Oct 7, 2025 5:00 PM Eastern Daylight Time More information about Novanta is available on the Company's website at www.novanta.com. For additional information, please contact Novanta Inc. Investor Relations at (781) 266-5137 or InvestorRelations@novanta.com. More News From Novanta Inc. A replay of the audio webcast will be available approximately three hours after the conclusion of the call on the Events & Presentations page of the Investors section of the Company's website at www.novanta.com. The replay wil ...

If you like to see more ideas, please subscribe to the premium service "Value in Corporate Events" here and try the free trial. In this service we cover major earnings events, M&A, IPOs and other significant corporate events with actionable ideas. Furthermore, we provide coverage of situations and names on request!Early in April, I called Novanta Inc. (NASDAQ: NOVT ) a trusted, yet premium technology partner. The company claims to be a crucial technology partner to OEMs, and while it has a sound track recor ...

Group 1 - The company is responsible for the development of all transcript-related projects [1] - The company publishes thousands of quarterly earnings calls per quarter and is expanding its coverage [1] - The purpose of the profile is to share new transcript-related developments with readers [1]

Financial Data and Key Metrics Changes - Revenue reached $241 million, representing reported revenue growth of 2% and organic revenue declines of 2% [7] - Adjusted gross margins held at 46% and adjusted EBITDA margin was 22%, both in line with expectations [8][29] - Non-GAAP adjusted earnings per share was $0.76, up 4% versus the prior year [29] - Operating cash flow for the quarter was $15 million compared to $41 million in the prior year, primarily driven by timing of tax payments and increased inventory purchases [29][30] Business Line Data and Key Metrics Changes - New product revenue grew by over 50% year over year, with a vitality index climbing to 21% of total sales [33] - Advanced surgery business experienced 17% growth year over year, driven by strong patient procedural growth rates [35] - Robotics and automation business unit revenue was up nearly 16% year over year, with a book to bill ratio of 1.05 [34] - Precision medicine business saw a 13% decline in sales year over year, but grew 10% sequentially [35] Market Data and Key Metrics Changes - Sales to medical device markets remained strong, driving sustained double-digit growth in advanced surgery [11] - Sales to industrial capital equipment saw declines year over year, but revenue has stabilized and bookings are rising at a double-digit pace [18] - Total China sales were up 15% year over year, despite challenges related to tariffs [80] Company Strategy and Development Direction - Long-term growth strategy focuses on markets with secular tailwinds such as precision and AI-driven robotics, minimally invasive surgery, and precision medicine [10] - The company aims to expand its portfolio into high-growth areas, increasing recurring consumables revenue to approximately 15% of sales [11] - The acquisition of Keon Technologies is expected to enhance the company's capabilities in RFID and AI-enhanced cloud-based software [30][23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving $50 million of incremental new product revenue for 2025, mainly due to strong outlook for next-generation medical devices [12] - The company is optimistic about the growth in physical AI applications, expecting sales to double in 2026 versus 2025 [15] - Management acknowledged the impact of tariffs but indicated that mitigation strategies are in place, with a focus on regional manufacturing [37][40] Other Important Information - The company expects full-year 2025 GAAP revenue to be approximately $970 million to $985 million, representing overall revenue growth of 2% to 4% [41] - Adjusted EBITDA for the full year of 2025 is expected to be $225 million to $230 million, or approximately a 23% EBITDA margin [42] - The company has a strong balance sheet and credit facility, positioning it well for future acquisitions [47] Q&A Session Summary Question: Can you break down your revenue guidance? - The full year guidance indicates reported organic growth will likely be down 1% to up 1% [53] Question: What is the FX implied impact for benefit? - The FX impact is expected to carry forward from the second quarter [55] Question: What are the biggest drivers of organic growth in 2026? - Key drivers include advanced surgery product ramps, physical AI applications, and strong design wins [60][64] Question: Have we seen the low point for the year in industrial and precision medicine? - Management believes the industrial business has reached its bottom and will improve sequentially [72] Question: What is the status of the $35 million held up due to tariffs? - This amount is factored into guidance, and recovery is not assumed yet [79] Question: Can you elaborate on the warehouse robotics win? - The technology involves sensing and fast, safe reactions, essential for advanced warehouse automation [90]

