- First Quarter 2020 GAAP Revenue of $155.5 million
- First Quarter 2020 GAAP Net Income of $11.9 million
- First Quarter 2020 GAAP Diluted Earnings Per Share of
$0.34
- First Quarter 2020 Adjusted Earnings Per Share of
$0.51
- First Quarter 2020 Adjusted EBITDA of $27.6 million
Novanta Inc. (Nasdaq: NOVT) (the “Company”), a trusted
technology partner to medical and advanced technology equipment
manufacturers, today reported financial results for the first
quarter 2020.
Financial
Highlights
Three Months Ended
(In millions, except per share
amounts)
April 3,
March 29,
2020
2019
GAAP
Revenue
$
155.5
$
157.2
Operating Income
$
13.3
$
14.4
Consolidated Net Income
$
11.9
$
12.3
Diluted EPS
$
0.34
$
0.35
Non-GAAP*
Adjusted Operating Income
$
21.3
$
22.8
Adjusted Diluted EPS
$
0.51
$
0.53
Adjusted EBITDA
$
27.6
$
28.2
*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.
First Quarter
“We are pleased with the company’s performance in the first
quarter, especially considering the significant challenges caused
by the COVID-19 pandemic. In the first quarter, we delivered above
our guidance for revenue, Adjusted EBITDA, and Adjusted EPS, and I
am very proud of how our employees have stepped up and pulled
together in the face of adversity,” said Matthijs Glastra, Chief
Executive Officer of Novanta. “Our most important concern is the
health and well-being of our employees, and we have taken swift
actions to ensure their safety. Around the world, all of our
factories continue to operate, delivering essential products to our
customers who serve medical end markets. We have taken decisive
actions to protect our employees, our operations, and our financial
position, to help weather the current downturn, and emerge strong
when the global economy begins to recover.”
During the first quarter of 2020, Novanta generated GAAP revenue
of $155.5 million, a decrease of $1.7 million, or 1.1%, versus the
first quarter of 2019. The Company’s acquisition activities
resulted in an increase in revenue of $6.6 million, or 4.2%,
compared to the first quarter of 2019. Changes in foreign currency
exchange rates year over year adversely impacted our revenue by
$1.5 million, or 1.0%, during the first quarter of 2020. Our
year-over-year Organic Revenue Growth, which excludes the net
impact of acquisitions and changes in foreign currency exchange
rates, was a decrease of 4.3% for the first quarter of 2020 (see
“Organic Revenue Growth” in the non-GAAP reconciliations
below).
In the first quarter of 2020, GAAP operating income was $13.3
million, compared to $14.4 million in the first quarter of 2019.
GAAP net income was $11.9 million in the first quarter of 2020,
compared to $12.3 million in the first quarter of 2019. GAAP
diluted earnings per share (“EPS”) was $0.34 in the first quarter
of 2020, compared to $0.35 in the first quarter of 2019.
Adjusted Diluted EPS was $0.51 in the first quarter of 2020,
compared to $0.53 in the first quarter of 2019. The Company ended
the first quarter of 2020 with 35.6 million diluted weighted
average shares outstanding. Adjusted EBITDA was $27.6 million in
the first quarter of 2020, compared to $28.2 million in the first
quarter of 2019.
Operating cash flow for the first quarter of 2020 was $17.6
million, compared to $5.5 million in the first quarter of 2019. The
Company completed the first quarter of 2020 with approximately
$211.6 million of total debt and $73.7 million of total cash. Net
Debt, as defined in the non-GAAP reconciliation below, was $143.1
million.
Financial Position
Novanta believes it has a strong balance sheet and has
positioned the Company well to weather the economic disruptions
caused by the COVID-19 pandemic. The Company believes that it has
ample liquidity, with approximately $74 million in cash and cash
equivalents as of the first quarter of 2020, and $375 million
borrowing capacity under the Company’s revolving credit facility.
The Company has no debt maturing until December 2024. In addition,
the Company has focused its near-term financial objectives on
maximizing free cash flow and Adjusted EBITDA to position the
Company well for the eventual recovery from the pandemic.
Given this, Novanta continues to focus on capital allocation
decisions that drive our long-term strategies, including investing
in our people, our capabilities and culture, investing in our new
product development pipeline, as well as actively looking for the
right strategic acquisition opportunities.
