we're seeing here the profile? Or does the current upside maybe create some growth challenges in fiscal twenty twenty six as you know, I don't know if you have to digest the scaling that you're seeing here in fiscal twenty five. So just kind of surrounding, some of the Atrion dynamics a bit there.

[Sundaram Nagarajan, President and CEO at Nordson]

Yeah. You know, a, I I wouldn't say it was a conservative model. You know, remember, we have been in this the kind of products that we sell majority of the business. We have very good familiarity. And so understand what the performance expectations can be from both the market perspective as well as internal.

[Sundaram Nagarajan, President and CEO at Nordson]

Where we are at in that business is we're integrating nicely. We're certainly performing well commercially. They've got one new product out there that, you know, we're doing really well. They've got a couple of more coming right behind it. So I think we have a good benefit of new products that are going to help our growth.

[Sundaram Nagarajan, President and CEO at Nordson]

Look, we're ahead, but we still have opportunity in this business. You know? And and I think that's how I would think about it.

[Christopher Glynn, Managing Director and Senior Analyst at Oppenheimer & Co. Inc.]

Okay. Great. Is this is this something where they can really generate, you know, a a material new products every couple of years?

[Sundaram Nagarajan, President and CEO at Nordson]

I I don't it's gonna it's gonna be difficult to say, but look, this is a business that has significant amount of IP. I don't know whether I could put a number next to it other than I would say that the innovation opportunities are pretty strong. And we really like where they're at. I think that is an important growth contributor for them and the rest of Nordson, right? Innovation has always been an important part of our playbook and that's what they that's the alignment with their strategy and ours.

[Sundaram Nagarajan, President and CEO at Nordson]

Operationally, there may be more opportunities too. I think that is we are very early days there.

[Christopher Glynn, Managing Director and Senior Analyst at Oppenheimer & Co. Inc.]

Okay, great. And then pivoting over to ATS, just curious how the center of gravity is moving. Are you seeing the industrial RF chips around customer innovation starting to land? Is it more midstream processing? Just trying to get a sense of where the piglet is in the pipeline.

[Sundaram Nagarajan, President and CEO at Nordson]

All right, Chris. So let me, let me try to if you're asking me where we are at and how how this cycle is playing out, you know, a couple of things we see is a, the investments that are happening by our customers are pretty significant and they're pretty rapid, which essentially tells us that the opportunity for us to continue to benefit from it remains. I think the investment as Dan mentioned, investments in North America is still an upside that's not played out. It will take many more years to have that show up. But the opportunities in Asia are strong and and they're happening.

[Sundaram Nagarajan, President and CEO at Nordson]

There is a ton of innovation that is happening, and I don't think that is going to end here, because I think we are at very early stages of, you know, the GPUs that are getting built. The technology around the GPU is is significant. And I think so the more difficult it is, the better it is for Nordson, and that is this is one of those cases where we're going to benefit from it. So we're going to continue to adapt our existing technologies. You know, there's going to be some fast innovation to customize for people's investments.

[Sundaram Nagarajan, President and CEO at Nordson]

But also as we solve these bigger problems, I think we have an opportunity. And we have new categories of products through our CyberOptics acquisition. We have a new generation of in process sensors called WaferSense. And that is a product category that is growing very nicely for us. We see we just released two new products in that category.

[Sundaram Nagarajan, President and CEO at Nordson]

We have new opportunities there. We're working on more. So innovation is going to in ATS, for us to win, we have to innovate and we need to have we have to play at the right price points with right manufacturing footprint. So it's got nice upside, but it is lumpy and it is cyclical.

[Christopher Glynn, Managing Director and Senior Analyst at Oppenheimer & Co. Inc.]

Great. Thanks for that.

[Operator]

Your next question comes from the line of Matt Summerville from D. A. Davidson. Your line is open.

[Matt Summerville, Managing Director & Senior Research Analyst at D.A. Davidson]

Thanks. Just a couple of quick ones. If you look at your tariff exposure on an annualized basis, what does it look like if it's completely unmitigated, which I realize it isn't based on the current tariff scenario? I'm trying to get a feel for how much of an impact you're working to offset, and then I have a follow-up.

