Nordson Corporation

Good morning. This is Laura Mahoney, Vice President of Investor Relations and Corporate Communications. I'm here with 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 29th, to report Nordson's fiscal 2025 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 forward slash investors. This conference call is being broadcast live on our website and will be available there for 30 days. There will be a telephone replay of the conference call available until Thursday, June 5th, 2025. 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. 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 2025 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.

Good morning, everyone. Thank you for joining Norton's fiscal 2025 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 part 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 agricultural business, previously referred to as ARAG, posted solid double-digit year-over-year growth. 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. 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 million in shares during the quarter. In addition, we paid $44 million 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, using NBS Next, we hold our product portfolio to a high standard. 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 28th, 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 million 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 2025. I'll speak more about the enterprise performance in a few moments, but first I'll turn the call over to Dan to provide a detailed perspective on our financial results for the quarter.

Thank you, Naga, and good morning to everyone. On slide number six, you'll see second quarter fiscal 2025 sales were $683 million, up 5% from the prior year second quarter sales of $651 million. 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 million, a healthy and consistent 55% of sales. SG&A leverage improved year over year, leading to EBITDA adjusted for restructuring and integration costs in both periods of $217 million, or 32% of sales. This is an increase of 7% compared to the prior year. EBITDA growth was driven by improving incrementals in our ATS segment, as well as strong contributions from the Atrion acquisition, which continued to perform above expectations from both the 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 million, an increase of $7 million versus the prior year, driven by higher debt levels tied to the Atrion acquisition. Other expenses increased the nominal $3 million, primarily reflecting higher foreign exchange transactional losses compared to the prior year. Tax expense for the quarter was $26 million, or an effective tax rate of 19%. in line with our guidance range for fiscal 2025 and 180 basis points lower than the prior year. Net income in the quarter totaled $112 million, or $1.97 per share on a gap basis. Excluding non-recurring 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 2025 segment performance. Industrial precision solution sales of 319 million 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. 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 million in the quarter, or 36% of sales. This is a decrease of 12% compared to the prior year EBITDA of 128 million, driven by lower sales volume in the quarter. Turning to slide eight, you'll see medical and fluid solution sales of 203 million, increased 20% compared to the prior year's second quarter. Growth was driven by the acquired Atrion business, which delivered $51 million 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 sales. 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. 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 million, or 38% of sales, which was an increase of 22% from prior year EBITDA of 63 million. 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 solution sales were $161 million, or an 18% increase compared to the prior year second quarter. The growth in sales was driven by broad-based demands, notably in electronic suspense, optical, and X-ray inspection systems, all growing double digits over the prior year. 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 million, or 25% of sales, an increase of 43% compared to the prior year second quarter EBITDA of $28 million, 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. At the end of the second quarter, we had cash on hand of approximately $130 million, and net debt was approximately $2.1 billion. resulting in a leverage ratio of 2.4 times based on trailing 12 months EBITDA. This is a slight reduction from year end and within our long-term targeted leverage ratio of 2 to 2.5 times. Our free cash flow generation was in line with the prior year at $103 million 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 million. In addition, we returned $44 million to shareholders through dividends, and we also continued to invest in our base businesses, spending roughly $16 million 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. 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 Nag.