“While we expect the short-term impact of the pandemic to our
financial results to be significant, it is consistent with what our
customers will see across more than 45 different application
areas,” said Robert Buckley, Chief Financial Officer. “We continue
to lean into the near-term headwinds, as we are confident this will
position us well in a recovery and thereafter. We remain focused on
leveraging our financial strength and our innovation to further our
relationships with our customers, on attracting and retaining the
best talent, and on identifying additional innovative companies to
welcome to the Novanta family.”
Financial Guidance
For the second quarter of 2020, the Company expects GAAP revenue
of approximately $130 million to $142 million. “In the first
quarter, we saw strong bookings and shipments across the board,
mostly driven by customers who wanted to secure additional
inventory to protect against pandemic caused supply disruptions,”
said Matthijs Glastra, “Although this led to strong performance in
the first quarter, we believe it will result in lower sales in the
second quarter. Regardless, our balance sheet is strong, as is our
innovation line-up, and our portfolio is well positioned with
exposure to long term secular trends in robotics and automation,
healthcare productivity and precision medicine.”
Due to the impact of the COVID-19 pandemic on Novanta’s
business, the uncertain duration and scope of the pandemic, and the
uncertain timing of the global public health and economic recovery,
the Company is not able at this time to reliably estimate the
future impact on its operations and other financial results,
including for the full year 2020.
Conference Call Information
The Company will host a conference call on Tuesday, May 12, 2020
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, July 6, 2020.
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/(Benefit) and Effective Tax Rate, Adjusted Consolidated
Net Income, Adjusted Diluted EPS, Adjusted EBITDA, Adjusted EBITDA
Margin, Free Cash Flow, Free Cash Flow as a Percentage of
Consolidated Net Income and Net Debt.
The Company believes that these non-GAAP financial measures
provide useful and supplementary information to investors regarding
the operating performance of the Company. It is management’s belief
that these non-GAAP financial measures would be particularly useful
to investors because of the significant changes that have occurred
outside of the Company’s day-to-day business in accordance with the
execution of the Company’s strategy. This strategy includes
streamlining the Company’s existing operations through site and
functional consolidations, strategic divestitures and product line
closures, expanding the Company’s business through significant
internal investments, and broadening the Company’s product and
service offerings through 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 financial
measures provide greater transparency and insight into management’s
method of analysis.
Non-GAAP financial measures should not be considered as
substitutes for, or superior to, measures of financial performance
prepared in accordance with GAAP. They are limited in value because
they exclude charges that have a material effect on the Company’s
reported results and, therefore, should not be relied upon as the
sole financial measures to evaluate the Company’s financial
results. The non-GAAP financial measures are meant to supplement,
and to be viewed in conjunction with, GAAP financial measures.
Investors are encouraged to review the reconciliation of these
non-GAAP financial measures to their most directly comparable GAAP
financial measures as provided in the tables accompanying this
press release.
Safe Harbor and Forward-Looking Information
Certain statements in this release are “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995 and are based on current expectations and
assumptions that are subject to risks and uncertainties. All
statements contained in this news release that do not relate to
matters of historical fact should be considered forward-looking
statements, and are generally identified by words such as “expect,”
“intend,” “anticipate,” “estimate,” “believe,” “future,” “could,”
“should,” “plan,” “aim,” and other similar expressions. These
forward-looking statements include, but are not limited to,
statements regarding anticipated financial performance, including
our financial outlook for the second quarter 2020; our estimates of
the impact of the COVID-19 pandemic on our revenues; the Company’s
liquidity position to weather and recover from the disruptions
caused by the COVID-19 pandemic; expectations regarding market
conditions; our product development pipeline; acquisition
opportunities; 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 the
COVID-19 pandemic and events outside our control; 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 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; changes in tax
laws, and fluctuations in our effective tax rates; any need for
additional capital to adequately respond to business challenges or
opportunities and repay or refinance our existing indebtedness,
which may not be available on acceptable terms or at all; our
existing indebtedness limiting our ability to engage in certain
activities; volatility in the market price for our common shares;
and our failure to maintain appropriate internal controls in the
future.