[Sundaram Nagarajan, President and CEO at Nordson]

Dan, you wanna

[Daniel Hopgood, Executive VP & CFO at Nordson]

Yeah. May maybe I'll take that one, and certainly appreciate the the question. It's It's something that's top of mind for everybody. But what I would say is, certainly, the current levels, I mean, tariffs are very manageable. And as we stated, really had no material impact on our second quarter results.

[Daniel Hopgood, Executive VP & CFO at Nordson]

We continue to monitor it, and obviously, this is a developing situation. And frankly, announcements seem to be coming. But the general way I would think about it is our in region, four region mitigates a large amount of the tariff exposure. And so maybe I'll just give you a little bit of a framework. If you think about it, as a percent of our overall sales, you know, roughly 85 to 90% of our sales are fully in region, for region, meaning very little import export exposure.

[Daniel Hopgood, Executive VP & CFO at Nordson]

If you think of the 10 to 15% that is not, that is a broad based or very diversified set of exposures. So we do not have any concentrations of exposure. So if you think of that 10 to 15%, it's split amongst many different arrangements in our global footprint, and no single inter country exposure is more than low single digits. And so for those reasons, and others, including Naga's points that, you know, we we tend to be more nimble than most and can pivot as our customers pivot, we, you know, we don't see a significant impact. It's certainly not at the current levels.

[Daniel Hopgood, Executive VP & CFO at Nordson]

No. Things can change, and that's where we're continuing to monitor the situation. If the situation change changes, we'll we'll make pivots where we need to, but, I would come back to no material, exposure in the second quarter. At the current levels, we think this is very manageable. And really, for us, the bigger risk and the bigger consideration in all of this is what it does to end market demand with our customers.

[Daniel Hopgood, Executive VP & CFO at Nordson]

Right? If our customers start deferring investments or deferring, you know, capital, that's probably the bigger risk, what the general economic impact

[Daniel Hopgood, Executive VP & CFO at Nordson]

is to this.

[Daniel Hopgood, Executive VP & CFO at Nordson]

And frankly, that's, I would say, you know, what we're watching closer than than anything.

[Matt Summerville, Managing Director & Senior Research Analyst at D.A. Davidson]

Thank you for that color. And then just as a

[Matt Summerville, Managing Director & Senior Research Analyst at D.A. Davidson]

yeah. No. That was super helpful. Thank you. Just to maybe try and put a little bit finer point on what you're seeing in ATS, is there a way to quantify how much of that business today is being driven by various categories of high performance computing relative to what that number would have looked like twelve to eighteen months ago?

[Matt Summerville, Managing Director & Senior Research Analyst at D.A. Davidson]

Thank you.

[Sundaram Nagarajan, President and CEO at Nordson]

I I would say, think 50% of our business would be semiconductor, high you know, high power computing as you describe it. And couple of years ago, I I don't know, if you go back, I wanna say, you know, four, five years ago, you know, maybe that number was 30% or so. 20 look, I'm guessing here, 20 to 30% at best. Certainly, this is an area our teams have focused on, but also the type of customers have changed. That's, you know, without getting into specific names, I would tell you if we were very North American centric five years ago, We are more Asia centric.

[Sundaram Nagarajan, President and CEO at Nordson]

Although Asia was a big presence for us even five years ago, I would say the kind of customer projects we're working on, the innovations we are leading, the demands we are creating, tend to be in Asia than than North America. But I think that would also change because as North American semiconductor investments become, you know, real, meaning when the buildings are done, when things people are making, as as you have packaging lines come on, not soon as going to benefit.

[Matt Summerville, Managing Director & Senior Research Analyst at D.A. Davidson]

Understood. Thank you.

[Operator]

Your next question comes from the line of Walt Liptak from Seaport Research. Your line is open.

[Walter Liptak, Industry Analyst at Seaport Research Partners]

Hi, thanks and good morning.

[Sundaram Nagarajan, President and CEO at Nordson]

Good morning, Walt.

[Walter Liptak, Industry Analyst at Seaport Research Partners]

So

[Walter Liptak, Industry Analyst at Seaport Research Partners]

I've got a couple of follow ons. On the ATS segment, Naga, I think you kind of alluded to like a 5% growth. And I wonder if I just wanted to clarify, was that 5% growth in the second half on an organic basis? Or were you just talking about kind of growth in the future?

