- Second Quarter 2023 GAAP Revenue increased 7% to $229
million
- Second Quarter 2023 GAAP Net Income of $21 million
- Second Quarter 2023 GAAP Diluted Earnings Per Share of
$0.58
- Second Quarter 2023 Adjusted Earnings Per Share of
$0.80
- Second Quarter 2023 Adjusted EBITDA of $52 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
second quarter 2023.
Financial
Highlights
Three Months Ended
(In millions, except per share
amounts)
June 30,
July 1,
2023
2022
GAAP
Revenue
$
229.5
$
215.4
Operating Income
$
32.2
$
23.3
Consolidated Net Income
$
20.9
$
17.5
Diluted EPS
$
0.58
$
0.49
Non-GAAP*
Adjusted Operating Income
$
42.1
$
36.7
Adjusted Diluted EPS
$
0.80
$
0.78
Adjusted EBITDA
$
51.7
$
45.0
*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 delivered a strong quarter of revenue growth and profit
growth despite the challenging macroeconomic climate,” said
Matthijs Glastra, Chair and Chief Executive Officer of Novanta.
“Growth in our medical end-markets remains robust, and our sales to
industrial end-market customers stayed resilient despite the
evolving industrial capital spending environment. Our teams
performed exceptionally well, utilizing the Novanta Growth System,
and delivered gross margin expansion, as well as improving customer
satisfaction by reducing our past-due backlog to customers by 46%
sequentially. We remain very confident in our operating model, and
in our ability to bring innovations to our customers in high-growth
end-markets.”
Second Quarter
During the second quarter of 2023, Novanta generated GAAP
revenue of $229.5 million, an increase of $14.1 million, or 6.6%,
versus the second quarter of 2022. The Company’s acquisition
activities resulted in an increase in revenue of $3.3 million, or
1.5%, compared to the second quarter of 2022. Changes in foreign
currency exchange rates year over year adversely impacted our
revenue by $0.1 million, or 0.0%, during the second quarter of
2023. 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 5.1% for the second quarter of 2023 (see
“Organic Revenue Growth” in the non-GAAP reconciliations
below).
In the second quarter of 2023, GAAP operating income was $32.2
million, compared to $23.3 million in the second quarter of 2022.
GAAP net income was $20.9 million in the second quarter of 2023,
compared to $17.5 million in the second quarter of 2022. GAAP
diluted earnings per share (“EPS”) was $0.58 in the second quarter
of 2023, compared to $0.49 in the second quarter of 2022.
Adjusted Diluted EPS was $0.80 in the second quarter of 2023,
compared to $0.78 in the second quarter of 2022. The Company ended
the second quarter of 2023 with 36.0 million diluted weighted
average shares outstanding. Adjusted EBITDA was $51.7 million in
the second quarter of 2023, compared to $45.0 million in the second
quarter of 2022.
Operating cash flow for the second quarter of 2023 was $26.2
million, compared to $24.1 million for the second quarter of 2022.
The Company completed the second quarter of 2023 with approximately
$408.5 million of total debt and $91.3 million of total cash. Net
Debt, as defined in the non-GAAP reconciliation below, was $321.4
million.
Financial Guidance
“While macroeconomic conditions, particularly with regard to
industrial capital spending and China, are expected to intensify in
the second half, Novanta’s diversified portfolio, especially its
medical end-market exposure, is expected to continue to remain
strong, acting as a counterbalance to the environment,” said
Matthijs Glastra. “Regardless of the macroeconomic climate, we
continue to focus on secular growth opportunities in the right
applications, coupled with the Novanta Growth System to deliver
consistent, predictable, and sustainable long-term growth.”
For the third quarter of 2023, the Company expects GAAP revenue
of approximately $221 million to $224 million. The Company expects
Adjusted EBITDA to be in the range of $48 million to $51 million
and Adjusted Diluted EPS to be in the range of $0.70 to $0.77. The
Company’s guidance assumes no significant changes in foreign
exchange rates.
