Q2 2024 Novanta Inc Earnings Call

Torben: Good morning. My name is Novant, and I will be your consultant for today.

Operator: At this time, I would like to welcome everyone to Novanta Incorporated's second quarter 2024 earnings call. All lines have been placed on mute to prevent any background noise.

Operator: At this time, I would like to welcome everyone to Novanta Incorporated 2nd quarter 2024 earnings call. Online have been placed on mute to prevent any background noise.

Speaker Change: At this time, I would like to welcome everyone to Novanta Incorporated's second quarter 2024 earnings call.

Speaker Change: All lines have been placed on mute to prevent any background noise.

Operator: After the speaker's remarks, there will be a question-and-answer session. To ask a question, you may first star, then one on your touchtone telephone. To withdraw your question, please press star, then two. Please note, this event is being recorded.

Operator: After the speaker's remarks... There will be a question and answer session. To ask a question, you may press star, then 1 on your touchtone telephone. To withdraw your question, please press star, then 2. Please note, this event is being recorded. I would now like to turn the conference over to Ray Nash, Corporate Finance Leader for Novanta. Please go ahead.

Speaker Change: After the speaker's remarks, there will be a question and answer session. To ask a question, you may press star then 1 on your touchtone telephone.

Speaker Change: To withdraw your question, please press star, then 2.

Ray Nash: I would now like to turn the conference over to Ray Nash, Corporate Finance Leader for Novanta. Please go ahead.

Speaker Change: Please note, this event is being recorded.

Speaker Change: I would now like to turn the conference over to Ray Nash, Corporate Finance Leader for Novanta.

Ray Nash: Thank you very much.

Ray Nash: Thank you very much. Good morning, and welcome to Novanta's second quarter 2024 earnings conference call. This is Ray Nash, Corporate Finance Leader for Novanta. With me on today's call is our Chair and Chief Executive Officer, Matthijs Glastra, and our Chief Financial Officer, Robert Buckley. If you have 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.novanta.com. Please note this call is being webcast live and will be archived on our website shortly after the call.

Ray Nash: Good morning and welcome to Novanta's 2nd quarter 2024 earnings conference call. This is Ray Nash, Corporate Finance Leader for Novanta. With me on today's call is our chair and chief executive officer, Matthijs Glastra, and our chief financial officer, Robert Buckley.

Ray Nash: Thank you very much. Good morning and welcome to Novanta's second quarter 2024 earnings conference call. This is Ray Nash, Corporate Finance Leader for Novanta. With me on today's call is our Chair and Chief Executive Officer, Matthijs Glastra, and our Chief Financial Officer, Robert Buckley.

Ray Nash: If you have 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.novanta.com. Please note, this call is being webcast live and will be archived on our website shortly after the call.

Speaker Change: If you have 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.novanta.com. Please note this call is being webcast live and will be archived on our website shortly after the call.

Ray Nash: Before we begin, 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 in 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.

Ray Nash: Before we begin, we need to remind everyone of the safe harbor for forward-looking statements that we outlined in our earnings press release issued earlier today and also those in our SEC filing. We may make some comments today, both in our prepared remarks and in 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.

Speaker Change: Before we begin, 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.

Speaker Change: We may make some comments today both in our prepared remarks and in our responses to questions that may include forward-looking statements.

Speaker Change: 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.

Ray Nash: 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 at any time after this call. During this call, we will 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.

Speaker Change: 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 any time after this call.

Ray Nash: So you should not rely on any of these forward-looking statements as representing our views as of any time after this call.

Ray Nash: During this call, we will 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 properly on the Investor Relations section of our website after this call.

Speaker Change: During this call, we will 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.

Ray Nash: 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 promptly on the investor relations section of our website after this call. I'm now pleased to introduce the Chairman and Chief Executive Officer of Novanta, Matthijs Glastra. Thank you.

Speaker Change: 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 promptly on the investor relations section of our website after this call. I'm now pleased to introduce the Chair and Chief Executive Officer of Novanta, Matthijs Glastra. I'm pleased to introduce the Chair and Chief Executive Officer of Novanta, Matthijs Glastra.

Matthijs Glastra: I'm now pleased to introduce the Chair and Chief Executive Officer of NOVANSA, Matthias Kostra. Thank you, Ray. Good morning, everybody. And thanks for joining our call.

Matthijs Glastra: Thank you, Ray. Good morning, everybody, and thanks for joining us on our call. Novanta delivered another quarter of outstanding operating results in the second quarter of 2024. Our teams delivered revenue, profit, and cash flow performance above our expectations and prior guidance in a challenging market environment. For the second quarter, we delivered $236 million in revenue, which beat our previous guidance and represents a reported growth of 3% and a decline of 5% on an organic basis.

Matthijs Glastra: NOVANSA delivered an honor quarter of outstanding operating results in the second quarter of 2024. Our teams delivered revenue, profit, and cash flow performance above our expectations and prior guidance in a challenging market environment. For the second quarter, we delivered $200,000 to $36 million in revenue, which beat our previous guidance and represents reported growth of 3% and a kind of 5% on an organic basis. The adjusted growth margins were 47% as core businesses expanded margins by over a hundred basis points year-to-year, offsetting the dilutive effect of the motion solutions acquisition. And just the debit that was $51 million, beating our expectations and prior guidance.

Matthijs Glastra: Thank you, Ray. Good morning, everybody, and thanks for joining our call. Novanta delivered another quarter of outstanding operating results in the second quarter of 2024.

Matthijs Glastra: Our teams delivered revenue, profit, and cash flow performance above our expectations and prior guidance in a challenging market environment.

Matthijs Glastra: For the second quarter, we delivered $236 million in revenue, which beat our previous guidance and represents a reported growth of 3% and a decline of 5% on an organic basis.

Matthijs Glastra: The adjusted gross margins were 47% as core businesses expanded margins by over 100 basis points year-over-year, offsetting the dilutive effect of the motion solutions acquisition.

Matthijs Glastra: It just grows margins by 47% as core businesses expanded margins by over 100 basis points year over year, offsetting the dilutive effect of the motion solutions acquisition. Adjusted EBITDA was $51 million, beating our expectations and prior guidance. Operating cash flows were very strong for the fourth straight quarter at approximately $41 million, which represents 57% growth year over year.

Matthijs Glastra: Adjusted EBITDA was $51 million, beating our expectations and prior guidance.

Matthijs Glastra: Raining cash flows was very strong for the fourth straight quarter at approximately $41 million, which represents 57% growth year-to-year.

Matthijs Glastra: Our rating cash flows was very strong for the fourth straight quarter at approximately $41 million, which represents 57% growth year over year.

Matthijs Glastra: here. His operating performance reflects excellent execution by our teams in a difficult market economic environment. The Stiggy-Novanta business model would diversify exposure to a long life cycle customer platforms in secular, high growth markets as proven resilience under multiple geopolitical and market economic scenarios. Our proprietary technologies are well positioned in medical and advanced industrial applications with long-term secular killings such as robotic anonymation, minimally invasive and robotic surgery, and precision medicine.

Matthijs Glastra: His operating performance reflects excellent execution by our teams in a difficult market economic environment. The Sticky Novanta business model, with diversified exposure to long lifecycle customer platforms in secular high growth markets, has proven resilient under multiple geopolitical and macroeconomic scenarios. Our proprietary technologies are well positioned in medical and advanced industrial applications with long-term secular growth such as robotics and automation.

Matthijs Glastra: This operating performance reflects excellent execution by our teams in a difficult market economic environment.

Matthijs Glastra: The Sticky Novanta business model, with diversified exposure to long life cycle customer platforms in secular high growth markets, has proven resilient under multiple geopolitical and market economic scenarios.

Matthijs Glastra: Our proprietary technologies are well-positioned in medical and advanced industrial applications with long-term secular killings, such as robotics and automation.

Matthijs Glastra: Minimally Invasive and Robotic Surgery, and Precision Medicine.

