- Full Year 2018 GAAP Revenue of
$614.3 million
- Full Year 2018 GAAP Net Income of
$49.1 million
- Full Year 2018 GAAP Diluted Earnings
Per Share of $1.43
- Full Year 2018 Adjusted Earnings Per
Share of $2.16
- Full Year 2018 Adjusted EBITDA of
$124 million
Novanta Inc. (Nasdaq: NOVT) (the “Company”), a trusted
technology partner to medical and advanced technology equipment
manufacturers, today reported financial results for the fourth
quarter and full year 2018.
Financial
Highlights
Three Months Ended December 31, Year Ended December
31, (In millions, except per share amounts)
2018
2017 2018 2017
GAAP Revenue $ 156.2 $ 146.9 $ 614.3 $ 521.3 Operating
Income $ 15.7 $ 19.1 $ 71.0 $ 57.6 Net Income Attributable to
Novanta Inc. $ 11.6 $ 8.9 $ 49.1 $ 60.1 Diluted EPS $ 0.33 $ (0.00
) $ 1.43 $ 1.13
Non-GAAP* Adjusted Operating Income $ 25.5 $
25.8 $ 104.7 $ 90.8 Adjusted Diluted EPS $ 0.56 $ 0.44 $ 2.16 $
1.60 Adjusted EBITDA $ 30.8 $ 30.0 $ 123.8 $ 106.1 *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.
“2018 was an excellent year for Novanta with solid execution and
good financial results,” said Matthijs Glastra, Chief Executive
Officer of Novanta. “We delivered on our promises for robust top
line growth and bottom-line profitability. For the full year,
reported revenue growth was very strong at 18%, our Adjusted EPS
grew 35% and Adjusted EBITDA grew 17%. As we head into 2019, we
remain very confident in our strategy, our business model and our
team’s commitment and ability to deliver results.”
Fourth Quarter
During the fourth quarter of 2018, Novanta generated GAAP
revenue of $156.2 million, an increase of $9.3 million, or 6.3%,
versus the fourth quarter of 2017. The Company’s acquisition
activities resulted in an increase in revenue of $3.3 million, or
2.2%, compared to the fourth quarter of 2017. Changes in foreign
currency exchange rates year over year adversely impacted our
revenue by $1.6 million, or 1.1%, during the fourth quarter of
2018. Our year-over-year Organic Revenue Growth, which excludes the
net impact of acquisitions and changes in foreign currency exchange
rates, was 5.2% for the fourth quarter of 2018 (see “Organic
Revenue Growth” in the non-GAAP reconciliation below).
In the fourth quarter of 2018, GAAP operating income was $15.7
million, compared to $19.1 million in the fourth quarter of 2017.
GAAP net income attributable to Novanta was $11.6 million in the
fourth quarter of 2018, compared to $8.9 million in the fourth
quarter of 2017. GAAP diluted earnings per share (“EPS”) was $0.33
in the fourth quarter of 2018, compared to ($0.00) in the fourth
quarter of 2017.
Adjusted Diluted EPS was $0.56 in the fourth quarter of 2018,
compared to $0.44 in the fourth quarter of 2017. The Company ended
the fourth quarter of 2018 with 35.5 million weighted average
shares outstanding. Adjusted EBITDA was $30.8 million in the fourth
quarter of 2018, compared to $30.0 million in the fourth quarter of
2017.
Operating cash flow for the fourth quarter of 2018 was $21.9
million, compared to $22.1 million for the fourth quarter of
2017.
Full Year
For the full year 2018, Novanta generated GAAP revenue of $614.3
million, an increase of $93.0 million, or 17.8%, versus the full
year 2017. The Company’s acquisition activities resulted in an
increase in revenue of $52.9 million, or 10.2%. Changes in foreign
currency exchange rates year over year favorably impacted our
revenue by $3.7 million, or 0.6%, in 2018. Our year-over-year
Organic Revenue Growth, which excludes the net impact of
acquisitions and changes in foreign currency exchange rates, was
7.0% for the full year 2018 (see “Organic Revenue Growth” in the
non-GAAP reconciliation below).
