- Full Year 2022 GAAP Revenue increased 22% to $861
million
- Full Year 2022 GAAP Net Income of $74 million
- Full Year 2022 GAAP Diluted Earnings Per Share increased 46%
to $2.06
- Full Year 2022 Adjusted Earnings Per Share increased 17% to
$3.07
- Full Year 2022 Adjusted EBITDA of $184 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 2022.
Financial
Highlights
Three Months Ended December
31,
Year Ended December
31,
(In millions, except per share
amounts)
2022
2021
2022
2021
GAAP
Revenue
$
218.4
$
199.0
$
860.9
$
706.8
Operating Income
$
26.8
$
21.7
$
103.1
$
64.1
Net Income
$
15.3
$
13.8
$
74.1
$
50.3
Diluted EPS
$
0.42
$
0.38
$
2.06
$
1.41
Non-GAAP*
Adjusted Operating Income
$
37.3
$
33.9
$
147.5
$
116.9
Adjusted Diluted EPS
$
0.75
$
0.67
$
3.07
$
2.62
Adjusted EBITDA
$
46.1
$
42.6
$
184.1
$
152.7
*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.
“Novanta delivered record financial results for 2022,” said
Matthijs Glastra, Chair and Chief Executive Officer of Novanta. “In
the fourth quarter, our teams continued to execute well, delivering
impressive performance in a challenging operating environment,
delivering strong revenue and profit growth for the quarter and for
the full year.”
Matthijs Glastra continued, “Looking at 2023 and beyond, we
intend to continue to focus on new product development, design wins
in high growth applications, driving cash flows, and
institutionalizing the Novanta Growth System. With leading and
diverse technologies across attractive high growth markets, we
believe Novanta is well positioned to continue to deliver sustained
long-term shareholder value.”
Fourth Quarter
During the fourth quarter of 2022, Novanta generated GAAP
revenue of $218.4 million, an increase of $19.4 million, or 9.8%,
versus the fourth quarter of 2021. The Company’s acquisition
activities resulted in an increase in revenue of $3.2 million, or
1.6%, compared to the fourth quarter of 2021. Changes in foreign
currency exchange rates year over year adversely impacted our
revenue by $11.3 million, or 5.6%, during the fourth 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 13.8% for the fourth quarter of 2022 (see
“Organic Revenue Growth” in the non-GAAP reconciliations
below).
In the fourth quarter of 2022, GAAP operating income was $26.8
million, compared to $21.7 million in the fourth quarter of 2021.
GAAP net income was $15.3 million in the fourth quarter of 2022,
compared to $13.8 million in the fourth quarter of 2021. GAAP
diluted earnings per share (“EPS”) was $0.42 in the fourth quarter
of 2022, compared to $0.38 in the fourth quarter of 2021.
Adjusted Diluted EPS was $0.75 in the fourth quarter of 2022,
compared to $0.67 in the fourth quarter of 2021. The Company ended
the fourth quarter of 2022 with 36.0 million diluted weighted
average shares outstanding. Adjusted EBITDA was $46.1 million in
the fourth quarter of 2022, compared to $42.6 million in the fourth
quarter of 2021.
Operating cash flow for the fourth quarter of 2022 was $40.6
million, compared to $28.7 million for the fourth quarter of
2021.
Full Year
For the full year 2022, Novanta generated GAAP revenue of $860.9
million, an increase of $154.1 million, or 21.8%, versus the full
year 2021. The Company’s acquisition activities resulted in an
increase in revenue of $93.3 million, or 13.2%. Changes in foreign
currency exchange rates year over year favorably impacted our
revenue by $36.9 million, or 5.2%, in 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 13.8% for the full year 2022 (see “Organic Revenue
Growth” in Reconciliation of GAAP to Non-GAAP Financial Measures
below).
For the full year 2022, GAAP operating income was $103.1
million, compared to $64.1 million for 2021. GAAP net income was
$74.1 million for the full year 2022, compared to $50.3 million for
2021. GAAP diluted EPS was $2.06 for the full year 2022, compared
to $1.41 for 2021.
Adjusted Diluted EPS was $3.07 for the full year 2022, compared
to $2.62 for 2021. For the full year 2022, the Company had 35.9
million diluted weighted average shares outstanding. Adjusted
EBITDA was $184.1 million for the full year 2022, compared to
$152.7 million for 2021.
Operating cash flow for the full year 2022 was $90.8 million,
compared to $94.6 million for 2021. The Company finished the year
with approximately $435.5 million of total debt and $100.1 million
of total cash. Net Debt, as defined in the non-GAAP reconciliation
below, was $340.2 million.
