- Second Quarter 2022 GAAP Revenue increased 29% to $215
million
- Second Quarter 2022 GAAP Consolidated Net Income of $17.5
million
- Second Quarter 2022 GAAP Diluted Earnings Per Share
increased 48% to $0.49
- Second Quarter 2022 Adjusted Earnings Per Share increased
26% to $0.78
- Second Quarter 2022 Adjusted EBITDA of $45.0
million
- Raises Full Year Guidance
Novanta Inc. (Nasdaq: NOVT) (the “Company”), a trusted
technology partner to medical and advanced technology equipment
manufacturers, today reported financial results for the second
quarter 2022.
Financial
Highlights
Three Months Ended
(In millions, except per share
amounts)
July 1,
July 2,
2022
2021
GAAP
Revenue
$
215.4
$
167.5
Operating Income
$
23.3
$
16.0
Consolidated Net Income
$
17.5
$
11.7
Diluted EPS
$
0.49
$
0.33
Non-GAAP*
Adjusted Operating Income
$
36.7
$
28.7
Adjusted Diluted EPS
$
0.78
$
0.62
Adjusted EBITDA
$
45.0
$
37.0
*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 achieved exceptionally strong financial results in the
second quarter, with double-digit growth for sales, Adjusted
EBITDA, and EPS,” said Matthijs Glastra, Chair and Chief Executive
Officer of Novanta. “Customer demand continues to be healthy across
our medical and advanced industrial application areas, with
bookings up 25% year over year, giving us a new record level of
backlog at $653 million. The diversification of our portfolio is
helping us to navigate through the ongoing macroeconomic
environment difficulties, and we continue to expand in attractive
application areas with outstanding progress in our design
wins.”
Second Quarter
During the second quarter of 2022, Novanta generated GAAP
revenue of $215.4 million, an increase of $47.8 million, or 28.6%,
versus the second quarter of 2021. The Company’s acquisition
activities resulted in an increase in revenue of $34.9 million, or
20.9%, compared to the second quarter of 2021. Changes in foreign
currency exchange rates year over year adversely impacted our
revenue by $8.6 million, or 5.2%, during the second quarter of
2022. 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 12.9% for the second quarter of 2022 (see
“Organic Revenue Growth” in the non-GAAP reconciliations
below).
In the second quarter of 2022, GAAP operating income was $23.3
million, compared to $16.0 million in the second quarter of 2021.
GAAP consolidated net income was $17.5 million in the second
quarter of 2022, compared to $11.7 million in the second quarter of
2021. GAAP diluted earnings per share (“EPS”) was $0.49 in the
second quarter of 2022, compared to $0.33 in the second quarter of
2021.
Adjusted Diluted EPS was $0.78 in the second quarter of 2022,
compared to $0.62 in the second quarter of 2021. The Company ended
the second quarter of 2022 with 35.9 million diluted weighted
average shares outstanding. Adjusted EBITDA was $45.0 million in
the second quarter of 2022, compared to $37.0 million in the second
quarter of 2021.
Operating cash flow for the second quarter of 2022 was $24.1
million. The Company completed the second quarter of 2022 with
approximately $407.4 million of total debt and $100.5 million of
total cash. Net Debt, as defined in the non-GAAP reconciliation
below, was $312.3 million.
Financial Guidance
“Our strong first half performance gives us confidence to raise
our outlook for the full year. For the third quarter, we expect to
maintain momentum with strong double-digit revenue growth due to
our consistently strong customer demand and record levels of
backlog.” said Matthijs Glastra. “Our teams are working diligently
to counteract the continued supply chain constraints, inflationary
pressures, and foreign exchange challenges, yet we continue to see
a strong full year, despite the macroeconomic environment.”
For the third quarter of 2022, the Company expects GAAP revenue
of approximately $214 million to $216 million, demonstrating
reported growth of 20% to 22%. The Company expects Adjusted Gross
Profit Margin to be approximately 46.0%. The Company expects
Adjusted EBITDA to be in the range of $43.5 million to $45.5
million and Adjusted Diluted EPS to be in the range of $0.71 to
$0.76. The Company’s guidance assumes no significant changes in
foreign exchange rates.