Matthijs Glastra: At this time, we see the following themes in our end markets. Overall, we're seeing improving momentum in our business, but with mixed visibility depending on the end market. Medical device technology markets continue to be robust and appear likely to stay strong all year and into 2025. Life sciences markets, including precision medicine applications, are experiencing more prolonged weakness in capital equipment demand by our customers and their customers than previously expected. This is being reported on by many other major players. Although signs of a recovery materializing are certainly there, we expect it to start materializing our results in 2025.

Matthijs Glastra: At this time, we see the following themes in our end markets. Overall, we're seeing improving momentum in our business, but with mixed visibility depending on the end market. Medical device technology markets continue to be robust and appear likely to stay strong all year and into 2025. However, the life sciences markets, including precision medicine applications, are experiencing more prolonged weakness in capital equipment demand by ARCA stores and their customers than previously expected. This is being reported on by many other major players.

Matthijs Glastra: At this time, we see the following themes in our end markets. Overall, we're seeing improving momentum in our business, but with mixed visibility depending on the end market.

Matthijs Glastra: Although signs of a recovery materializing are certainly there, we expect it to start materializing in our results in 2025. Industrial capital spending overall also continues to remain muted due to the interest rate and regional economic challenges. The larger impacts were seen in Europe and China, consistent with contracting PMIs in Europe and China.

Matthijs Glastra: Industrial capital spending overall also continues to remain muted due to the interest rate of regional economic challenges. The larger impacts are seen in Europe and China, consistent with contracting PMIs in Europe and China. At this stage, despite an improving industrial capital spending environment in the US, we're not expecting a broad-based market recovery until 2025.

Matthijs Glastra: At this stage, despite an improving industrial capital spending environment in the U.S., we're not expecting a broad-based market recovery until 2025. However, there are some bright spots appearing within advanced industry. U.S. revolutionary automation markets are seeing improved demand, as evidenced in our recent bookings growth. These areas of growth, coupled with new product timing in lithography.

Matthijs Glastra: At this stage, despite an improving industrial capital spending environment in the U.S., we're not expecting a broad-based market recovery until 2025.

Matthijs Glastra: However, there are some bright spots appearing within advance in the Sue. US revots and illumination markets are seeing improved demand as evidence in our recent bookings growth. And microelectronics and markets are showing solid signs of a rebound, with multiple players predicting a strong recovery ramping up as the beginning of 2025. These spots of growth, coupled with new product timing in lithography, are leading indicators of a broader recovery and therefore a stronger 2025. Our outlook for customer demand for the full year of 2024 now reflects the latest view of these end-market dynamics. In the second half of the year, we continue to expect accelerating momentum for new venta on the back of our new product lounges, many of which are focused on the medical devising markets.

Matthijs Glastra: While this momentum will not be partially offset by the more prolonged weakness in life signs and industrial applications, the debt results still will be returned to organic growth year-over-year into third and the fourth quarter. I'll be it at a lower growth rate than we previously expected. Despite this near-term challenge in the demand environment in 2024, the fundamentals of new venta remain very much intact.

Matthijs Glastra: While this momentum will not be partially offset by the more prolonged weakness in life science and industrial applications,

Matthijs Glastra: Despite this near-term challenge in the demand environment in 2024, the fundamentals of Novanta have remained very much intact. We continue to stay focused on the things we can control, which is reflected in our top three priorities for 2024, which are first, to launch a record set of new products. Turning back to the second quarter, we saw further improvement in our bookings activity, with bookings growing 12% sequentially, and our book-to-bill was 0.95, which is up versus the previous quarter, driven by improved bookings in microelectronics, robotics and automation, and medical devices.

Matthijs Glastra: We continue to stay focused on the things we can control, which is reflected in our top three parties for 2024, which are first, lounges, a record set of new products. Second, expend margins in cash flow using the Novanta gross system, and third, continue to acquire additional companies that fit or strategy at attractive returns. And I'm proud to say our teams are executing really well at expending margins and driver profit in cash flow. As a result, despite a slower revenue ramp up, we still expect to deliver adjusted EBITAM and adjusted DPS results for the full year, mostly aligned with our previously full year guide.

Matthijs Glastra: And I'm proud to say our teams are executing really well at expanding margins and driving profit and cash flow. As a result, despite a slower revenue ramp up, we still expect to deliver adjusted EBITDA and adjusted DPS results for the full year, mostly in line with our previously full year guide.

Matthijs Glastra: Robert will cover more details on our financial guidance in a few minutes. For an effective second quarter, we saw further improvement in our booking activity, with bookings growing 12% sequentially, and our book to bill was 0.95, which is up versus last quarter, driven by improved bookings in market electronics, robotics and automation, and medical devices. Going into more detail for the second quarter of 2024, sales to medical markets made up approximately 58% of total mental sales and grew 13% versus the prior year on a reported basis, and those have grew 2% on an organic basis. We saw strong growth in multiple application areas, particularly in medical device technology applications.

Matthijs Glastra: Going into more detail for the second quarter of 2024, sales to medical markets made up approximately 58% of total Novanta sales and grew 13% versus the prior year on a reported basis, and also grew 2% on an organic basis.

Matthijs Glastra: We saw strong growth in multiple application areas, particularly in medical device technology applications. Novanta is positioned for many attractive applications in the advanced industrial sector, which are driven by secular growth trends such as Industry 4.0, robotics automation, and precision manufacturing. A new product pipeline is geared towards intelligent subsystems and strategic growth areas such as minimally invasive surgery. This enclosed 5-axis precision subsystem, controlling both the location and angle of incidence, is uniquely positioned for precision manufacturing applications in micromachining, medical, automotive, and semiconductor markets.

Matthijs Glastra: We saw strong growth in multiple application areas, particularly in medical device technology applications.

Matthijs Glastra: However, it was partially offset by softness in some precision medicine applications, and at 2.4 million dollars organic growth headwinds, after discontinuing our surgical displays product line, which we discussed in our last earnings call. Turning to advanced industrial markets, for the second quarter, sales to advanced industrial markets, excluding our market electronics applications, were down 11% year over year on a reported basis, and down 15% on an organic basis, and made up approximately 34% of total mental sales. The subdued sales performed across this end market was in line with our expectations due to the interest rate environment and regional economic challenges.

Matthijs Glastra: However, this was partially offset by softness in some precision medicine applications and a $2. or $4 million organic growth headwind after discontinuing our surgical displaced product line, which we discussed in our last earnings call.

Matthijs Glastra: The subdued sales performance across this end market was in line with our expectations due to the interest rate environment and regional economic challenges.

Matthijs Glastra: While these trends are expected to continue for longer, the 2025 algorithm for these markets remained strong, and science is materializing to support that view. The event is positioned in many attractive applications in the advanced industrial sector, which are driven by secular growth trends such as industry photo, though, robotics and automation, and precision manufacturing. Finally, speaking to our market electronics applications, these represented just 8% of sales in the second quarter, and sales were roughly consistent sequentially, representing a modest increase in year-over-year sales growth. Because all our end markets, we continue to stay focused on gaining confidence share with intelligent sub-systems into multiple high growth application areas.

Speaker Change: Novanta is positioned in many attractive applications in the advanced industrial sector, which are driven by secular growth trends such as Industry 4.0, robotics automation, and precision manufacturing.

Speaker Change: Finally, speaking to our microelectronics applications, these represented just 8% of sales in the second quarter, and sales were roughly consistent sequentially, representing a modest increase in year-over-year sales growth.

Matthijs Glastra: A new product pipeline is geared towards intelligent sub-systems in strategic growth area applications such as minimally invasive surgery, robotic surgery, next generation of lithography, precision medicine and manufacturing application, and advanced motion solutions for robotics and automation applications.

Matthijs Glastra: Now, let me touch on some of the events of strategic growth metrics. For our design, we saw solid design and activity in multiple businesses, particularly with our customers in medical end markets, as well as robotics and automation end markets. For new product metrics, we continue to confidently lean in with a record amount of new product launches in 2024, up more than 50% versus 2023, with more scheduled for 2025. This position is to deliver our goal to $50 million of revenue in 2025 from new product launches with your incremental to an eventous career product offerings. We are already seeing some of its incremental revenue in 2024 as multiple new product launches are already wrapping their sales.

