Novanta Announces Financial Results for the Second Quarter 2024

Rhea-AI Summary

Novanta Inc. (Nasdaq: NOVT) reported its Q2 2024 financial results, showing revenue growth of 2.8% to $235.9 million. The company's GAAP net income was $13.8 million, with diluted EPS of $0.38. Adjusted EBITDA reached $51.1 million, while adjusted diluted EPS was $0.73. Novanta's acquisition activities contributed 8.9% to revenue growth, offsetting a 5.3% decrease in organic revenue. The company generated strong operating cash flow of $41.1 million. For the full year 2024, Novanta expects GAAP revenue of approximately $975 million, representing over 10% growth, with adjusted EBITDA projected between $215-$222 million and adjusted diluted EPS of $3.20-$3.35.

Positive

• Revenue increased by 2.8% year-over-year to $235.9 million
• Acquisitions contributed 8.9% to revenue growth
• Operating cash flow improved to $41.1 million from $26.2 million in Q2 2023
• Full-year 2024 guidance projects over 10% revenue growth to $975 million
• Adjusted gross profit margin expected to be 46.6% to 47.0% for full-year 2024

Negative

• Organic Revenue Growth decreased by 5.3% year-over-year
• GAAP operating income decreased to $25.7 million from $32.2 million in Q2 2023
• GAAP net income declined to $13.8 million from $20.9 million in Q2 2023
• GAAP diluted EPS decreased to $0.38 from $0.58 in Q2 2023
• Adjusted Diluted EPS decreased to $0.73 from $0.80 in Q2 2023

Financial Analyst

Novanta's Q2 2024 results show a mixed picture. While revenue increased by 2.8% year-over-year to $235.9 million, GAAP net income decreased from $20.9 million to $13.8 million. The company's organic revenue growth was negative at -5.3%, indicating challenges in core business areas.

Despite these headwinds, Novanta maintained a strong adjusted EBITDA of $51.1 million, only slightly down from $51.7 million in Q2 2023. This suggests effective cost management. The company's operating cash flow improved significantly to $41.1 million, up from $26.2 million in the same quarter last year, demonstrating solid cash generation capabilities.

Looking ahead, Novanta's full-year 2024 guidance of $975 million in revenue represents over 10% growth, indicating confidence in future performance despite current market weaknesses in industrial and life sciences sectors. The projected adjusted EBITDA range of $215-222 million suggests continued profitability, albeit with potential pressure on margins.

Market Research Analyst

Novanta's Q2 results reflect broader market trends. The company's strength in medical device markets is offsetting weaknesses in industrial capital spending, particularly in Europe and China, as well as in life sciences and bioprocessing sectors. This diversification is proving important in maintaining overall growth.

The 8.9% revenue increase from acquisitions highlights Novanta's strategic growth initiatives. However, the -5.3% organic revenue decline underscores challenges in core markets. The company's focus on new product launches and anticipated strength in robotics and automation markets in H2 2024 could be key drivers for future growth.

Novanta's optimism for 2025, based on expected improvements in capital spending markets and accelerating growth from new products, suggests a potential turnaround. Investors should monitor the company's ability to capitalize on these opportunities while navigating current market headwinds.

Tech Industry Expert

Novanta's performance in Q2 2024 demonstrates resilience in a challenging tech landscape. The company's ability to maintain strong adjusted EBITDA despite organic revenue decline showcases effective operational management. The focus on innovative product launches is important for long-term competitiveness in the high-tech manufacturing sector.

The company's strength in medical device markets and anticipated growth in robotics and automation align with broader industry trends towards healthcare technology and industrial automation. These sectors are likely to see continued investment and innovation, potentially providing Novanta with growth opportunities.

However, the weakness in industrial capital spending, particularly in Europe and China, reflects broader economic uncertainties affecting the tech sector. Novanta's ability to navigate these challenges while positioning itself for an expected market improvement in 2025 will be critical. The company's strategic acquisitions and focus on new product development could provide a competitive edge in capitalizing on future market upturns.

• Second Quarter 2024 GAAP Revenue of $236 million
• Second Quarter 2024 GAAP Net Income of $13.8 million
• Second Quarter 2024 GAAP Diluted Earnings Per Share of $0.38
• Second Quarter 2024 Adjusted Earnings Per Share of $0.73
• Second Quarter 2024 Adjusted EBITDA of $51 million

BEDFORD, Mass.--(BUSINESS WIRE)-- Novanta Inc. (Nasdaq: NOVT) (“Novanta” or the “Company”), a trusted technology partner to medical and advanced technology equipment manufacturers, today reported financial results for the second quarter 2024.

