- Second Quarter 2017 GAAP Revenue of $119.1 million, up 22% year over year
- Second Quarter 2017 GAAP Net Income of $9.4 million
- Second Quarter 2017 Adjusted EBITDA of $25.6 million
- Raising Full Year 2017 GAAP Revenue and Adjusted Diluted EPS Guidance
Novanta Inc. (NASDAQ: NOVT) (the "Company" or "Novanta"), a trusted
technology partner to medical and advanced technology equipment
manufacturers, today reported financial results for the second quarter
2017.
Financial Highlights
|
|
Three Months Ended
|
(In millions, except per share amounts)
|
|
June 30,
|
|
|
|
July 1,
|
|
|
2017
|
|
|
|
2016
|
GAAP
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
119.1
|
|
|
|
$
|
97.7
|
Operating income from continuing operations
|
|
$
|
15.6
|
|
|
|
$
|
7.6
|
Net Income Attributable to Novanta Inc.
|
|
$
|
9.4
|
|
|
|
$
|
4.9
|
Diluted EPS from continuing operations
|
|
$
|
0.16
|
|
|
|
$
|
0.14
|
Non-GAAP*
|
|
|
|
|
|
|
|
|
Adjusted Operating Income from Continuing Operations
|
|
$
|
22.2
|
|
|
|
$
|
14.3
|
Adjusted Diluted EPS
|
|
$
|
0.41
|
|
|
|
$
|
0.27
|
Adjusted EBITDA
|
|
$
|
25.6
|
|
|
|
$
|
17.3
|
*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
"Our company delivered a record quarter with strong double-digit revenue
growth and double-digit Adjusted Diluted EPS growth. Our teams delivered
this stellar financial performance while closing the WOM acquisition and
after integrating two acquisitions completed in the first quarter,"
said Matthijs Glastra, Chief Executive Officer of Novanta Inc. "We are
proud of our progress executing against our strategic priorities, our
increased presence in medical markets and our team's ability to produce
sustained profitable growth. We are confident in our 2017 outlook."
During the second quarter of 2017, Novanta generated GAAP revenue
of $119.1 million, an increase of $21.4 million, or 21.9%, versus the
second quarter of 2016. The net effect of our acquisition activities
resulted in an increase in revenue of $15.4 million, or 15.8%, compared
to the second quarter of 2016. Foreign currency exchange rates adversely
impacted our revenue by $1.3 million, or 1.3%, during the three months
ended June 30, 2017. Our organic revenue growth, which excludes the net
impact of acquisitions and foreign currency exchange rates, increased
7.4%, versus the second quarter of 2016 (see "Organic Revenue Growth" in
the non-GAAP reconciliation below).
In the second quarter of 2017, GAAP operating income from continuing
operations was $15.6 million, compared to $7.6 million in the second
quarter of 2016. GAAP net income attributable to Novanta Inc. was $9.4
million in the second quarter of 2017, compared to $4.9 million in the
second quarter of 2016. GAAP diluted earnings per share ("EPS") from
continuing operations was $0.16 in the second quarter of 2017, compared
to $0.14 in the second quarter of 2016.
In the second quarter of 2017, the Company increased the carrying amount
of the redeemable noncontrolling interest in Laser Quantum by $3.7
million to reflect the estimated redemption value as of June 30, 2017.
The adjustment was recognized in retained earnings and as a
net ($0.11) reduction in earnings per share. Adjusted Diluted EPS
was $0.41 in the second quarter of 2017, compared to $0.27 in the second
quarter of 2016. The Company ended the second quarter of 2017 with 35.5
million weighted average diluted common shares outstanding. Adjusted
EBITDA was $25.6 million in the second quarter of 2017, compared
to $17.3 million in the second quarter of 2016.
Operating cash flow from continuing operations for the second quarter of
2017 was $16.8 million, compared to $15.5 million for the second quarter
of 2016. The Company completed the second quarter of 2017 with
approximately $111.5 million of total debt, and $25.4 million of Net
Debt, as defined in the non-GAAP reconciliation below.