Other important risk factors that could affect the outcome of
the events set forth in these statements and that could affect the
Company’s operating results and financial condition are discussed
in Item 1A of our Annual Report on Form 10-K for the fiscal year
ended December 31, 2019, as updated by our Quarterly Report on Form
10-Q for the quarter ended April 3, 2020, 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
April 3,
March 29,
2020
2019
Revenue
$
155,468
$
157,186
Cost of revenue
91,023
90,897
Gross profit
64,445
66,289
Operating expenses:
Research and development and
engineering
15,334
13,997
Selling, general and administrative
30,755
31,847
Amortization of purchased intangible
assets
3,445
3,998
Restructuring and acquisition related
costs
1,661
2,054
Total operating expenses
51,195
51,896
Operating income
13,250
14,393
Interest income (expense), net
(1,678
)
(2,044
)
Foreign exchange transaction gains
(losses), net
254
41
Other income (expense), net
83
(68
)
Income before income taxes
11,909
12,322
Income tax provision/(benefit)
(38
)
69
Consolidated net income
$
11,947
$
12,253
Earnings per common share:
Basic
$
0.34
$
0.35
Diluted
$
0.34
$
0.35
Weighted average common shares
outstanding—basic
35,152
34,958
Weighted average common shares
outstanding—diluted
35,561
35,474
NOVANTA INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands of U.S.
dollars)
(Unaudited)
April 3,
December 31,
2020
2019
ASSETS
Current Assets
Cash and cash equivalents
$
73,701
$
78,944
Accounts receivable, net
89,556
91,078
Inventories
112,003
116,618
Prepaid expenses and other current
assets
21,625
17,872
Total current assets
296,885
304,512
Property, plant and equipment, net
74,780
77,556
Operating lease assets
34,332
35,180
Intangible assets, net
155,498
166,175
Goodwill
268,719
274,710
Other assets
11,754
11,603
Total assets
$
841,968
$
869,736
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current Liabilities
Current portion of long-term debt
$
4,871
$
5,031
Accounts payable
48,419
52,585
Accrued expenses and other current
liabilities
82,126
77,230
Total current liabilities
135,416
134,846
Long-term debt
206,752
215,334
Operating lease liabilities
33,036
34,108
Other long-term liabilities
53,661
68,276
Total liabilities
428,865
452,564
Stockholders’ Equity:
Total stockholders’ equity
413,103
417,172
Total liabilities and stockholders’
equity
$
841,968
$
869,736
NOVANTA INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands of U.S.
dollars)
(Unaudited)
Three Months Ended
April 3,
March 29,
2020
2019
Cash flows from operating
activities:
Consolidated net income
$
11,947
$
12,253
Adjustments to reconcile consolidated net
income to
net cash provided by operating
activities:
Depreciation and amortization
9,330
9,074
Share-based compensation
3,199
2,727
Deferred income taxes
(621
)
(24
)
Other
1,357
520
Changes in assets and liabilities which
(used)/provided cash,
excluding effects from business
acquisitions:
Accounts receivable
343
(5,403
)
Inventories
1,919
(2,571
)
Other operating assets and liabilities
(9,719
)
(11,119
)
Net cash provided by operating
activities
17,755
5,457
Cash flows from investing
activities:
Purchases of property, plant and
equipment
(2,319
)
(2,429
)
Payment of contingent consideration
related to acquisition of technology assets
(2,632
)
-
Other investing activities
(150
)
24
Net cash used in investing activities
(5,101
)
(2,405
)
Cash flows from financing
activities:
Repayments of term loan and revolving
credit facilities
(1,250
)
(4,600
)
Repurchase of common stock
(5,500
)
—
Other financing activities
(9,295
)
(6,030
)
Net cash provided by (used in) financing
activities
(16,045
)
(10,630
)
Effect of exchange rates on cash and cash
equivalents
(1,852
)
(391
)
Increase (decrease) in cash and cash
equivalents
(5,243
)
(7,969
)
Cash and cash equivalents, beginning of
period
78,944
82,043
Cash and cash equivalents, end of
period
$
73,701
$
74,074
NOVANTA INC.
Revenue by Reportable
Segment
(In thousands of U.S.
dollars)
(Unaudited)
Three Months Ended
April 3,
March 29,
2019
2019
Revenue
Photonics
$
55,140
$
59,225
Vision
69,008
65,936
Precision Motion
31,320
32,025
Total
$
155,468
$
157,186
NOVANTA INC.
