Sign in

You're signed outSign in or to get full access.

NI

NOVANTA INC (NOVT)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 was solid and in line/slightly above expectations: revenue $233.4M (+1% YoY), GAAP EPS $0.59, and Adjusted EPS $0.74; Adjusted EBITDA was $50.0M, and operating cash flow was $31.7M .
  • Against rising trade/tariff volatility, management reiterated full‑year 2025 Adjusted EBITDA guidance, but shifted to quarterly revenue guidance; Q2 2025 outlook: revenue $230–$240M, Adjusted GM% 45.5–46.5%, Adjusted EBITDA $50–$55M, Adjusted EPS $0.68–$0.78 .
  • Tariffs are a key swing factor: ~$20M annual cost inflation is largely mitigated by sourcing/price actions; the bigger near‑term risk is ~$35M of U.S.-manufactured shipments to China on hold; a $20M annualized cost containment program is being executed to protect FY EBITDA .
  • Portfolio resiliency continues to show: AET segment grew YoY; Advanced Surgery delivered double‑digit growth; Precision Medicine (life sciences) softened on NIH funding cuts and trade uncertainty; orders recovered in March/April; book‑to‑bill 0.88 with bookings +3% YoY .

What Went Well and What Went Wrong

  • What Went Well

    • Execution versus plan with quality cash conversion: “met or exceeded expectations” with $233M revenue, $50M Adjusted EBITDA, and $32M operating cash flow; eighth consecutive quarter with >120% cash conversion to net income .
    • Advanced Surgery momentum and new product ramps on track; management reconfirmed ~$50M incremental 2025 new product revenue, largely medical, with strong customer reception and orders .
    • Proactive tariff mitigation and footprint strategy (in‑region‑for‑region) underway; ~50% of supply chain tariff cost already mitigated via sourcing, surcharges, customs actions; long‑term plan to double “in‑China‑for‑China” output by 2026 and stand up duplicate European lines .

  • What Went Wrong

    • Trade war uncertainty and reciprocal tariffs drove shipment deferrals; ~$35M of U.S.‑made shipments to China for the remainder of 2025 are currently on hold, creating revenue visibility risk .
    • Life sciences softness: Precision Medicine unit declined on NIH funding cuts and industry-wide capital deferrals; segment bookings −10% YoY (Medical Solutions book‑to‑bill 0.85), though partially offset by strong Advanced Surgery .
    • Margin headwinds near‑term from tariff timing; Q2 Adjusted GM% guided to 45.5–46.5% as mitigation actions phase in across the quarter .

Financial Results

Actuals by quarter (oldest → newest):

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$244.4 $238.1 $233.4
GAAP Diluted EPS ($)$0.53 $0.46 $0.59
Adjusted Diluted EPS ($)$0.85 $0.76 $0.74
Adjusted EBITDA ($USD Millions)$57.0 $52.1 $50.0
GAAP Gross Margin (%)44.7% 45.5% 44.7%
Adjusted Gross Margin (%)46.2% 47.0% 46.2%
Operating Income ($USD Millions)$32.6 $26.7 $32.4
Net Income ($USD Millions)$19.2 $16.5 $21.2

Q1 2025 Actual vs S&P Global Consensus:

MetricQ1 2025 ActualQ1 2025 ConsensusSurprise
Revenue ($USD Millions)$233.4 $233.34*In line/slight beat*
Primary EPS ($)$0.74 $0.67*Bold beat at $0.74 vs $0.67*

Values retrieved from S&P Global.*

Segment revenue and margins (Q1 2025):

SegmentRevenue ($USD Millions)GAAP Gross Margin (%)Adjusted Gross Margin (%)
Automation Enabling Technologies$123.167 48.2% 49.3%
Medical Solutions$110.199 41.7% 43.7%
Total$233.366 44.7% 46.2%

Selected KPIs (Q1 2025):

KPIQ1 2025
Book-to-bill0.88
Bookings YoY+3%
Operating Cash Flow$31.7M
Free Cash Flow (Non‑GAAP)$32.9M
Net Debt (Non‑GAAP)$286.3M
Gross leverage / Net leverage~1.9x / ~1.4x

Guidance Changes

MetricPeriodPrevious Guidance (Q4’24 release)Current Guidance (Q1’25)Change
Revenue (GAAP)FY 2025~$1.0B Company moving to quarterly revenue guidance only; FY revenue not reaffirmed Guidance withdrawn/suspended for FY revenue
Adjusted Gross MarginFY 202547.0%–47.5% Not reaffirmed for FY; Q2 guide 45.5%–46.5% FY not reaffirmed; Q2 introduced
Adjusted EBITDAFY 2025$225M–$235M Reiterated FY 2025 Adjusted EBITDA guidance Maintained
Adjusted Diluted EPSFY 2025$3.35–$3.55 Not reaffirmed (visibility limited) Guidance withdrawn/suspended
Revenue (GAAP)Q2 2025N/A$230M–$240M New
Adjusted Gross MarginQ2 2025N/A45.5%–46.5% New
Adjusted EBITDAQ2 2025N/A$50M–$55M New
Adjusted Diluted EPSQ2 2025N/A$0.68–$0.78 New
R&D + SG&AQ2 2025N/A~$68M–$70M New
Interest ExpenseQ2 2025N/A~$6M New
Non‑GAAP Tax RateQ2 2025N/A~22% New
Diluted SharesQ2 2025N/A~36M New

