NOVT - Earnings call transcript Q4 2021

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Operator

Good morning. My name is Keith, and I will be your conference operator today. At this time, I would like to welcome everyone to Novanta Inc. 2021 Fourth Quarter and Full Year Earnings Call. [Operator Instructions]. is event this note, being recorded. Please now Ray Nash, would like Novanta. to to over call the Corporate turn I Finance for Leader Please go ahead.

Ray Nash

fourth Buckley. today’s Ray Matthijs Chief Nash, Thank welcome Finance Executive Leader XXXX Good Officer, much. With Corporate our conference quarter me Financial Chairperson Novanta. Novanta’s Chief on earnings am you our year is and Officer, Glastra; I morning, call. and of Robert full call very to and and

of copy Investor our press you our have live a If be on obtain this the received today, and issued from website note, archived call. may webcast our Relations earnings you is Please not release of being website call will the at shortly it www.novanta.com. section after

to with today assumptions only of to our if safe our known both to earlier issued filings. obligation our responses differ include we to of we’ve in We this everyone future questions expectations. estimates We some statements from that the statements that may unknown may statements begin, in harbor today, other factors risks inherent even and views forward-looking our that future could and in materially involve These current we forward-looking our disclaim any Any results statements. in press forward-looking the represent outlined make SEC prepared and our our also remarks those Before need in cause earnings for made our today and release time. as update forward-looking remind comments change.

our views after any on any of you forward-looking this rely as time these So of should representing statements as call. not

press introduce comparable financial most the promptly during To be reconciliation will the release, that measures Matthijs Officer referring this During financial such use Novanta, measures in an our measures available Chief A Investor I’m we our website extent this the measures. call as the press to reconciliations directly reconciled not is measures are earnings financial of to of provide earnings Relations to attachment after Executive call. call, on to non-GAAP Chairperson certain release. non-GAAP will that we section non-GAAP the pleased and GAAP Glastra. this we to GAAP of now

Matthijs Glastra

and This demand structural serve. fourth million and quarter, another Good quarter everybody, is and joining us. of set Novanta all we demand delivered you, for year basis, Thank for thanks In revenue rate We on million customer fourth record great medical revenue and on our with XXXX the It quarter and drivers growth performance excellent mark full growth quarter. the strong Ray. in both the in sales the representing an a with industrial billion million close year and XXXX. for up reported $XXX full exited hit $XXX visibility morning, a record and record growth basis bookings $X eclipsing revenue company long-term The year and to a with organic advanced revenue XX% of run also We last $XXX time delivered a XXXX. highs full to a of operating new XXXX. backlog at indicator. year-over-year markets us the sets in bookings. XX%

which on an is For XX% basis. $XXX and the a had of of year-over-year year Novanta full sales on basis, XXXX, million, XX% reported organic up

million excellent of fourth In operating up $XX XX% with the adjusted performance EBITDA in of addition, quarter we had another quarter year-over-year.

year is $XXX EBITDA full year-over-year. which XX% the up was adjusted For million,

is which quarter XXXX. fourth adjusted per was XX% up was Our prior EPS and adjusted the share versus diluted $X.XX, in year versus year up which for the is earnings full XX% $X.XX,

a quarter – XXXX. XX% challenges, fourth quarter year-over-year of of proud strong moment. quarter versus which in system record We reported a bookings using drove third, and tools, already bookings quarter to of on very growth despite operating fourth versus Novanta fourth third growth of the extremely We our the bookings the chain sequential growth with widely breaking of in XX% exceptional with teams and saw pleased supply are how I another performance speak

still the Excluding segments the impact advanced XX% each as healthy very in in across up well overall very We many saw demand was applications. saw most having our of industrial in our segment quarter. applications, over the quarter, as book-to-bill We year-over-year fourth all acquisitions quarter. bookings was strong medical our X.XX. book-to-bill the with strong orders In fourth

year bookings the before of was of for mentioned X.XX. the an nearly full book-to-bill impressive billion $X and As full year sold XXXX, we

give other take how Novanta. let to on global the about moving operating an me macroeconomic results, they’re impacting to Before update and a moment dynamics

war the and solution Russia the negligible. with will is obviously exposure be Ukraine are Russia Ukraine all, found are our and while increased the peaceful these and uncertainty of has events soon, First tragic between people, Ukrainian and hopefully very the economic with direct thoughts Novanta, a very

quarter. shortages challenge on some supply to we times. lead promised to widely during our quarter Second, demand ability in chain have within last and the customer other reported our worse continued gotten fourth Discontinued and have that the commented disruptions cases meet

moments. widely we addition, are market. Robert few detail more on labor reported comment these on which as both In raw in cost, seeing as are now materials, in will in inflation cost a well in dynamics being the

great I’m extraordinary who to by and the of and up manage customers these of stepping keep throughout beyond who and and organization team extremely keep agility go above our our However, protecting impressed pressures all happy members while proud to the efforts our profitability.

quarter strengths exciting an market In production, the we’re growth sales advance saw business applications, of automation in accelerated total and our exposed of in automation, sequentially quarter, were as Novanta quarter, sales XX% electric markets and advanced seeing year-over-year. industrial to full to such a industrial Now, to growth with sales its fourth base our let’s vehicle the in of growth XX% reflects there’s areas. robotics and a to where robotics warehouse turn industrial ongoing what application markets, overall ATI acquisition in high penetration. multiple fourth XX% see the we’re majority

and investments XG, as from industry high into technologies. investments specific penetration in speed We and as Novanta’s also higher increased and well market applications, experience to factory continue networking cloud-based EUV-based X.X to requiring automation enabling higher infrastructure, electronic demand markets demands

and increased Factory demand the XXXX. micro sustained expect We be to electronics X.X well into

