- Second Quarter 2016 GAAP Revenue of $97.7 million
- Second Quarter 2016 GAAP Net Income of $4.9 million
- Second Quarter 2016 GAAP Earnings Per Share of $0.14
- Second Quarter 2016 Adjusted Earnings Per Share of $0.27
- Second Quarter 2016 Adjusted EBITDA of $17.3 million
Novanta Inc. (NASDAQ: NOVT) (the "Company", "we", "our", "Novanta"), a
global leader and supplier of laser, precision motion, and vision
technologies to original equipment manufacturers in the medical and
advanced industrial markets, today reported financial results for the
second quarter of 2016.
Financial Highlights
|
|
Three Months Ended
|
(In millions, except per share amounts)
|
|
July 1,
|
|
|
July 3,
|
|
|
2016
|
|
|
2015
|
GAAP
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
97.7
|
|
|
$
|
96.5
|
Operating income from continuing operations
|
|
$
|
7.6
|
|
|
$
|
10.3
|
Consolidated net income
|
|
$
|
4.9
|
|
|
$
|
19.5
|
Diluted EPS from continuing operations
|
|
$
|
0.14
|
|
|
$
|
0.56
|
Non-GAAP*
|
|
|
|
|
|
|
|
Adjusted Revenue
|
|
$
|
97.7
|
|
|
$
|
96.5
|
Adjusted operating income from continuing operations
|
|
$
|
14.3
|
|
|
$
|
13.8
|
Adjusted EPS
|
|
$
|
0.27
|
|
|
$
|
0.20
|
Adjusted EBITDA
|
|
$
|
17.3
|
|
|
$
|
16.3
|
|
*Reconciliations of GAAP to non-GAAP financial measures, as well as
definitions for the non-GAAP financial measures in this press
release and the reasons for their use, are presented below.
|
Second Quarter of 2016
"We delivered strong operating results in the second quarter, exceeding
our own expectations across the board. We continue to deliver
innovative technology to OEM customers and capture design wins in
attractive growth applications. We delivered substantial profit
improvement from the first quarter despite sluggish capital spending
markets in some of our industrial end markets. We continue to drive our
commercial growth and productivity engines to further improve operating
results and position ourselves for sustainable growth," said John Roush,
Chief Executive Officer.
During the second quarter of 2016, Novanta generated GAAP revenue
of $97.7 million, an increase of 1.3% from $96.5 million in the second
quarter of 2015.
In the second quarter of 2016, GAAP operating income from continuing
operations was $7.6 million, compared to $10.3 million in the second
quarter of 2015. Adjusted operating income from continuing operations
was $14.3 million in the second quarter of 2016, compared to $13.8
million in the second quarter of 2015.
GAAP Diluted EPS from continuing operations was $0.14 in the second
quarter of 2016, compared to $0.56 in the second quarter of 2015. The
second quarter of 2015 included a $19.6 million pre-tax gain from the
sale of JK Lasers. Adjusted EPS was $0.27 in the second quarter of 2016,
compared to $0.20 in the second quarter of 2015. The Company ended the
second quarter of 2016 with 34.9 million weighted average diluted common
shares outstanding. GAAP consolidated net income was $4.9 million in
the second quarter of 2016, compared to $19.5 million in the second
quarter of 2015. Adjusted EBITDA was $17.3 million in the second
quarter of 2016, compared to $16.3 million in the second quarter of
2015.
As of July 1, 2016, cash and cash equivalents were $60.5 million. The
Company completed the second quarter of 2016 with approximately $86.5
million of total debt, and $29.5 million of Net Debt, as defined in the
non-GAAP reconciliation below. Operating cash flow from continuing
operations for the second quarter of 2016 was $15.5 million, compared
with $8.5 million in the second quarter of 2015.
Financial Outlook
For the third quarter of 2016, the Company expects GAAP revenue of
approximately $97 million to $98 million and Adjusted EBITDA of
approximately $17 million to $18 million. Additionally, the Company
expects Adjusted EPS to be in the range of $0.26 to $0.29. This
compares to Adjusted EPS of $0.24 in the third quarter of 2015.
"We are pleased with the second quarter operating results, which gives
us further confidence that we are well positioned to deliver on our full
year financial commitments and advance our strategic objectives. In
addition, our strong first half operating cash flows combined with our
recently amended and restated credit agreement give us a strong capital
position to pursue our acquisition strategy," said Robert Buckley, Chief
Financial Officer.
