Nordson Corporation Price & Performance (NDSN)

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 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. I also want to take a moment to highlight that effective November 1, 2024, which is the beginning of our fiscal year, the Measurements and Control Solutions division formerly reported as part of the Industrial Precision Solutions segment has been realigned to the Advanced Technology Solutions segment based on a reassessment of our portfolio. Our segment reporting reflects this change and prior year financial information has been revised to be comparable. Please refer to the appendix in our earnings press release for comparative segment data by quarter for fiscal twenty twenty four. Now moving to today's agenda on Slide three, Naca will discuss first 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.

Naga will then share a high level common and provide an update on the fiscal twenty twenty five second quarter guidance.

We will then be happy to take your questions With that, I'll turn the call over to Naga.

Good morning, everyone. Thank you for joining Nordson's fiscal twenty twenty five first quarter conference call. We're starting the year with the sales of $615,000,000 which is at the low end of our guidance range. Due to soft demand in key end markets particularly electronics [indiscernible] And foreign exchange had been that were slightly worse than expectations. This more than offset the solid performance of our Atrion acquisition as well as organic growth within our consumer non doable product lines. Positively, order entry rates accelerated throughout the quarter growing double digits above the prior year order entry run rate, You can see this growth in our backlog. Which increased sequentially from fiscal year end by approximately $85,000,000 ending at approximately $670,000,000 as we exit the first quarter, The improvement in order entry rates and backlog is particularly encouraging to see in our electronics businesses. Our continued focus on top customers and products coupled with leveraging MBS Next to drive factory efficiencies and manage costs led to another strong quarter operational performance. The team delivered 56% gross margin 26% operating profit margin, 31% EBITDA margin and converted free cash flow at nearly 150% of net income We achieved adjusted earnings per share of $2.06 slightly above the midpoint of our guidance despite weaker sales.

As a growth compounder, we remain steadfast with our balanced capital deployment strategy repurchasing approximately $60,000,000 in shares during the quarter. In addition, we paid $45,000,000 in dividends and decreased our net leverage ratio to 2.4 times exceeding the first quarter comfortably within our targeted range. Our consistently strong operating performance quarter over quarter positions us well to capitalize profitably on growth as demand improves, throughout fiscal twenty twenty five. I'll speak more about the enterprise performance in few moments, but first, I'll turn the call over to Dale to provide detailed perspective on our financial results for the quarter. Thank you, Naga, and good morning to everyone. On Slide number five, you'll see a summary of our overall operating company results.

First quarter twenty twenty five sales were $615,000,000 down 3% from the prior year first quarter sales of $633,000,000 This was driven by an 8% increase from the Atreon acquisition offset by an overall organic sales decrease of 9% and unfavorable currency translation of about 2%.

Demand was choppy to start the year.

And we experienced headwinds in several end markets as we exited the calendar year.

Particularly in selected systems and medical businesses. Coupled with a 2% FX headwind, this drove sales at the bottom end of our guidance range. As Naga mentioned, we were encouraged to see order entry rates accelerate throughout the quarter. Which is reflected in our backlog growth.

In addition, organic growth in packaging, non wovens optical sensors and measurement and controls businesses helped soften the revenue decline.

Gross profit remained strong in the first quarter at 56% of sales, and EBITDA adjusted for special items in both periods.

Totaled $188,000,000 or 31% of sales.

While overall EBITDA was down 4% from the prior year, driven by lower sales volume, EBITDA margins were flat year over year inclusive of the newly acquired Atreon business.

Looking at non operating expenses, net interest expense was $26,000,000 an increase of $5,000,000 versus the prior year driven by higher debt levels tied to the Ation acquisition. This was partially offset by a $2,000,000 in improvement in other income and expense primarily reflecting foreign exchange transactional variations compared to the prior year. Tax expense for the quarter was $22,000,000 an effective tax rate of 19% This is in line with our guidance range for fiscal year twenty twenty five and two hundred basis points lower than the prior year. Related to the Ation acquisition, and selected restructuring actions, as well as $19,000,000 in amortization of acquisition related intangibles, Adjusted earnings per share totaled $2.06 per share slightly above the midpoint of our quarterly guidance. But a 7% decrease from the prior year adjusted earnings per share of $2.21 The decrease in year over year earnings reflects the impact of lower organic sales volume, and higher acquisition related interest expense I referenced just a moment ago. Now let's turn to Slide six through eight. To review the first quarter twenty twenty five segment performance. Starting with Industrial Precision Solutions, And 3% due to unfavorable currency impacts. Weaker system sales in our industrial coatings and polymer processing product lines.

