Novanta (NOVT) Q1 2025 Earnings Call May 06, 2025 10:00 AM ET Company Participants Ray Nash - Corporate Finance LeaderMatthijs Glastra - Chair and Chief Executive OfficerRobert Buckley - CFOLee Jagoda - Senior Managing Director Conference Call Participants Brian Drab - Equity Research AnalystRobert Mason - Senior Research Analyst Operator Good morning. My name is Gary, and I will be your conference operator today. At this time, I would like to welcome everyone to Novanta Incorporated's First Quarter twenty ...

Novanta (NOVT) Q1 2025 Earnings Call May 06, 2025 10:00 AM ET Speaker0 Good morning. My name is Gary, and I will be your conference operator today. At this time, I would like to welcome everyone to Novanta Incorporated's First Quarter twenty twenty five Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Please note this event is being recorded. I would now like to turn the conference over to Ray Nash, C ...

Novanta (NOVT) came out with quarterly earnings of $0.74 per share, beating the Zacks Consensus Estimate of $0.68 per share. This compares to earnings of $0.74 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 8.82%. A quarter ago, it was expected that this photonic and motion control components maker would post earnings of $0.71 per share when it actually produced earnings of $0.76, delivering a surprise of 7.04%.Over the last ...

Financial Performance - Novanta reported GAAP revenue of $233.4 million for Q1 2025, a 1.1% increase from $230.9 million in Q1 2024[5]. - GAAP net income for Q1 2025 was $21.2 million, reflecting a 45% increase compared to $14.7 million in Q1 2024[6]. - Diluted EPS for Q1 2025 was $0.59, up from $0.41 in Q1 2024, while adjusted diluted EPS remained stable at $0.74[7][8]. - Organic revenue growth for Q1 2025 was 1.7%, excluding the impact of acquisitions and foreign currency fluctuations[5]. - Revenue for the three months ended March 28, 2025, was $233.366 million, a 1.9% increase from $230.916 million for the same period in 2024[25]. - Gross profit increased to $104.354 million, representing a gross profit margin of 44.7%, compared to $100.416 million and a margin of 43.5% in the prior year[25]. - Operating income rose to $32.421 million, with an operating margin of 13.9%, up from $25.607 million and an 11.1% margin in the same quarter last year[25]. - Net income for the quarter was $21.208 million, a significant increase of 44.6% compared to $14.676 million in the prior year[25]. - Basic and diluted earnings per share both increased to $0.59, compared to $0.41 for the same period in 2024[25]. - Adjusted EBITDA for Q1 2025 increased by 1% to $50 million compared to $49.7 million in Q1 2024[8]. - Adjusted EBITDA for the same period was $49,978,000, with an Adjusted EBITDA Margin of 21.4%, slightly down from $49,688,000 and 21.5% in the prior year[39]. Cash Flow and Liquidity - Operating cash flow for Q1 2025 was $31.7 million, slightly down from $32.8 million in Q1 2024[8]. - Cash and cash equivalents at the end of the period were $106.045 million, down from $113.989 million at the beginning of the period[29]. - The company reported a net cash provided by operating activities of $31.684 million, slightly down from $32.829 million in the prior year[29]. - Free Cash Flow for the three months ended March 28, 2025, was $32,937,000, which is 155.3% of Net Income, compared to $26,414,000 and 180.0% in the same period of 2024[42]. - Net Cash Provided by Operating Activities was $31,684,000, representing 149.4% of Net Income for the period[42]. - The company emphasizes the importance of Free Cash Flow as a key indicator of liquidity and ability to fund future growth[54]. Debt and Interest - Total Debt decreased to $390,131,000 as of March 28, 2025, down from $416,640,000 at the end of 2024, resulting in a Net Debt of $286,314,000[41]. - The company reported a decrease in interest expense from $8,254,000 in 2024 to $5,644,000 in 2025[39]. Business Strategy and Outlook - The company expects Q2 2025 GAAP revenue to be between $230 million and $240 million, with adjusted EBITDA projected between $50 million and $55 million[10]. - Novanta plans to implement cost containment actions targeting approximately $20 million in annualized savings due to trade policy changes and global disruptions[10]. - The company successfully closed a tuck-in acquisition in April 2025 and continues to focus on launching new products throughout the year[4]. - Novanta emphasizes innovation and operational excellence as part of its growth strategy in high-growth markets such as precision robotics and automation[9]. - The company did not report any revenue growth attributable to acquisitions for the period[40]. Segment Performance - The Automation Enabling Technologies segment generated $123.167 million in revenue, up from $117.389 million, while Medical Solutions revenue decreased to $110.199 million from $113.527 million[31]. - Adjusted gross profit margin improved to 46.2% from 46.3% year-over-year, with adjusted gross profit totaling $107.915 million[33].

