Novanta Inc. (NASDAQ: NOVT) reported fourth‑quarter 2025 results with revenue of $258.3 million, an 8.5% year‑over‑year increase, and GAAP diluted earnings per share of $0.45, slightly below the $0.46 consensus estimate. Adjusted diluted EPS reached $0.91, beating the $0.88 consensus by $0.03, while adjusted operating income climbed to $48.3 million and adjusted EBITDA rose to $60.7 million, a 17% increase from the prior year.
The GAAP EPS miss reflects margin compression driven by Novanta’s regional manufacturing transition. The company’s strategy to prioritize customer deliveries over the pace of plant transfers has increased dual‑running costs and built up inventory, leading to a 150‑basis‑point drop in adjusted gross margin year‑over‑year and a 100‑basis‑point sequential decline. These cost pressures offset the revenue growth, causing the GAAP EPS to fall short of expectations.
The adjusted EPS beat is largely attributable to strong demand in the medical solutions segment and a 25% jump in customer bookings. The company’s mix shift toward higher‑margin medical consumables, which grew at a double‑digit rate, helped lift profitability. Cost control measures and operational leverage in the advanced industrial markets also contributed to the adjusted earnings outperformance.
Segment performance shows medical solutions accounting for 53% of total revenue, while advanced industrial markets represented 47%. Medical consumables, a subset of the medical solutions segment, grew at a double‑digit rate and contributed significantly to the overall revenue increase.
Novanta guided 2026 revenue to $1,030 million–$1,050 million, adjusted EBITDA to $245 million–$250 million, and adjusted diluted EPS to $3.50–$3.65. The guidance signals confidence in mid‑single‑digit organic growth and margin expansion, with management projecting adjusted gross margins to reach roughly 47% in 2026 as the regional manufacturing strategy matures.
Headwinds include a sharp decline in operating cash flow—from $62 million in Q4 2024 to $9 million in Q4 2025—attributable to inventory build‑ups and higher dual‑running costs. The company also faces dilution from a recent equity fundraise and an all‑employee equity grant, which will temper EPS growth in 2026.
Market reaction was mixed. Some investors noted the GAAP EPS miss and revenue slightly below consensus, while others highlighted the adjusted EPS beat, robust 25% bookings growth, and positive 2026 outlook as reasons for a cautious but supportive stance.
Management emphasized the strength of the quarter: "We said we would return to organic growth and double‑digit profit growth in the fourth quarter, and we delivered. Novanta Inc. posted record revenue in the fourth quarter with 9% reported growth, 2% organic growth, and 4% sequential growth. Bookings surged 25% year over year and 12% sequentially with a book‑to‑bill of 1.11. Every single business delivered double‑digit bookings growth, and a positive book‑to‑bill in the same quarter. That is the first time that has happened since 2022." CEO Matthijs Glastra also noted that for the full year 2025, customer bookings advanced 14%, new product revenue surpassed targets, and the Keonn acquisition performed better than planned, underscoring disciplined execution on strategic priorities. He added that in 2026, the company expects to drive mid‑single‑digit organic growth with sequential quarterly improvements in bookings and revenue across all businesses, benefiting from new product launches and strong commercial execution in target markets. Finally, Glastra highlighted the company’s unique position in AI‑driven GPU board drilling, noting that its air‑bearing spindles are the only qualified supplier for this niche market.
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