- First Quarter 2019 GAAP Revenue of
$157.2 million
- First Quarter 2019 GAAP Net Income
of $12.3 million
- First Quarter 2019 GAAP Diluted
Earnings Per Share of $0.35
- First Quarter 2019 Adjusted Earnings
Per Share of $0.53
- First Quarter 2019 Adjusted EBITDA
of $28.2 million
Novanta Inc. (Nasdaq: NOVT) (the “Company”), a trusted
technology partner to medical and advanced technology equipment
manufacturers, today reported financial results for the first
quarter 2019.
Financial
Highlights
Three Months Ended (In millions, except per share amounts)
March 29, March 30, 2019
2018 GAAP Revenue $ 157.2 $ 147.0 Operating Income $
14.4 $ 17.2 Net Income Attributable to Novanta Inc. $ 12.3 $ 11.9
Diluted EPS $ 0.35 $ 0.18
Non-GAAP* Adjusted Operating
Income $ 22.8 $ 23.4 Adjusted Diluted EPS $ 0.53 $ 0.47 Adjusted
EBITDA $ 28.2 $ 28.4
*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.
First Quarter
"The company delivered excellent results in the first quarter,
with better than expected revenue growth and Adjusted EPS,” said
Matthijs Glastra, Chief Executive Officer of Novanta. “Revenue
growth was 7% driven by robust medical end-markets. Overall, we are
pleased with our performance in an uncertain macroeconomic and
capital spending environment.”
During the first quarter of 2019, Novanta generated GAAP revenue
of $157.2 million, an increase of $10.2 million, or 7.0%, versus
the first quarter of 2018. The Company’s acquisition activities
resulted in an increase in revenue of $3.8 million, or 2.6%,
compared to the first quarter of 2018. Changes in foreign currency
exchange rates year over year adversely impacted our revenue by
$3.9 million, or 2.6%, during the first quarter of 2019. Our
year-over-year Organic Revenue Growth, which excludes the net
impact of acquisitions and changes in foreign currency exchange
rates, was 7.0% for the first quarter of 2019 (see “Organic Revenue
Growth” in the non-GAAP reconciliation below).
In the first quarter of 2019, GAAP operating income was $14.4
million, compared to $17.2 million in the first quarter of 2018.
GAAP net income attributable to Novanta was $12.3 million in the
first quarter of 2019, compared to $11.9 million in the first
quarter of 2018. GAAP diluted earnings per share (“EPS”) was $0.35
in the first quarter of 2019, compared to $0.18 in the first
quarter of 2018.
Adjusted Diluted EPS was $0.53 in the first quarter of 2019,
compared to $0.47 in the first quarter of 2018. The Company ended
the first quarter of 2019 with 35.5 million weighted average shares
outstanding. Adjusted EBITDA was $28.2 million in the first quarter
of 2019, compared to $28.4 million in the first quarter of
2018.
Operating cash flow for the first quarter of 2019 was $5.5
million. Included in operating cash flow was a $4 million earn-out
payment associated with the acquisition of Zettlex and the impact
from the change in the Company’s employee incentive bonus plans
from semi-annual payments to annual payments. The Company completed
the first quarter of 2019 with approximately $200.4 million of
total debt and $74.1 million of total cash. Net Debt, as defined in
the non-GAAP reconciliation below, was $128.3 million.
Financial Outlook
For the full year 2019, the Company is raising its expected
Adjusted Diluted EPS to be in the range of $2.36 to $2.42. The
Company’s Adjusted Diluted EPS guidance assumes no significant
changes in foreign exchange rates.
For the second quarter of 2019, the Company expects GAAP revenue
of approximately $153 million to $155 million, Adjusted EBITDA in
the range of $29.5 million to $30.5 million, and Adjusted Diluted
EPS to be in the range of $0.53 to $0.55. The Company’s Adjusted
Diluted EPS and Adjusted EBITDA guidance assumes no significant
changes in foreign exchange rates.