On August 1, 2017, the Company entered into an amendment to its Credit
Agreement, dated as of May 19, 2016. The amendment increased the
revolving credit facility commitment under the Credit Agreement by $100
million from $225 million to $325 million, and reset the accordion
feature to $125 million for potential future expansion. Additionally,
the amendment increased the current term loan balance of $65.6
million to $90.6 million.
Financial Outlook
"With the momentum heading into the third quarter, combined with the
closing of the WOM acquisition, we are raising our full year 2017
outlook for revenue, Adjusted Diluted EPS, and Adjusted EBITDA,"
said Robert Buckley, Chief Financial Officer.
For the full year of 2017, the Company expects GAAP revenue of
approximately $497 million to $502 million. The Company expects Adjusted
Diluted EPS to be in the range of $1.40 to $1.46, and Adjusted EBITDA to
be approximately $96 million to $98 million. The Company's Adjusted
Diluted EPS and EBITDA guidance assume no significant foreign exchange
gains or losses.
For the third quarter of 2017, the Company expects GAAP revenue of
approximately $130 million to $135 million. The Company expects Adjusted
Diluted EPS to be in the range of $0.34 to $0.39, and Adjusted EBITDA to
be approximately $25 million to $27 million. The Company's Adjusted
Diluted EPS and EBITDA guidance assume no significant foreign exchange
gains or losses.
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 EBITDA and Adjusted 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 adjustments that could
be made for significant discrete income tax expenses (benefits);
divestiture related expenses; acquisition-related expenses; impact of
purchase price allocations for recently completed acquisitions; 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 Thursday, August 3,
2017 at 10:00 a.m. ET to discuss these results. Matthijs Glastra, Chief
Executive Officer, and Robert Buckley, Chief Financial Officer, will
host the call.
To access the call, please dial (877) 482-5124 prior to the scheduled
conference call time. The conference ID number is 61105734. A playback
of this conference call will be available beginning 1:00 p.m.
ET, Thursday, August 3, 2017. The playback phone number is (855)
859-2056 or (404) 537-3406 and the code number is 61105734. The playback
will remain available until 11:00 p.m. ET, Thursday, August 24, 2017.
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 Growth, Adjusted Gross Profit, Adjusted Gross Profit Margin,
Adjusted Operating Income from Continuing Operations, Adjusted Operating
Margin, Adjusted Income from Continuing Operations before Income Taxes,
Non-GAAP Income Tax Provision (Benefit) and Effective Tax Rate, Adjusted
Net Income Attributable to Novanta Inc., net of tax, Adjusted Diluted
EPS, Adjusted EBITDA, Adjusted EBITDA Margin, 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 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 and Organic Revenue Growth 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 and Organic Revenue Growth are used to determine bonus
payments for senior management and employees. The Company also uses
Adjusted Diluted EPS as a measurement for performance shares issued to
certain executives. Accordingly, the Company believes that these
non-GAAP 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 producing sustained profitable growth;
executing our strategy; anticipated financial performance, including our
updated financial outlook for the third quarter and full year 2017; 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; risks associated with our
operations in foreign countries; risks associated with increased
outsourcing of components manufacturing; our failure to comply with
local import and export regulations in the jurisdictions in which we
operate; negative effects on global economic conditions, financial
markets and our business as a result of the United Kingdom's potential
withdrawal from the European Union and recent U.S presidential election;
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 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
