- Second Quarter 2019 GAAP Revenue of $155.1 million
- Second Quarter 2019 GAAP Net Income of $10.4
million
- Second Quarter 2019 GAAP Diluted Earnings Per Share of
$0.29
- Second Quarter 2019 Adjusted Earnings Per Share of
$0.54
- Second Quarter 2019 Adjusted EBITDA of $31.0
million
Novanta Inc. (Nasdaq: NOVT) (the “Company”), a trusted
technology partner to medical and advanced technology equipment
manufacturers, today reported financial results for the second
quarter 2019.
Financial Highlights
Three Months Ended
(In millions, except per share
amounts)
June 28,
June 29,
2019
2018
GAAP
Revenue
$
155.1
$
150.4
Operating Income
$
15.1
$
17.1
Net Income Attributable to Novanta
Inc.
$
10.4
$
11.0
Diluted EPS
$
0.29
$
0.32
Non-GAAP*
Adjusted Operating Income
$
25.8
$
25.9
Adjusted Diluted EPS
$
0.54
$
0.51
Adjusted EBITDA
$
31.0
$
30.4
*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.
Second Quarter
“Novanta delivered solid results in the second quarter, with
good execution by our teams and solid progress on our strategic
goals,” said Matthijs Glastra, Chief Executive Officer of Novanta.
“We continue to see strong high-teens growth in our Medical
businesses, mitigating the weakness in the broader Industrial
capital equipment markets.”
During the second quarter of 2019, Novanta generated GAAP
revenue of $155.1 million, an increase of $4.7 million, or 3.2%,
versus the second quarter of 2018. The Company’s acquisition
activities resulted in an increase in revenue of $1.7 million, or
1.2%, compared to the second quarter of 2018. Changes in foreign
currency exchange rates year over year adversely impacted our
revenue by $3.0 million, or 2.0%, during the second quarter of
2019. Our year-over-year Organic Revenue Growth, which excludes the
net impact of acquisitions and changes in foreign currency exchange
rates, was 4.0% for the second quarter of 2019 (see “Organic
Revenue Growth” in the non-GAAP reconciliation below).
In the second quarter of 2019, GAAP operating income was $15.1
million, compared to $17.1 million in the second quarter of 2018.
GAAP net income attributable to Novanta was $10.4 million in the
second quarter of 2019, compared to $11.0 million in the second
quarter of 2018. GAAP diluted earnings per share (“EPS”) was $0.29
in the second quarter of 2019, compared to $0.32 in the second
quarter of 2018.
Adjusted Diluted EPS was $0.54 in the second quarter of 2019,
compared to $0.51 in the second quarter of 2018. The Company ended
the second quarter of 2019 with 35.5 million weighted average
shares outstanding. Adjusted EBITDA was $31.0 million in the second
quarter of 2019, compared to $30.4 million in the second quarter of
2018.
Operating cash flow for the second quarter of 2019 was $15.4
million. The Company completed the second quarter of 2019 with
approximately $214.6 million of total debt and $66.1 million of
total cash. Net Debt, as defined in the non-GAAP reconciliation
below, was $150.2 million.
Financial Outlook
"Our third quarter is impacted by temporary lumpiness with a
large in vitro diagnostics customer and a temporary slowdown in
June bookings caused by the global trade uncertainties impacting
Industrial end market sales,” said Matthijs Glastra, Chief
Executive Officer of Novanta. “However, we expect to perform
significantly better in our fourth quarter driven by growth in our
Medical businesses and stronger bookings and backlog in our
Advanced Industrial businesses, helping us exit the year with
strong momentum.”
For the third quarter of 2019, the Company expects GAAP revenue
of approximately $154 million to $156 million, Adjusted EBITDA in
the range of $29 million to $31 million, and Adjusted Diluted EPS
to be in the range of $0.50 to $0.52. The Company’s Adjusted
Diluted EPS and Adjusted EBITDA guidance assumes no significant
changes in foreign exchange rates.