Financial Data and Key Metrics Changes - Revenue for the second quarter reached $241 million, representing a reported revenue growth of 2% and organic revenue declines of 2% [6][24] - Adjusted gross margins held at 46%, while adjusted EBITDA margin was 22%, both in line with expectations [7][28] - Non-GAAP adjusted earnings per share was $0.76, up 4% year over year [28] - Operating cash flow decreased to $15 million compared to $41 million in the prior year, primarily due to timing of tax payments and increased inventory purchases [28][29] Business Line Data and Key Metrics Changes - Medical market sales represented 54% of total sales, while advanced industrial markets accounted for 46% [30] - Advanced surgery business experienced 17% growth year over year, driven by strong patient procedural growth rates [33] - Revenue from the robotics and automation business unit was up nearly 16% year over year [32] - Precision medicine business saw a 13% decline in sales year over year, but grew 10% sequentially [33][34] Market Data and Key Metrics Changes - Customer orders grew 10% year over year and 20% sequentially, indicating a strengthening outlook [7] - Sales to medical device markets remained strong, with sustained double-digit growth in advanced surgery [10] - Total China sales increased by 15% year over year, despite uncertainties related to tariffs [75] Company Strategy and Development Direction - Long-term growth strategy focuses on markets with secular tailwinds, such as precision and AI-driven robotics, minimally invasive surgery, and precision medicine [8][10] - The company aims to expand its portfolio into high-growth areas, increasing recurring consumables revenue to approximately 15% of sales [10] - The acquisition of Keon Technologies is expected to enhance the company's capabilities in RFID and AI-enhanced software solutions [29][23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving $50 million of incremental new product revenue for 2025, mainly due to strong outlook for next-generation medical devices [11][24] - The company anticipates that the advanced surgery business revenue will nearly double by 2026 [11] - Despite challenges in the industrial capital equipment market, bookings are rising at a double-digit pace, indicating stabilization [18] Other Important Information - The company is committed to delivering sequential revenue and profit growth driven by innovation and operational discipline [37] - Tariff impacts are being mitigated through strategic shifts in production and cost reduction plans [35][36] - The company expects full-year 2025 GAAP revenue to be approximately $970 million to $985 million, representing overall revenue growth of 2% to 4% [38] Q&A Session Summary Question: Can you break down your revenue guidance? - The full-year organic growth is expected to be down 1% to up 1%, with the key driver being the Keon acquisition [52][56] Question: What are the biggest drivers of organic growth in 2026? - Key drivers include the continuation of advanced surgery product ramps, growth in physical AI applications, and strong design wins [57][61] Question: Have we seen the low point for the year in industrial and precision medicine? - Management believes both businesses have reached their bottom and expect sequential improvement moving forward [68][69] Question: What is the status of the $35 million held up due to tariffs? - This amount is factored into guidance, and recovery is not yet assumed due to ongoing uncertainties [74][75] Question: Can you elaborate on the warehouse robotics win? - The technology involves sensing capabilities and servo drives, essential for advanced warehouse automation applications [82][84]

Company Performance - Novanta reported quarterly earnings of $0.76 per share, exceeding the Zacks Consensus Estimate of $0.74 per share, and showing an increase from $0.73 per share a year ago, representing an earnings surprise of +2.70% [1] - The company posted revenues of $241.05 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 1.68% and increasing from $235.86 million year-over-year [2] - Over the last four quarters, Novanta has surpassed consensus EPS estimates three times and topped consensus revenue estimates two times [2] Future Outlook - The sustainability of Novanta's stock price movement will depend on management's commentary during the earnings call and the company's earnings outlook [3][4] - The current consensus EPS estimate for the upcoming quarter is $0.96 on revenues of $259.39 million, and for the current fiscal year, it is $3.44 on revenues of $989.7 million [7] - The estimate revisions trend for Novanta was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Industry Context - The Electronics - Miscellaneous Components industry, to which Novanta belongs, is currently in the top 39% of over 250 Zacks industries, suggesting a favorable outlook compared to the bottom 50% [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

[Executive Summary & Financial Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Financial%20Highlights) Novanta's Q2 2025 achieved GAAP revenue growth but declining net income, with non-GAAP metrics improving from strong bookings and strategic growth [Press Release Header](index=1&type=section&id=Press%20Release%20Header) Novanta Inc. announced its second quarter 2025 financial results on August 5, 2025 - Novanta Inc. (Nasdaq: NOVT) announced its second quarter 2025 financial results on August 5, 2025[1](index=1&type=chunk)[2](index=2&type=chunk) [Q2 2025 Financial Highlights](index=1&type=section&id=Q2%202025%20Financial%20Highlights) Novanta's Q2 2025 GAAP revenue grew 2.2% to $241 million, but net income and diluted EPS fell, while adjusted diluted EPS and EBITDA rose Q2 2025 Financial Highlights | Financial Highlight (Q2 2025) | GAAP (Millions USD) | Non-GAAP (Millions USD) | | :---------------------------- | :------------------ | :---------------------- | | Revenue | $241.0 | | | Operating Income | $14.9 | $40.7 (Adjusted) | | Net Income | $4.5 | | | Diluted EPS | $0.12 | $0.76 (Adjusted) | | Adjusted EBITDA | | $52.2 | - GAAP revenue increased by **2.2%** or **$5.2 million** year-over-year to **$241.0 million**[4](index=4&type=chunk) [CEO Commentary & Business