Q3 2019 Earnings Call
Good morning. My name is French has gone I would be your conference. Some probably just a day or this time I would like to work on that we launched in events incorporated your jobs non Gina third quarter earnings calls.
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After the speaker's remarks that would be a question answer session to ask a question you May Press Star then one on you touched on fund.
So your question. Please press Star then to be Snorted. Its event is being recorded I would like to turn the conference all that to me said rain that corporate Finance leader. Please go ahead.
Thank you very much good morning, and welcome to the Vantage third quarter 2019 earnings Conference call Irene Nattel corporate finance leader of Novanta with me on today's call is our Chief Executive Officer, <unk>, and our Chief Financial Officer, Robert Buckley.
If you've not received a copy of our earnings press release issued today you may obtain it from the Investor Relations section of our website at Www Dot Novanta Dot Com. Please note. This call is being webcast live and will be archived on our website shortly after the call.
Before we began we need to remind everyone of the safe Harbor for forward looking statements that we've outlined in our earnings press release issued earlier today and also those in our SEC filings, we may make some comments today both in our prepared remarks, and then our responses to questions that may include forward looking statements.
These involve inherent assumptions with known and unknown risks and other factors that could cause our future results to differ materially from our current expectations any forward looking statements made today represent our views only as of this time.
We disclaim any obligation to update forward looking statements in the future even if our estimates change.
So you should not rely on any of these forward looking statements as representing our views as of anytime after this call.
During this call, we'll be referring to certain non-GAAP financial measures a reconciliation of such non-GAAP financial measures to the most directly comparable GAAP measures is available as an attachment to our earnings press release to the extent that we use non-GAAP financial measures. During this call that are not reconciled to GAAP measures in the earnings press release, we will provide reconciliations.
Probably on the Investor Relations section of our website after this call.
I'm now pleased to introduce the Chief Executive Officer of Novanta Matthias cost dropped.
Thank you Ray good morning, everybody and thanks for joining our call Novanta performed inline with our expectations in the third quarter of 2019 with revenue flat sequentially versus the second quarter and EPS exceeding the top end over guidance, our company delivered $154 million in revenue represent.
I think a 6% year over year decline on organic basis, and 4% decline on a reported basis year to date. Our revenue grew just below 2% year over year, both organic and a reported basis.
We exceeded the top end of our adjusted earnings per share guidance at 53 cents adjusted EBITDA was $31 million.
Our book to Bill was 1.0 for inter quarter and bookings grew sequentially by 14% versus the second quarter.
Our team executed very well in a deteriorating industrial capital spending climate no ventas positioning is favorable with over half over revenue in medical markets that are structurally growing.
We remain laser focused on growing faster than the market.
With proprietary motion vision of photonics capabilities in a diverse set of applications driven by secular industry portal Boe.
Precision medicine, and health care productivity trends.
We are strongly investing in innovation and commercial capabilities through business cycles to enhance our proprietary technology position.
And long term sustainable growth potential in secular growth applications, such as robotic surgery minimally invasive surgery, DNA sequencing advanced material processing and precision automation robotics.
In the third quarter, we continue to see solid momentum and success in our efforts to introduce new innovations to our customers.
On the back of our innovations.
Innovation investments made we view our innovation pipeline is the strongest in a decade.
As a result, we are committed to continue to invest in R&D to bring these innovations to market in the second half of 2020 and 2021.
We also continue to see the fruits overlay labor in today's results.
New product revenue year to date grew 26% year over year, our vitality index, which is revenue from new products launched in the last four years. You today is continuing to be 25% of sales versus mid single digit percentages a few years ago.
Our third quarter design wins accelerated to over 30% year over year.
Gross as our teams executed on the strong funnel of design win opportunities.
We're seeing many customer platforms openings with our opportunity to gain share on the back over strong innovation pipeline.
All in all I'm proud of the strong performance by our team the third quarter.
In a quarter, we have appointed or whatever stronger as leaders and operators in the business to oversee and accelerated implementation over an event the gross system.
Corporate supply chain efforts disappointment is a testament to our growing internal talent pipeline.
