Exhibit 99.1

 

Novanta Announces Financial Results
for the First Quarter 2018

 

First Quarter 2018 GAAP Revenue of $147.0 million, up 35% year over year

 

First Quarter 2018 GAAP Net Income of $11.9 million

 

First Quarter 2018 GAAP Diluted Earnings Per Share of $0.18

 

First Quarter 2018 Adjusted Earnings Per Share of $0.47

 

First Quarter 2018 Adjusted EBITDA of $28.4 million

 

Raising Full Year 2018 Guidance

 

BEDFORD, Mass., May 8, 2018 -- 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 2018. 

 

 

Financial Highlights

Three Months Ended

 

(In millions, except per share amounts)

March 30,

 

 

March 31,

 

 

2018

 

 

2017

 

GAAP

 

 

 

 

 

 

 

Revenue

$

147.0

 

 

$

109.0

 

Operating Income

$

17.2

 

 

$

10.3

 

Net Income Attributable to Novanta Inc.

$

11.9

 

 

$

34.3

 

Diluted EPS

$

0.18

 

 

$

0.98

 

Non-GAAP*

 

 

 

 

 

 

 

Adjusted Operating Income

$

23.4

 

 

$

16.7

 

Adjusted Diluted EPS

$

0.47

 

 

$

0.31

 

Adjusted EBITDA

$

28.4

 

 

$

20.1

 

*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

 

"Our company delivered a record quarter of revenue and profitability, with strong double-digit growth in revenue, Adjusted EBITDA, and Adjusted Diluted EPS," said Matthijs Glastra, Chief Executive Officer of Novanta.  "We are proud of our progress executing against our priorities and our team's ability to produce sustained profitable growth through the first quarter 2018."

 

During the first quarter of 2018, Novanta generated GAAP revenue of $147.0 million, an increase of $38.0 million, or 34.9%, versus the first quarter of 2017. The Company’s prior year acquisition activities resulted in an increase in revenue of $24.6 million, or 22.6%, compared to the first quarter of 2017.  Changes in foreign currency exchange rates year over year favorably impacted our revenue by $3.6 million, or 3.3%, during the first quarter of 2018.  Our Organic Revenue Growth, which excludes the net impact of acquisitions and changes in foreign currency exchange rates, increased 9.0%, versus the first quarter of 2017 (see “Organic Revenue Growth” in the non-GAAP reconciliation below).        

 

In the first quarter of 2018, GAAP operating income was $17.2 million, compared to $10.3 million in the first quarter of 2017. GAAP net income attributable to Novanta was $11.9 million in the first quarter of


 

 

2018, compared to $34.3 million in the first quarter of 2017.  GAAP diluted earnings per share (“EPS”) was $0.18 in the first quarter of 2018, compared to $0.98 in the first quarter of 2017.  In the first quarter of 2017, the Company recognized a nontaxable gain of $26.4 million, representing the excess fair value of our previously-held equity interest in Laser Quantum over its carrying value when we increased our ownership position from approximately 41% to approximately 76%.

 

In the first quarter of 2018, the Company increased the carrying amount of the redeemable noncontrolling interest in Laser Quantum by $5.4 million to reflect the estimated redemption value as of March 30, 2018. This nontaxable adjustment was recognized in retained earnings instead of net income, and resulted in a net ($0.16) reduction in EPS under U.S. GAAP accounting rules. Adjusted Diluted EPS was $0.47 in the first quarter of 2018, compared to $0.31 in the first quarter of 2017.  The Company ended the first quarter of 2018 with 35.4 million weighted average shares outstanding.  Adjusted EBITDA was $28.4 million in the first quarter of 2018, compared to $20.1 million in the first quarter of 2017.  

 

Operating cash flow for the first quarter of 2018 was $20.4 million, compared to $12.8 million for the first quarter of 2017. The Company completed the first quarter of 2018 with approximately $236.1 million of total debt and $111.1 million of total cash. Net Debt, as defined in the non-GAAP reconciliation below, was $125.0 million.

 

 

Financial Outlook

 

“With a more favorable tax rate outlook and the strong first quarter, we are raising our full year 2018 outlook for revenue, Adjusted EBITDA, and Adjusted Diluted EPS,” said Robert Buckley, Chief Financial Officer.  

 

For the full year 2018, the Company expects GAAP revenue of approximately $590 million to $605 million, Adjusted EBITDA in the range of $119 million to $125 million, and Adjusted Diluted EPS to be in the range of $1.93 to $2.02.  The Company’s Adjusted Diluted EPS assumes no significant changes in foreign exchange rates.  

