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NOVANTA INC (NOVT)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue was $241.0M (+2.2% YoY), Adjusted EPS $0.76, and Adjusted EBITDA $52.2M; bookings grew 10% YoY and book-to-bill was 1.02, signaling a strengthening outlook .
  • Results modestly beat Wall Street consensus: revenue $241.0M vs $238.0M consensus and Adjusted EPS $0.76 vs $0.73 consensus; Adjusted EBITDA $52.2M vs ~$51.5M consensus (small beat) *.
  • Full-year 2025 guidance was tightened/lowered on revenue and EPS (GAAP revenue $970–$985M; Adjusted EPS $3.22–$3.36), while Adjusted EBITDA was maintained at $225–$230M; Q3 2025 guide calls for revenue $244–$247M, Adjusted EPS $0.78–$0.85 .
  • Key catalysts: double-digit growth in Advanced Surgery (+17% YoY) and Robotics & Automation (+16% YoY), >50% new product revenue growth, and a $50M warehouse robotics contract, offset by tariff-related headwinds and deferred China shipments ($35M at risk) .

What Went Well and What Went Wrong

What Went Well

  • “Novanta delivered solid second quarter financial results, meeting or exceeding expectations in revenue, margins, and profitability,” with bookings +10% YoY and book-to-bill 1.02 .
  • Advanced Surgery revenue grew 17% YoY; Robotics & Automation up nearly 16% YoY; adjusted gross margin held at ~46% and Adjusted EBITDA margin ~22% .
  • Management reiterated confidence in $50M of new product sales in 2025 and announced a $50M contract with a leading warehouse robotics company, highlighting physical AI opportunities .

What Went Wrong

  • Organic revenue declined 2.1% YoY as acquisitions and FX masked underlying softness; GAAP operating margin compressed to 6.2% (vs 10.9% in Q2’24) on restructuring, acquisition, ERP, and FX costs .
  • Operating cash flow fell to $15.1M (vs $41.1M) due to tax timing and higher inventory purchases to mitigate trade risks and acquisitions .
  • China-related tariff uncertainty deferred ~$35M of U.S.-manufactured shipments; tariff cost impact year-to-date approximated $4M in cost of sales, with mitigation and regional manufacturing in progress .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD)$238,060,000 $233,366,000 $241,049,000
GAAP Diluted EPS ($)$0.46 $0.59 $0.12
Adjusted Diluted EPS ($)$0.76 $0.74 $0.76
Operating Income ($USD)$26,707,000 $32,421,000 $14,911,000
Adjusted Operating Income ($USD)$43,327,000 $39,081,000 $40,656,000
Adjusted EBITDA ($USD)$52,081,000 $49,978,000 $52,163,000
GAAP Gross Profit Margin (%)45.5% 44.7% 44.3%
Adjusted EBITDA Margin (%)21.9% 21.4% 21.6%
Weighted Avg Diluted Shares36,148,000 36,130,000 36,076,000

Segment revenue breakdown:

Segment Revenue ($USD)Q4 2024Q1 2025Q2 2025
Automation Enabling Technologies$127,798,000 $123,167,000 $121,672,000
Medical Solutions$110,262,000 $110,199,000 $119,377,000
Total$238,060,000 $233,366,000 $241,049,000

Key KPIs:

KPIQ4 2024Q1 2025Q2 2025
Book-to-bill0.96 0.88 1.02
Bookings YoY growth+54% +3% +10%
Bookings sequential growth+5% Recovered Mar/Apr +20%
New product revenue growthStrong double-digit Strong double-digit >50% YoY
Vitality index (% of sales)Mid-teens ~21% (company-wide) 21%
Advanced Surgery revenue growth YoYDouble-digit High single-digit 17%
Robotics & Automation revenue growth YoYRecovery Strength ~16%
Operating Cash Flow ($USD)$61,562,000 $31,684,000 $15,072,000
Free Cash Flow ($USD)$59,486,000 $32,937,000 $11,684,000
Net Debt ($USD)$305,170,000 $286,314,000 $355,166,000
China Sales YoY——+15%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
GAAP Revenue ($USD)FY 2025~$1.0B $970M–$985M Lowered
Adjusted Gross Margin (%)FY 202547.0%–47.5% ~46% Lowered
Adjusted EBITDA ($USD)FY 2025$225M–$235M $225M–$230M Tightened/Maintained
Adjusted Diluted EPS ($)FY 2025$3.35–$3.55 $3.22–$3.36 Lowered
GAAP Revenue ($USD)Q3 2025—$244M–$247M New
Adjusted EBITDA ($USD)Q3 2025—$57M–$60M New
Adjusted Diluted EPS ($)Q3 2025—$0.78–$0.85 New
R&D + SG&A ($USD)Q3 2025—$68M–$69M New
Non-GAAP Tax Rate (%)Q3 2025—~22% New
Interest Expense ($USD)Q3 2025—~$6M New
Stock Compensation ($USD)Q3 2025—~$11M New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
AI/physical roboticsLaunches in servo drives, sensors; early orders (Q4) ; strong bookings (Q1) $50M warehouse robotics contract; doubling sales in 2026 and again in 2027; humanoid collaborations (10+ programs) Accelerating demand and design wins
Advanced SurgeryNew insufflators/pumps ramping (Q4) ; reconfirm $50M NPI (Q1) +17% YoY growth; robust market demand; regulatory tailwinds (smoke evacuation) Strong secular growth
Supply chain/tariffsTariff playbook in place (Q4) ; $20M annualized cost savings program (Q1) ~$4M tariff cost YTD; regional manufacturing strategy; $35M China shipments deferred, mitigation underway Headwind near term; mitigation progressing
Regional trends (China)In-China-for-China strategy (Q1) Total China sales +15% YoY; Chinese customers cautious on U.S. factory exports; design wins accelerating Mixed: local growth offsetting export pause
Precision Medicine/Life SciencesWeakness tied to NIH cuts; DNA sequencing issues; mix impacts margins (Q4) ; continued volatility (Q1) Precision Medicine -13% YoY, +10% sequential; transition to RFID/machine vision; new partnership Stabilizing sequentially; tech shift
Semiconductor (DUV/EUV)First production order; 2H ramp (Q4) Early units shipping with sole-source content; ramp with customer pace Early upcycle; gradual ramp
R&D/NGS executionNGS embedded; cash flow focus (Q4) Kaizen improving capacity; ERP design costs; Opex discipline Ongoing productivity gains
M&AActive pipeline; leverage discipline (Q4) Closed Kion (RFID + AI software); credit facility expanded; more acquisitions targeted by YE More actionable pipeline