Novanta provides earnings guidance on a non-GAAP basis and does not
provide earnings guidance on a GAAP basis. A reconciliation of the
Company's forward-looking adjusted EBITDA and adjusted diluted earnings
per share 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 adjustments that could be made for
significant discrete income tax expenses (benefits); divestiture and
acquisition-related expenses, gains and losses from sale of real estate
assets; costs related to product line closures; future changes in the
fair value of contingent considerations; intangible asset impairment
charges and related asset write-offs; future restructuring expenses;
foreign exchange gains / (losses) on proceeds from divestitures;
benefits or expenses associated with the completion of tax audits; and
other charges reflected in our 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 2,
2016 at 5:00 p.m. ET to discuss these results. John A. Roush, Chief
Executive Officer, Matthijs Glastra, Chief Operating Officer, and Robert
Buckley, Chief Financial Officer, will host the conference call.
To access the call, please dial (877) 482-5124 prior to the scheduled
conference call time. The conference ID number is 19313633.
A playback of this conference call will be available beginning 8:00 p.m.
ET, Tuesday, August 2, 2016. The playback phone number is (855) 859-2056
or (404) 537-3406 and the code number is 19313633. The playback will
remain available until 11:00 p.m. ET, Tuesday, August 23, 2016.
A replay of the audio webcast will be available approximately three
hours after the conclusion of the call on the Investor Relations section
of the Company's website at www.novanta.com.
Use of Non-GAAP Financial Measures
The non-GAAP financial measures used in this press release are Organic
Revenue, Adjusted Revenue, Adjusted Gross Profit, Adjusted Gross Profit
Margin, Adjusted Operating Income from Continuing Operations, Adjusted
Operating Margin, Adjusted Income from Continuing Operations before
Income Taxes, Adjusted Income from Continuing Operations, net of tax,
Adjusted Diluted EPS from Continuing Operations, Adjusted EBITDA, and
Net Debt.
The Company believes that the non-GAAP financial measures provide useful
and supplementary information to investors regarding the Company's
operating performance. 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 acquisition 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 is 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 is used to
determine bonus payments for senior management and employees.
Accordingly, the Company believes that this non-GAAP measure provides
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 delivering sustainable growth; our
strong capital position enabling us to pursue our acquisition strategy;
anticipated financial performance; business prospects; market
conditions; second quarter operating results giving us further
confidence that we are well positioned to deliver on our full year
commitments and furthering our strategic objectives; 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 and level of business activity; our significant dependence
upon our customers' capital expenditures, which are subject to cyclical
market fluctuations; our dependence upon our ability to respond to
fluctuations in product demand; our ability to continually innovate and
successfully commercialize our innovations; failure to introduce new
products in a timely manner; customer order timing and other similar
factors beyond our control; disruptions or breaches in security of our
information technology systems; changes in interest rates, credit
ratings or foreign currency exchange rates; risk associated with our
operations in foreign countries; our failure to comply with local import
and export regulations in the jurisdictions in which we operate;
negative effect on global economic conditions, financial markets and our
business as a result of the potential United Kingdom's withdrawal from
the European Union; our reliance on third party distribution channels;
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 businesses; our
ability to make divestitures that provide business benefits; our ability
to attract and retain key personnel; our restructuring and realignment
activities and disruptions to our operations as a result of
consolidation of our operations; product defects or problems integrating
our products with other vendors' products; disruptions in the supply of
certain key components or other goods from our suppliers; production
difficulties and product delivery delays or disruptions; our compliance,
or our failure to comply, with various federal, state and foreign
regulations; changes in governmental regulation of our businesses or