Financial Highlights	Three Months Ended
(In millions, except per share amounts)	June 28,				June 30,
	2024				2023
GAAP
Revenue	$	235.9			$	229.5
Operating Income	$	25.7			$	32.2
Net Income	$	13.8			$	20.9
Diluted EPS	$	0.38			$	0.58
Non-GAAP*
Adjusted Operating Income	$	41.3			$	42.1
Adjusted Diluted EPS	$	0.73			$	0.80
Adjusted EBITDA	$	51.1			$	51.7

*Reconciliations of GAAP to non-GAAP financial measures, as well as definitions for the non-GAAP financial measures included in this press release and the reasons for their use, are presented below.

“Novanta delivered another quarter of outstanding operating results,” said Matthijs Glastra, Chair and Chief Executive Officer of Novanta. “In the Second Quarter, we beat expectations for sales, profit, and cash flow. For the quarter, we had $236 million in revenue, adjusted gross profit margin of 47%, adjusted EBITDA of $51 million, and operating cash flow of $41 million. These excellent results reflect the resilience and dedication of our team as they work to serve our customers, launch innovative new products, and deliver on our financial commitments.”

Second Quarter

During the second quarter of 2024, Novanta generated GAAP revenue of $235.9 million, an increase of $6.4 million, or 2.8%, versus the second quarter of 2023. The Company’s acquisition activities resulted in an increase in revenue of $20.3 million, or 8.9%, compared to the second quarter of 2023. Changes in foreign currency exchange rates year over year adversely impacted our revenue by $1.7 million, or 0.8%, during the second quarter of 2024. Our year-over-year Organic Revenue Growth, which excludes the net impact of acquisitions and changes in foreign currency exchange rates, was a decrease of 5.3% for the second quarter of 2024 (see “Organic Revenue Growth” in the non-GAAP reconciliations below).

In the second quarter of 2024, GAAP operating income was $25.7 million, compared to $32.2 million in the second quarter of 2023. GAAP net income was $13.8 million in the second quarter of 2024, compared to $20.9 million in the second quarter of 2023. GAAP diluted earnings per share (“EPS”) was $0.38 in the second quarter of 2024, compared to $0.58 in the second quarter of 2023.

Adjusted Diluted EPS was $0.73 in the second quarter of 2024, compared to $0.80 in the second quarter of 2023. Diluted weighted average shares outstanding was 36.1 million in the second quarter of 2024. Adjusted EBITDA was $51.1 million in the second quarter of 2024, compared to $51.7 million in the second quarter of 2023.

Operating cash flow for the second quarter of 2024 was $41.1 million, compared to $26.2 million for the second quarter of 2023.

Financial Guidance

“While industrial capital spending markets, particularly in Europe and China, and life sciences and bioprocessing capital spending markets remain particularly weak, Novanta’s new products continue to accelerate in adoption, our medical device end-markets remain strong, and robotics and automation markets are seeing strength in the second half,” said Matthijs Glastra. “We are positioned well for an improving capital spending market in 2025, and accelerating growth from new product launches, improving our confidence in 2025 and our long-term outlook.”

For the full year 2024, the Company expects GAAP revenue of approximately $975 million, representing reported revenue growth of greater than 10%. The Company expects Adjusted Gross Profit Margin to be approximately 46.6% to 47.0%. The Company expects Adjusted EBITDA to be in the range of $215 million to $222 million and Adjusted Diluted EPS to be in the range of $3.20 to $3.35. The Company’s guidance assumes no significant changes in foreign exchange rates.

For the third quarter of 2024, the Company expects GAAP revenue of approximately $241 million to $244 million. The Company expects Adjusted Gross Profit Margin to be approximately 47.0% to 47.5%. The Company expects Adjusted EBITDA to be in the range of $56 million to $58 million and Adjusted Diluted EPS to be in the range of $0.85 to $0.89. The Company’s guidance assumes no significant changes in foreign exchange rates.

