- Full Year 2020 GAAP Revenue of $591 million
- Full Year 2020 GAAP Net Income of $45 million
- Full Year 2020 GAAP Diluted Earnings Per Share of
$1.25
- Full Year 2020 Adjusted Earnings Per Share of $1.95
- Full Year 2020 Adjusted EBITDA of $121 million
Novanta Inc. (Nasdaq: NOVT) (“Novanta” or the “Company”), a
trusted technology partner to medical and advanced technology
equipment manufacturers, today reported financial results for the
fourth quarter and full year 2020.
Financial Highlights
Three Months Ended December
31,
Year Ended December
31,
(In millions, except per share
amounts)
2020
2019
2020
2019
GAAP
Revenue
$
147.5
$
159.7
$
590.6
$
626.1
Operating Income
$
17.1
$
13.0
$
55.9
$
55.3
Net Income
$
12.7
$
9.2
$
44.5
$
40.8
Diluted EPS
$
0.35
$
0.26
$
1.25
$
1.15
Non-GAAP*
Adjusted Operating Income
$
22.0
$
25.4
$
85.3
$
99.6
Adjusted Diluted EPS
$
0.53
$
0.55
$
1.95
$
2.14
Adjusted EBITDA
$
32.4
$
30.5
$
121.0
$
120.7
*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.
“We are very pleased with the company’s performance in 2020,
despite the challenges caused by the COVID-19 pandemic,” said
Matthijs Glastra, Chief Executive Officer of Novanta. “The fourth
quarter played out as expected; revenue increased sequentially, and
our customer orders were up 26% sequentially, giving us a 1.09
book-to-bill. We also expanded our Adjusted EBITDA Margins and once
again had record cash flows. This performance gives us significant
confidence as we enter the new year, and we are excited to continue
to execute on our strategy as a company.”
Fourth Quarter
During the fourth quarter of 2020, Novanta generated GAAP
revenue of $147.5 million, a decrease of $12.2 million, or 7.6%,
versus the fourth quarter of 2019. There was no acquisition impact
on revenue in the fourth quarter of 2020 from our acquisition
activities. Changes in foreign currency exchange rates year over
year favorably impacted our revenue by $4.0 million, or 2.5%,
during the fourth 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 10.1%
for the fourth quarter of 2020 (see “Organic Revenue Growth” in the
non-GAAP reconciliation below).
In the fourth quarter of 2020, GAAP operating income was $17.1
million, compared to $13.0 million in the fourth quarter of 2019.
GAAP net income was $12.7 million in the fourth quarter of 2020,
compared to $9.2 million in the fourth quarter of 2019. GAAP
diluted earnings per share (“EPS”) was $0.35 in the fourth quarter
of 2020, compared to $0.26 in the fourth quarter of 2019.
Adjusted Diluted EPS was $0.53 in the fourth quarter of 2020,
compared to $0.55 in the fourth quarter of 2019. The Company ended
the fourth quarter of 2020 with 35.8 million diluted weighted
average shares outstanding. Adjusted EBITDA was $32.4 million in
the fourth quarter of 2020, compared to $30.5 million in the fourth
quarter of 2019.
Operating cash flow for the fourth quarter of 2020 was $46.6
million, compared to $35.4 million for the fourth quarter of
2019.
Full Year
For the full year 2020, Novanta generated GAAP revenue of $590.6
million, a decrease of $35.5 million, or 5.7%, versus the full year
2019. The Company’s acquisition activities resulted in an increase
in revenue of $8.4 million, or 1.3%. Changes in foreign currency
exchange rates year over year favorably impacted our revenue by
$3.7 million, or 0.6%, in 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 7.6% for the
full year 2020 (see “Organic Revenue Growth” in the non-GAAP
reconciliation below).
For the full year 2020, GAAP operating income was $55.9 million,
compared to $55.3 million for 2019. GAAP net income was $44.5
million for the full year 2020, compared to $40.8 million for 2019.