Were partially offset by growth in packaging and non woven product lines. Both our Industrial Coatings and polymer product lines are coming off as strong system delivery years in 2024, And you may also recall that we're in the midst of transitioning selected industrial coating manufacturing to our new South Carolina plant. Which should be substantially completed in the second fiscal quarter. EBITDA for the segment was 100 and and $13,000,000 in the quarter or 38% of sales. This is a decrease of 10% compared to the prior year EBITDA of $126,000,000 driven by lower sales volumes in the quarter. EBITDA margin improved 1% despite lower sales year over year. Due to a higher mix of parts and consumables, versus the prior year. Turning to Slide seven, you'll see Medical and Fluid Solutions of $194,000,000 increased 21% compared to the prior year's first quarter. Growth was driven by the acquired Ation business, which delivered $53,000,000 in revenue during the quarter. This was offset by double digit declines in our medical interventional where destocking trends continue to impact demand, and we completed some strategic program rationalization. To reposition the business for profitable growth. It's important to note that these destocking trends began in our second quarter of fiscal twenty twenty four.

Impacting the year over year decline on a comparative basis. We expect our interventional product lines to return to sequential growth heading into the second quarter of this year. EBITDA for medical and fluid Solutions was $64,000,000 or 33% of sales which was an 8% increase from prior year EBITDA of $60,000,000 The increase was driven by higher sales from the Atreon acquisition EBITDA margins were down 400 basis basis points reflecting the lower contribution from Ation. But as a reminder, we expect our EBITDA margins to improve sequentially for the Atrion business as we continue to integrate and implement NBS Next. To improve manufacturing efficiencies and overall profitability. Importantly, Atreon's first quarter performance was actually well ahead of our initial targets for this business. Turning to Slide eight, you'll see Advanced Technology Solutions were 121,000,000 an 11% decrease compared to the prior year first quarter. The decrease included a 10% organic volume decline as well as an unfavorable currency translation of 1%. The decrease in sales was driven by double digit declines in electronics processing and X-ray product lines. Partially offset by growth in our optical sensors, and measurement and control businesses. Despite weaker Q1 performance, we continue to see improvement in order intake as the semiconductor and electronic applications we serve continue to show signs of improvement.

Orders were up double digits in the quarter versus the prior year and backlog grew double digits, sequentially from the end of the year for this segment. In short, we continue to see encouraging signs in ATS for the balance 2025. Despite a slow start to the year. First quarter EBITDA was $23,000,000 for the segment or 19% of sales, in line with the prior year first quarter EBITDA of $23,000,000 or 17% of sales. The improvement in EBITDA margin was driven by continued emphasis on cost management and improved manufacturing efficiencies. The margin enhancements we've implemented positioned the ATS segment well as demand continues to improve. Finally, let's turn to the balance sheet and cash flows on Slide nine. At the end of the first quarter, we had cash on hand of $130,000,000 and net debt was $2,100,000,000 resulting in a leverage ratio of 2.4 times based on trailing twelve months EBITDA. This is a slight improvement from year end within our long term target leverage range. Of two to 2.5 times. Our free cash flow generation continues to be a compounding strength at $138,000,000 during the quarter. Resulting in a 146 And we continue to strategically deploy this strong cash flow.