Novanta provides earnings guidance on a non-GAAP basis and does
not provide earnings guidance on a GAAP basis, with the exception
of GAAP revenue guidance. A reconciliation of the Company’s
forward-looking Adjusted EBITDA and Adjusted EPS guidance to the
most directly comparable GAAP financial measures is not provided
because of the inherent difficulty in forecasting and quantifying
certain amounts that are necessary for such reconciliations,
including future changes in the fair value of contingent
considerations; significant discrete income tax expenses
(benefits); divestiture related expenses; acquisition 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) on proceeds
from divestitures; benefits or expenses associated with the
completion of tax audits; and other charges reflected in the
Company’s reconciliation of historical non-GAAP financial measures,
the amounts of which, based on past experience, could be material.
For additional information regarding Novanta’s non-GAAP financial
measures, see “Use of Non-GAAP Financial Measures” below.
Conference Call Information
The Company will host a conference call on Tuesday, May 7, 2019
at 10:00 a.m. ET to discuss these results. To access the call,
please dial (888) 346-3959 prior to the scheduled conference call
time. Alternatively, the conference call can be accessed online via
a live webcast on the Presentations and Events 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 on the Investor
Relations section of the Company’s website at www.novanta.com. The
replay will remain available until Monday, July 8, 2019.
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
and Effective Tax Rate, Adjusted Net Income Attributable to Novanta
Inc., Net of Tax, Adjusted Diluted EPS, Adjusted EBITDA, Adjusted
EBITDA Margin, Free Cash Flow, Free Cash Flow as a Percentage of
Net Income Attributable to Novanta Inc. 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 and Organic Revenue Growth 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 and Organic Revenue
Growth are used to determine bonus payments for senior management
and employees. The Company also uses Adjusted Diluted EPS as a
measurement for performance shares issued to certain executives.
Accordingly, the Company believes that these non-GAAP 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, including
our financial outlook for the second quarter and full year 2019;
expectations regarding market conditions; and other statements that
are not historical facts.
These forward-looking statements are neither promises nor
guarantees, but involve risks and uncertainties that may cause
actual results to differ materially from those contained in the
forward-looking statements. Our actual results could differ
materially from those anticipated in these forward-looking
statements for many reasons, including, but not limited to, the
following: economic and political conditions and the effects of
these conditions on our customers’ businesses and level of business
activity; our significant dependence upon our customers’ capital
expenditures, which are subject to cyclical market fluctuations;
our dependence upon our ability to respond to fluctuations in
product demand; our ability to continually innovate and
successfully commercialize our innovations; failure to introduce
new products in a timely manner; customer order timing and other
similar factors beyond our control; disruptions or breaches in
security of our information technology systems; our failure to
comply with data privacy regulations; changes in interest rates,
credit ratings or foreign currency exchange rates; risks associated
with our operations in foreign countries; risks associated with
increased outsourcing of components manufacturing; our exposure to
increased tariffs, trade restrictions or taxes on our products; our
failure to comply with local import and export regulations in the
jurisdictions in which we operate; negative effects on global
economic conditions, financial markets and our business as a result
of the United Kingdom’s impending withdrawal from the European
Union and the actions of the current U.S. government, including its
policies on trade tariffs and reactions from other countries to any
new tariffs imposed by the U.S.; 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 businesses; 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
interruptions and delays in the delivery of our products to
customers; production difficulties and product delivery delays or
disruptions; our exposure to medical device regulation, 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;
changes in governmental regulations affecting our businesses or
products; our failure to comply with environmental regulations; our
failure to implement new information technology systems and
software successfully; our failure to realize the full value of our
intangible assets; our exposure to the credit risk of some of our
customers and in weakened markets; our reliance on third party
distribution channels; being subject to U.S. federal income
taxation even though we are a non-U.S. corporation; tax audits by
tax authorities; 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; provisions of our corporate documents
that may delay or prevent a change in control; 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, 2018 our subsequent filings with the
Securities and Exchange Commission (“SEC”), and in our future
filings with the SEC. Such statements are based on the Company’s
beliefs and assumptions and on information currently available to
the Company. The Company disclaims any obligation to publicly
update or revise any such forward-looking statements as a result of
developments occurring after the date of this document except as
required by law.