GAAP diluted EPS was $1.25 for the full year 2020, compared to
$1.15 for 2019.
Adjusted Diluted EPS was $1.95 for the full year 2020, compared
to $2.14 for 2019. The diluted weighted average shares outstanding
for the full year 2020 was 35.7 million. Adjusted EBITDA was $121.0
million for the full year 2020, compared to $120.7 million for
2019.
Operating cash flow for the full year 2020 was $140.2 million.
The Company completed 2020 with approximately $200.4 million of
total debt and $125.1 million of total cash. Net Debt, as defined
in the non-GAAP reconciliation below, was $79.8 million.
Financial Outlook
“We are encouraged by the increase in demand we are seeing
across a number of applications, particularly in our advanced
industrial markets. We expect to launch a record number of new
products in 2021, double the number released in 2020, and we
believe these will contribute to our growth trajectory this year,”
said Matthijs Glastra.
For the first quarter of 2021, the Company expects GAAP revenue
of approximately $155 million to $157 million. The Company expects
Adjusted EBITDA to be in the range of $27 million to $29 million
and Adjusted Diluted EPS to be in the range of $0.35 to $0.39.
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 and related expenses; acquisition and
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); 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 Monday, March 01,
2021 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 Events & Presentations page of the
Investors 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, April 05, 2021.
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 Net Income,
Adjusted Diluted EPS, Adjusted EBITDA, Adjusted EBITDA Margin, Free
Cash Flow, Free Cash Flow as a Percentage of 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, Organic Revenue Growth and
Adjusted Gross Margin 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, Organic Revenue Growth and Adjusted Gross Margins are used
to determine bonus payments for senior management and employees.
The Company also uses Adjusted Diluted EPS as a measurement for
performance-based restricted stock units 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 and
financial position, including our financial outlook for the first
quarter 2021; expectations regarding market conditions; statements
regarding the COVID-19 pandemic; expectations regarding product
launches; 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
activities; risks associated with the COVID-19 pandemic and other
events outside our control; 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; our
increased use of outsourcing in foreign countries; risks associated
with increased outsourcing of components manufacturing; our
exposure to increased tariffs, trade restrictions or taxes on our
products; negative effects on global economic conditions, financial
markets and our business as a result of the United Kingdom’s
withdrawal from the European Union; 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 business; 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 delays in
the delivery of our products; production difficulties and product
delivery delays or disruptions; our exposure to medical device
regulations, 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; impact of healthcare industry cost containment and
healthcare reform measures; changes in governmental regulations
affecting our business or products; our compliance, or 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, 2020, as updated by our future filings with the