For the full to XX% industrial applications year were sales by advance of grew of versus XXXX, and sales XXXX. total XX%

of the XX% quarter the fourth quarter XX% total sales by applications of Turning of sequentially. our and X% the and medical medical were of sales end-market to grew XXXX XXXX, year to XX% XX% sales medical were year-over-year, for fourth of Novanta’s applications in sales to total XXXX versus and grew full

minimally In impact invasive patient we in impacted very During for for sequencing, the the for the electric hospital of as year-over-year the procedures, OEMs greater the we to surgical will expect in surgical elective all high year-over-year and surgery growth with that full and of levels. see to double-digit of medical very sales saw impact we sales major the our continue – saw XXXX, exposure United XX% in starts demand geographies. fourth fourth particular shipments were growth and and DNA production. very quarter, Europe invasive where the XX% pre-pandemic from Europe States increased still orders than sales Omicron subside strong battery we continue minimally and return in sales subdued however the variant. and and our United market EV by strength gradually States saw will across year-over-year. which vehicle up With quarter, to robotics both China were strong sales rebound growth. in held increased of overall grew cases backlogs and starts Despite regional in Omicron to in procedures by the the and improved increased strength strong sales many From this Sales to China grew medical to to and grew XX%, by XX%, also year quarter, variant perspective, XX% strong CapEx a procedures

Novanta’s growth me Now, metrics. some strategic on touch of let

ATI reporting acquisitions. metrics IMS to For from ATI those and starting established exclude now IMS the and with these we in sometime XXXX, metrics impact these tracking and plan start any as We including teams. proper our in

our had prior design of with of major most sales our fourth businesses. is even the multiple saw quarter more huge teams. wins. a our were our customer accomplishment a the minimally the wins in already wins wins in double-digit up prior We wins full for double Design year, than huge with which more which major in year year the were For multiple surgery business, XXXX, year versus invasive

our vehicle manufacturing, Precision steering saw beam application in micro-machining, as welding. surgical design businesses laser also electric such We high wins Motion strong battery growth robotics, laser additive, on areas and and

four new last sales which index, XX% for fourth launch for new of quarter be revenue years at to the from product double-digit the is above healthy sales full the vitality continues in year with year-over-year. both products and growing Our

We invest our continue terrific in pipeline innovation results. with to

I’ve the record we XX in some product this of spoken products NPIs achieve our of some some in of delays single platforms. a of year. reallocate difficulties new are we number some that products, for managed nearly full impressive our number For It’s as we launch the our high launch chain matching our supply last launches to to part launch year, of call, resources of to timeline new the of despite that having the about. engineering mitigate in Yet, our help seeing and mentioned customer

this of of stage, as long-term at material trajectory not impact a any on we the these However, delays. the company growth do result see

chain capability and benefit term. will mitigate foundational supply and we’re us adding that the engineering challenges these to process, We’re building resources in long

XXXX is continue of strong We lineup launches very pipeline the products of to healthy. a in new have product

businesses significant and to like of fourth Novanta. have with for integrating quarter, the on I’d give us the progress were brief acquisitions. and rest a with we made IMS update Both full both the ATI businesses Next,

Novanta of to impressed performance work with very Novanta pipeline IMS positions and in in of progressing and be of for automation We and cool strong, well growth the ATI active expanding till both markets. fantastic engagement Novanta’s we and Acquisitions our continue which to opportunities capital focus to businesses XXXX. excellent bookings are market in very primary to these deployment are continue demand teams, the saw an and tools. strategic in robotics and by Both and businesses, for addition the be the continue they’re performance sales for strong fourth These on we the the strong growth are system high quarter. the businesses a

be and possible Finally, none would teammates. teams of of talented performance without our our Novanta committed

called continue we systems, And values? Novanta core double that behave how differentiator work to included our in Novanta retain has to which believe together the our and and growth Novanta How We culture cohesive our priorities. execute investments attract, will teams? Way, we we diversion, in down people, strategic our Way five been everybody of invest talent. We we inclusive core in institutionalizes, of around through labor and market and XXXX, our engaged tenants how and develop increase feels a interact where respected, in growth the tough development a in and culture, our our through

staying to our people’s customers laser and We our responsibility is vision are strengthening executing our our innovations includes vision strategy, and which At enhance Novanta focused matter to corporate deliver lives. on efforts. long-term that

governance We equitable brighter environmental and a future building robust and and are inclusive creating system. to committed workforce a initiatives, a sustainability through maintaining diversion

SASB two We are XXXX this the achieve will be will XXXX leading month, TCFD. emission which global publish to we net our line later ESG by in report standards zero with developing action and plans and

So and positioning year XXXX chain backlog we demand and short-term ever been. with Despite record significant XXXX enter profit, customers. We levels the very of believe landmark ongoing is challenges, foreseen of despite as a as in feel bookings, in factory disruptions levels from sales, summary, some it continued long-term as strategic We supply never and for operations. our good Novanta. our achieve good Novanta’s we was has strong

have productivity, continue applications medicine. and broaden to long-term as healthcare and medical robotics growth industrial automation, We exposure secular such advanced our to precision and that trends

performance. financial will on call over to turn details I to that, more our with operations So Robert Robert? and the provide