The November gross system as a common way you're working a set of common tools and processes vigorously applied across the entire novanta enterprise to accelerate and drive sustained long term growth and operating performance with initial focus on customer satisfaction gross margin expansion and inventory optimization.
We feel that with disappointment, we will be able to orchestrate a harmonize our efforts more swiftly in areas such as end to end supply chain performance supplier consolidation continuous improvement manufacturing can put on centers and footprint rationalization and value pricing.
An important element in our capital deployment strategy is M&A in the third quarter, we closed our third acquisition this year arduous.
Arduous dramatically accelerates or intelligent laser scanning subsystem strategy into high growth markets, such as additive manufacturing micro machining and medical applications.
The acquisition doubles, our engineering capabilities and laser beam steering and adds a phenomenal breadth of proprietary IP and no outdoor photonics segment.
We see strong sales and technology synergies of applying these capabilities through to November photonic sales channels.
And while the basin project business are just short term is affected by marker industrial headwinds are just engineering capabilities have greatly exceeded our expectations as we look at it right now we will be able to accelerate our innovation pipeline in a very meaningful way with the first products hitting the market in 2020.
From an M&A pipeline perspective, we remain very disciplined on strategic fit and returns.
And we will move quickly you have an opportunity arises that we few accelerates our strategy.
Now, let me touch on what we're seeing in our markets in the overall market economic climate.
Our medical markets continued to be very robust, we see mid teens double digit growth in a medical businesses into third quarter and expect that momentum to continue for the full year of 2019.
Adam is broad based but we're particularly pleased with our momentum in robotic a minimally invasive surgery.
November as gaining share in these markets driven by innovations and expect that momentum to continue in these areas.
I would also like to pointed out we're achieving double digit growth in our must medical businesses. Despite a double digit year over year decline in DNA sequencing, representing over 50% of our revenue we expect our medical business to serve as our growth engine in 2019 in an uncertain macroeconomic economic climate.
We saw a further decelerating momentum in the industrial capital spending climate into third quarter consistent with further deterioration of the lowest BMI indices, we have seen since 2012 for most geographies.
The uncertainty reported on in our last earnings call continue to cost softening in our advanced industrial market.
This is purely a migrate environment phenomenon as we're actually gaining share in this tough environment.
And although we've seen some bolt on and out with bookings, which are growing sequentially about 14%. These bookings came in late in the quarter request states, mostly for 2020, we now expect only a modest sequential improvement over business in the fourth quarter.
Geographically to trade wars, with China, and the resulting customer uncertainty, we're particularly felt in the Asia Pacific region and Europe .
Our revenue to China, and Acorda deteriorated rapidly to a 32% decline in the quarter, an 18% year to date, driven by microelectronics and industrial material processing market declines.
In our Photonics segment.
We're seeing signs of Mark is bottoming out in China, driven by growing demand for Fiveg and cloud based infrastructure investments as a reminder, Walmart create a challenging China contributions are relatively modest at about 10% of our overall revenue.
Declines are meaningful enough to have an impact at that event the level for year over year comparisons.
Our teams are performing very well in Europe , where our business is up 11% year to date. However, deceleration was felt here as well with third quarter revenue down low single digits versus the prior year.
Lower decisively trimming manufacturing costing weak areas.
We still do cedars weakness as temporary and we're not wavering on our conviction of innovation and growth investments to expand our proprietary technology positions through the business cycle as mentioned before we feel we have to strongest innovation line up in a decade and seen opportunity to gain share through the cycle.
Now, let me turn to our operating segments, starting with the vision segment, which was again the absolute growth story. This quarter was strong momentum carrying into the rest of the year. As a reminder division segment predominantly serves the medical market.
Its application includes a minimally invasive surgery in vitro diagnostics and other medical devices.
For the third quarter, our vision of segment delivered a very solid 13% year over year revenue growth growth continues to be driven by new products and new product launches with customers in.
And divisional segment, new product revenue year to date grew over 60% versus last year and total new product revenue maintained at about 35% of sales year to date.
The book to Bill and our vision Sequans was 1.03 divisions segment predominantly serves the medical market and as previously mentioned, we see soul of market momentum as well as new product launch momentum, which we expect to continue as we progress through 2019.