Securities and Exchange Commission (“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 December
31,
Year Ended December
31,
2020
2019
2020
2019
Revenue
$
147,498
$
159,702
$
590,623
$
626,099
Cost of revenue
85,233
93,742
346,106
364,014
Gross profit
62,265
65,960
244,517
262,085
Operating expenses:
Research and development and
engineering
15,991
14,769
60,996
55,965
Selling, general and administrative
27,402
29,430
109,853
118,407
Amortization of purchased intangible
assets
3,582
4,117
13,970
15,857
Restructuring and acquisition related
costs
(1,781
)
4,661
3,810
16,574
Total operating expenses
45,194
52,977
188,629
206,803
Operating income
17,071
12,983
55,888
55,282
Interest income (expense), net
(1,487
)
(2,136
)
(6,564
)
(8,493
)
Foreign exchange transaction gains
(losses), net
(778
)
(1,235
)
(942
)
(780
)
Other income (expense), net
(26
)
(57
)
21
(243
)
Income before income taxes
14,780
9,555
48,403
45,766
Income tax provision
2,124
338
3,882
4,993
Net income
$
12,656
$
9,217
$
44,521
$
40,773
Earnings per common share:
Basic
$
0.36
$
0.26
$
1.27
$
1.16
Diluted
$
0.35
$
0.26
$
1.25
$
1.15
Weighted average common shares
outstanding—basic
35,145
35,079
35,144
35,030
Weighted average common shares
outstanding—diluted
35,787
35,611
35,654
35,546
NOVANTA INC. CONDENSED CONSOLIDATED BALANCE
SHEETS (In thousands of U.S. dollars) (Unaudited)
December 31,
December 31,
2020
2019
ASSETS
Current Assets
Cash and cash equivalents
$
125,054
$
78,944
Accounts receivable, net
75,054
91,078
Inventories
92,737
116,618
Prepaid expenses and other current
assets
11,328
17,872
Total current assets
304,173
304,512
Property, plant and equipment, net
78,676
77,556
Operating lease assets
34,444
35,180
Intangible assets, net
148,521
166,175
Goodwill
285,980
274,710
Other assets
13,385
11,603
Total assets
$
865,179
$
869,736
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current Liabilities
Current portion of long-term debt
$
5,508
$
5,031
Accounts payable
42,966
52,585
Accrued expenses and other current
liabilities
65,755
77,230
Total current liabilities
114,229
134,846
Long-term debt
194,927
215,334
Operating lease liabilities
32,802
34,108
Other long-term liabilities
46,412
68,276
Total liabilities
388,370
452,564
Stockholders’ Equity:
Total stockholders’ equity
476,809
417,172
Total liabilities and stockholders’
equity
$
865,179
$
869,736
NOVANTA INC. CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (In thousands of U.S. dollars)
(Unaudited)
Three Months Ended December
31,
Year Ended December
31,
2020
2019
2020
2019
Cash flows from operating
activities:
Net income
$
12,656
$
9,217
$
44,521
$
40,773
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization
9,930
10,326
38,293
38,280
Share-based compensation
7,047
1,992
23,119
9,340
Deferred income taxes
(658
)
(1,156
)
(4,113
)
(4,332
)
Other non-cash items
(5,285
)
2,580
(1,120
)
6,628
Changes in assets and liabilities which
provided/(used) cash,
excluding effects from business
acquisitions:
Accounts receivable
8,371
8,547
18,026
(3,600
)
Inventories
10,165
347
22,102
(7,397
)
Other operating assets and liabilities
4,327
3,552
(589
)
(16,444
)
Net cash provided by operating
activities
46,553
35,405
140,239
63,248
Cash flows from investing
activities:
Acquisition of businesses, net of cash
acquired and working capital adjustments
—
—
—
(53,143
)
Purchases of property, plant and
equipment
(3,360
)
(2,792
)
(10,524
)
(10,743
)
Other investing activities
—
—
(2,632
)
42
Net cash used in investing activities
(3,360
)
(2,792
)
(13,156
)
(63,844
)
Cash flows from financing
activities:
Borrowings under revolving credit
facilities
—
—
—
66,792
Repayments under term loan and revolving