For the full year 2022, the Company expects GAAP revenue of
approximately $848 million to $852 million, demonstrating reported
growth of 20% to 21%. The Company expects Adjusted Gross Profit
Margin to be approximately 46.0%. The Company expects Adjusted
EBITDA to be in the range of $177 million to $180 million and
Adjusted Diluted EPS to be in the range of $2.96 to $3.02. 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 Gross Profit Margin, Adjusted EBITDA and
Adjusted Diluted 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); divestitures and related expenses;
acquisitions 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, August 9,
2022 at 10:00 a.m. ET to discuss these results and to provide a
business update. 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, October 3, 2022.
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 third
quarter and full year; statements regarding the COVID-19 pandemic;
expectations for our end markets and market position; expectations
regarding our ability to mitigate supply chain disruptions;
inflationary pressures; expectations regarding the benefits of
recent acquisitions; 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, capital expenditures
and level of business activities; risks associated with the
COVID-19 pandemic and other events outside our control; our
dependence upon our ability to respond to fluctuations in product
demand; our ability to continually innovate, introduce new products
timely, 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 and our third-party providers’
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 failure to implement new information
technology systems and software successfully; our failure to
realize the full value of our intangible assets; increasing
scrutiny and changing expectations from investors, customers, and
governments with respect to Environmental, Social and Governance
policies and practices; our exposure to the credit risk of some of
our customers and in weakened markets; our reliance on third party
distribution channels; our reliance on original equipment
manufacturer customers; 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, 2021, as updated by our future filings with the
Securities and Exchange Commission. 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 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
July 1,
July 2,
2022
2021
Revenue
$
215,356
$
167,523
Cost of revenue
120,111
95,117
Gross profit
95,245
72,406
Operating expenses:
Research and development and
engineering
21,588
16,954
Selling, general and administrative
40,538
31,240
Amortization of purchased intangible
assets
7,173
3,586
Restructuring, acquisition, and related
costs
2,655
4,634
Total operating expenses
71,954
56,414
Operating income
23,291
15,992
Interest income (expense), net
(2,757
)
(1,378
)
Foreign exchange transaction gains
(losses), net
152
(76
)
Other income (expense), net
68
(97
)
Income before income taxes
20,754
14,441
Income tax provision (benefit)
3,275
2,777
Consolidated net income
$
17,479
$
11,664
Earnings per common share:
Basic
$
0.49
$
0.33
Diluted
$
0.49
$
0.33
Weighted average common shares
outstanding—basic
35,609
35,374
Weighted average common shares
outstanding—diluted
35,933
35,763
NOVANTA INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands of U.S.
dollars)
(Unaudited)
July 1,
December 31,
2022
2021
ASSETS
Current Assets
Cash and cash equivalents
$
100,489
$
117,393
Accounts receivable, net
129,808
115,617
Inventories
153,887
125,657
Prepaid expenses and other current
assets
15,183
15,158
Total current assets
399,367
373,825
Property, plant and equipment, net
87,924
87,439
Operating lease assets
45,575
48,338
Intangible assets, net
193,499
220,989
Goodwill
466,411
479,500
Other assets
13,067
17,792
Total assets
$
1,205,843
$
1,227,883
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current Liabilities
Current portion of long-term debt
$
4,678
$
5,097
Accounts payable
77,351
68,514
Accrued expenses and other current
liabilities
116,371
110,327
Total current liabilities
198,400
183,938
Long-term debt
402,679
429,361
Operating lease liabilities
42,580
45,700
Other long-term liabilities
30,015
47,593
Total liabilities
673,674
706,592
Stockholders’ Equity:
Total stockholders’ equity
532,169
521,291
Total liabilities and stockholders’
equity
$
1,205,843
$
1,227,883
NOVANTA INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands of U.S.