For the full year 2018, GAAP operating income was $71.0 million,
compared to $57.6 million in 2017. GAAP net income attributable to
Novanta was $49.1 million for the full year 2018, compared to $60.1
million in 2017. GAAP diluted EPS was $1.43 for the full year 2018,
compared to $1.13 in 2017. In 2018, the Company purchased the
remaining equity interest in Laser Quantum, resulting in a reversal
of $1.8 million of the previously recorded redemption value
adjustment, to reduce the carrying value of the noncontrolling
interest to the actual purchase price. This nontaxable adjustment
was recognized in retained earnings instead of net income, but
resulted in a $0.05 increase in EPS under U.S. GAAP accounting
rules.
Adjusted Diluted EPS was $2.16 for the full year 2018, compared
to $1.60 in 2017. The Company ended the full year 2018 with 35.5
million weighted average shares outstanding. Adjusted EBITDA was
$123.8 million for the full year 2018, compared to $106.1 million
in 2017.
Operating cash flow for the full year 2018 was $89.6 million,
compared to $63.4 million in 2017. The Company finished 2018 with
approximately $207.4 million of total debt and $82.0 million of
total cash. Net Debt, as defined in the non-GAAP reconciliation
below, was $127.5 million.
Financial Outlook
For the full year 2019, the Company expects GAAP revenue of
approximately $645 million to $655 million, Adjusted EBITDA in the
range of $131 million to $135 million, and Adjusted Diluted EPS to
be in the range of $2.30 to $2.36. The Company’s Adjusted Diluted
EPS and Adjusted EBITDA guidance assumes no significant changes in
foreign exchange rates.
For the first quarter of 2019, the Company expects GAAP revenue
of approximately $154 million to $157 million, Adjusted EBITDA in
the range of $27 million to $29 million, and Adjusted Diluted EPS
to be in the range of $0.44 to $0.49. The Company’s Adjusted
Diluted EPS and Adjusted EBITDA 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 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 future changes in the fair value of contingent
considerations; 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; 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 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 Wednesday, February
27, 2019 at 10:00 a.m. ET to discuss these results. 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 Presentations and Events page of
the Investor Relations 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 on the Investor
Relations section of the Company's website at www.novanta.com. The
replay will remain available until Friday, April 5, 2019.
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 and Operating Margin,
Adjusted Income before Income Taxes, Adjusted Income Tax Provision
and Effective Tax Rate, Adjusted Net Income Attributable to Novanta
Inc., Net of Tax, Adjusted Diluted EPS, Adjusted EBITDA, Adjusted
EBITDA Margin, Free Cash Flow, Free Cash Flow as a Percentage of
Net Income Attributable to Novanta Inc. 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 our confidence in our strategy and our
business model and our team’s commitment and ability to deliver
results; anticipated financial performance, including our financial
outlook for the first quarter and full year 2019; expectations
regarding market conditions; 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; our failure to
comply with data privacy regulations; 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 exposure to
increased tariffs, trade restrictions or taxes on our products; 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 impending withdrawal from the European
Union and the actions of the current U.S. government, including its
policies on trade tariffs and reactions from other countries to any
new tariffs imposed by the U.S.; 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 exposure to medical device regulation, which may
impede or hinder the approval or sale of our products and, in some
cases, may ultimately result in an inability to obtain approval of
certain products or may result in the recall or seizure of
previously approved products; changes in governmental regulation of
our businesses or products; 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; being subject to
U.S. federal income taxation even though we are a non-U.S.