Speaker Change: Now, let me touch on some of Novanta's strategic growth metrics. For our design wins, we saw solid design win activity in multiple businesses, particularly with our customers in medical end markets, as well as robotics and automation end markets.

Speaker Change: For new product metrics, we continue to confidently lean in, with a record amount of new product launches in 2024, up more than 50% versus 2023, with more scheduled for 2025.

Matthijs Glastra: These new products should help prevent the content of the labor-attractive wonder organic growth for many years to come. Our Vatelli Index, which is sales from new products launch in the past four years, and the second quarter was still at about 15 percent of sales, but it improved by several percentest points for product quarter. So, quenchally the second quarter saw a 30 percent increase in your product sales versus the first quarter. This was in line with our expectations and the gradual ramp of new product launches. As stated before, we expect our Vatelli Index to rebound to above 20 percent as we launch our ramp for our pipeline of new products.

Speaker Change: Our Vitality Index, which is sales from new products launched in the past four years, in the second quarter was still at about mid-teens percent of sales, but it improved by several percentage points from prior quarter.

Speaker Change: This was in line with our expectations and the gradual ramp of new product launches. As stated before, we expect our fatality index to rebound to above 20% as we launch and ramp our pipeline of new products.

Matthijs Glastra: I want to highlight five new product platforms we have launched since our last call, which we will begin ramping in the second half of 2024 and are expected to make a strong contribution to our 2025 results. First, the Precision Elephant 3, a uniquely differentiated laser scanning subsystem. This enclosed five-axis Precision subsystem controlling both the location and angle of incidence is uniquely positioned for precision manufacturing applications in micro-machining, medical, automotive, and semi-conof-domarines. Second, another launch of our second-generation smoke evacuation platform by our minimally evasive search reading. This time with a major medical OEM, who was a global leader in endoscopy.

Speaker Change: I want to highlight five new product platforms we have launched since our last call, which we will begin ramping in the second half of 2024, and are expected to make a strong contribution to our 2025 results.

Speaker Change: First, the Precision Elephant 3, a uniquely differentiated laser scanning subsystem.

Speaker Change: This enclosed 5-axis precision subsystem controlling both the location and angle of incidence is uniquely positioned for precision manufacturing applications in micromachining, medical, automotive, and semiconductor markets.

Speaker Change: Second, another launch of our second-generation smoke evacuation platform by our minimally invasive surgery team.

Speaker Change: this time with a major medical OEM who is a global leader in endoscopy. At this point, we're now a vendor to every major medical endoscopy OEM in the world and are well positioned in an exciting, accelerating growth category.

Matthijs Glastra: At this point, we're now a vendor to every major medical endoscopy OEM in the world and are well positioned in an exciting, accelerating growth category. Third, the launch of a new endoscopic pump platform with a smaller, but fast-growing OEM. This is the first step in our strategy to expand in endoscopic pumps, where our share is still relatively low. We are leveraging our insulator playbook expertise and customer relationships to drive growth in endoscopy pumps, which we expect to become one of our next growth engines beyond insulation. Next, the smallest U.S. RFID module in the market are due for small form factor and portable rain RFID readers that are used to identify and track items in healthcare, manufacturing, and retail.

Speaker Change: Third, the launch of a new endoscopic pump platform with a smaller but fast-growing OEM.

Matthijs Glastra: This is the first step in our strategy to expand into endoscopic pumps, where our share is still relatively low. We are leveraging our insufflator playbook, expertise, and customer relationships to drive growth in endoscopy pumps, which we expect to become one of our next growth engines beyond insufflation. Next, the smallest UF RFID module on the market, ideal for small form factor and portable RAIN RFID readers that are used to identify and track items in healthcare, manufacturing, and retail.

Speaker Change: We are leveraging our insufflator playbook, expertise, and customer relationships to drive growth in endoscopy pumps, which we expect to become one of our next growth engines beyond insufflation.

Speaker Change: Next, the smallest U.S. RFID module on the market, ideal for small form factor and portable range RFID readers that are used to identify and track items in health care, manufacturing and retail.

Matthijs Glastra: And finally, our RFP miniature absolute encoder with clouds leading small size and ease of insulation for advanced robotics applications in medical and industrial markets.

Speaker Change: And finally, our RFP miniature absolute encoder with class-leading small size and ease of installation for advanced robotics applications in medical and industrial markets.

Matthijs Glastra: We are on track for the remaining product launches in 2024, as well as some planned launches in 2025, with some launches dependent on customer timing. Who will share more details as we progress further into the year?

Matthijs Glastra: We are on track for the remaining product launches in 2024, as well as some planned launches in 2025, with some launches dependent on customer time. Although the softness in the life science equipment advertising market is having a near-term impact on motion solutions product sales, we beat expectations for sales, margins, EBITDA, and cash flow. Thank you, Matthijs, and good morning, everyone.

Speaker Change: We are on track for the remaining product launches in 2024, as well as some planned launches in 2025, with some launches dependent on customer time.

Matthijs Glastra: Finally, I'd like to give a brief update on the event's acquisition activities. The integration of motion solutions remains on track. We continue to be impressed with our team, the customer intimacy, and their excellent innovation capabilities. We are pleased with how well our teams are integrating together. Although the softness in life science equipment at market is having a near-term impact on motion solutions products, too. We believe that thesis for the transaction is in fact a progressing well, and we're excited to start seeing this business realize its growth potential as the marks eventually recovered.

Speaker Change: We will share more details as we progress further into the year.

Speaker Change: Finally, I'd like to give a brief update on Novanta's acquisition activities. The integration of motion solutions remains on track. We continue to be impressed with our team, their customer intimacy, and their excellent innovation capabilities. And we're pleased with how well our teams are integrating together.

Speaker Change: Although the softness in the life science equipment ad market is having a near-term impact on motion solutions product sales,

Speaker Change: We believe the thesis for the transaction is, in fact, progressing well, and we're excited to start seeing this business realize its growth potential as the markets eventually recover.

Matthijs Glastra: Field motion solutions new acquisitions continue to remain the event of stock priority for capital allocation. We have a strong pipeline of potential targets; our balance sheet is strong, positioning us well to execute on additional transactions. Therefore, you should expect this to continue to be active in the marketplace in 2024.

Speaker Change: Beyond motion solutions, new acquisitions continue to remain Noventa's top priority for capital allocation. We have a strong pipeline of potential targets. Her balance sheet is strong, positioning us well to execute on additional transactions.

Speaker Change: Therefore, you should expect us to continue to be active in the marketplace in 2024.

Matthijs Glastra: In summary, in the second quarter of 2024, Novanta achieved very good operating results in a difficult market economic environment. We beat expectations for sales, margins, even though in cash flows, we have multiple new products which are beginning to ramp up, and the integration of motion solutions is progressing nicely. Overall, another strong quarter for the company, and we're well positioned for strong 2025.

Speaker Change: In summary, in the second quarter of 2024, Novanta achieved very good operating results in a difficult macroeconomic environment. We beat expectations for sales, margins, EBITDA, and cash flows.

Speaker Change: We have multiple new products which are beginning to ramp up, and the integration of motion solutions is progressing nicely.

Speaker Change: Overall, another strong quarter for the company, and we're well-positioned for a strong 2025. With that, I will turn the call over to Robert to provide more details on our operations and financial performance.

Robert Buckley: With that, I will turn to throw over to Robert to provide more details on our operations of financial performance. Robert?

Robert Buckley: For the second quarter, R&D expenses were roughly $24 million, or approximately 10% of sales. Second quarter SG&A expenses were approximately $45 million, or 19% of sales. Adjusted EBITDA was approximately $51 million in the second quarter of 2024, or a 22% adjusted EBITDA margin, versus $52 million in the prior year. On the tax front, our non-GAAP tax rate for the second quarter of 2024 was

Robert Buckley: Thank you, Matthijs.