Management Commentary

  • CEO: “We achieved 10% growth in bookings…book-to-bill ratio of 1.02…mid-teens revenue growth in Advanced Surgery and Robotics & Automation…on track to achieving our target of $50 million in new product sales this year” .
  • CEO on physical AI: “Significant contract…$50,000,000 revenue opportunity over the next three years…these robots need a sense of touch and fast and safe movement…Novanta has unique capabilities” .
  • CFO: “Adjusted EBITDA was $52,000,000…non-GAAP adjusted EPS was $0.76…net debt was $355,000,000 (1.7x)…book-to-bill 1.02; bookings up 10% YoY and 20% sequential” .
  • CFO on tariffs: “Approximately a $4,000,000 net impact from tariffs year to date…cost mitigation strategies to further reduce the impact in the second half” .

Q&A Highlights

  • China/Tariffs: ~$35M of U.S.-factory shipments to China deferred; mitigation via regional manufacturing and alternate locations; potential recovery starting in Q4 if plans execute .
  • Warehouse robotics use case: Novanta’s sensing + servo drives enable accurate “touch” and safe motion at the edge; $50M contract could expand as deployment scales across physical AI applications .
  • Capacity scaling: Kaizen reduced lead times by 3x and increased capacity 4–5x; plans to automate lines as volumes ramp .
  • Semiconductor: Sole-source content in advanced lithography; shipping initial units; ramp depends on customer timing but multi-year content increase expected .
  • 2026 drivers: Continued mid-teens growth in Advanced Surgery; ~10% growth in Robotics & Automation; stabilization in Precision Manufacturing and Precision Medicine from tech shifts .

Estimates Context

Results vs S&P Global consensus:

MetricQ4 2024 ConsensusQ4 2024 ActualQ1 2025 ConsensusQ1 2025 ActualQ2 2025 ConsensusQ2 2025 Actual
Revenue ($USD)$240,285,330*$238,060,000 $233,338,670*$233,366,000 $237,973,330*$241,049,000
Primary EPS ($)$0.71333*$0.76 $0.67333*$0.74 $0.73333*$0.76
EBITDA ($USD)$50,373,500*$52,081,000 $50,208,500*$49,978,000 $51,486,500*$52,163,000

Values retrieved from S&P Global*.

  • Q2 2025 was a modest beat on revenue and Adjusted EPS; Adjusted EBITDA slightly exceeded consensus *.
  • Prior two quarters generally tracked consensus closely, with beats on Adjusted EPS in Q4 2024 and Q1 2025 *.

Key Takeaways for Investors

  • Sequential growth re-accelerating: Q3 guide implies 1–2% sequential revenue growth and higher profitability (Adjusted EBITDA $57–$60M; EPS $0.78–$0.85) .
  • Core growth engines intact: Advanced Surgery (+17% YoY) and Robotics & Automation (~+16% YoY) underpin mid-teens momentum; >50% new product revenue growth and 21% vitality index support sustainability .
  • Physical AI optionality: $50M warehouse robotics contract and humanoid collaborations expand TAM, with expected doubling of robotics sales in 2026 and again in 2027 (from a small base) .
  • Tariff risk manageable but not trivial: ~$4M cost YTD and ~$35M deferred China shipments; mitigation via regional manufacturing and cost actions progressing, with potential recovery starting Q4 .
  • Guidance prudence: FY25 revenue/EPS lowered amid trade/NIH volatility, while EBITDA maintained—focus on margin resilience via NGS, cost containment, and ERP planning .
  • Balance sheet flexibility: Gross leverage 2.2x; expanded credit facility ($1B plus $350M accordion) supports continued M&A (Kion closed, more targeted by YE) .
  • Watch catalysts: Q3 execution vs guide, tariff mitigation pace, China order behavior, advanced lithography ramp, and additional M&A announcements .