Nordson's Q1 2025: Unraveling Contradictions in Medical Destocking, Segment Challenges, and Margin Recovery

These are the key contradictions discussed in Nordson Corporation's latest 2025 Q1 earnings call, specifically including: Medical Destocking Trends, Industrial Precision Solutions Segment Challenges, Atrion Margin Expectations, and Medical Segment Recovery:



Sales and Organic Growth:
- Nordson Corporation reported sales of $615 million for Q1 2025, at the low end of their guidance range, due to soft demand in key end markets like electronics and industrial, as well as foreign exchange headwinds.
- The company's backlog grew by approximately $85 million in Q1, ending at $670 million, driven by a significant acceleration in order entry rates.
- The sales performance was affected by lower demand in selected markets and higher-than-expected foreign exchange impacts, although they experienced solid performance from the acquisition of Atrion and organic growth in consumer non-durable product lines.

Profitability and Cash Flow:
- Nordson achieved an adjusted earnings per share of $2.06, slightly above the midpoint of their guidance, despite weaker sales due to strong operational performance, resulting in a 56% gross margin and 31% EBITDA margin.
- The company generated a free cash flow conversion rate of nearly 150% of net income, with cash flow of $138 million during the quarter, facilitating share repurchases and dividend payments.

ATS Segment and Electronics Business:
- The Advanced Technology Solutions (ATS) segment saw an 11% decline in sales compared to the prior year, with double-digit declines in electronics processing and x-ray product lines.
- Despite the decline, the ATS segment showed encouraging signs with order intakes up double digits and backlog growing, indicating potential for a stronger performance as demand improves.

Medical and Fluid Solutions:
- The Medical and Fluid Solutions segment reported a 21% increase in sales, driven by the newly acquired Atrion business contributing $53 million in revenue for the quarter.
- The growth was offset by double-digit declines in medical interventional product lines due to destocking trends, with expectations for a return to sequential growth in the second quarter.