Robert Buckley: Thank you, Matthijs, and good morning, everyone. Our second quarter 2024 non-GAAP adjusted gross profit was $110 million, or 47% adjusted gross margin, compared to $108 million, or 47% adjusted gross margin, in the second quarter of 2023. Adjusted gross margins were roughly flat year over year, excluding the impact of the motion solutions acquisition, our adjusted gross margin was up roughly 100 basis points in line with expectations. Our gross margin expansion continues to be largely driven by the Novanta growth system deployment in our factories and our commercial.

Robert Buckley: Good morning, everyone. Our second quarter, 2024 non-GAAP adjusted growth profit was 110 million or 47% adjusted growth margin compared to 108 million or 47% adjusted growth margin in the second quarter of 2023. Adjusted growth margins were roughly flat year over year. Excluding the impact of motion solutions acquisition, our adjusted growth margin was up roughly 100 basis points in line with expectations. Our growth margin expansion continues to be largely driven by the Novanta growth system deployment in our factories and our commercial teams. With the second quarter, R&D expenses were roughly 24 million, or approximately 10% of sales.

Robert: Thank you, Matthijs, and good morning, everyone. Our second quarter 2024 non-GAAP adjusted gross profit was $110 million, or 47% adjusted gross margin, compared to $108 million, or 47% adjusted gross margin in the second quarter of 2023.

Robert: Adjusted growth margins were roughly flat year-over-year.

Robert: Excluding the impact of motion solutions acquisition, our adjusted gross margin was up roughly 100 basis points in line with expectations. Our gross margin expansion continues to be largely driven by the Novanta growth system deployment in our factories and our commercial teams.

Robert: For the second quarter, R&D expenses were roughly $24 million or approximately 10% of sales. Second quarter SG&A expenses were approximately $45 million or 19% of sales.

Robert Buckley: Adjusted EBITDA was approximately 51 million in the second quarter of 2024, or 22% adjusted EBITDA margin, versus 52 million in the prior year. On the tax front, our non-GAAP tax rate for the second quarter of 2024 was 20%. Our tax rate remains on track to our estimate of 18% for the full year. Our non-GAAP adjusted earnings per share was 73 cents compared to 80 cents in the second quarter of 2023. Our EPS growth remains muted during the higher interest rates on a higher debt balance. Second quarter operating cash flow was approximately 41 million dollars compared to 26 million in the second quarter of last year.

Robert: Adjusted EBITDA was approximately $51 million in the second quarter of 2024, or a 22% adjusted EBITDA margin versus $52 million in the prior year.

Robert: On the tax front, our non-GAAP tax rate for the second quarter of 2024 was 20%. Our tax rate remains on track to our estimate of 18% for the full year.

Robert Buckley: Our tax rate remains on track to our estimate of 18% for the full year, and our GAAP-adjusted earnings per share remains muted with $0.73 compared to $0.80 in the second quarter of 2023. Our EPS growth remains muted due to higher interest rates on a higher debt balance. Second quarter operating cash flow was approximately $41 million compared to $26 million in the second quarter of last year, an increase of 57% year over year. We are pleased with the improvement in cash flows and expect to continue this momentum by rigorously managing our networking capital and driving strong operating profits. We ended the second quarter with gross debt of $485 million and a gross leverage ratio of approximately 2.4 times, and our net debt was $387 million.

Robert: Our non-GAAP adjusted earnings per share was $0.73 compared to $0.80 in the second quarter of 2023. Our EPS growth remains muted due to higher interest rates on a higher debt balance.

Robert: Second quarter operating cash flow was approximately $41 million compared to $26 million in the second quarter of last year.

Robert Buckley: It increased to 57% year over year. We are pleased with the improvement in cash flows and expect to continue this momentum by rigorously managing our networking capital and driving strong operating profits. We ended the second quarter with growth debt of 485 million, with a growth leverage ratio of approximately 2.4 times, and our net debt was 387 million. We may not track to reducing growth leverage to two or below by year end.

Robert: an increase of 57% year over year. We are pleased with the improvement in cash flows and expect to continue this momentum by rigorously managing our networking capital and driving strong operating profits.

Robert: We ended the second quarter with gross debt of $485 million, with a gross leverage ratio of approximately 2.4 times, and our net debt was $387 million. We remain on track to reducing gross leverage to 2 or below by year end.

Robert Buckley: I'll now update the performance of our operating segments. First, I'll speak to precision medicine and manufacturing segments. Second quarter sales declined by 14% year over year, in line with guidance. The book-to-bill in this segment was 0.81, which is up sequentially from a 10% sequential increase in bookings. Adjust the growth margins in this segment were down year over year, largely driven by lower factor utilization from the lower sales volume. New product revenue was approximately 15% of sales, in line with the company average. Design wins in this segment were down year over year, driven by weakness in the industrial capital spending markets and timing of new product development activities and EUV and EUV applications.

Robert Buckley: We remain on track to reducing gross leverage to two or below by year-end on All Updates. Performance of our Operating Sector. First, I'll speak to our precision medicine and manufacturing segment. Second quarter sales declined by 14% year-over-year in line with guidance.

Speaker Change: I'll now update.

Robert: the performance of our operating segments.

Robert Buckley: The book to bill in this segment was 0.81, which is up sequentially from a 10% sequential increase in booking. However, adjusted gross margins in this segment were down year-over-year, largely driven by lower factory utilization from lower sales volume. New product revenues were approximately mid-teens percent of sales, in line with the company average. Design wins in this segment were down year-over-year, driven by weakness in industrial capital spending markets and timing of new product development activities in EUV and DUV applications.

Speaker Change: First, I'll speak to precision medicine and manufacturing segments. Second quarter sales declined by 14% year-over-year in line with guidance. The book-to-bill in this segment was 0.81, which is up sequentially from a 10% sequential increase of bookings.

Speaker Change: Adjusted gross margins in this segment were down year-over-year, largely driven by lower factory utilization from the lower sales volume.

Speaker Change: New product revenues was approximately mid-teens percent of sales in line with the company average. Design wins in this segment were down year over year driven by weakness in the industrial capital spending markets and timing of new product development activities and EUV and DUV applications.

Robert Buckley: We expect to see gradual improvements in design wins in the second half tied with the new product introduction and our customer's activities. Starting the robotics and automation segment, this segment experienced a revenue decline of 6% year-to-year in the quarter, also in line with our expectations and represents a sequential improvement. The overall book to build in this segment was 1.2, demonstrating a sequential recovery in robotics and automation markets, particular microelectronics, medical, mobile robotics, and humanoids. Bookings grew 40% year-over-year and 29% sequentially; adjusted gross margins increased 80 basis points year-over-year, driven by strong factory efficiencies on increased volumes.

Robert Buckley: We expect to see gradual improvements and design wins in the second half, tied with the new product introductions and our customers' activities, turning the robotics and automation segment. This segment experienced a revenue decline of 6% year-over-year in the quarter, also in line with our expectations and represents a sequential improvement. The overall book to build in this segment was 1.2, demonstrating a sequential recovery in robotics and automation markets, particularly in microelectronics, medical, Mobile Robotics, and Humanoids. Bookings grew 40% year-over-year and 29% sequentially. Adjusted gross margins increased 80 basis points year-over-year driven by strong factory efficiencies on increased volume.

Speaker Change: We expect to see gradual improvements in design wins in the second half, tied with the new product introductions and our customers' activities.

Speaker Change: Turning to Robotics and Automation segments.

Speaker Change: This segment experienced a revenue decline of 6% year-over-year in the quarter, also in line with our expectations and represents a sequential improvement. The overall book to build in this segment was 1.2.

Speaker Change: demonstrating a sequential recovery in robotics and automation markets,

Speaker Change: Mobile Robotics, and Humanoids. Bookings grew 40% year-over-year and 29% sequentially. Adjusted gross margins increased 80 basis points year-over-year, driven by strong factory efficiencies on increased volumes.

Robert Buckley: New product revenue was roughly 12% of total sales for the segment. Design wins in the segment were up strong double digit year-to-day, and we expect to see continued progress here as the year progresses. Finally, medical solutions, the segment experienced reported revenue growth of 25% year-over-year and a 1% organic growth. Excluding the impact of discontinuing our surgical displays, revenue growth would have been up in single digits. This is in line with our expectations and prior guidance. The segment saw a book to build a 0.88, and bookings were roughly flat sequentially and year-of-year. Bookings in our minimum basis of surgery business line were up 30% versus the prior year and 10% sequentially.