 

For the second quarter of 2018, the Company expects GAAP revenue of approximately $146 million to $149 million.  The Company expects Adjusted Diluted EPS to be in the range of $0.47 to $0.50, and Adjusted EBITDA to be approximately $29 million to $31 million.  The Company’s Adjusted Diluted EPS and EBITDA guidance assumes no significant foreign exchange gains or losses.  

 

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 adjustments that could be made for noncontrolling interest redemption value adjustments; 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; future changes in the fair value of contingent considerations; 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 our 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 at 10:00 a.m. ET on Tuesday, May 8, 2018 to discuss these results.  To access the call, please dial (877) 870-4263 prior to the scheduled conference call time.  Alternatively, the conference call can be accessed online via a live webcast on the Event Calendar 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 Friday, July 6, 2018.

 

 

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 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 reaching our 2020 strategic goals; executing our strategy; anticipated financial performance, including our updated financial outlook for the second quarter and full year 2018; expectations regarding market conditions; expectations regarding the Company’s future; 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; 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 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; 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; 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; changes in governmental regulation of 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; anticipated impact from the U.S. Tax Cuts and Jobs Act; 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; our ability to access cash and other assets of our subsidiaries; provisions of our articles of incorporation 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, 2017, 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 update any 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.

Investor Relations Contact:

Robert J. Buckley

(781) 266-5137

 

 



 

 

NOVANTA INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands of U.S. dollars or shares, except per share amounts)

(Unaudited)

 

 

Three Months Ended

 

 

March 30,

 

 

March 31,

 

 

2018

 

 

2017

 

Revenue

$

146,965

 

 

$

108,974

 

Cost of revenue

 

84,806

 

 

 

62,880

 

Gross profit

 

62,159

 

 

 

46,094

 

Operating expenses:

 

 

 

 

 

 

 

Research and development and engineering

 

11,989

 

 

 

9,215

 

Selling, general and administrative

 

29,220

 

 

 

22,874

 

Amortization of purchased intangible assets

 

3,698

 

 

 

2,849

 

Restructuring, acquisition and divestiture related costs

 

25

 

 

 

817

 

Total operating expenses

 

44,932

 

 

 

35,755

 

Operating income

 

17,227

 

 

 

10,339

 

Interest income (expense), net

 

(2,358

)

 

 

(1,328

)

Foreign exchange transaction gains (losses), net

 

(407

)

 

 

(1

)

Other income (expense), net

 

(41

)

 

 

(31

)

Gain on acquisition of business

 

 

 

 

26,409

 

Income before income taxes

 

14,421

 

 

 

35,388

 

Income tax provision

 

1,584

 

 

 

1,114

 

Consolidated net income

 

12,837

 

 

 

34,274

 

Less: Net income attributable to noncontrolling interest

 

(926

)

 

 

(22

)

Net income attributable to Novanta Inc.

$

11,911

 

 

$

34,252

 

 

 

 

 

 

 

 

 

Earnings per common share attributable to Novanta Inc.:

 

 

 

 

 

 

 

Basic

$

0.19

 

 

$

0.99

 

Diluted

$

0.18

 

 

$

0.98

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding—basic

 

34,887

 

 

 

34,765

 

Weighted average common shares outstanding—diluted

 

35,428

 

 

 

35,125

 

 



 

 

NOVANTA INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands of U.S. dollars)

(Unaudited)

 

 

March 30,

 

 

December 31,

 

 

2018

 

 

2017

 

ASSETS

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

Cash and cash equivalents

$

111,127

 

 

$

100,057

 

Accounts receivable, net

 

76,915

 

 

 

81,482

 

Inventories

 

98,812

 

 

 

91,278

 

Prepaid expenses and other current assets

 

11,221

 

 

 

15,062

 

Total current assets

 

298,075

 

 

 

287,879

 

Property, plant and equipment, net

 

61,591

 

 

 

61,718

 

Intangible assets, net

 

151,816

 

 

 

155,048

 

Goodwill

 

213,822

 

 

 

210,988

 

Other assets

 

8,444

 

 

 

11,070

 

Total assets

$

733,748

 

 

$

726,703

 

LIABILITIES, NONCONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

Current portion of long-term debt

$

9,123

 

 

$

9,119

 

Accounts payable

 

41,717

 

 

 

39,793

 

Accrued expenses and other current liabilities

 

40,771

 

 

 

49,256

 

Total current liabilities

 

91,611

 

 

 

98,168

 

Long-term debt

 

224,098

 

 

 

225,500

 

Other long-term liabilities

 

44,512

 

 

 

44,567

 

Total liabilities

 

360,221

 

 

 

368,235

 