Financial Guidance
“We remain very optimistic about our position and opportunities
in the medical and advanced industrial end markets that we serve,”
said Matthijs Glastra, “Sales in our medical end markets are
expected to have solid demand in 2023. And despite some near term
slowdown in some areas of the microelectronics end market capital
spending, we enter the year with strong backlog and resilient
customer demand. We are confident in the ability of our teams to
remain disciplined and diligent to serve our customers and deliver
strong operating performance in the year ahead.”
For the first quarter of 2023, the Company expects GAAP revenue
of approximately $210 million to $212 million. The Company expects
Adjusted EBITDA to be in the range of $44 million to $45 million
and Adjusted Diluted EPS to be in the range of $0.64 to $0.65. The
Company’s guidance assumes no significant changes in foreign
exchange rates.
For the full year 2023, the Company expects GAAP revenue of
approximately $890 million to $915 million. The Company expects
Adjusted EBITDA to be in the range of $195 million to $207 million
and Adjusted Diluted EPS to be in the range of $3.00 to $3.20. The
Company’s guidance assumes no significant changes in foreign
exchange rates, but does assume a weighted average interest rate of
6%, and therefore $24 million to $26 million of net interest
expense.
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 Wednesday, March 1,
2023 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, April 3, 2023.
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
certain 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 and full year 2023; expectations for our end markets and
market position; expectations regarding our ability to navigate
difficult macroeconomic conditions; our ability to deliver
sustained long-term shareholder value; expectations regarding our
backlog and demand 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 may cause fluctuations in our operating
results; 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; the
continuing impact of “Brexit”; 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 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; our
exposure to the credit risk of some of our customers and in
weakened markets; 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, 2022, as updated by our subsequent 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 December
31,
Year Ended December
31,
2022
2021
2022
2021
Revenue
$
218,373
$
198,960
$
860,903
$
706,793
Cost of revenue
123,830
116,076
482,431
406,465
Gross profit
94,543
82,884
378,472
300,328
Operating expenses:
Research and development and
engineering
21,904
19,418
85,770
72,522
Selling, general and administrative
38,710
34,966
158,901
129,155
Amortization of purchased intangible
assets
5,351
5,277
26,338
16,577
Restructuring and acquisition related
costs
1,734
1,535
4,384
18,020
Total operating expenses
67,699
61,196
275,393
236,274
Operating income
26,844
21,688
103,079
64,054
Interest income (expense), net
(5,688
)
(2,891
)
(15,616
)
(7,387
)
Foreign exchange transaction gains
(losses), net
(2,240
)
172
67
(127
)
Other income (expense), net
19
(130
)
(371
)
(368
)
Income before income taxes
18,935
18,839
87,159
56,172
Income tax provision
3,673
5,085
13,108
5,841
Net income
$
15,262
$
13,754
$
74,051
$
50,331
Earnings per common share:
Basic
$
0.43
$
0.39
$
2.08
$
1.42
Diluted
$
0.42
$
0.38
$
2.06
$
1.41
Weighted average common shares
outstanding—basic
35,738
35,485
35,652
35,396
Weighted average common shares
outstanding—diluted
36,000
35,811
35,909
35,781
NOVANTA INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands of U.S.
dollars)
(Unaudited)
December 31,
December 31,
2022
2021
ASSETS
Current Assets
Cash and cash equivalents
$
100,105
$
117,393
Accounts receivable, net
137,697
115,617
Inventories
167,997
125,657
Prepaid expenses and other current
assets
14,720
15,158
Total current assets
420,519
373,825
Property, plant and equipment, net
103,186
87,439
Operating lease assets
43,317
48,338
Intangible assets, net
175,766
220,989
Goodwill
478,897
479,500
Other assets
19,527
17,792
Total assets
$
1,241,212
$
1,227,883
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current Liabilities
Current portion of long-term debt
$
4,800
$
5,097
Accounts payable
75,225
68,514
Accrued expenses and other current
liabilities
84,497
110,327
Total current liabilities
164,522
183,938
Long-term debt
430,662
429,361
Operating lease liabilities
40,808
45,700
Other long-term liabilities
27,634
47,593
Total liabilities
663,626
706,592
Stockholders’ Equity:
Total stockholders’ equity
577,586
521,291
Total liabilities and stockholders’
equity
$
1,241,212
$
1,227,883
NOVANTA INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands of U.S.