Our EMI as business performed extremely well into third quarter 2019, continuing its momentum from the last few quarters, we couldn't be more pleased with the innovation strengths and the customer relationship depth of this business.
The warm team did a superb job in keeping up with a tremendous demand for one of their new product innovations the from 300.
Inflator with integrated smoking evacuation.
Our from 300 answer flatter product innovation integrate smoke filtering and the Vic relation functionally into the inflator, optimizing workflow and not requiring a separate smoking evacuation box.
Worldwide and into us loss of being passed or pending required smoking evacuation devise a surgical smoke is a dangerous byproduct.
Vaporization of tissue with energy based devices during approximately 95% nickel surgical procedures.
Our loan business is uniquely positioned to capitalize on this market opportunity.
Moving on we're very pleased with the addition of met exchange their NDS business on the US now has a more significant exposure to the attractive integrated or segment.
With a strong product line up for 2020.
In addition, the NDS business continued to substantially improve its profitability and is expected to complete a product production transfer into our Myos manufacturing components centre in the fourth quarter, improving scale and efficiency.
Finally, our detection and analysis business continues to show solid momentum around new product launches of medical grade ours idea machine vision product offerings in the third quarter of 2019 to business continued to see strong double digit growth and its RF idea machine vision revenue.
Our precision motion segment revenue declined 21% year over year into third quarter were fantastic growth momentum and robotic surgery could not offset declines in microelectronics semiconductors and industrial markets.
We finished declines are temporary and as a result was assumed an order.
Stopped late in the second quarter, which led to revenue timing challenges against tough comps in 2018.
We're seeing the first signs of recovery, giving that uptick in demand for Fiveg and cloud based infrastructure investment are seeing orders improved.
The precision motion book to Bill improved to 0.94 in the third quarter with bookings improving sequentially by 10% on organic basis.
We continue to like our position in per size and dynamic motion control technologies, serving multiple markets with structural growth on an ex such as precision automation unmanned vehicles robotics metrology and robotic surgery markets.
We're also excited about the in Genie acquisition earlier, this year, which as a critical motion control capability that now allows us to offer intelligent motion control solutions to our customers.
The first product family average, which was just allowance is based on the unique delhomme nitrite technology were again.
Which enables ultra small form factor and footprint with an order of magnitude lowering fewer wires and less weight.
This allows were close integration of our precision motors encoders with the motion controls reducing weight in size.
We believed is particularly critical in surgical and precision robotics as well as amend vehicle applications.
Within the precision motion segment year to date, new product revenue grew 70% and our design wins grew more than 50% versus last year as we bring new innovations to market and our expanding our commercial teams.
Turning to the performance over Photonics segment revenue was down 11% driven by laser quantum ended deteriorating industrial capital spending climate as indicated in our last earnings calls laser quantum revenue in the third quarter declined double digit year over year as expected.
Due to the Nymex in DNA sequencing, we have ride widely reported on in the last few earnings calls.
We believe this short term lumpiness is temporary enough correlated with long term market demand, nor our competitive position and we reiterate our excitement about the long term growth prospect of this business as the DNA sequencing is still into very early stages of penetration into clinical applications with numerous positive catalysts on the horizon.
The performance of the Photonics segment was also impacted by the deteriorating market economic headwinds and industrial capital spending markets that we just discussed and which are synrad businesses, particularly sensitive to as indicated in our last call. This was a drag on our growth in the third quarter with more stabilization expected in the fourth quarter at third quarter.
Bookings grew six sequentially by 16% versus the second quarter.
Our photonics team is doing a fantastic job and gaining share in a tough environment design wins accelerated and grew close to 80% year over year to third quarter Photonics book to Bill was one point 11 in the third quarter and bookings grew sequentially by 15% versus the second quarter.
We expect revenue infosonics improved sequentially into fourth quarter on organic growth basis.
To wrap up we're very pleased with our positioning our performance in our medical business I'm proud of the performance and agility over teams and the weak industrial capital spending environment.
Our design win activity is accelerating our bookings recovery and new product introductions and innovation pipelines are as strong as they have ever be.
We feel novanta is very well positioned in an uncertain macroeconomic environment, which is showing some signs of stabilization.