corporation; tax audits by tax authorities; changes in tax laws,
and fluctuations in our effective tax rates; anticipated impact
from the U.S. Tax Cuts and Jobs Act; 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;
our ability to access cash and other assets of our subsidiaries;
provisions of our corporate documents that may delay or prevent a
change in control; 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, 2018, 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 medical and advanced industrial original
equipment manufacturers (“OEMs”) a competitive advantage. We
combine deep proprietary technology expertise and competencies in
photonics, vision, and precision 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. 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 December 31, Year
Ended December 31, 2018 2017 2018
2017 Revenue $ 156,178 $ 146,918 $ 614,337 $ 521,290
Cost of revenue 91,672 84,677 352,809
300,759 Gross profit 64,506 62,241 261,528
220,531 Operating expenses: Research and development and
engineering 13,280 11,795 51,024 41,673 Selling, general and
administrative 28,302 27,380 115,900 101,654 Amortization of
purchased intangible assets 4,012 2,683 15,550 12,096
Restructuring, acquisition and divestiture related costs
3,236 1,310 8,041 7,542 Total operating
expenses 48,830 43,168 190,515 162,965
Operating income 15,676 19,073 71,013 57,566 Interest income
(expense), net (2,499 ) (2,291 ) (9,814 ) (7,165 ) Foreign exchange
transaction gains (losses), net 311 (271 ) 147 (447 ) Other income
(expense), net 87 59 (44 ) (229 ) Gain on acquisition of business
— — — 26,409 Income before income taxes
13,575 16,570 61,302 76,134 Income tax provision 1,931
6,893 10,207 13,827 Consolidated net income
11,644 9,677 51,095 62,307 Less: Net income attributable to
noncontrolling interest — (812 ) (1,986 )
(2,256 ) Net income attributable to Novanta Inc. $ 11,644 $
8,865 $ 49,109 $ 60,051 Earnings (loss) per common share
attributable to Novanta Inc. Basic $ 0.33 $ (0.00 ) $ 1.46 $ 1.14
Diluted $ 0.33 $ (0.00 ) $ 1.43 $ 1.13 Weighted average
common shares outstanding—basic 34,897 34,842 34,913 34,817
Weighted average common shares outstanding—diluted 35,485 34,842
35,473 35,280
NOVANTA INC.CONDENSED
CONSOLIDATED BALANCE SHEETS(In thousands of U.S.
dollars)(Unaudited)
December 31,2018
December 31,2017 ASSETS Current Assets Cash
and cash equivalents $ 82,043 $ 100,057 Accounts receivable, net
83,955 81,482 Inventories 104,764 91,278 Other current assets
11,007 15,062 Total current assets 281,769 287,879
Property, plant and equipment, net 65,464 61,718 Intangible assets,
net 142,920 155,048 Goodwill 217,662 210,988 Other assets
11,761 11,070 Total assets $ 719,576 $ 726,703
LIABILITIES, NONCONTROLLING INTEREST AND STOCKHOLDERS’
EQUITY Current Liabilities Current portion of long-term debt $
4,535 $ 9,119 Accounts payable 50,733 39,793 Accrued expenses and
other current liabilities 48,928 49,256 Total current
liabilities 104,196 98,168 Long-term debt 202,843 225,500 Other
long-term liabilities 44,282 44,567 Total liabilities
351,321 368,235 Redeemable noncontrolling interest
— 46,923 Stockholders’ Equity: Total stockholders’
equity 368,255 311,545
Total liabilities, noncontrolling interest
and stockholders’ equity
$ 719,576 $ 726,703
NOVANTA INC.CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands of U.S.