products; effects of conflict minerals regulations; our failure to
comply with environmental regulations; our failure to implement new
information technology systems and software successfully; our failure to
realize the full value of our intangible assets; our
exposure to the credit risk of some of our customers and in weakened
markets; changes in tax laws, and fluctuations in our effective tax
rates; being subject to U.S. federal income taxation even though we are
a non-U.S. corporation; 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; volatility in the market price for our common shares;
our ability to access cash and other assets of our subsidiaries; the
influence over our business of certain significant shareholders;
provisions of our articles of incorporation may delay or prevent a
change in control; our significant existing indebtedness may limit our
ability to engage in certain activities; 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 Item 1A of
our Annual Report on Form 10-K for the fiscal year ended December 31,
2015, our subsequent filings with the Securities and Exchange Commission
("SEC"), and in our future filings with the SEC. 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 update any 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 advanced industrial and healthcare OEMs a competitive advantage. We
combine deep expertise at the intersection of photonics and motion 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. We deliver highly engineered laser, vision and precision
motion solutions to customers around the world. 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 Inc. 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
|
|
|
July 1,
|
|
|
July 3,
|
|
|
2016
|
|
|
2015
|
Revenue
|
|
$
|
97,734
|
|
|
$
|
96,494
|
Cost of revenue
|
|
|
56,238
|
|
|
|
55,149
|
Gross profit
|
|
|
41,496
|
|
|
|
41,345
|
Operating expenses:
|
|
|
|
|
|
|
|
Research and development and engineering
|
|
|
8,016
|
|
|
|
7,840
|
Selling, general and administrative
|
|
|
20,198
|
|
|
|
20,922
|
Amortization of purchased intangible assets
|
|
|
1,979
|
|
|
|
1,852
|
Restructuring, acquisition and divestiture related costs
|
|
|
3,705
|
|
|
|
416
|
Total operating expenses
|
|
|
33,898
|
|
|
|
31,030
|
Operating income from continuing operations
|
|
|
7,598
|
|
|
|
10,315
|
Interest income (expense), net
|
|
|
(1,205)
|
|
|
|
(1,375)
|
Foreign exchange transaction gains (losses), net
|
|
|
707
|
|
|
|
(3,153)
|
Other income (expense), net
|
|
|
270
|
|
|
|
20,034
|
Income from continuing operations before income taxes
|
|
|
7,370
|
|
|
|
25,821
|
Income tax provision
|
|
|
2,499
|
|
|
|
6,310
|
Income from continuing operations
|
|
|
4,871
|
|
|
|
19,511
|
Loss from discontinued operations, net of tax
|
|
|
—
|
|
|
|
(13)
|
Consolidated net income
|
|
$
|
4,871
|
|
|
$
|
19,498
|
|
|
|
|
|
|
|
|
Earnings per common share from continuing operations:
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.14
|
|
|
$
|
0.56
|
Diluted
|
|
$
|
0.14
|
|
|
$
|
0.56
|
Loss per common share from discontinued operations:
|
|
|
|
|
|
|
|
Basic
|
|
$
|
—
|
|
|
$
|
(0.00)
|
Diluted
|
|
$
|
—
|
|
|
$
|
(0.00)
|
Earnings per common share:
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.14
|
|
|
$
|
0.56
|
Diluted
|
|
$
|
0.14
|
|
|
$
|
0.56
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding—basic
|
|
|
34,734
|
|
|
|
34,630
|
Weighted average common shares outstanding—diluted
|
|
|
34,887
|
|
|
|
35,029
|
NOVANTA INC.
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
(In thousands of U.S. dollars)
|
(Unaudited)
|
|
|
|
July 1,
|
|
|
December 31,
|
|
|
2016
|
|
|
2015
|
ASSETS
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
60,497
|
|
|
$
|
59,959
|
Accounts receivable, net
|
|
|
57,587
|
|
|
|
57,188
|
Inventories
|
|
|
59,981
|
|
|
|
59,566
|
Other current assets
|
|
|
9,423
|
|
|
|
8,499
|
Total current assets
|
|
|
187,488
|
|
|
|
185,212
|
Property, plant and equipment, net
|
|
|
37,647
|
|
|
|
40,550
|
Intangible assets, net
|
|
|
64,020
|
|
|
|
66,269
|
Goodwill
|
|
|
108,253
|
|
|
|
103,456
|
Other assets
|
|
|
16,477
|
|
|
|
20,558
|
Total assets
|
|
$
|
413,885
|
|
|
$
|
416,045
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
$
|
7,371
|
|
|
$
|
7,385
|
Accounts payable
|
|
|
25,879
|
|
|
|
24,401
|
Accrued expenses and other current liabilities
|
|
|
30,556
|
|
|
|
25,167
|
Total current liabilities
|
|
|
63,806
|
|
|
|
56,953
|
Long-term debt
|
|
|
79,164
|
|
|
|
88,426
|
Other long-term liabilities
|
|
|
21,326
|
|
|
|
25,965
|
Total liabilities
|
|
|
164,296
|
|
|
|
171,344
|
Stockholders' Equity:
|
|
|
|
|
|
|
|
Total stockholders' equity
|
|
|
249,589
|
|
|
|
244,701
|
Total liabilities and stockholders' equity
|
|
$
|
413,885
|
|
|
$
|
416,045
|
NOVANTA INC.
