Novanta (US:NOVT)2020-05-12 18:52Financial Data and Key Metrics Changes - In Q1 2020, the company reported revenue of $155.5 million, representing a 1% year-over-year decline on a reported basis and a 4% decline on an organic basis [25][48] - Adjusted EBITDA was $28 million, down 2% compared to Q1 2019 [26][62] - The company achieved a book-to-bill ratio of 1.06, indicating strong bookings driven by customers securing inventories against COVID-19 disruptions [26] Business Line Data and Key Metrics Changes - Medical markets accounted for 58% of total revenue, growing 6% year-over-year, while industrial markets declined by 10% year-over-year [50][52] - The vision segment saw a 5% year-over-year revenue growth, with a book-to-bill ratio of 1.11 [35] - The precision motion segment experienced a 22% revenue decline, but bookings grew by 15% year-over-year [39] - The photonics segment revenue decreased by 7%, with bookings declining by 4% year-over-year [42][43] Market Data and Key Metrics Changes - Sales to China increased by 2% year-over-year, while sales to the U.S. and Europe decreased by 3% year-over-year [54] - The company noted a stable business in diagnostics and ICU markets, with a rapid uptake in PCR molecular testing [32][38] Company Strategy and Development Direction - The company aims to maintain business continuity and ensure employee safety during the pandemic, focusing on innovation and customer support [11][20] - The long-term growth drivers in robotics, automation, and healthcare productivity are expected to remain relevant post-pandemic [46] - The company is committed to pursuing M&A opportunities as a priority for capital allocation [46][105] Management's Comments on Operating Environment and Future Outlook - The management acknowledged the uncertainty in the operating environment due to COVID-19 but expressed confidence in the company's resilience and innovation pipeline [10][46] - The company expects revenue declines in Q2 and Q3, with a potential recovery in the medical business as elective procedures resume [72][76] - Management emphasized the importance of maintaining liquidity and cash flow during the economic downturn [67][88] Other Important Information - The company implemented cost control measures, including a reduction in executive compensation and a temporary halt to share repurchase programs [78][83] - The company has a strong liquidity position with $449 million available, including cash and unused credit facilities [67][87] Q&A Session Summary Question: What is the expected impact on gross margins due to product mix? - Management indicated that gross margins are expected to be impacted by COVID-related costs, which could significantly increase in the upcoming quarters [98][99] Question: Has the R&D budget changed? - The company plans to maintain a similar R&D budget, with a focus on priority programs that may shift based on market conditions [101][102] Question: What is the outlook for acquisitions in the current market? - Management believes that the current climate will create M&A opportunities, although activity may be limited in the first half of the year due to pandemic uncertainties [103][105] Question: How does the company view the recovery trajectory among its platforms? - Management expects medical consumables to recover first, followed by capital equipment as hospitals resume procedures [112][113] Question: What are the anticipated COVID-related costs in the upcoming quarters? - Management expects COVID-related costs to increase significantly in Q2, primarily affecting the cost of goods sold [125][126]