Oh vendors leadership position across a diversified medical and advanced industrial markets combined with our disciplined approach to M&A is providing a solid foundation for long term sustainable profitable growth. Therefore, we remain focused on our strategy strategy to expand in growing medical markets or not and wavering.
And our conviction of innovation investments to expand our proprietary technology positions through the business cycle. So with that I will turn the call over to Robert to provide more details on our financial performance Robert Thank you appetites and good morning, everyone.
We delivered 154.1 million revenue in the third quarter of 2019 that decrease of 4% year over year on reported basis and the decline of 6% on organic basis, while the industrial capital spending environment and the economic climate in Europe , and China deteriorated in the quarter, we're pleased with the organization's ability to deliver on our promise red.
In your guidance for the quarter.
From an end market perspective sales and micro electronics applications were down more than 30% year over year, which is similar to the prior quarter sales to the industrial end markets were down nearly 20%, which worsened from the second quarter as we previously communicated due to the order delays in the second quarter.
And sales the medical end markets were up high teens year over year, despite the headwinds and DNA sequencing on the quarter overall sales and bookings were largely in line with our expectations.
Turning to profit our third quarter GAAP gross profit was 64.1 million or 42% of sales compared to 69.6 million a 43%.
Sales in the third quarter 2018 on a non-GAAP basis third quarter. Adjusted gross profit was 67.4 million or 44% of sales compared to 72.1 million or 45% in the third quarter 2018, our adjusted gross margins were roughly flat sequentially and down versus the prior year driven by these.
Rent growth at our medical consumables product line, which is driving unfavorable mix effects.
The adjusted growth margins at our Photonics segment continued to improve sequentially. Despite the lower sales year to date as a team has done an excellent job at reducing the cost of poor quality to their lowest level in years and by implementing proactive cost control measures to mitigate the near term reductions and volume.
Within our vision segments. We also experienced sequential gross margin improvements driven by the strong improvements in our detection analysis business and greater manufacturing overhead leverage in our EMI ETF business. It was another strong example of our teams utilizing the tools and novanta growth system to reduce their cost of poor quality leverage there.
Infrastructure and deliver on their customer commitments.
It was particular noteworthy at the group is carrying the cost of a redundant manufacturing facility through year end.
Until production for the NDS.
This fully move to our German manufacturing center.
Finally, the adjusted gross margins of the precision motion segment were down sequentially driven by a sharp Darryl downturn, a micro electronics applications. We believe the volume drop here in a temporary given the demand for Fiveg and cloud based infrastructure investments in China, and hence we did not adjusted cost structure as aggressively for fear.
Sure of damage, our ability to react quickly to an improving environment.
Moving on to other financial results third quarter, R&D expenses were 13.8 million or 9% of sales compared to 13.2 million or 8% of sales in the third quarter of 2018.
As the tie as mentioned, we intend to protect our investments in R&D as we strongly believe the economic climate will provide us with the opportunity to take market share through product innovation.
This was evident in the quarter with the greater than 30% growth in design wins and the strong growth in new product introductions.
In addition, customer discussions happening today around new opportunities and product platform further cements, our view of protecting our R&D investments.
Third quarter SGN, a expenses for 28 million or 18% of sales compared to 29 million or 18% of sales in the third quarter of 2018, GAAP operating income was $13 million in the third quarter 2019, compared to 21 million in 2018, whereas non-GAAP operating income was 26 million or 17% of sales can.
30 million or 19% of sales in the prior year and adjusted EBITDA was 31 million a third quarter of 2019, or 20% EBITDA margin compared to 34 million in the third quarter of 2018.
Interest expense for the quarter with 2.2 million versus 2.4 million in the prior year. The weighted average interest rate of our senior credit facility is 3.1% in the third quarter as we took advantage of lower interest rates in Europe to borrow for our arduous acquisition.
On the tax front, our GAAP tax rate was 18.8% in the third quarter 2019, it different from the Canadian statutory rate of 29% driven largely by jurisdictional mix of income.
On a non-GAAP basis, our tax rate from the third quarter 2019 was 21%, which again was impacted by our jurisdictional mix of income most notably from higher income generated in Germany from our EMEA business unit.