Robert Buckley

morning everyone. you, and Matthijs, Thank good

quarter profit XX% gross million margin gross adjusted compared or fourth non-GAAP $XX.X $XX.X Our or XX% in XXXX. to adjusted fourth margin the million quarter was adjusted gross of

non-GAAP XXXX. XX% million our $XXX was year, a or adjusted in $XXX full profit gross margin to the million gross XX% compared or For adjusted

a to gross teams, consequence This factories For efforts year-over-year. adjusted our increased of came a the and deploy logistic were actions XXX as dilution to disrupted. team. our slightly Novanta and our gross as chain into result day-to-day ensure demand strong delivering operating the productivity de-levering the customer deeper better not system on margin our the company And difficulties vendors, factories as our on year result declined our the points the full to margins disruptions Managing from the their customer which supply diligent top our our Sequentially, drive basis acquisition. margins a us gross – lesser drove as leverage sorry approximately required activities, remains, ATI extent, of costs. costly and who priority allowing growth mitigating a with short-term remains leadership to as a demand

an rapid on at are and COVID-related their caused our suppliers our doing inflation we job incredible outbreaks. supplier global around at continue to these see We labor our own parts, seeing impacts. Overall, shortages, part mitigating shortages. by electronic electronic manufacturing largely shortages, But suppliers are disruptions significant and teams also

with aggressively of in sharing challenge, costs the we’re our However increases. of some price due customers magnitude of to form these working the the on

announced practice of follow our in inflationary price meaningful all increases units, this the have We across sharing pressures. which business

will expect of Taunton it’s price into factored increases last to XXXX, customers guidance and from call. our want the also cost few which important but actions mitigation in a very so spoke the pricing is is we to about UK a the We in, for brief and be the net update our receptivity result to The our phased give speak I minutes. high. which taking we understanding far facility, I’ll are on say

as already begins fourth to quarter the the this into plan of online. and it facility During our facility. new we new benefits facility the We the come began move operational remain of seen

that In our capacity first two to the as in customers be quarter, remainder very cost which and fact, running as beneficial will move, well will to in This recently we accelerate the in in result structure. structures decided from our the continues temporary factories of cost reduction redundant quarter. a

and our in this to capacity improve do right is capabilities thing delivery the However, to sooner XXXX. structurally

us We customers – are and how excited producing truly deliver our about our product. can online our this help fully to factory once

quarter Moving fourth roughly on XX% R&D were or sales. million $XX.X expenses of

R&D year sales. or were or For expenses were sales. million quarter full XX.X% Fourth million expenses the of $XX.X XX% SG&A $XX of

were The with in and the year operating $XX approximately and million EBITDA line quarter increases of million or were the $XXX For full were was XX% result SG&A the guidance ATI IMS XX.X% sequential expenses in of fourth were prior sales. Adjusted of expenses margin. the in acquisitions. XXXX EBITDA

EBITDA approximately year full margin. million the EBITDA For $XXX a XX% adjusted was or

through statutory our Our higher driven ATI adjusted performance the fourth tax beat profit. and and different was from higher and EBITDA of quarter XX% expectations the On of minimum tax our issued equity front rate previously of our This mix driven guidance, financing mainly the by effects mainly rate income to of by sales the windfall was this to non-GAAP tax volume a compensation, due flowing jurisdictional acquisition. ATI the acquisition. of benefits, sequentially XXXX

XX%. For tax was the rate full our non-GAAP year,

quarter to the of fourth of increase quarter XX% was XXXX, an Our year-over-year. in $X.XX compared $X.XX non-GAAP adjusted share the per earnings in

adjusted was the year $X.XX strong $X.XX For year-over-year. EPS profit an The XX% EPS higher offset compared XXXX, driven increase for by adjusted were to adjusted in our results by sales, of the favorable higher full somewhat from tax EBITDA. to and which $XX flow our rate. operating quarter a financing a costs XX% higher represents greater in and our was of slightly than line ratio expectations was nearly Fourth with cash million,

year the was operating For cash $XX full flow million.

growth with $XXX X.X data ratio growth year was the ended we Finally, our times. and million, leverage

acquisitions. approximately quarter, was the sales these impacted first approximately was have growth and businesses the about teams Motion million. XXX% an fourth heavily experience growth succeeded the quarter, XX% been our talented not Our of segments. the start the million could these year-over-year this net In sequential ATI segment, IMS guidance. were revenue offering. $XX really with performance about they growth contributed internal and performance update future their debt operating businesses now We of and by turn in opportunities this excited more and was the $XXX I’ll Precision the of to I’ll segment

overall acquisitions, in more ratio segment in XX% bookings year-over-year. grew an the book-to-bill quarter. The was than the this year-over-year. Precision XX% Excluding Motion impressive grew And X.XX

new IMS, and expectations was segment fantastic absolutely and segment margins the had the were of gross dropped proud we’re with Precision the very team. slightly for of sequentially came Motion, effects this for impact due acquisition, Motion sales nearly of strong full and in fair year to profit line the Precision the margin combined up of ATI year and with ATI for say revenue, this It’s of to the performance total product an Excluding performance. and the XX% segment. Design doubled over XX%, the wins