dollars)
(Unaudited)
Three Months Ended
July 1,
July 2,
2022
2021
Cash flows from operating
activities:
Consolidated net income
$
17,479
$
11,664
Adjustments to reconcile consolidated net
income to net cash provided by operating activities:
Depreciation and amortization
13,811
9,875
Share-based compensation
5,081
5,035
Deferred income taxes
(4,364
)
269
Other
3,017
1,638
Changes in assets and liabilities which
(used)/provided cash, excluding effects from business
acquisitions:
Accounts receivable
(8,678
)
248
Inventories
(18,581
)
(6,320
)
Other operating assets and liabilities
16,296
6,337
Net cash provided by (used in) operating
activities
24,061
28,746
Cash flows from investing
activities:
Purchases of property, plant and
equipment
(5,795
)
(5,375
)
Net cash provided by (used in) investing
activities
(5,795
)
(5,375
)
Cash flows from financing
activities:
Repayments under term loan and revolving
credit facilities
(1,193
)
(1,361
)
Payments of debt issuance costs
(359
)
—
Payments of withholding taxes from
share-based awards
(1,744
)
(156
)
Repurchases of common shares
(10,000
)
—
Payment of contingent consideration
related to an acquisition
—
(1,401
)
Other financing activities
(148
)
(141
)
Net cash provided by (used in) financing
activities
(13,444
)
(3,059
)
Effect of exchange rates on cash and cash
equivalents
(3,138
)
(21
)
Increase (decrease) in cash and cash
equivalents
1,684
20,291
Cash and cash equivalents, beginning of
period
98,805
113,562
Cash and cash equivalents, end of
period
$
100,489
$
133,853
NOVANTA INC.
Revenue by Reportable
Segment
(In thousands of U.S.
dollars)
(Unaudited)
Three Months Ended
July 1,
July 2,
2022
2021
Revenue
Photonics
$
69,461
$
62,357
Vision
65,516
63,447
Precision Motion
80,379
41,719
Total
$
215,356
$
167,523
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
July 1,
July 2,
2022
2021
Photonics
Gross Profit (GAAP)
$
31,182
$
29,593
Gross Profit Margin (GAAP)
44.9
%
47.5
%
Amortization of intangible assets
628
784
Acquisition fair value adjustments
—
—
Adjusted Gross Profit (Non-GAAP)
$
31,810
$
30,377
Adjusted Gross Profit Margin
(Non-GAAP)
45.8
%
48.7
%
Vision
Gross Profit (GAAP)
$
26,535
$
24,443
Gross Profit Margin (GAAP)
40.5
%
38.5
%
Amortization of intangible assets
1,232
1,518
Acquisition fair value adjustments
—
—
Adjusted Gross Profit (Non-GAAP)
$
27,767
$
25,961
Adjusted Gross Profit Margin
(Non-GAAP)
42.4
%
40.9
%
Precision Motion
Gross Profit (GAAP)
$
38,864
$
20,874
Gross Profit Margin (GAAP)
48.4
%
50.0
%
Amortization of intangible assets
1,476
680
Acquisition fair value adjustments
160
—
Adjusted Gross Profit (Non-GAAP)
$
40,500
$
21,554
Adjusted Gross Profit Margin
(Non-GAAP)
50.4
%
51.7
%
Unallocated Corporate and Shared
Services
Gross Profit (GAAP)
$
(1,336
)
$
(2,504
)
Amortization of intangible assets
—
—
Employee COVID-19 testing costs
39
1,473
Adjusted Gross Profit (Non-GAAP)
$
(1,297
)
$
(1,031
)
Novanta Inc.
Gross Profit (GAAP)
$
95,245
$
72,406
Gross Profit Margin (GAAP)
44.2
%
43.2
%
Amortization of intangible assets
3,336
2,982
Acquisition fair value adjustments
160
—
Employee COVID-19 testing costs
39
1,473
Adjusted Gross Profit (Non-GAAP)
$
98,780
$
76,861
Adjusted Gross Profit Margin
(Non-GAAP)
45.9
%
45.9
%
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 July 1,
2022
Operating Income
Operating Margin
Income before Income Taxes
Income Tax Provision /
(Benefit)
Effective Tax Rate
Consolidated Net Income
Diluted EPS
GAAP results
$
23,291
10.8
%
$
20,754
$
3,275
15.8
%
$
17,479
$
0.49
Non-GAAP Adjustments:
Amortization of intangible assets
10,509
4.9
%
10,509
Restructuring costs
610
0.3
%
610
Acquisition and related costs
2,045
0.9
%
2,045
Acquisition inventory fair value
adjustments
160
0.1
%
160
Employee COVID-19 testing costs
39
0.0
%
39
Foreign exchange transaction (gains)
losses, net
(152
)
Tax effect on non-GAAP adjustments
2,673
Non-GAAP tax adjustments
81
Total non-GAAP adjustments
13,363
6.2
%
13,211
2,754
10,457
0.29
Adjusted results (Non-GAAP)
$
36,654
17.0
%
$
33,965
$
6,029
17.8
%
$
27,936
$
0.78
Weighted average shares outstanding -
Diluted
35,933
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 July 2,
2021
Operating Income
Operating Margin
Income before Income Taxes
Income Tax Provision /
(Benefit)
Effective Tax Rate
Consolidated Net Income
Diluted EPS
GAAP results
$
15,992
9.5
%
$
14,441
$
2,777
19.2
%
$
11,664
$
0.33
Non-GAAP Adjustments:
Amortization of intangible assets
6,568
3.9
%
6,568
Restructuring costs
1,165
0.7
%
1,165
Acquisition and related costs
3,469
2.1
%
3,469
Employee COVID-19 testing costs
1,473
0.9
%
1,473
Foreign exchange transaction (gains)
losses, net
76
Tax effect on non-GAAP adjustments
2,518
Non-GAAP tax adjustments
(347
)
Total non-GAAP adjustments
12,675
7.6
%
12,751
2,171
10,580
0.29
Adjusted results (Non-GAAP)
$
28,667
17.1
%
$
27,192
$
4,948
18.2
%
$
22,244
$
0.62
Weighted average shares outstanding -
Diluted
35,763
NOVANTA INC.