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(In thousands of U.S. dollars)
|
(Unaudited)
|
|
|
Three Months Ended
|
|
July 1,
|
|
|
July 3,
|
|
2016
|
|
|
2015
|
Cash flows from operating activities:
|
|
|
|
|
|
|
Consolidated net income
|
$
|
4,871
|
|
|
$
|
19,498
|
Less: Loss from discontinued operations, net of tax
|
|
—
|
|
|
|
13
|
Income from continuing operations
|
|
4,871
|
|
|
|
19,511
|
Adjustments to reconcile income from continuing operations to
net cash provided by operating activities of continuing operations:
|
|
|
|
|
|
|
Depreciation and amortization
|
|
4,924
|
|
|
|
4,623
|
Share-based compensation
|
|
1,055
|
|
|
|
936
|
Deferred income taxes
|
|
(536)
|
|
|
|
275
|
Earnings from equity investment
|
|
(268)
|
|
|
|
(394)
|
Gain on disposal of business
|
|
—
|
|
|
|
(19,638)
|
Earn-out adjustment
|
|
1,427
|
|
|
|
—
|
Other
|
|
885
|
|
|
|
417
|
Changes in assets and liabilities which (used)/provided cash,
excluding
effects from businesses purchased or classified as discontinued
operations:
|
|
|
|
|
|
|
Accounts receivable
|
|
1,726
|
|
|
|
(147)
|
Inventories
|
|
1,912
|
|
|
|
134
|
Other operating assets and liabilities
|
|
(503)
|
|
|
|
2,809
|
Net cash provided by operating activities of continuing operations
|
|
15,493
|
|
|
|
8,526
|
Net cash used in operating activities of discontinued operations
|
|
—
|
|
|
|
(13)
|
Net cash provided by operating activities
|
|
15,493
|
|
|
|
8,513
|
Cash flows from investing activities:
|
|
|
|
|
|
|
Purchases of property, plant and equipment
|
|
(2,946)
|
|
|
|
(1,187)
|
Acquisition of businesses, net of cash acquired and working capital
adjustments
|
|
(9,374)
|
|
|
|
804
|
Proceeds from the sale of business, net of transaction costs
|
|
—
|
|
|
|
30,623
|
Proceeds from the sale of property, plant and equipment
|
|
42
|
|
|
|
93
|
Net cash provided by (used in) investing activities of continuing
operations
|
|
(12,278)
|
|
|
|
30,333
|
Net cash provided by investing activities of discontinued operations
|
|
—
|
|
|
|
—
|
Net cash provided by (used in) investing activities
|
|
(12,278)
|
|
|
|
30,333
|
Cash flows from financing activities:
|
|
|
|
|
|
|
Repayments of long-term debt and revolving credit facility
|
|
(5,625)
|
|
|
|
(6,875)
|
Payments for debt issuance costs
|
|
(1,987)
|
|
|
|
—
|
Purchase of common stock
|
|
(1,349)
|
|
|
|
—
|
Other financing activities
|
|
(527)
|
|
|
|
(218)
|
Net cash used in financing activities of continuing operations
|
|
(9,488)
|
|
|
|
(7,093)
|
Net cash used in financing activities of discontinued operations
|
|
—
|
|
|
|
—
|
Net cash used in financing activities
|
|
(9,488)
|
|
|
|
(7,093)
|
Effect of exchange rates on cash and cash equivalents
|
|
(1,122)
|
|
|
|
1,756
|
Increase (decrease) in cash and cash equivalents
|
|
(7,395)
|
|
|
|
33,509
|
Cash and cash equivalents, beginning of period
|
|
67,892
|
|
|
|
47,542
|
Cash and cash equivalents, end of period
|
$
|
60,497
|
|
|
$
|
81,051
|
Reconciliation of GAAP to Non-GAAP Financial Measures
|
(In thousands of U.S. dollars)
|
(Unaudited)
|
|
Adjusted Revenue by Segment (Non-GAAP):
|
|
|
|
Three Months Ended
|
|
|
July 1,
|
|
|
July 3,
|
|
|
2016
|
|
|
2015
|
Laser Products
|
|
|
|
|
|
|
|
Revenue (GAAP)
|
|
$
|
46,124
|
|
|
$
|
42,190
|
JK Lasers divestiture
|
|
|
—
|
|
|
|
(53)
|
Acquisition fair value adjustments
|
|
|
—
|
|
|
|
—
|
Adjusted Revenue (Non-GAAP)
|
|
$
|
46,124
|
|
|
$
|
42,137
|
|
|
|
|
|
|
|
|
Vision Technologies
|
|
|
|
|
|
|
|
Revenue (GAAP)
|
|
$
|
28,305
|
|
|
$
|
31,216
|
Acquisition fair value adjustments
|
|
|
8
|
|
|
|
39
|
Adjusted Revenue (Non-GAAP)
|
|
$
|
28,313
|
|
|
$
|
31,255
|
|
|
|
|
|
|
|
|
Precision Motion
|
|
|
|
|
|
|
|
Revenue (GAAP)
|
|
$
|
23,305
|
|
|
$
|
23,088
|
Acquisition fair value adjustments
|
|
|
—
|
|
|
|
—
|
Adjusted Revenue (Non-GAAP)
|
|
$
|
23,305
|
|
|
$
|
23,088
|
|
|
|
|
|
|
|
|
Novanta Inc.