credit facilities
(1,374
)
(9,926
)
(35,391
)
(50,694
)
Repurchases of common shares
—
(3,316
)
(5,500
)
(10,000
)
Payments of deferred and escrowed purchase
price related to acquisitions
(25,249
)
—
(31,021
)
-
Other financing activities
(539
)
(3,072
)
(12,445
)
(10,033
)
Net cash used in financing activities
(27,162
)
(16,314
)
(84,357
)
(3,935
)
Effect of exchange rates on cash and cash
equivalents
2,393
1,240
3,384
1,432
Increase (decrease) in cash and cash
equivalents
18,424
17,539
46,110
(3,099
)
Cash and cash equivalents, beginning of
period
106,630
61,405
78,944
82,043
Cash and cash equivalents, end of
period
$
125,054
$
78,944
$
125,054
$
78,944
NOVANTA INC. Revenue by Reportable Segment
(In thousands of U.S. dollars) (Unaudited)
Three Months Ended December
31,
Year Ended December
31,
2020
2019
2020
2019
Revenue
Photonics
$
50,276
$
58,376
$
199,613
$
230,457
Vision
63,603
69,653
261,650
271,407
Precision Motion
33,619
31,673
129,360
124,235
Total
$
147,498
$
159,702
$
590,623
$
626,099
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 December
31,
Year Ended December
31,
2020
2019
2020
2019
Photonics
Gross Profit (GAAP)
$
23,335
$
25,934
$
89,060
$
105,845
Gross Profit Margin (GAAP)
46.4
%
44.4
%
44.6
%
45.9
%
Amortization of intangible assets
788
949
3,058
2,929
Acquisition fair value adjustments
—
562
188
935
Adjusted Gross Profit (Non-GAAP)
$
24,123
$
27,445
$
92,306
$
109,709
Adjusted Gross Profit Margin
(Non-GAAP)
48.0
%
47.0
%
46.2
%
47.6
%
Vision
Gross Profit (GAAP)
$
24,591
$
27,122
$
100,267
$
105,228
Gross Profit Margin (GAAP)
38.7
%
38.9
%
38.3
%
38.8
%
Amortization of intangible assets
1,633
1,794
6,399
6,609
Acquisition fair value adjustments
—
—
—
240
Adjusted Gross Profit (Non-GAAP)
$
26,224
$
28,916
$
106,666
$
112,077
Adjusted Gross Profit Margin
(Non-GAAP)
41.2
%
41.5
%
40.8
%
41.3
%
Precision Motion
Gross Profit (GAAP)
$
15,526
$
13,542
$
58,279
$
53,326
Gross Profit Margin (GAAP)
46.2
%
42.8
%
45.1
%
42.9
%
Amortization of intangible assets
432
291
1,666
1,050
Acquisition fair value adjustments
—
—
—
95
Adjusted Gross Profit (Non-GAAP)
$
15,958
$
13,833
$
59,945
$
54,471
Adjusted Gross Profit Margin
(Non-GAAP)
47.5
%
43.7
%
46.3
%
43.8
%
Unallocated Corporate and Shared
Services
Gross Profit (GAAP)
$
(1,187
)
$
(638
)
$
(3,089
)
$
(2,314
)
Amortization of intangible assets
—
—
—
—
Acquisition fair value adjustments
—
—
—
—
Employee COVID-19 testing costs
275
—
275
—
Adjusted Gross Profit (Non-GAAP)
$
(912
)
$
(638
)
$
(2,814
)
$
(2,314
)
Novanta Inc.
Gross Profit (GAAP)
$
62,265
$
65,960
$
244,517
$
262,085
Gross Profit Margin (GAAP)
42.2
%
41.3
%
41.4
%
41.9
%
Amortization of intangible assets
2,853
3,034
11,123
10,588
Acquisition fair value adjustments
—
562
188
1,270
Employee COVID-19 testing costs
275
—
275
—
Adjusted Gross Profit (Non-GAAP)
$
65,393
$
69,556
$
256,103
$
273,943
Adjusted Gross Profit Margin
(Non-GAAP)
44.3
%
43.6
%
43.4
%
43.8
%
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 December
31, 2020
Operating income
Operating Margin
Income before Income Taxes
Income Tax Provision
Effective Tax Rate
Net Income
Diluted EPS
GAAP results
$
17,071
11.6
%
$
14,780
$
2,124
14.4
%
$
12,656
$
0.35
Non-GAAP Adjustments:
Amortization of intangible assets
6,435
4.3
%
6,435
Restructuring costs
2,050
1.4
%
2,050
Acquisition related costs
(3,831
)
-2.6
%
(3,831
)
Employee COVID-19 testing costs
275
0.2
%
275
Foreign exchange transaction (gains)
losses, net
778
Tax effect on non-GAAP adjustments
176
Non-GAAP tax adjustments
(653
)
Total non-GAAP adjustments
4,929
3.3
%
5,707
(477
)
6,184
0.18
Adjusted results (Non-GAAP)
$
22,000
14.9