including rules and regulations issued by the U.S. Food and Drug
Administration and similar international agencies; 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; our reliance on third party
distribution channels; 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
limiting 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,
2016, 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 healthcare and advanced industrial original equipment manufacturers
("OEMs") a competitive advantage. We combine deep proprietary expertise
in photonics, vision, and precision motion technologies with a proven
ability to solve complex technical challenges. This enables Novanta to
engineer mission-critical 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 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
|
|
June 30,
|
|
|
July 1,
|
|
2017
|
|
|
2016
|
Revenue
|
$
|
119,102
|
|
|
$
|
97,734
|
Cost of revenue
|
|
65,613
|
|
|
|
56,238
|
Gross profit
|
|
53,489
|
|
|
|
41,496
|
Operating expenses:
|
|
|
|
|
|
|
Research and development and engineering
|
|
9,004
|
|
|
|
8,016
|
Selling, general and administrative
|
|
23,941
|
|
|
|
20,198
|
Amortization of purchased intangible assets
|
|
3,347
|
|
|
|
1,979
|
Restructuring, acquisition and divestiture related costs
|
|
1,581
|
|
|
|
3,705
|
Total operating expenses
|
|
37,873
|
|
|
|
33,898
|
Operating income from continuing operations
|
|
15,616
|
|
|
|
7,598
|
Interest income (expense), net
|
|
(1,435)
|
|
|
|
(1,205)
|
Foreign exchange transaction gains (losses), net
|
|
486
|
|
|
|
707
|
Other income (expense), net
|
|
12
|
|
|
|
270
|
Income from continuing operations before income taxes
|
|
14,679
|
|
|
|
7,370
|
Income tax provision
|
|
4,689
|
|
|
|
2,499
|
Income from continuing operations
|
|
9,990
|
|
|
|
4,871
|
Loss from discontinued operations, net of tax
|
|
—
|
|
|
|
—
|
Consolidated net income
|
|
9,990
|
|
|
|
4,871
|
Less: Net income attributable to noncontrolling interest
|
|
(588)
|
|
|
|
—
|
Net income attributable to Novanta Inc.
|
$
|
9,402
|
|
|
$
|
4,871
|
|
|
|
|
|
|
|
Earnings per common share from continuing operations:
|
|
|
|
|
|
|
Basic
|
$
|
0.16
|
|
|
$
|
0.14
|
Diluted
|
$
|
0.16
|
|
|
$
|
0.14
|
Loss per common share from discontinued operations:
|
|
|
|
|
|
|
Basic
|
$
|
—
|
|
|
$
|
—
|
Diluted
|
$
|
—
|
|
|
$
|
—
|
Earnings per common share attributable to Novanta Inc.:
|
|
|
|
|
|
|
Basic
|
$
|
0.16
|
|
|
$
|
0.14
|
Diluted
|
$
|
0.16
|
|
|
$
|
0.14
|
|
|
|
|
|
|
|
Weighted average common shares outstanding—basic
|
|
34,827
|
|
|
|
34,734
|
Weighted average common shares outstanding—diluted
|
|
35,463
|
|
|
|
34,887
|
NOVANTA INC.
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
(In thousands of U.S. dollars)
|
(Unaudited)
|
|
|
June 30,
|
|
|
December 31,
|
|
2017
|
|
|
2016
|
ASSETS
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
89,126
|
|
|
$
|
68,108
|
Accounts receivable, net
|
|
69,112
|
|
|
|
63,769
|
Inventories
|
|
76,796
|
|
|
|
59,745
|
Prepaid expenses and other current assets
|
|
10,656
|
|
|
|
7,628
|
Total current assets
|
|
245,690
|
|
|
|
199,250
|
Property, plant and equipment, net
|
|
36,503
|
|
|
|
35,421
|
Intangible assets, net
|
|
100,993
|
|
|
|
61,743
|
Goodwill
|
|
151,538
|
|
|
|
108,128
|
Other assets
|
|
14,889
|
|
|
|
21,095
|
Total assets
|
$
|
549,613
|
|
|
$
|
425,637
|
LIABILITIES, NONCONTROLLING INTEREST AND
STOCKHOLDERS'
EQUITY
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
Current portion of long-term debt
|
$
|
7,371
|
|
|
$
|
7,366
|
Accounts payable
|
|
37,784
|
|
|
|
32,213
|
Accrued expenses and other current liabilities
|
|
38,194
|
|
|
|
30,917
|
Total current liabilities
|
|
83,349
|
|
|
|
70,496
|
Long-term debt
|
|
104,176
|
|
|
|
70,554
|
Other long-term liabilities
|
|
30,184
|
|
|
|
25,717
|
Total liabilities
|
|
217,709
|
|
|
|
166,767
|
Redeemable noncontrolling interest
|
|
27,358
|
|
|
|
—
|
Stockholders' Equity:
|
|
|
|
|
|
|
Total stockholders' equity
|
|
304,546
|
|
|
|
258,870
|
Total liabilities, noncontrolling interest and stockholders' equity
|
$
|
549,613
|
|
|
$
|
425,637
|
NOVANTA INC.