|
|
|
|
|
|
|
|
Revenue (GAAP)
|
|
$
|
97,734
|
|
|
$
|
96,494
|
JK Lasers divestiture
|
|
|
—
|
|
|
|
(53)
|
Acquisition fair value adjustments
|
|
|
8
|
|
|
|
39
|
Adjusted Revenue (Non-GAAP)
|
|
$
|
97,742
|
|
|
$
|
96,480
|
Reconciliation of GAAP to Non-GAAP Financial Measures
|
(In thousands of U.S. dollars)
|
(Unaudited)
|
|
Adjusted Gross Profit by Segment (Non-GAAP):
|
|
|
|
Three Months Ended
|
|
|
|
July 1,
|
|
|
July 3,
|
|
|
|
2016
|
|
|
2015
|
|
Laser Products
|
|
|
|
|
|
|
|
|
Gross Profit (GAAP)
|
|
$
|
20,861
|
|
|
$
|
18,950
|
|
JK Lasers divestiture
|
|
|
—
|
|
|
|
50
|
|
Amortization of intangible assets
|
|
|
384
|
|
|
|
516
|
|
Acquisition fair value adjustments
|
|
|
—
|
|
|
|
—
|
|
Adjusted Gross Profit (Non-GAAP)
|
|
$
|
21,245
|
|
|
$
|
19,516
|
|
Gross Profit Margin (GAAP)
|
|
|
45.2
|
%
|
|
|
44.9
|
%
|
Adjusted Gross Profit Margin (Non-GAAP)
|
|
|
46.1
|
%
|
|
|
46.3
|
%
|
|
|
|
|
|
|
|
|
|
Vision Technologies
|
|
|
|
|
|
|
|
|
Gross Profit (GAAP)
|
|
$
|
10,524
|
|
|
$
|
12,158
|
|
Amortization of intangible assets
|
|
|
500
|
|
|
|
547
|
|
Acquisition fair value adjustments
|
|
|
51
|
|
|
|
39
|
|
Adjusted Gross Profit (Non-GAAP)
|
|
$
|
11,075
|
|
|
$
|
12,744
|
|
Gross Profit Margin (GAAP)
|
|
|
37.2
|
%
|
|
|
38.9
|
%
|
Adjusted Gross Profit Margin (Non-GAAP)
|
|
|
39.1
|
%
|
|
|
40.8
|
%
|
|
|
|
|
|
|
|
|
|
Precision Motion
|
|
|
|
|
|
|
|
|
Gross Profit (GAAP)
|
|
$
|
10,497
|
|
|
$
|
10,611
|
|
Amortization of intangible assets
|
|
|
102
|
|
|
|
111
|
|
Acquisition fair value adjustments
|
|
|
—
|
|
|
|
—
|
|
Adjusted Gross Profit (Non-GAAP)
|
|
$
|
10,599
|
|
|
$
|
10,722
|
|
Gross Profit Margin (GAAP)
|
|
|
45.0
|
%
|
|
|
46.0
|
%
|
Adjusted Gross Profit Margin (Non-GAAP)
|
|
|
45.5
|
%
|
|
|
46.4
|
%
|
|
|
|
|
|
|
|
|
|
Unallocated Corporate and Shared Services
|
|
|
|
|
|
|
|
|
Gross Profit (GAAP)
|
|
$
|
(386)
|
|
|
$
|
(374)
|
|
Amortization of intangible assets
|
|
|
—
|
|
|
|
—
|
|
Acquisition fair value adjustments
|
|
|
—
|
|
|
|
—
|
|
Adjusted Gross Profit (Non-GAAP)
|
|
$
|
(386)
|
|
|
$
|
(374)
|
|
|
|
|
|
|
|
|
|
|
Novanta Inc.
