- First Quarter 2021 GAAP Revenue of $163 million
- First Quarter 2021 GAAP Consolidated Net Income of $11
million
- First Quarter 2021 GAAP Diluted Earnings Per Share of
$0.32
- First Quarter 2021 Adjusted Earnings Per Share of
$0.58
- First Quarter 2021 Adjusted EBITDA of $33 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 2021.
Financial Highlights
Three Months Ended
(In millions, except per share
amounts)
April 2,
April 3,
2021
2020
GAAP
Revenue
$
162.6
$
155.5
Operating Income
$
11.1
$
13.3
Consolidated Net Income
$
11.3
$
11.9
Diluted EPS
$
0.32
$
0.34
Non-GAAP*
Adjusted Operating Income
$
22.8
$
21.3
Adjusted Diluted EPS
$
0.58
$
0.51
Adjusted EBITDA
$
32.7
$
27.6
*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.
“Novanta delivered strong First Quarter results, with sales,
bookings, profit, and cash flow all exceeding our expectations,”
said Matthijs Glastra, Chief Executive Officer of Novanta. “Demand
accelerated across multiple application areas, particularly in the
advanced industrial sector, demonstrated in our record sales and
bookings performance, with bookings increasing 28% sequentially and
25% year over year. Our innovation programs are on track and making
good progress, and we launched five new products in the quarter. We
also saw record growth in design wins as we continue to partner
with our customers on new opportunities. We feel very good that
Novanta is well-positioned for continued success as the global
economy returns to growth.”
First Quarter
During the first quarter of 2021, Novanta generated GAAP revenue
of $162.6 million, an increase of $7.1 million, or 4.6%, versus the
first quarter of 2020. There was no acquisition impact on revenue
in the first quarter of 2021 from our acquisition activities.
Changes in foreign currency exchange rates year over year favorably
impacted our revenue by $5.4 million, or 3.5%, during the first
quarter of 2021. Our year-over-year Organic Revenue Growth, which
excludes the net impact of acquisitions and changes in foreign
currency exchange rates, was an increase of 1.1% for the first
quarter of 2021 (see “Organic Revenue Growth” in the non-GAAP
reconciliations below).
In the first quarter of 2021, GAAP operating income was $11.1
million, compared to $13.3 million in the first quarter of 2020.
GAAP consolidated net income was $11.3 million in the first quarter
of 2021, compared to $11.9 million in the first quarter of 2020.
GAAP diluted earnings per share (“EPS”) was $0.32 in the first
quarter of 2021, compared to $0.34 in the first quarter of
2020.
Adjusted Diluted EPS was $0.58 in the first quarter of 2021,
compared to $0.51 in the first quarter of 2020. The Company ended
the first quarter of 2021 with 35.8 million diluted weighted
average shares outstanding. Adjusted EBITDA was $32.7 million in
the first quarter of 2021, compared to $27.6 million in the first
quarter of 2020.
Operating cash flow for the first quarter of 2021 was $23.3
million, compared to $17.8 million in the first quarter of 2020.
The Company completed the first quarter of 2021 with approximately
$191.4 million of total debt and $113.6 million of total cash. Net
Debt, as defined in the non-GAAP reconciliation below, was $82.0
million.
Financial Guidance
“With our performance in the First Quarter, and the strong broad
based demand signals from our customers, we expect to see continued
growth in the Second Quarter and for the Full Year,” said Matthijs
Glastra. “While we expect strong demand for the year, we are seeing
an uptick in pandemic related disruptions and electronic material
shortages impacting our supply chain and that of our customers,
which we expect to continue over the course of 2021. However, our
design win and customer order activities are expected to remain
robust; with long-term prospects in our medical and advanced
industrial end-markets remaining very positive.”
For the second quarter of 2021, the Company expects GAAP revenue
of approximately $162 million to $165 million. The Company expects
Adjusted EBITDA to be in the range of $32 million to $34 million,
and Adjusted Diluted EPS to be in the range of $0.49 to $0.53. The
Company’s guidance assumes no significant changes in foreign
exchange rates.