Novanta provides earnings guidance on a non-GAAP basis and does not provide earnings guidance on a GAAP basis, with the exception of GAAP revenue guidance. A reconciliation of the Company’s forward-looking Adjusted Gross Profit Margin, Adjusted EBITDA and Adjusted Diluted EPS guidance to the most directly comparable GAAP financial measures is not provided because of the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations, including acquisitions and related expenses; impact of purchase price allocations for recently completed acquisitions; future changes in the fair value of contingent considerations; future restructuring expenses; foreign exchange gains/(losses); significant discrete income tax expenses (benefits); benefits or expenses associated with the completion of tax audits; divestitures and related expenses; gains and losses from sale of real estate assets; costs related to product line closures; intangible asset impairment charges and related asset write-offs; and other charges reflected in the Company’s reconciliation of historical non-GAAP financial measures, the amounts of which, based on past experience, could be material. For additional information regarding Novanta’s non-GAAP financial measures, see “Use of Non-GAAP Financial Measures” below.

Conference Call Information

The Company will host a conference call on Tuesday, August 6, 2024 at 10:00 a.m. ET to discuss these results and to provide a business update. To access the call, please dial (888) 346-3959 prior to the scheduled conference call time. Alternatively, the conference call can be accessed online via a live webcast on the Events & Presentations page of the Investors section of the Company’s website at www.novanta.com.

A replay of the audio webcast will be available approximately three hours after the conclusion of the call in the Investor Relations section of the Company’s website at www.novanta.com. The replay will remain available until Monday, September 30, 2024.

Use of Non-GAAP Financial Measures

The non-GAAP financial measures used in this press release are Organic Revenue Growth, Adjusted Gross Profit, Adjusted Gross Profit Margin, Adjusted Operating Income, Adjusted Operating Margin, Adjusted Income Before Income Taxes, Adjusted Income Tax Provision/(Benefit) and Effective Tax Rate, Adjusted Net Income, Adjusted Diluted EPS, Adjusted EBITDA, Adjusted EBITDA Margin, Free Cash Flow, Free Cash Flow as a Percentage of Net Income, and Net Debt.

The Company believes that these non-GAAP financial measures provide useful and supplementary information to investors regarding the operating performance of the Company. It is management’s belief that these non-GAAP financial measures would be particularly useful to investors because of the significant changes that have occurred outside of the Company’s day-to-day business in accordance with the execution of the Company’s strategy. This strategy includes streamlining the Company’s existing operations through site and functional consolidations, strategic divestitures and product line closures, expanding the Company’s business through significant internal investments, and broadening the Company’s product and service offerings through acquisitions of innovative and complementary technologies and solutions. The financial impact of certain elements of these activities, particularly acquisitions, divestitures, and site and functional restructurings, is often large relative to the Company’s overall financial performance and can adversely affect the comparability of its operating results and investors’ ability to analyze the business from period to period.

The Company’s Adjusted EBITDA, Organic Revenue Growth and Adjusted Gross Profit Margin are used by management to evaluate operating performance, communicate financial results to the Board of Directors, benchmark results against historical performance and the performance of peers, and evaluate investment opportunities, including acquisitions and divestitures. In addition, Adjusted EBITDA, Organic Revenue Growth and Adjusted Gross Profit Margin are used to determine bonus payments for senior management and employees. The Company has also used in the past, and may use in the future, Adjusted Diluted EPS and Adjusted EBITDA as performance targets for certain performance-based restricted stock units. Accordingly, the Company believes that these non-GAAP financial measures provide greater transparency and insight into management’s method of analysis.

Non-GAAP financial measures should not be considered as substitutes for, or superior to, measures of financial performance prepared in accordance with GAAP. They are limited in value because they exclude charges that have a material effect on the Company’s reported results and, therefore, should not be relied upon as the sole financial measures to evaluate the Company’s financial results. The non-GAAP financial measures are meant to supplement, and to be viewed in conjunction with, GAAP financial measures. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures as provided in the tables accompanying this press release.

Safe Harbor and Forward-Looking Information

Certain statements in this release are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and are based on current expectations and assumptions that are subject to risks and uncertainties. All statements contained in this news release that do not relate to matters of historical fact should be considered forward-looking statements, and are generally identified by words such as “expect,” “intend,” “anticipate,” “estimate,” “believe,” “future,” “could,” “should,” “plan,” “aim,” and other similar expressions. These forward-looking statements include, but are not limited to, statements regarding anticipated financial performance and financial position, including our financial outlook for the full year 2024 and third quarter of 2024; expectations for our end markets and market position; our competitive position, including our positioning for long-term growth, capital spending and growth from new product launches; and other statements that are not historical facts.