|
|
|
|
|
|
|
|
|
Gross Profit (GAAP)
|
|
$
|
41,496
|
|
|
$
|
41,345
|
|
JK Lasers divestiture
|
|
|
—
|
|
|
|
50
|
|
Amortization of intangible assets
|
|
|
986
|
|
|
|
1,174
|
|
Acquisition fair value adjustments
|
|
|
51
|
|
|
|
39
|
|
Adjusted Gross Profit (Non-GAAP)
|
|
$
|
42,533
|
|
|
$
|
42,608
|
|
Gross Profit Margin (GAAP)
|
|
|
42.5
|
%
|
|
|
42.8
|
%
|
Adjusted Gross Profit Margin (Non-GAAP)
|
|
|
43.5
|
%
|
|
|
44.2
|
%
|
Reconciliation of GAAP to Non-GAAP Financial Measures
|
(In thousands of U.S. dollars)
|
(Unaudited)
|
|
Adjusted Operating Income from Continuing Operations and
Adjusted EPS (Non-GAAP):
|
|
|
|
Three Months Ended July 1, 2016
|
|
|
Operating Income from Continuing Operations
|
|
|
Operating Margin
|
|
|
Income from Continuing Operations before Income Taxes
|
|
|
Income Tax Provision (Benefits)
|
|
|
Income from Continuing Operations, Net of Tax
|
|
|
Diluted EPS from Continuing Operations
|
GAAP results
|
|
$
|
7,598
|
|
|
|
7.8
|
%
|
|
$
|
7,370
|
|
|
$
|
2,499
|
|
|
$
|
4,871
|
|
|
$
|
0.14
|
Non-GAAP Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets
|
|
|
2,964
|
|
|
|
3.0
|
%
|
|
|
2,964
|
|
|
|
—
|
|
|
|
|
|
|
|
|
Restructuring, divestiture and other costs
|
|
|
1,972
|
|
|
|
2.0
|
%
|
|
|
1,972
|
|
|
|
—
|
|
|
|
|
|
|
|
|
Acquisition related costs
|
|
|
1,733
|
|
|
|
1.8
|
%
|
|
|
1,733
|
|
|
|
—
|
|
|
|
|
|
|
|
|
Acquisition fair value adjustments
|
|
|
51
|
|
|
|
0.1
|
%
|
|
|
51
|
|
|
|
—
|
|
|
|
|
|
|
|
|
Tax effect on non-GAAP adjustments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,160
|
|
|
|
|
|
|
|
|
Non-GAAP tax adjustments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
39
|
|
|
|
|
|
|
|
|
Total non-GAAP adjustments
|
|
|
6,720
|
|
|
|
6.9
|
%
|
|
|
6,720
|
|
|
|
2,199
|
|
|
|
4,521
|
|
|
|
0.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted results (Non-GAAP)
|
|
$
|
14,318
|
|
|
|
14.7
|
%
|
|
$
|
14,090
|
|
|
$
|
4,698
|
|
|
$
|
9,392
|
|
|
$
|
0.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,887
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 3, 2015
|
|
|
Operating Income from Continuing Operations
|
|
|
Operating Margin
|
|
|
Income from Continuing Operations before Income Taxes
|
|
|
Income Tax Provision (Benefits)
|
|
|
Income from Continuing Operations, Net of Tax
|
|
|
Diluted EPS from Continuing Operations
|
GAAP results
|
|
$
|
10,315
|
|
|
|
10.7
|
%
|
|
$
|
25,821
|
|
|
$
|
6,310
|
|
|
$
|
19,511
|
|
|
$
|
0.56
|
Non-GAAP Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets
|
|
|
3,026
|
|
|
|
3.1
|
%
|
|
|
3,026
|
|
|
|
—
|
|
|
|
|
|
|
|
|
Restructuring, divestiture and other costs
|
|
|
891
|
|
|
|
0.9
|
%
|
|
|
891
|
|
|
|
—
|
|
|
|
|
|
|
|
|
Acquisition related costs
|
|
|
(475)
|
|
|
|
(0.4)
|
%
|
|
|
(475)
|
|
|
|
—
|
|
|
|
|
|
|
|
|
Acquisition fair value adjustments
|
|
|
39
|
|
|
|
0.0
|
%
|
|
|
39
|
|
|
|
—
|
|
|
|
|
|
|
|
|
Gain on JK Lasers sale
|
|
|
—
|
|
|
|
—
|
|
|
|
(19,641)
|
|
|
|
—
|
|
|
|
|
|
|
|
|
Unrealized foreign currency loss on JK Lasers sale
|
|
|
—
|
|
|
|
—
|
|
|
|
1,612
|
|
|
|
—
|
|
|
|
|
|
|
|
|
Tax effect on non-GAAP adjustments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,692)
|
|
|
|
|
|
|
|
|
Non-GAAP tax adjustments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
671
|
|
|
|
|
|
|
|
|
Total non-GAAP adjustments
|
|
|
3,481
|
|
|
|
3.6
|
%
|
|
|
(14,548)
|
|
|
|
(2,021)
|
|
|
|
(12,527)
|
|
|
|
(0.36)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted results (Non-GAAP)
|
|
$
|
13,796
|
|
|
|
14.3
|
%
|
|
$
|
11,273
|
|
|
$
|
4,289
|
|
|
$
|
6,984
|
|
|
$
|
0.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,029
|
Reconciliation of GAAP to Non-GAAP Financial Measures
|
(In thousands of U.S. dollars)
|
(Unaudited)
|
|
Adjusted EBITDA (Non-GAAP):
|
|
|
|
Three Months Ended
|
|
|
July 1,
|
|
|
July 3,
|
|
|
2016
|
|
|
2015
|
Consolidated net income (GAAP)
|
|
$
|
4,871
|
|
|
$
|
19,498
|
Interest (income) expense, net
|
|
|
1,205
|
|
|
|
1,375
|
Income tax provision
|
|
|
2,499
|
|
|
|
6,310
|
Depreciation and amortization
|
|
|
4,924
|
|
|
|
4,623
|
Share-based compensation
|
|
|
1,055
|
|
|
|
936
|
Restructuring, acquisition, divestiture and other costs
|
|
|
3,705
|
|
|
|
416
|