Our GAAP diluted earnings per share with 25 cents, a third quarter 2019 compared to diluted earnings per share of 60 cents in the third quarter of 2018 on a non-GAAP basis adjusted earnings per share was 53 cents and in the quarter compared to 61% in the prior year.
We ended the third quarter with 35.6 million diluted weighted average shares outstanding.
Third quarter operating cash flow was 7 million compared to 27.4 million a third quarter of 2018. This result was disappointing, but the cost was largely timing related.
Shipments in the quarter were more back end loaded than expected caused an uptick in accounts receivable and another uptick in inventory, we continue to view, our networking capital as an opportunity and expect to recover the cash as we better scheduled shipments with our customers and closed down the San Jose manufacturing facility.
We ended the third quarter 2018, with gross debt of 229 million and our gross leverage ratios 1.8 times to find as gross debt divided by Rolling 12 months pro forma EBITDA. Our net debt was 168 million as at the end of third quarter or roughly 1.4 times.
In addition, despite the recent acquisition activity, we continue to build a very healthy acquisition pipeline particular around medical end markets. You should continue to expect us to be highly disciplined around maximizing cash flow returns and ensuring future transactions will accelerate our financial goals.
Turning to guidance, the economic news from China, and Europe , as well as the global capital spending settlement are showing that the global trade disruptions are fueling economic uncertainty and causing customers delay or push out their projects.
While our design wins are continuing to accelerate we are seeing customers rescheduled deliveries until the new year, specifically around project based work after carefully reviewing customer schedules. We now expect approximately $10 million of revenue shifting out of the fourth quarter to 2020, we believe we have not lost.
Market share and have not seen a customer cancellation, but rather the economic climate has made our customers plan much more conservatively until global trade relations become clear and capital investments settlement improves.
In the fourth quarter 2019, we expect GAAP revenue in the range of 156 million to $158 million. Adjusted gross margins are again expected to be between 44%, 45% R&D expenses for the fourth quarter will remain around 9% and SGN a expenses are expected to be around 19%.
Depreciation amortization and stock compensation expense will be at the same models they were in the fourth quarter.
In the fourth quarter they were in the third quarter.
Interest expense in the fourth quarter will be aligned with the third quarter absent a significant debt paydown.
We expect to see non-GAAP tax rate of just over 20%.
We expect.
Fourth quarter 2018, adjusted EBITDA to be in the range of 30.5 million to 32.5 million.
Finally, we expect fourth quarter 2019, adjusted diluted earnings per share to be in range of 52 cents to 54 cents.
Diluted weighted average shares outstanding be 35.6 million as always our guidance does not assume any significant impacts from foreign exchange rate changes.
Overall, we feel confident in our ability and the strength of our portfolio to manage through the softness we see in the industrial markets, our medical business, because continuing as strong growth trajectory.
With tremendous demand across various products and multiple end markets.
Which is giving our portfolio resilience our design win activity is accelerating the new product introductions are as strong as they've ever been and this gives us confidence that were exit the year with strong momentum and are well positioned to deliver our 2020 financial goals.
The acquisition activity completed thus far further cements this view.
I'd like to mention that we significantly raised our focus and effort on the VAT to grow system in the quarter as Matteis mentioned, we named one of our highest potential business leaders to enroll champion and institutionalizing the demand to grow system disciplines across the company. He has team and the business units will be passed.
And compensated on driving our net working capital down and improving gross margins 100 basis points a year over the next five years.
We're very proud of the performance of our employees and their commitments to helping us whether this difficult and doctoral environment. We remain excited about our future and look forward to continuing to deliver on our commitments to our employees our customers and our shareholders.
This concludes our prepared remarks, we'll now open the call up to questions.
We will now begin the question and answer to ask a question you may.
And with that stuff.
Okay using the speakerphone.
This is progressing Vicki.
Your question please.
It's this question comes from lead Gen.
Yes.
Please go ahead.
Hey, it's Lee from CJS.
Hey, good morning.
So just starting with I guess, we'll call it the in vitro diagnostic market can you talk about the outlook for Q4 versus the guidance that you gave on the Q2 call.
Yes, I would say there's no change in.
In that so that business returns to sort of flattish performance in the Q4.