During the quarter, we repurchased approximately $60,000,000 in shares in addition to our quarterly dividend of $45,000,000 which as a reminder we increased by 15% at the end of last year. We also reduced net debt by $20,000,000 during the quarter while continuing to invest in our base businesses. Spending $21,000,000 on capital investments, during the quarter. All in all, we had a solid operational quarter despite a slower sales start. And we're well positioned to capitalize on profitable growth as demand normalizes in selected key end markets. With that, let's turn to Slide 10 and I'll turn the call back to Naga. Thanks, Dan. I also want to thank the Nordson team for delivering strong operating performance in a challenging demand environment. While first quarter was a slow start to the year from a revenue perspective, I'm encouraged by our ability to deliver best in class profitability In varying market scenarios, while remaining invested in our best growth opportunities. Among our bright spots, is the ongoing integration of the Atrion acquisition. During the quarter, I had the opportunity to visit our three new Atrium manufacturing sites, I'm excited about the strong product portfolio that we acquired as well as the energetic colleagues for quickly embracing and soon to deploy the NBS Next growth framework.

We're also seeing growing acceptance of [indiscernible] newest generation myocardial protection system which is used during open heart procedures. Positive market acceptance is accelerating sales for this product including an attractive opportunity to recapitalize its installed base. Also during the quarter, several of our product lines were celebrated with notable industry achievements. [indiscernible] inspection system won three awards for its industry leading wafer inspection throughput and best in class image quality, defect capture and Footprint. Our Quadro Pro manual system received the [indiscernible] Innovation Award for its exceptional image clarity and defect detection capabilities back end semiconductor and SMT applications. And our Precision Agriculture divisions OrientPro product was recognized For technical innovation at the EIMA, twenty twenty four International Agriculture Machinery Exhibition. [indiscernible] is an integrated system for regulating and measuring the actual amount of product sprayed by liquid fertilizer distribution systems. Two notable electronics customers also recognized our market lead collaboration. In December, we received supplier awards both from TSMC and Jabil recognizing our product performance, and support of critical underfill applications, as our dedicated responsive and talented local Nordson teams We remain committed to product innovation tracking strong vitality metrics in our packaging assembly and nonvolins, product lines.

This is reflected in the strong performance of those product lines in the quarter. We also have new products currently being launched in our medical fluid components, and polymer processing product lines.

In all cases, these new products are designed to solve the unique needs of our customers. Regardless of dynamic environment, Nordson remains steadfast in our commitment to innovation through differentiated products, our customer intimate sales model and protecting the diversified niche end markets we operate. These competitive advantages secure our position [indiscernible] a high quality growth compounder, even in challenging macro environments, Our division led organization provides our teams with a clear view of our end markets and they know where we need to focus and where we're doing well. We will continue to manage costs in weaker sales environments while balancing investments that support the increasing order entry trends, that we experienced throughout the quarter. Turn now to our outlook on Slide 11.

We are entering the second quarter of that approximately $670,000,000 in backlog, and order entry that continued to improve throughout the quarter across all three segments. Based on these factors, as well as current foreign exchange rates, and end market expectations we anticipate delivering second quarter sales in the range of $650,000,000 dollars to $690,000,000 and adjusted earnings in the range of $2.3 to $2.5 per diluted share. At this point in time, we're not updating our full year guidance range although we would now expect our sales for the year to be on the lower end of our full year expectations given the slower start to the year and broad geopolitical macro environment dynamics. As always, [indiscernible] thank our customers, shareholders and the Nordson team for your continued support. With that, we will pause Thank you. Ladies and gentlemen, we will now begin the question and answer session.

At this time, I would like to remind everyone that in order Your first question comes from the line of Matt Summerville of D. A. Davidson. Please go ahead.

Thanks. Couple of questions. Help me understand a little bit more about what played out in your electronics related business in the [indiscernible] I was under the impression that you had seen order inflection supporting a returned and sustained sort of pathway to organic growth in that business. Help me understand kind of how the quarter played out and then how incoming orders inform the go forward view on semielectronics? And then I have a follow-up. Thanks, Matt.