Earnings Call Themes & Trends

TopicQ3 2024 (Q-2)Q4 2024 (Q-1)Q1 2025 (Current)Trend
New product ramps (medical)MIS book‑to‑bill 1.4; sequential momentum On schedule to ramp in 2025 Reconfirms ~$50M 2025 incremental new product revenue; strong reception Strengthening, execution on track
Tariffs / Trade disruptionsNot a major focusFlagged macro/trade uncertainty into H1’25 Significant visibility headwind; reciprocal tariffs halting ~$35M shipments; mitigation/footprint actions Worsened; active mitigation underway
AI/Automation, “physical AI”Robotics & Automation growth; design wins Positioning for 2025 recovery Strong demand in warehouse automation, RFID, humanoids; Kion acquisition (RFID + AI cloud software) Expanding into software/solutions
Life sciences (Precision Medicine)Flat organic; mixed conditions Conservative outlook for H1’25 Weaker on NIH cuts and trade uncertainty Deteriorated near‑term
Semiconductor/EUVGreen shoots for 2025 Recovery optimism EUV ramp on track; next‑gen platforms modestly up Gradual improvement
Cash/Leverage & M&ANet debt up with M&A; strong FCF Strong OCF; target acquisitions in 2025 Kion closed; net leverage ~1.4x; capacity for more deals M&A pipeline active

Management Commentary

  • Strategic posture: “Our diversified and resilient portfolio, strong balance sheet, and an execution-focused culture positions us well… while capitalizing on growth opportunities” .
  • Tariff response: “We expect to implement proactive cost containment actions… targeting ~$20 million in annualized cost savings… to offset trade policy changes… and global trade disruptions” .
  • End‑market mix: Medical 55% of sales; Advanced Surgery strong; industrial niches benefiting from “physical AI” (warehouse automation, humanoids, RFID) .
  • Supply chain/footprint: “In‑China‑for‑China” already >$50M and expected to double in 2026; duplicate lines in Europe to bypass reciprocal tariffs .
  • Capital allocation: Reiterated FY25 Adjusted EBITDA; active M&A pipeline; repurchased ~$6M stock in Q1 with ROI discipline .

Selected quotes:

  • “We met sales and profit expectations… delivering strong cash flow performance… while effectively navigating a challenging environment.” — CEO, Matthijs Glastra .
  • “Tariffs… have increased our manufacturing cost by approximately $20 million annually. We expect to mitigate this impact… and maintain our full year 2025 EBITDA guidance.” — CEO/CFO .
  • “As of today, [Q2] revenue is currently forecasted at the top end of this range.” — CFO, Robert Buckley .

Q&A Highlights

  • Kion acquisition: ~$66M upfront cash, $22M earn‑out; expected slightly accretive to EPS in year 1; strategic for RFID hardware + AI cloud software; larger revenue impact likely in 2026 .
  • Cost actions: ~$20M annualized savings to secure FY EBITDA amid shipment deferrals; mix of temporary deferrals and structural regionalization; executing by end of Q2 .
  • Revenue visibility: ~$35M of U.S.-made product shipments to China deferred due to >100% tariffs; mitigating via in‑region manufacturing and European lines .
  • Q2 trajectory: Trending to high end ($240M) but range widened given fast‑moving reciprocal tariff risk, including EU .
  • NIH exposure: Precision Medicine weakness largely tied to NIH and broader life sciences funding hesitation; difficult to precisely size, but main driver of bookings decline in segment .

Estimates Context

  • Q1 2025 vs S&P Global consensus: revenue $233.4M vs $233.34M* (in line), Primary EPS $0.74 vs $0.67* (beat). Number of estimates: 3 for both revenue and EPS*. Values retrieved from S&P Global.
  • Street for next quarter (as context): Company guided Q2 2025 revenue $230–$240M and Adjusted EPS $0.68–$0.78 ; subsequent actuals (reported later in 2025) came in above Q2 consensus on revenue and EPS, signaling operational resilience amid tariff mitigation* (revenue actual $241.05M* vs $237.97M*; EPS $0.76* vs $0.73*) — Values retrieved from S&P Global.*

Key Takeaways for Investors

  • EBITDA durability: Management reaffirmed FY25 Adjusted EBITDA ($225–$235M previously) despite tariff shocks, supported by tangible cost actions and pricing/sourcing levers .
  • Tariff path is the primary stock driver near‑term: Watch pace of regionalization and timing of resumed China shipments; ~$35M deferred revenue is a key swing factor .
  • Mix favoring medical and “physical AI”: Advanced Surgery momentum and automation/robotics/semiconductor design‑win pipeline support medium‑term growth and margin stability .
  • Cash/FCF visibility remains strong: $31.7M OCF and $32.9M FCF in Q1 underpin balance sheet and M&A capacity; net leverage ~1.4x post‑Q1 .
  • Guidance posture more tactical: Withdrew FY revenue/EPS guidance given volatility; shifted to quarterly revenue guidance while maintaining FY EBITDA, prioritizing profit and cash .
  • M&A optionality with strategic fit: Kion expands Novanta into integrated RFID + AI cloud software; more transactions possible with leverage <2x .
  • Trading lens: Near‑term headline risk on tariff developments vs. continued execution on cost saves and new product ramps; bias to accumulate on volatility if EBITDA track remains intact .

Values retrieved from S&P Global.*