Robert Buckley: New product revenue was roughly 12% of total sales for the segment. Design wins in the segment were up strong double-digits year to date, and we expect to see continued progress here as the year progresses. Finally, in medical solutions, the segment experienced reported revenue growth of 25% year-over-year and 1% organic growth. Excluding the impact of discontinuing our surgical displays, revenue growth would have been up mid-single digit. This is in line with our expectations and prior guidance.

Speaker Change: New product revenue was roughly 12% of total sales for the segment. Design wins in the segment were up strong double-digit year-to-date, and we expect to see continued progress here as the year progresses.

Robert Buckley: The segment saw a book-to-bill of 0.88, and bookings were roughly flat sequentially and year-over-year. However, bookings in our minimum evasive surgery business line were up 30% versus the prior year and 10% sequentially. Bookings for our Precision Medicine line were down 30% versus the prior year and down 13% sequentially. Weakness in precision medicine is from a weaker anticipated capital spending environment in life science, multiomics, and bioprocessing markets, whereas growth in bookings and our minimum evasive surgical business line is tied to the launch of our second generation smoke evacuation insulators, which remains on track with expectations. The Vitality Index in this segment remains in the mid-teens percent sales level. We expect this metric to continue to accelerate as we ramp up our product. Design wins in this segment.

Speaker Change: This is in line with our expectations and prior guidance.

Speaker Change: This segment saw us book a bill of $0.88 and bookings were roughly flat sequentially and year-over-year. Bookings in our minimum evasive surgery business line were up 30% versus the prior year and 10% sequentially.

Robert Buckley: Bookings for our precision medicine line were down 30% versus the prior year and down 13% sequentially. The weakness in precision medicine is from a weaker anticipated capital spending environment and life science, multiomics, and bioprocessing markets. Whereas the growth in bookings in our minimum basis of surgical business line is tied to the launch of our second-generation smoke evacuation insulators, which remains on track with expectations. The vitality index in this segment remained in the mid-teens percent or sales level. We expect this metric to continue to accelerate as we ramp up our product. Design wins in the segment were up strong double digit year-to-date.

Robert Buckley: We're up strong double digits year-over-year. Adjusted gross margins in this segment increased roughly 50 basis points year-over-year. Excluding motion solutions, the margin expansion in this segment was over 300 basis points. Now turning to our guide.

Robert Buckley: Adjust the growth margins in the segment increased roughly 50 basis points year-of-year; including motion solutions, the margin expansion in the segment was over 300 basis points.

Robert Buckley: Now turning to our guidance. When we guided our full year back in February, we based it on customers' expectations for sales growth in their businesses over the course of the year. The upper end of the range anticipated, substantially improving life science markets with a more stable industrial capital spending environment, coupled with easier comparisons to the second half of the year. Whereas the bottom end of the range anticipated, no sequential improvement in life science markets, and therefore only modest growth for the year. This range considered both organic growth as well as the revenue contributed from motion solutions, which is now also looking at a reduced outlook due to the same dynamics in the life science markets.

Robert Buckley: When we guided our full year back in February, we based it on customers' expectations for sales growth in their businesses over the course of the year. The upper end of the range anticipated substantially improving life science markets with a more stable industrial capital spending environment, coupled with easier comparison to the second half of the year. Whereas the bottom end of the range anticipated no sequential improvement in life science markets and therefore only modest growth for the year.

Speaker Change: When we guided our full year back in February , we based it on customers' expectations.

Robert Buckley: This range considered both organic growth as well as revenue contributed from motion solutions, which is now also looking at a reduced outlook due to the same dynamics in the life science market. While Novanta still sees sequentially improving revenue from new product introductions accelerating in the second half and a stronger medical device end market, this improvement is now partially offset by a weaker capital spending environment in both industrial and life science markets. For industrial capital spending, the markets in Europe and China have deteriorated further from the first half of the year.

Robert Buckley: While Novanta still sees sequentially improving revenue from new product introductions, accelerating in the second half and a stronger medical device and market, this improvement is now partially offset by a weaker capital spending environment in both industrial and life science markets. For industrial capital spending, the markets in Europe and China have deteriorated further from the first half of the year. This is evident in the recent weakness and further drops in European and China PMI measures. As we stand here today, we're not expecting these markets to recover this year. Furthermore, we are seeing an additional step down in demand for capital equipment sales into life science, multiomics, and bioprocessing markets, which is obviously off of an already low revenue level.

Speaker Change: While Novanta still sees sequentially improving revenue from new product introductions accelerating in the second half and a stronger medical device end market, this improvement is now partially offset by a weaker capital spending environment in both industrial and life science markets.

Robert Buckley: This is evident in the recent weakness and further drops in European and Chinese PMI measures. As we stand here today, we're not expecting these markets to recover this year. Furthermore, we are seeing an additional step down in demand for capital equipment sales into life science, multiomics, and bioprocessing markets, which is obviously off of an already low revenue level. While our customers are seeing signs of a market recovery in the second half of this year, capital equipment sales are still expected to be deferred as our customers' customers shift dollars into services, assays, consumables, and other non-capital equipment purchases.

Speaker Change: As we stand here today, we're not expecting these markets to recover this year.

Robert Buckley: While our customers are seeing signs of a market recovery in the second half of this year, the capital equipment sales are still expected to be deferred as our customers' customers shift dollars into services, cafes, consumables, and other non-capital equipment purchases. On the positive, this uptick and drug discovery and development activity is a leading indicator of an improving capital spending sentiment. Coupled with its expected interest rate declines, capital equipment demand in 2025 is expected to improve. Elsewhere in our portfolio, we are seeing many positive tailwinds. New product revenue is accelerating; demand and microelectronics is beginning to recover.

Speaker Change: While our customers are seeing signs of a market recovery in the second half of this year, the capital equipment sales are still expected to be deferred as our customers' customers shift dollars into services, assays, consumables, and other non-capital equipment purchases.

Robert Buckley: On the positive, this uptick in drug discovery and development activity is a leading indicator of an improving capital spending set. coupled with expected interest rate declines, capital equipment demand in 2025 is expected to improve. Elsewhere in our portfolio, we are seeing many positive tailwinds. New product revenue is accelerating, and demand for microelectronics is beginning to recover. Robotics and automation orders in the U.S. are accelerating, and the medical device market, particularly around our minimally invasive surgical products, continues to stay robust, with our products gaining further traction in the market.

Speaker Change: On the positive, this uptick in drug discovery and development activity is a leading indicator of an improving capital spending sentiment.

Speaker Change: Elsewhere in our portfolio, we are seeing many positive tailwinds.

Speaker Change: New product revenue is accelerating. Demand in microelectronics is beginning to recover. Robotics and automation orders in the U.S. are accelerating. And the medical device market, particularly around our minimally invasive surgical products, continues to stay robust, with our products gaining further traction in the market.

Robert Buckley: Robotics and automation orders in the U.S. are accelerating, and the medical device market, particularly around our minimum base of surgical products, continues to stay robust with our products gaining further traction in the market. Unfortunately, the strong positive demand trends in our business cannot overcome the headwinds elsewhere. Based on this dynamic, we are trending to the lower end of the revenue guidance we provided in February. For the full year 2024, we now expect gap revenue to be at the bottom of our previously communicated revenue range of 975. This represents reported revenue growth of greater than 10 percent.

Robert Buckley: Unfortunately, the strong positive demand trends in our business cannot overcome the headwinds elsewhere. Based on this dynamic, we are trending to the lower end of the revenue guidance we provided in February. For the full year 2024, we now expect GAAP revenue to be at the bottom of our previously communicated revenue range of $9.75. This represents reported revenue growth of greater than 10%. Revenue from current year acquisitions is expected to decline from a prior estimate of nearly $90 million to approximately $80 million.