The midst of our ATS business really was largely timing of orders particularly in our X-ray and electronic processing product lines, In short, we expect that more of our backlog to ship in the quarter at the beginning of the quarter is what happened. [indiscernible] that said, order entry throughout the quarter progressed very positively And we expect the sales or shipments of ATS to continue to be strong through the year. [indiscernible] in this segment, order entry is up double digit backlog is up double digit. Probably the strongest we have seen in this part. [indiscernible] And then as a follow-up, Just getting over to the interventional side of your medical related business. Thirteenth anniversary that destock you mentioned expect to see quarter on quarter growth When do we start to see year on year growth more aligned to the long term trajectory you lay out for that business? Yes. I think the inflection of that, as we said, the destocking really started in earnest in the second quarter of last year. And so from a year over year comp, I think we'll continue to see tough comps through the first half of the year and then we would see that inflection point starting in really Q3 and heading into Q4. Hey, good morning, guys.

Good morning. Good morning. In the ATS segment, if you were to take food that the movement of that measurement control solutions What would organic growth have been And then what's the rationale behind moving that out of IPS and into ATS? Yes. Let me take that question first. Look, there is a significant overlap in customers for MCS with the IPS customers. But if you look at it from a product perspective and the technology perspective, it is more a test and measurement kind of And so it belongs better with our further analysis we have decided to have that in the ADS business. And you have you can you answer the part of that without and with Yes. And if you it's not to be honest, it's not a huge impact. Certainly, organically, they were a positive contributor to the segment. But when you look at the materiality of the MCS business versus the total segment, it's not a big needle mover on the overall growth or organic impact year on year. Certainly, MCS grew year over year and it mitigated a little bit the decline that we saw in some of the electronics processing and X-ray that we mentioned, but it's not a big needle mover.

It's either side of that, I would say. Okay. Yes. And actually, a slower start to the year you expected and you're trending towards the low end of that guidance range for the top line. The full year Are there other things you're working on to still achieve at least the midpoint of EPS, whether it's further restructuring or some sort of market enhancement Yes, it's a great question. Let me take that one.

And look, I would say as we think about the full year and the reason we're not changing our guidance [indiscernible] It's frankly a little soon to call exactly how the year is going to play out. We're going to very dynamic environment depending on the headlines you read changing day to day. What I would say is just based on the soft start to the year, we see our sales toward the lower end of our range But as we've demonstrated in Q1, we're still quite confident that we can deliver on our earnings commitment even with sales towards the lower end of that range. So for those reasons, we're not going to tighten things up I think as we get into as we finish out the second quarter, and we reassess where our backlogs and order rates which as Nagav mentioned have been quite strong We'll reassess what that looks like for the full year and tighten things up What I would say is we're comfortable in our sales range and pretty comfortable with our earnings commitments despite the slow start to the sales year and that really demonstrated in our first quarter profit delivery.

Let me maybe add to that. So if you think if you zoom up and say, look, let me look at it broadly think about the market, and where the company is at and what we're thinking about for the full year. I'll tell you on the positive side, order entry is up in all three segments. Backlog building in all three segments, ATS being a significant contributor to Operational performance is strong in a weak environment like Ben mentioned. We had a very strong operating operating income performance. Very well positioned to grow Third thing I would tell you is our innovative in many of our businesses are starting to deliver on growth. If you think about our adhesive business, our Harmony, applicator that is in the market is contributing nicely to our growth. If you think about Spinsam and new emission, it is not contributing to growth yet, but it positions us really well to continue to grow. If you look in the medical side in our fluid components business, a new product line called PharmaLOG starting to launch So innovation operational performance, order entry, all three positives for the outlook that we're thinking about. Clearly, one negative is this environment we live in.

If you don't if you ignore the environment and we look look at our order entry and backlog, you'd be very confident. And but one negative is, there is a broader choppiness in geopolitical as well as macroeconomic environment. So hopefully that helps you.

Okay. Thank you. Your next question comes from the line of Jeff Hammond of KeyBanc Capital Markets.

Hey, good morning. Good morning. Good morning. So just real quick on the guide.