For the full year 2023, the Company expects GAAP revenue of
approximately $892 million to $902 million. The Company expects
Adjusted Gross Profit Margin to be approximately 46.5% to 47.0%.
The Company expects Adjusted EBITDA to be in the range of $196
million to $204 million and Adjusted Diluted EPS to be in the range
of $2.96 to $3.15. 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 8,
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 Investor Relations section
of the Company’s website at www.novanta.com.
A replay of the audio webcast will be available approximately
three hours after the conclusion of the call in the Investor
Relations section of the Company’s website at www.novanta.com. The
replay will remain available until Monday, October 2, 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 and Adjusted EBITDA as
performance targets 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 third
quarter and full year 2023; expectations for our end markets and
market position; expectations regarding our ability to navigate
difficult macroeconomic conditions; improvements in customer
satisfaction 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 epidemics
or pandemics 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;
cyberattacks, disruptions or other 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 Quarterly Report on Form
10-Q for the quarterly period ended March 31, 2023 and other
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 precision
medicine and manufacturing, medical solutions, and robotics and
automation 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
June 30,
July 1,
2023
2022
Revenue
$
229,464
$
215,356
Cost of revenue
125,341
120,111
Gross profit
104,123
95,245
Operating expenses:
Research and development and
engineering
23,380
21,588
Selling, general and administrative
42,187
40,538
Amortization of purchased intangible
assets
5,124
7,173
Restructuring, acquisition, and related
costs
1,234
2,655
Total operating expenses
71,925
71,954
Operating income
32,198
23,291
Interest income (expense), net
(6,810
)
(2,757
)
Foreign exchange transaction gains
(losses), net
74
152
Other income (expense), net
(191
)
68
Income before income taxes
25,271
20,754
Income tax provision (benefit)
4,392
3,275
Consolidated net income
$
20,879
$
17,479
Earnings per common share:
Basic
$
0.58
$
0.49
Diluted
$
0.58
$
0.49
Weighted average common shares
outstanding—basic
35,851
35,609
Weighted average common shares
outstanding—diluted
36,032
35,933
NOVANTA INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands of U.S.
dollars)
(Unaudited)
June 30,
December 31,
2023
2022
ASSETS
Current Assets
Cash and cash equivalents
$
91,330
$
100,105
Accounts receivable, net
144,837
137,697
Inventories
162,904
167,997
Prepaid expenses and other current
assets
15,272
14,720
Total current assets
414,343
420,519
Property, plant and equipment, net
103,801
103,186
Operating lease assets
43,280
43,317
Intangible assets, net
160,956
175,766
Goodwill
483,409
478,897
Other assets
26,933
19,527
Total assets
$
1,232,722
$
1,241,212
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current Liabilities
Current portion of long-term debt
$
4,906
$
4,800
Accounts payable
64,653
75,225
Accrued expenses and other current
liabilities
66,419
84,497
Total current liabilities
135,978
164,522
Long-term debt
403,586
430,662
Operating lease liabilities
40,729
40,808
Other long-term liabilities
26,399
27,634
Total liabilities
606,692
663,626
Stockholders’ Equity:
Total stockholders’ equity
626,030
577,586
Total liabilities and stockholders’
equity
$
1,232,722
$
1,241,212
NOVANTA INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands of U.S.