dollars)(Unaudited)
Three Months EndedDecember
31,
Year Ended December 31, 2018 2017
2018 2017 Cash flows from operating
activities: Consolidated net income $ 11,644 $ 9,677 $ 51,095 $
62,307 Adjustments to reconcile consolidated net income to
net cash provided by operating
activities:
Depreciation and amortization 9,666 8,318 37,052 30,758 Share-based
compensation 2,239 1,270 7,714 5,493 Gain on acquisition of
business — — — (26,409 ) Deferred income taxes (2,767 ) 353 (6,076
) (2,560 ) Inventory acquisition fair value adjustment — — — 4,754
Other non-cash items 519 (144 ) 2,794 2,886 Changes in assets and
liabilities which provided/(used) cash,
excluding effects from business
acquisitions:
Accounts receivable 4,591 1,782 (1,156 ) (2,077 ) Inventories
(6,562 ) (1,781 ) (15,603 ) (13,587 ) Other operating assets and
liabilities 2,597 2,616 13,827 1,813
Net cash provided by operating activities 21,927
22,091 89,647 63,378
Cash flows from investing
activities: Purchases of property, plant and equipment (3,013 )
(2,592 ) (14,658 ) (9,094 ) Acquisition of businesses, net of cash
acquired and working capital adjustments — — (29,600 ) (168,332 )
Acquisition of assets (374 ) — (1,599 ) — Other investing
activities 54 2 267 46 Net cash used in
investing activities (3,333 ) (2,590 ) (45,590
) (177,380 )
Cash flows from financing activities:
Borrowings under revolving credit facility — — 55,253 176,769
Repayments of term loan and revolving credit facility (45,589 )
(11,300 ) (74,648 ) (26,925 ) Acquisition of noncontrolling
interest — — (30,800 ) — Repurchase of common stock (2,085 ) —
(5,850 ) (370 ) Other financing activities (216 )
(468 ) (4,119 ) (6,144 ) Net cash provided by (used
in) financing activities (47,890 ) (11,768 )
(60,164 ) 143,330 Effect of exchange rates on cash and cash
equivalents (475 ) 175 (1,907 ) 2,621
Increase (decrease) in cash and cash equivalents (29,771 ) 7,908
(18,014 ) 31,949 Cash and cash equivalents, beginning of period
111,814 92,149 100,057 68,108 Cash and
cash equivalents, end of period $ 82,043 $ 100,057 $ 82,043 $
100,057
NOVANTA INC.Revenue by
Reportable Segment(In thousands of U.S.
dollars)(Unaudited)
Three Months Ended
December 31, Year Ended December 31, 2018
2017 2018 2017
Revenue Photonics $ 62,161 $ 61,856 $ 249,339 $ 232,359
Vision 60,757 58,131 232,902 183,074 Precision Motion 33,260
26,931 132,096 105,857
Total $ 156,178
$ 146,918 $ 614,337 $ 521,290
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 December 31, Year Ended December
31, 2018 2017 2018
2017 Photonics Gross Profit (GAAP) $ 27,599 $ 28,694
$ 117,109 $ 106,117 Gross Profit Margin (GAAP) 44.4 % 46.4 % 47.0 %
45.7 % Amortization of intangible assets 664 1,020 2,750 4,005
Acquisition fair value adjustments — — —
699 Adjusted Gross Profit (Non-GAAP) $ 28,263 $ 29,714 $
119,859 $ 110,821 Adjusted Gross Profit Margin (Non-GAAP) 45.5 %
48.0 % 48.1 % 47.7 %
Vision Gross Profit (GAAP) $
22,876 $ 21,871 $ 87,198 $ 69,249 Gross Profit Margin (GAAP) 37.7 %
37.6 % 37.4 % 37.8 % Amortization of intangible assets 1,732 1,636
6,658 4,460 Acquisition fair value adjustments — —
— 4,055 Adjusted Gross Profit (Non-GAAP) $ 24,608 $
23,507 $ 93,856 $ 77,764 Adjusted Gross Profit Margin (Non-GAAP)
40.5 % 40.4 % 40.3 % 42.5 %
Precision Motion Gross
Profit (GAAP) $ 14,727 $ 12,006 $ 59,477 $ 46,564 Gross Profit
Margin (GAAP) 44.3 % 44.6 % 45.0 % 44.0 % Amortization of
intangible assets 203 90 652 359 Acquisition fair value adjustments
— — — — Adjusted Gross Profit
(Non-GAAP) $ 14,930 $ 12,096 $ 60,129 $ 46,923 Adjusted Gross
Profit Margin (Non-GAAP) 44.9 % 44.9 % 45.5 % 44.3 %
Unallocated Corporate and Shared Services Gross Profit
(GAAP) $ (696 ) $ (330 ) $ (2,256 ) $ (1,399 ) Amortization of
intangible assets — — — — Acquisition fair value adjustments
— — — — Adjusted Gross Profit (Non-GAAP) $
(696 ) $ (330 ) $ (2,256 ) $ (1,399 )
Novanta Inc.
