Novanta Announces Financial Results for the First Quarter 2023
6:59 AM ET 5/9/23 | BusinessWire
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NOVT
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-- First Quarter 2023 GAAP Revenue increased 7% to $219 million -- First Quarter 2023 GAAP Net Income of $18 million -- First Quarter 2023 GAAP Diluted Earnings Per Share of $0.51 -- First Quarter 2023 Adjusted Earnings Per Share of $0.74 -- First Quarter 2023 Adjusted EBITDA of $47 million BEDFORD, Mass.--(BUSINESS WIRE)--May 09, 2023--
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 first quarter 2023.
Financial Highlights Three Months Ended ---------------------- (In millions, except per share amounts) March 31, April 1, 2023 2022 ------------ -------- GAAP Revenue $ 219.1 $ 204.2 Operating Income $ 26.3 $ 24.3 Consolidated Net Income $ 18.3 $ 18.8 Diluted EPS $ 0.51 $ 0.53 Non-GAAP* Adjusted Operating Income $ 36.9 $ 33.5 Adjusted Diluted EPS $ 0.74 $ 0.73 Adjusted EBITDA $ 47.0 $ 43.6 *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.
"Our first quarter results are a solid start to the year, thanks to the strong growth we are seeing in our medical end-markets," said Matthijs Glastra, Chair and Chief Executive Officer of Novanta. "Our teams continue to execute well, reducing past-due orders to customers, while also maintaining overall customer backlog levels, resulting in strong organic growth, gross margins, and profit growth in the quarter."
First Quarter
During the first quarter of 2023, Novanta generated GAAP revenue of $219.1 million, an increase of $14.9 million, or 7.3%, versus the first quarter of 2022. The Company's acquisition activities resulted in an increase in revenue of $3.5 million, or 1.7%, compared to the first quarter of 2022. Changes in foreign currency exchange rates year over year adversely impacted our revenue by $5.8 million, or 2.8%, during the first 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 8.4% for the first quarter of 2023 (see "Organic Revenue Growth" in the non-GAAP reconciliations below).
In the first quarter of 2023, GAAP operating income was $26.3 million, compared to $24.3 million in the first quarter of 2022. GAAP net income was $18.3 million in the first quarter of 2023, compared to $18.8 million in the first quarter of 2022. GAAP diluted earnings per share ("EPS") was $0.51 in the first quarter of 2023, compared to $0.53 in the first quarter of 2022.
Adjusted Diluted EPS was $0.74 in the first quarter of 2023, compared to $0.73 in the first quarter of 2022. The Company ended the first quarter of 2023 with 36.0 million diluted weighted average shares outstanding. Adjusted EBITDA was $47.0 million in the first quarter of 2023, compared to $43.6 million in the first quarter of 2022.
Operating cash flow for the first quarter of 2023 was $10.2 million, compared to $11.3 million for the first quarter of 2022. The Company completed the first quarter of 2023 with approximately $423.4 million of total debt and $82.7 million of total cash. Net Debt, as defined in the non-GAAP reconciliation below, was $345.3 million.
During the first quarter of 2023, the Company changed the names of its reportable segments from "Photonics" to "Precision Medicine and Manufacturing", from "Vision" to "Medical Solutions", and from "Precision Motion" to "Robotics and Automation", respectively. The segment name changes did not result in any change to the compositions of the segments and therefore did not result in any change to historical results. The Company changed the names of these segments to better reflect the strategic focus of their technologies and applications.
Financial Guidance
"Strong growth in our medical end-markets drove our excellent first quarter financial performance," said Matthijs Glastra. "We are on track with our previously issued full year 2023 guidance, and expect to drive a more linear first half financial performance. In addition, demand continues to build beyond 2023 from the new products launching in our medical and industrial applications, which are on track to launch later in 2023 and in 2024."
For the second quarter of 2023, the Company expects GAAP revenue of approximately $222 million to $225 million. The Company expects Adjusted EBITDA to be in the range of $47 million to $49 million and Adjusted Diluted EPS to be in the range of $0.70 to $0.74. 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, May 9, 2023 at 10:00 a.m. ET to discuss these results and to provide a business update. To access the call, please dial (888) 346-3959 prior to the scheduled conference call time. Alternatively, the conference call can be accessed online via a live webcast on the Events & Presentations page of the Investors section of the Company's website at www.novanta.com.
A replay of the audio webcast will be available approximately three hours after the conclusion of the call in the Investor Relations section of the Company's website at www.novanta.com. The replay will remain available until Monday, July 3, 2023.
Use of Non-GAAP Financial Measures
The non-GAAP financial measures used in this press release are Organic Revenue Growth, Adjusted Gross Profit, Adjusted Gross Profit Margin, Adjusted Operating Income and Operating Margin, Adjusted Income before Income Taxes, Adjusted Income Tax Provision/(Benefit) and Effective Tax Rate, Adjusted Net Income, Adjusted Diluted EPS, Adjusted EBITDA, Adjusted EBITDA Margin, Free Cash Flow, Free Cash Flow as a Percentage of Net Income, and Net Debt.
The Company believes that these non-GAAP financial measures provide useful and supplementary information to investors regarding the operating performance of the Company. It is management's belief that these non-GAAP financial measures would be particularly useful to investors because of the significant changes that have occurred outside of the Company's day-to-day business in accordance with the execution of the Company's strategy. This strategy includes streamlining the Company's existing operations through site and functional consolidations, strategic divestitures and product line closures, expanding the Company's business through significant internal investments, and broadening the Company's product and service offerings through acquisition of innovative and complementary technologies and solutions. The financial impact of certain elements of these activities, particularly acquisitions, divestitures, and site and functional restructurings, is often large relative to the Company's overall financial performance and can adversely affect the comparability of its operating results and investors' ability to analyze the business from period to period.
The Company's Adjusted EBITDA, Organic Revenue Growth and Adjusted Gross Margin are used by management to evaluate operating performance, communicate financial results to the Board of Directors, benchmark results against historical performance and the performance of peers, and evaluate investment opportunities, including acquisitions and divestitures. In addition, Adjusted EBITDA, Organic Revenue Growth and Adjusted Gross Margins are used to determine bonus payments for senior management and employees. The Company also uses Adjusted Diluted EPS 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.
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