Novanta Q1 Earnings Call Highlights

Key Points

• Novanta beat expectations in Q1 2026, with revenue up 10% reported and 3% organically, bookings surging 37%, and adjusted EBITDA rising 14%. Management said momentum is improving and expects organic growth to reach the high single digits in Q2.
• Growth was broad-based across core businesses and AI-linked applications. Automation Enabling Technology revenue grew 7% and Medical Solutions revenue rose 15%, while AI data center-related applications accounted for about 15% of revenue and grew roughly 20% year over year.
• The company raised full-year revenue guidance despite margin pressure from tariffs and freight costs. Novanta now expects 2026 revenue of $1.04 billion to $1.055 billion, while reaffirming EBITDA and EPS guidance as it works to recover margins through pricing actions and facility closures.

Novanta NASDAQ: NOVT reported stronger-than-expected first-quarter 2026 results, with management citing broad-based bookings growth, accelerating demand in automation and medical markets, and rising exposure to artificial intelligence-related infrastructure applications.

Chair and Chief Executive Officer Matthijs Glastra said revenue increased 10% on a reported basis and 3% organically in the quarter, marking “a step up versus the prior quarter.” Bookings rose 37% year over year, and the company posted a book-to-bill ratio of 1.10. Glastra said every business delivered double-digit bookings growth and year-over-year revenue growth.

Adjusted EBITDA increased 14%, while adjusted EBITDA margin expanded 70 basis points year over year. Adjusted diluted earnings per share rose 9%. Operating cash flow increased 63% year over year, and cash flow conversion to net income was above 200% in the quarter.

“Our momentum is building,” Glastra said. He added that Novanta expects organic growth to reach the high single digits in the second quarter and sees continued acceleration in the back half of the year, “absent a deeper shift in the macro and geopolitical environment.”

Bookings and New Products Support Growth Outlook

Chief Financial Officer Robert Buckley said bookings strength supports a growing backlog and a positive outlook for 2026. New product sales increased more than 50% year over year, lifting the company’s vitality index to 27% of sales. Company-wide design wins rose nearly 30% from the prior year.

Medical end markets accounted for 53% of total company sales in the first quarter, while advanced industrial markets represented 47%. Medical consumable sales remained nearly 15% of total company sales, with Buckley pointing to strength from new product launches in Advanced Surgery.

Glastra said medical consumables have become “an important growth engine and capability” for Novanta, noting that the franchise represents 15% of revenue and is on a sustained double-digit growth trajectory.

Automation and Medical Segments Both Grow

Novanta’s Automation Enabling Technology segment grew 7% year over year in the quarter, with bookings up 35% and a book-to-bill ratio of 1.15. Within the segment, Precision Manufacturing revenue increased 6%, while Robotics & Automation revenue rose 7%. Buckley said Robotics & Automation bookings were up 50%, supported by demand for advanced robotic applications and stronger semiconductor-related applications benefiting from AI investment.

The Medical Solutions segment posted 15% year-over-year revenue growth, with bookings up 40% and a book-to-bill ratio of 1.04. Advanced Surgery revenue increased 11%, driven by patient procedure growth and new product launches in second-generation insufflators. Precision Medicine sales grew 18%, mainly due to the Keonn acquisition, while the core business grew 2% from products sold into hospital equipment markets.

Glastra said Novanta’s Advanced Surgery business remains on track for strong full-year growth, supported by insufflation, robotic surgery, arthroscopy, customer product ramps and medical consumables.

AI Data Center Exposure Reaches 15% of Revenue

Management highlighted Novanta’s growing exposure to GenAI data center-related applications, including DUV and EUV lithography, advanced packaging, probe card production, precision robotics, GPU drilling, metrology for advanced semiconductor wafer nodes and other AI data center applications.

Glastra said these applications represented about 15% of total company revenue in the first quarter and grew roughly 20% year over year. He said the company expects that growth rate to increase as the year progresses.

During the question-and-answer session, Glastra said the AI-related exposure is spread across Precision Manufacturing and Robotics & Automation and is not limited to standard wafer fab equipment. He described it as a set of niche applications tied to GenAI infrastructure investment, including advanced manufacturing steps used in GPU production and testing.

Analysts also asked about Novanta joining the NVIDIA Holoscan AI Systems Inspection Lab. Glastra said Novanta is, to the company’s knowledge, the only servo drive manufacturer selected, adding that the certification process gives credibility to its drives within NVIDIA’s ecosystem. He said related applications remain early, with more meaningful impact expected in 2027, though Novanta is seeing more prototype orders.

Margins Pressured by Tariffs and Freight Costs

First-quarter non-GAAP adjusted gross profit was $118 million, or 45.6% of sales, compared with $108 million, or 46% of sales, a year earlier. Buckley said adjusted gross margin declined 60 basis points year over year due to price-cost timing impacts tied to higher freight, tariff and material costs.

He said geopolitical dynamics shifted rapidly in the first quarter, outpacing the company’s ability to surcharge customers and reprice orders. During the Q&A, Buckley said tariff changes affected immediate shipments and that freight vendors adjusted surcharges faster than Novanta did.

Buckley said Novanta has implemented updated surcharges and product price increases, with the company working to reprice existing backlog. He said management expects tariffs to be “completely neutered” again in the second quarter and expects a positive price-cost ratio in the third quarter, helping gross margins improve in the second half.

Novanta also expects benefits from its regional manufacturing strategy. Glastra said two facility closures are on track to be completed in the second quarter, supporting a gross margin step-up in the second half.

Guidance Raised for Revenue, Earnings Outlook Reaffirmed

For full-year 2026, Novanta now expects GAAP revenue of approximately $1.04 billion to $1.055 billion, an increase from its previous range. The outlook represents reported growth of more than 7% and organic growth of up to 6%.

The company reaffirmed its full-year adjusted EBITDA guidance of $245 million to $250 million, representing 11% to 13% growth, and adjusted diluted EPS of $3.50 to $3.65, representing 6% to 11% growth.

For the second quarter, Novanta expects GAAP revenue of $259 million to $264 million, representing organic growth of 6% to 8% and reported growth of up to 10%. Adjusted EBITDA is expected to be $58 million to $62 million, with adjusted diluted EPS of $0.81 to $0.86.

Buckley said Novanta is maintaining discipline by raising the top end and narrowing the revenue range while waiting for another quarter of performance before considering a more bullish overall financial outlook.

Management also reiterated that acquisitions remain the company’s top capital allocation priority. Glastra said Novanta is focused on expanding its mix and technology leadership in medical technologies, medical consumables and embedded software, and expects to deploy “meaningful capital” this year.

About Novanta NASDAQ: NOVT

Novanta, Inc NASDAQ: NOVT is a global technology company that designs and manufactures precision components, subsystems and software used in advanced photonics and motion control applications. The company serves customers in the medical device and advanced industrial markets, supplying critical technologies for diagnostics and therapeutic systems, semiconductor and electronics manufacturing, and scientific instrumentation. Novanta's product portfolio includes laser control modules, optics, beam delivery systems, high-precision motors, actuators, stages, and fluidics solutions designed to meet stringent accuracy and reliability requirements.

Novanta's Photonics segment delivers laser and energy delivery components that enable minimally invasive surgical procedures and diagnostic imaging.

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