dollars)
(Unaudited)
Three Months Ended
June 30,
July 1,
2023
2022
Cash flows from operating
activities:
Consolidated net income
$
20,879
$
17,479
Adjustments to reconcile consolidated net
income to
net cash provided by operating
activities:
Depreciation and amortization
11,937
13,811
Share-based compensation
5,875
5,081
Deferred income taxes
(3,970
)
(4,364
)
Other
2,085
3,017
Changes in assets and liabilities which
(used)/provided cash,
excluding effects from business
acquisitions:
Accounts receivable
(3,644
)
(8,678
)
Inventories
1,125
(18,581
)
Other operating assets and liabilities
(8,090
)
16,296
Net cash provided by (used in) operating
activities
26,197
24,061
Cash flows from investing
activities:
Purchases of property, plant and
equipment
(3,326
)
(5,795
)
Net cash provided by (used in) investing
activities
(3,326
)
(5,795
)
Cash flows from financing
activities:
Repayments under term loan and revolving
credit facilities
(15,189
)
(1,193
)
Payments of debt issuance costs
—
(359
)
Payments of withholding taxes from
share-based awards
(407
)
(1,744
)
Repurchases of common shares
—
(10,000
)
Other financing activities
(157
)
(148
)
Net cash provided by (used in) financing
activities
(15,753
)
(13,444
)
Effect of exchange rates on cash and cash
equivalents
1,536
(3,138
)
Increase (decrease) in cash and cash
equivalents
8,654
1,684
Cash and cash equivalents, beginning of
period
82,676
98,805
Cash and cash equivalents, end of
period
$
91,330
$
100,489
NOVANTA INC.
Revenue by Reportable
Segment
(In thousands of U.S.
dollars)
(Unaudited)
Three Months Ended
June 30,
July 1,
2023
2022
Revenue
Precision Medicine and Manufacturing
$
74,333
$
69,461
Medical Solutions
83,322
65,516
Robotics and Automation
71,809
80,379
Total
$
229,464
$
215,356
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
June 30,
July 1,
2023
2022
Precision Medicine and
Manufacturing
Gross Profit (GAAP)
$
36,513
$
31,182
Gross Profit Margin (GAAP)
49.1
%
44.9
%
Amortization of intangible assets
582
628
Inventory related charges associated with
a product line closure
473
—
Acquisition fair value adjustments
—
—
Adjusted Gross Profit (Non-GAAP)
$
37,568
$
31,810
Adjusted Gross Profit Margin
(Non-GAAP)
50.5
%
45.8
%
Medical Solutions
Gross Profit (GAAP)
$
34,257
$
26,535
Gross Profit Margin (GAAP)
41.1
%
40.5
%
Amortization of intangible assets
1,070
1,232
Acquisition fair value adjustments
—
—
Adjusted Gross Profit (Non-GAAP)
$
35,327
$
27,767
Adjusted Gross Profit Margin
(Non-GAAP)
42.4
%
42.4
%
Robotics and Automation
Gross Profit (GAAP)
$
34,909
$
38,864
Gross Profit Margin (GAAP)
48.6
%
48.4
%
Amortization of intangible assets
1,394
1,476
Acquisition fair value adjustments
—
160
Adjusted Gross Profit (Non-GAAP)
$
36,303
$
40,500
Adjusted Gross Profit Margin
(Non-GAAP)
50.6
%
50.4
%
Unallocated Corporate and Shared
Services
Gross Profit (GAAP)
$
(1,556
)
$
(1,336
)
Amortization of intangible assets
—
—
Employee COVID-19 testing costs
—
39
Adjusted Gross Profit (Non-GAAP)
$
(1,556
)
$
(1,297
)
Novanta Inc.
Gross Profit (GAAP)
$
104,123
$
95,245
Gross Profit Margin (GAAP)
45.4
%
44.2
%
Amortization of intangible assets
3,046
3,336
Acquisition fair value adjustments
—
160
Inventory related charges associated with
a product line closure
473
—
Employee COVID-19 testing costs
—
39
Adjusted Gross Profit (Non-GAAP)
$
107,642
$
98,780
Adjusted Gross Profit Margin
(Non-GAAP)
46.9
%
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 June 30,
2023
Operating Income
Operating Margin
Income Before Income Taxes
Income Tax Provision /
(Benefit)
Effective Tax Rate
Consolidated Net Income
Diluted EPS
GAAP results
$
32,198
14.0
%
$
25,271
$
4,392
17.4
%
$
20,879
$
0.58
Non-GAAP Adjustments:
Amortization of intangible assets
8,170
3.6
%
8,170
Restructuring costs
1,136
0.5
%
1,136
Acquisition and related costs
98
0.0
%
98
Inventory related charges associated with
a product line closure
473
0.2
%
473
Foreign exchange transaction (gains)
losses, net
(74
)
Tax effect on non-GAAP adjustments
2,092
Non-GAAP tax adjustments
(149
)
Total non-GAAP adjustments
9,877
4.3
%
9,803
1,943
7,860
0.22
Adjusted results (Non-GAAP)
$
42,075
18.3
%
$
35,074
$
6,335
18.1
%
$
28,739
$
0.80
Weighted average shares outstanding -
Diluted
36,032
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
(In thousands of U.S.
