• Revenue: $244 million, 10% reported growth, flat organic growth.
• Adjusted Gross Margin: 46%, up 70 basis points excluding Motion Solutions acquisition impact.
• Adjusted EBITDA: $57 million, 23% margin, 9% year-over-year growth.
• Bookings Growth: 13% year-over-year.
• R&D Expenses: $23 million, 10% of sales.
• SG&A Expenses: $44 million, 18% of sales.
• Non-GAAP Tax Rate: 21% for the third quarter, 19% expected for the full year.
• Adjusted EPS: $0.85, flat year-over-year.
• Operating Cash Flow: $23 million for the third quarter.
• Gross Debt Balance: $460 million, gross leverage ratio of 2.3 times.
• Net Debt: $368 million.
• Book-to-Bill Ratio: 0.89 overall, 1.4 in minimally invasive surgery business line.
• Precision Medicine and Manufacturing Sales Decline: 15% year-over-year.
• Robotics and Automation Revenue Increase: 20% year-over-year.
• Medical Solutions Revenue Growth: 24% reported, 1% organic decline.
• Fourth Quarter Revenue Guidance: $237 million to $242 million, 12% to 14% reported growth, 2% to 4% organic growth.
• Full Year 2024 Revenue Guidance: $948 million to $953 million, 8% reported growth.
• Adjusted EBITDA Guidance for Q4: $50 million to $52 million.
• Adjusted EPS Guidance for Q4: $0.70 to $0.74.

• Warning! GuruFocus has detected 6 Warning Sign with NOVT.

Release Date: November 05, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Novanta Inc (NASDAQ:NOVT) delivered strong third-quarter results, reaching the top end of their guidance range.
• The company reported $244 million in revenue, representing a 10% growth, with adjusted EBITDA growing 9% year-over-year.
• Bookings grew 13% year-over-year, indicating strong demand for new product launches in 2025.
• Novanta Inc (NASDAQ:NOVT) is optimistic about returning to organic growth in the fourth quarter of 2024 and expects strong growth in 2025.
• The company is well-positioned in markets with long-term secular growth trends, such as precision medicine, minimally invasive surgery, and robotics and automation.

Negative Points

• Fourth-quarter revenue guidance is impacted by the rescheduling of DNA sequencing product shipments and new product launch timing shifts.
• Short-term timing changes and macroeconomic factors are affecting customer confidence and capital equipment market demand.
• Adjusted gross margins were down year-over-year due to lower factory utilization and the impact of the Motion Solutions acquisition.
• The precision medicine and manufacturing segment experienced a 15% sales decline, weaker than prior expectations.
• The company's book-to-bill ratio was 0.89, indicating a weaker demand environment in life science and advanced industrial applications.

Q & A Highlights

Q: Can you explain the $25 million revenue guidance delta for Q4 and how much is due to macroeconomic factors versus specific customer launches deferred to 2025? A: The delta is a mix of customer-specific and market challenges. The primary customer-specific impacts are in DNA sequencing, DUV, EUV lithography, and robotic surgery, with DNA sequencing being the largest single impact. The biggest end market deferral is in life sciences tools. (Matthijs Glastra, CEO)

Q: With the deferral of $25 million into 2025, why is the growth guidance only up to 10% for 2025? Is there more conservatism built in due to macro factors? A: We are being cautious due to ongoing geopolitical and macroeconomic uncertainties. The product launches are still scheduled for 2025, and we are not losing market share. If the environment improves, our business should benefit. (Robert Buckley, CFO)

Q: What is the visibility into Q1 2025 deliveries, and how should we think about organic growth compared to Q4? A: Organic growth should continue to sequentially improve and stay positive. The back half of 2025 is expected to be stronger due to easier comparisons and more new product launches. (Robert Buckley, CFO)

Q: Why is EPS expected to decline more materially in Q4 despite only a slight sequential revenue decline? A: The decline is due to a higher tax rate from jurisdictional mix and an increase in operating expenses related to compensation and project timing. (Robert Buckley, CFO)

Q: Can you provide more details on the new technology for EUV, DUV lithography applications? A: We are supplying a new type of technology that we did not supply before. The customer is excited about the solution, and the delay is related to launch timing, not the technology itself. (Matthijs Glastra, CEO)

Q: Has the revenue expectation for Motion Solutions changed with the softness in Q4? A: The expectation remains the same, with a reduction from $90 million to $80 million due to market dynamics in life sciences tools. (Robert Buckley, CFO)

Q: Is there any shift in new product launches from 2025 to 2026? A: No, there are no shifts from 2025 to 2026. The new product launches are still on track, with some timing adjustments within 2025. (Robert Buckley, CFO)

Q: Why do you believe the industrial and microelectronics markets are bottoming out? A: We see early signs of recovery in short-cycle businesses within these markets, which typically indicate a bottoming out. Customer conversations and short-cycle business improvements support this view. (Matthijs Glastra, CEO)

For the complete transcript of the earnings call, please refer to the full earnings call transcript.