So there is there we're not seeing any kind of delays there and any push outs or any any sort of changes from what we communicated last quarter and then as we look at the 2020 that in line with market growth.
Want to put it should return is that the expectation.
While we are what I would say is we are embedded on all the high throughput screeners.
In the DNA sequencing markets. So in relation to one large customer so have a performance how will perform.
Okay.
And then looking at.
Q1 of 2020 seasonally typically you see a modest organic decline versus Q4, however, obviously given the softness in some of the push outs you talked about is that still a reasonable expectation and how do you think about that 10 million of push out does it right away or does it kind of get spread out.
Yes, I was trying to steer clear of getting into into 2020.
It is fair to say that that will definitely benefit us in the first half there are a couple other things going on in the first half is obviously some more difficult comps on the medical side of the business.
When in the industrial as remains to be seeing yes, So I would say leading from a market perspective, right. I think we continue to see our medical business could be robust.
Keeping in mind that we have indeed to after growing double digit very strongly this year, we have some tougher comps next year.
And.
Yes, the industrial climate will.
<unk> is expected to be uncertain, while we do see of core as much easier comps in the second half of next year. So that's that's how we're looking at it right now and we'll get more into detail, let's say once we gave our full year guidance for air for 2020.
And then just one more and I'll hop back in on the on the vision segment gross margins, obviously, you highlighted mix towards consumables dragging down your margins.
But given the facility consolidation headwind in the duplicate facilities you're running.
How much do you think that is dragging you down negatively so as we look for next year when that switches to a neutral or positive. In addition to everything else you're doing to improve margins, what sort of the low hanging fruit on margin expansion within vision.
Well I think what.
Let me give answered a few as the so one of the big benefits in 2020 and divisions segment is the closure of the NDS manufacturing facility, which adds about $2 million worth of benefit to us and so you'll see an uptick in division gross margin as a consequence of that manufacturing facility completely closing down.
That's one of the big first steps the other steps we're working on obviously the low cost manufacturing facility that will take a little bit longer we're looking at pricing decisions in the business and we're looking at what we call the which is value engineering to reduce the cost of manufacturing and reduce the complexity of the manufacturing to improve the gross margin.
Yes.
And then the final thing we're looking at is increasing the amount of throughput that we can get through the existing facilities, which would then thereby allow us the levers the footprint that we have in Germany, even better and.
And so we look at this is kind of a grad next year will be a little bit of a step up in gross margins in the vision segment that will help us.
Then as an overall company, we should not fee as much of a headwind as a consequence of what's happening in there and that will allow us to drive that that higher gross margin improvement.
Got it very helpful. Thank you.
Thanks, Mike.
Your next question is from Brian Drab with William Blair. Please go ahead.
Hey, good morning, Thanks for taking my questions Hey, good morning, Brian .
Would you mind stepping through the book to Bill for each segment and for the total.
Yep will.
Due to right away.
So from the third quarter, we the Photonics segment book to Bill is one point 11.
Now.
For Division for Division segment, It was 1.03.
And 40 precision motion as it goes to 0.94, and where we set for precision motion actually the.
That improved versus the second quarter, all segments actually improve their bookings sequentially and overall the sequential bookings improvement was 14%, so one 4% versus the second quarter.
Okay got it and the sorry did you say the aggregated.
Book to Bill.
In water point before 1.0 for.
Got it okay.
And bookings up 14%.
In aggregate.
Versus the second quarter, yes.
Got it versus Twoq.
So Robert you just made the comment Irrs steering clear 2020 guidance and that's obviously understandable, but in the past I think it was on the second quarter call.
You had mentioned that you thought that a 46% gross margin was achievable in 2020 I just wonder it seems like some things have changed since then obviously so.
How do you.
Stepped back from that.
Yes, no I didn't mean to step back from that if that was an intense so we do see.
Better gross margin improvement next year.
And that is certainly.
What I was with being a little hesitant on is giving some details around the sales mix and then what to expect on a quarterly basis.
But from a gross margin we're going we're exiting the year with some some nice benefits not only are you gaining on the material productivity side, but you get the close the that NDS manufacturing facility and that's carrying a lot of costs associated with it. So theres a number of things that really kind of benefit us and then frankly as as you look at.
