Novanta Q4 Earnings Call Highlights

Key Points

• Novanta reported record Q4 results with 9% reported growth, 2% organic and 4% sequential growth, bookings up 25% YoY (a 1.11 book-to-bill) and full-year revenue of $981 million.
• New-product momentum accelerated—new product revenue rose more than 60% for the year and >80% in Q4, lifting the vitality index to 24% and supporting double-digit design-win gains.
• Prioritizing customer deliveries over manufacturing transfers pressured margins and cash (management said transfers cost >100 bps of gross margin and Q4 operating cash flow was $9 million), but 2026 guidance targets 4–6% organic growth, ~47% gross margin, $145–185M operating cash flow and nearly $1.5 billion acquisition capacity.

Novanta NASDAQ: NOVT executives said the company returned to organic growth and delivered double-digit profit growth in the fourth quarter of 2025, supported by a sharp increase in bookings and accelerating contributions from new products. On the company’s earnings call, management also outlined a 2026 outlook calling for mid-single-digit organic revenue growth, margin expansion as manufacturing transfers are completed, and a rebound in cash generation.

Fourth-quarter performance: record revenue and broad-based bookings strength

Chair and CEO Matthijs Glastra said Novanta posted record fourth-quarter revenue with 9% reported growth, 2% organic growth, and 4% sequential growth. Bookings increased 25% year-over-year and 12% sequentially, producing a 1.11 book-to-bill. Glastra emphasized that every business delivered double-digit bookings growth and a positive book-to-bill in the same quarter for the first time since 2022.

For the full year, Novanta reported $981 million in revenue, which management called the company’s biggest year ever. Full-year bookings grew 14%, with a 1.01 book-to-bill.

New product momentum and mix trends

Management pointed to significant growth in new products. Glastra said new product revenue grew more than 60% for the full year, including more than 80% growth in the fourth quarter, which he said exceeded expectations and reflected the company’s investments in commercial excellence and innovation.

CFO Robert Buckley added that fourth-quarter new product sales growth lifted the company’s vitality index to 24% of sales, while the full-year vitality index was 22%. Buckley also said full-year company-wide design wins were up more than 20% versus the prior year.

By end market, Buckley said medical represented 53% of total sales in both the quarter and the full year, with advanced industrial at 47%. He also noted medical consumables were 15% of full-year sales and grew at a “strong double-digit rate,” which he attributed to a high attachment rate for next-generation insufflator launches.

Margins and cash flow impacted by manufacturing transfer timing

While management highlighted strong revenue and earnings growth, Glastra said fourth-quarter margins and cash flow came in below expectations set on the third-quarter call due to a deliberate operational choice. As the quarter progressed, Novanta prioritized customer deliveries over the pace of regional manufacturing transfers, which led to temporary dual running costs and elevated inventory.

Buckley quantified the impact, saying the decision drove more than a 100 basis point hit to gross margin and increased net working capital by 400 basis points as a percent of sales. Fourth-quarter non-GAAP adjusted gross profit was $118 million with a 45.5% adjusted gross margin, down from 47% a year earlier. Adjusted EBITDA was $61 million, up 17% year-over-year, with a 23.5% margin. Non-GAAP adjusted EPS was $0.91, up 20% year-over-year, despite an increase in diluted shares following a November equity raise.

Cash flow was the most notable pressure point. Operating cash flow was $9 million in the fourth quarter, down from $62 million a year earlier, and $64 million for the full year. Buckley said cash flow was impacted by the manufacturing dynamics, inventory builds, and temporary accounts receivable timing items, “most of which have already been collected in January.” He said the company expects a significant inventory drawdown and cash rebound as site moves complete in the first half of the year.

Balance sheet, capital allocation, and acquisition capacity

Novanta ended the quarter with $381 million in cash and $260 million of gross debt, resulting in net cash of $121 million and a net leverage ratio of -0.5x, which Buckley said was the first net cash position for the company in more than a decade. He also discussed the November fundraise, noting proceeds were used to pay down the revolving credit facility, partially offset by debt added through notes issued in the offering.

Both executives emphasized acquisitions as a major pillar of the strategy. Glastra said the company raised more than $600 million in November due to confidence in its acquisition pipeline and now has nearly $1.5 billion in total acquisition capacity, with expectations to deploy “meaningful capital” in 2026. In the quarter, the company repurchased $19 million of stock and nearly $40 million for the full year, with Buckley saying repurchases will remain opportunistic alongside M&A priorities.

In response to questions, management described acquisition focus areas including medical technologies, medical consumables, bioprocessing, and embedded software. Buckley reiterated financial discipline, including return on invested capital targets that exceed the company’s cost of capital within defined timeframes and a preference for high cash conversion businesses.

2026 outlook: accelerating organic growth and margin recovery

For 2026, Buckley guided to GAAP revenue of $1.03 billion to $1.05 billion, representing 4% to 6% organic growth. He said the company expects sequentially improving organic growth through the year, with +1% to +3% in the first quarter and +5% to +7% in the second quarter, similar to the back half, driven by bookings strength and backlog visibility.

Novanta expects full-year adjusted gross margin of about 47%, which would be roughly 100 basis points of expansion, tied to completing regional manufacturing moves by the end of the second quarter. Adjusted EBITDA is expected to be $245 million to $250 million, implying a roughly 24% margin. The company guided to diluted EPS of $3.50 to $3.65, which Buckley said includes headwinds from the equity raise and a one-time employee equity grant.

Operating cash flow is expected to rebound to $145 million to $185 million for 2026, more than double 2025 levels, with Buckley citing the completion of site moves, inventory reduction, and improved working capital dynamics.

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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