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(In thousands of U.S. dollars)
|
(Unaudited)
|
|
|
Three Months Ended
|
|
June 30,
|
|
|
July 1,
|
|
2017
|
|
|
2016
|
Cash flows from operating activities:
|
|
|
|
|
|
|
Consolidated net income
|
$
|
9,990
|
|
|
$
|
4,871
|
Less: Loss from discontinued operations, net of tax
|
|
—
|
|
|
|
—
|
Income from continuing operations
|
|
9,990
|
|
|
|
4,871
|
Adjustments to reconcile income from continuing operations to
net cash provided by operating activities of continuing operations:
|
|
|
|
|
|
|
Depreciation and amortization
|
|
7,094
|
|
|
|
4,924
|
Share-based compensation
|
|
1,318
|
|
|
|
1,055
|
Deferred income taxes
|
|
(888)
|
|
|
|
(536)
|
Earnings from equity investment
|
|
—
|
|
|
|
(268)
|
Contingent consideration adjustments
|
|
419
|
|
|
|
1,427
|
Other
|
|
1,090
|
|
|
|
885
|
Changes in assets and liabilities which (used)/provided cash,
excluding
effects from businesses purchased or classified as discontinued
operations:
|
|
|
|
|
|
|
Accounts receivable
|
|
1,330
|
|
|
|
1,726
|
Inventories
|
|
(6,495)
|
|
|
|
1,912
|
Other operating assets and liabilities
|
|
2,904
|
|
|
|
(503)
|
Net cash provided by operating activities of continuing operations
|
|
16,762
|
|
|
|
15,493
|
Net cash provided by operating activities of discontinued operations
|
|
—
|
|
|
|
—
|
Net cash provided by operating activities
|
|
16,762
|
|
|
|
15,493
|
Cash flows from investing activities:
|
|
|
|
|
|
|
Purchases of property, plant and equipment
|
|
(1,357)
|
|
|
|
(2,946)
|
Acquisition of businesses, net of cash acquired and working capital adjustments
|
|
98
|
|
|
|
(9,374)
|
Proceeds from the sale of property, plant and equipment
|
|
10
|
|
|
|
42
|
Net cash used in investing activities of continuing operations
|
|
(1,249)
|
|
|
|
(12,278)
|
Net cash used in investing activities of discontinued operations
|
|
—
|
|
|
|
—
|
Net cash used in investing activities
|
|
(1,249)
|
|
|
|
(12,278)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
Repayments of long-term debt and revolving credit facility
|
|
(6,875)
|
|
|
|
(5,625)
|
Payments of debt issuance costs
|
|
—
|
|
|
|
(1,987)
|
Purchase of common stock
|
|
—
|
|
|
|
(1,349)
|
Other financing activities
|
|
(310)
|
|
|
|
(527)
|
Net cash used in financing activities of continuing operations
|
|
(7,185)
|
|
|
|
(9,488)
|
Net cash used in financing activities of discontinued operations
|
|
—
|
|
|
|
—
|
Net cash used in financing activities
|
|
(7,185)
|
|
|
|
(9,488)
|
Effect of exchange rates on cash and cash equivalents
|
|
784
|
|
|
|
(1,122)
|
Increase (decrease) in cash and cash equivalents
|
|
9,112
|
|
|
|
(7,395)
|
Cash and cash equivalents, beginning of period
|
|
80,014
|
|
|
|
67,892
|
Cash and cash equivalents, end of period
|
$
|
89,126
|
|
|
$
|
60,497
|
NOVANTA INC.