It sounds like you think right now lower end of the sales guide, but you're still kind of closer to the midpoint. One, is that correct? And two, what are kind of the drivers that are kind of offsetting the weaker sales? [indiscernible] Appreciate the question, Mike. And I think that's the right way to think about it. And I would say the best indicator is look at our performance for the first quarter. We were at the very low end of our sales guidance and still delivered the midpoint or slightly above the midpoint of our earnings guidance. That's not a fluke. We think that's replicable for the balance of the year. Again, the sales outlook I think it's too soon to call typically in general. You look at our history across the company, in a market where we see accelerating Nordson, that trend could be even exacerbated. And so it's a bit of a wait and see and continue to monitor how demand continues to play out for the year. Indicators today are very good, If that continues, we'll see how the second half plays out. But what I would say in general is even if we don't see any continued acceleration we're comfortable with our sales on the lower end that we can still deliver on our profit commitments.

By simply managing our operations and our cost structure to ensure that we can deliver on those commitments.

Maybe add a little bit color to it. If you take segment by segment, right, So if you think about ATS, We've got this business positioned from a cost perspective through the last down cycle. And if you look at the decremental performance of this segment in the It is very strong.

Mean, they had a tough organic revenue growth, but they're decrementals were they were pretty much flat in terms of dollar income they generated when compared to last last year. Right? So from an ATS perspective, [indiscernible] performance. And if you think about decrementals for IPS, again, a very strong performance.

This is a solid business. This is a business where we have implemented MVPD. MBS Next and has delivered great So if you think about those two, we're in very good shape. And if you look at MFS, if you look at MFS with the Atrium together, there is a mix issue and you could think that our operating performance are operating margin performance was not that good. But I would remind you that you have Atrium, which is at a lower margin when compared to our core MFS businesses. And if you if you account for that, our core MFS businesses again had strong decremental performance. So So that is the confidence we have as we think about it. And in businesses where we have weaker sales, we are taking action to reduce cost. It is not broad based, it's not across all of our businesses, but in places where our sales is weak, we are adjusting costs. So that's Maybe adding a little bit more color to what Dennis is telling you. About what our expectations are.

No, that's very helpful. I wanted to follow-up on that. Medical margin dynamic. Can you give us a sense of how much of the margin dilution was just Atreon coming in and what the decrementals were on the base? And then how it looks from a dilution perspective as we go forward? And then just on the medical destocking, I mean, I understand that the comps get easier, but just any update on on kind of where we're at in that process? Is it still the view that that carries through the first half and then abates?

Yes. So it's a simple way to think of it. Our core medical business were basically in line with what we would expect You're on.

The mid [indiscernible] overall, even I'm speaking to EBITDA margins, EBITDA is tied to [indiscernible] the growth in MFS came from Atrium a lower EBITDA margin from our base business. I would say to Naga's point, our decrementals in our base business are right in line with what we do. But and these are on top of that adding $53,000,000 let's say mid-20s majority of the dilution that margin year over year.

Let me I'm not sure that we at least the line was cutting out a little bit. Let me make sure we I repeat what some of what Dan mentioned here. Let's start with our core MFS business. Clearly, our core MFS business EBITDA margins are better than Atreon. Atreon margins are sort of in the mid -20s. Atrion margins are sort of in the mid-20s. Atrion margins are sort of in the mid-20s.

And we suddenly have a very good line of sight for that business to continue to improve and get to our valuation model expectations around high 20s to low 30s. Right? So that is that pathway is there. So long term, Atrium continues to improve and continue to add to MFS. Right? And in terms of MFS core decremental, the core decrementals were in line with what we have for the company. So there is for us, the MFS performance was mainly due to mix issues. With Atrium contributing while core businesses organically being And then just the the destocking Yes. From the destocking perspective, if you remember, destocking started sometime last year. There are two things going on here and this is probably something that we've not talked about. You have we were organically down 11% in MFS in half of that is from destocking, but half of it is also for the first time, you're seeing a reset in our strategic repositioning of some programs that we have in our finished devices. And so that restocking is that repositioning of programs is substantially complete And so you will start to see from second quarter as sequential growth in that.

And destocking should abate sometime in third to fourth quarter. And we are starting to see order rates So I think what is important to know is that order rates in our medical interventional component business are picking up. Our order rates in our medical fluid components have been very strong. So this is the business that had undergone a lot of destocking from a biopharma and surgical perspective. That is coming back very nicely. And we're beginning to see sequential improvement on MIS. Yes, I think that's an important point, Naga.