dollars)
(Unaudited)
Adjusted EBITDA
(Non-GAAP):
Three Months Ended
June 30,
July 1,
2023
2022
Consolidated Net Income (GAAP)
$
20,879
$
17,479
Consolidated Net Income Margin
9.1
%
8.1
%
Interest (income) expense, net
6,810
2,757
Income tax provision (benefit)
4,392
3,275
Depreciation and amortization
11,937
13,811
Share-based compensation
5,875
5,081
Employee COVID-19 testing costs
—
39
Restructuring, acquisition and related
costs
1,234
2,655
Acquisition fair value adjustment
—
160
Inventory related charges associated with
a product line closure
473
—
Other, net
117
(220
)
Adjusted EBITDA (Non-GAAP)
$
51,717
$
45,037
Adjusted EBITDA Margin (Non-GAAP)
22.5
%
20.9
%
Organic Revenue
Growth (Non-GAAP):
Three Months Ended June 30,
2023
Compared to
Three Months Ended July 1,
2022
Reported Revenue Growth/(Decline)
(GAAP)
6.6
%
Less: Change attributable to
acquisitions
1.5
%
Plus: Change due to foreign currency
0.0
%
Organic Revenue Growth/(Decline)
(Non-GAAP)
5.1
%
Net Debt
(Non-GAAP):
June 30,
December 31,
2023
2022
Total Debt (GAAP)
$
408,492
$
435,462
Plus: Deferred financing costs
4,262
4,843
Gross Debt
412,754
440,305
Less: Cash and cash equivalents
(91,330
)
(100,105
)
Net Debt (Non-GAAP)
$
321,424
$
340,200
Free Cash Flow
(Non-GAAP):
Three Months Ended
June 30,
July 1,
2023
2022
Net Cash Provided by Operating
Activities (GAAP)
$
26,197
$
24,061
Less: Purchases of property, plant and
equipment
(3,326
)
(5,795
)
Plus: Proceeds from sale of property,
plant and equipment
—
—
Free Cash Flow (Non-GAAP)
$
22,871
$
18,266
Consolidated Net Income (GAAP)
$
20,879
$
17,479
Net Cash Provided by Operating
Activities as a Percentage of Consolidated Net Income
125.5
%
137.7
%
Free Cash Flow as a Percentage of
Consolidated Net Income
109.5
%
104.5
%
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. The Company
also excluded inventory related charges associated with a product
line closure as these costs 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.” Additionally, the Company excluded costs directly
related to employee COVID-19 testing as these costs are unique to
the COVID-19 pandemic and 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, amortization of inventory fair value
adjustments related to business acquisitions, inventory related
charges associated with a product line closure, 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, amortization of inventory fair value adjustments related to
business acquisitions, inventory related charges associated with a
product line closure, 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
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, amortization
of inventory fair value adjustments related to business
acquisitions, inventory related charges associated with a product
line closure, 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, amortization of inventory fair value adjustments
related to business acquisitions, inventory related charges
associated with a product line closure, 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,
acquisition and related costs, acquisition fair value adjustments,
inventory related charges associated with a product line closure,
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/20230808487325/en/
Novanta Inc. Investor Relations Contact: Ray Nash (781)
266-5137
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