Outlook](index=1&type=section&id=CEO%20Commentary%20%26%20Business%20Outlook) CEO Matthijs Glastra reported solid Q2 performance with 10% bookings growth and a 1.02 book-to-bill ratio, driven by advanced surgical and robotics - Novanta's bookings grew by **10%**, with an overall book-to-bill ratio of **1.02**, indicating strengthening prospects[4](index=4&type=chunk) - Mid-double-digit revenue growth in advanced surgical and robotics & automation businesses highlights the company's strategic focus on high-growth markets[4](index=4&type=chunk) - The company is on track to achieve its **$50 million** new product sales target for the year, securing significant design wins in medical devices and warehouse robotics[4](index=4&type=chunk) [Detailed Financial Results](index=3&type=section&id=Detailed%20Financial%20Results) This section details Novanta's Q2 2025 GAAP and non-GAAP financial performance, including income statements, balance sheets, and cash flow [Second Quarter 2025 GAAP Results](index=3&type=section&id=Second%20Quarter%202025%20GAAP%20Results) Q2 2025 GAAP revenue grew 2.2% to $241 million, but operating income, net income, and diluted EPS declined, with organic revenue growth at (2.1)% GAAP Financials (Q2 2025 vs Q2 2024) | GAAP Financials (Q2 2025 vs Q2 2024) | Q2 2025 (Millions USD) | Q2 2024 (Millions USD) | YoY Change (%) | | :----------------------------------- | :--------------------- | :--------------------- | :------------- | | Revenue | $241.0 | $235.9 | +2.2% | | Operating Income | $14.9 | $25.7 | -42.0% | | Net Income | $4.5 | $13.8 | -67.4% | | Diluted EPS | $0.12 | $0.38 | -68.4% | - Organic revenue growth, excluding acquisitions and foreign currency exchange rate changes, was **(2.1)%**[6](index=6&type=chunk) - Acquisitions contributed a net increase of **$5.3 million (2.3%)** to revenue, while foreign currency exchange rate changes had a favorable impact of **$4.8 million (2.0%)**[4](index=4&type=chunk) [Second Quarter 2025 Non-GAAP Results](index=3&type=section&id=Second%20Quarter%202025%20Non-GAAP%20Results) Q2 2025 adjusted diluted EPS increased to $0.76 and adjusted EBITDA rose to $52.2 million, indicating growth in non-GAAP profitability Non-GAAP Financials (Q2 2025 vs Q2 2024) | Non-GAAP Financials (Q2 2025 vs Q2 2024) | Q2 2025 (Millions USD) | Q2 2024 (Millions USD) | YoY Change (%) | | :--------------------------------------- | :--------------------- | :--------------------- | :------------- | | Adjusted Diluted EPS | $0.76 | $0.73 | +4.1% | | Adjusted EBITDA | $52.2 | $51.1 | +2.2% | [Cash Flow Performance](index=3&type=section&id=Cash%20Flow%20Performance) Q2 2025 operating cash flow significantly decreased to $15.1 million, driven by tax payment timing and increased inventory purchases Cash Flow (Millions USD) | Cash Flow (Millions USD) | Q2 2025 | Q2 2024 | YoY Change (%) | | :----------------------- | :------ | :------ | :------------- | | Operating Cash Flow | $15.1 | $41.1 | -63.3% | - The year-over-year decrease in operating cash flow was driven by the timing of tax payments and increased inventory purchases to mitigate global trade dynamic risks and support recent acquisitions[9](index=9&type=chunk) [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q2 2025 net income decreased to $4.5 million from $13.8 million, driven by increased restructuring, acquisition costs, and foreign exchange losses Statements of Operations (Thousands USD) | Statement of Operations (Thousands USD) | Three Months Ended June 27, 2025 | Three Months Ended June 28, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | | Revenue | $241,049 | $235,864 | | Cost of revenue | $134,303 | $132,175 | | Gross profit | $106,746 | $103,689 | | Total operating expenses | $91,835 | $77,974 | | Operating income | $14,911 | $25,715 | | Net Income | $4,497 | $13,755 | | Diluted EPS | $0.12 | $0.38 | - Restructuring, acquisition, and related costs significantly increased from **$2,543 thousand** in Q2 2024 to **$12,572 thousand** in Q2 2025[27](index=27&type=chunk) - Net foreign currency transaction losses increased from **$264 thousand** in Q2 2024 to **$2,744 thousand** in Q2 2025[27](index=27&type=chunk) [Condensed Consolidated Balance Sheets](index=8&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 27, 2025, total assets increased to $1,511,069 thousand, driven by higher receivables, inventory, intangibles, and goodwill from recent acquisitions Balance Sheets (Thousands USD) | Balance Sheet (Thousands USD) | June 27, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | Total current assets | $462,100 | $433,648 | | Total assets | $1,511,069 | $1,388,511 | | Total current liabilities | $181,938 | $167,791 | | Total liabilities | $709,623 | $642,813 | | Total stockholders' equity | $801,446 | $745,698 | - Goodwill increased from **$584,098 thousand** to **$649,093 thousand**, and net intangible assets from **$185,844 thousand** to **$203,630 thousand**, indicating significant acquisition activity[29](index=29&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities decreased to $15.1 million, investing activities increased due to acquisitions, and financing activities saw a net inflow from borrowings Cash Flow Activities (Thousands USD) | Cash Flow Activities (Thousands USD) | Three Months Ended June 27, 2025 | Three Months Ended June 28, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | | Net cash provided by operating activities | $15,072 | $41,095 | | Net cash used in investing activities | $(66,561) | $(4,937) | | Net cash provided by (used in) financing activities | $54,832 | $(32,023) | | Cash and cash equivalents, end of period | $109,912 | $98,468 | - Cash paid