Turning to the year. and given growth line comparisons end experience serves with the Vision in X% business, market revenue the year-over-year medical the predominantly of for segment segment. prior This the expectations difficult

surgical While COVID of impacted the now environment XXXX. elective of XXXX, medical in few in segment spike the in wins from significant the new index was XX% segment was a and win above more the a surgical the to the the Despite and Vision procedures closed saw resilience year-over-year activity the on year vitality in volume products quarter, we driver infections procedures a several the prior improving amount customers. second again of first OEM in XX% very of this been with being business. this, in by key of X.X. bookings as of remained The activity impressive point months large more than quarter the rebounding this grow business fourth Design with double have an quarter book-to-bill all signs the couple seeing sales,

huge A For accomplishment double more win year design this XXXX year. for full was team. the than prior growth

and of next by and are chain the temporary near the As of the caused difficulties deferral prospects long-term this key challenges put a behind of as years, procedures. we We electric term, draw this supply short-term we despite disruptions few over once stronger the before, ever Novanta’s see pandemic. the segment growth segment than said finally growth by caused

turning Photonics year-over-year. customer of continues XX% fourth up was applications in The in The fourth unprecedented the DNA quarter. X.X up demand our Finally in segment XX% was book-to-bill in advanced XXXX, business the sequencing. to experience the were year-over-year. revenue quarter Bookings industrial and their

micro-machining. were Despite segment for wins revenue Design to the than battery year-over-year. disappointed the laser In margin and addition, earlier, were which in which certainly cost I quarter and gross the greater increases as manufacturing, performance, drilling via temporary In XX%, excellent sales year-over-year, and saw down order new disrupted. full sales XX% the disruptions strong year such fourth sequentially in driven strong at year-over-year – up by have Photonics we wins platform the the performance, stayed applications in our quarter, XX% total hole of additive which NPI product result the were of welding year-over-year. up impact in adjusted ensure required mentioned not logistics was factories e-mobility,

the We hitting impact redundant segment. facility cost UK also of this of Tauton saw the

impacted points for basis margins teams the making. XXXX. been adjusted expansion of full saw were strong XXX gross This segment structural versus quarter the Although improvements, of the in reflects XXXX, which year fourth and margins the have

come manufacturing the relocation to of continues complete our Taunton facility. price year into drive expect In continue after we to team XXXX, margins. as expand the the new NGS increases their this full aggressively We segment to into And operation. effect as

we quarter margins the expect quarter. start be gross up expect in flat roughly to margins XXXX, ramping we the first While second back sequentially, of to

for gives elective a company, Not establish confidence. procedures see advanced This customer more strong expected demand only demand in at markets their spending Now our post industrial continue base surgical further If demand strong look robotics wave. surgical DNA solid see does to and maintain medical we but we this applications, robust, turning to sequencing from the as also we the demand remains and tailwinds looking from key whereas customers. is likely performance. the and to Capital of recovery Omicron such guidance. XXXX, us

with deal XXXX the production and with one levers electronic amazed challenge, to we We continue complex is to as of customer issuing year and Consequently, strength disruptions, but the demand, strong ability remain full which difficulties, will demand, our to supply chain remain year to leverage team’s to also state number and customer strong. year guidance. material chain and is our scenarios of have revenue to topic The of plenty their but supply solutions say in It steady XXXX first disruptions customer at Novanta’s find we a a range that be driven our not we entirely the expect in focus. be around shortages, of expectations demand we’re our by believe quarter with because almost is and fair characterized shortages challenges. our a and confidence them by

XXXX, quarter stand the for with starting today. So first revenue of guidance the we here

revenue million We in $XXX range million. expect of $XXX the and GAAP

to the expect in year revenue XXXX, million. $XXX full we range of the For GAAP million $XXX

to gives as revenue that year-over-year range challenges. expecting known see account today range strong are remain disruptions to processes customer our and revenue supply their with We see as in XX% growth for disruptions – This quarter. our them production we logistics from which of products, first chain own demand well takes the XX% into

momentum mitigation Taunton expect and revenue year the facility improve continue new as comes gain on as supply efforts chain growth our We to our as progresses initiatives a of line. the to

by with continued segment we shortages. we the Motion strengths core the acquisitions. as of demand as normalize And the The Precision shortages, expect in path first we driven in segment below caused a higher ratios both gain by continued in actions Therefore due modest, businesses, segment the supply book-to-bill though to quarter, online the the see facility segment in and our expect strength our as the shipping the in anticipate quarter level more also for well orders. mitigation low the start On low the Taunton growth customers to chain momentum. year. new is of The growth material the will is teens will comes single-digit as in and second impact growth to the full which bookings expect growth continue as well versus we saw XXXX. We the we of accelerate respect more significant Photonics, level around directly see

As in year prior quarter, expect more dollar first a double we on the a be sales than consequence the to basis.

growth we expect be year full single-digits will mid-to-high be growth the the in reported to organic off strong building also and the growth For in strong XXXX. organic

for electronic to Finally, the quarter, the companies but decline revenue we also our XX% Vision These year by on expect are an of two shortages. of visibility to who shortages chip quarter expect come year-over-year vendors driven most Fortune segment the suppliers see their of vendors part online. large new a first and vendors the are XXX first a solely be these improving as in basis, experiencing effects themselves challenging, are have into

rebound is may this range will gross now. believe to XXXX. our minimum rebound occur And full virus growth as flat for behave. we guidance expect expect we digit a in not this because the starting demonstrate while growth of wave, include surgery to a be procedures adjusted the of for recovering relatively to market half year. predict for the second for decided now, the we addition, following how in margins vision segment the Despite mid-single Vision cannot This elective the in largely In surgical Omicron invasive the we we

However, we half the second expansion see year. margin expect of growth in do the to