Our medical business is contributing to both the order growth and the back we're we see very good line of sight to sequential improvement The year over year comp will be tough until the second half.

Okay. Thank you. Your next question comes from the line of Michael Lauren of Baird. Please go ahead.

Hey, good morning, everyone. Good morning. Not to overly harp on the guide, I just want to make sure I understand what's embedded on the revenue side of things. Obviously, the first quarter, as you said, was a little below your expectations, FX a little worse. Is that a majority of the move for the the revenue to be at the low end And maybe I suppose what is the assumption then for end market curves, normal seasonality backlog conversion that's embedded in that lower assumption? Is it pretty normal sequentials from here, pretty normal backlog outlay? Any kind of color around those things would be super helpful.

Yes. No, I appreciate the question. So I'll start with a couple of things. As you look at our backlog, I can't say 100% because there's some one offs in there, but the vast majority of our backlog will ship in 2025. We're not taking multiyear orders. We're not this isn't a replay of COVID where we're taking three orders three years out. This is these are current year deliveries.

And so I think as you look at ongoing book to bill and or backlog, I think that's the way to think about it is that these are normal recurring orders that we're taking in, not any type of long term long term preorders like we've had coming out of COVID in some of our businesses.

As I think about the full year, again, if you just play out the first quarter miss or the first quarter shortfall of sales I mean that's naturally if you flow that through for the year going to put us toward the lower end of our sales guidance. Some level of recovery in the second half. That is supported by, number one, I would say our normal cyclical cyclicality of the business. We typically have a stronger second half to begin with. But it's also supported by the acceleration that we're seeing in order intake throughout the first quarter and frankly even into the early days of the second quarter. And so I think if you think about that outlook, I'll maybe talk about what underlies our revenue assumptions for the year. If you think of the low end of our guidance, that basically says we're going to see low single digit growth for the year in ATS We're going to see basically flattish to slightly down sales within our IPS and our medical business. And then we're going to see the contribution come through from the Atrium acquisition. If you think of the higher end of our guidance that anticipates, I would say, a more accelerated more historical recovery in our ATS segment.

Which we're not banking on, So let's call that a bigger ramp in ATS as well as recovery in some of the capital investment cycles in industrial. And a bigger rebound from the destocking in medical. So So we're not counting on significant recoveries. That doesn't mean couldn't happen. And so as we look at it today, we're simply following it based on what we see today. And that would say the first quarter miss is going to kind of flow through. But the rest of the year seems to be playing out [indiscernible] Super helpful there.

And then just kind of a question on once that recovery happens in these markets, I know earlier Nagel was talking about the positive decremental margin performance, particularly in the ETF side. [indiscernible] And I suppose as well on the MFS side, What does the torque look like to the upside Obviously, the IPS margins are already at really healthy levels. And weighted by mix, but still really strong levels. What kind of work would you expect to see in in those margins or incremental margins as the volume recovers and normalizes to a more historically normal pattern?

So let me make sure I understand your question, You're asking from an incremental margin performance, what we would expect going forward? Is that the question?

Correct.

Yes. I think my best guidance to that would be in line with what we've said historically, which is look overall, we've said about a 35% incremental mix between acquisition and organic. And as you think about that, obviously, the organic growth comes with a hiring acquisition as we talked about with Atreons margins comes with a lower incremental. So I would I would think of that blended rate of 35% still a good long term planning target. Obviously, the organic above that the inorganic below that, but that 35% mix is kind of a good good blended range to use still. Appreciate it.

Thank you. [indiscernible] Next question comes from the line of Saree Boroditsky of Jefferies. Please go ahead. Thanks for taking the question. So maybe building on the last question. As we think specifically on ATS, that business has seen margins decrease substantially over the last few years. So how should we think about incrementals in this segment once demand inflects? And what would it take to get back to that 23% -plus margins you saw in 2022?