Reconciliation of GAAP to
Non-GAAP Financial Measures
(In thousands of U.S.
dollars)
(Unaudited)
Adjusted EBITDA
(Non-GAAP):
Three Months Ended
July 1,
July 2,
2022
2021
Consolidated Net Income (GAAP)
$
17,479
$
11,664
Consolidated Net Income Margin
8.1
%
7.0
%
Interest (income) expense, net
2,757
1,378
Income tax provision (benefit)
3,275
2,777
Depreciation and amortization
13,811
9,875
Share-based compensation
5,081
5,035
Restructuring, acquisition, and related
costs
2,655
4,634
Acquisition fair value adjustment
160
-
Employee COVID-19 testing costs
39
1,473
Other, net
(220
)
173
Adjusted EBITDA (Non-GAAP)
$
45,037
$
37,009
Adjusted EBITDA Margin
(Non-GAAP)
20.9
%
22.1
%
Organic Revenue
Growth (Non-GAAP):
Three Months Ended July 1,
2022
Compared to
Three Months Ended July 2,
2021
Reported Revenue Growth/(Decline)
(GAAP)
28.6
%
Less: Change attributable to
acquisitions
20.9
%
Plus: Change due to foreign currency
5.2
%
Organic Revenue Growth/(Decline)
(Non-GAAP)
12.9
%
Net Debt
(Non-GAAP):
July 1,
December 31,
2022
2021
Total Debt (GAAP)
$
407,357
$
434,458
Plus: Deferred financing costs
5,436
4,126
Gross Debt
412,793
438,584
Less: Cash and cash equivalents
(100,489
)
(117,393
)
Net Debt (Non-GAAP)
$
312,304
$
321,191
Free Cash Flow
(Non-GAAP):
Three Months Ended
July 1,
July 2,
2022
2021
Net Cash Provided by Operating
Activities (GAAP)
$
24,061
$
28,746
Less: Purchases of property, plant and
equipment
(5,795
)
(5,375
)
Plus: Proceeds from sale of property,
plant and equipment
—
—
Free Cash Flow (Non-GAAP)
$
18,266
$
23,371
Consolidated Net Income (GAAP)
$
17,479
$
11,664
Net Cash Provided by Operating
Activities as a Percentage of Consolidated Net Income
137.7
%
246.5
%
Free Cash Flow as a Percentage of
Consolidated Net Income
104.5
%
200.4
%
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 COVID-19 pandemic and have
had a significant impact on the Company’s 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 excludes write-off of unamortized
deferred financing costs because they only arise in certain
specific situations when the Company’s existing credit agreement is
terminated or modified. 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, write-off of
unamortized deferred financing costs, and foreign exchange
transaction gains (losses) for the reasons described for Adjusted
Income before Income Taxes. In addition, the Company excluded
significant discrete income tax expenses (benefits) related to
releases of valuation allowances, benefits or expenses associated
with the completion of tax audits, effects of changes in tax laws,
effects of acquisition related tax planning actions on 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
calculation of diluted EPS, 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, write-off of unamortized deferred financing
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 tax provision
(benefit), 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, write-off of
unamortized deferred financing costs, 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 net cash provided by
operating activities less cash paid for purchases of property,
plant and equipment and plus cash proceeds from sales 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/20220809005064/en/
Novanta Inc. Investor Relations Contact: Ray Nash (781)
266-5137
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