Speaker Change: Unfortunately, the strong positive demand trends in our business cannot overcome the headwinds elsewhere. Based on this dynamic, we are trending to the lower end of the revenue guidance we provided in February .

Speaker Change: For the full year 2024, we now expect GAAP revenue to be at the bottom of our previously communicated revenue range of $9.75.

Speaker Change: This represents reported revenue growth of greater than 10%.

Robert Buckley: Revenue from current year acquisitions is expected to decline from a prior estimate of nearly 90 million to approximately 80 million. Therefore, a full year organic growth is still expected to be low single digit at approximately 2 percent. Revenue growth in the second half is largely driven by new product revenues, a robust medical device and market, summer recovery microelectronics, and a better capital spending environment in the U.S. Robotic space. For the third quarter of 2024, we expect gap revenue in the range of 241 million to 244 million. This represents organic revenue growth between 1 and 2 percent, on a year-over-year basis, and up sequentially 3 percent to 4 percent.

Speaker Change: Revenue from current year acquisitions is expected to decline from a prior estimate of nearly $90 million to approximately $80 million.

Robert Buckley: Therefore, full-year organic growth is still expected to be low single-digit at approximately 2%. Revenue growth in the second half is largely driven by new product revenues, a robust medical device and market, some recovery microelectronics, and a better capital spending environment in the U.S. robotics space. For the third quarter of 2024, we expect gap revenue in the range of 241 million to 244 million. This represents organic revenue growth between one and two percent on a year-over-year basis and up sequentially 3% to 4%. The third quarter is returning to growth, albeit at a lower rate than anticipated due to the dynamics I talked about.

Speaker Change: Therefore, full-year organic growth is still expected to be low single-digit at approximately 2%.

Speaker Change: Revenue growth in the second half is largely driven by new product revenues, a robust medical device and market, some recovery microelectronics, and a better capital spending environment in the U.S. robotic space.

Speaker Change: on a year-over-year basis, and up sequentially 3% to 4%.

Robert Buckley: The third quarter is returning to growth, albeit at a lower rate than anticipated due to the dynamics I talked about. On the segment level, in the third quarter, we expect precision medicine and manufacturing revenue to climb on a low double-digit percentage basis year-over-year and to be roughly flat on a sequential basis. We expect the segments to return to modest year-over-year growth in the fourth quarter and expect the quenchally improving revenue to accelerate. This segment is impacted by both the industrial capital spending environment and from life science, weakness and capital spending. A robotics and automation segment revenue is expected to grow 17-18% year-over-year in the third quarter, representing both an improving demand environment from the first half in the year, as these end markets start to show solid signs of recovery, largely in the US.

Speaker Change: The third quarter is returning to growth, albeit at a lower rate than anticipated due to the dynamics I talked about.

Robert Buckley: On the segment level, in the third quarter, we expect precision medicine and manufacturing revenue to climb on a low double-digit percentage basis year-over-year and to be roughly flat on a sequential basis. We expect this segment to return to modest year-over-year growth in the fourth quarter and expect sequentially improving revenue to accelerate. This segment is impacted by both the industrial capital spending environment and from life science weakness in capital spending.

Speaker Change: On the segment level, in the third quarter, we expect Precision Medicine and Manufacturing Revenue to decline.

Speaker Change: on a low double-digit percentage basis year-over-year and to be roughly flat on a sequential basis. We expect this segment to return to modest year-over-year growth in the fourth quarter and expect sequentially improving revenue to accelerate.

Speaker Change: This segment is impacted by both the industrial capital spending environment and from life science weakness in capital spending.

Robert Buckley: The robotics and automation segment revenue is expected to grow 17 to 18 percent year-over-year in the third quarter, representing both an improving demand environment from the first half of the year as these end markets start to show solid signs of recovery, largely in the U.S. We expect strong double-digit organic growth in the fourth quarter as the end markets continue to improve and also from easier year-over-year comparisons. And finally, our Medical Solutions segment is expected to show year-over-year growth of 19-21%, driven by the Motion Solutions acquisition.

Robert Buckley: We expect strong, double-digit organic growth in the fourth quarter, as the end markets continue to improve and also from easier year-over-year comparisons. And finally, our medical solutions segment is expected to show year-over-year growth of 19-21% reported revenue growth, driven by the motion solutions acquisition. On our organic basis, we expect low to mid-single-digit decline year-over-year. Excluding the impact of discontinuing our surgical display product lines, the organic revenue would have been flat year-over-year. While the new product introductions and our minimum basis of surgical business line continue to see broad market adoption, this is offset by high-single-digit declines in our precision medicine business line from the before-mentioned dynamics in the life science market.

Speaker Change: And finally, our Medical Solutions segment is expected to show year-over-year growth of 19-21% reported revenue growth, driven by the Motion Solutions acquisition. On an organic basis, we expect low to mid-single-digit decline year-over-year.

Robert Buckley: On an organic basis, we expect a low to mid-single-digit decline year-over-year; excluding the impact of discontinuing our surgical displays product line, organic revenue would have been flat year over year. Meanwhile, the new product introductions at our Minnovasive Surgical Business Line continue to see broad market adoption. This is offset by high single-digit declines in our precision medicine business line from the above-mentioned dynamics of the life science market.

Speaker Change: While the new product introductions in our Minimum Evasive Surgical Business Line continue to see broad market adoption, this is offset by high single-digit declines in our Precision Medicine Business Line from the before-mentioned dynamics in the life science market.

Robert Buckley: However, in the fourth quarter, this segment is expected to deliver greater than 30% reported revenue growth and high single-digit to low double-digit organic growth. As new products continue to ramp up in our minimum basis of surgical business, overcoming the weakness in the life science markets.

Robert Buckley: However, in the fourth quarter, this segment is expected to deliver greater than 30% reported revenue growth and High Single-Digit to Low Double-Digit organic growth, as new products continue to ramp up in our minimally invasive surgical business, overcoming the weakness in the life science market. Moving on to adjusted gross margins for the third quarter, we expect a range of 47% to 47.5%. In this segment, we expect gross margin to be flat or up compared to the gross margins they delivered in the second quarter.

Speaker Change: and high single-digit to low double-digit organic growth.

Speaker Change: As new products continue to ramp up in our minimally invasive surgical business, overcoming the weakness in the life science markets.

Robert Buckley: Moving on to adjusted growth margins. For the third quarter, we expect a range of 47% to 47.5%. In the segment, we expect growth margin to be flat. We're up-prepared to the growth margins they delivered in the second quarter. For the full year of 2024, we now expect to adjust the growth margins to be approximately 46.6% to 47%. Our current outlook gives us confidence to raise the bottom end of the range by 60 basis points versus what we communicated in February. We expect the margin performance of our core business to continue to overcome the diluted impact of the motion solutions acquisitions.

Speaker Change: Moving on to adjusted growth margins for the third quarter, we expect a range of 47 percent to 47.5 percent.

Speaker Change: In this segment, we expect gross margin to be flat or up compared to the gross margins they delivered in the second quarter.

Robert Buckley: For the full year of 2024, we now expect adjusted gross margins to be approximately 46.6% to 47%. Our current outlook gives us confidence to raise the bottom end of the range by 60 basis points versus what we communicated in February. We expect the margin performance of our core business to continue to overcome the diluted impact of the motion solutions acquisition. This is strong evidence of the team's ability to execute using the Novanta growth system to drive structural cost and quality improvements and other efficiencies.

Speaker Change: Our current outlook gives us confidence to raise the bottom end of the range by 60 basis points versus what we communicated in February . We expect the margin performance of our core business to continue to overcome the diluted impact of the motion solutions acquisitions.

Robert Buckley: This is strong evidence of the team's ability to execute using the advanced growth system, the dry structural cost and quality improvements, and other efficiencies. We expect R&D and SNA expenses in the third quarter to be approximately 68 to 69 million and approximately 275 million to 278 million for the aviation expenses, which for 3.5 million in the second quarter should be roughly 4 million in the third and fourth quarter. Stock compensation expense, which was 6.2 million in the second quarter, should be approximately 7 million in the third and fourth quarter. For adjusted EBITDA for the third quarter, we expect a range of 56 million to 58 million, which will represent double-digit growth year-to-year and a greater than 23% EBITDA margin.