These forward-looking statements are neither promises nor guarantees, but involve risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including, but not limited to, the following: economic and political conditions and the effects of these conditions on our customers’ businesses, capital expenditures and level of business activities; risks associated with epidemics, pandemics or other public health crises; our dependence upon our ability to respond to fluctuations in product demand; our ability to continuously innovate, to introduce new products in a timely manner, and to manage transitions to new product innovations effectively; customer order timing and other similar factors; disruptions or breaches in security of our or our third-party providers’ information technology systems; risks associated with our operations in foreign countries; our increased use of outsourcing in foreign countries; risks associated with increased outsourcing of components manufacturing; our exposure to increased tariffs, trade restrictions or taxes on our products; violations of our intellectual property rights and our ability to protect our intellectual property against infringement by third parties; risk of losing our competitive advantage; our failure to successfully integrate recent and future acquisitions into our business; our ability to attract and retain key personnel; our restructuring and realignment activities; product defects or problems integrating our products with other vendors’ products; disruptions in the supply of certain key components and other goods from our suppliers; our failure to accurately forecast component and raw material requirements leading to additional costs and significant delays in shipments; production difficulties and product delivery delays or disruptions; our exposure to extensive medical device regulations, which may impede or hinder the approval, certification or sale of our products and, in some cases, may ultimately result in an inability to obtain approval or certification of certain products or may result in the recall or seizure of previously approved or certified products; potential penalties for violating foreign and U.S. federal and state healthcare laws and regulations; impact of healthcare industry cost containment and healthcare reform measures; changes in governmental regulations related to our business or products; actual or perceived failures to comply with applicable data protection, privacy and security laws, regulations, standards, and other requirements; our failure to implement new information technology systems successfully; changes in foreign currency rates; our failure to realize the full value of our intangible assets; our reliance on original equipment manufacturer customers; increasing scrutiny and changing expectations from investors, customers, governments and other stakeholders and third parties with respect to corporate sustainability policies and practices; the effects of climate change and related regulatory responses; our exposure to the credit risk of some of our customers and in weakened markets; being subject to U.S. federal income taxation even though we are a non-U.S. corporation; changes in tax laws and fluctuations in our effective tax rates; any need for additional capital to adequately respond to business challenges or opportunities and repay or refinance our existing indebtedness, which may not be available on acceptable terms or at all; our existing indebtedness limiting our ability to engage in certain activities; volatility in the market price for our common shares; and our failure to maintain appropriate internal controls in the future.

Other important risk factors that could affect the outcome of the events set forth in these statements and that could affect the Company’s operating results and financial condition are discussed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as updated by our subsequent filings with the Securities and Exchange Commission. Such statements are based on the Company’s beliefs and assumptions and on information currently available to the Company. The Company disclaims any obligation to publicly update or revise any such forward-looking statements as a result of developments occurring after the date of this document except as required by law.

About Novanta

Novanta is a leading global supplier of core technology solutions that give medical and advanced industrial original equipment manufacturers a competitive advantage. We combine deep proprietary technology expertise and competencies in precision medicine and manufacturing, medical solutions, and robotics and automation with a proven ability to solve complex technical challenges. This enables Novanta to engineer core components and sub-systems that deliver extreme precision and performance, tailored to our customers' demanding applications. The driving force behind our growth is the team of innovative professionals who share a commitment to innovation and customer success. Novanta’s common shares are quoted on Nasdaq under the ticker symbol “NOVT.”

More information about Novanta is available on the Company’s website at www.novanta.com. For additional information, please contact Novanta Investor Relations at (781) 266-5137 or InvestorRelations@novanta.com.

NOVANTA INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of U.S. dollars or shares, except per share amounts)
(Unaudited)
	Three Months Ended
	June 28,				June 30,
	2024				2023
Revenue	$	235,864			$	229,464
Cost of revenue		132,175				125,341
Gross profit		103,689				104,123
Operating expenses:
Research and development and engineering		23,731				23,380
Selling, general and administrative		44,793				42,187
Amortization of purchased intangible assets		6,907				5,124
Restructuring, acquisition, and related costs		2,543				1,234
Total operating expenses		77,974				71,925
Operating income		25,715				32,198
Interest income (expense), net		(8,266	)			(6,810	)
Foreign exchange transaction gains (losses), net		(264	)			74
Other income (expense), net		(55	)			(191	)
Income before income taxes		17,130				25,271
Income tax provision (benefit)		3,375				4,392
Net income	$	13,755			$	20,879
Earnings per common share:
Basic	$	0.38			$	0.58
Diluted	$	0.38			$	0.58
Weighted average common shares outstanding—basic		35,946				35,851
Weighted average common shares outstanding—diluted		36,092				36,032