[Sundaram Nagarajan, President and CEO at Nordson]

I'm talking about through the cycle growth, right? I mean, you know, there is going to be since it's cyclical, you got to take it through the cycle. You know, our expectation is this business grows 5%, Right? We have very good clarity to q three, and that is definitely higher than 5%. But we don't guide by segments of, you know

[Walter Liptak, Industry Analyst at Seaport Research Partners]

I realize that. Yeah. So think for adding mental that in.

[Walter Liptak, Industry Analyst at Seaport Research Partners]

Okay. Good. And then do you I think

[Walter Liptak, Industry Analyst at Seaport Research Partners]

in your prepared remarks, you guys commented on some selling price increases.

[Walter Liptak, Industry Analyst at Seaport Research Partners]

Yeah.

[Walter Liptak, Industry Analyst at Seaport Research Partners]

And so I wonder if you could just help us understand was this like a price increase or like a tariff surcharge? Or and was this uncommon? Do you usually do like annual price increases?

[Walter Liptak, Industry Analyst at Seaport Research Partners]

Or is it kind of a normal course of business?

[Daniel Hopgood, Executive VP & CFO at Nordson]

Yeah. No. It's a good question. Look. Our our pricing focus so so the answer to your question is we regularly assess pricing.

[Daniel Hopgood, Executive VP & CFO at Nordson]

It's a normal part of our process. Our focus, and this is largely driven by our current margin profile, our focus is really on maintaining competitiveness and maintaining our margins. But it is something that we look at regularly in the current environment. Certainly, some of what you're seeing is tariff impacts being passed on where necessary. And that would include both think about it as both the direct impact and any indirect impact through the general supply base.

[Daniel Hopgood, Executive VP & CFO at Nordson]

And so that is certainly, but but, again, if I were to look at our overall pricing, I would say, you know, there's no significant escalation at this point. Right? It's really, you know, look, where we have to pass things through and manage, we are doing that, but it's not a significant impact.

[Sundaram Nagarajan, President and CEO at Nordson]

Yeah. And and the other way to also remember is that we run the company as 14, now 15 divisions. So what this allows us is you have a decentralized organization with business owners who understand their market dynamics, understand their cost structure, are able to, you know, simply read the situation and be able to adjust pricing, adjust supply chain so that we are able to keep growing and growing profitably. So our structure, our entrepreneurial spirit in the businesses as well as our close to the customer model allows us to be able to learn the market and adjust accordingly.

[Walter Liptak, Industry Analyst at Seaport Research Partners]

Okay. That's awesome. And just maybe a follow on to that. Did the so the price increases went through do you get benefits from it already? Or are you just about to announce them?

[Daniel Hopgood, Executive VP & CFO at Nordson]

They're phased in over time. It's there's no one size fits all. I think as Naga just mentioned, each of our divisions are making those decisions and managing as appropriate. And so think of it as pricing is generally an ongoing activity that takes place throughout the year.

[Walter Liptak, Industry Analyst at Seaport Research Partners]

Okay. Got it. Fair enough. And then just one last one for me, if it's okay. Last quarter, I think you guys talked about how you were feeling that things would be at the low end of your sales range.

[Walter Liptak, Industry Analyst at Seaport Research Partners]

And but I didn't hear or maybe you did make a comment about that. Are do you still think you're gonna be at the low end of the sales range for for 2025?

[Daniel Hopgood, Executive VP & CFO at Nordson]

Yes. No. It's a very good question. And look, I'm going to come back to what we've said explicitly. What we can tell you is that Q3 guidance providing for Q3 is certainly fine with our full year expectations.

[Daniel Hopgood, Executive VP & CFO at Nordson]

There's a lot of things that are still pending on the policy and trade front, namely some deadlines coming up in July and August. It's a bit early to call Q4 and the outlook for the full year. That doesn't mean that we're backing away from our guidance. Frankly, we just don't know what's going to happen as some of these decisions get made and play out. So Q3 is certainly in line with our full year expectations that we reiterated in the first quarter.