|
Revenue by Reportable Segment
|
(In thousands of U.S. dollars)
|
(Unaudited)
|
|
|
Three Months Ended
|
|
June 30,
|
|
|
July 1,
|
|
2017
|
|
|
2016
|
Revenue
|
|
|
|
|
|
|
Photonics
|
$
|
57,885
|
|
|
$
|
46,124
|
Vision
|
|
34,031
|
|
|
|
28,305
|
Precision Motion
|
|
27,186
|
|
|
|
23,305
|
Total
|
$
|
119,102
|
|
|
$
|
97,734
|
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
Segment (Non-GAAP):
|
|
|
Three Months Ended
|
|
|
June 30,
|
|
|
July 1,
|
|
|
2017
|
|
|
2016
|
|
Photonics
|
|
|
|
|
|
|
|
Gross Profit (GAAP)
|
$
|
26,668
|
|
|
$
|
20,861
|
|
Gross Profit Margin (GAAP)
|
|
46.1
|
%
|
|
|
45.2
|
%
|
Amortization of intangible assets
|
|
997
|
|
|
|
384
|
|
Acquisition fair value adjustments
|
|
—
|
|
|
|
—
|
|
Adjusted Gross Profit (Non-GAAP)
|
$
|
27,665
|
|
|
$
|
21,245
|
|
Adjusted Gross Profit Margin (Non-GAAP)
|
|
47.8
|
%
|
|
|
46.1
|
%
|
|
|
|
|
|
|
|
|
Vision
|
|
|
|
|
|
|
|
Gross Profit (GAAP)
|
$
|
14,440
|
|
|
$
|
10,524
|
|
Gross Profit Margin (GAAP)
|
|
42.4
|
%
|
|
|
37.2
|
%
|
Amortization of intangible assets
|
|
609
|
|
|
|
500
|
|
Acquisition fair value adjustments
|
|
—
|
|
|
|
51
|
|
Adjusted Gross Profit (Non-GAAP)
|
$
|
15,049
|
|
|
$
|
11,075
|
|
Adjusted Gross Profit Margin (Non-GAAP)
|
|
44.2
|
%
|
|
|
39.1
|
%
|
|
|
|
|
|
|
|
|
Precision Motion
|
|
|
|
|
|
|
|
Gross Profit (GAAP)
|
$
|
12,749
|
|
|
$
|
10,497
|
|
Gross Profit Margin (GAAP)
|
|
46.9
|
%
|
|
|
45.0
|
%
|
Amortization of intangible assets
|
|
90
|
|
|
|
102
|
|
Acquisition fair value adjustments
|
|
—
|
|
|
|
—
|
|
Adjusted Gross Profit (Non-GAAP)
|
$
|
12,839
|
|
|
$
|
10,599
|
|
Adjusted Gross Profit Margin (Non-GAAP)
|
|
47.2
|
%
|
|
|
45.5
|
%
|
|
|
|
|
|
|
|
|
Unallocated Corporate and Shared Services
|
|
|
|
|
|
|
|
Gross Profit (GAAP)
|
$
|
(368)
|
|
|
$
|
(386)
|
|
Amortization of intangible assets
|
|
—
|
|
|
|
—
|
|
Acquisition fair value adjustments
|
|
—
|
|
|
|
—
|
|
Adjusted Gross Profit (Non-GAAP)
|
$
|
(368)
|
|
|
$
|
(386)
|
|
|
|
|
|
|
|
|
|
Novanta Inc.