NOVANTA INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars)
(Unaudited)
	June 28,				December 31,
	2024				2023
ASSETS
Current Assets
Cash and cash equivalents	$	98,468			$	105,051
Accounts receivable, net		145,025				139,410
Inventories		160,042				149,371
Prepaid expenses and other current assets		21,256				21,465
Total current assets		424,791				415,297
Property, plant and equipment, net		114,758				109,449
Operating lease assets		43,641				38,302
Intangible assets, net		206,938				145,022
Goodwill		587,028				484,507
Other assets		21,418				33,479
Total assets	$	1,398,574			$	1,226,056
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Current portion of long-term debt	$	4,813			$	4,968
Accounts payable		71,044				57,195
Accrued expenses and other current liabilities		77,613				77,012
Total current liabilities		153,470				139,175
Long-term debt		477,113				349,404
Operating lease liabilities		41,279				37,345
Other long-term liabilities		24,720				26,672
Total liabilities		696,582				552,596
Stockholders’ Equity:
Total stockholders’ equity		701,992				673,460
Total liabilities and stockholders’ equity	$	1,398,574			$	1,226,056

NOVANTA INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
(Unaudited)
	Three Months Ended
	June 28,				June 30,
	2024				2023
Cash flows from operating activities:
Net income	$	13,755			$	20,879
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		14,116				11,937
Share-based compensation		6,231				5,875
Deferred income taxes		(4,000	)			(3,970	)
Other		4,869				2,085
Changes in assets and liabilities which (used)/provided cash, excluding effects from business acquisitions:
Accounts receivable		5,385				(3,644	)
Inventories		(2,805	)			1,125
Other operating assets and liabilities		3,544				(8,090	)
Net cash provided by (used in) operating activities		41,095				26,197
Cash flows from investing activities:
Purchases of property, plant and equipment		(4,937	)			(3,326	)
Net cash provided by (used in) investing activities		(4,937	)			(3,326	)
Cash flows from financing activities:
Repayments under term loan and revolving credit facilities		(31,368	)			(15,189	)
Payments of withholding taxes from share-based awards		(476	)			(407	)
Other financing activities		(179	)			(157	)
Net cash provided by (used in) financing activities		(32,023	)			(15,753	)
Effect of exchange rates on cash and cash equivalents		813				1,536
Increase (decrease) in cash and cash equivalents		4,948				8,654
Cash and cash equivalents, beginning of period		93,520				82,676
Cash and cash equivalents, end of period	$	98,468			$	91,330

NOVANTA INC.
Revenue by Reportable Segment
(In thousands of U.S. dollars)
(Unaudited)
	Three Months Ended
	June 28,				June 30,
	2024				2023
Revenue
Precision Medicine and Manufacturing	$	63,952			$	74,333
Medical Solutions		104,525				83,322
Robotics and Automation		67,387				71,809
Total	$	235,864			$	229,464

NOVANTA INC.
Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands of U.S. dollars)
(Unaudited)
Adjusted Gross Profit and Adjusted Gross Profit Margin by Reportable Segment (Non-GAAP):
	Three Months Ended
	June 28,				June 30,
	2024				2023
Precision Medicine and Manufacturing
Gross Profit (GAAP)	$	30,580			$	36,513
Gross Profit Margin (GAAP)		47.8	%			49.1	%
Amortization of intangible assets		491				582
Inventory related charges associated with a product line closure		—				473
Adjusted Gross Profit (Non-GAAP)	$	31,071			$	37,568
Adjusted Gross Profit Margin (Non-GAAP)		48.6	%			50.5	%
Medical Solutions
Gross Profit (GAAP)	$	40,364			$	34,257
Gross Profit Margin (GAAP)		38.6	%			41.1	%
Amortization of intangible assets		1,961				1,070
Inventory related charges associated with a product line closure		2,493				—
Adjusted Gross Profit (Non-GAAP)	$	44,818			$	35,327
Adjusted Gross Profit Margin (Non-GAAP)		42.9	%			42.4	%
Robotics and Automation
Gross Profit (GAAP)	$	33,388			$	34,909
Gross Profit Margin (GAAP)		49.5	%			48.6	%
Amortization of intangible assets		1,233				1,394
Adjusted Gross Profit (Non-GAAP)	$	34,621			$	36,303
Adjusted Gross Profit Margin (Non-GAAP)		51.4	%			50.6	%
Unallocated Corporate and Shared Services
Gross Profit (GAAP)	$	(643	)		$	(1,556	)
Adjusted Gross Profit (Non-GAAP)	$	(643	)		$	(1,556	)
Novanta Inc.
Gross Profit (GAAP)	$	103,689			$	104,123
Gross Profit Margin (GAAP)		44.0	%			45.4	%
Amortization of intangible assets		3,685				3,046
Inventory related charges associated with a product line closure		2,493				473
Adjusted Gross Profit (Non-GAAP)	$	109,867			$	107,642
Adjusted Gross Profit Margin (Non-GAAP)		46.6	%			46.9	%