For the full year 2021, the Company expects GAAP revenue of
approximately $645 million to $655 million. The Company expects
Adjusted EBITDA to be in the range of $127 million to $134 million,
and Adjusted Diluted EPS to be in the range of $2.04 to $2.19. The
Company’s 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 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 Tuesday, May 11, 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 in the Investor
Relations section of the Company’s website at www.novanta.com. The
replay will remain available until Monday, July 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 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, 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 second
quarter and full year 2021; statements regarding the COVID-19
pandemic; expectations for our market position as the global
economy returns to growth; expectations regarding our design win
and customer order activities and long-term prospects in our
medical and advanced industrial end-markets; 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
April 2,
April 3,
2021
2020
Revenue
$
162,584
$
155,468
Cost of revenue
93,844
91,023
Gross profit
68,740
64,445
Operating expenses:
Research and development and
engineering
18,682
15,334
Selling, general and administrative
31,653
30,755
Amortization of purchased intangible
assets
3,575
3,445
Restructuring, acquisition, and related
costs
3,731
1,661
Total operating expenses
57,641
51,195
Operating income
11,099
13,250
Interest income (expense), net
(1,408
)
(1,678
)
Foreign exchange transaction gains
(losses), net
(257
)
254
Other income (expense), net
(70
)
83
Income before income taxes
9,364
11,909
Income tax provision (benefit)
(1,946
)
(38
)
Consolidated net income
$
11,310
$
11,947
Earnings per common share:
Basic
$
0.32
$
0.34
Diluted
$
0.32
$
0.34
Weighted average common shares
outstanding—basic
35,279
35,152
Weighted average common shares
outstanding—diluted
35,789
35,561
NOVANTA INC. CONDENSED CONSOLIDATED
BALANCE SHEETS (In thousands of U.S. dollars)
(Unaudited)
April 2,
December 31,
2021
2020
ASSETS
Current Assets
Cash and cash equivalents
$
113,562
$
125,054
Accounts receivable, net
90,060
75,054
Inventories
89,944
92,737
Prepaid expenses and other current
assets
15,551
11,328
Total current assets
309,117
304,173
Property, plant and equipment, net
77,535
78,676
Operating lease assets
31,642
34,444
Intangible assets, net
139,354
148,521
Goodwill
281,614
285,980
Other assets
12,992
13,385
Total assets
$
852,254
$
865,179
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current Liabilities
Current portion of long-term debt
$
5,273
$
5,508
Accounts payable
51,952
42,966
Accrued expenses and other current
liabilities
60,152
65,755
Total current liabilities
117,377
114,229
Long-term debt
186,145
194,927
Operating lease liabilities
30,934
32,802
Other long-term liabilities
41,675
46,412
Total liabilities
376,131
388,370
Stockholders’ Equity:
Total stockholders’ equity
476,123
476,809
Total liabilities and stockholders’
equity
$
852,254
$
865,179
NOVANTA INC. CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (In thousands of U.S. dollars)
(Unaudited)
Three Months Ended
April 2,
April 3,
2021
2020
Cash flows from operating
activities:
Consolidated net income
$
11,310
$
11,947
Adjustments to reconcile consolidated net
income to net cash provided by operating activities:
Depreciation and amortization
9,849
9,330
Share-based compensation
6,644
3,199
Deferred income taxes
(968
)
(621
)
Other
1,549
1,357
Changes in assets and liabilities which
(used)/provided cash, excluding effects from business
acquisitions:
Accounts receivable
(15,828
)
343
Inventories
675
1,919
Other operating assets and liabilities
10,037
(9,719
)
Net cash provided by operating
activities
23,268
17,755
Cash flows from investing
activities:
Payment of business acquisition purchase
price held in escrow
—
(150
)
Purchases of property, plant and
equipment
(3,268
)
(2,319
)
Payment of contingent consideration
related to acquisition of technology assets
(2,200
)
(2,632
)
Net cash used in investing activities
(5,468
)
(5,101
)
Cash flows from financing
activities:
Repayments under term loan and revolving
credit facilities
(1,345
)
(1,250
)
Payments of debt issuance costs
—
(1,280
)
Payments of withholding taxes from
share-based awards
(18,272
)
(7,825
)
Repurchases of common shares
—
(5,500
)
Payment of contingent consideration
related to an acquisition
(435
)
—
Purchase of building under finance
lease
(8,743
)
—
Other financing activities
(140
)
(190
)
Net cash provided by (used in) financing
activities
(28,935
)
(16,045
)
Effect of exchange rates on cash and cash
equivalents
(357
)
(1,852
)
Increase (decrease) in cash and cash
equivalents
(11,492
)
(5,243
)
Cash and cash equivalents, beginning of
period
125,054
78,944
Cash and cash equivalents, end of
period
$
113,562
$
73,701
NOVANTA INC. Revenue by Reportable
Segment (In thousands of U.S. dollars)
(Unaudited)
Three Months Ended
April 2,
April 3,
2021
2020
Revenue
Photonics
$
58,493
$
55,140
Vision
67,636
69,008
Precision Motion
36,455
31,320
Total
$
162,584
$
155,468
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 2,
April 3,
2021
2020
Photonics
Gross Profit (GAAP)
$
28,109
$
24,661
Gross Profit Margin (GAAP)
48.1
%
44.7
%
Amortization of intangible assets
779
754
Acquisition fair value adjustments
—
188
Adjusted Gross Profit (Non-GAAP)
$
28,888
$
25,603
Adjusted Gross Profit Margin
(Non-GAAP)
49.4
%
46.4
%
Vision
Gross Profit (GAAP)
$
26,926
$
26,575
Gross Profit Margin (GAAP)
39.8
%
38.5
%
Amortization of intangible assets
1,519
1,574
Acquisition fair value adjustments
—
—
Adjusted Gross Profit (Non-GAAP)
$
28,445
$
28,149
Adjusted Gross Profit Margin
(Non-GAAP)
42.1
%
40.8
%
Precision Motion
Gross Profit (GAAP)
$
16,077
$
13,908
Gross Profit Margin (GAAP)
44.1
%
44.4
%
Amortization of intangible assets
679
406
Acquisition fair value adjustments
—
—
Adjusted Gross Profit (Non-GAAP)
$
16,756
$
14,314
Adjusted Gross Profit Margin
(Non-GAAP)
46.0
%
45.7
%
Unallocated Corporate and Shared
Services
Gross Profit (GAAP)
$
(2,372
)
$
(699
)
Amortization of intangible assets
—
—
Acquisition fair value adjustments
—
—
Employee COVID-19 testing costs
1,409
—
Adjusted Gross Profit (Non-GAAP)
$
(963
)
$
(699
)
Novanta Inc.