for business acquisitions (net of working capital adjustments) was **$63,173 thousand** in Q2 2025, compared to zero in Q2 2024[31](index=31&type=chunk) - Borrowings under the revolving credit facility amounted to **$72,805 thousand** in Q2 2025[31](index=31&type=chunk) [Financial Guidance](index=3&type=section&id=Financial%20Guidance) This section outlines Novanta's financial projections for full year 2025 and Q3 2025, including GAAP revenue, adjusted EBITDA, and adjusted diluted EPS [Full Year 2025 Guidance](index=3&type=section&id=Full%20Year%202025%20Guidance) Novanta projects full-year 2025 GAAP revenue of $970-$985 million, adjusted EBITDA of $225-$230 million, and adjusted diluted EPS of $3.22-$3.36 Full Year 2025 Guidance | Full Year 2025 Guidance | Range (Millions USD, except EPS) | | :---------------------- | :------------------------------- | | GAAP Revenue | $970 - $985 | | Adjusted EBITDA | $225 - $230 | | Adjusted Diluted EPS | $3.22 - $3.36 | [Third Quarter 2025 Guidance](index=3&type=section&id=Third%20Quarter%202025%20Guidance) Novanta anticipates Q3 2025 GAAP revenue of $244-$247 million, adjusted EBITDA of $57-$60 million, and adjusted diluted EPS of $0.78-$0.85 Third Quarter 2025 Guidance | Third Quarter 2025 Guidance | Range (Millions USD, except EPS) | | :-------------------------- | :------------------------------- | | GAAP Revenue | $244 - $247 | | Adjusted EBITDA | $57 - $60 | | Adjusted Diluted EPS | $0.78 - $0.85 | [Non-GAAP Guidance Disclaimer](index=3&type=section&id=Non-GAAP%20Guidance%20Disclaimer) Novanta provides non-GAAP profitability guidance without GAAP reconciliation due to inherent difficulties in forecasting and quantifying certain significant adjustments - The company provides non-GAAP profitability guidance (excluding GAAP revenue) without reconciliation to GAAP financial measures due to inherent difficulties in forecasting and quantifying certain necessary amounts[13](index=13&type=chunk) - These difficult-to-quantify amounts include acquisition and related expenses, acquisition accounting impact, fair value changes of future contingent consideration, future restructuring charges, foreign exchange gains and losses, and significant discrete income tax expenses (benefits)[13](index=13&type=chunk) [Segment Performance & Non-GAAP Reconciliations](index=10&type=section&id=Segment%20Performance%20%26%20Non-GAAP%20Reconciliations) This section details Novanta's Q2 2025 segment performance, covering revenue, adjusted gross profit, operating income, EBITDA, organic revenue growth, net debt, and free cash flow [Revenue by Reportable Segment](index=10&type=section&id=Revenue%20by%20Reportable%20Segment) In Q2 2025, Automation Enabling Technologies revenue increased to $121.672 million, while Medical Solutions revenue remained relatively flat Revenue by Segment (Thousands USD) | Revenue by Segment (Thousands USD) | Q2 2025 | Q2 2024 | YoY Change (%) | | :--------------------------------- | :--------- | :--------- | :------------- | | Automation Enabling Technologies | $121,672 | $116,729 | +4.2% | | Medical Solutions | $119,377 | $119,135 | +0.2% | | Total | $241,049 | $235,864 | +2.2% | [Adjusted Gross Profit and Margin by Segment](index=10&type=section&id=Adjusted%20Gross%20Profit%20and%20Margin%20by%20Segment) Q2 2025 saw Automation Enabling Technologies' adjusted gross profit and margin grow; Medical Solutions' slightly decreased due to prior-year inventory charges Adjusted Gross Profit and Margin (Thousands USD) | Adjusted Gross Profit & Margin (Thousands USD) | Q2 2025 (Adj. GP) | Q2 2025 (Adj. GP Margin) | Q2 2024 (Adj. GP) | Q2 2024 (Adj. GP Margin) | | :--------------------------------------------- | :---------------- | :----------------------- | :---------------- | :----------------------- | | Automation Enabling Technologies | $59,536 | 48.9% | $56,561 | 48.5% | | Medical Solutions | $52,469 | 44.0% | $53,949 | 45.3% | | Novanta Inc. (Total) | $111,031 | 46.1% | $109,867 | 46.6% | - Medical Solutions' Q2 2024 adjusted gross profit included **$2,493 thousand** in inventory charges related to a product line closure, which significantly impacted its gross margin comparison[33](index=33&type=chunk) [Adjusted Operating Income and Adjusted Diluted EPS](index=11&type=section&id=Adjusted%20Operating%20Income%20and%20Adjusted%20Diluted%20EPS) Novanta's Q2 2025 adjusted operating income was $40,656 thousand and diluted EPS was $0.76, adjusted for intangible amortization, restructuring, and acquisition costs Adjusted Operating Income and Diluted EPS (Thousands USD, except EPS) | Adjusted Operating Income & Diluted EPS (Thousands USD, except EPS) | Q2 2025 | Q2 2024 | | :---------------------------------------------------------------- | :--------- | :--------- | | Adjusted Operating Income | $40,656 | $41,343 | | Adjusted Operating Margin | 16.9% | 17.5% | | Adjusted Diluted EPS | $0.76 | $0.73 | - Key non-GAAP adjustments for Q2 2025 included **$11,091 thousand** for intangible asset amortization, **$10,221 thousand** for restructuring costs, and **$2,351 thousand** for acquisition and related costs[35](index=35&type=chunk) [Adjusted EBITDA](index=13&type=section&id=Adjusted%20EBITDA) Q2 2025 adjusted EBITDA slightly increased to $52,163 thousand, with the adjusted EBITDA margin remaining stable at 21.6% Adjusted EBITDA (Thousands USD) | Adjusted EBITDA (Thousands USD) | Q2 2025 | Q2 2024 | YoY Change (%) | | :------------------------------ | :--------- | :--------- | :------------- | | Adjusted EBITDA | $52,163 | $51,103 | +2.1% | | Adjusted EBITDA Margin | 21.6% | 21.7% | -0.1 pp | - Significant adjustments to net income for Q2 2025 adjusted EBITDA calculation