Novanta Inc. reports 22.9% EBITDA growth in 2018 and 0.72 pp EBITDA Margin growth from 16.9% to 17.6%
02/27/2019 • About Novanta Inc. (
$NOVT) • By InTwits
Novanta Inc. reported 2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Novanta Inc. is a growth stock: 2018 revenue growth was 17.8%, 5 year revenue CAGR was 14.2% at 2018 ROIC 11.7%
- EBITDA Margin is quite volatile: 17.6% in 2018, 16.9% in 2017, 13.8% in 2016, 12.9% in 2015, 1.9% in 2014
- Novanta Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.9%. At the same time it's a lot of higher than industry average of 13.3%.
- CAPEX is quite volatile: $15m in 2018, $9m in 2017, $8m in 2016, $6m in 2015, $5m in 2014
- In the last 5 years the company invested considerably less than D&A: $43m vs. $131m. In 2018 this situation was still the same: CAPEX was 15 while D&A was 37
- The company has business model with average profitability: ROIC is 11.7%
- It operates with medium-size leverage: Net Debt/EBITDA is 1.2x while industry average is -0.8x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Novanta Inc.'s Revenue surged on 17.8%. Revenue growth showed slowdown in 18Q4 - it was 6.3% YoY. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 3.9 pp from 18.2% to 22.1% in 2018. EBITDA Margin followed a growing trend at 3.5 pp per annum in 2014-2018.
Gross Margin showed almost no change in 2018. SG&A as a % of Revenue decreased slightly on 0.71 pp from 19.6% to 18.9% in 2018. SG&A as a % of Revenue stuck to a declining trend at -1.1 pp per annum in the last 5 years. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in 2018. During 2014-2018 SBC as a % of Revenue bottomed in 2017 at 1.1%.
Net Income margin decreased on 3.5 pp from 11.5% to 8.0% in 2018. The efficient tax rate was 17.2% in 2018.
Investments (CAPEX, working capital and M&A)
In 2018 the company had CAPEX/Revenue of 2.4%. Novanta Inc. showed small growth in CAPEX/Revenue of 0.90 pp from 1.5% in 2015 to 2.4% in 2018. For the last three years the average CAPEX/Revenue was 2.1%.
Accounts receivable as a % of Revenue decreased slightly on 2.0 pp from 15.6% to 13.7% in 2018. Inventories as a % of Revenue showed almost no change at 17.1% in 2018. Accounts payable as a % of Revenue increased slightly on 1.1 pp from 13.2% to 14.4% in 2018.
Novanta Inc. has spent
$31m on M&A in 2018 which accounts for 5.1% of revenue.
Return on investment
The company operates at good ROE (14.4%) while ROIC is low (11.7%). ROIC showed almost no change in 2018. ROE decreased on 6.6 pp from 21.1% to 14.4% in 2018. During 2014-2018 ROIC topped in 2017 at 11.8%.
Leverage (Debt)
Debt level is 1.2x Net Debt / EBITDA and 1.9x Debt / EBITDA. Net Debt / EBITDA dropped on 0.5x from 1.6x to 1.2x in 2018. Debt dropped on 14.5% while cash dropped on 18.0%.
Novanta Inc. has no short term refinancing risk: cash is higher than short term debt (1,809.1%).
Valuation and dividends
Novanta Inc.'s trades at EV/EBITDA 26.8x and P/E 56.3x.
Management team
Matthijs Glastra is a the company's CEO. Matthijs Glastra is a founder and has spent 2 years with the company. CEO total compensation was
$3,984,613 in 2018 which included
$581,069 salary. Robert J Buckley is a the company's CFO. Robert J Buckley has spent 3 years at the company.
Insider ownership is 4.5%. Insider ownership didn't change in 2018.
At the end of financial year the company had 2,133 employees. The number of employees increased on 4.9%. Average revenue per employee in 2018 was
$288,015 and it surged on 12.4%.