Redeemable noncontrolling interest

 

54,916

 

 

 

46,923

 

Stockholders’ Equity:

 

 

 

 

 

 

 

Total stockholders’ equity

 

318,611

 

 

 

311,545

 

Total liabilities, noncontrolling interest and stockholders’ equity

$

733,748

 

 

$

726,703

 



 

 

NOVANTA INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. dollars)

(Unaudited)

 

 

Three Months Ended

 

 

March 30,

 

 

March 31,

 

 

2018

 

 

2017

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Consolidated net income

$

12,837

 

 

$

34,274

 

Adjustments to reconcile consolidated net income to

   net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

9,067

 

 

 

6,482

 

Share-based compensation

 

2,044

 

 

 

1,469

 

Deferred income taxes

 

235

 

 

 

(1,607

)

Earnings from equity-method investment

 

 

 

 

(104

)

Gain on acquisition of business

 

 

 

 

(26,409

)

Inventory acquisition fair value adjustment

 

 

 

 

1,035

 

Other

 

904

 

 

 

1,058

 

Changes in assets and liabilities which (used)/provided cash, excluding

   effects from businesses acquired:

 

 

 

 

 

 

 

Accounts receivable

 

5,421

 

 

 

(3,690

)

Inventories

 

(7,423

)

 

 

(4,414

)

Other operating assets and liabilities

 

(2,676

)

 

 

4,666

 

Cash provided by operating activities

 

20,409

 

 

 

12,760

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Purchases of property, plant and equipment

 

(2,933

)

 

 

(1,760

)

Acquisition of businesses, net of cash acquired

 

 

 

 

(34,896

)

Other investing activities

 

52

 

 

 

 

Cash used in investing activities

 

(2,881

)

 

 

(36,656

)

Cash flows from financing activities:

 

 

 

 

 

 

 

Borrowings under revolving credit facility

 

 

 

 

42,000

 

Repayments of long-term debt and revolving credit facility

 

(5,300

)

 

 

(1,875

)

Payments of contingent considerations

 

 

 

 

(2,398

)

Other financing activities

 

(3,020

)

 

 

(2,254

)

Cash provided by (used in) financing activities

 

(8,320

)

 

 

35,473

 

Effect of exchange rates on cash and cash equivalents

 

1,862

 

 

 

329

 

Increase in cash and cash equivalents

 

11,070

 

 

 

11,906

 

Cash and cash equivalents, beginning of period

 

100,057

 

 

 

68,108

 

Cash and cash equivalents, end of period

$

111,127

 

 

$

80,014

 



 

 

NOVANTA INC.

Revenue by Reportable Segment

(In thousands of U.S. dollars)

(Unaudited)

 

 

 

Three Months Ended

 

 

March 30,

 

 

March 31,

 

 

2018

 

 

2017

 

Revenue

 

 

 

 

 

 

 

Photonics

$

61,831

 

 

$

50,736

 

Vision

 

56,209

 

 

 

32,762

 

Precision Motion

 

28,925

 

 

 

25,476

 

Total

$

146,965

 

 

$

108,974

 



 

 

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 30,

 

 

 

 

March 31,

 

 

2018

 

 

 

 

2017

 

Photonics

 

 

 

 

 

 

 

 

 

Gross Profit (GAAP)

$

29,555

 

 

 

 

$

21,789

 

Gross Profit Margin (GAAP)

 

47.8

%

 

 

 

 

42.9

%

Amortization of intangible assets

 

714

 

 

 

 

 

976

 

Acquisition fair value adjustments

 

 

 

 

 

 

699

 

Adjusted Gross Profit (Non-GAAP)

$

30,269

 

 

 

 

$

23,464

 

Adjusted Gross Profit Margin (Non-GAAP)

 

49.0

%

 

 

 

 

46.2

%

 

 

 

 

 

 

 

 

 

 

Vision

 

 

 

 

 

 

 

 

 

Gross Profit (GAAP)

$

19,721

 

 

 

 

$

13,146

 

Gross Profit Margin (GAAP)

 

35.1

%

 

 

 

 

40.1

%

Amortization of intangible assets

 

1,686

 

 

 

 

 

575

 

Acquisition fair value adjustments

 

 

 

 

 

 

336

 

Adjusted Gross Profit (Non-GAAP)

$

21,407

 

 

 

 

$

14,057

 

Adjusted Gross Profit Margin (Non-GAAP)

 

38.1

%

 

 

 

 

42.9

%

 

 

 

 

 

 

 

 

 

 

Precision Motion

 

 

 

 

 

 

 

 

 

Gross Profit (GAAP)

$

13,260

 

 

 

 