About Novanta
Novanta is a leading global supplier of core technology
solutions that give medical and advanced industrial original
equipment manufacturers (“OEMs”) a competitive advantage. We
combine deep proprietary technology expertise and competencies in
photonics, vision, and precision motion with a proven ability to
solve complex technical challenges. This enables Novanta to
engineer core components and sub-systems that deliver extreme
precision and performance, tailored to our customers' demanding
applications. The driving force behind our growth is the team of
innovative professionals who share a commitment to innovation and
customer success. Novanta’s common shares are quoted on Nasdaq
under the ticker symbol “NOVT.”
More information about Novanta is available on the Company’s
website at www.novanta.com. For additional information, please
contact Novanta Investor Relations at (781) 266-5137 or
InvestorRelations@novanta.com.
NOVANTA INC.CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS(In thousands of U.S.
dollars or shares, except per share
amounts)(Unaudited)
Three Months Ended March 29,
March 30, 2019 2018 Revenue $ 157,186 $
146,965 Cost of revenue 90,897 84,806 Gross profit
66,289 62,159 Operating expenses: Research and
development and engineering 13,997 11,989 Selling, general and
administrative 31,847 29,220 Amortization of purchased intangible
assets 3,998 3,698 Restructuring and acquisition related costs
2,054 25 Total operating expenses 51,896
44,932 Operating income 14,393 17,227 Interest income
(expense), net (2,044 ) (2,358 ) Foreign exchange transaction gains
(losses), net 41 (407 ) Other income (expense), net (68 )
(41 ) Income before income taxes 12,322 14,421 Income tax
provision 69 1,584 Consolidated net income 12,253
12,837 Less: Net income attributable to noncontrolling interest
— (926 ) Net income attributable to Novanta Inc. $
12,253 $ 11,911 Earnings per common share attributable to
Novanta Inc.: Basic $ 0.35 $ 0.19 Diluted $ 0.35 $ 0.18
Weighted average common shares outstanding—basic 34,958 34,887
Weighted average common shares outstanding—diluted 35,474 35,428
NOVANTA INC.CONDENSED
CONSOLIDATED BALANCE SHEETS(In thousands of U.S.
dollars)(Unaudited)
March 29, December 31,
2019 2018 ASSETS Current Assets Cash and cash
equivalents $ 74,074 $ 82,043 Accounts receivable, net 89,437
83,955 Inventories 106,784 104,764 Prepaid expenses and other
current assets 16,265 11,007 Total current assets
286,560 281,769 Property, plant and equipment, net 64,754 65,464
Operating lease assets 35,374 — Intangible assets, net 136,629
142,920 Goodwill 217,625 217,662 Other assets 11,718
11,761 Total assets $ 752,660 $ 719,576
LIABILITIES AND
STOCKHOLDERS’ EQUITY Current Liabilities Current portion of
long-term debt $ 2,240 $ 4,535 Accounts payable 50,554 50,733
Accrued expenses and other current liabilities 48,295
48,928 Total current liabilities 101,089 104,196 Long-term debt
198,203 202,843 Operating lease liabilities 31,808 — Other
long-term liabilities 41,859 44,282 Total liabilities
372,959 351,321 Stockholders’ Equity: Total
stockholders’ equity 379,701 368,255 Total
liabilities and stockholders’ equity $ 752,660 $ 719,576
NOVANTA INC.CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands of U.S.