included **$15,581 thousand** for depreciation and amortization, **$7,498 thousand** for share-based compensation expense, and **$12,091 thousand** for restructuring, acquisition, and related costs[39](index=39&type=chunk) [Organic Revenue Growth](index=13&type=section&id=Organic%20Revenue%20Growth) Novanta reported 2.2% GAAP revenue growth in Q2 2025, but organic revenue growth was (2.1)% after adjusting for acquisitions and favorable foreign exchange Revenue Growth Components (Q2 2025) | Revenue Growth Components (Q2 2025) | Percentage | | :---------------------------------- | :--------- | | Reported Revenue Growth (GAAP) | 2.2% | | Less: Change attributable to acquisitions | 2.3% | | Plus: Change due to foreign currency | (2.0)% | | Organic Revenue Growth (Non-GAAP) | (2.1)% | [Net Debt](index=13&type=section&id=Net%20Debt) As of June 27, 2025, net debt increased to $355,166 thousand, reflecting higher total debt and a slight decrease in cash and cash equivalents Net Debt (Thousands USD) | Net Debt (Thousands USD) | June 27, 2025 | December 31, 2024 | | :----------------------- | :------------ | :---------------- | | Total Debt (GAAP) | $459,240 | $416,640 | | Cash and cash equivalents | $(109,912) | $(113,989) | | Net Debt (Non-GAAP) | $355,166 | $305,170 | [Free Cash Flow](index=13&type=section&id=Free%20Cash%20Flow) Q2 2025 free cash flow significantly decreased to $11,684 thousand, primarily due to reduced net cash provided by operating activities Free Cash Flow (Thousands USD) | Free Cash Flow (Thousands USD) | Q2 2025 | Q2 2024 | YoY Change (%) | | :----------------------------- | :--------- | :--------- | :------------- | | Net Cash Provided by Operating Activities (GAAP) | $15,072 | $41,095 | -63.3% | | Purchases of property, plant and equipment | $(3,388) | $(4,937) | +31.4% | | Free Cash Flow (Non-GAAP) | $11,684 | $36,158 | -67.7% | [Non-GAAP Financial Measures Explanation](index=4&type=section&id=Non-GAAP%20Financial%20Measures%20Explanation) This section defines Novanta's non-GAAP financial measures, explaining their rationale and utility for investors and management [Overview and Rationale](index=4&type=section&id=Overview%20and%20Rationale) Novanta uses non-GAAP financial measures to provide investors with supplementary information for evaluating operating performance, benchmarking, and assessing long-term trends - Non-GAAP financial measures provide investors with useful supplemental information regarding the company's operating performance, particularly in the context of significant changes from strategic execution such as acquisitions, divestitures, and restructuring[17](index=17&type=chunk) - Management uses these non-GAAP measures to assess operating performance, report financial results to the board of directors, benchmark against historical performance and peers, and evaluate investment opportunities[18](index=18&type=chunk) - Non-GAAP financial measures should not be considered as substitutes for, or superior to, financial performance measures prepared in accordance with GAAP, but rather are intended to supplement GAAP financial measures[19](index=19&type=chunk) [Organic Revenue Growth Definition](index=14&type=section&id=Organic%20Revenue%20Growth%20Definition) Organic revenue growth is defined as revenue excluding the impact of acquisitions, divestitures, product line discontinuations, and foreign currency translation - Organic revenue growth is defined as revenue excluding the impact of business acquisitions, divestitures, product line discontinuations, and foreign currency translation[44](index=44&type=chunk) - The company believes this non-GAAP measure helps better measure company performance and assess long-term performance trends, facilitating comparisons to prior and future periods and peers[44](index=44&type=chunk) [Adjusted Gross Profit and Margin Definition](index=14&type=section&id=Adjusted%20Gross%20Profit%20and%20Margin%20Definition) Adjusted gross profit and margin exclude amortization of acquired intangible assets and inventory charges related to product line closures - Adjusted gross profit and margin calculations exclude amortization of acquired intangible assets and inventory charges related to product line closures[45](index=45&type=chunk) - The exclusion of these expenses aims to provide investors and management with clearer visibility into the underlying trends and performance of the business[45](index=45&type=chunk) [Adjusted Operating Income and Margin Definition](index=14&type=section&id=Adjusted%20Operating%20Income%20and%20Margin%20Definition) Adjusted operating income and margin exclude amortization of acquired intangibles, inventory charges, restructuring, acquisition, ERP implementation, and insurance claim costs - Adjusted operating income and margin calculations exclude amortization of acquired intangible assets, inventory charges related to product line closures, restructuring costs, acquisition and related costs, discrete costs for the planning and design phase of ERP system implementation, and insurance claim-related expenses[46](index=46&type=chunk) [Adjusted Income Before Income Taxes Definition](index=14&type=section&id=Adjusted%20Income%20Before%20Income%20Taxes%20Definition) Adjusted income before income taxes excludes net foreign currency transaction gains/losses and debt refinancing write-offs from adjusted operating income - Adjusted income before income taxes calculations exclude amortization of acquired intangible assets, restructuring, acquisition and related costs, discrete costs for the planning and design phase of ERP system implementation, inventory charges related to product line closures, insurance