$

11,518

 

Gross Profit Margin (GAAP)

 

45.8

%

 

 

 

 

45.2

%

Amortization of intangible assets

 

80

 

 

 

 

 

90

 

Acquisition fair value adjustments

 

 

 

 

 

 

 

Adjusted Gross Profit (Non-GAAP)

$

13,340

 

 

 

 

$

11,608

 

Adjusted Gross Profit Margin (Non-GAAP)

 

46.1

%

 

 

 

 

45.6

%

 

 

 

 

 

 

 

 

 

 

Unallocated Corporate and Shared Services

 

 

 

 

 

 

 

 

 

Gross Profit (GAAP)

$

(377

)

 

 

 

$

(359

)

Amortization of intangible assets

 

 

 

 

 

 

 

Acquisition fair value adjustments

 

 

 

 

 

 

 

Adjusted Gross Profit (Non-GAAP)

$

(377

)

 

 

 

$

(359

)

 

 

 

 

 

 

 

 

 

 

Novanta Inc.

 

 

 

 

 

 

 

 

 

Gross Profit (GAAP)

$

62,159

 

 

 

 

$

46,094

 

Gross Profit Margin (GAAP)

 

42.3

%

 

 

 

 

42.3

%

Amortization of intangible assets

 

2,480

 

 

 

 

 

1,641

 

Acquisition fair value adjustments

 

 

 

 

 

 

1,035

 

Adjusted Gross Profit (Non-GAAP)

$

64,639

 

 

 

 

$

48,770

 

Adjusted Gross Profit Margin (Non-GAAP)

 

44.0

%

 

 

 

 

44.8

%

 


 

 

NOVANTA INC.

Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands of U.S. dollars except per share amounts)

(Unaudited)

 

 

Adjusted Operating Income and Adjusted EPS (Non-GAAP):

 

 

Three Months Ended March 30, 2018

 

 

Operating Income

 

 

Operating Margin

 

 

Income before Income Taxes

 

 

Income Tax Provision

 

 

Effective Tax Rate

 

 

Net Income Attributable to Novanta Inc., Net of Tax

 

 

Diluted EPS

 

GAAP results

$

17,227

 

 

 

11.7

%

 

$

14,421

 

 

$

1,584

 

 

 

11.0

%

 

$

11,911

 

 

 

 

 

Less: Adjustment of redeemable noncontrolling interest to estimated redemption value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,399

)

 

 

 

 

Net income attributable to Novanta Inc. after adjustment of redeemable noncontrolling interest to estimated redemption value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

6,512

 

 

$

0.18

 

Adjustment of redeemable noncontrolling interest to estimated redemption value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 except per share amounts)

(Unaudited)

 

 

Adjusted Operating Income and Adjusted EPS (Non-GAAP):

 

 

Three Months Ended March 31, 2017

 

 

Operating Income

 

 

Operating Margin

 

 

Income before Income Taxes

 

 

Income Tax Provision

 

 

Effective Tax Rate

 

 

Net Income Attributable to Novanta Inc., Net of Tax

 

 

Diluted EPS

 

GAAP results

$

10,339

 

 

 

9.5

%

 

$

35,388

 

 

$

1,114

 

 

 

3.1

%

 

$

34,252

 

 

$

0.98

 

Non-GAAP Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of intangible assets

 

4,490

 

 

 

4.1

%

 

 

4,490

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring, divestiture and other costs

 

37

 

 

 

0.0

%

 

 

37

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition related costs

 

780

 

 

 

0.7

%

 

 

780

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition fair value adjustments

 

1,035

 

 

 

1.0

%

 

 

1,035

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on acquisition of business

 

 

 

 

 

 

 

 

 

(26,409

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax effect on non-GAAP adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

1,887

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP tax adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

1,370

 

 

 

 

 

 

 

 

 

 

 

 

 

Total non-GAAP adjustments

 

6,342

 

 

 

5.8

%

 

 

(20,067

)

 

 

3,257

 

 

 

 

 

 

 

(23,324

)

 

 

(0.67

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted results (Non-GAAP)

$

16,681

 

 

 

15.3

%

 

$

15,321

 

 

$

4,371

 

 

 

28.5

%

 

$

10,928

 

 

$

0.31

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding - Diluted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

35,125

 

 


 

 

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 30,

 

 

March 31,

 

 

2018

 

 

2017

 

Consolidated Net Income (GAAP)

$

12,837

 

 

$

34,274

 

Net Income Margin

 

8.7

%

 

 

31.5

%

Interest (income) expense, net

 

2,358

 

 

 

1,328

 

Income tax provision

 

1,584

 