dollars)(Unaudited)
Three Months Ended March 29,
March 30, 2019 2018 Cash flows from
operating activities: Consolidated net income $ 12,253 $ 12,837
Adjustments to reconcile consolidated net income to
net cash provided by operating
activities:
Depreciation and amortization 9,074 9,067 Share-based compensation
2,727 2,044 Deferred income taxes (24 ) 235 Other 520 904 Changes
in assets and liabilities which (used)/provided cash,
excluding effects from business
acquisitions:
Accounts receivable (5,403 ) 5,421 Inventories (2,571 ) (7,423 )
Other operating assets and liabilities (11,119 )
(2,676 ) Cash provided by operating activities 5,457
20,409
Cash flows from investing activities: Purchases of
property, plant and equipment (2,429 ) (2,933 ) Other investing
activities 24 52 Cash used in investing activities
(2,405 ) (2,881 )
Cash flows from financing
activities: Repayments of term loan and revolving credit
facility (4,600 ) (5,300 ) Other financing activities (6,030
) (3,020 ) Cash used in financing activities (10,630
) (8,320 ) Effect of exchange rates on cash and cash
equivalents (391 ) 1,862 Increase (decrease) in cash
and cash equivalents (7,969 ) 11,070 Cash and cash equivalents,
beginning of period 82,043 100,057 Cash and cash
equivalents, end of period $ 74,074 $ 111,127
NOVANTA INC.Revenue by
Reportable Segment(In thousands of U.S.
dollars)(Unaudited)
Three Months Ended March 29,
March 30, 2019 2018 Revenue
Photonics $ 59,225 $ 61,831 Vision 65,936 56,209 Precision Motion
32,025 28,925
Total $ 157,186 $ 146,965
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 Segment
(Non-GAAP):
Three Months Ended March 29,
March 30, 2019 2018 Photonics
Gross Profit (GAAP) $ 27,314 $ 29,555 Gross Profit Margin (GAAP)
46.1 % 47.8 % Amortization of intangible assets 592
714 Adjusted Gross Profit (Non-GAAP) $ 27,906 $ 30,269 Adjusted
Gross Profit Margin (Non-GAAP) 47.1 % 49.0 %
Vision
Gross Profit (GAAP) $ 25,973 $ 19,721 Gross Profit Margin (GAAP)
39.4 % 35.1 % Amortization of intangible assets 1,522
1,686 Adjusted Gross Profit (Non-GAAP) $ 27,495 $ 21,407 Adjusted
Gross Profit Margin (Non-GAAP) 41.7 % 38.1 %
Precision
Motion Gross Profit (GAAP) $ 13,521 $ 13,260 Gross Profit
Margin (GAAP) 42.2 % 45.8 % Amortization of intangible assets
197 80 Adjusted Gross Profit (Non-GAAP) $ 13,718 $
13,340 Adjusted Gross Profit Margin (Non-GAAP) 42.8 % 46.1 %
Unallocated Corporate and Shared Services Gross Profit
(GAAP) $ (519 ) $ (377 ) Amortization of intangible assets —
— Adjusted Gross Profit (Non-GAAP) $ (519 ) $ (377 )
Novanta Inc. Gross Profit (GAAP) $ 66,289 $ 62,159 Gross
Profit Margin (GAAP) 42.2 % 42.3 % Amortization of intangible
assets 2,311 2,480 Adjusted Gross Profit (Non-GAAP) $
68,600 $ 64,639 Adjusted Gross Profit Margin (Non-GAAP) 43.6 % 44.0
%
NOVANTA INC.Reconciliation of
GAAP to Non-GAAP Financial Measures(Amounts in thousands
except per share amounts)(Unaudited)
Adjusted
Operating Income and Adjusted EPS (Non-GAAP):
Three Months Ended March 29, 2019
OperatingIncome
OperatingMargin
IncomebeforeIncomeTaxes
Income TaxProvision
Effective TaxRate
Net IncomeAttributableto NovantaInc., Net
ofTax
DilutedEPS
GAAP results $ 14,393 9.2
% $ 12,322 $ 69
0.6 % $ 12,253 $ 0.35