For the fourth quarter of 2019, the Company expects GAAP revenue
of approximately $166 million to $169 million, Adjusted EBITDA in
the range of $34 million to $36 million, and Adjusted Diluted EPS
to be in the range of $0.61 to $0.63. 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 Tuesday, August 6,
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 Monday, October 7, 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 anticipated financial performance, including
our financial outlook for the third quarter and fourth quarter
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; our failure to accurately forecast component and raw
material requirements leading to excess inventories or
interruptions and delays in the delivery of our products to
customers; 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; potential penalties for violating
foreign, U.S. federal, and state healthcare laws and regulations;
changes in governmental regulations affecting 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; 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; 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 publicly update or revise
any such forward-looking statements as a result of developments
occurring after the date of this document except as required by
law.
About Novanta
Novanta is a leading global supplier of core technology
solutions that give medical and advanced industrial original
equipment manufacturers (“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
June 28,
June 29,
2019
2018
Revenue
$
155,145
$
150,400
Cost of revenue
89,363
85,171
Gross profit
65,782
65,229
Operating expenses:
Research and development and
engineering
13,388
12,551
Selling, general and administrative
29,204
29,231
Amortization of purchased intangible
assets
3,772
3,893
Restructuring and acquisition related
costs
4,313
2,439
Total operating expenses
50,677
48,114
Operating income
15,105
17,115
Interest income (expense), net
(2,160
)
(2,561
)
Foreign exchange transaction gains
(losses), net
27
177
Other income (expense), net
(70
)
(46
)
Income before income taxes
12,902
14,685
Income tax provision
2,522
3,060
Consolidated net income
10,380
11,625
Less: Net income attributable to
noncontrolling interest
—
(625
)
Net income attributable to Novanta
Inc.
$
10,380
$
11,000
Earnings per common share attributable to
Novanta Inc.:
Basic
$
0.30
$
0.32
Diluted
$
0.29
$
0.32
Weighted average common shares
outstanding—basic
34,998
34,949
Weighted average common shares
outstanding—diluted
35,503
35,474
NOVANTA INC. CONDENSED
CONSOLIDATED BALANCE SHEETS (In thousands of U.S. dollars)
(Unaudited)
June 28,
December 31,
2019
2018
ASSETS
Current Assets
Cash and cash equivalents
$
66,093
$
82,043
Accounts receivable, net
88,831
83,955
Inventories
113,297
104,764
Prepaid expenses and other current
assets
16,690
11,007
Total current assets
284,911
281,769
Property, plant and equipment, net
64,630
65,464
Operating lease assets
38,633
—
Intangible assets, net
152,775
142,920
Goodwill
230,371
217,662
Other assets
12,053
11,761
Total assets
$
783,373
$
719,576
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current Liabilities
Current portion of long-term debt
$
—
$
4,535
Accounts payable
50,015
50,733
Accrued expenses and other current
liabilities
48,530
48,928
Total current liabilities
98,545
104,196
Long-term debt
214,562
202,843
Operating lease liabilities
35,108
—
Other long-term liabilities
48,976
44,282
Total liabilities
397,191
351,321
Stockholders’ Equity:
Total stockholders’ equity
386,182
368,255
Total liabilities and stockholders’
equity
$
783,373
$
719,576
NOVANTA INC. CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands of U.S.
