What Novanta (NOVT) Said on Its Q3 Earnings Call

Key Points

• Novanta exceeded expectations in Q3: Revenue grew 23% to $305 million, including nearly 10% organic growth, while adjusted EPS rose 21% to $1.05. Bookings increased 29% and backlog reached $543 million.
• Growth was strongest in automation, while medical results were mixed. Robotics and automation revenue rose 17%; Riverpoint added about $33 million in its first two months. Precision medicine sales declined 5%, with recovery expected in late 2027.
• Novanta raised its full-year revenue outlook and expects strong growth in 2027, but a temporary lithography shipment pause and factory-transition costs are expected to lower Q4 adjusted gross margin by about 200 basis points. The company plans to prioritize reducing debt after funding Riverpoint’s acquisition.

Novanta NASDAQ: NOVT reported third-quarter revenue growth of 23% and its strongest organic growth in more than three years, as demand for robotics and advanced manufacturing products helped offset weakness in precision medicine. The company also completed its largest acquisition, Riverpoint Medical.

Revenue rose to $305 million, including nearly 10% organic growth. Adjusted EBITDA increased 38% to $80 million, while adjusted earnings per share rose 21% to $1.05. All three measures exceeded the company’s expectations, Chair and CEO Matthijs Glastra said on the earnings call.

Customer bookings increased 29%, or 18% excluding Riverpoint, and the company ended the quarter with a $543 million backlog. Its book-to-bill ratio, a measure of orders relative to sales, was 1.08.

Riverpoint Adds to Medical Business

Riverpoint Medical contributed approximately $33 million in revenue during its first two months as part of Novanta and performed in line with expectations, Co-Chief Operating Officer John Lesica said. The acquisition brought recurring medical consumables to roughly 25% of company revenue.

Medical Solutions segment revenue rose 30% on a reported basis and approximately 3% organically. Within the segment, advanced surgical technologies grew 66% on a reported basis and 12% organically, helped by new products, including second-generation insufflators and consumables.

Lesica said the company’s first multi-indication fluid management system was completing regulatory submission and shipping clinical evaluation units. Novanta expects to introduce the platform with a leading surgical equipment maker in early 2027, with four other manufacturer programs in development.

Precision medicine sales fell 5% as the company continued to experience the effects of a decision not to pursue lower-margin business for a customer’s next-generation product. Lesica said Novanta expects the business to return to growth in late 2027 as it laps that impact and benefits from new customer wins.

Automation Demand and Factory Disruption

Automation Enabling Technologies revenue rose 16%, above the company’s 12% to 14% outlook. Precision manufacturing revenue grew 14%, while robotics and automation revenue increased 17%, Co-Chief Operating Officer Chuck Ravetto said.

Ravetto cited demand across semiconductor equipment, advanced manufacturing and robotics. He said the company’s air bearing spindles business, which serves electronics drilling, was sold out for the next two years. An expansion of its China facility is expected to be fully ramped by April 2027.

CFO Robert Buckley said the spindle business is expected to roughly double by 2028 as capacity fills. He described the increase as a gradual ramp, with shipments from the expanded capacity helping organic growth from the second quarter of 2027 onward.

Novanta also faces a temporary shipment delay for certain lithography products following an end-user test finding at its Stockport, U.K., facility. Glastra said the company is correcting the issue and expects shipments to resume in the first quarter of 2027. He said the program was not in jeopardy.

Buckley said the shipment pause, combined with overlapping costs from moving two factories into the site, is expected to reduce fourth-quarter adjusted gross margin by roughly 200 basis points, to about 46%. He expects margins to recover as shipments restart and redundant costs decline.

Outlook and Cash Flow

For the fourth quarter, Novanta forecast revenue of $306 million to $312 million, including approximately $35 million from Riverpoint, and organic growth of 5% to 7%. It expects adjusted EBITDA of $76 million to $79 million and adjusted earnings of $0.91 to $0.96 per share.

The company raised the low end of its full-year revenue forecast to a range of $1.135 billion to $1.140 billion. It expects approximately 7% organic growth, adjusted EBITDA of $274 million to $277 million and adjusted earnings of $3.66 to $3.71 per share. Buckley said the earnings forecast update reflects the gross-margin outlook and higher stock compensation expense.

For 2027, Novanta expects more than 15% reported revenue growth and more than 20% adjusted EBITDA growth. Buckley said the company expects at least 100 basis points of adjusted gross-margin expansion next year, while noting that more detailed guidance will come with year-end results.

Year-to-date operating cash flow rose to $156 million from $55 million a year earlier. Novanta ended the quarter with $839 million in gross debt after funding Riverpoint’s $1.2 billion upfront purchase price. Glastra said the company’s near-term capital deployment priority is reducing debt.

About Novanta (NASDAQ:NOVT)

Novanta develops and manufactures precision technologies used in medical and advanced industrial applications. Its products include photonics and laser components, precision motion-control systems, machine-vision technologies, and related equipment and software. The company's technologies are used in areas such as medical and surgical systems, life sciences, robotics, and industrial automation. Novanta serves customers internationally, with operations and customers across North America, Europe, and Asia.

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