Moving adjusted overall on to margins. Novanta’s gross

be quarter at first approximately XX.X%. flat to the sequentially gross expect margins roughly We in

than slightly by the vesting continue certain in company as additional up increasing due grants. experience. we increase for acquired up approximately we’ve cost performance we full IMS the XXXX to approximately the versus in to Stock The quarter our well as of rest will of Depreciation to margins of the full the but a lower timing in full the are year be a these expense on be NPI ramp million key as already higher be driven further $XX mainly than to we Gross that Therefore disruptions XXXX. be full quarter. of year the first for slightly from impact will compensation inflation we the will for consequence be XXXX expand XXXX XXXX of million full million inclusive for margins deploy higher maintain year. spoken programs. as expand well $XXX XX% year of to impacted issues mitigate would the for compensation which to again, and key ATI is growth the particularly equity continue year, and $XX expenses products. the the the businesses to full first our talent $XX to to full approximately year year of approximately headwinds expect for first the will the expected of as $XXX acquisitions. margins higher R&D we aggressive to million, in our slightly of to SG&A project million to the also retention million rates pricing full of temporary a from be prior because having and acquisitions, year year expense XXXX year to spend quarter expect expense expenses actions higher continue the approximately would the have $XX Stock year taken to by to, as the for

adjusted For XXXX, a for EBITDA, quarter $XX $XX million the to of we of range expect million. first

from EBITDA the of million. million, result is the XXXX higher be $XXX expect balances the the range $XXX adjusted full full be of will and to average of acquisitions. than which debt for expense million range year $XX in year to in XXXX $XX as we Interest a prior the year million higher of For the

jurisdictional absent our our discrete and tax year of other the year expect of similar as to in XX full timing any years. weighted million be shares. rate Diluted XXXX, We for variation prior outstanding to throughout in shares the non-GAAP rate the variability certain from on approximately We expect based or tax tax some tax quarter-to-quarter eligible XX% benefits of benefits. changes mix income around be a do will significant in of average

share, full for we expect to quarter $X.XX $X a $X.XX year for range earnings For adjusted the of of of XXXX. and to a in first the diluted $X.XX range

cash to operating a as adjusted we expect we improve expect and have EBITDA Finally, versus ratio XXXX solid flows XXXX a to growth in year-over-year. to cash

earnings As rates. always, assume was To share. a for Novanta. sales XXXX EBITDA and to this We recap, any guidance adjusted achieved of foreign year does significant changes record a adjusted record not level exchange per

our We significant levels, has despite also new the teams record facing product recent has the seen environment the ever design and modern accomplishing this challenges, business backlog, most XXXX revenues. with experienced We highest had, company the in booking wins, entered history. are all

we great about the all applications seeing to progress. markets. demand company’s its position ability Given sustain across strong and its our the company is The this, feel and

We talent are attract best the talent. continue our to and retaining best

questions. engine us We it innovation remain has handle operations performance our the very maturing strongest and successful their the our excited ever to importantly, environment. about opportunities. of our to be and partnerships the Our This employees to proud remarks. remain prepared are in to been, markets now remains where deliver our how continuing a most And that to help tireless for efforts and very up we a employees, commitments of call challenging and in open about about customers, attractive our growth the our stakeholders. our customers, with concludes innovation secular the on position our We’ll our future, forward continuing look

Operator

Lee Securities. question Yes. comes [Operator CJS from with Jagoda And Instructions] Thank the you. first

Lee Jagoda

morning. Good Hi.

Matthijs Glastra

Lee. Hey,

Robert Buckley

Hey, Lee.

Lee Jagoda

Can ever I backlog out don’t given number you is to the So your compares a a backlog business that time levels far the release. this we the how about think pre-COVID? talk how about this, really out first backlog business. stretches as historically in And saw I you’ve backlog and think

Matthijs Glastra

more to any we that shipments by sort said, it our and demand. range year. gave It’s to some also docks, a revenue the that if end we the us I I And dictated I’ll it’s have we’ve It disruptions it. completely customer and even achieve of start of on gives a we chain it’s forecast, still perspective level of had still that supply double are of the where It’s shortages before. is have pre-COVID, shortages. range chain bit the full for material by going in to that unusual little meaning backlog upper the with not than seeing you the that leave supply for why clear we’re So

is year. for full environment the stronger our range than end demand the upper So the even Yes. revenue of

for I demand profile. that yes, including and we very Right. summary, good structural our feel it the mean, have, growth about innovation in long-term we is reason our design win So our on

we wanted this so And now. that support backlog to with

Lee Jagoda

quarter two been transitory, gross lasts a can get But have some gross if that of or may could a some in your the that helpful. sense for it. some we so it for just I be more. for not able are XXX a And one to bridge margins. at of that’s you XXXX, give gross increase me back margins the these look margin that’s, then kind of or related Got guidance the more point basis contributing a for obviously holding transitory No, been, given should last to If just factors year had issues? all what

Matthijs Glastra

without I been of way at fourth of disruptions the probably would’ve above the it we XX%. logistics The in Yes. kind quarter, look some

different like that. I some disruptions. we and subside experienced, as inventory first into position were that expect temporary do We, to then continue to deal order there with thereafter but So get localities the in logistics quarter,

fourth think have into in that structure the now We’ll that quarter, obviously I eliminate will we’ll second quarter. facility, the going structure cost UK quarter. but the there’s that first have cost Taunton in the

and that above get the level is the up. are the quarter we Those subside last supply and again. the course quarter that, some third XX% jump effect And seeing higher in Vision as And allow then business that that allow second shortages we a And quarter, so of demonstrate across will probably in through segment. that one all there will to price now margin first quarter, get units. are that then was will a second the gross chain increases in

a at us And see consequence. XXX gross to phase year. that translates a in of so really drive margin that a points to the that you’ll full as is that positions the year they What a so expansion even rate run course quarter, the really higher margin of higher will as basis over fourth on really in the

Lee Jagoda

it. Got

Thank good. you. Sounds

Matthijs Glastra

Yes. Thanks Lee.