[Daniel Hopgood, Executive VP & CFO at Nordson]

Q4 were remains to be seen and largely dependent around what happens on the front over the next couple of months. What that impact is, again, I'm going go back to my earlier statements. You asked me what are we concerned about? It's really what is the impact on end market demand, right, across our portfolio? If customers start pulling back because of these uncertainties, we haven't seen that yet, but it's too soon to say.

[Sundaram Nagarajan, President and CEO at Nordson]

I I think that is probably what you have to remember is it is uncertain, but we are not seeing in our businesses yet. But these deadlines come up in summer. Look, these are not these are dynamic times to say the least. Yet our teams are doing a fantastic job of continuing to serve our customers, continuing to innovate, continuing to do all the things Nordson does really well. And I think that is a testament to the team's ability in a very entrepreneurial way to adjust to some very uncertain times.

[Sundaram Nagarajan, President and CEO at Nordson]

And we tell you that there is no impact on tariffs. Yes, but there is a lot of work that goes behind achieving that outcome, right? And so I think that's what you want to take away is that the impact is minimal. Teams are agile, working and we'll take a quarter at a time here.

[Walter Liptak, Industry Analyst at Seaport Research Partners]

Thank you very much guys.

[Operator]

Your next question comes from the line of Chris Dankert from Loop Capital Markets. Your line is open.

[Christopher Dankert, SVP - Equity Research at Loop Capital Markets LLC]

Hey, good morning guys. Thanks for squeezing me in here. Just as it relates to the outlook, we've been hearing some more constructive commentary from the European machine builders. I guess maybe any color on customer conversations within that business? And then does that support a chance for organic growth in that adhesive dispense business in the back half year?

[Sundaram Nagarajan, President and CEO at Nordson]

Yes. I think the you're right about the European machine builders. We feel pretty good about our position there, and we continue to do well. What we are seeing really is our big cyclical, big system businesses, which is not the adhesive we don't include the adhesive businesses in it because we have our plastic processing business and industrial coating business, which are much bigger systems. Now those are that is different, and that's what is weighing on IPS.

[Sundaram Nagarajan, President and CEO at Nordson]

But the adhesive business in general, our nonwovens business year to date has done extremely well and we expect that they will finish the year really nicely. Our packaging business is doing well. We also expect to do well there and our product assembly seems to be okay. So I think what we are experiencing is slightly different. We are seeing what you're talking about, which is the machine builders and our adhesive businesses are definitely benefiting from that.

[Christopher Dankert, SVP - Equity Research at Loop Capital Markets LLC]

I guess my response on relative basis, I mean, it seem like current demand is similar to what we saw in the first half? Or is there actually some improvement in that nonwovens activity?

[Sundaram Nagarajan, President and CEO at Nordson]

I would say similar, nothing significantly better. But they had pretty nice first half.

[Christopher Dankert, SVP - Equity Research at Loop Capital Markets LLC]

Got it. I guess I'll leave it there. Thanks so much for the color, Naga.

[Daniel Hopgood, Executive VP & CFO at Nordson]

Sure.

[Operator]

And we have reached the end of our question and answer session. I will now turn the call back over to Naga for some closing remarks.

[Sundaram Nagarajan, President and CEO at Nordson]

Thank you for your time and attention on today's call. Nordson is well positioned in this dynamic environment. Our close to the customer model, proprietary and niche technology, diversified geographic and end market exposures, high level of recurring revenue and a strong balance sheet are among the many attributes that makes us a reliable compounder. Thank you.

[Operator]

This concludes today's conference call. Thank you for your participation. You may now disconnect.

Participants

Executives

• Lara Mahoney, Vice President of Investor Relations & Corporate Communications
• Sundaram Nagarajan, President and CEO
• Daniel Hopgood, Executive VP & CFO

Analysts

• Michael Halloran, Senior Research Analyst - Associate Director of Research at Robert W. Baird & Co
• Andrew Buscaglia, Executive Director at BNP Paribas
• Saree Boroditsky, Senior Vice President at Jefferies & Company Inc
• Christopher Glynn, Managing Director and Senior Analyst at Oppenheimer & Co. Inc.
• Matt Summerville, Managing Director & Senior Research Analyst at D.A. Davidson
• Walter Liptak, Industry Analyst at Seaport Research Partners
• Christopher Dankert, SVP - Equity Research at Loop Capital Markets LLC