|
|
|
|
|
|
|
|
Gross Profit (GAAP)
|
$
|
53,489
|
|
|
$
|
41,496
|
|
Gross Profit Margin (GAAP)
|
|
44.9
|
%
|
|
|
42.5
|
%
|
Amortization of intangible assets
|
|
1,696
|
|
|
|
986
|
|
Acquisition fair value adjustments
|
|
—
|
|
|
|
51
|
|
Adjusted Gross Profit (Non-GAAP)
|
$
|
55,185
|
|
|
$
|
42,533
|
|
Adjusted Gross Profit Margin (Non-GAAP)
|
|
46.3
|
%
|
|
|
43.5
|
%
|
NOVANTA INC.
|
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 June 30, 2017
|
|
Operating Income from Continuing Operations
|
|
|
Operating Margin
|
|
|
Income from Continuing Operations before Income Taxes
|
|
|
Income Tax Provision (Benefit)
|
|
|
Effective Tax Rate
|
|
|
Net Income Attributable to Novanta Inc., Net of Tax
|
|
|
Diluted EPS
|
GAAP results
|
$
|
15,616
|
|
|
|
13.1
|
%
|
|
$
|
14,679
|
|
|
$
|
4,689
|
|
|
|
31.9
|
%
|
|
$
|
9,402
|
|
|
|
|
Less: Adjustment of redeemable noncontrolling interest to estimated
redemption value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,718)
|
|
|
|
|
Net income attributable to Novanta Inc. after adjustment of redeemable
noncontrolling interest to estimated redemption value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,684
|
|
|
$
|
0.16
|
Non-GAAP Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets
|
|
5,043
|
|
|
|
4.3
|
%
|
|
|
5,043
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring, divestiture and other costs
|
|
163
|
|
|
|
0.1
|
%
|
|
|
163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition related costs
|
|
1,418
|
|
|
|
1.2
|
%
|
|
|
1,418
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax effect on non-GAAP adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,535
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP tax adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-GAAP adjustments
|
|
6,624
|
|
|
|
5.6
|
%
|
|
|
6,624
|
|
|
|
1,585
|
|
|
|
|
|
|
|
5,039
|
|
|
|
0.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment of redeemable noncontrolling interest to estimated redemption
value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,718
|
|
|
|
0.11
|
Adjusted results (Non-GAAP)
|
$
|
22,240
|
|
|
|
18.7
|
%
|
|
$
|
21,303
|
|
|
$
|
6,274
|
|
|
|
29.5
|
%
|
|
$
|
14,441
|
|
|
$
|
0.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,463
|
NOVANTA INC.
|
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 (Benefit)
|
|
|
Effective Tax Rate
|
|
|
Net Income Attributable to Novanta Inc., Net of Tax
|
|
|
Diluted EPS
|
GAAP results
|
$
|
7,598
|
|
|
|
7.8
|
%
|
|
$
|
7,370
|
|
|
$
|
2,499
|
|
|
|
33.9
|
%
|
|
$
|
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
|
|
|
|
33.3
|
%
|
|
$
|
9,392
|
|
|
$
|
0.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,887
|
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 30,
|
|
|
July 1,
|
|
|
2017
|
|
|
2016
|
|
Consolidated net income (GAAP)
|
$
|
9,990
|
|
|
$
|
4,871
|
|
Net income margin
|
|
8.4
|
%
|
|
|
5.0
|
%
|
Interest (income) expense, net
|
|
1,435
|
|
|
|
1,205
|
|
Income tax provision
|
|
4,689
|
|
|
|
2,499
|
|
Depreciation and amortization
|
|
7,094
|
|
|
|
4,924
|
|
Share-based compensation
|
|
1,318
|
|
|
|
1,055
|
|
Restructuring, acquisition and divestiture related costs
|
|
1,581
|
|
|
|
3,705
|
|
Acquisition fair value adjustments
|
|
—
|
|
|
|
51
|
|
Other, net
|
|
(498)
|
|
|
|
(977)
|
|
Adjusted EBITDA (Non-GAAP)
|
$
|
25,609
|
|
|
$
|
17,333
|
|
Adjusted EBITDA margin (Non-GAAP)
|
|
21.5
|
%
|
|
|
17.7
|
%
|
|
|
Net Debt (Non-GAAP):
|
|
|
|
June 30, 2017
|
|
|
December 31, 2016
|
|
Total Debt (GAAP)
|
$
|
111,547
|
|
|
$
|
77,920
|
|
Plus: Deferred financing costs
|
|
2,953
|
|
|
|
3,330
|
|
Gross Debt
|
|
114,500
|
|
|
|
81,250
|
|
Less: Cash and cash equivalents
|
|
(89,126)
|
|
|
|
(68,108)
|
|
Net Debt (Non-GAAP)
|
$
|
25,374
|
|
|
$
|
13,142
|
|
|
|
Organic Revenue Growth (Non-GAAP):
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
June 30, 2017
|
|
Reported growth (GAAP)
|
|
|
|
|
|
21.9
|
%
|
Less: Change attributable to acquisitions
|
|
|
|
|
|
15.8
|
%
|