Operator

from question with Baird. next the Rob Mason And you. Thank comes

Matthijs Glastra

Rob. Hey,

Rob Mason

gate. the they’re the Yes. case Good just taking well was Maybe morning. third Thanks of the the quarter into acquisitions it performing in with the I’ll Certainly start the for question. really carried out fourth. seems

really get I as FX contribution XXXX. while in would be contribution acquisition what on the clarify you you’re to opportunity and well didn’t topic? an that, what out are So, tease But could your expectations maybe for

Matthijs Glastra

experts today. not in the the expecting, that guidance FX not that we’re at we’re the we’re FX FX forecasting, but that FX the obviously well on we’re have is we currently forecasting, rate So,

continue about XXXX. to taking there’s be the, numbers, a reported to the around to be an business close directionally any of run own stay I we least naturally And XXXX. They at, around acquisitions. on performing shifts impacts that didn’t hedge well, are to implications the something of of but side. the major kind little impact guided, have two there’ll profitability account of the a you them that kind revenue throughout numbers careful been could rating we’ve numbers quarter. expect if things of able unit haven’t we that, pretty the specific we for I’d would completely in probably using where fourth the that generally so and that, indicator sort that, can at fairly robust get they, quarter are say business third The buy are fairly good but for the into

from So maybe there. go

Rob Mason

the acquisitions. the fourth above with final we’re again orders, on XXXX Okay. level book-to-bill that in one that Because one the in What quarter the is still the, other the… orders purchase price now the book, of of the side the over in

Matthijs Glastra

disclosure through that valued in earn our basis. a XX-K actual could Monte around We have a you look Carlo though. we the the way it on calculations, work have it’s There’s that to take out at some language out earn payment,

take So, might over that I this the you at point. direct a probably look at did XX-K to

Rob Mason

electronics, business you Okay. you question that thought strong. Factory space, and continuing, electronics you touched last on I micro to just just then said but remain totality. have good visibility. that your demand exposure And around And X.X maybe in in bookings, apparently you stands year again, of through again, have terms thinking about backlog how that you’re of of balance where whether of extends revenue it overall in the to that, in piece and business? that the and level the percent you that that visibility your Can continued

Matthijs Glastra

has micro exposure to I Yes, of magnitude. the mean, order that historically between, electronics XX% XX%,

So, we to that range. consider in it be

the actually which the dominant roughly is of business. piece business, our I of majority think that to XX% industrial was speaking was Right. I what advanced of the

it’s are And we are a feel drivers, vehicle there’s whether whether your a accelerated by long-term secular are driven whether driven investments based applications it’s steering, automation, so by multitude the electric change on pays automation in that production, that of applications that laser warehouse all growth that as laser are the requirement whereas, as and leader to of technologies also structural robotics in well it’s laser beams. production we’re

we these years. yes, the see all tailwinds for coming So tremendous

but still again, cyclical a that, So to that’s, XX% maybe or the most probably, order so a we for microelectronic cycle And as around know of sales is again, about. is demand of I we’re would say profile, of very all multiyear XX% that’s that magnitude. to excited we strong XXXX see

Rob Mason

it. Got

the in back hop I’ll Thanks. queue. Okay.

Matthijs Glastra

Yes.

Operator

with And comes Thank from Drab Blair. Brian the question you. next William

Matthijs Glastra

Brian. Hey

Brian Drab

for my questions. Thanks Hey, taking good morning.

quantify the in you’d associated You limitation, revenue the mentioned in prepared think first remarks move, possibly? have I quarter the facility with some that that can you

Matthijs Glastra

move one impacting the, cost impacting more facility structure quarter, elements that’s the is and really anything the two just than It’s first else. the

in a little cost. results higher that bit So

shut effectively into for new and facility. weeks have move everything down production the then We over two

with So, time get some overhead have you you have stranded of back. deal to doesn’t period that that that costs absorbed for

The issue the to within is Vision tied other segment.

that deliver they the vendor is quarter been to brought around XXX to them a has enough in now, time will They product. it get turn ability We delivering components product limited. vendor in their online us them need, have to Fortune but that the deliver to unable new new the vendor first

And in well impact so hampering first that’s really quarter, of the kind on the revenue an the gross number margin. as both of the as

absent two probably So, at you’re I would XX%. things, above a looking gross say those margin

second the things been quarter. into there’s up tick all our the has are in those phased across but from in as get at the final been And extremely price have as two go we second helps you are quarter, positive. all And then as those and so businesses announced with January resolved least increases And of now actually X. that discussions receptivity to the going we through customers customers, of be that

Brian Drab

Got it.

don’t there’s isn’t second margin shutting the down from also ship facility of product that but to those impact, issue. couple have revenue weeks both you a on understand gross there and a a for impact So, the I

Matthijs Glastra

in low-single it’s I Yes. mean, the probably digit million.

