Novanta (NOVT) 8-K Regulation FD Disclosure

Exhibit 99.1

Use of Non-GAAP Financial Measures

The non-GAAP financial measures used in this exhibit are non-GAAP gross profit, gross profit margin, income from operations, operating margin, income from continuing operations before income taxes, income from continuing operations, net of tax, diluted earnings per share from continuing operations and Adjusted EBITDA.

The Company believes that the non-GAAP financial measures provide useful and supplementary information to investors regarding the Company’s quarterly performance. It is Management’s belief that these non-GAAP financial measures are 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, 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, are often large relative to the Company’s overall financial performance, which 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, a non-GAAP financial measure, 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. Accordingly, the Company believes that this non-GAAP measure provides 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 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 in this exhibit.

GSI GROUP INC.

Sales, Gross Profit and Operating Income by Reportable Segment

(UNAUDITED)

The following table sets forth the external sales, gross profit, gross profit margin and operating income for each of our reportable segments for the periods noted (dollars in thousands):

	Three Months Ended,												Twelve Months Ended,			Three Months Ended,
	March 29, 2013			June 28, 2013			September 27, 2013			December 31, 2013			December 31, 2013			March 28, 2014
Sales:
Laser Products	$	38,164		$	40,433		$	44,714		$	43,286		$	166,597		$	41,860
Medical Technologies		23,557			22,135			19,718			24,866			90,276			22,367
Precision Motion		13,350			17,201			15,426			14,060			60,037			14,906
Total	$	75,071		$	79,769		$	79,858		$	82,212		$	316,910		$	79,133
Gross Profit:
Laser Products	$	15,507		$	16,677		$	19,252		$	17,383		$	68,819		$	17,013
Medical Technologies		9,463			8,273			7,535			10,553			35,824			8,889
Precision Motion		5,768			8,290			7,429			6,291			27,778			6,416
Corporate, Shared Services and Unallocated		(107	)		(1	)		(55	)		(31	)		(194	)		(213	)
Total	$	30,631		$	33,239		$	34,161		$	34,196		$	132,227		$	32,105
Gross Profit Margin:
Laser Products		40.6	%		41.2	%		43.1	%		40.2	%		41.3	%		40.6	%
Medical Technologies		40.2	%		37.4	%		38.2	%		42.4	%		39.7	%		39.7	%
Precision Motion		43.2	%		48.2	%		48.2	%		44.7	%		46.3	%		43.0	%
Total		40.8	%		41.7	%		42.8	%		41.6	%		41.7	%		40.6	%
Operating Income:
Laser Products	$	4,693		$	5,441		$	7,734		$	7,248		$	25,116		$	7,124
Medical Technologies		1,445			399			(469	)		2,191			3,566			(117	)
Precision Motion		2,014			4,420			3,223			2,405			12,062			2,643
Corporate, Shared Services and Unallocated		(6,690	)		(4,870	)		(4,689	)		(5,049	)		(21,298	)		(5,582	)
Total	$	1,462		$	5,390		$	5,799		$	6,795		$	19,446		$	4,068

GSI GROUP INC.

Consolidated Statements of Operations

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

(UNAUDITED)

