Press release·02/25/2025 20:38:43

Novanta’s Financial Performance: A Balanced Approach to Growth

Novanta Inc., a leading global supplier of core technology solutions, has reported its financial results for the year ended December 31, 2024. The company’s performance showcases a balanced approach to growth, with a focus on diversifying its business and capitalizing on opportunities in both the medical and advanced industrial markets.

Overview of Financial Results

In 2024, Novanta’s total revenue reached $949.2 million, an increase of 7.7% compared to the previous year. This growth was primarily driven by the company’s acquisition of Motion Solutions, which contributed $82.4 million, or 9.4%, to the overall revenue increase. However, the company also experienced a decrease in demand in both the advanced industrial and medical end markets.

Operating income for 2024 remained flat at $110.6 million compared to the prior year. This was due to an increase in gross profit of $21.6 million, which was offset by higher expenses, including a $11.5 million increase in selling, general and administrative (SG&A) expenses, a $5.3 million increase in amortization expense, a $3.8 million increase in research and development (R&D) expenses, and a $0.9 million increase in restructuring, acquisition and related costs.

Earnings per share (EPS) declined in 2024, with basic EPS decreasing from $2.03 in 2023 to $1.78, and diluted EPS decreasing from $2.02 to $1.77. This was primarily attributable to an increase in interest expense and a higher income tax provision.

Segmental Performance

Novanta operates in two main end markets: the medical market and the advanced industrial market. In 2024, the medical market accounted for approximately 55% of the company’s revenue, while the advanced industrial market accounted for 45%.

Automation Enabling Technologies

The Automation Enabling Technologies segment, which serves the advanced industrial market, saw a 1.7% decrease in revenue in 2024 compared to 2023, primarily due to a decline in demand in the advanced industrial markets. Gross profit and gross profit margin for this segment remained relatively stable, with the increase in gross profit margin attributable to a lower cost of poor quality, partially offset by unfavorable factory utilization due to lower sales.

Medical Solutions

The Medical Solutions segment, which serves the medical market, experienced a 19.9% increase in revenue in 2024 compared to 2023. This was primarily due to revenue from the 2024 acquisition of Motion Solutions and an increase in sales from the company’s advanced surgery products, partially offset by a decrease in revenue from its precision medicine products. Gross profit for the Medical Solutions segment increased by 11.2%, but gross profit margin decreased from 44.7% in 2023 to 41.4% in 2024, primarily due to an inventory-related charge associated with a precision medicine product and the dilutive effect of the 2024 acquisition, partially offset by improved factory utilization in the advanced surgery products.

Operating Expenses

Novanta’s operating expenses increased by 7.4% in 2024 compared to 2023, driven by the following:

• R&D expenses increased by 4.2%, primarily due to the addition of costs from the 2024 acquisition.
• SG&A expenses increased by 7.0%, mainly due to the 2024 acquisition and higher discretionary spending.
• Amortization of purchased intangible assets increased by 26.2%, reflecting the impact of the 2024 acquisition.
• Restructuring, acquisition and related costs increased by 7.0%, primarily due to the 2024 acquisition.

Liquidity and Capital Resources

Novanta ended 2024 with $114.0 million in cash and cash equivalents, an increase from $105.1 million at the end of 2023. This increase was primarily due to $158.5 million in cash provided by operating activities and $198.0 million in borrowings under the company’s revolving credit facility, partially offset by $191.2 million in cash consideration for the 2024 acquisition, $131.1 million in debt repayments, and other cash outflows.

The company’s primary sources of liquidity are cash flows from operations and borrowings under its revolving credit facility. As of December 31, 2024, Novanta had $70.4 million in term loan and $348.8 million in revolving credit facility borrowings outstanding under its Senior Credit Facilities. The company’s leverage ratio and fixed charge coverage ratio were well within the required covenants under the credit agreement.

Outlook and Strategic Initiatives

Novanta’s strategy is focused on driving sustainable, profitable growth through both short-term and long-term initiatives. Key elements of the strategy include:

1. Disciplined Focus on Diversified Business Model: Maintaining a diversified business model by providing functionality to long life-cycle OEM customer platforms in attractive medical and advanced industrial niche markets.

2. Increasing Medical Sales: Improving the business mix to increase medical sales as a percentage of total revenue through new product introductions, deepening key account relationships, and pursuing complementary medical technology acquisitions.

3. Expanding Industrial Penetration: Increasing penetration of high-growth advanced industrial applications, such as laser materials processing, intelligent end-of-arm robotic technology solutions, robotics, laser additive manufacturing, automation, and metrology.

4. Investing in New Technologies: Broadening the portfolio of enabling proprietary technologies and capabilities through increased investment in new product development and application development to further penetrate existing customers and expand into new markets.

5. Operational Improvements: Improving existing operations to expand profit margins and improve customer satisfaction by implementing lean manufacturing principles, strategic sourcing, and optimizing the fixed cost base.

6. Talent Attraction and Retention: Attracting, retaining, and developing world-class talented and motivated employees.

Novanta’s balanced approach to growth, with a focus on both the medical and advanced industrial markets, combined with its strategic initiatives, positions the company well to navigate the evolving business environment and capitalize on future opportunities.

Conclusion

Novanta’s 2024 financial performance demonstrates the company’s ability to adapt to market conditions and execute on its strategic priorities. While facing some challenges in the form of decreased demand in certain end markets, Novanta was able to offset these declines through the successful integration of its 2024 acquisition and continued growth in its medical solutions segment. The company’s focus on operational excellence, technological innovation, and strategic acquisitions positions it for continued success in the years ahead.