which one you structural. we equipment. that Taunton But million issues, of let’s cost was those timing what which to revenue, Right. accelerating then And are the not has is just we’re impact. quicker. $X more move the accelerating now, of there into old of originally on magnitude as is They’re right? to as well the, And maybe. the us shape kind supplier, the indeed just this to order significant So, better basically trying a Right. segment, I move, both position staggered site, basically is, the But we’re piece bottleneck say get timing in faster. Robert mentioned is, Vision which larger are a this capacity right Right short the asset, things. term get mean,

how again, look So kind by improve the of quarter. first you demand to need situation. at impact but the have will just the things, And we those temporarily that’s backlog year. throughout tremendous they It’s

So issue. issue. it’s really ability more to supply not really of It’s the a demand short-term

Brian Drab

Industry term and a point? longer at capacity here to few you’re the additive, Motion, Thank seeing semiconductor and within that in mentioned all but market that and you semiconductor like additions talked in know that, manufacturing the in secular you. And at guess what the X.X, than tailwinds you’re it. Photonics there’s out, different – then all this coming tailwind I about be. years you the seeing next now, your Got are what’s, different markets the Precision you is what’s or advanced that Yes. it this see, exposure to are lot going used to lower I it’s a for least

Matthijs Glastra

Yes.

think I question. Rob similar asked again, a So,

altogether electronics, to XX%. So, I lump right micro XX% around it in

of for RAS higher. and fact, electric acquisitions, is our So, it’s vehicle more in not automation our of to exposure let’s it say, also than be used as much production, example, substantially a towards what result matter a

that down So, but continued moment fundamental is of increased the versus Who all will we yes, knows from because decade that investment coming capacities long of markets benefit going other a think a as yes, side. take, climate cautious how the these I will because nevertheless, at underlying market, the long that also there turn we’re little driver. trend on that course, will about market semiconductor we investment the an secular always about, and then keep bit online, diversifying exposure, talk we’re think we, this we

So that’s how kind of at we’re looking it.

we’re the these for company through pleased exposure this more automation from for with sure. related larger all And markets robotics – actually being our innovation. both about as very well electronics that and momentum to but there well year the structural excited where increased micro positioned, and we even We’re much in feel have the a as we’re

So, predominantly. our expansion we where focus that’s

Brian Drab

Yes. Okay.

and the And can so broad, – things, is that your exposure is pure semiconductor today bit that electronics many a Sometimes category the around includes today? thereabouts like little micro quantify X% I you get so

Matthijs Glastra

Yes. magnitude. Probably. Order of Yes.

Brian Drab

Okay. In the ballpark.

helpful. Okay. Thanks a That’s lot.

Matthijs Glastra

even devices, a say also look XG, Then again high let’s all mobile infrastructure, speed is let’s electronics. these in large include micro Right. by, at, say cloud-based if networking, driven chunk you phone

that clear we’re is actually of I just them be why are to similar, which So, want some lumping these drivers together. and

Brian Drab

it. you Right, right. Thank Got much. very

Operator

the Berenberg. question from comes Thank Andrew Instructions] you. Buscaglia [Operator And next with

Andrew Buscaglia

guys. Hey

Matthijs Glastra

how you Hey, doing? are

Andrew Buscaglia

taking for Thanks good. Yes, my question.

provide go each or the you I’m business said they curious, segments? underlying in each commentary you just interesting comment of book-to-bill, each details about that curious across the with demand. into I’m you had which some – So deeper how segment that? can to was and more compare regards around segment, strong

Matthijs Glastra

that it it I but short-term, invasive can subdued little good long-term of surgery and demand very in we if with the minimally feel give procedures right, long-term, shot were start Vision, about Yes. drivers because But a a I Robert, I think business. mean, characterize there you well. growth drivers bit

And that would it’s the think to prime well we segment in that support as see is the I as on will sequencing in vehicle that coming already most side – electric through DNA nicely motion that. – structural I automation, Precision warehouse very in are well a probably a demand and automation-enabling production. electric side, category we whole a laser precise being trend slew vehicle, applications that robotics using in of automation, laser micro-machining, driven production, manufacturing, by additive really like by a listed X.X form monitorization, say and again, battery the of making smaller Photonics fair a driven robotic surgery, demand which near-term we see Motion side, orders factors and features Factory say technology. based is smaller our called as further and

and XG and via well, driven cloud-based networking drilling infrastructure So as and all by even these, and hole and, investments.

have we which kind are we’re high think structural of I wins. multiple level, what expansion, that providing on feel a that, is those we’re markets I of indicator seeing. leading And that design of all top think includes is years those tail a wind So

There’s We past. by, areas is there’s won this share we’ve by basically more increasing that fundamentally fundamentally, inflation. lot in subdued. our big one the we of even that increase did a, two course, our because we three comment on demand on evacuation so there shorter, but we’ve excite patient minimally a there commented procedures procedures backlog, market is that some really will elective customer segment while very business maybe And in strategically things is, smoke these is surgery rebound excitement pretty a platforms big that invasive the will in us said

So market next market come in lead further extended our online by leader going that we’re will winning the few basically designs the there major years.

pumps, that a in capability evacuation, is years, cavity which in three also expertise kind that integration next expand new fluid insufflation, in and Secondly, become the gas insufflation basically enter third two, management. COX and air of which manipulating our insufflation, to pressure which smoke online at least robotic into is towards the entering, for is is piece. basically surgery, And using a which category human using

have share well. low So won entering category new where as just design we’ve into where a major we a and

major see a of will basically you growth that factors rebound. So top market three on