dollars) (Unaudited)
Three Months Ended
June 28,
June 29,
2019
2018
Cash flows from operating
activities:
Consolidated net income
$
10,380
$
11,625
Adjustments to reconcile consolidated net
income to
net cash provided by operating
activities:
Depreciation and amortization
9,040
9,120
Share-based compensation
2,378
1,736
Deferred income taxes
(2,013
)
(1,456
)
Other
2,375
539
Changes in assets and liabilities which
(used)/provided cash,
excluding effects from business
acquisitions:
Accounts receivable
2,253
1,105
Inventories
(5,591
)
879
Other operating assets and liabilities
(3,426
)
(3,592
)
Cash provided by operating activities
15,396
19,956
Cash flows from investing
activities:
Acquisition of businesses, net of cash
acquired and working capital adjustments
(28,884
)
(27,445
)
Purchases of property, plant and
equipment
(3,172
)
(4,326
)
Other investing activities
17
20
Cash used in investing activities
(32,039
)
(31,751
)
Cash flows from financing
activities:
Borrowings under revolving credit
facility
23,643
30,272
Repayments of term loan and revolving
credit facility
(11,500
)
(16,532
)
Repurchase of common stock
(3,339
)
(1,929
)
Other financing activities
(972
)
(779
)
Cash provided by financing activities
7,832
11,032
Effect of exchange rates on cash and cash
equivalents
830
(3,103
)
Decrease in cash and cash equivalents
(7,981
)
(3,866
)
Cash and cash equivalents, beginning of
period
74,074
111,127
Cash and cash equivalents, end of
period
$
66,093
$
107,261
NOVANTA INC. Revenue by
Reportable Segment (In thousands of U.S. dollars)
(Unaudited)
Three Months Ended
June 28,
June 29,
2019
2018
Revenue
Photonics
$
58,286
$
64,062
Vision
65,895
53,823
Precision Motion
30,964
32,515
Total
$
155,145
$
150,400
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 28,
June 29,
2019
2018
Photonics
Gross Profit (GAAP)
$
27,308
$
30,737
Gross Profit Margin (GAAP)
46.9
%
48.0
%
Amortization of intangible assets
584
699
Acquisition fair value adjustments
—
—
Adjusted Gross Profit (Non-GAAP)
$
27,892
$
31,436
Adjusted Gross Profit Margin
(Non-GAAP)
47.9
%
49.1
%
Vision
Gross Profit (GAAP)
$
25,211
$
20,441
Gross Profit Margin (GAAP)
38.3
%
38.0
%
Amortization of intangible assets
1,586
1,625
Acquisition fair value adjustments
80
—
Adjusted Gross Profit (Non-GAAP)
$
26,877
$
22,066
Adjusted Gross Profit Margin
(Non-GAAP)
40.8
%
41.0
%
Precision Motion
Gross Profit (GAAP)
$
13,759
$
14,702
Gross Profit Margin (GAAP)
44.4
%
45.2
%
Amortization of intangible assets
276
165
Acquisition fair value adjustments
95
—
Adjusted Gross Profit (Non-GAAP)
$
14,130
$
14,867
Adjusted Gross Profit Margin
(Non-GAAP)
45.6
%
45.7
%
Unallocated Corporate and Shared
Services
Gross Profit (GAAP)
$
(496
)
$
(651
)
Amortization of intangible assets
—
—
Acquisition fair value adjustments
—
—
Adjusted Gross Profit (Non-GAAP)
$
(496
)
$
(651
)
Novanta Inc.
Gross Profit (GAAP)
$
65,782
$
65,229
Gross Profit Margin (GAAP)
42.4
%
43.4
%
Amortization of intangible assets
2,446
2,489
Acquisition fair value adjustments
175
—
Adjusted Gross Profit (Non-GAAP)
$
68,403
$
67,718
Adjusted Gross Profit Margin
(Non-GAAP)
44.1
%
45.0
%
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 June 28,
2019
Operating Income
Operating Margin
Income before Income Taxes
Income Tax Provision
Effective Tax Rate
Net Income Attributable to
Novanta Inc., Net of Tax
Diluted EPS
GAAP results
$
15,105
9.7
%
$
12,902
$
2,522
19.5
%
$
10,380
$
0.29
Non-GAAP Adjustments:
Amortization of intangible assets
6,218
4.0
%
6,218
Restructuring costs
2,134
1.4
%
2,134
Acquisition related costs
2,179
1.4
%
2,179
Acquisition fair value adjustments
175
0.1
%
175
Tax effect on non-GAAP adjustments
1,795
Non-GAAP tax adjustments
15
Total non-GAAP adjustments
10,706
6.9
%
10,706
1,810
8,896
0.25
Adjusted results (Non-GAAP)
$
25,811
16.6
%
$
23,608
$
4,332
18.3
%
$
19,276
$
0.54
Weighted average shares outstanding -
Diluted
35,503
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 June 29,
2018
Operating Income
Operating Margin
Income before Income Taxes
Income Tax Provision
Effective Tax Rate
Net Income Attributable to
Novanta Inc., Net of Tax
Diluted EPS
GAAP results
$
17,115
11.4
%
$
14,685
$
3,060
20.8
%
$
11,000
Less: Redeemable noncontrolling interest
redemption value adjustment
303
Net income attributable to Novanta Inc.
after adjustment for redeemable noncontrolling interest redemption
value
$
11,303
$
0.32
Redeemable noncontrolling interest
redemption value adjustment
(303
)
(0.01
)
Net income attributable to Novanta
Inc.