Gross Profit (GAAP) $ 64,506 $ 62,241 $ 261,528 $ 220,531 Gross
Profit Margin (GAAP) 41.3 % 42.4 % 42.6 % 42.3 % Amortization of
intangible assets 2,599 2,746 10,060 8,824 Acquisition fair value
adjustments — — — 4,754 Adjusted Gross
Profit (Non-GAAP) $ 67,105 $ 64,987 $ 271,588 $ 234,109 Adjusted
Gross Profit Margin (Non-GAAP) 43.0 % 44.2 % 44.2 % 44.9 %
NOVANTA INC.Reconciliation of
GAAP to Non-GAAP Financial Measures(Amounts in thousands
except per share amounts)(Unaudited)
Adjusted
Operating Income and Adjusted EPS (Non-GAAP):
Three Months Ended December 31, 2018
Operatingincome
OperatingMargin
Income beforeIncome Taxes
Income TaxProvision
Effective TaxRate
Net IncomeAttributableto NovantaInc., Net
ofTax
Diluted EPS
GAAP results $
15,676 10.0 % $ 13,575
$ 1,931 14.2 % $
11,644
$
0.33
Non-GAAP Adjustments: Amortization of intangible
assets 6,611 4.2 % 6,611 Restructuring, divestiture and other costs
900 0.6 % 900 Acquisition related costs 2,336 1.5 % 2,336 Tax
effect on non-GAAP adjustments 1,210 Non-GAAP tax adjustments
372 Total non-GAAP
adjustments 9,847 6.3 % 9,847 1,582
8,265 0.23
Adjusted results (Non-GAAP)
$ 25,523 16.3 % $
23,422 $ 3,513 15.0 %
$ 19,909 $ 0.56 Weighted average
shares outstanding - Diluted 35,485
NOVANTA INC.Reconciliation of
GAAP to Non-GAAP Financial Measures(Amounts in thousands
except per share amounts)(Unaudited)
Adjusted
Operating Income and Adjusted EPS (Non-GAAP):
Three Months Ended December 31, 2017
Operatingincome
OperatingMargin
Income beforeIncome Taxes
Income TaxProvision
Effective TaxRate
Net IncomeAttributableto NovantaInc., Net
ofTax
Diluted EPS
GAAP results $ 19,073
13.0 % $ 16,570 $
6,893 41.6 % $ 8,865
Less: Redeemable noncontrolling interest redemption value
adjustment (8,941 )
Net income (loss)
attributable to Novanta Inc. after adjustment for redeemable
noncontrolling interest redemption value $ (76
) $ (0.00 ) Redeemable noncontrolling
interest redemption value adjustment 8,941 0.25
Net
income attributable to Novanta Inc. $ 8,865
Non-GAAP Adjustments: Amortization of intangible assets 5,429 3.7 %
5,429 Restructuring, divestiture and other costs 146 0.1 % 146
Acquisition related costs 1,164 0.8 % 1,164 Tax effect on non-GAAP
adjustments 2,845 Non-GAAP tax adjustments
(2,584 ) Total non-GAAP adjustments
6,739 4.6 % 6,739 261 6,478
0.19
Adjusted results (Non-GAAP) $
25,812 17.6 % $ 23,309
$ 7,154 30.7 % $
15,343 $ 0.44 Weighted average shares
outstanding - Diluted 34,842
NOVANTA INC.Reconciliation of
GAAP to Non-GAAP Financial Measures(Amounts in thousands
except per share amounts)(Unaudited)
Adjusted
Operating Income and Adjusted EPS (Non-GAAP):
Year Ended December 31, 2018
Operatingincome
OperatingMargin
Income beforeIncome Taxes
Income TaxProvision
Effective TaxRate
Net IncomeAttributableto NovantaInc., Net
ofTax
Diluted EPS
GAAP results $ 71,013
11.6 % $ 61,302 $
10,207 16.7 % $ 49,109
Less: Redeemable noncontrolling interest redemption value
adjustment 1,781
Net income attributable to
Novanta Inc. after adjustment for redeemable noncontrolling
interest redemption value $ 50,890 $
1.43 Redeemable noncontrolling interest redemption value
adjustment (1,781 ) (0.05 )
Net income attributable to
Novanta Inc. $ 49,109 Non-GAAP Adjustments:
Amortization of intangible assets 25,610 4.2 % 25,610
Restructuring, divestiture and other costs 2,025 0.3 % 2,025
Acquisition related costs 6,016 0.9 % 6,016 Tax effect on non-GAAP
adjustments 5,920 Non-GAAP tax adjustments
377 Total non-GAAP adjustments
33,651 5.4 % 33,651 6,297 27,354
0.78
Adjusted results (Non-GAAP) $
104,664 17.0 % $ 94,953