Financial and operational results
FY ended 12/31/2018
Novanta Inc. ($NOVT) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 364.7 | 373.6 | 384.8 | 521.3 | 614.3 | 17.8% |
| Gross Profit | 150.2 | 157.9 | 162.5 | 220.5 | 261.5 | 18.6% |
| SG&A | 84.4 | 82.0 | 81.7 | 102.0 | 115.9 | 13.6% |
| EBITDA | 7.0 | 48.0 | 52.9 | 88.0 | 108.1 | 22.9% |
| EBIT | -16.8 | 28.9 | 32.6 | 57.2 | 71.0 | 24.2% |
| Tax | -1.0 | 10.4 | 10.5 | 13.8 | 10.2 | -26.2% |
| Net Income | -24.3 | 35.6 | 22.0 | 60.1 | 49.1 | -18.2% |
| Stock Based Compensation | 4.3 | 4.4 | 4.3 | 5.5 | 7.7 | 40.4% |
Balance Sheet
|
|---|
| Cash | 51.1 | 60.0 | 68.1 | 100.1 | 82.0 | -18.0% |
| Accounts Receivable | 51.5 | 57.2 | 63.8 | 81.5 | 84.0 | 3.0% |
| Inventory | 62.9 | 59.6 | 59.7 | 91.3 | 104.8 | 14.8% |
| Accounts Payable | 25.6 | 24.4 | 32.2 | 39.8 | 50.7 | 27.5% |
| Short Term Debt | 7.3 | 7.4 | 7.4 | 9.1 | 4.5 | -50.3% |
| Long Term Debt | 114.5 | 97.6 | 78.7 | 233.4 | 202.8 | -13.1% |
Cash flow
|
|---|
| Capex | 5.4 | 5.6 | 8.5 | 9.1 | 14.7 | 61.2% |
| Acquisitions | 88.2 | 26.0 | 12.9 | 168.3 | 31.2 | -81.5% |
Ratios
|
|---|
| Revenue growth | 15.1% | 2.4% | 3.0% | 35.5% | 17.8% | |
| EBITDA growth | -82.1% | 587.3% | 10.1% | 66.2% | 22.9% | |
|
|---|
| Gross Margin | 41.2% | 42.3% | 42.2% | 42.3% | 42.6% | 0.3% |
| EBITDA Margin | 1.9% | 12.9% | 13.8% | 16.9% | 17.6% | 0.7% |
| EBIT Margin | -4.6% | 7.7% | 8.5% | 11.0% | 11.6% | 0.6% |
| SG&A, % of revenue | 23.1% | 22.0% | 21.2% | 19.6% | 18.9% | -0.7% |
| SBC, % of revenue | 1.2% | 1.2% | 1.1% | 1.1% | 1.3% | 0.2% |
| Net Income Margin | -6.6% | 9.5% | 5.7% | 11.5% | 8.0% | -3.5% |
| CAPEX, % of revenue | 1.5% | 1.5% | 2.2% | 1.7% | 2.4% | 0.6% |
|
|---|
| ROIC | -5.1% | 8.5% | 9.5% | 11.8% | 11.7% | -0.2% |
| ROE | -10.7% | 15.6% | 8.7% | 21.1% | 14.4% | -6.6% |
| Net Debt/EBITDA | 10.1x | 0.9x | 0.3x | 1.6x | 1.2x | -0.5x |
People
|
|---|
| Insider ownership | 4.5% | 4.5% | 4.5% | 4.5% | 4.5% | 0.0% |
| Employees | 1,418 | 1,355 | 1,269 | 2,034 | 2,133 | 4.9% |
| Revenue/Employee, th. $ | 257 | 276 | 303 | 256 | 288 | 12.4% |
Novanta Inc. ($NOVT) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 147 | 150 | 161 | 156 | | 34.9% | 26.3% | 9.9% | 6.3% |
| EBITDA | 26 | 26 | 30 | 25 | | 57.5% | 14.9% | 42.8% | -7.6% |
| Net Income | 12 | 11 | 15 | 12 | | -65.2% | 17.0% | 93.2% | 31.3% |
Balance Sheet
|
|---|
| Cash | 111 | 107 | 112 | 82 | | 38.9% | 20.3% | 21.3% | -18.0% |
| Short Term Debt | 9 | 9 | 9 | 5 | | 23.8% | 23.8% | 0.2% | -50.3% |
| Long Term Debt | 224 | 228 | 247 | 203 | | 88.5% | 103.7% | 2.2% | -13.1% |
Ratios
|
|---|
| Gross Margin | 42.3% | 43.4% | 43.3% | 41.3% | | -0.0% | -1.5% | 3.2% | -1.1% |
| EBITDA Margin | 17.9% | 17.4% | 18.8% | 16.2% | | 2.6% | -1.7% | 4.3% | -2.4% |
| Net Income Margin | 8.1% | 7.3% | 9.1% | 7.5% | | -23.3% | -0.6% | 3.9% | 1.4% |
Peers in Electronic Equipment & Instrum
Below you can find Novanta Inc. benchmarking vs. other companies in Electronic Equipment & Instrum industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Hickok Inc ($HICKA) | | -7.2% | 13.5% | 258.4% | 178.7% |