Or is that sort of a one time event? [indiscernible] In general, we expect that as the sales recovers, we get back to where the margins are. We were in 2022. There may be some upside but it is remember, this is a business where our R and D investments are critical to our growth. And so you're always going to see this business have higher R and D investments. But as the sales recover, I have every confidence that we get back to the margins we were at in 2022. That's how And maybe just on the weaker growth in IPS, how much of this is related to underlying demand versus the challenging comparables that you had from the strong incoming backlog from last I think the IPS let me I'll give you a broader view and then Dan can help you a little bit more detail. On IPS, the biggest comparable issues are in our system business is our two large system businesses of PPS and ICS where we had shipments from prior huge backlogs. But if you think about our consumer non durable business, our adhesive business, they are growing nicely in line with our expectations already.

And I think maybe just to add some additional color on the Industrial Coatings and Polymer businesses. To your point, if you go back to last year, large backlogs, large multiyear backlogs that we were working off, that has normalized.

And so from a year over year comparability standpoint, that does create some tough comps this year. But importantly, when we talk about order strengthening and backlog growth, we are seeing it in those businesses as well.

And so we see a clear path to that starting to rebuild and inflect And I think you'll see that play out in the form of sequential growth in those businesses going forward. But we'll have this year over year comparability to work through because of the large system backlog that we had coming out of the last couple of years.

Sorry, this is Harry. One additional point to make here is, we're also beginning to see modest sequential improvement in our Airac business. And I know the general agriculture market is still down. We're beginning to see some modest improvement in order entry. And backlog in that business.

Thank you. Your next question comes from the line of Chris Dankert of Loop Capital Markets.

Please go ahead. Hey, good morning, guys.

Good morning. Maybe Maybe just a conceptual question. I guess, if we go back to the Medical segment, Atrium has been doing really well on an organic basis. Is there anything to learn from Atreons' operations in terms of they didn't seem to get destocked the same way that legacy intervention I mean, is there a difference in customer set? Is there a difference in how they stock maybe just conceptually, what's how do we think about that? Yes. I think it's a great question, Chris.

In term there are two things going on, which you need to recognize. Atreion serves the fluid components and the Atrium has two parts to it. One is the consumable component part and other is the system part. So in their system, this is the myocardial protection system. That they're launching their new generation product, which is the third generation and that market acceptance as I mentioned in my comments, is going really well. So you have the benefit of a new product launch and a recap of existing business existing systems, which is different and has got no resemblance to our MIS business, right, our medical interventional business. That's one. On the component side of the business, which is their Hockey Roberts business, In that business, they went through destocking long before we started seeing it. In our medical interventional business. So there is a timing difference there. And then the third thing I would tell you is our fluid component business resembles more the Atrium component business than our medical interventional business. Right? So there are different products, different end markets We are seeing the same patterns we are seeing in Hake Robert's business in Atriaon's component business as we are seeing in our medical fluid component business.

Right? Hopefully that helps you. That's extremely helpful. Thank you, Naga.

Sure. And then maybe just to circle back, I mean back in October, I could be interpreting this wrong, but you sounded fairly optimistic about just the deals that were out there from an acquisition perspective what was kind of coming across your desk? I guess, would you echo that same level of optimism today?

Yes. We continue to be active. We continue to look at deals. But we're going to be pretty strategically and financially disciplined. And so we continue to work the pipeline. Pipeline continues to build. Number of inbound may be lesser [indiscernible] we still have a pretty good So what you read in the papers around inbound is lesser but the activity level continues to be pretty good for us. But we're going to be We're going to be thoughtful in what what we choose to do. Makes sense. Well, thanks a lot for the color. [indiscernible] Your next question comes from the line of Walter Liptak of Seaport Global. Please go ahead.

Hi, good morning guys. Good morning. I wanted to ask go back to that the 2025 guidance on sales.

Questions again.

And just I think Dan, when you were going through, you gave some some good kind of delineation around the segments. And so just repeating back, so I heard him right. You're thinking that MFS could be mid to high end.

Of the revenue guide, ATS at the low end and IPS at the low end, is that kind of what you guys are thinking on a segment basis? No. So what I was referring to is if you think of the upper and lower bounds of our guidance, What I would say is if you think of the lower end of our guide, that would say our IPS or the industrial businesses are down low single digits for the year.