$ 16,504 17.4 % $
76,463 $ 2.16 Weighted average shares
outstanding - Diluted 35,473
NOVANTA INC.Reconciliation of
GAAP to Non-GAAP Financial Measures(Amounts in thousands
except per share amounts)(Unaudited)
Adjusted
Operating Income and Adjusted EPS (Non-GAAP):
Year Ended December 31, 2017
Operatingincome
OperatingMargin
Income beforeIncome Taxes
Income TaxProvision
Effective TaxRate
Net IncomeAttributableto NovantaInc., Net
ofTax
Diluted EPS
GAAP results $ 57,566
11.0 % $ 76,134 $
13,827 18.2 % $ 60,051
Less: Redeemable noncontrolling interest redemption value
adjustment (20,244 )
Net income attributable to
Novanta Inc. after adjustment for redeemable noncontrolling
interest redemption value $ 39,807 $
1.13 Redeemable noncontrolling interest redemption value
adjustment 20,244 0.57
Net income attributable to Novanta
Inc. $ 60,051 Non-GAAP Adjustments: Amortization
of intangible assets 20,920 4.0 % 20,920 Restructuring, divestiture
and other costs 346 0.1 % 346 Acquisition related costs 7,196 1.4 %
7,196 Acquisition fair value adjustments 4,754 0.9 % 4,754 Gain on
acquisition of business (26,409 ) Tax effect on non-GAAP
adjustments 9,641 Non-GAAP tax adjustments
759 Total non-GAAP adjustments
33,216 6.4 % 6,807 10,400 (3,593 )
(0.10 )
Adjusted results (Non-GAAP) $
90,782 17.4 % $ 82,941
$ 24,227 29.2 % $
56,458 $ 1.60 Weighted average shares
outstanding - Diluted 35,280
NOVANTA INC.Reconciliation of GAAP to
Non-GAAP Financial Measures(In thousands of U.S.
dollars)(Unaudited)
Adjusted EBITDA
(Non-GAAP):
Three Months EndedDecember
31,
Year Ended December 31, 2018 2017
2018 2017 Consolidated Net Income
(GAAP) $ 11,644 $ 9,677 $ 51,095 $ 62,307
Net Income
Margin 7.5 % 6.6 % 8.3 % 12.0
%
Interest (income) expense, net 2,499 2,291 9,814 7,165 Income tax
provision 1,931 6,893 10,207 13,827 Depreciation and amortization
9,666 8,318 37,052 30,758 Share-based compensation 2,172 1,270
7,647 5,493 Restructuring, acquisition and divestiture related
costs 3,236 1,310 8,041 7,542 Acquisition fair value adjustments —
— — 4,754 Gain on acquisition of business — — — (26,409
)
Other, net (398 ) 212 (103 ) 676
Adjusted EBITDA (Non-GAAP) $ 30,750 $ 29,971 $ 123,753 $
106,113
Adjusted EBITDA Margin (Non-GAAP) 19.7 % 20.4 % 20.1
% 20.4
%
Organic Revenue
Growth (Non-GAAP):
Three Months EndedDecember 31,
2018Compared toThree Months EndedDecember 31,
2017
Year EndedDecember 31,
2018Compared toYear EndedDecember 31,
2017
Reported growth (GAAP) 6.3 % 17.8 % Less: Change
attributable to acquisitions 2.2 % 10.2 % Plus: Change due to
foreign currency 1.1 % (0.6 )%
Organic growth
(Non-GAAP) 5.2 % 7.0 %
Net Debt
(Non-GAAP):
December 31, 2018 December 31, 2017 Total
Debt (GAAP) $ 207,378 $ 234,619 Plus: Deferred financing costs
2,205 3,159
Gross Debt 209,583 237,778 Less:
Cash and cash equivalents (82,043 ) (100,057 )
Net
Debt (Non-GAAP) $ 127,540 $ 137,721
Free Cash Flow
(Non-GAAP):
Three Months EndedDecember
31,
Year Ended December 31, 2018 2017
2018 2017 Cash Provided by Operating Activities
(GAAP) $ 21,927 $ 22,091 $ 89,647 $ 63,378 Less: Purchases of
property, plant and equipment (3,013 ) (2,592 ) (14,658 ) (9,094 )
Plus: Proceeds from sale of property, plant and equipment 54
2 267 46
Free Cash Flow (Non-GAAP) $
18,968 $ 19,501 $ 75,256 $ 54,330
Net Income Attributable to
Novanta Inc. (GAAP) $ 11,644 $ 8,865 $ 49,109 $ 60,051
Cash
Provided by Operating Activities as a Percentage of Net Income
Attributable to Novanta Inc. 188.3 % 249.2 % 182.5 % 105.5 %
Free Cash Flow as a Percentage of Net Income Attributable to
Novanta Inc. 162.9 % 220.0 % 153.2 % 90.5 %