 

 

1,114

 

Depreciation and amortization

 

9,067

 

 

 

6,482

 

Share-based compensation

 

2,044

 

 

 

1,469

 

Restructuring, acquisition and divestiture related costs

 

25

 

 

 

817

 

Gain on acquisition of business

 

 

 

 

(26,409

)

Acquisition fair value adjustments

 

 

 

 

1,035

 

Other, net

 

448

 

 

 

32

 

Adjusted EBITDA (Non-GAAP)

$

28,363

 

 

$

20,142

 

Adjusted EBITDA Margin (Non-GAAP)

 

19.3

%

 

 

18.5

%

 

 

Organic Revenue Growth (Non-GAAP):

 

Three Months Ended March 30, 2018 Compared to Three Months Ended March 31, 2017

 

Reported Growth (GAAP)

 

34.9

%

Less: Change attributable to acquisitions

 

22.6

%

Plus: Change due to foreign currency

 

(3.3

)%

Organic Growth (Non-GAAP)

 

9.0

%

 

 

Net Debt (Non-GAAP):

 

March 30,

 

 

December 31,

 

 

2018

 

 

2017

 

Total Debt (GAAP)

$

233,221

 

 

$

234,619

 

Plus: Deferred financing costs

 

2,928

 

 

 

3,159

 

Gross Debt

 

236,149

 

 

 

237,778

 

Less: Cash and cash equivalents

 

(111,127

)

 

 

(100,057

)

Net Debt (Non-GAAP)

$

125,022

 

 

$

137,721

 

 

 

Free Cash Flow (Non-GAAP):

 

Three Months Ended

 

 

March 30,

 

 

March 31,

 

 

2018

 

 

2017

 

Cash Provided by Operating Activities (GAAP)

$

20,409

 

 

$

12,760

 

Less: Purchases of property, plant and equipment

 

(2,933

)

 

 

(1,760

)

Plus: Proceeds from sale of property, plant and equipment

 

52

 

 

 

 

Free Cash Flow (Non-GAAP)

$

17,528

 

 

$

11,000

 



 

 

Non-GAAP Measures

 

Organic Revenue Growth

 

We define the term “organic revenue” as revenue excluding the impact from business acquisitions, divestitures, product line discontinuations, and the effect of foreign currency translation. We use 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. We believe that this non-GAAP measure, when taken together with our GAAP financial measures, allows us and our investors to better measure our performance and evaluate long-term performance trends. Organic revenue growth also facilitates easier comparisons of our performance with prior and future periods and relative comparisons to our peers. We exclude the effect of foreign currency translation from these measures because foreign currency translation is subject to volatility and can obscure underlying business trends. We exclude the effect of acquisitions and divestitures because these activities can vary dramatically between reporting periods and between us and our peers, which we believe makes comparisons of long-term performance trends difficult for management and investors. Beginning in 2017, 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 excludes amortization of acquired intangible assets and inventory fair value adjustments from 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 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 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 components of operating costs.  The Company also excluded restructuring, acquisition and divestiture 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, inventory fair value adjustments related to business acquisitions, and restructuring, acquisition and divestiture related costs for the reasons described for Adjusted Operating Income and Adjusted Operating Margin above. In addition, the Company excluded the gain recognized upon increasing its equity ownership position in Laser Quantum from approximately 41% to approximately 76% because the gain is unusual and nonrecurring in nature and should be excluded from the assessment of long-term performance trends of the Company.

 



 

 

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 our 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, inventory fair value adjustments related to business acquisitions, and restructuring, acquisition and divestiture related costs and the gain on the Laser Quantum acquisition for the reasons described for Adjusted Income before Income Taxes. In addition, the Company excluded significant discrete income tax expenses (benefits) related to releases of valuation allowances, benefits or expenses associated with the completion of tax audits, effects of changes in tax laws, effects of acquisition related tax planning actions on our 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, inventory fair value adjustments related to business acquisitions, restructuring, acquisition and divestiture related costs, and the gain on the Laser Quantum acquisition, 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 our 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 adjustment of redeemable noncontrolling interest to estimated redemption value 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 it may not be indicative of future adjustments and 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, acquisition and divestiture related costs, acquisition fair value adjustments, and other non-operating income (expense) items, including the gain on the Laser Quantum acquisition, foreign exchange gains (losses) and earnings from an equity-method investment 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 our 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

 

The Company defines Free Cash Flow as cash provided by (used in) operating activities less cash paid for purchases of property, plant and equipment and plus cash proceeds from sale of property, plant and equipment. Management believes free cash flow is an important measure of its liquidity as well as its ability to service the Company’s 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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