Gross Profit (GAAP)
$
68,740
$
64,445
Gross Profit Margin (GAAP)
42.3
%
41.5
%
Amortization of intangible assets
2,977
2,734
Acquisition fair value adjustments
—
188
Employee COVID-19 testing costs
1,409
—
Adjusted Gross Profit (Non-GAAP)
$
73,126
$
67,367
Adjusted Gross Profit Margin
(Non-GAAP)
45.0
%
43.3
%
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 2,
2021
Operating
Income
Operating
Margin
Income
before
Income Taxes
Income Tax
Provision /
(Benefit)
Effective Tax
Rate
Consolidated
Net Income
Diluted EPS
GAAP results
$
11,099
6.8
%
$
9,364
$
(1,946
)
-20.8
%
$
11,310
$
0.32
Non-GAAP Adjustments:
Amortization of intangible assets
6,552
4.0
%
6,552
Restructuring costs
1,546
1.0
%
1,546
Acquisition and related costs
2,185
1.3
%
2,185
Employee COVID-19 testing costs
1,409
0.9
%
1,409
Foreign exchange transaction (gains)
losses, net
257
Tax effect on non-GAAP adjustments
2,424
Non-GAAP tax adjustments
120
Total non-GAAP adjustments
11,692
7.2
%
11,949
2,544
9,405
0.26
Adjusted results (Non-GAAP)
$
22,791
14.0
%
$
21,313
$
598
2.8
%
$
20,715
$
0.58
Weighted average shares outstanding -
Diluted
35,789
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 and 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 (In thousands of U.S.
dollars) (Unaudited)
Adjusted EBITDA
(Non-GAAP):
Three Months Ended
April 2,
April 3,
2021
2020
Consolidated Net Income (GAAP)
$
11,310
$
11,947
Consolidated Net Income Margin
7.0
%
7.7
%
Interest (income) expense, net
1,408
1,678
Income tax provision
(1,946
)
(38
)
Depreciation and amortization
9,849
9,330
Share-based compensation
6,644
3,199
Restructuring, acquisition, and related
costs
3,731
1,661
Acquisition fair value adjustments
—
188
Employee COVID-19 testing costs
1,409
—
Other, net
327
(337
)
Adjusted EBITDA (Non-GAAP)
$
32,732
$
27,628
Adjusted EBITDA Margin
(Non-GAAP)
20.1
%
17.8
%
Organic Revenue Growth
(Non-GAAP):
Three Months Ended April 2,
2021
Compared to
Three Months Ended April 3,
2020
Reported Revenue Growth/(Decline)
(GAAP)
4.6
%
Less: Change attributable to
acquisitions
(—
)%
Plus: Change due to foreign currency
(3.5
)%
Organic Revenue Growth/(Decline)
(Non-GAAP)
1.1
%
Net Debt (Non-GAAP):
April 2,
December 31,
2021
2020
Total Debt (GAAP)
$
191,418
$
200,435
Plus: Deferred financing costs
4,130
4,405
Gross Debt
195,548
204,840
Less: Cash and cash equivalents
(113,562
)
(125,054
)
Net Debt (Non-GAAP)
$
81,986
$
79,786
Free Cash Flow
(Non-GAAP):
Three Months Ended
April 2,
April 3,
2021
2020
Cash Provided by Operating Activities
(GAAP)
$
23,268
$
17,755
Less: Purchases of property, plant and
equipment
(3,268
)
(2,319
)
Plus: Proceeds from sale of property,
plant and equipment
—
—
Free Cash Flow (Non-GAAP)
$
20,000
$
15,436
Consolidated Net Income (GAAP)
$
11,310
$
11,947
Cash Provided by Operating Activities
as a Percentage of Consolidated Net Income
205.7
%
148.6
%
Free Cash Flow as a Percentage of
Consolidated Net Income
176.8
%
129.2
%
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 and 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 and 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 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 and 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 Consolidated Net Income is used in the
diluted EPS calculation, the calculation of Adjusted Diluted EPS
excludes amortization of acquired intangible assets and 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
Consolidated 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 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/20210511005254/en/
Novanta Inc. Investor Relations Contact: Ray Nash (781)
266-5137
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