%
$
20,487
$
1,647
8.0
%
$
18,840
$
0.53
Weighted average shares outstanding -
Diluted
35,787
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 December
31, 2019
Operating income
Operating Margin
Income before Income Taxes
Income Tax Provision
Effective Tax Rate
Net Income
Diluted EPS
GAAP results
$
12,983
8.1
%
$
9,555
$
338
3.5
%
$
9,217
$
0.26
Non-GAAP Adjustments:
Amortization of intangible assets
7,151
4.5
%
7,151
Restructuring costs
3,804
2.4
%
3,804
Acquisition related costs
857
0.5
%
857
Acquisition inventory fair value
adjustments
562
0.4
%
562
Foreign exchange transaction (gains)
losses, net
1,235
Tax effect on non-GAAP adjustments
2,797
Non-GAAP tax adjustments
609
Total non-GAAP adjustments
12,374
7.8
%
13,609
3,406
10,203
0.29
Adjusted results (Non-GAAP)
$
25,357
15.9
%
$
23,164
$
3,744
16.2
%
$
19,420
$
0.55
Weighted average shares outstanding -
Diluted
35,611
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):
Year Ended December 31,
2020
Operating income
Operating Margin
Income before Income Taxes
Income Tax Provision
Effective Tax Rate
Net Income
Diluted EPS
GAAP results
$
55,888
9.5
%
$
48,403
$
3,882
8.0
%
$
44,521
$
1.25
Non-GAAP Adjustments:
Amortization of intangible assets
25,093
4.2
%
25,093
Restructuring costs
4,477
0.8
%
4,477
Acquisition related costs
(667
)
-0.1
%
(667
)
Acquisition inventory fair value
adjustments
188
0.0
%
188
Employee COVID-19 testing costs
275
0.0
%
275
Foreign exchange transaction (gains)
losses, net
942
Tax effect on non-GAAP adjustments
5,482
Non-GAAP tax adjustments
(35)
Total non-GAAP adjustments
29,366
4.9
%
30,308
5,447
24,861
0.70
Adjusted results (Non-GAAP)
$
85,254
14.4
%
$
78,711
$
9,329
11.9
%
$
69,382
$
1.95
Weighted average shares outstanding -
Diluted
35,654
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):
Year Ended December 31,
2019
Operating income
Operating Margin
Income before Income Taxes
Income Tax Provision
Effective Tax Rate
Net Income
Diluted EPS
GAAP results
$
55,282
8.8
%
$
45,766
$
4,993
10.9
%
$
40,773
$
1.15
Non-GAAP Adjustments:
Amortization of intangible assets
26,445
4.2
%
26,445
Restructuring costs
8,640
1.4
%
8,640
Acquisition related costs
7,934
1.3
%
7,934
Acquisition inventory fair value
adjustments
1,270
0.2
%
1,270
Foreign exchange transaction (gains)
losses, net
780
Tax effect on non-GAAP adjustments
8,950
Non-GAAP tax adjustments
805
Total non-GAAP adjustments
44,289
7.1
%
45,069
9,755
35,314
0.99
Adjusted results (Non-GAAP)
$
99,571
15.9
%
$
90,835
$
14,748
16.2
%
$
76,087
$
2.14
Weighted average shares outstanding -
Diluted
35,546
NOVANTA INC. Reconciliation of GAAP to
Non-GAAP Financial Measures (In thousands of U.S. dollars)
(Unaudited)
Adjusted EBITDA
(Non-GAAP):
Three Months Ended December
31,
Year Ended December
31,
2020
2019
2020
2019
Net Income (GAAP)
$
12,656
$
9,217
$
44,521
$
40,773
Net Income Margin
8.6
%
5.8
%
7.5
%
6.5
%
Interest (income) expense, net
1,487
2,136
6,564
8,493
Income tax provision
2,124
338
3,882
4,993
Depreciation and amortization
9,930
10,326
38,293
38,280
Share-based compensation
6,921
1,992
22,535
9,340
Restructuring and acquisition related
costs
(1,781
)
4,661
3,810
16,574
Acquisition inventory fair value
adjustments
-
562
188
1,270
Employee COVID-19 testing costs
275
—
275
—
Other non-operating income (expense),
net
804
1,292
921
1,023
Adjusted EBITDA (Non-GAAP)
$
32,416
$
30,524
$
120,989
$
120,746
Adjusted EBITDA Margin
(Non-GAAP)
22.0
%
19.1
%
20.5
%
19.3
%
Organic Revenue Growth
(Non-GAAP):
Three Months Ended
December 31, 2020
Compared to
Three Months Ended
December 31, 2019
Year Ended
December 31, 2020
Compared to
Year Ended
