Novanta Announces Financial Results For The Fourth Quarter And Full Year 2016

- Fourth Quarter 2016 GAAP Revenue of $99 million, up 10% year-over-year

- Full Year 2016 GAAP Revenue of $385 million

- Full Year 2016 GAAP Net Income of $22 million

- Full Year 2016 GAAP Diluted Earnings Per Share of $0.63

- Full Year 2016 Adjusted Earnings Per Share of $1.09

- Full Year 2016 Adjusted EBITDA of $68 million

BEDFORD, Mass., March 6, 2017 /PRNewswire/ -- Novanta Inc. (NASDAQ: NOVT) (the "Company", "we", "our", "Novanta"), a global leader and supplier of photonics, precision motion, and vision technologies to original equipment manufacturers in the medical and advanced industrial markets, today reported financial results for the fourth quarter and full year 2016.

Fourth Quarter

During the fourth quarter of 2016, Novanta generated GAAP revenue of $98.9 million, an increase of 9.6% from $90.2 million in the fourth quarter of 2015. 

In the fourth quarter of 2016, GAAP operating income from continuing operations was $11.3 million, compared to $4.2 million in the fourth quarter of 2015. GAAP consolidated net income was $7.8 million in the fourth quarter of 2016, compared to $6.1 million in the fourth quarter of 2015.  GAAP Diluted EPS was $0.22 in the fourth quarter of 2016, compared to $0.18 in the fourth quarter of 2015.  Adjusted EPS was $0.35 in the fourth quarter of 2016, compared to $0.29 in the fourth quarter of 2015.  The Company ended the fourth quarter of 2016 with 35 million weighted average diluted common shares outstanding.  Adjusted EBITDA was $19.4 million in the fourth quarter of 2016, compared to $14.4 million in the fourth quarter of 2015. 

Operating cash flow from continuing operations for the fourth quarter of 2016 was $13.1 million, compared to $8.0 million for the fourth quarter of 2015.

Full Year

For the full year 2016, Novanta generated GAAP revenue of $384.8 million, an increase of 3% from $373.6 million for the full year 2015.  Adjusted Revenue for the full year of 2016 increased 5% to $384.8 million from $368.0 million for the full year 2015.   

For the full year 2016, GAAP operating income from continuing operations was $32.6 million, compared to $28.9 million for the full year 2015. GAAP consolidated net income for the full year 2016 was $22.0 million, compared to $35.6 million for the full year 2015.  GAAP Diluted EPS was $0.63 for the full year 2016, compared to $1.02 for the full year 2015. Adjusted EPS was $1.09 for the full year 2016, compared to $0.93 for the full year 2015.  Adjusted EBITDA was $68 million for the full year 2016, compared to $61.1 million for the full year 2015.    

Operating cash flow from continuing operations for the full year 2016 was $47.8 million, compared to $33.4 million for 2015.  As of December 31, 2016, cash and cash equivalents were $68.1 million. The Company completed the fourth quarter of 2016 with approximately $81.3 million of total debt, and $13.1 million of Net Debt, as defined in the non-GAAP reconciliation below. 

"We are very proud of our accomplishments in 2016, and how we finished off the year," said Matthijs Glastra, Chief Executive Officer of Novanta Inc.  "We successfully rebranded the Company, we seamlessly transitioned our Company's leadership, and our focus on accelerating profitable growth was evident in our financial results.  We delivered 5% growth on our full year Adjusted Revenue, and our Adjusted Revenue growth in the fourth quarter accelerated to 10%.  Profitability in the fourth quarter exceeded our expectations with 35% Adjusted EBITDA growth and 21% Non-GAAP EPS growth versus the fourth quarter of 2015. In addition, since closing out 2016, we have added two strategic acquisitions, Laser Quantum and ThingMagic, which further our strategy to increase our medical end-market presence with proprietary technology offerings. We are excited about our 2017 outlook and believe we are well positioned to deliver a strong 2017."  

Financial Outlook

"In 2016, we demonstrated our progress on accelerating our revenue growth, delivering strong profitability, generating strong operating cash flows, and remaining financially disciplined and focused around our acquisition strategy," said Robert Buckley, Chief Financial Officer of Novanta Inc.     

For the full year 2017, the Company expects GAAP revenue of approximately $430 million to $435 million.  This compares to GAAP revenue of $384.8 million for the full year 2016. Adjusted EBITDA is expected to be approximately $80 million to $82 million, compared to $68 million for the full year 2016.  In addition, Adjusted EPS is expected to be in the range of $1.20 to $1.25.  This compares to Adjusted EPS of $1.09 for the full year 2016. 

For the first quarter of 2017, the Company expects GAAP revenue of approximately $100 million to $102 million.  The Company expects Adjusted EPS to be in the range of $0.22 to $0.25, presuming no significant foreign exchange gains or losses, and Adjusted EBITDA to be approximately $16.5 million to $17.5 million. 

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 significant discrete income tax expenses (benefits); divestiture related expenses; acquisition-related expenses; 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 on Monday, March 6, 2017 at 10:00 a.m. ET to discuss these results. Matthijs Glastra, Chief Executive Officer, and Robert Buckley, Chief Financial Officer, will host the conference call.  

To access the call, please dial (877) 482-5124 prior to the scheduled conference call time.  The conference ID number is 61103173.

A playback of this conference call will be available beginning 1:00 p.m. ET, Monday, March 6, 2017. The playback phone number is (855) 859-2056 or (404) 537-3406 and the code number is 61103173. The playback will remain available until 11:00 p.m. ET, Monday, March 27, 2017.

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. 

Use of Non-GAAP Financial Measures

The non-GAAP financial measures used in this press release are Organic Revenue Growth, Adjusted Revenue, Adjusted Gross Profit, Adjusted Gross Profit Margin, Adjusted Operating Income from Continuing Operations, Adjusted Operating Margin, Adjusted Income from Continuing Operations before Income Taxes, Non-GAAP Income Tax Provision (Benefit) and Effective Tax Rate, Adjusted Income from Continuing Operations, net of tax, Adjusted Diluted EPS from Continuing Operations, Adjusted EBITDA, Adjusted EBITDA Margin, 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 is 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 is used to determine bonus payments for senior management and employees. The Company also uses non-GAAP 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 sustainable growth; anticipated financial performance, including profit and revenue growth, and expectations for 2017; market conditions; our Laser Quantum and ThingMagic acquisitions giving us further confidence that we are well positioned to deliver on our full year commitments and furthering our strategic objectives; 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 innovateand 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; risk associated with our operations in foreign countries; our failure to comply with local import and export regulations in the jurisdictions in which we operate; negative effect on global economic conditions, financial markets and our business as a result of the potential United Kingdom's withdrawal from the European Union and recent U.S presidential election; our reliance on third party distribution channels; 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 make divestitures that provide business benefits; 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 compliance, or our failure to comply, with various federal, state and foreign regulations; changes in governmental regulation of our businesses or products; effects of conflict minerals regulations; 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;

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