Revenue Performance - Novanta reported Q4 2024 GAAP revenue of $238.1 million, a 12.5% increase from Q4 2023[5] - Full year 2024 GAAP revenue reached $949.2 million, up 7.7% compared to 2023[10] - Revenue for Q4 2024 was $238.06 million, a 12.5% increase from $211.57 million in Q4 2023[30] - Full-year revenue for 2024 reached $949.25 million, up 7.7% from $881.66 million in 2023[30] - Novanta's acquisition activities contributed to a 9.4% revenue increase in Q4 2024 compared to the same quarter in 2023[5] - Organic revenue growth for full year 2024 was a decrease of 1.6%, excluding acquisitions and foreign currency impacts[10] - Novanta expects full year 2025 GAAP revenue of approximately $1.0 billion, representing a 5% year-over-year growth[14] Earnings and Profitability - Q4 2024 GAAP diluted EPS was $0.46, compared to $0.35 in Q4 2023, reflecting a 31.4% increase[8] - Full year 2024 net income was $64.1 million, down from $72.9 million in 2023[11] - Net income for Q4 2024 was $16.46 million, compared to $12.51 million in Q4 2023, reflecting a 31.5% increase[30] - The diluted adjusted EPS for Q4 2024 was $0.76, compared to $0.63 in Q4 2023, indicating a 20.6% growth[40] - Adjusted Operating Income for the year ended December 31, 2023, was $619 million, reflecting a 17.8% operating margin[46] - Adjusted Diluted EPS for the same period was $3.02, with a total of 156 million weighted average shares outstanding[46] Cash Flow and Financial Position - Operating cash flow for Q4 2024 increased 58% to $61.6 million, compared to $39.0 million in Q4 2023[9] - Free Cash Flow for the year ended December 31, 2024, was $141.5 million, which is 221% of Net Income[51] - Cash Provided by Operating Activities for the year ended December 31, 2024, was $158.5 million, compared to $120.1 million in 2023[51] - Cash and cash equivalents at the end of Q4 2024 were $113.99 million, up from $105.05 million at the end of Q4 2023[34] - Total assets increased to $1.39 billion in 2024 from $1.23 billion in 2023, marking a 13.3% growth[32] - Total Debt as of December 31, 2024, increased to $416.6 million from $354.4 million in 2023[50] - Net Debt as of December 31, 2024, was $305.2 million, up from $253.0 million in 2023[50] Gross Profit and Margins - Gross profit for Q4 2024 was $108.23 million, representing a gross margin of 45.4%, compared to $96.56 million and 45.6% in Q4 2023[30] - The company’s gross profit margin for the Medical Solutions segment decreased to 40.8% in Q4 2024 from 46.4% in Q4 2023[38] - The adjusted gross profit margin for the Automation Enabling Technologies segment improved to 51.2% in Q4 2024, up from 47.7% in Q4 2023[38] - For the year ended December 31, 2024, the adjusted gross profit reached $241,256,000, slightly down from $242,316,000 in 2023[38] - The company reported a GAAP gross profit of $421,545,000 for the year ended December 31, 2024, compared to $399,897,000 in 2023, with a margin of 44.4%[38] - Adjusted Gross Profit Margin for the year ended December 31, 2023, was 22.3%[48] Research and Development - Research and development expenses for Q4 2024 were $25.29 million, a 7.8% increase from $23.45 million in Q4 2023[30] Future Outlook - The company anticipates adjusted EBITDA for 2025 to be in the range of $225 million to $235 million[14] - Full year 2024 adjusted EBITDA increased 7% to $209.8 million, compared to $196.2 million in 2023[12] - Adjusted EBITDA for the year ended December 31, 2024, was $209.8 million, representing a 22.1% margin[48] - The effective tax rate for adjusted results in Q4 2024 was 23.9%, compared to 20.8% in Q4 2023[40]

Novanta Inc. (NASDAQ:NOVT) Q4 2024 Earnings Call February 25, 2025 10:00 AM ET Company Participants Ray Nash - Investor Relations Matthijs Glastra - Chair and Chief Executive Officer Robert Buckley - Chief Financial Officer Conference Call Participants Lee Jagoda - CJS Securities Brian Drab - William Blair Rob Mason - Baird Operator Good morning. My name is Gary, and I will be your conference today. At this time, I would like to welcome everyone to the Novanta Inc.'s fourth quarter and full year 2024 earnin ...