Acquisition fair value adjustments
|
|
|
51
|
|
|
|
39
|
Loss from discontinued operations, net of tax
|
|
|
—
|
|
|
|
13
|
Other, net
|
|
|
(977)
|
|
|
|
(16,881)
|
Adjusted EBITDA (Non-GAAP)
|
|
$
|
17,333
|
|
|
$
|
16,329
|
Net Debt (Non-GAAP):
|
|
|
|
July 1, 2016
|
|
|
December 31, 2015
|
Total Debt (GAAP)
|
|
$
|
86,535
|
|
|
$
|
95,811
|
Plus: Deferred financing costs
|
|
|
3,465
|
|
|
|
1,689
|
Gross Debt
|
|
|
90,000
|
|
|
|
97,500
|
Less: Cash and cash equivalents
|
|
|
(60,497)
|
|
|
|
(59,959)
|
Net Debt (Non-GAAP)
|
|
$
|
29,503
|
|
|
$
|
37,541
|
Organic Revenue Decline (Non-GAAP):
|
|
|
|
Three Months Ended
|
|
|
|
July 1, 2016 Compared
to Three Months Ended
July
3, 2015
|
|
Reported growth (GAAP)
|
|
|
1.3
|
%
|
Less: Change attributable to acquisitions and divestitures
|
|
|
1.6
|
%
|
Plus: Change due to foreign currency
|
|
|
0.0
|
%
|
Organic decline (Non-GAAP)
|
|
|
(0.3)
|
%
|
Non-GAAP Measures
Adjusted Revenue
Adjusted Revenue excludes the JK Lasers business to only show the
results of ongoing operations of the Company. As the JK Lasers business
was sold in April 2015, we excluded JK Lasers revenue from Adjusted
Revenue because divestiture activities can vary between reporting
periods and between us and our peers, which we believe make comparisons
of long-term performance trends difficult for management and investors,
and could result in overstating or understating to our investors the
performance of our operations. Additionally, we include estimated
revenue from contracts acquired with business acquisitions that will not
be fully recognized due to business combination rules. Because GAAP
accounting rules require the elimination of this revenue, GAAP results
alone do not fully capture all of our economic activities. These
non-GAAP adjustments are intended to reflect the full amount of such
revenue.
Organic Revenue
We define the term "organic revenue" as revenue excluding the impact
from business acquisitions, divestitures, and the effect of foreign
currency translation. We use the related term "organic revenue
growth/(decline)" to refer to the measure of comparing current period
organic revenue with reported revenue of the corresponding period in the
prior year. We believe that this non-GAAP measure, when taken together
with our GAAP financial measures, allows us and our investors to better
measure our performance and evaluate long-term performance trends.
Organic revenue growth/(decline) also provides for easier comparisons of
our performance with prior and future periods and relative comparisons
to our peers. We exclude the effect of foreign currency translation from
these measures because foreign currency translation is subject to
volatility and can obscure underlying trends. We exclude the effect of
acquisitions and divestitures because these activities can vary
dramatically between reporting periods and between us and our peers,
which we believe makes comparisons of long-term performance trends
difficult for management and investors, and could result in overstating
or understating to our investors the performance of our operations.
Adjusted Gross Profit and Adjusted Gross Profit Margin
The calculation of Adjusted Gross Profit and Adjusted Gross Profit
Margin is displayed in the tables above. Adjusted Gross Profit and
Adjusted Gross Profit Margin exclude the JK Lasers business to only show
the results of ongoing operations, as the JK Lasers business was sold
in April 2015. Adjusted Gross Profit and Adjusted Gross Profit Margin
also excludes the amortization of acquired intangible assets and revenue
and inventory fair value adjustments from business acquisitions because:
(1) the amounts are non-cash; (2) the Company cannot influence the
timing and amount of future expense recognition; and (3) excluding such
expenses provides investors and management better visibility into the
components of operating expenses. In addition, the Company excluded
inventory related charges associated with a product line closure as
these costs occurred outside of the Company's day-to-day business as a
result of the execution of the Company's strategy for the reasons
described above in the introductory paragraphs of the "Use of Non-GAAP
Financial Measures".