NOVANTA INC.
Reconciliation of GAAP to Non-GAAP Financial Measures
(Amounts in thousands except per share amounts)
(Unaudited)
Adjusted Operating Income and Adjusted Diluted EPS (Non-GAAP):
	Three Months Ended June 28, 2024
	Operating Income				Operating Margin				Income Before Income Taxes				Income Tax Provision / (Benefit)				Effective Tax Rate				Net Income				Diluted EPS
GAAP results	$	25,715				10.9	%		$	17,130			$	3,375				19.7	%		$	13,755			$	0.38
Non-GAAP Adjustments:
Amortization of intangible assets		10,592				4.5	%			10,592
Restructuring costs		2,523				1.1	%			2,523
Acquisition and related costs		20				0.0	%			20
Inventory related charges associated with a product line closure		2,493				1.0	%			2,493
Foreign exchange transaction (gains) losses, net										264
Tax effect of non-GAAP adjustments														3,228
Non-GAAP tax adjustments														(48	)
Total non-GAAP adjustments		15,628				6.6	%			15,892				3,180								12,712				0.35
Adjusted results (Non-GAAP)	$	41,343				17.5	%		$	33,022			$	6,555				19.9	%		$	26,467			$	0.73
Weighted average shares outstanding - Diluted																										36,092

NOVANTA INC.
Reconciliation of GAAP to Non-GAAP Financial Measures
(Amounts in thousands except per share amounts)
(Unaudited)
Adjusted Operating Income and Adjusted Diluted EPS (Non-GAAP):
	Three Months Ended June 30, 2023
	Operating Income				Operating Margin				Income Before Income Taxes				Income Tax Provision / (Benefit)				Effective Tax Rate				Net Income				Diluted EPS
GAAP results	$	32,198				14.0	%		$	25,271			$	4,392				17.4	%		$	20,879			$	0.58
Non-GAAP Adjustments:
Amortization of intangible assets		8,170				3.6	%			8,170
Restructuring costs		1,136				0.5	%			1,136
Acquisition and related costs		98				0.0	%			98
Inventory related charges associated with a product line closure		473				0.2	%			473
Foreign exchange transaction (gains) losses, net										(74	)
Tax effect of non-GAAP adjustments														2,092
Non-GAAP tax adjustments														(149	)
Total non-GAAP adjustments		9,877				4.3	%			9,803				1,943								7,860				0.22
Adjusted results (Non-GAAP)	$	42,075				18.3	%		$	35,074			$	6,335				18.1	%		$	28,739			$	0.80
Weighted average shares outstanding - Diluted																										36,032

NOVANTA INC.
Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands of U.S. dollars)
(Unaudited)
Adjusted EBITDA (Non-GAAP):
	Three Months Ended
	June 28,				June 30,
	2024				2023
Net Income (GAAP)	$	13,755			$	20,879
Net Income Margin		5.8	%			9.1	%
Interest (income) expense, net		8,266				6,810
Income tax provision (benefit)		3,375				4,392
Depreciation and amortization		14,116				11,937
Share-based compensation		6,231				5,875
Restructuring, acquisition and related costs		2,548				1,234
Inventory related charges associated with a product line closure		2,493				473
Other, net		319				117
Adjusted EBITDA (Non-GAAP)	$	51,103			$	51,717
Adjusted EBITDA Margin (Non-GAAP)		21.7	%			22.5	%

Organic Revenue Growth (Non-GAAP):
	Three Months Ended June 28, 2024
	Compared to
	Three Months Ended June 30, 2023
Reported Revenue Growth/(Decline) (GAAP)		2.8	%
Less: Change attributable to acquisitions		8.9	%
Plus: Change due to foreign currency		0.8	%
Organic Revenue Growth/(Decline) (Non-GAAP)		(5.3	)%