$
11,000
Non-GAAP Adjustments:
Amortization of intangible assets
6,382
4.2
%
6,382
Restructuring costs
988
0.7
%
988
Acquisition related costs
1,451
0.9
%
1,451
Tax effect on non-GAAP adjustments
1,590
Non-GAAP tax adjustments
14
Total non-GAAP adjustments
8,821
5.8
%
8,821
1,604
7,217
0.20
Adjusted results (Non-GAAP)
$
25,936
17.2
%
$
23,506
$
4,664
19.8
%
$
18,217
$
0.51
Weighted average shares outstanding -
Diluted
35,474
NOVANTA INC. Reconciliation of
GAAP to Non-GAAP Financial Measures (In thousands of U.S. dollars)
(Unaudited)
Adjusted EBITDA
(Non-GAAP):
Three Months Ended
June 28,
June 29,
2019
2018
Consolidated Net Income (GAAP)
$
10,380
$
11,625
Net Income Margin
6.7
%
7.7
%
Interest (income) expense, net
2,160
2,561
Income tax provision
2,522
3,060
Depreciation and amortization
9,040
9,120
Share-based compensation
2,378
1,736
Restructuring and acquisition related
costs
4,313
2,439
Acquisition fair value adjustments
175
—
Other, net
43
(131
)
Adjusted EBITDA (Non-GAAP)
$
31,011
$
30,410
Adjusted EBITDA Margin
(Non-GAAP)
20.0
%
20.2
%
Organic Revenue
Growth (Non-GAAP):
Three Months Ended June 28,
2019 Compared to Three Months Ended June 29, 2018
Reported Growth (GAAP)
3.2
%
Less: Change attributable to
acquisitions
1.2
%
Plus: Change due to foreign currency
2.0
%
Organic Growth (Non-GAAP)
4.0
%
Net Debt
(Non-GAAP):
June 28,
December 31,
2019
2018
Total Debt (GAAP)
$
214,562
$
207,378
Plus: Deferred financing costs
1,683
2,205
Gross Debt
216,245
209,583
Less: Cash and cash equivalents
(66,093
)
(82,043
)
Net Debt (Non-GAAP)
$
150,152
$
127,540
Free Cash Flow
(Non-GAAP):
Three Months Ended
June 28,
June 29,
2019
2018
Cash Provided by Operating Activities
(GAAP)
$
15,396
$
19,956
Less: Purchases of property, plant and
equipment
(3,172
)
(4,326
)
Plus: Proceeds from sale of property,
plant and equipment
17
20
Free Cash Flow (Non-GAAP)
$
12,241
$
15,650
Net Income Attributable to Novanta Inc.
(GAAP)
$
10,380
$
11,000
Cash Provided by Operating Activities
as a Percentage of Net Income Attributable to Novanta Inc.
148.3
%
181.4
%
Free Cash Flow as a Percentage of Net
Income Attributable to Novanta Inc.
117.9
%
142.3
%
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. 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 and acquisition related costs due to the significant
changes that have occurred outside of the Company’s day-to-day
business for the reasons described above in the introductory
paragraphs of the “Use of Non-GAAP Financial Measures.”
Adjusted Income before Income Taxes
The calculation of Adjusted Income before Income Taxes 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 and acquisition related costs for
the reasons described for Adjusted Operating Income and Adjusted
Operating Margin above.
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 the
Company’s 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 and
acquisition related costs. 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 the
Company’s 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 and acquisition 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 the
Company’s 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 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 and acquisition related costs, acquisition fair value
adjustments, other non-operating income (expense) items, including
foreign exchange gains (losses) and net periodic pension costs of
the Company’s frozen U.K. defined benefit pension plan for the
reasons described above in the introductory paragraphs of the “Use
of Non-GAAP Financial Measures.”
Adjusted EBITDA includes 100% of the results of the Company’s
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 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.
* * * *
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version on businesswire.com: https://www.businesswire.com/news/home/20190806005162/en/
Novanta Inc. Investor Relations Contact: Robert J.
Buckley (781) 266-5137
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