Non-GAAP Adjustments: Amortization of intangible
assets 6,309 4.0 % 6,309 Restructuring costs 1,236 0.8 % 1,236
Acquisition related costs 818 0.5 % 818 Tax effect on non-GAAP
adjustments 1,647 Non-GAAP tax adjustments
80 Total non-GAAP adjustments
8,363 5.3 % 8,363 1,727 6,636
0.18
Adjusted results (Non-GAAP) $
22,756 14.5 % $ 20,685
$ 1,796 8.7 % $
18,889 $ 0.53 Weighted average shares
outstanding - Diluted 35,474
NOVANTA INC.Reconciliation of
GAAP to Non-GAAP Financial Measures(Amounts in thousands
except per share amounts)(Unaudited)
Adjusted
Operating Income and Adjusted EPS (Non-GAAP):
Three Months Ended March 30,
2018
OperatingIncome
OperatingMargin
IncomebeforeIncomeTaxes
Income TaxProvision
Effective TaxRate
Net IncomeAttributableto NovantaInc., Net
ofTax
DilutedEPS
GAAP results $ 17,227 11.7
% $ 14,421 $ 1,584
11.0 % $ 11,911 Less: Redeemable
noncontrolling interest redemption value adjustment
(5,399 )
Net income attributable to Novanta Inc. after
adjustment for redeemable noncontrolling interest redemption
value $ 6,512 $ 0.18 Redeemable
noncontrolling interest redemption value adjustment 5,399
0.16
Net income attributable to Novanta Inc. $
11,911 Non-GAAP Adjustments: Amortization of intangible
assets 6,178 4.2 % 6,178 Acquisition related costs 25 0.0 % 25 Tax
effect on non-GAAP adjustments 1,417 Non-GAAP tax adjustments
(43 ) Total
non-GAAP adjustments 6,203 4.2 % 6,203
1,374 4,829 0.13
Adjusted results
(Non-GAAP) $ 23,430 15.9 %
$ 20,624 $ 2,958 14.3
% $ 16,740 $ 0.47
Weighted average shares outstanding - Diluted 35,428
NOVANTA INC.Reconciliation of
GAAP to Non-GAAP Financial Measures(In thousands of U.S.
dollars)(Unaudited)
Adjusted EBITDA
(Non-GAAP):
Three Months Ended March 29,
March 30, 2019 2018
Consolidated Net Income (GAAP) $ 12,253 $ 12,837
Net
Income Margin 7.8 % 8.7 % Interest (income) expense, net 2,044
2,358 Income tax provision 69 1,584 Depreciation and amortization
9,074 9,067 Share-based compensation 2,727 2,044 Restructuring and
acquisition related costs 2,054 25 Other, net 27 448
Adjusted EBITDA (Non-GAAP) $ 28,248 $ 28,363
Adjusted
EBITDA Margin (Non-GAAP) 18.0 % 19.3 %
Organic Revenue
Growth (Non-GAAP):
Three Months EndedMarch 29,
2019Compared toThree Months EndedMarch 30,
2018
Reported Growth (GAAP) 7.0 % Less: Change
attributable to acquisitions 2.6 % Plus: Change due to foreign
currency 2.6 %
Organic Growth (Non-GAAP) 7.0 %
Net Debt
(Non-GAAP):
March 29, December
31, 2019 2018 Total Debt (GAAP) $ 200,443
$ 207,378 Plus: Deferred financing costs 1,962 2,205
Gross Debt 202,405 209,583 Less: Cash and cash equivalents
(74,074 ) (82,043 )
Net Debt (Non-GAAP) $
128,331 $ 127,540
Free Cash Flow
(Non-GAAP):
Three Months Ended March 29,
March 30, 2019 2018 Cash
Provided by Operating Activities (GAAP) $ 5,457 $ 20,409 Less:
Purchases of property, plant and equipment (2,429 ) (2,933 ) Plus:
Proceeds from sale of property, plant and equipment 24
52
Free Cash Flow (Non-GAAP) $ 3,052 $ 17,528
Net
Income Attributable to Novanta Inc. (GAAP) $ 12,253 $ 11,911
Cash Provided by Operating Activities as a Percentage of Net
Income Attributable to Novanta Inc. 44.5 % 171.3 %
Free Cash
Flow as a Percentage of Net Income Attributable to Novanta Inc.