claim-related expenses, net foreign currency transaction gains and losses, and write-offs of unamortized deferred financing costs related to debt refinancing[47](index=47&type=chunk) [Non-GAAP Income Tax Provision/(Benefit) and Effective Tax Rate Definition](index=14&type=section&id=Non-GAAP%20Income%20Tax%20Provision%2F%28Benefit%29%20and%20Effective%20Tax%20Rate%20Definition) Non-GAAP tax metrics are based on adjusted income before taxes, applicable rates, and non-GAAP adjustments' tax impact, excluding discrete tax expenses/benefits - Non-GAAP income tax provision/(benefit) and effective tax rate are calculated based on adjusted income before income taxes, applicable tax rates, and the income tax impact of non-GAAP adjustments[48](index=48&type=chunk) - Additionally, the company excludes significant discrete income tax expenses (benefits) related to valuation allowance releases, uncertain tax positions, tax audits, certain tax law changes, and acquisition-related tax planning actions[49](index=49&type=chunk) [Adjusted Net Income Definition](index=16&type=section&id=Adjusted%20Net%20Income%20Definition) Adjusted net income incorporates all adjustments from adjusted income before taxes, discrete tax expenses/benefits, and non-GAAP adjustments' tax impact - Adjusted net income calculations exclude amortization of acquired intangible assets, restructuring, acquisition and related costs, discrete costs for the planning and design phase of ERP system implementation, inventory charges related to product line closures, insurance claim-related expenses, write-offs of debt refinancing costs, and net foreign currency transaction gains and losses[50](index=50&type=chunk) - Additionally, the company excludes significant discrete income tax expenses (benefits) related to valuation allowance releases, uncertain tax positions, tax audits or amended prior period filings, certain tax law changes, and acquisition-related tax planning actions, as well as the income tax impact of non-GAAP adjustments[50](index=50&type=chunk) [Adjusted Diluted EPS Definition](index=16&type=section&id=Adjusted%20Diluted%20EPS%20Definition) Adjusted diluted EPS excludes various non-GAAP adjustments from adjusted net income, including intangible amortization, restructuring, acquisition, ERP, inventory, insurance, foreign exchange, debt refinancing, and discrete tax costs - Adjusted diluted EPS excludes amortization of acquired intangible assets, restructuring, acquisition and related costs, discrete costs for the planning and design phase of ERP system implementation, inventory charges related to product line closures, insurance claim-related expenses, net foreign currency transaction gains and losses, costs related to debt refinancing, and specific discrete income tax expenses (benefits) and the income tax impact of non-GAAP adjustments[51](index=51&type=chunk) [Adjusted EBITDA and EBITDA Margin Definition](index=16&type=section&id=Adjusted%20EBITDA%20and%20Margin%20Definition) Adjusted EBITDA is income before interest, taxes, depreciation, amortization, share-based compensation, restructuring, acquisition, ERP, inventory, insurance, and other non-operating expenses; margin is its percentage of revenue - Adjusted EBITDA is defined as income before interest (income) expense, income tax provision (benefit), depreciation, amortization, non-cash share-based compensation expense, restructuring, acquisition and related costs, discrete costs for the planning and design phase of ERP system implementation, inventory charges related to product line closures, insurance claim-related expenses, and other non-operating (income) expense items[52](index=52&type=chunk) - Adjusted EBITDA margin is defined as adjusted EBITDA as a percentage of revenue[52](index=52&type=chunk) [Free Cash Flow Definition](index=16&type=section&id=Free%20Cash%20Flow%20Definition) Free cash flow is net cash from operating activities minus capital expenditures plus asset sales, indicating liquidity and ability to repay debt and fund growth - Free cash flow is defined as net cash provided by operating activities less cash expenditures for purchases of property, plant and equipment, plus cash proceeds from the sale of property, plant and equipment[54](index=54&type=chunk) - Management considers these non-GAAP financial measures important indicators of the company's liquidity and ability to repay outstanding debt and fund future growth[54](index=54&type=chunk) [Net Debt Definition](index=16&type=section&id=Net%20Debt%20Definition) Net debt is total debt plus unamortized deferred financing costs, minus cash and cash equivalents, used to monitor outstanding debt not covered by available cash - Net debt is defined as total debt reported on the consolidated balance sheets plus unamortized deferred financing costs, less cash and cash equivalents at the end of the period[55](index=55&type=chunk) - Management uses net debt to monitor the company's outstanding debt that is not covered by cash and cash equivalents on hand[55](index=55&type=chunk) [Corporate Information](index=3&type=section&id=Corporate%20Information) This section provides details on Novanta's Q2 2025 earnings conference call, safe harbor statements, and an overview of the company's business and strategic focus [Conference Call Information](index=3&type=section&id=Conference%20Call%20Information) Novanta held a conference call on August 5, 2025, at 10:00 AM ET to discuss Q2 results, with a webcast replay available until September 29, 2025 - The company held a conference call on Tuesday, August 5, 2025, at **10:00 AM ET** to discuss results and provide a business update[14](index=14&type=chunk) - An audio webcast