	Three Months Ended,												Twelve Months Ended,			Three Months Ended,
	March 29, 2013			June 28, 2013			September 27, 2013			December 31, 2013			December 31, 2013			March 28, 2014
Sales	$	75,071		$	79,769		$	79,858		$	82,212		$	316,910		$	79,133
Cost of sales		44,440			46,530			45,697			48,016			184,683			47,028
Gross profit		30,631			33,239			34,161			34,196			132,227			32,105
Operating expenses:
Research and development and engineering		5,816			6,115			6,031			5,825			23,787			5,857
Selling, general and administrative		18,689			19,374			19,006			19,268			76,337			19,618
Amortization of purchased intangible assets		2,236			1,617			1,772			1,645			7,270			1,744
Restructuring and acquisition related costs		2,428			743			1,553			663			5,387			818
Total operating expenses		29,169			27,849			28,362			27,401			112,781			28,037
Income from operations		1,462			5,390			5,799			6,795			19,446			4,068
Interest income (expense), net		(898	)		(921	)		(841	)		(808	)		(3,468	)		(837	)
Foreign exchange transaction gains (losses), net		1,219			(459	)		(1,723	)		(338	)		(1,301	)		(19	)
Other income (expense), net		369			293			542			296			1,500			581
Income from continuing operations before income taxes		2,152			4,303			3,777			5,945			16,177			3,793
Income tax provision		403			3,018			1,533			1,192			6,146			937
Income from continuing operations		1,749			1,285			2,244			4,753			10,031			2,856
Income (loss) from discontinued operations, net of tax		369			(1,827	)		(185	)		(465	)		(2,108	)		(1,866	)
Loss on disposal of discontinued operations, net of tax		—			(311	)		(281	)		—			(592	)		—
Consolidated net income (loss)		2,118			(853	)		1,778			4,288			7,331			990
Less: Net income (loss) attributable to noncontrolling interest		(36	)		(18	)		12			20			(22	)		(7	)
Net income (loss) attributable to GSI Group Inc.	$	2,082		$	(871	)��	$	1,790		$	4,308		$	7,309		$	983
Earnings per common share from continuing operations:
Basic	$	0.05		$	0.03		$	0.07		$	0.14		$	0.29		$	0.08
Diluted	$	0.05		$	0.03		$	0.07		$	0.14		$	0.29		$	0.08
Earnings (loss) per common share from discontinued operations:
Basic	$	0.01		$	(0.06	)	$	(0.02	)	$	(0.01	)	$	(0.08	)	$	(0.05	)
Diluted	$	0.01		$	(0.06	)	$	(0.02	)	$	(0.01	)	$	(0.08	)	$	(0.05	)
Earnings (loss) per common share attributable to GSI Group Inc.:
Basic	$	0.06		$	(0.03	)	$	0.05		$	0.13		$	0.21		$	0.03
Diluted	$	0.06		$	(0.03	)	$	0.05		$	0.13		$	0.21		$	0.03
Weighted average common shares outstanding – basic		33,983			34,088			34,102			34,114			34,073			34,227
Weighted average common shares outstanding – diluted		34,271			34,285			34,417			34,607			34,396			34,669
Adjusted EBITDA (non-GAAP):
Net income (loss) attributable to GSI Group Inc. (GAAP)	$	2,082		$	(871	)	$	1,790		$	4,308		$	7,309		$	983
Income tax provision		403			3,018			1,533			1,192			6,146			937
Interest (income) expense, net		898			921			841			808			3,468			837
Depreciation & amortization		5,259			4,750			4,786			4,777			19,572			4,829
Share-based compensation		1,531			1,309			1,329			1,271			5,440			1,439
Restructuring and acquisition related costs		2,428			743			1,553			663			5,387			818
Acquisition fair value adjustments		504			325			74			62			965			165
Loss (income) from discontinued operations, net of tax		(369	)		1,827			185			465			2,108			1,866
Loss on disposal of discontinued operations, net of tax		—			311			281			—			592			—
Other (income) expense, net		(1,588	)		166			1,181			42			(199	)		(562	)
Adjusted EBITDA (Non-GAAP)	$	11,148		$	12,499		$	13,553		$	13,588		$	50,788		$	11,312

GSI GROUP INC.

Reconciliation of GAAP to Non-GAAP Financial Measures

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

(UNAUDITED)

Adjusted EPS (Non-GAAP):