Reconciliation of GAAP to
Non-GAAP Financial Measures
(In thousands of U.S.
dollars)
(Unaudited)
Adjusted Gross
Profit and Adjusted Gross Profit Margin by Reportable Segment
(Non-GAAP):
Three Months Ended
April 3,
March 29,
2020
2019
Photonics
Gross Profit (GAAP)
$
24,661
$
27,314
Gross Profit Margin (GAAP)
44.7
%
46.1
%
Amortization of intangible assets
754
592
Acquisition fair value adjustments
188
—
Adjusted Gross Profit (Non-GAAP)
$
25,603
$
27,906
Adjusted Gross Profit Margin
(Non-GAAP)
46.4
%
47.1
%
Vision
Gross Profit (GAAP)
$
26,575
$
25,973
Gross Profit Margin (GAAP)
38.5
%
39.4
%
Amortization of intangible assets
1,574
1,522
Acquisition fair value adjustments
—
—
Adjusted Gross Profit (Non-GAAP)
$
28,149
$
27,495
Adjusted Gross Profit Margin
(Non-GAAP)
40.8
%
41.7
%
Precision Motion
Gross Profit (GAAP)
$
13,908
$
13,521
Gross Profit Margin (GAAP)
44.4
%
42.2
%
Amortization of intangible assets
406
197
Acquisition fair value adjustments
—
—
Adjusted Gross Profit (Non-GAAP)
$
14,314
$
13,718
Adjusted Gross Profit Margin
(Non-GAAP)
45.7
%
42.8
%
Unallocated Corporate and Shared
Services
Gross Profit (GAAP)
$
(699
)
$
(519
)
Amortization of intangible assets
—
—
Acquisition fair value adjustments
—
—
Adjusted Gross Profit (Non-GAAP)
$
(699
)
$
(519
)
Novanta Inc.
Gross Profit (GAAP)
$
64,445
$
66,289
Gross Profit Margin (GAAP)
41.5
%
42.2
%
Amortization of intangible assets
2,734
2,311
Acquisition fair value adjustments
188
—
Adjusted Gross Profit (Non-GAAP)
$
67,367
$
68,600
Adjusted Gross Profit Margin
(Non-GAAP)
43.3
%
43.6
%
NOVANTA INC.
Reconciliation of GAAP to
Non-GAAP Financial Measures
(Amounts in thousands except
per share amounts)
(Unaudited)
Adjusted
Operating Income and Adjusted Diluted EPS
(Non-GAAP):
Three Months Ended April 3,
2020
Operating Income
Operating Margin
Income before Income Taxes
Income Tax
Provision/(Benefit)
Effective Tax Rate
Consolidated Net Income
Diluted EPS
GAAP results
$
13,250
8.5
%
$
11,909
$
(38
)
-0.3
%
$
11,947
$
0.34
Non-GAAP Adjustments:
Amortization of intangible assets
6,179
4.0
%
6,179
Restructuring costs
655
0.4
%
655
Acquisition related costs
1,006
0.7
%
1,006
Acquisition fair value adjustments
188
0.1
%
188
Foreign exchange transaction (gains)
losses, net
(254
)
Tax effect on non-GAAP adjustments
1,484
Non-GAAP tax adjustments
32
Total non-GAAP adjustments
8,028
5.2
%
7,774
1,516
6,258
0.17
Adjusted results (Non-GAAP)
$
21,278
13.7
%
$
19,683
$
1,478
7.5
%
$
18,205
$
0.51
Weighted average shares outstanding -
Diluted
35,561
NOVANTA INC.