replay will be available approximately three hours after the call in the investor relations section of the company's website, www.novanta.com, through Monday, September 29, 2025[15](index=15&type=chunk) [Safe Harbor and Forward-Looking Information](index=4&type=section&id=Safe%20Harbor%20and%20Forward-Looking%20Information) This press release contains forward-looking statements regarding financial performance, market expectations, new product sales, and acquisition strategies, subject to risks detailed in the Form 10-K - Certain statements in this press release are "forward-looking statements" concerning expected financial performance and condition, anticipated new product sales, end market and market position expectations, macroeconomic expectations, competitive position, acquisition strategy, and other statements that are not historical facts[20](index=20&type=chunk) - These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from expectations, including economic and political conditions, fluctuations in product demand, innovation challenges, timing of customer orders, IT system disruptions, risks of international operations, increased tariffs, intellectual property infringement, failure to integrate acquisitions, loss of key personnel, product defects, supply chain disruptions, medical device regulations, data protection compliance, foreign currency exchange rate changes, reliance on OEM customers, and changes in tax laws[21](index=21&type=chunk)[22](index=22&type=chunk) - Other important risk factors that could affect the outcome of these statements and the company's operating results and financial condition are discussed in Item 1A of the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and updated by subsequent filings with the Securities and Exchange Commission[23](index=23&type=chunk) [About Novanta](index=6&type=section&id=About%20Novanta) Novanta is a global leader in core technology solutions for medical, life sciences, and advanced industrial OEMs, specializing in precision medicine, manufacturing, robotics, and advanced surgical fields - Novanta is a global leader in core technology solutions for medical, life sciences, and advanced industrial original equipment manufacturers (OEMs)[24](index=24&type=chunk) - The company possesses deep proprietary expertise and capabilities across precision medicine, precision manufacturing, robotics & automation, and advanced surgical fields[24](index=24&type=chunk) - Novanta's growth is driven by its innovative team of experts, the Novanta Growth System, and a commitment to customer success[24](index=24&type=chunk)

Financial Data and Key Metrics Changes - In Q1 2025, the company reported revenue of $233 million, reflecting organic growth of 2% and reported growth of 1% year over year [7][21] - Adjusted gross margins were 46%, consistent with expectations, and adjusted EBITDA was $50 million, showing a 1% increase year over year [24][7] - Free cash flow reached $32 million, exceeding expectations and demonstrating strong cash conversion capabilities [24][21] Business Line Data and Key Metrics Changes - The Automation Enabling Technologies segment saw sales grow by 5% year over year, driven by strength in robotics and automation [27] - The Medical Solutions segment experienced a revenue decline of 3% year over year, primarily due to a decrease in the precision medicine business unit [29] - New product sales grew strong double digits year over year, with the vitality index reaching nearly 25% of total sales in the Medical Solutions segment [30][17] Market Data and Key Metrics Changes - Sales to healthcare markets grew with strong patient procedure growth and hospital spending, driving high single-digit growth in the advanced surgery business [10] - The company expects to grow faster than the healthcare market in 2025, driven by new product launches in surgical robotics and minimally invasive surgery [11] - The industrial market is facing short-term uncertainty, but long-term growth potential remains strong in sectors like robotics and automation [16] Company Strategy and Development Direction - The company focuses on markets with long-term secular tailwinds, such as precision robotics, advanced minimally invasive surgery, and precision medicine [9] - A strategic tuck-in acquisition was completed in April 2025, with plans for further acquisitions remaining a top priority [9][20] - The company aims to mitigate tariff impacts through a multipronged strategy, including regional manufacturing and cost containment actions [14][32] Management's Comments on Operating Environment and Future Outlook - The management highlighted the current macroeconomic environment as one of the most uncertain and volatile since the early COVID pandemic days [12] - Despite challenges, the company remains confident in achieving $50 million of incremental new product revenue for 2025 [11][22] - The management expressed optimism about the company's resilience and ability to navigate near-term dynamics while focusing on long-term growth [23][47] Other Important Information - The company ended Q1 with gross debt of $392 million and a net leverage ratio of approximately 1.4 times, providing ample capacity for further acquisitions [25] - The company repurchased approximately $6 million worth of common shares in Q1 [26] - The anticipated impact of tariffs on profitability is being managed through various strategies, including price increases and sourcing adjustments [33][82] Q&A Session Summary Question: Can you provide insight into the acquisition's potential revenue contribution? - The upfront payment for the acquisition was around $66 million, with expectations for it to