24.9 % 147.2 %
Non-GAAP 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 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 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 components of
operating costs.
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 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 components of operating costs. The Company also excluded
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 restructuring and acquisition related costs for the
reasons described for Adjusted Operating Income and Adjusted
Operating Margin above.
Non-GAAP Income Tax Provision and Effective Tax Rate
The Non-GAAP Income Tax Provision and Effective Tax Rate are
calculated based on the Adjusted Income before Income Taxes by
jurisdiction and the applicable tax rates currently in effect for
the respective jurisdictions. In addition, the Company excluded
significant discrete income tax expenses (benefits) related to
releases of valuation allowances, benefits or expenses associated
with the completion of tax audits, effects of changes in tax laws,
effects of acquisition related tax planning actions on the
Company’s effective tax rate, and the income tax effect of non-GAAP
adjustments discussed above.
Adjusted Net Income Attributable to Novanta Inc., Net of
Tax
The calculation of Adjusted Net Income Attributable to Novanta
Inc., Net of Tax, is displayed in the tables above. Because pre-tax
income is included in determining net income attributable to
Novanta Inc., net of tax, the calculation of Adjusted Net Income
Attributable to Novanta Inc., Net of Tax, also excludes
amortization of acquired intangible assets, and restructuring and
acquisition related costs. In addition, the Company excluded
significant discrete income tax expenses (benefits) related to
releases of valuation allowances, benefits or expenses associated
with the completion of tax audits, effects of changes in tax laws,
effects of acquisition related tax planning actions on the
Company’s effective tax rate, and the income tax effect of non-GAAP
adjustments discussed above.
Adjusted Diluted EPS
The calculation of Adjusted Diluted EPS is displayed in the
tables above. Because Net Income Attributable to Novanta Inc., Net
of Tax, is used in the diluted EPS calculation, the calculation of
Adjusted Diluted EPS excludes amortization of acquired intangible
assets, restructuring and acquisition related costs, significant
discrete income tax expenses (benefits) related to releases of
valuation allowances, benefits or expenses associated with the
completion of tax audits, effects of changes in tax laws, effects
of acquisition related tax planning actions on the Company’s
effective tax rate, and the income tax effect of non-GAAP
adjustments for the reasons described above for Adjusted Net Income
Attributable to Novanta Inc., Net of Tax. In addition, the Company
excluded the redeemable noncontrolling interest redemption value
adjustment as (1) the adjustment is unusual; (2) the amount is
noncash; (3) the amount does not represent a measure of earnings
and is excluded from the determination of net income attributable
to Novanta Inc.; and (4) the Company believes that investors may
benefit from an understanding of the Company's operating results
without giving effect to this adjustment.
Adjusted EBITDA and Adjusted EBITDA Margin
The Company defines Adjusted EBITDA as the consolidated net
income before deducting interest (income) expense, income taxes,
depreciation, amortization, non-cash share-based compensation,
restructuring and acquisition related costs, other non-operating
income (expense) items, including foreign exchange gains (losses)
and net periodic pension costs of the Company’s frozen U.K. defined
benefit pension plan for the reasons described above in the
introductory paragraphs of the “Use of Non-GAAP Financial
Measures.”
Adjusted EBITDA includes 100% of the results of the Company’s
consolidated subsidiaries and therefore does not exclude the
Adjusted EBITDA attributable to noncontrolling interests.
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 Attributable to Novanta, Inc.
The Company defines Free Cash Flow as cash provided by operating
activities less cash paid for purchases of property, plant and
equipment and plus cash proceeds from sale of property, plant and
equipment. Free Cash Flow as a Percentage of Net Income
Attributable to Novanta, Inc. is defined as Free Cash Flow divided
by Net Income Attributable to Novanta, Inc. Management believes
these non-GAAP 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.
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version on businesswire.com: https://www.businesswire.com/news/home/20190507005369/en/
Novanta Inc.Investor Relations Contact:Robert J.
Buckley(781) 266-5137
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