Plus: Change due to foreign currency
|
|
|
|
|
|
1.3
|
%
|
Organic growth (Non-GAAP)
|
|
|
|
|
|
7.4
|
%
|
Non-GAAP Measures
Organic Revenue Growth/(Decline)
We define the term "organic revenue" as revenue excluding the impact
from business acquisitions, divestitures, product line discontinuation,
and the effect of foreign currency translation. We use the related term
"organic revenue growth/(decline)" 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. 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 facilitates 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. Beginning in 2017, 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 is displayed in the tables above. Adjusted Gross Profit and
Adjusted Gross Profit Margin excludes amortization of acquired
intangible assets, inventory and deferred revenue 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 costs.
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 amortization of acquired intangible assets, inventory and
deferred revenue 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 costs. The Company also excluded
restructuring, acquisition and divestiture related costs 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 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, inventory and deferred
revenue fair value adjustments related to business acquisitions, and
restructuring, acquisition and divestiture related costs for the reasons
described for Adjusted Operating Income from Continuing Operations and
Adjusted Operating Margin above.
Non-GAAP Income Tax Provision (Benefit) and Effective Tax Rate
The Non-GAAP Income Tax Provision (Benefit) and Effective Tax Rate are
calculated based on the Adjusted Income from Continuing Operations
before Income Taxes by jurisdiction and the applicable tax rates
currently in effect for the respective jurisdictions. 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 Net Income Attributable to Novanta Inc., Net of Tax
The calculation of Adjusted Net Income Attributable to Novanta Inc., net
of tax, is displayed in the tables above. Because pre-tax income is
included in determining net income attributable to Novanta Inc., net of
tax, the calculation of Adjusted Net Income Attributable to Novanta
Inc., net of tax, also excludes amortization of acquired intangible
assets, inventory and deferred revenue fair value adjustments related to
business acquisitions and restructuring, acquisition and divestiture
related costs 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
The calculation of Adjusted Diluted EPS is displayed in the tables
above. Because Net Income Attributable to Novanta Inc., net of tax, is
used in the diluted EPS calculation, the calculation of Adjusted Diluted
EPS excludes amortization of acquired intangible assets, inventory and
deferred revenue fair value adjustments related to business
acquisitions, restructuring, acquisition and divestiture related costs,
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 for the reasons described
above for Adjusted Net Income Attributable to Novanta Inc., net of tax.
In addition, the Company excluded the adjustment of redeemable
noncontrolling interest to estimated redemption value as (1) the amount
is noncash; (2) the amount is excluded from the determination of net
income attributable to Novanta Inc.; and (3) the Company believes it may
not be indicative of future adjustments and that investors may benefit
from an understanding of the Company's results without giving effect to
this adjustment.
Adjusted EBITDA and Adjusted EBITDA Margin
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, and other non-operating income (expense) items, including
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."
Adjusted EBITDA includes 100% of the results of our consolidated
subsidiaries and therefore does not exclude the Adjusted EBITDA
attributable to noncontrolling interests.
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.
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.