Novanta (US:NOVT)2022-11-12 17:19Financial Data and Key Metrics Changes - Novanta achieved record results in Q3 2022 with revenue of $223 million, representing a 25% year-over-year growth on a reported basis and 21% organic growth [9][10] - Adjusted EBITDA was $49 million, up 22% year-over-year, with adjusted diluted earnings per share of $0.81, an 8% increase compared to the previous year [10][26] - The company raised its full-year 2022 financial guidance due to strong year-to-date performance [10][34] Business Line Data and Key Metrics Changes - Advanced industrial markets saw a 33% year-over-year growth and 5% sequential growth, driven by demand in automation and robotics [13] - Medical applications grew 19% year-over-year and 6% sequentially, with strong orders in surgical robotics and minimally invasive surgery equipment [15] - The Photonics segment experienced a 28% year-over-year revenue growth, while the Vision segment grew 12% year-over-year [28][30] Market Data and Key Metrics Changes - Sales in Europe grew 15%, while the U.S. saw a 36% year-over-year increase [16] - China revenue grew 9% year-over-year, but excluding acquisitions, it was down double digits due to the microelectronics downturn [16] - The overall book-to-bill ratio for Novanta normalized to 0.91 in Q3, with a year-to-date book-to-bill of 1.12 [12] Company Strategy and Development Direction - Novanta is focused on medical and advanced industrial applications, capitalizing on long-term trends such as robotics and automation [11][22] - The company continues to invest in R&D, with a Vitality Index of about 25% of sales from new products launched in the last four years [17] - A recent acquisition of MPH Medical Devices aims to enhance manufacturing capacity and improve gross margins in the medical consumables segment [20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's resilience amid macroeconomic challenges, with a strong backlog of $626 million [11][12] - The company anticipates continued strength in medical applications, which are expected to offset weaknesses in microelectronics [33] - Management expects to exit 2022 with near-record backlog and accelerating demand trends in medical markets [34] Other Important Information - Adjusted gross profit for Q3 was $101.7 million, with a 46% adjusted gross margin, up from 45% in the previous year [24] - Operating cash flow was approximately $15 million, impacted by higher inventory purchases and accounts receivables [27] - The company expects gross margins in Q4 to exceed 46%, maintaining a target of 46% for the full year [36] Q&A Session Summary Question: Can you parse out the mix of consumables versus capital equipment in the Vision segment? - Both consumables and capital equipment had strong growth in Q3, but volatility may arise in Q4 due to labor shortages in hospital systems [43] Question: How do you view the current capacity of the new facility acquired? - The facility will require 2023 for production line transfers and qualification, with significant contributions expected in 2024 [47] Question: What is the expected impact of currency on Q4 revenue guidance? - Similar FX headwinds as experienced in Q3 are expected to be embedded in the Q4 guidance [48][51] Question: How is the Precision Motion segment expected to trend in Q4 and beyond? - The segment is expected to decline 8% to 10% in Q4 due to the Westwind product line, but Celera Motion and ATI businesses are expected to grow mid-single digits [63] Question: What is the outlook for the medical market in 2023? - The medical market is expected to grow collectively in 2023, offsetting weaknesses in microelectronics [56]