Reconciliation of GAAP to
Non-GAAP Financial Measures
(Amounts in thousands except
per share amounts)
(Unaudited)
Adjusted
Operating Income and Adjusted Diluted EPS
(Non-GAAP):
Three Months Ended March 29,
2019
Operating Income
Operating Margin
Income before Income Taxes
Income Tax
Provision/(Benefit)
Effective Tax Rate
Consolidated Net Income
Diluted EPS
GAAP results
$
14,393
9.2
%
$
12,322
$
69
0.6
%
$
12,253
$
0.35
Non-GAAP Adjustments:
Amortization of intangible assets
6,309
4.0
%
6,309
Restructuring costs
1,236
0.8
%
1,236
Acquisition related costs
818
0.5
%
818
Foreign exchange transaction (gains)
losses, net
(41
)
Tax effect on non-GAAP adjustments
1,598
Non-GAAP tax adjustments
80
Total non-GAAP adjustments
8,363
5.3
%
8,322
1,678
6,644
0.18
Adjusted results (Non-GAAP)
$
22,756
14.5
%
$
20,644
$
1,747
8.5
%
$
18,897
$
0.53
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
April 3,
March 29,
2020
2019
Consolidated Net Income (GAAP)
$
11,947
$
12,253
Net Income Margin
7.7
%
7.8
%
Interest (income) expense, net
1,678
2,044
Income tax provision/(benefit)
(38
)
69
Depreciation and amortization
9,330
9,074
Share-based compensation
3,199
2,727
Restructuring and acquisition related
costs
1,661
2,054
Acquisition fair value adjustments
188
—
Other, net
(337
)
27
Adjusted EBITDA (Non-GAAP)
$
27,628
$
28,248
Adjusted EBITDA Margin
(Non-GAAP)
17.8
%
18.0
%
Organic Revenue
Growth (Non-GAAP):
Three Months Ended April 3,
2020 Compared to Three Months Ended March 29, 2019
Reported Revenue Growth/(Decline)
(GAAP)
(1.1
)%
Less: Change attributable to
acquisitions
4.2
%
Plus: Change due to foreign currency
1.0
%
Organic Revenue Growth/(Decline)
(Non-GAAP)
(4.3
)%
Net Debt
(Non-GAAP):
April 3,
December 31,
2020
2019
Total Debt (GAAP)
$
211,623
$
220,365
Plus: Deferred financing costs
5,209
4,187
Gross Debt
216,832
224,552
Less: Cash and cash equivalents
(73,701
)
(78,944
)
Net Debt (Non-GAAP)
$
143,131
$
145,608
Free Cash Flow
(Non-GAAP):
Three Months Ended
April 3,
March 29,
2020
2019
Cash Provided by Operating Activities
(GAAP)
$
17,755
$
5,457
Less: Purchases of property, plant and
equipment
(2,319
)
(2,429
)
Plus: Proceeds from sale of property,
plant and equipment
-
24
Free Cash Flow (Non-GAAP)
$
15,436
$
3,052
Consolidated Net Income (GAAP)
$
11,947
$
12,253
Cash Provided by Operating Activities
as a Percentage of Consolidated Net Income
148.6
%
44.5
%
Free Cash Flow as a Percentage of
Consolidated Net Income
129.2
%
24.9
%
Non-GAAP Financial
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 financial measure, when taken together with our GAAP
financial measures, allows the Company and its investors to better
measure the Company’s performance and evaluate long-term
performance trends. Organic revenue growth also facilitates easier
comparisons of the Company’s performance with prior and future
periods and relative comparisons to its peers. The Company excludes
the effect of foreign currency translation from these measures
because foreign currency translation is subject to volatility and
can obscure underlying business trends. The Company excludes the
effect of acquisitions and divestitures because these activities
can vary dramatically between reporting periods and between the
Company and its peers, which the Company believes makes comparisons
of long-term performance trends difficult for management and
investors. Organic Revenue Growth is also used as a performance
metric to determine bonus payments for senior management and
employees.
Adjusted Gross Profit and Adjusted Gross Profit
Margin
The calculation of Adjusted Gross Profit and Adjusted Gross
Profit Margin 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
underlying trend and performance of our businesses.
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
underlying trend and performance of our businesses.. 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, restructuring and acquisition related costs, and
foreign exchange transaction gains (losses) for the reasons
described for Adjusted Operating Income 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 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 Consolidated Net Income
The calculation of Adjusted Consolidated Net Income, is
displayed in the tables above. Because income before income taxes
is included in determining Consolidated Net Income, the calculation
of Adjusted Consolidated Net Income also excludes amortization of
acquired intangible assets, inventory fair value adjustments
related to business acquisitions, restructuring and acquisition
related costs, and foreign currency transaction gains (losses). 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 Consolidated Net Income 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, foreign currency transaction gains
(losses), 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
Consolidated Net Income.
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 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
Consolidated Net Income
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 Consolidated Net
Income is defined as Free Cash Flow divided by Consolidated Net
Income. Management believes these non-GAAP financial measures are
important indicators of the Company’s liquidity as well as its
ability to service its outstanding debt, and to fund future
growth.
Net Debt
The Company defines Net Debt as its total debt as reported on
the consolidated balance sheet plus unamortized deferred financing
costs and less its cash and cash equivalents as of the end of the
period presented. Management uses Net Debt to monitor the Company’s
outstanding debt obligations that could not be satisfied by its
cash and cash equivalents on hand.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200512005159/en/
Novanta Inc. Investor Relations Contact: Robert J.
Buckley (781) 266-5137
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