And a next three see tremendous that potential that two, so in growth not business. in years, happen the right we will only potential or

you strategically across little more DNA of place used So better. early more it then, nice meaning that error, and you clinical, say course, and of, those you for we feel see or cancer the that’s cure And for when all few kind for being you diseases. let’s you being can see of that. put COVID-related side, a there, but feel related disease, And long modality me catching, tests term, going and is surveillance in early and kinds a therefore of them sequencing daily catch much other you are on actually drivers course, that things

as think very we is term, under modality and penetrated still is grow So, will long to that well. this a Yes. continue

we’re multiple are, So about. excited think those super I if you at it, look there are applications that

Andrew Buscaglia

Yes, no great. that all sounds

move changed terms little to more things the maybe most that to along are I chain through issues switching most the want sounds where in what it cautious, the to you’re little and Yes. you, side, the what’s the you segment, we customers their guess challenges, like guess, ability like question. implement. your of or they challenges a months to of last bit I called three a So kind that sound before out bit other specifically maybe you in each easy, sound around change went seeing to guess of seeing supply this, call curious, it kind I supply the I’m

Matthijs Glastra

Yes.

will are probably I on to think, enormous which free and online up, more get through the and quarter that. quarters fourth second, that amount first the the materials, the electronic of fourth quarter, you will was, third interconnects chain, back supply. But things as and the and first be quarter Let difficult the coming short quarter I an me are begin well, comment deal chips to actually semiconductor think just into from largest with billion, right? that nature of quarter $XX probably of vendors some $XX rolls do are business the vendors, into better see there’s with and We supply how off, lot fourth we a $XX first transitory a So the perspective. of and I look that. There’s don’t in billion supply basically supply some size. think, billion, new in our are

so supply. getting, see takes us they’re putting which of little online that just, continuity and some It And that these and get they’re place, there’s they’re capacity effect to quarter. a you first issues gap for in of solving the

So, on more I than wouldn’t say we’re necessarily were negative it we before.

in happening there’s The there bigger And first we’re of the trying would’ve facility just and quarter, that, disruptions more We’re quarter. manufacturing the logistics we that able new fourth been some most – then to effect to was a mitigate cognizant carry transitory happening but of also that a fourth in it quarter occurred. completed.

the it’s few to at their little So, work bit time, well teams worked have things a really through happening a of way same the that. but

I margins as to ability into the articulate. expanding back that’s our fourth comments that’s and demand problem. think what start I have see you’ll what good get been think think very We the is as progresses. a So, I And about that the we trying we third feel quarters. Right. the to unfold year we’ve second, And don’t

Our demand there. the far even we outstrips, have out that guidance

feel perspective. so we from pretty good that And

through down these just it’s working hunkering kind So really disruptions. short-term boiling, of on and

us benefit in solve So sharing with of for helping in. partner us they that they us effort, our we us, form of with customers supply but in can problems. is that the And the with partner the cost, get partner that some in big also these

and related, temporary and time not it’s Right. and it’s So structural.

and improvement into that’s continue So of see kind we the takeaway, year. key as to the we expand

Andrew Buscaglia

Yeah.

not improvement, guy really gradually improved, but whole to So like sounds get is a of embedding But… ton maybe it but your things prudent. be

Matthijs Glastra

right I being now. think we’re conservative just

being to significantly prudent disruptions with have additional us elective bake demand. is variance. to rebound would it’s We think I do there’s for the on given than bit more in this yet. haven’t that But to additional forecasted But right to is into little gross conservative That internal forecast something the we obviously not more thing It’s been expense environment. that demonstrate. our margin plans procedures levers, likely that not our not. surgical some a drive And

Robert Buckley

Yes.

was, impact predicted don’t variant on Omicron would’ve the I hospital course, that. example, For think Right. procedures of anybody

kind medical So that it by major was of much were back as larger well, set OEMs and temporarily. all

resolve little of signs again, this but it’s early clear. too itself, to a So will still kind fundamentally all give

prudent bit that’s area. So a that in

Andrew Buscaglia

Yes.

enough. you Okay. Thank Fair guys.

Matthijs Glastra

Thank you.

Robert Buckley

the Thank you. conference like question-and-answer our would turn this you. Matthijs closing And for remarks. Thank I Glastra session. over concludes any to to

Matthijs Glastra

you, Thank operator.

and had record local in all this of programs all for million and backlog to time appreciate is teams the XXXX talked day. in diversified Thank all support, well your strong challenges earnings our wins, and precision employees, sector. committed you that close And we XXXX in interest to all are This with teams positioned bookings. year design robotics and is our exited we and rate close summarize, which quarter year hard surgery, and mitigate medicine, chain. and performing the $X record Industry their achieved closing, with supply automation, ongoing to about see In I well global thank a the at of working again, shortages, the was our extremely So a despite healthy for sector, forward Novanta their joining your hard sales, We to secular fighting teams. for to bookings, strong medical in engagement we’re company, now to advanced adjourned. our like recovery We contribution we highs of are $XXX and We billion economy, industrial the and And profit. of today’s landmark these our sectors trends grateful from disruptions months are very two our customers, despite first just and participation minor for employees full look in are I in the our exposure would some revenue invasive resilience new term to and strength stole are long and global on market much. which minimally progressing you to have continued very the several an excited some and Novanta call. we in growth in X.X. very XXXX so acquisitions, with Novanta who innovation run And manage call. call every also the delays. a shareholders tremendous

Operator

Thank Yes. you.

concluded. mentioned, Thank you conference presentation. attending today’s has for As the now

disconnect your You many lines. now

Novanta (NOVT) 1 Mar 222021 Q4 Earnings call transcript