dollars)
(Unaudited)
Three Months Ended December
31,
Year Ended December
31,
2022
2021
2022
2021
Cash flows from operating
activities:
Net income
$
15,262
$
13,754
$
74,051
$
50,331
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
12,159
12,781
53,158
43,394
Share-based compensation
5,299
5,437
23,108
25,606
Deferred income taxes
(4,026
)
(881
)
(18,654
)
(3,945
)
Other non-cash items
1,441
1,847
3,853
6,248
Changes in assets and liabilities which
provided/(used) cash, excluding effects from business
acquisitions:
Accounts receivable
11,198
(3,897
)
(23,246
)
(25,355
)
Inventories
(1,995
)
(7,135
)
(48,547
)
(19,078
)
Other operating assets and liabilities
1,274
6,807
27,056
17,424
Net cash provided by operating
activities
40,612
28,713
90,779
94,625
Cash flows from investing
activities:
Acquisition of businesses, net of cash
acquired and working capital adjustments
—
453
(21,565
)
(284,728
)
Purchases of property, plant and
equipment
(4,258
)
(5,217
)
(19,643
)
(19,976
)
Other investing activities
—
200
(1,333
)
(2,000
)
Net cash used in investing activities
(4,258
)
(4,564
)
(42,541
)
(306,704
)
Cash flows from financing
activities:
Borrowings under revolving credit
facilities
—
—
69,941
280,000
Repayments under term loan and revolving
credit facilities
(21,238
)
(8,345
)
(59,029
)
(32,381
)
Repurchases of common shares
—
—
(10,000
)
—
Payments of contingent consideration
related to acquisitions
—
—
(46,254
)
(1,836
)
Other financing activities
(2,247
)
(1,192
)
(14,812
)
(41,030
)
Net cash used in financing activities
(23,485
)
(9,537
)
(60,154
)
204,753
Effect of exchange rates on cash and cash
equivalents
2,656
386
(5,372
)
(335
)
Increase (decrease) in cash and cash
equivalents
15,525
14,998
(17,288
)
(7,661
)
Cash and cash equivalents, beginning of
period
84,580
102,395
117,393
125,054
Cash and cash equivalents, end of
period
$
100,105
$
117,393
$
100,105
$
117,393
NOVANTA INC.
Revenue by Reportable
Segment
(In thousands of U.S.
dollars)
(Unaudited)
Three Months Ended December
31,
Year Ended December
31,
2022
2021
2022
2021
Revenue
Photonics
$
71,632
$
56,346
$
274,674
$
232,459
Vision
77,081
65,631
277,992
262,060
Precision Motion
69,660
76,983
308,237
212,274
Total
$
218,373
$
198,960
$
860,903
$
706,793
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,
2022
2021
2022
2021
Photonics
Gross Profit (GAAP)
$
34,905
$
24,980
$
129,173
$
107,993
Gross Profit Margin (GAAP)
48.7
%
44.3
%
47.0
%
46.5
%
Amortization of intangible assets
597
753
2,482
3,087
Acquisition fair value adjustments
—
—
—
—
Adjusted Gross Profit (Non-GAAP)
$
35,502
$
25,733
$
131,655
$
111,080
Adjusted Gross Profit Margin
(Non-GAAP)
49.6
%
45.7
%
47.9
%
47.8
%
Vision
Gross Profit (GAAP)
$
28,747
$
24,757
$
108,713
$
100,890
Gross Profit Margin (GAAP)
37.3
%
37.7
%
39.1
%
38.5
%
Amortization of intangible assets
1,212
1,485
4,905
6,025
Acquisition fair value adjustments
—
—
—
—
Adjusted Gross Profit (Non-GAAP)
$
29,959
$
26,242
$
113,618
$
106,915
Adjusted Gross Profit Margin
(Non-GAAP)
38.9
%
40.0
%
40.9
%
40.8
%
Precision Motion
Gross Profit (GAAP)
$
32,304
$
34,651
$
146,150
$
99,345
Gross Profit Margin (GAAP)
46.4
%
45.0
%
47.4
%
46.8
%
Amortization of intangible assets
1,455
1,775
5,883
4,176
Acquisition fair value adjustments
—
1,131
160
1,411
Adjusted Gross Profit (Non-GAAP)
$
33,759
$
37,557
$
152,193
$
104,932
Adjusted Gross Profit Margin
(Non-GAAP)
48.5
%
48.8
%
49.4
%
49.4
%
Unallocated Corporate and Shared
Services
Gross Profit (GAAP)
$
(1,413
)
$
(1,504
)
$
(5,564
)
$
(7,900
)
Amortization of intangible assets
—
—
—
—
Acquisition fair value adjustments
—
—
—
—
Employee COVID-19 testing costs
76
254
240
3,568
Adjusted Gross Profit (Non-GAAP)
$
(1,337
)
$
(1,250
)
$
(5,324
)
$
(4,332
)
Novanta Inc.