Net Debt (Non-GAAP):
	June 28,				December 31,
	2024				2023
Total Debt (GAAP)	$	481,926			$	354,372
Plus: Deferred financing costs		3,099				3,681
Gross Debt		485,025				358,053
Less: Cash and cash equivalents		(98,468	)			(105,051	)
Net Debt (Non-GAAP)	$	386,557			$	253,002

Free Cash Flow (Non-GAAP):
	Three Months Ended
	June 28,				June 30,
	2024				2023
Net Cash Provided by Operating Activities (GAAP)	$	41,095			$	26,197
Less: Purchases of property, plant and equipment		(4,937	)			(3,326	)
Free Cash Flow (Non-GAAP)	$	36,158			$	22,871
Net Income (GAAP)	$	13,755			$	20,879
Net Cash Provided by Operating Activities as a Percentage of Net Income		298.8	%			125.5	%
Free Cash Flow as a Percentage of Net Income		262.9	%			109.5	%

Non-GAAP Financial Measures

The following provides additional explanations for non-GAAP financial measures used by the Company, including explanations for certain non-GAAP adjustments that may not be present in the quarterly disclosures included in the current earnings release but have been used by the Company in the two most recent fiscal years. See the tables above for the calculations of the non-GAAP financial measures used in this earnings release.

Organic Revenue Growth

The Company defines the term “organic revenue” as revenue excluding the impact from business acquisitions, divestitures, product line discontinuations, and the effect of foreign currency translation. The Company uses the related term “organic revenue growth” to refer to the financial performance metric of comparing current period organic revenue with the reported revenue of the corresponding period in the prior year. The Company believes that this non-GAAP financial measure, when taken together with our GAAP financial measures, allows the Company and its investors to better measure the Company’s performance and evaluate long-term performance trends. Organic revenue growth also facilitates easier comparisons of the Company’s performance with prior and future periods and relative comparisons to its peers. The Company excludes the effect of foreign currency translation from these measures because foreign currency translation is subject to volatility and can obscure underlying business trends. The Company excludes the effect of acquisitions and divestitures because these activities can vary dramatically between reporting periods and between the Company and its peers, which the Company believes makes comparisons of long-term performance trends difficult for management and investors. Organic Revenue Growth is also used as a performance metric to determine bonus payments for senior management and employees.

Adjusted Gross Profit and Adjusted Gross Profit Margin

The calculation of Adjusted Gross Profit and Adjusted Gross Profit Margin excludes amortization of acquired intangible assets, inventory fair value adjustments related to business acquisitions, and inventory related charges associated with product line closures because: (i) the amounts are non-cash; (ii) the Company cannot influence the timing and amount of future expense recognition; and (iii) excluding such expenses provides investors and management better visibility into the underlying trends and performance of our businesses. The Company also excludes inventory related charges associated with product line closures as these costs occurred outside of the Company’s day-to-day business for the reasons described above in the introductory paragraphs of the “Use of Non-GAAP Financial Measures.”

Adjusted Operating Income and Adjusted Operating Margin

The calculation of Adjusted Operating Income and Adjusted Operating Margin excludes amortization of acquired intangible assets, amortization of inventory fair value adjustments related to business acquisitions, and inventory related charges associated with product line closures for the reasons described above for Adjusted Gross Profit and Adjusted Gross Profit Margin. The Company also excludes restructuring and acquisition-related costs due to the significant changes that have occurred outside of the Company’s day-to-day business for the reasons described above in the introductory paragraphs of the “Use of Non-GAAP Financial Measures.”

Adjusted Income Before Income Taxes

The calculation of Adjusted Income Before Income Taxes excludes amortization of acquired intangible assets, amortization of inventory fair value adjustments related to business acquisitions, inventory related charges associated with product line closures, and restructuring and acquisition-related costs for the reasons described above for Adjusted Operating Income and Adjusted Operating Margin. The Company also excludes foreign exchange transaction gains (losses) from the calculation of Adjusted Income Before Income Taxes as the Company cannot fully influence the timing and amount of foreign exchange transaction gains (losses).