You get the easier comparables in the back half of the year on the industrial side in the portions of those business or when they return will be higher margin than what you see on the medical side and so you get a little bit of a better mix effect in the back half of the year as a consequence of that.
Okay, Great and then.
So just to be really could you said you did not back away from the 46% as a full year target for gross margin.
Yes, I did I did not back away from that added.
Okay.
I just want to make sure I heard it correctly and then just one last question Matteis, you talked about some of the acquisitions I think it was with respect to arduous that that could have a meaningful impact on your business and I just wonder if you could just talk.
In a little more detail about the timing and kind of magnitude of.
What you mean by meaningful I guess.
Yep. So so meaningful means that we fundamentally can accelerate and reduce the need our Cambridge technology innovation pipeline.
And pull forward the plans that we have had maybe coming too.
Due to market in three to four years from now to gain of 2021 in the second half of 2020. So thats, what we feel is meaningful right and we're talking not like Wal product, we talking and align I'll probably six projects here.
And and old targeting high growth markets fundamentally improving our architecture and rejuvenate the to basically further expand our leadership position in integrating the IP that.
Arduous has which takes years to develop right, so and and what's your what's great to see is that the engineering teams over those two entities that are now which is basically mashed into one are just super excited to accelerate because it's basically.
Capabilities are truly complimentary and the engineers couldn't be more excited which is to me.
You don't know that ahead of when you do an acquisition and but to see that come to fruition and yes. It makes me makes me really excited and these are the type of acquisitions that might take a little longer before you see kind of the differential benefits, but strategically.
Yes, we couldn't be more play so we will report in 2020, when these products will get introduced obviously.
As a reminder, these products will then have to be design into customers. So before you see revenue contributions that it might take a little while but but yes, we were taking a leap forward here in terms of our potential in the high growth markets like Micromachining additive manufacturing and last minute lease our customers are giving.
Yes that this feedback to since not only internally.
Customers are really impressed with this with his lineup so.
So is the bigger opportunity.
Or maybe it maybe the answer to this is all the above it is a big opportunity and getting into some new end markets or is it more.
Yes, yes.
Yes, but is it more moving.
Yes, sorry.
Go ahead, Sir yes, sorry were in line as a little choppy I know so so what I the way I see it is we were able to win new customer platforms, because we were not able to address certain segments were surgeon customers.
And because we didnt have to full capability set and we were developing that but now with the arduous acquisitions, we just accelerate that capability set. So we can go out those platforms.
I certainly much more quickly and Africa. So it is summarizing it is going deeper in certain segments that we were in today that are growing like laser additive manufacturing, but conquering new customer platforms and then also.
Okay seller, adding entry into new market segments now.
Okay. Thanks, very much thank you.
Right.
Again, the other question Keith.
One.
This concludes our question answer session I would like to turn the conference back over to me too much.
Right.
Yeah.
Thank you operator, so to summarize into third quarter of 2019, Novanta delivered a solid performance in a uncertain macroeconomic environment, we're very pleased with our positioning and performance in our medical businesses and proud of the performance and agility over teams in a weak industrial capital.
And our design win activity is accelerating and new product introductions.
Ovation pipelines are as strong as they've ever been.
And Novatels leadership positions across diversified medical in it and advanced industrial markets combined with our disciplined approach to M&A is providing a solid foundation for long term sustainable profitable growth. We continue to feel good about the positioning of our businesses around secular macro growth drivers with over half of our revenue and robust medical.
Markets, we see a long term need.
For our motion vision and photonics capabilities in a variety of applications on the back of macro trends of industry forward, although precision medicine and healthcare productivity.
We defer continue to remain excited about the applications, we play in and the positions, we have and continuing to invest in long term organic growth innovation on M&A.
In closing I would like to thank our customers our employees and our shareholders for their ongoing support I'm, particularly grateful for the strong contribution the execution of our teams have committed novanta employees that are showing tremendous dedication and agility.
We appreciate your interest in the company and your participation in today's call I look forward to joining all of you in several months from now on our fourth quarter and full year 2019 earnings call. Thank you very much. This call is now the journey.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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