Non-GAAP Measures
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 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. 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 exclude amortization of
acquired intangible assets 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 costs.
Adjusted Operating Income and Adjusted Operating
Margin
The calculation of Adjusted Operating Income and Adjusted
Operating Margin is displayed in the tables above. Adjusted
Operating Income and Adjusted Operating Margin exclude amortization
of acquired intangible assets 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 costs. The Company also excluded
restructuring, acquisition and divestiture 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 is
displayed in the tables above. The calculation of Adjusted Income
before Income Taxes excludes amortization of acquired intangible
assets, inventory fair value adjustments related to business
acquisitions, and restructuring, acquisition and divestiture
related costs for the reasons described for Adjusted Operating
Income and Adjusted Operating Margin above. In addition, the
Company excluded the prior year gain recognized upon increasing its
equity ownership position in Laser Quantum from approximately 41%
to approximately 76% because the gain is unusual and nonrecurring
in nature and should be excluded from the assessment of long-term
performance trends of the Company.
Non-GAAP Income Tax Provision and Effective Tax Rate
The Non-GAAP Income Tax Provision and Effective Tax Rate are
calculated based on the Adjusted Income 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 fair value
adjustments related to business acquisitions, and restructuring,
acquisition and divestiture related costs and prior year gain on
the Laser Quantum acquisition for the reasons described for
Adjusted Income 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 fair value adjustments related to business
acquisitions, restructuring, acquisition and divestiture related
costs, and prior year gain on the Laser Quantum acquisition,
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 redeemable noncontrolling interest redemption value
adjustment as (1) the adjustment is unusual; (2) the amount is
noncash; (3) the amount does not represent a measure of earnings
and is excluded from the determination of net income attributable
to Novanta Inc.; and (4) the Company believes it may not be
indicative of future adjustments and that investors may benefit
from an understanding of the Company's operating 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, prior year gain on the Laser
Quantum acquisition, other non-operating income (expense) items,
including foreign exchange gains (losses), net periodic pension
costs of the Company’s frozen U.K. defined benefit pension plan,
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.
Free Cash Flow and Free Cash Flow as a Percentage of Net
Income Attributable to Novanta, Inc.
The Company defines Free Cash Flow as cash provided by (used in)
operating activities less cash paid for purchases of property,
plant and equipment and plus cash proceeds from sale of property,
plant and equipment. Free Cash Flow as a Percentage of Net Income
Attributable to Novanta, Inc. is defined as Free Cash Flow divided
by Net Income Attributable to Novanta, Inc. Management believes
these non-GAAP 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/20190227005171/en/
Novanta Inc.Investor Relations Contact:Robert J.
Buckley(781) 266-5137
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