Robert Buckley: We expect R&D and SG&A expenses in the third quarter to be approximately $68 to $69 million and approximately $275 million to $278 million for the full year. Depreciation expenses, which were $3.5 million in the second quarter, should be roughly $4 million in the third and fourth quarter. Stock compensation expense, which was $6.2 million in the second quarter, should be approximately $7 million in the third and fourth quarter.

Speaker Change: We expect R&D and SG&A expenses in the third quarter to be approximately $68 to $69 million and approximately $275 million to $278 million for the full year.

Speaker Change: Depreciation expenses, which were $3.5 million in the second quarter, should be roughly $4 million in the third and fourth quarter. Stock compensation expense, which was $6.2 million in the second quarter, should be approximately $7 million in the third and fourth quarter.

Robert Buckley: For adjusted EBITDA for the third quarter, we expect a range of $56 million to $58 million, which will represent double-digit growth year-over-year and a greater than 23% EBITDA margin. For the full year of 2024, we now expect a range of $215 million to $222 million, which will demonstrate double-digit growth year-over-year and represent the company delivering an EBITDA margin greater than 23% in the Interest expense is expected to be approximately $8 million in the third and fourth quarters.

Speaker Change: For adjusted EBITDA for the third quarter, we expect a range of $56 million to $58 million, which will represent double-digit growth year-over-year and a greater than 23% EBITDA margin.

Robert Buckley: For the full year of 2024 for adjusted EBITDA, we now expect a range of 215 million to 222 million, which will demonstrate double-digit growth year-to-year and represent the company delivering EBITDA margin greater than 23% in the second half. It just expense is expected to be approximately 8 million in the third and fourth quarter. We expect our non-GAAP tax rate to be around 18% through the third and fourth quarter, so emerge the full year of 2024. However, we are carefully watching both the jurisdictional mix of income and changes to the pillar two adoption of rules, both of which could increase our tax rate slightly from this estimate.

Speaker Change: For the full year of 2024 for Adjusted EBITDA, we now expect a range of $215 million to $222 million, which will demonstrate double-digit growth year-over-year and represent the company delivering an EBITDA margin greater than 23% in the second half.

Speaker Change: Interest expense is expected to be approximately $8 million in the 3rd and 4th quarter. We expect our non-GAAP tax rate to be around 18% for the 3rd and 4th quarters, similar to the full year of 2024.

Speaker Change: However, we are carefully watching both the jurisdictional mix of income and changes to the Pillar 2 adoption rules, both of which could increase our tax rates slightly from this estimate.

Robert Buckley: For adjusted deluded earnings per share, we expect a range of 85 cents to 89 cents in the third quarter. For the full year of 2024, for adjusted diluted earnings per share, we now expect a range of $3.20 to $3.35. Our current outlook gives us confidence to raise the bottom end of the range by 10 cents versus what we communicated back in February. Finally, we expect cash flows that continue to be strong in the third and fourth quarters, following the continued momentum from the past several quarters as we continue to rigorously manage our networking capital levels, improve our profitability, and pay down our debt.

Robert Buckley: We expect our non-GAAP tax rate to be around 18% for the third and fourth quarters, similar to the full year of 2024. However, we are carefully watching both the jurisdictional mix of income and changes to the Pillar 2 adoption rules, both of which could increase our tax rate slightly from this estimate. For adjusted diluted earnings per share, we expect a range of 85 cents to 89 cents in the third quarter. For the full year of 2024, we now expect a range of $3.20 to $3.35.

Speaker Change: For adjusted diluted earnings per share, we expect a range of $0.85 to $0.89 in the third quarter. For the full year of 2024, for adjusted diluted earnings per share, we now expect a range of $3.20 to $3.35.

Robert Buckley: Our current outlook gives us confidence to raise the bottom end of the range by 10 cents versus what we communicated back in February. Finally, we expect cash flows to continue to be strong in the third and fourth quarters, following the continued momentum from the past several quarters, as we continue to rigorously manage our net working capital levels, improve our profitability, and pay down our debt. Until we make new acquisitions, we plan to continue to use cash flow to pay down existing debt and reduce our growth leverage, putting us in a strong position to execute on the next acquisition. As always, this guidance does not assume any significant changes in foreign exchange rates, and we are not factoring in any significant geopolitical disruptions that can negatively impact the macroeconomic climate.

Speaker Change: Our current outlook gives us confidence to raise the bottom end of the range by 10 cents versus what we communicated back in February .

Speaker Change: Finally, we expect cash flows to continue to be strong in the third and fourth quarters following the continued momentum from the past several quarters as we continue to rigorously manage our net working capital levels, improve our profitability, and pay down our debt.

Robert Buckley: Until we make new acquisitions, we plan to continue to use cash flow to pay down existing debt and reduce our gross leverage, putting us in a strong position that execute on the next acquisition. As always, this guidance does not assume any significant changes to foreign exchange rates, and we are not factoring in any significant geopolitical disruptions that can negatively impact the macroeconomic climate. While we continue to work through a challenging macroeconomic environment, we are encouraged by the strength of our new product introductions, the strength of our medical device and markets, and some signs of some market recoveries and improving acquisition environment.

Speaker Change: Until we make new acquisitions, we plan to continue to use cash flow to pay down existing debt and reduce our gross leverage, putting us in a strong position to execute on the next acquisition.

Speaker Change: As always, this guidance does not assume any significant changes to foreign exchange rates, and we are not factoring in any significant geopolitical disruptions that can negatively impact the macroeconomic climate.

Operator: While we continue to work through a challenging macroeconomic environment, we are encouraged by the strength of our new product introductions, the strength of our medical device end markets, and some signs of some market recoveries and an improving acquisition environment. The organization's business execution continues to improve with the broad adoption of the Vanta growth system, which is evidenced by the strong financial execution in the past two quarters, as well as the dramatically improving customer lead times and improving product quality levels.

Speaker Change: While we continue to work through a challenging macroeconomic environment, we are encouraged by the strength of our new product introductions, the strength of our medical device end markets, and some signs of some market recoveries and an improving acquisition environment.

Robert Buckley: The organization's business execution continues to improve with a broad adoption of the advanced growth system, which is evident for the strong financial execution of the past two quarters, as well as the dramatically improving customer lead times and improving product quality levels. However, this is also evident in the strong and improving growth margins, EBITDA, in earnings for share, and cash flow for the year. We continue to attract and retain the best talent, bringing on leaders that allow us to dramatically scale the business in the coming years. Finally, despite some pauses in capital spending, we expect to demonstrate very strong financial results in the second half of the year, positioning us well for an even stronger 2025 due to new product launches and the breadth of our end market exposures.

Speaker Change: The organization's business execution continues to improve.

Speaker Change: with the broad adoption of the advanced growth system, which is evidenced by the strong financial execution in the past two quarters, as well as the dramatically improving customer lead times and improving product quality levels.

Operator: However, this is also evident in the strong and improving growth margins, EBITDA, and earnings per share and cashflow for the year. We continue to attract and retain the best talent, bringing on leaders that will allow us to dramatically scale the business in the coming years. And finally, despite some pauses in capital spending, we expect to demonstrate very strong financial results in the second half of the year, positioning us well for an even stronger 2025, due to new product launches and the breadth of our end market exposure.

Speaker Change: However, this is also evident in the strong and improving growth margins, EBITDA, and earnings per share, and cash flow for the year.

Speaker Change: We continue to attract and retain the best talent, bringing on leaders that allow us to dramatically scale the business in the coming years. And finally, despite some pauses in capital spending,

Speaker Change: We expect to demonstrate very strong financial results in the second half of the year, positioning us well for an even stronger 2025 due to new product launches and the breadth of our end market exposures.

Robert Buckley: It is important to emphasize our guidance for revenue in the second half, translates into flat to slightly up organic revenue growth in the third quarter and double-digit positive organic revenue and reported revenue growth in the fourth quarter. This supports our view that we are well positioned for a much stronger 2025.