Non-GAAP Income Tax Provision/(Benefit) and Effective Tax Rate

Non-GAAP Income Tax Provision/(Benefit) and Effective Tax Rate are calculated based on the Adjusted Income Before Income Taxes by jurisdiction, the applicable tax rates in effect for the respective jurisdictions and the income tax effect of non-GAAP adjustments discussed above. In addition, the Company excludes significant discrete income tax expenses (benefits) related to releases of valuation allowances and uncertain tax positions, tax audits, certain changes in tax laws, and acquisition related tax planning actions on the Company’s effective tax rate.

Adjusted Net Income

Because Income Before Income Taxes is included in determining Net Income, the calculation of Adjusted Net Income also excludes amortization of acquired intangible assets, amortization of inventory fair value adjustments related to business acquisitions, inventory related charges associated with product line closures, restructuring costs, acquisition-related costs, and foreign exchange transaction gains (losses) for the reasons described above for Adjusted Income Before Income Taxes. In addition, the Company excludes (i) significant discrete income tax expenses (benefits) related to releases of valuation allowances and uncertain tax positions, tax audits or amendments to prior year returns, certain changes in tax laws, and acquisition related tax planning actions on the Company’s effective tax rate; and (ii) the income tax effect of non-GAAP adjustments discussed above.

Adjusted Diluted EPS

Because Net Income is used in the calculation of Diluted EPS, Adjusted Diluted EPS excludes: (i) amortization of acquired intangible assets; (ii) amortization of inventory fair value adjustments related to business acquisitions; (iii) inventory related charges associated with product line closures; (iv) restructuring, acquisition and related costs; (v) foreign exchange transaction gains (losses); (vi) significant discrete income tax expenses (benefits) related to releases of valuation allowances, uncertain tax positions, tax audits or amendments to prior year returns, certain changes in tax laws, and acquisition related tax planning actions on the Company’s effective tax rate; and (vii) the income tax effect of non-GAAP adjustments for the reasons described above for Adjusted Net Income.

Adjusted EBITDA and Adjusted EBITDA Margin

The Company defines Adjusted EBITDA as income before deducting interest (income) expense, income tax provision (benefit), depreciation, amortization, non-cash share-based compensation, restructuring, acquisition and related costs, acquisition fair value adjustments, inventory related charges associated with product line closures, other non-operating (income) expense items, including foreign exchange transaction (gains) losses and net periodic pension costs of the Company’s frozen U.K. defined benefit pension plan for the reasons described above in the introductory paragraphs of the “Use of Non-GAAP Financial Measures.”

Adjusted EBITDA Margin is defined as Adjusted EBITDA as a percentage of Revenue.

In evaluating Adjusted EBITDA and Adjusted EBITDA Margin, you should be aware that in the future the Company may incur expenses that are the same as, or similar to, some of the adjustments in this presentation.

Free Cash Flow and Free Cash Flow as a Percentage of Net Income

The Company defines Free Cash Flow as net cash provided by operating activities less cash paid for purchases of property, plant and equipment and plus cash proceeds from sales of property, plant and equipment. Free Cash Flow as a Percentage of Net Income is defined as Free Cash Flow divided by Net Income. Management believes these non-GAAP financial measures are important indicators of the Company’s liquidity as well as its ability to service its outstanding debt and to fund future growth.

Net Debt

The Company defines Net Debt as its total debt as reported on the consolidated balance sheet plus unamortized deferred financing costs and less its cash and cash equivalents as of the end of the period presented. Management uses Net Debt to monitor the Company’s outstanding debt obligations that could not be satisfied by its cash and cash equivalents on hand.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240806124276/en/

Novanta Inc.

Investor Relations Contact:

Ray Nash

(781) 266-5137

Source: Novanta Inc.

FAQ

What was Novanta's (NOVT) revenue for Q2 2024?

Novanta's revenue for Q2 2024 was $235.9 million, representing a 2.8% increase from Q2 2023.

How did Novanta's (NOVT) GAAP diluted EPS change in Q2 2024 compared to Q2 2023?

Novanta's GAAP diluted EPS decreased to $0.38 in Q2 2024 from $0.58 in Q2 2023.

What is Novanta's (NOVT) full-year 2024 revenue guidance?

Novanta expects full-year 2024 GAAP revenue of approximately $975 million, representing over 10% growth.

How much did acquisitions contribute to Novanta's (NOVT) revenue growth in Q2 2024?

Novanta's acquisition activities contributed 8.9% to revenue growth in Q2 2024 compared to Q2 2023.

What was Novanta's (NOVT) operating cash flow in Q2 2024?

Novanta's operating cash flow for Q2 2024 was $41.1 million, compared to $26.2 million in Q2 2023.