Gross Profit (GAAP)
$
94,543
$
82,884
$
378,472
$
300,328
Gross Profit Margin (GAAP)
43.3
%
41.7
%
44.0
%
42.5
%
Amortization of intangible assets
3,264
4,013
13,270
13,288
Acquisition fair value adjustments
—
1,131
160
1,411
Employee COVID-19 testing costs
76
254
240
3,568
Adjusted Gross Profit (Non-GAAP)
$
97,883
$
88,282
$
392,142
$
318,595
Adjusted Gross Profit Margin
(Non-GAAP)
44.8
%
44.4
%
45.6
%
45.1
%
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, 2022
Operating income
Operating Margin
Income before Income Taxes
Income Tax Provision
Effective Tax Rate
Net Income
Diluted EPS
GAAP results
$
26,844
12.3
%
$
18,935
$
3,673
19.4
%
$
15,262
$
0.42
Non-GAAP Adjustments:
Amortization of intangible assets
8,615
4.0
%
8,615
Restructuring costs
1,400
0.6
%
1,400
Acquisition related costs
334
0.2
%
334
Employee COVID-19 testing costs
76
0.0
%
76
Foreign exchange transaction (gains)
losses, net
2,240
Tax effect of non-GAAP adjustments
2,392
Non-GAAP tax adjustments
(1,534
)
Total non-GAAP adjustments
10,425
4.8
%
12,665
858
11,807
0.33
Adjusted results (Non-GAAP)
$
37,269
17.1
%
$
31,600
$
4,531
14.3
%
$
27,069
$
0.75
Weighted average shares outstanding -
Diluted
36,000
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, 2021
Operating income
Operating Margin
Income before Income Taxes
Income Tax Provision
Effective Tax Rate
Net Income
Diluted EPS
GAAP results
$
21,688
10.9
%
$
18,839
$
5,085
27.0
%
$
13,754
$
0.38
Non-GAAP Adjustments:
Amortization of intangible assets
9,290
4.7
%
9,290
Restructuring costs
445
0.2
%
445
Acquisition related costs
1,090
0.5
%
1,090
Acquisition inventory fair value
adjustments
1,131
0.6
%
1,131
Employee COVID-19 testing costs
254
0.1
%
254
Foreign exchange transaction (gains)
losses, net
(172
)
Tax effect of non-GAAP adjustments
2,848
Non-GAAP tax adjustments
(1,164
)
Total non-GAAP adjustments
12,210
6.1
%
12,038
1,684
10,354
0.29
Adjusted results (Non-GAAP)
$
33,898
17.0
%
$
30,877
$
6,769
21.9
%
$
24,108
$
0.67
Weighted average shares outstanding -
Diluted
35,811
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,
2022
Operating income
Operating Margin
Income before Income Taxes
Income Tax Provision
Effective Tax Rate
Net Income
Diluted EPS
GAAP results
$
103,079
12.0
%
$
87,159
$
13,108
15.0
%
$
74,051
$
2.06
Non-GAAP Adjustments:
Amortization of intangible assets
39,608
4.6
%
39,608
Restructuring costs
4,408
0.5
%
4,408
Acquisition related costs
(24
)
0.0
%
(24
)
Acquisition inventory fair value
adjustments
160
0.0
%
160
Employee COVID-19 testing costs
240
0.0
%
240
Write-off of unamortized deferred
financing costs
624
Foreign exchange transaction (gains)
losses, net
(67
)
Tax effect of non-GAAP adjustments
9,502
Non-GAAP tax adjustments
(806
)
Total non-GAAP adjustments
44,392
5.1
%
44,949
8,696
36,253
1.01
Adjusted results (Non-GAAP)
$
147,471
17.1
%
$
132,108
$
21,804
16.5
%
$
110,304
$
3.07
Weighted average shares outstanding -
Diluted
35,909
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,
2021
Operating income
Operating Margin
Income before Income Taxes
Income Tax Provision
Effective Tax Rate
Net Income
Diluted EPS
GAAP results
$
64,054
9.1
%
$
56,172
$
5,841
10.4
%
$
50,331
$
1.41
Non-GAAP Adjustments:
Amortization of intangible assets
29,865
4.2
%
29,865
Restructuring costs
8,341
1.2
%
8,341
Acquisition related costs
9,679
1.4
%
9,679
Acquisition inventory fair value
adjustments
1,411
0.2
%
1,411
Employee COVID-19 testing costs
3,568
0.5
%
3,568
Foreign exchange transaction (gains)
losses, net
127
Tax effect of non-GAAP adjustments
10,815
Non-GAAP tax adjustments
(1,370
)
Total non-GAAP adjustments
52,864
7.5
%
52,991
9,445
43,546
1.21
Adjusted results (Non-GAAP)
$
116,918
16.6
%
$
109,163
$
15,286
14.0
%
$
93,877
$
2.62
Weighted average shares outstanding -
Diluted
35,781
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,
2022
2021
2022
2021
Net Income (GAAP)
