Novanta Inc. Q4 FY2025 earnings call

• Novanta Inc. delivered on its promise of returning to organic growth and double-digit profit growth in the fourth quarter. Full year 2025 revenue was a record $981 million. - Long-term growth strategy focuses on high-growth end markets like AI-driven robotics and automation, minimally invasive and robotic surgery, etc. - The Novanta Growth System is becoming a deeper way of working across the company. Regionalized manufacturing initiative is underway to solidify preferred supplier status. - 2026 top priorities are driving mid-single-digit organic growth, acquisitions, and completing manufacturing foundation.

In the fourth quarter of 2025, Novanta Inc. posted record revenue with 9% reported growth, 2% organic growth, and 4% sequential growth. Bookings surged 25% year over year and 12% sequentially with a book-to-bill of 1.11. For the full year, revenue reached $981 million, the biggest year ever. Sales to medical end markets represented 53% of total sales in both the fourth quarter and full year, while advanced industrial markets were 47%. Fourth quarter 2025 non-GAAP adjusted gross profit was $118 million or 45.5% adjusted gross margin, compared to $112 million or 47% adjusted gross margin in 2024. Full year 2025 non-GAAP adjusted gross profit was $452 million or 46% adjusted gross margin. Automation Enabling Technologies segment revenue grew 2% year over year in the fourth quarter, and 2% for the full year. Medical Solutions segment revenue grew 16% year over year in the fourth quarter, and 5% for the full year. Precision medicine business saw sequential revenue growth in the fourth quarter, with sales expected to be roughly flat in 2026.

• For full year 2026, GAAP revenue is expected to be approximately $1,030 million to $1,050 million, representing 4% to 6% organic revenue growth. - Adjusted gross margins for full year 2026 are expected to be approximately 47%, a 100 basis point expansion year over year. - Adjusted EBITDA for full year 2026 is expected to be between $245 million and $250 million, representing a low double-digit increase year over year. - First quarter 2026 GAAP revenues are expected to be in the range of $250 million to $255 million, with organic growth in the positive 1% to positive 3% range.

• Regional manufacturing transfers initially caused higher dual running costs and elevated inventory. - Geopolitical risks could impact the business. - Market dynamics and customer destocking could pose challenges for some segments.

Q: Looking at the Automation Enabling Technology segment first and just the sequential increase in bookings of about $30 million, can you go through sort of what businesses and what product categories are driving that increase? And how much of those bookings are longer lead time versus more book and ship within a quarter or two?

A: It is pretty broad-based. All businesses had double-digit bookings growth and positive book-to-bill. In Automation Enabling Technologies, there is momentum in robotics and automation driven by precision robotics, improving semiconductor wafer fab equipment market, and GPU drilling. Precision manufacturing has multiple drivers like customer destocking subsiding, strong design wins, and new product launches in laser beam steering.

Q: So much momentum on the top line, the bookings, the orders, and, you know, backlog. Can you just again maybe this is for Robert, just bridge that momentum and kind of reconcile that with your expectation for, at the midpoint, I think it is about 9% EPS growth, and just maybe rank order the investments again that are happening this year that will kind of result in what might be perceived as a little bit of restrained earnings growth?

A: The EPS growth is impacted by dilution from the fundraise ($0.22 to $0.24 headwind) and the all-employee grant ($0.14 headwind in the first half). Despite these, organic element of EPS growth is bigger.

Q: You said book-to-bill was positive across all of the businesses. Are, just to put a finer point on it, we are talking about the two segments or all four sub-segments or what do we mean by that?

A: All four business units and the two segments had positive book-to-bill. Book-to-bill was positive in every business line.