Financial Data and Key Metrics Changes - In Q4 2024, Novanta achieved $238 million in revenue, representing a 3% organic growth year over year and a 13% reported revenue increase [11] - For the full year 2024, total revenue was $949 million, with an 8% reported growth and a 2% organic decline [13] - Adjusted EBITDA for Q4 2024 was $52 million, a 15% increase from the previous year, while for the full year, it grew 7% to $210 million [42][13] - Operating cash flow reached a record $62 million in Q4 2024, up 58% year over year, and $159 million for the full year, up 32% [45][13] - Non-GAAP adjusted earnings per share for Q4 2024 was $0.76, up 21% year over year, and $3.08 for the full year [45] Business Line Data and Key Metrics Changes - Medical market sales accounted for 55% of total sales in 2024, growing high single digits, particularly in minimally invasive surgery and robotics [19] - Advanced industrial markets made up 45% of total sales, growing low double digits despite challenges [21] - The automation enabling technologies segment saw a 9% year-over-year sales growth in Q4, while for the full year, sales declined 2% [50] - The medical solutions segment experienced a 17% reported revenue growth year over year but a 4% organic decline [52] Market Data and Key Metrics Changes - Bookings grew 54% year over year in Q4 2024, driven by major OEM customers [12] - The book-to-bill ratio for the automation enabling technologies segment was 0.89% in Q4, while the medical solutions segment had a book-to-bill of 1.05% [54][50] - Demand in robotics and automation applications showed signs of recovery, while there was continued softness in life sciences and DNA sequencing applications [16][50] Company Strategy and Development Direction - Novanta's growth strategy focuses on innovation and new product launches, with plans to introduce 50% more new products in 2025 compared to 2024 [38][91] - The company aims to achieve $50 million in incremental new product revenue in 2025, primarily from insufflators and pumps for hospitals [15][57] - Organizational changes were made to enhance operational capabilities, including the appointment of two co-COOs to lead different segments [29] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2025 despite market uncertainties, citing strong growth in healthcare markets and patient procedure growth [14][60] - The geopolitical disruptions and market economic uncertainty are expected to impact capital spending in various sectors, but there are signs of gradual recovery [16][60] - Management emphasized the importance of the Novanta growth system in driving operational performance and resilience [34][63] Other Important Information - The company launched 50 new products in 2024 and plans to launch over 50% more in 2025 [23][91] - Novanta's balance sheet is positioned well for acquisitions, with a focus on maintaining discipline on price and returns [27][125] - The vitality index for new products was in the mid-teens percentage of sales, expected to climb in 2025 [23] Q&A Session Summary Question: Comments on DNA sequencing product lines and recovery expectations - Management noted that shipments have normalized, but funding cuts from the National Institute of Health have created caution among customers, leading to increased volatility in the DNA sequencing market [84][85] Question: Outlook for organic growth in 2026 - Management expects accelerating organic growth in 2026, driven by innovation and new product launches, with a strong contribution from consumables in the advanced surgery business [88][92] Question: Clarification on EUV and DUV subsystem product orders - Initial orders for the intelligent subsystem product are expected to increase content with customers, with revenue ramping more in the second half of the year [98][100] Question: Update on humanoid robotics orders - The humanoid category is small but growing rapidly, with Novanta positioned to meet demand through high-precision robotics technology [102][104] Question: M&A opportunities and leverage comfort levels - Management is excited about the M&A pipeline and remains disciplined on price, with a focus on maintaining leverage below three times [121][126]

Novanta (NOVT) Q4 2024 Earnings Call February 25, 2025 10:00 AM ET Company Participants Ray Nash - Corporate Finance Leader & IRMatthijs Glastra - Chair and Chief Executive OfficerRobert Buckley - CFOLee Jagoda - Senior Managing DirectorBrian Drab - Co-Group Head–Industrials Conference Call Participants Robert Mason - Senior Research Analyst Operator Good morning. My name is Gary, and I will be your conference operator today. At this time, I would like to welcome everyone to the Novanta Incorporated's Fourt ...

