Novanta Q2 Earnings Call Highlights

Key Points

• Novanta delivered strong Q2 performance, with 9% organic sales growth, a 16% increase in adjusted EBITDA, 17% adjusted EPS growth and adjusted gross margin expansion to 47%. Operating cash flow rose to $65 million, bringing year-to-date cash flow to $117 million.
• Automation Enabling Technologies led segment growth with 12% higher revenue, 18% bookings growth and a 1.1 book-to-bill ratio. Generative-AI-related applications accounted for about 17% of revenue and grew roughly 25%, while the company received its first major servo-drive orders for humanoid-robot development.
• Novanta raised its 2026 outlook after closing the Riverpoint Medical acquisition, which is expected to roughly double recurring medical consumables revenue to $300 million and increase recurring consumables to about 25% of sales. The company now expects $1.13 billion–$1.14 billion in revenue, $273 million–$278 million in adjusted EBITDA and adjusted EPS of $3.68–$3.74.

Novanta NASDAQ: NOVT reported second-quarter results marked by 9% organic sales growth, expanding margins and higher operating cash flow, while raising its full-year outlook following the late-July closing of its Riverpoint Medical acquisition.

Chair and Chief Executive Officer Matthijs Glastra said reported revenue grew 10% year over year during the quarter, while adjusted EBITDA increased 16% and adjusted earnings per share rose 17%. Adjusted gross margin reached 47%, up 100 basis points from a year earlier. Glastra also said year-to-date operating cash flow exceeded the company’s operating cash flow for all of 2025.

“All of our business units grew organically in the quarter,” Glastra said, adding that the company’s new-product revenue rose more than 50% in the quarter and more than 60% through the first half. Novanta’s vitality index, which measures sales from newer products, rose to about 29% of sales from 21% a year earlier.

Segment growth led by automation technologies

The Automation Enabling Technologies segment posted 12% year-over-year revenue growth, exceeding management’s expectations. Bookings increased 18%, and the segment’s book-to-bill ratio was 1.1.

Co-Chief Operating Officer Chuck Ravetto said precision manufacturing revenue rose 9%, supported by demand for applications including laser additive manufacturing, probe-card production for AI graphics-processing chips, advanced packaging and lithography. Robotics and automation revenue increased 13.5%, aided by demand for advanced robotics and semiconductor applications tied to artificial-intelligence investment.

Ravetto said the company received its first significant orders for servo drives intended to support hundreds of humanoid robots in customer training and development facilities. He described the orders as a move beyond prototyping, while noting that widespread commercial deployment of humanoid systems remains a longer-term development process.

Applications connected to generative AI technologies and infrastructure represented about 17% of Novanta’s second-quarter revenue and grew approximately 25% from a year earlier, according to Ravetto. The company expects that growth rate to continue through the second half.

Automation Enabling Technologies adjusted gross margin was about 53%, up 450 basis points year over year. Ravetto attributed the improvement to productivity efforts, pricing and surcharge actions, duty drawback and credits, and a stronger mix of higher-margin products, despite factory redundancy, logistics, supply-chain inflation and tariff-related costs.

Medical business expands with Riverpoint

Medical Solutions revenue increased 8.6% year over year. The advanced surgery business grew 12%, driven by patient procedural growth and sales of second-generation insufflators. John Lesica, co-chief operating officer for Medical Solutions, said the business remains positioned for a strong full year, with bookings up more than 8% year to date and new-product revenue up more than 70% in the second quarter.

Precision medicine sales increased 5%, supported by momentum from the Keonn acquisition and growth among core medical customers. Lesica said customer demand outside life sciences has begun to improve, though the company does not expect the precision medicine business to return to sustained growth in 2026. Novanta expects life-sciences exposure to represent less than 10% of company revenue this year and sees a path to growth in that business during 2027.

Medical Solutions adjusted gross margin was approximately 41%, down 290 basis points from the prior year. Lesica said the decline reflected a higher mix of lower-margin precision medicine products and temporary costs associated with site rationalization. He said medical gross margin is expected to expand materially in the third quarter.

The company closed its acquisition of Riverpoint Medical at the end of July. Glastra called the transaction Novanta’s largest acquisition to date and said it accelerates the company’s shift toward minimally invasive surgery markets. Riverpoint adds fiber-based sutures and implantables used in sports medicine, cardiovascular and orthopedic applications.

Novanta said Riverpoint roughly doubles its recurring medical consumables business to approximately $300 million and increases recurring consumables to roughly 25% of annualized revenue from about 15%. The acquisition also raises medical end-market exposure to about 60% of revenue. Management said Riverpoint is expected to be immediately accretive to revenue growth, gross margin, EBITDA margin and earnings per share.

Cash flow, manufacturing actions and outlook

CFO Robert Buckley said second-quarter adjusted gross profit was $125 million, compared with $111 million a year earlier. Adjusted EBITDA was $60.7 million, producing an adjusted EBITDA margin of nearly 23%. Adjusted diluted EPS was $0.89.

Operating cash flow totaled $65 million in the quarter, versus $15 million in the prior-year period, bringing year-to-date operating cash flow to $117 million. At quarter-end, Novanta had $719 million of cash and gross debt of $239 million.

The company completed two factory closures during the second quarter and announced plans to close two additional manufacturing facilities by the end of the first quarter of 2027. Buckley said Novanta is also doubling capacity at its China factory for air-bearing spindles, a business with committed demand for the next two years and customer-supported funding for part of the expansion.

For full-year 2026, Novanta raised its outlook and expects:

• GAAP revenue of approximately $1.13 billion to $1.14 billion, representing reported growth of more than 15% and organic growth of up to 7%.
• Adjusted EBITDA of $273 million to $278 million, up 24% to 26% year over year.
• Adjusted diluted EPS of $3.68 to $3.74, up 12% to 14% year over year.

For the third quarter, the company expects revenue of $300 million to $304 million, including Riverpoint Medical, with reported growth of 21% to 23% and organic growth of 7% to 9%. Novanta forecast third-quarter adjusted EBITDA of $74 million to $77 million and adjusted EPS of $0.95 to $1.00.

Buckley said Riverpoint is expected to contribute about $25 million in adjusted EBITDA during the second half, based on its end-of-July closing date. He also said the company expects adjusted gross margin of approximately 48% in the third quarter and around 47% for the full 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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