	Three Months Ended March 29, 2013
	Gross Profit		Gross Profit Margin			Income From Operations		Operating Margin			Income From Continuing Operations Before Income Taxes		Income From Continuing Operations, Net of Tax			Diluted EPS From Continuing Operations
GAAP results, three months ended	$	30,631		40.8	%	$	1,462		1.9	%	$	2,152	$	1,749		$	0.05
Non-GAAP Adjustments:
Amortization of intangible assets		1,251		1.6	%		3,487		4.6	%		3,487		2,536			0.08
Restructuring costs and other		—		—			1,362		1.8	%		1,362		991			0.03
Acquisition related costs		—		—			1,066		1.5	%		1,066		776			0.02
Acquisition fair value adjustments		504		0.7	%		504		0.7	%		504		366			0.01
Non-recurring income tax benefits		—		—			—		—			—		(964	)		(0.03	)
Total non-GAAP adjustments		1,755		2.3	%		6,419		8.6	%		6,419		3,705			0.11
Non-GAAP results, three months ended	$	32,386		43.1	%	$	7,881		10.5	%	$	8,571	$	5,454		$	0.16
Weighted average shares outstanding – Diluted																	34,271
	Three Months Ended June 28, 2013
	Gross Profit		Gross Profit Margin			Income From Operations		Operating Margin			Income From Continuing Operations Before Income Taxes		Income From Continuing Operations, Net of Tax			Diluted EPS From Continuing Operations
GAAP results, three months ended	$	33,239		41.7	%	$	5,390		6.8	%	$	4,303	$	1,285		$	0.03
Non-GAAP Adjustments:
Amortization of intangible assets		1,343		1.7	%		2,960		3.7	%		2,960		1,862			0.05
Restructuring costs and other		—		—			722		0.9	%		722		455			0.01
Acquisition related costs		—		—			21		0.0	%		21		13			0.00
Acquisition fair value adjustments		325		0.4	%		325		0.4	%		325		204			0.01
Non-recurring income tax expenses		—		—			—		—			—		1,352			0.04
Total non-GAAP adjustments		1,668		2.1	%		4,028		5.0	%		4,028		3,886			0.11
Non-GAAP results, three months ended	$	34,907		43.8	%	$	9,418		11.8	%	$	8,331	$	5,171		$	0.14
Weighted average shares outstanding – Diluted																	34,285
	Three Months Ended September 27, 2013
	Gross Profit		Gross Profit Margin			Income From Operations		Operating Margin			Income From Continuing Operations Before Income Taxes		Income From Continuing Operations, Net of Tax			Diluted EPS From Continuing Operations
GAAP results, three months ended	$	34,161		42.8	%	$	5,799		7.3	%	$	3,777	$	2,244		$	0.07
Non-GAAP Adjustments:
Amortization of intangible assets		1,343		1.7	%		3,115		3.9	%		3,115		1,990			0.06
Restructuring costs and other		—		—			1,440		1.8	%		1,440		920			0.03
Acquisition related costs		—		—			113		0.1	%		113		72			0.00
Acquisition fair value adjustments		74		0.1	%		74		0.1	%		74		48			0.00
Non-recurring income tax benefits		—		—			—		—			—		(252	)		(0.01	)
Total non-GAAP adjustments		1,417		1.8	%		4,742		5.9	%		4,742		2,778			0.08
Non-GAAP results, three months ended	$	35,578		44.6	%	$	10,541		13.2	%	$	8,519	$	5,022		$	0.15
Weighted average shares outstanding – Diluted																	34,417