Revenue and Market Segmentation - Total revenue for 2024 was $949.2 million, an increase of $67.6 million, or 7.7%, compared to 2023, primarily driven by the 2024 acquisition[222]. - The medical market accounted for approximately 55% of total revenue, while the advanced industrial market accounted for approximately 45%[214][215]. - Medical Solutions segment revenue increased by $76.2 million, or 19.9%, in 2024, primarily due to the 2024 acquisition and increased sales from advanced surgery products[227]. - Automation Enabling Technologies segment revenue decreased by $8.6 million, or 1.7%, in 2024, primarily due to decreased demand in advanced industrial markets[226]. Operating Income and Expenses - Operating income for 2024 was $110.6 million, remaining flat compared to the prior year, with an increase in gross profit of $21.6 million offset by higher operating expenses[223]. - SG&A expenses rose to $175.9 million, or 18.5% of revenue, in 2024, compared to $164.5 million, or 18.7% of revenue, in 2023[237]. - Operating income for the Automation Enabling Technologies segment was $106.4 million, or 21.7% of revenue, in 2024, compared to $96.3 million, or 19.3% of revenue, in 2023[246]. - Operating income for the Medical Solutions segment decreased to $57.5 million, or 12.5% of revenue, in 2024, down from $63.3 million, or 16.5% of revenue, in 2023[248]. Earnings and Taxation - Basic EPS for 2024 was $1.78, a decrease of $0.25 from $2.03 in 2023, primarily due to increased interest expense and income tax provision[224]. - The effective tax rate for 2024 was 18.9%, compared to 13.0% for 2023, with a tax provision of $15.0 million in 2024 versus $10.9 million in 2023[258]. - Net income was $64.1 million for 2024, down from $72.9 million in 2023[261]. Cash Flow and Investments - Cash and cash equivalents totaled $114.0 million as of December 31, 2024, an increase from $105.1 million as of December 31, 2023, primarily due to cash provided by operating activities of $158.5 million[277]. - Net cash provided by operating activities increased to $158.5 million in 2024 from $120.1 million in 2023, attributed to reduced net working capital and lower income tax payments[279]. - Net cash used in investing activities was $208.2 million in 2024, primarily due to $191.2 million for the 2024 acquisition and $17.2 million in capital expenditures[281]. Debt and Borrowing Capacity - The company has the ability to expand its borrowing capacity by up to $350.0 million under its revolving credit agreement[262]. - As of December 31, 2024, the company had $70.4 million in term loan and $348.8 million in revolving credit facility borrowings outstanding under its Senior Credit Facilities[275]. - The maximum consolidated leverage ratio was 1.86 as of December 31, 2024, well below the requirement of 3.50[276]. - Future interest payments under the Senior Credit Facilities are estimated to be approximately $52.7 million through maturity, with $24.4 million payable within the next twelve months[293]. Research and Development - Research and development expenses increased by 4.2% to $95.5 million in 2024, reflecting ongoing investment in product development[234]. - R&D expenses increased to $95.5 million, or 10.1% of revenue, in 2024, up from $91.7 million, or 10.4% of revenue, in 2023[235]. Acquisitions and Strategic Goals - The acquisition of Motion Solutions was completed for a total purchase price of $192.0 million, enhancing the product portfolio in medical applications[217]. - The company aims to increase medical sales as a percentage of total revenue through new product introductions and strategic acquisitions[219]. Tax and Legal Matters - The company recorded a valuation allowance of $1.9 million on net operating losses and various credits in certain tax jurisdictions in 2024[327]. - As of December 31, 2024, the total amount of unrecognized tax benefits was $4.8 million, with $4.1 million potentially favorably affecting the effective tax rate if recognized[328]. - The undistributed earnings of foreign subsidiaries totaled $494.9 million as of December 31, 2024, with estimated unrecognized tax liabilities of approximately $7.3 million[329]. Inventory and Goodwill - The company evaluates goodwill and indefinite-lived intangible assets for impairment annually, with no impairment noted as of the beginning of the second quarter of 2024[322]. - The company assesses its inventories regularly and may increase reserves for excess and obsolete inventory if sales do not materialize as forecasted[304]. Foreign Currency and Interest Rate Exposure - The company had foreign currency contracts with notional amounts totaling $187.4 million and a net fair value of $0.2 million as of December 31, 2024[336]. - A hypothetical 10% strengthening of the U.S. dollar against other currencies would result in an approximately $0.7 million decrease in the net fair value of foreign currency contracts[336]. - A hypothetical 10% weakening of the U.S. dollar against other currencies would result in an approximately $0.7 million increase in the net fair value of foreign currency contracts[336]. - The company had $419.2 million of outstanding variable rate debt as of December 31, 2024[337]. - A 100 basis point increase in interest rates would increase the annual pre-tax interest expense by approximately $4.2 million[337].

Core Viewpoint - Novanta (NOVT) reported quarterly earnings of $0.76 per share, exceeding the Zacks Consensus Estimate of $0.71 per share, and showing an increase from $0.63 per share a year ago, indicating a 7.04% earnings surprise [1][2] Financial Performance - The company posted revenues of $238.06 million for the quarter ended December 2024, which was 0.57% below the Zacks Consensus Estimate, but an increase from $211.57 million year-over-year [2] - Over the last four quarters, Novanta has surpassed consensus EPS estimates three times and topped consensus revenue estimates three times as well [2] Stock Performance - Novanta shares have declined approximately 9.5% since the beginning of the year, contrasting with the S&P 500's gain of 1.7% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating it is expected to perform in line with the market in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.78, with expected revenues of $245.18 million, and for the current fiscal year, the consensus EPS is $3.68 on revenues of $1.04 billion [7] - The trend of estimate revisions for Novanta is mixed, which could change following the recent earnings report [6] Industry Context - The Electronics - Miscellaneous Components industry, to which Novanta belongs, is currently ranked in the bottom 32% of over 250 Zacks industries, suggesting potential challenges ahead [8]