December 31, 2019
Reported Revenue Growth/(Decline)
(GAAP)
(7.6
)%
(5.7
)%
Less: Change attributable to
acquisitions
(—
)%
1.3
%
Plus: Change due to foreign currency
(2.5
)%
(0.6
)%
Organic Revenue Growth/(Decline)
(Non-GAAP)
(10.1
)%
(7.6
)%
Net Debt (Non-GAAP):
December 31,
December 31,
2020
2019
Total Debt (GAAP)
$
200,435
$
220,365
Plus: Deferred financing costs
4,405
4,187
Gross Debt
204,840
224,552
Less: Cash and cash equivalents
(125,054
)
(78,944
)
Net Debt (Non-GAAP)
$
79,786
$
145,608
Free Cash Flow
(Non-GAAP):
Three Months Ended December
31,
Year Ended December
31,
2020
2019
2020
2019
Cash Provided by Operating Activities
(GAAP)
$
46,553
$
35,405
$
140,239
$
63,248
Less: Purchases of property, plant and
equipment
(3,360
)
(2,792
)
(10,524
)
(10,743
)
Plus: Proceeds from sale of property,
plant and equipment
-
-
-
42
Free Cash Flow (Non-GAAP)
$
43,193
$
32,613
$
129,715
$
52,547
Net Income (GAAP)
$
12,656
$
9,217
$
44,521
$
40,773
Cash Provided by Operating Activities
as a Percentage of Net Income
368
%
384
%
315
%
155
%
Free Cash Flow as a Percentage of Net
Income
341
%
354
%
291
%
129
%
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. Additionally,
the Company excluded costs directly related to employee COVID-19
testing as these costs are unique to the current pandemic and are
expected to have a significant impact on our operating results.
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
excluded costs directly related to employee COVID-19 testing for
the reasons described for Adjusted Gross Profit and Adjusted Gross
Profit Margin above. The Company also excluded restructuring,
acquisition, and 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, costs directly related to employee COVID-19 testing,
and restructuring, acquisition, and related costs for the reasons
described for Adjusted Operating Income and Adjusted Operating
Margin above. The Company also excluded foreign exchange
transaction gains (losses) from the calculation of Adjusted Income
before Income Taxes as the Company cannot fully influence the
timing and amount of foreign exchange transaction gains
(losses).
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 Net Income
The calculation of Adjusted Net Income is displayed in the
tables above. Because income before income taxes is included in
determining Net Income, the calculation of Adjusted Net Income also
excludes amortization of acquired intangible assets, inventory fair
value adjustments related to business acquisitions, costs directly
related to employee COVID-19 testing, restructuring, acquisition,
and related costs, and foreign exchange 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 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, costs directly
related to employee COVID-19 testing, restructuring, acquisition,
and related costs, foreign exchange 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 Net
Income.
Adjusted EBITDA and Adjusted EBITDA Margin
The Company defines Adjusted EBITDA as the income before
deducting interest (income) expense, income taxes, depreciation,
amortization, non-cash share-based compensation, costs directly
related to employee COVID-19 testing, restructuring, acquisition,
and related costs, acquisition fair value adjustments, other
non-operating income (expense) items, including foreign exchange
transaction 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 Net Income is defined
as Free Cash Flow divided by 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/20210301005115/en/
Novanta Inc. Investor Relations Contact: Ray Nash (781)
266-5137
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