And MFF is down low single digits or near flat year Excluding Atrium, right, set aside Atrium. And then the low end of our guidance would contemplate what I would say a very modest recovery in ATS. So think of ATS being up low single digit. Kind of our that's our low end thinking. Right. Converse that with the upper end of our guidance would be a more traditional ramp in ATS of higher growth again, which we're not counting on, but [indiscernible] And it would also contemplate a faster recovery from some of the destocking that we're seeing in the medical business. So I think low single digit growth in medical as well as the general recovery in the industrial markets. And so I would say the upper end is more stronger recovery in ATS low single digit growth in other business in medical and industrial, versus the low end of our guidance, I would say there's very little recovery in medical, very little recovery in industrial and just modest recovery in ATS. If that helps with some color?

Okay. Yes, I appreciate that. That's very helpful.

And just kind of drilling into the industrial precision part of it a little bit. Happy to hear that, ARAG that there's a potential plus there. I wonder if you could go into maybe a little bit more detail about it. Is it a new product? Is it Europe? Is it rest of world? You're seeing some green shoots And then maybe talk about some of those other sectors beyond polymers and coatings like you know, Nagano, you know the auto sector very well, what's going on there? What's happening with other things?

Great question. Maybe I'll start and then let Naga add some comments. I'll start with you responding maybe to the Eric question. So as Naga mentioned, so A on the product side, we are continuing to evolve and bring new products to market. In fact, I think we mentioned one that we received some awards for recently More generally, as far as demand in that business, we've certainly seen that business stabilize. We're seeing good what I'll say, ongoing recovery and order rates We would expect that business to return to year over year growth in the second quarter as they're continuing to to show strength in order rates. I will tell you, really Q1, I think we've mentioned this before, Q1 really the last tough comparison for them.

If you recall last year at this time or in the first quarter, they were working off a large [indiscernible] And so that first quarter last year was kind of the last tough comp for them. We've seen that business stabilize, I would say, even going back to Q4.

We're now starting to move back into this growth mode as there or we're past the year over year comparisons. Tough Nordson. So good stability, good ongoing [indiscernible] and a good path to returning to growth in that business in the next quarter.

So let me follow-up with that. One other additional data point on AirAg is that during last year, this business performed really well on the margin side as well. [indiscernible] short work week program that is available in Italy for industrial businesses. Now what is interesting is that in the first quarter, given their order dynamics, they have brought back their workforce completely. So essentially getting ready and being able to make product so that they can start to make the meet the commitments they've made with their customers. So that is kind of another data point that gives us confidence that our Airac business will start to businesses and we've already talked about Our plastic business, we've talked about our ICS business. Interestingly, even in both those businesses, we have two new product introductions. On the ICS side, we have a new manual powder coating product that has been launched, which is doing really well. And you also have a Prodigi die that is in the plastics business that is getting very good market acceptance. So So we have some new products, but it's very difficult to overcome the system decline that they have, but interesting comments to sort of share with you.

In terms of our other adhesive businesses, our non wovens business is doing extremely well. We have new products there. We have a Harmony applicator that I mentioned that is doing very well adding to the work that they're doing on parts growth that is also doing well. Their system business through product tiering has has been very successful for them. So that business after a couple of years of down years, it is coming back nicely. [indiscernible] packaging business is is holding its own and they have some pretty exciting new products that they're working on that we expect towards the end of the year that we'll be in market with. So, pretty good movement across our industrial businesses. One thing to note, and I'm not sure it came across in our conversations, Our parts mix in the adhesive businesses are pretty pretty strong and they've done well and they have mitigated some of the system weaknesses. But having said all of that, the order entry is up in this segment. It is up in plastics. It is up in ICS and it's also up in our businesses that have grown in the quarter. [indiscernible] Hopefully, that gives you a little bit more data points.

Okay. Yes. Thanks for that detail. Appreciate it. There are no further questions at this time. With that, I will now turn the call back over to Naga for final closing remarks. Please go ahead.

Thank you for your time and attention on today's call. Have a great day.

Ladies and gentlemen, that concludes your conference call.

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