$
15,262
$
13,754
$
74,051
$
50,331
Net Income Margin
7.0
%
6.9
%
8.6
%
7.1
%
Interest (income) expense, net
5,688
2,891
15,616
7,387
Income tax provision
3,673
5,085
13,108
5,841
Depreciation and amortization
12,159
12,647
53,158
43,126
Share-based compensation
5,299
5,353
23,108
22,557
Restructuring and acquisition related
costs
1,734
1,535
4,384
18,020
Acquisition inventory fair value
adjustments
—
1,131
160
1,411
Write-off of unamortized deferred
financing costs
—
—
624
—
Employee COVID-19 testing costs
76
254
240
3,568
Other non-operating income (expense),
net
2,221
(42
)
(320
)
495
Adjusted EBITDA (Non-GAAP)
$
46,112
$
42,608
$
184,129
$
152,736
Adjusted EBITDA Margin
(Non-GAAP)
21.1
%
21.4
%
21.4
%
21.6
%
Organic Revenue
Growth (Non-GAAP):
Three Months Ended
December 31, 2022 Compared to Three Months
Ended December 31, 2021
Year Ended December 31,
2022 Compared to Year Ended December 31,
2021
Reported Revenue Growth (GAAP)
9.8
%
21.8
%
Less: Change attributable to
acquisitions
1.6
%
13.2
%
Plus: Change due to foreign currency
5.6
%
5.2
%
Organic Revenue Growth
(Non-GAAP)
13.8
%
13.8
%
Net Debt
(Non-GAAP):
December 31,
December 31,
2022
2021
Total Debt (GAAP)
$
435,462
$
434,458
Plus: Deferred financing costs
4,843
4,126
Gross Debt
440,305
438,584
Less: Cash and cash equivalents
(100,105
)
(117,393
)
Net Debt (Non-GAAP)
$
340,200
$
321,191
Free Cash Flow
(Non-GAAP):
Three Months Ended December
31,
Year Ended December
31,
2022
2021
2022
2021
Cash Provided by Operating Activities
(GAAP)
$
40,612
$
28,713
$
90,779
$
94,625
Less: Purchases of property, plant and
equipment
(4,258
)
(5,217
)
(19,643
)
(19,976
)
Plus: Proceeds from sale of property,
plant and equipment
—
200
137
200
Free Cash Flow (Non-GAAP)
$
36,354
$
23,696
$
71,273
$
74,849
Net Income (GAAP)
$
15,262
$
13,754
$
74,051
$
50,331
Cash Provided by Operating Activities
as a Percentage of Net Income
266
%
209
%
123
%
188
%
Free Cash Flow as a Percentage of Net
Income
238
%
172
%
96
%
149
%
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 trends 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 excludes restructuring and acquisition-related costs due to
the significant changes that have occurred outside of the Company’s
day-to-day business for the reasons described above in the
introductory paragraphs of the “Use of Non-GAAP Financial
Measures.”
Adjusted Income before Income Taxes
The calculation of Adjusted Income before Income Taxes is
displayed in the tables above. The calculation of Adjusted Income
before Income Taxes excludes amortization of acquired intangible
assets and inventory fair value adjustments related to business
acquisitions, costs directly related to employee COVID-19 testing,
and restructuring and acquisition-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 excludes 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
excludes 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 and inventory
fair value adjustments related to business acquisitions, costs
directly related to employee COVID-19 testing, restructuring costs,
acquisition-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 excludes significant discrete income tax
expenses (benefits) related to releases of valuation allowances,
expenses (benefits) 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 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 costs, acquisition-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,
expenses (benefits) 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 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
costs, acquisition-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 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 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/20230301005061/en/
Novanta Inc. Investor Relations Contact: Ray Nash (781)
266-5137
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