Adjusted Operating Income from Continuing Operations and Adjusted
Operating Margin
The calculation of Adjusted Operating Income from Continuing Operations
and Adjusted Operating Margin is displayed in the tables above. Adjusted
Operating Income from Continuing Operations and Adjusted Operating
Margin exclude the amortization of acquired intangible assets and
revenue and inventory fair value adjustments related to business
acquisitions because: (1) the amounts are non-cash; (2) the Company
cannot influence the timing and amount of future expense recognition;
and (3) excluding such expenses provides investors and management better
visibility into the components of operating expenses. The Company also
excluded restructuring, acquisition and divestiture related costs, and
inventory related charges associated with a product line closure from
Adjusted Operating Income from Continuing Operations and Adjusted
Operating Margin due to the significant changes that have occurred
outside of the Company's day-to-day business as a result of the
execution of the Company's strategy for the reasons described above in
the introductory paragraphs of the "Use of Non-GAAP Financial Measures".
Adjusted Income from Continuing Operations before Income Taxes
The calculation of Adjusted Income from Continuing Operations before
Income Taxes is displayed in the tables above. The calculation of
Adjusted Income from Continuing Operations before Income Taxes excludes
amortization of acquired intangible assets and revenue and inventory
fair value adjustments related to business acquisitions, restructuring,
acquisition and divestiture related costs, and inventory related charges
associated with a product line closure for the reasons described for
Adjusted Operating Income from Continuing Operations and Adjusted
Operating Margin above. In addition, the gain on sale of JK Lasers and
the related unrealized foreign exchange loss on the U.S. dollar sales
proceeds held by our U.K. subsidiary are excluded to only show the
results of our ongoing operations, as the JK Lasers business was sold
in April 2015.
Adjusted Income from Continuing Operations, Net of Tax
The calculation of Adjusted Income from Continuing Operations, net of
tax, is displayed in the tables above. Because pre-tax income is
included in determining income from continuing operations, net of tax,
the calculation of Adjusted Income from Continuing Operations, net of
tax, also excludes amortization of acquired intangible assets and
revenue and inventory fair value adjustments related to business
acquisitions, restructuring, acquisition and divestiture related costs,
inventory related charges associated with a product line closure, the
gain on sale of JK Lasers and the related unrealized foreign exchange
loss on the U.S. dollar sales proceeds held by our U.K. subsidiary for
the reasons described for Adjusted Income from Continuing Operations
before Income Taxes. In addition, the Company excluded significant
discrete income tax expenses (benefits) related to releases of valuation
allowances, benefits or expenses associated with the completion of tax
audits, effects of changes in tax laws, effects of acquisition related
tax planning actions on our effective tax rate, and the income tax
effect of non-GAAP adjustments discussed above.
Adjusted Diluted EPS from Continuing Operations
The calculation of Adjusted Diluted EPS from Continuing Operations is
displayed in the tables above. Because income from continuing
operations, net of tax is used in the diluted EPS calculation, the
calculation of Adjusted Diluted EPS from Continuing Operations excludes
amortization of acquired intangible assets and revenue and inventory
fair value adjustments related to business acquisitions, restructuring,
acquisition and divestiture related costs, inventory related charges
associated with a product line closure, the gain on sale of JK Lasers
and the related unrealized foreign exchange loss on the U.S. dollar
sales proceeds held by our U.K. subsidiary, significant discrete income
tax expenses (benefits) related to releases of valuation allowances,
benefits or expenses associated with the completion of tax audits,
effects of changes in tax laws, effects of acquisition related tax
planning actions on our effective tax rate, tax benefit associated with
a dividend from the Company's equity investment, and the income tax
effect of non-GAAP adjustments for the reasons described above for
Adjusted Income from Continuing Operations, net of tax.
Adjusted EBITDA
The Company defines Adjusted EBITDA as the consolidated net income
before deducting interest (income) expense, income taxes, depreciation,
amortization, non-cash share-based compensation, restructuring,
acquisition and divestiture related costs, acquisition fair value
adjustments, inventory related charges associated with product line
closures, and other non-operating income (expense) items, including the
gain on the sale of JK Lasers, foreign exchange gains (losses) and
earnings from an equity-method investment for the reasons described
above in the introductory paragraphs of the "Use of Non-GAAP Financial
Measures.".
In evaluating Adjusted EBITDA, 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.
Net Debt
The Company defines Net Debt as its total debt as reported on the
consolidated balance sheet as of the end of the period plus unamortized
deferred financing costs and less its cash and cash equivalents.
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.