0001193125-26-217064
SEC filingRevenue grew 10.4% to $257.7M, driven by Medical Solutions and the Keonn acquisition, but operating income fell 15.1% on higher SG&A and restructuring costs, pressuring EPS.
Novanta reported revenue of $257.7 million for the first quarter ended April 3, 2026, up 10.4% from $233.4 million in the same period last year. Growth was driven by a 6.6% increase in the Automation Enabling Technologies segment and a 14.8% increase in Medical Solutions, which benefited from the Keonn acquisition ($9.0 million contribution) and higher sales of advanced surgery products. Foreign exchange also added 3.5% (approximately $8.2 million) to revenue.
Gross profit rose 8.8% to $113.6 million, but gross margin contracted 60 basis points to 44.1%, due to higher material costs, tariffs, and unfavorable product mix. Operating income declined 15.1% to $27.5 million, as SG&A expenses increased $8.8 million (19.3%) from higher employee compensation, system implementation costs, and the prior-year acquisition. Restructuring, acquisition, and related costs swung from a $2.5 million gain (from a 2020 restructuring facility sale) to a $2.6 million expense. Net income was essentially flat at $21.1 million versus $21.2 million, reflecting the lower operating income offset by lower interest expense ($1.8 million vs. $5.6 million) and foreign exchange gains. Diluted EPS fell to $0.51 from $0.59, impacted by a higher share count (41.2 million vs. 36.1 million) due to the tangible equity unit issuance.
As of April 3, 2026, total assets were $1.80 billion, slightly down from $1.81 billion at year-end 2025. Cash and cash equivalents increased to $388.8 million from $380.9 million, while total debt decreased to $241.4 million from $250.8 million, reflecting $8.8 million in scheduled repayments on term loans and amortizing notes. The company had $850 million available under its revolving credit facility, with no outstanding borrowings. Working capital (current assets minus current liabilities) improved to $566.0 million from $570.2 million. Inventories rose 2.6% to $193.1 million, while accounts receivable declined 5.9% to $173.9 million, aiding cash flow.
Cash provided by operating activities increased to $51.6 million from $31.7 million, driven by net income of $21.1 million, non-cash charges (depreciation and amortization $14.2 million, share-based compensation $9.8 million, deferred taxes $2.9 million), and a $13.3 million working capital benefit from accounts payable and accrued liabilities. Free cash flow (operating cash flow less capex) was approximately $47.5 million, though not explicitly stated in the filing. Investing activities used $3.8 million, primarily for capex ($4.1 million) partially offset by property sales proceeds. Financing activities used $40.1 million, including $18.6 million for share repurchases, $8.8 million for debt repayments, $7.0 million for tax withholdings on stock awards, and $4.4 million for contingent consideration payments.
Management attributed revenue growth to strong demand in robotics and automation (within Automation Enabling Technologies) and the Keonn acquisition. However, gross margins were pressured by tariffs, higher material costs, and regionalization of manufacturing. The company highlighted the impact of evolving U.S. trade policies and the Middle East conflict on supply chains and input costs. Novanta continues to execute its strategy of increasing medical sales (currently 53% of revenue), expanding into high-growth advanced industrial applications, and pursuing complementary acquisitions. Capital expenditures are expected to be $30–$40 million in 2026, including a capacity expansion in China. The 2025 restructuring program is expected to total approximately $25 million, with substantially completion by end of 2026. No specific revenue or earnings guidance was provided beyond these qualitative and quantitative targets.
Segments: Automation Enabling Technologies generated $131.2 million in revenue (up 6.6%) and segment operating income of $31.1 million (23.7% margin). Medical Solutions revenue was $126.5 million (up 14.8%) with segment operating income of $16.7 million (13.2% margin). Unallocated corporate costs increased to $20.3 million from $13.1 million, driven by system implementation and compensation.
Geographic Revenue: U.S. revenue was $122.0 million (47.3% of total), Germany $36.3 million, Rest of Europe $42.2 million, China $23.5 million, and Rest of Asia-Pacific $27.4 million.
Tangible Equity Units: During the quarter, $7.5 million of principal payments were made on the amortizing notes. The purchase contracts are mandatorily convertible into 4.7 million to 5.9 million shares in November 2028.
Stock-Based Compensation: Total SBC was $9.8 million, up from $7.1 million, reflecting higher equity grants.
Goodwill and Intangibles: Goodwill decreased to $643.4 million due to foreign exchange effects. Amortization expense was $9.5 million, including $3.8 million in cost of revenue.
Derivatives: The company uses foreign currency forward contracts with a notional amount of $138.1 million to manage FX exposure. Net gain of $2.3 million was recognized in earnings.
Income Taxes: The effective tax rate was 19.9%, close to the prior year's 19.7%, with the slight increase due to a decrease in the Canadian valuation allowance and R&D credits.