| Electro Scientific Industries, Inc. ($ESIO) | | -12.2% | 15.9% | -12.7% | 128.5% |
| Microvision, Inc. ($MVIS) | | 163.6% | 60.7% | -34.7% | 82.8% |
| Ipsidy Inc ($IDTY) | | | | | 66.2% |
| Magal Security Systems Ltd. ($MAGS) | | -17.8% | 6.4% | -5.2% | 44.0% |
| |
|---|
| Median (61 companies) | -78.5% | 4.5% | 0.3% | 3.6% | 9.1% |
|---|
| Novanta Inc. ($NOVT) | | 2.4% | 3.0% | 35.5% | 17.8% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Intellicheck, Inc. ($IDN) | 58.2% | 57.1% | 80.0% | 85.5% | 91.3% |
| Image Sensing Systems, Inc. ($ISNS) | 74.7% | 77.1% | 71.0% | 79.9% | 80.9% |
| National Instruments Corporation ($NATI) | 74.4% | 74.1% | 74.5% | 74.5% | 75.4% |
| Cognex Corporation ($CGNX) | 77.9% | 77.2% | 75.2% | 75.6% | 74.4% |
| Applied DNA Sciences Inc ($APDN) | | | 82.2% | 77.3% | 69.1% |
| |
|---|
| Median (60 companies) | 42.7% | 41.8% | 40.1% | 41.5% | 40.9% |
|---|
| Novanta Inc. ($NOVT) | 41.2% | 42.3% | 42.2% | 42.3% | 42.6% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Cognex Corporation ($CGNX) | 32.9% | 30.1% | 31.9% | 36.0% | 30.1% |
| Coherent, Inc. ($COHR) | 14.2% | 16.7% | 18.9% | 24.9% | 26.6% |
| Hollysys Automation Technologies, Ltd. ($HOLI) | 21.3% | 26.9% | 23.5% | 16.1% | 23.9% |
| Electro Scientific Industries, Inc. ($ESIO) | -10.1% | -19.1% | -2.0% | -17.8% | 23.1% |
| FLIR Systems, Inc. ($FLIR) | 20.7% | 22.8% | 21.3% | 20.0% | 21.7% |
| |
|---|
| Median (60 companies) | 5.5% | 3.9% | 3.0% | 3.0% | 3.3% |
|---|
| Novanta Inc. ($NOVT) | 1.9% | 12.9% | 13.8% | 16.9% | 17.6% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Wrap Technologies Inc ($WRTC) | | | | | 61.4% |
| ClearSign Combustion Corporation ($CLIR) | | 80.3% | 22.1% | 17.4% | 17.7% |
| LightPath Technologies, Inc. ($LPTH) | 16.8% | 5.0% | 6.5% | 7.8% | 7.7% |
| Giga-tronics Inc ($GIGA) | 1.7% | 0.1% | 1.3% | 0.3% | 7.0% |
| Applied DNA Sciences Inc ($APDN) | 8.4% | 3.9% | 16.1% | 3.1% | 6.8% |
| |
|---|
| Median (60 companies) | 1.9% | 2.0% | 2.1% | 1.6% | 2.2% |
|---|
| Novanta Inc. ($NOVT) | 1.5% | 1.5% | 2.2% | 1.7% | 2.4% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Evans & Sutherland Computer Corp ($ESCC) | | | 83.3% | 39.6% | 55.3% |
| Electro Scientific Industries, Inc. ($ESIO) | -11.7% | -19.7% | -7.1% | -22.9% | 31.5% |
| Coherent, Inc. ($COHR) | 9.9% | 13.1% | 15.6% | 24.0% | 21.5% |
| Zebra Technologies Corporation ($ZBRA) | 3.3% | 0.9% | 2.2% | 10.2% | 20.8% |
| Cognex Corporation ($CGNX) | 18.3% | 15.6% | 17.7% | 25.6% | 20.1% |
| |
|---|
| Median (72 companies) | 3.3% | 1.8% | 1.8% | 1.8% | 0.9% |
|---|
| Novanta Inc. ($NOVT) | -5.1% | 8.5% | 9.5% | 11.8% | 11.7% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Itron, Inc. ($ITRI) | 2.1x | 1.9x | 1.0x | 2.0x | 12.3x |
| Track Group Inc ($TRCK) | | | | | 12.2x |
| Mesa Laboratories, Inc. ($MLAB) | 0.7x | 1.1x | 1.7x | 2.0x | 3.5x |
| Trimble Inc. ($TRMB) | 1.3x | 1.7x | 1.1x | 1.3x | 3.4x |
| MTS Systems Corporation ($MTSC) | -0.0x | -0.4x | 5.8x | 3.9x | 3.2x |
| |
|---|
| Median (35 companies) | -0.8x | -0.9x | -0.9x | -0.8x | -0.9x |
|---|
| Novanta Inc. ($NOVT) | 10.1x | 0.9x | 0.3x | 1.6x | 1.2x |