	Three Months Ended December 31, 2013
	Gross Profit		Gross Profit Margin			Income From Operations		Operating Margin			Income From Continuing Operations Before Income Taxes		Income From Continuing Operations, Net of Tax			Diluted EPS From Continuing Operations
GAAP results, three months ended	$	34,196		41.6	%	$	6,795		8.3	%	$	5,945	$	4,753		$	0.14
Non-GAAP Adjustments:
Amortization of intangible assets		1,343		1.6	%		2,988		3.6	%		2,988		1,613			0.05
Restructuring costs and other		—		—			233		0.3	%		233		125			0.00
Acquisition related costs		—		—			430		0.5	%		430		232			0.01
Acquisition fair value adjustments		62		0.1	%		62		0.1	%		62		34			0.00
Non-recurring income tax benefits		—		—			—		—			—		(994	)		(0.03	)
Total non-GAAP adjustments		1,405		1.7	%		3,713		4.5	%		3,713		1,010			0.03
Non-GAAP results, three months ended	$	35,601		43.3	%	$	10,508		12.8	%	$	9,658	$	5,763		$	0.17
Weighted average shares outstanding – Diluted																	34,607
	Twelve Months Ended December 31, 2013
	Gross Profit		Gross Profit Margin			Income From Operations		Operating Margin			Income From Continuing Operations Before Income Taxes		Income From Continuing Operations, Net of Tax			Diluted EPS From Continuing Operations
GAAP results, twelve months ended	$	132,227		41.7	%	$	19,446		6.1	%	$	16,177	$	10,031		$	0.29
Non-GAAP Adjustments:
Amortization of intangible assets		5,280		1.7	%		12,550		4.0	%		12,550		8,001			0.24
Restructuring costs and other		—		—			3,757		1.2	%		3,757		2,491			0.07
Acquisition related costs		—		—			1,630		0.5	%		1,630		1,093			0.03
Acquisition fair value adjustments		965		0.3	%		965		0.3	%		965		652			0.02
Non-recurring income tax benefits		—		—			—		—			—		(858	)		(0.03	)
Total non-GAAP adjustments		6,245		2.0	%		18,902		6.0	%		18,902		11,379			0.33
Non-GAAP results, twelve months ended	$	138,472		43.7	%	$	38,348		12.1	%	$	35,079	$	21,410		$	0.62
Weighted average shares outstanding – Diluted																	34,396
	Three Months Ended March 28, 2014
	Gross Profit		Gross Profit Margin			Income From Operations		Operating Margin			Income From Continuing Operations Before Income Taxes		Income From Continuing Operations, Net of Tax			Diluted EPS From Continuing Operations
GAAP results, three months ended	$	32,105		40.6	%	$	4,068		5.1	%	$	3,793	$	2,856		$	0.08
Non-GAAP Adjustments:
Amortization of intangible assets		1,301		1.6	%		3,045		3.9	%		3,045		2,120			0.06
Restructuring costs and other		—		—			28		0.0	%		28		20			0.00
Acquisition related costs		—		—			790		1.0	%		790		550			0.02
Acquisition fair value adjustments		165		0.2	%		165		0.2	%		165		115			0.00
Non-recurring income tax benefits		—		—			—		—			—		(721	)		(0.02	)
Total non-GAAP adjustments		1,466		1.8	%		4,028		5.1	%		4,028		2,084			0.06
Non-GAAP results, three months ended	$	33,571		42.4	%	$	8,096		10.2	%	$	7,821	$	4,940		$	0.14
Weighted average shares outstanding – Diluted																	34,669

Non-GAAP Gross Profit and Gross Profit Margin

The calculation of non-GAAP gross profit and gross profit margin is displayed in the tables above. Non-GAAP gross profit and gross profit margin exclude the amortization of acquired intangible assets and acquisition 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 expenses.

Non-GAAP Income from Operations and Operating Margin

The calculation of non-GAAP income from operations and operating margin is displayed in the tables above. Non-GAAP income from operations and operating margin exclude the amortization of acquired intangible assets and acquisition 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 expenses. The Company also excluded restructuring costs and other, and acquisition related costs from non-GAAP income from operations and operating margin due to 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 for the reasons described above in the introductory paragraphs of the “Use of Non-GAAP Financial Measures”.

Non-GAAP Income from Continuing Operations before Income Taxes

The calculation of non-GAAP income from continuing operations before income taxes is displayed in the tables above. The calculation of non-GAAP income from continuing operations before income taxes excludes amortization of acquired intangible assets and acquisition fair value adjustments related to business acquisitions, restructuring costs and other, and acquisition related costs for the reasons described for non-GAAP income from operations and operating margin above.

Non-GAAP Income from Continuing Operations, Net of Tax

The calculation of non-GAAP income from continuing operations, net of tax, is displayed in the tables above. Because pre-tax income is included in determining income from continuing operations, net of tax, the calculation of non-GAAP income from continuing operations, net of tax, also excludes amortization of acquired intangible assets and acquisition fair value adjustments related to business acquisitions, restructuring and other, and acquisition related costs for the reasons described for non-GAAP income from operations and operating margin above. In addition, the Company excluded significant non-recurring income tax expenses related to releases of valuation allowances, recognition of previously unrecognized income tax benefits due to expiration of statute of limitations, 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.

Non-GAAP Diluted EPS from Continuing Operations

The calculation of non-GAAP diluted EPS from continuing operations is displayed in the above tables. Because income from continuing operations, net of tax, is included in the diluted EPS calculation, the calculation of non-GAAP diluted EPS from continuing operations excludes amortization of acquired intangible assets and acquisition fair value adjustments related to business acquisitions, restructuring costs and other, acquisition related costs, significant non-recurring income tax expenses related to releases of valuation allowances, recognition of previously unrecognized income tax benefits due to expiration of statute of limitations, 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 for non-GAAP income from operations, net of tax.

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