[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]

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]

Financial Data and Key Metrics Changes - In Q4 2024, the company 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 revenue 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, a 21% increase year over year, and $3.08 for the full year [45] Business Line Data and Key Metrics Changes - The medical market accounted for 55% of total sales in 2024, growing at a high single-digit rate, particularly in minimally invasive surgery and robotics [19] - Advanced industrial markets made up 45% of total sales, growing at a low double-digit rate despite challenges [20] - The automation enabling technologies segment saw a 9% year-over-year sales growth in Q4, while the medical solutions segment experienced a 17% reported revenue growth but a 4% organic decline [50][52] Market Data and Key Metrics Changes - Bookings grew 54% year over year in Q4 2024, driven by major OEM customers confirming new product launches for 2025 [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% [47][54] - The company noted a gradual return of growth in end markets, particularly in robotics and automation applications [16] Company Strategy and Development Direction - The company plans to launch 50% more new products in 2025 compared to 2024, aiming for $50 million in incremental new product revenue [15][38] - The focus remains on leveraging the Novanta growth system to drive operational excellence and margin expansion [36][63] - The company is prioritizing acquisitions aligned with its cash flow compounding strategy, with a robust pipeline of potential targets [27][125] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2025 despite market uncertainties, particularly in healthcare markets driven by strong patient procedure growth [14] - The geopolitical disruptions and market economic uncertainty are expected to impact capital spending in various sectors, but the company remains confident in its fundamentals [16][60] - Management highlighted the importance of adapting to changing market conditions and maintaining operational resilience [17] Other Important Information - The company has made significant organizational changes to better scale operations, appointing two co-COOs to lead different segments [29] - The Novanta Way culture is emphasized as a key differentiator in attracting and retaining talent [33] - The company aims to maintain a net leverage ratio below 1.4 times to ensure financial flexibility for acquisitions [46][126] Q&A Session Summary Question: Comments on DNA sequencing product lines and expected recovery - 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 focus on consumables in the advanced surgery business [88][92] Question: Clarification on EUV and DUV subsystem product orders - Management confirmed initial orders for an intelligent subsystem product, with revenue expected to ramp in the second half of the year [98][100] Question: Update on humanoid robotics orders - Management indicated that while the humanoid category is small, it is growing rapidly, with increasing demand for high-precision robotics [102][104] Question: Guidance on the cadence of the $50 million incremental revenue - Management expects a gradual increase in revenue contribution throughout the year, with significant growth anticipated in the second half [111][114] Question: Update on short-cycle business and semiconductor demand - Management reported sustained growth in short-cycle businesses, with positive signs of demand filling in for the first half of 2025 [116] Question: Comfort level around leverage for acquisitions - Management reiterated a disciplined approach to acquisitions, aiming to stay below three times leverage while pursuing meaningful opportunities [125][126]

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].