be slightly accretive to earnings per share in the first year [52] Question: Can you elaborate on the $20 million in annual cost savings? - The $20 million in savings will help achieve full-year EBITDA targets, with some actions being deferrals of investments that could be reinstated if demand improves [57][59] Question: What is the current trend in revenue guidance for Q2? - The company is currently trending towards the high end of the Q2 revenue guidance range, estimating revenue at $240 million [62] Question: Which end markets are experiencing deferrals in investments? - The most significant deferrals are related to US-based production to China, with additional uncertainty in life sciences and broader industrial markets [64][66] Question: How much of the revenue is tied to NIH funding? - The precision medicine business unit has exposure to NIH funding, with current declines largely attributed to funding cuts and general capital spending pullbacks in life sciences [72][75]

Financial Data and Key Metrics Changes - In Q1 2025, Novanta reported revenue of $233 million, reflecting organic growth of 2% and reported growth of 1% year over year [6][21] - Adjusted gross margins were 46%, consistent with expectations, while adjusted EBITDA was $50 million, showing a 1% increase year over year [24][6] - Free cash flow reached $32 million, exceeding expectations and demonstrating strong cash conversion capabilities [24][6] Business Line Data and Key Metrics Changes - Medical market sales accounted for 55% of total sales, while advanced industrial markets made up 45% [14] - The Automation Enabling Technologies segment saw sales grow by 5% year over year, driven by strength in robotics and automation [27] - The Medical Solutions segment experienced a revenue decline of 3% year over year, primarily due to a drop in the precision medicine business unit [28] Market Data and Key Metrics Changes - Sales to healthcare markets grew at a high single-digit rate, particularly in the advanced surgery business [9][10] - The precision medicine business unit faced disruptions from NIH funding cuts and tariffs, impacting overall sales [29][30] - Design wins in the automation enabling technology segment grew by strong double digits year over year, indicating robust demand despite market turbulence [16][27] Company Strategy and Development Direction - Novanta's strategy focuses on markets with long-term secular tailwinds, such as precision robotics and advanced minimally invasive surgery [7][8] - The company aims to achieve $50 million in incremental new product revenue in 2025, driven by new product launches [10][21] - The acquisition of Keyon is part of Novanta's strategy to expand into intelligent embedded software solutions [19][20] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the current macroeconomic environment as uncertain and volatile, similar to the early COVID pandemic days [11] - The company is confident in its ability to navigate these challenges, citing enhanced operational scalability and resilience [12][22] - Despite short-term uncertainties, management remains optimistic about long-term growth opportunities in high-growth markets [21][40] Other Important Information - Novanta's gross debt was $392 million, with a gross leverage ratio of 1.9 times, providing capacity for further acquisitions [25] - The company repurchased approximately $6 million worth of common shares in Q1 2025 [25][26] - The vitality index for new products reached nearly 20% of total sales, indicating strong growth potential [17] Q&A Session Summary Question: Can you provide insights on the Keyon acquisition and its revenue contribution? - The upfront payment for Keyon was around $66 million, with expectations for it to be slightly accretive to earnings per share in the first year [51][52] Question: What are the sources of the $20 million in annual cost savings? - The $20 million in savings is primarily from deferrals of investments and prioritization of actions to mitigate tariff impacts [55][56] Question: How is Novanta addressing the impact of tariffs on its supply chain? - The company has implemented a tariff response playbook, which includes sourcing from second vendors and regionalizing manufacturing to mitigate costs [33][80] Question: What is the outlook for revenue in Q2 2025? - Novanta expects Q2 revenue in the range of $230 million to $240 million, trending towards the higher end of this range [41][61] Question: How much of Novanta's revenue is tied to NIH funding? - The precision medicine business unit is sensitive to NIH funding cuts, which have impacted revenue, but specific revenue percentages are difficult to quantify [70][73]

Group 1 - Novanta reported quarterly earnings of $0.74 per share, exceeding the Zacks Consensus Estimate of $0.68 per share, with an earnings surprise of 8.82% [1] - The company posted revenues of $233.37 million for the quarter ended March 2025, slightly missing the Zacks Consensus Estimate by 0.28%, compared to $230.92 million in the same quarter last year [2] - Over the last four quarters, Novanta has surpassed consensus EPS estimates three times and topped consensus revenue estimates two times [2] Group 2 - The stock has underperformed, losing about 21.4% since the beginning of the year, while the S&P 500 has declined by 3.9% [3] - The current consensus EPS estimate for the upcoming quarter is $0.76 on revenues of $240.56 million, and for the current fiscal year, it is $3.48 on $1 billion in revenues [7] - The Zacks Industry Rank for Electronics - Miscellaneous Components is in the bottom 45% of over 250 Zacks industries, indicating potential challenges for stock performance [8]