Operator: It is important to emphasize that our guidance for revenue in the second half translates into flat to slightly higher organic revenue growth in the third quarter and double-digit positive organic revenue and reported revenue growth in the fourth quarter. This supports our view that we are well positioned for a much stronger 2025. To wrap up, we are proud of Novanta's performance in the second quarter, which showed excellent execution by our teams. We delivered revenue, profit, and cash flow performance above our expectations in a challenging operating environment.

Speaker Change: It is important to emphasize our guidance for revenue in the second half translates into flat to slightly up organic revenue growth in the third quarter, and double-digit positive organic revenue and reported revenue growth in the fourth quarter.

Speaker Change: This supports our view that we are well-positioned for a much stronger 2025.

Matthijs Glastra: To wrap up, we are proud of the advances performance in the second quarter, which showed excellent execution by our teams. We delivered revenue, profit, and cash flow performance above our expectations in a challenging operating environment. This performance was a testament to the resiliency of our business portfolio and the tenacity of our teams to achieve great results no matter the business environment.

Speaker Change: To wrap up, we are proud of Nuance's performance in the second quarter, which showed excellent execution by our teams. We delivered revenue, profit, and cash flow performance above our expectations in a challenging operating environment.

Operator: This performance was a testament to the resiliency of our business portfolio and the tenacity of our teams to achieve great results no matter the business environment. This concludes our prepared remarks. We'll now open the call to questions.

Speaker Change: This performance was a testament to the resiliency of our business portfolio and the tenacity of our teams to achieve great results no matter the business environment.

Matthijs Glastra: This concludes our prepared remarks.

Operator: We'll now open the call up for questions. Thank you very much. We will now begin the question and answer session. Glastra question, you may press star then one on your touch-tone phone. If you were using a speaker phone, please pick up your handset before pressing the keys. If you would draw your question, please press star, then two.

Speaker Change: This concludes our prepared remarks. We'll now open the call up for questions.

Operator: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2. The first question comes from Lee Jagoda from CJS Securities. Please go ahead. Oh, good morning, guys.

Speaker Change: Thank you very much.

Speaker Change: We will now begin the question and answer session.

Speaker Change: To ask a question, you may press star then 1 on your touchtone phone.

Speaker Change: If you are using a speakerphone, please pick up your handset before pressing the keys.

Speaker Change: To withdraw your question, please press star, then 2.

Lee Jagoda: The first question comes from Lee Jagoda from CJS Securities. Please go ahead. Good morning, guys. Good morning, Lee.

Speaker Change: The first question comes from Lee Jagoda from CJS Securities. Please go ahead.

Lee Jagoda: I guess to start on the life sciences bioprocessing space, can you give us some more context around what gives you the confidence that things are kind of turning, and I know you had mentioned not going to turn until 25, but things are kind of turning. And then, obviously, when you bought Motion Solutions, it gave you a head start on some of the secular trends that you're hopeful will materialize over the next several years. What are the other tools that you're still looking to acquire to kind of bolster that position further?

Matthijs Glastra: I guess to start on the life sciences bioprocessing space, can you give us some more context around what gives you the confidence that things are kind of turning, and I know you had mentioned not going to turn till 25, but things are kind of turning. Obviously, when you bought Motion Solutions, it gave you a head start into some of the secular trends that you're hopeful will materialize over the next several years. What are the other tools that you're still looking to acquire to kind of bolster that position further? Yeah, Lee, so what we're seeing is basically our customers' customers are starting to order and basically the consumable parts of the business, which means that the activity is improving in this space.

Lee Yakoda: Hi, good morning guys.

Lee Yakoda: Good morning, Ray. Good morning, Lee.

Speaker Change: I guess to start on the life sciences bioprocessing space,

Lee Yakoda: Can you give us some work?

Speaker Change: you know, context around what gives you the confidence that

Speaker Change: Things are kind of turning and I know you had mentioned not going to turn until 25, but things are kind of turning and then You know, obviously when you bought motion solutions It gave you a head start into some of the secular trends that you're hopeful will materialize over the next several years

Speaker Change: What are the other tools that you're still looking to acquire to kind of bolster that position further?

Matthijs Glastra: Yeah, Lee, so what we're seeing is that our customers are starting to order basically the consumable parts of the business, which means that activity is improving in this space. It's just the capital part of the market is just not yet improving. And we actually see that double-dip weakness that we talked about.

Speaker Change: Yeah, Lee, so what we're seeing is basically our customers' customers are starting to order basically the consumable parts of the business, which means that the activity is improving in this space. It's just the capital part of the market is just not yet improving, and we actually see that double dip weakness that we talked about.

Matthijs Glastra: It's just the capital part of the market is just not yet improving, and we actually see that double-dip, double-dip weakness that we talked about. But, as you can see, multiple of our customers are actually talking about an improving climate, albeit not as rapid as people expected, but it's incrementally improving on the non-capital side. And we feel that as a leading indicator for the capital side, and therefore we feel in 2025 that will be an improving outlook; of course, the timing of which is a bit uncertain. We are looking now just to structurally manage our business through the cycles, and we'll also introduce new products and gain new customer slots, and further expand the motion solutions business.

Matthijs Glastra: But as you can see, multiple of our customers are actually talking about an improving climate, albeit not as rapid as people expected, but it's incrementally improving on the non-capital side. And we feel that is a leading indicator for the capital side. And therefore, we feel that in 2025, that will be an improving outlook, of course, the timing of which is a bit uncertain. We are looking to, you know, just structurally manage your business through the cycles. And we will also introduce new products and gain new customer slots and further expand the motion solutions business. So we're, we're positive about the space in the medium.

Speaker Change: So, but as you can see, multiple of our customers are actually talking about an improving climate, albeit not as rapid as people expected.

Speaker Change: But it's incrementally improving on the non-capital side, and we feel that is a leading indicator for the capital side. And therefore, we feel in 2025, there will be an improving outlook, of course, the timing of which is a bit uncertain.

Matthijs Glastra: So we're apologized about the space in the medium term. And then I would add to that, I think we, as you think about all this stuff, is associated with capital equipment launches by our customers or capital equipment they're selling into the marketplace. That's obviously going to have some interest rate sensitivity. So in improving interest rate environment in the back half of the year and into 2025 actually gives us greater confidence that you'll see a faster return. In addition to most of the drugs being launched into the US and European markets, are based on biologics, and biologics require these new types of technologies, including the genomics, proteomics, and other types of multi-omic based technologies that you hear a lot of our customers talking about.

Robert Buckley: And I would add to that, I think, Lee, as you think about all this stuff associated with capital equipment launches by our customers or capital equipment they're selling into the marketplace, that's obviously going to have some interest rate sensitivity. So, an improving interest rate environment in the back half of the year, and this is 2025, actually gives us greater confidence that you'll see a faster return. In addition, most of the drugs being launched into the US and European markets are based on biologics, and biologics require these new types of technologies, including the genomics, proteomics, and other types of multi-omic based technologies that you hear a lot of our customers talking about.

Speaker Change: that you hear a lot of our customers talking about.

Matthijs Glastra: Great, and then gross margins were ahead of expectations and expected to be ahead of expectations. Are there specific drivers of that improvement, and is any of that a pull forward, meaning should we kind of temper our expectations for. Margin expansion next year or is everything continued to be on track? I think things continue on track, so we were anticipating driving a 47% gross margin. You know, we are on track to accomplishing that despite the delusion of the impact of motion solutions. As we get into next year, you know, we're still continuing to expect to drive robust internal gross margins, core robust margins. Obviously, motion solutions' growth characteristics could have a diluted impact on that for one final year.

Lee Jagoda: Great. And then gross margins were ahead of expectations and expected to be ahead of expectations. Are there specific drivers of that improvement? And is any of that a pull forward, meaning should we kind of temper our expectations for Margin Expansion next year or is everything continuing to be on track?

Speaker Change: Margin Expansion next year or is everything continued to be on track?

Robert Buckley: I think things will continue on track. So we were anticipating driving a 47 percent gross margin. You know, we are on track to accomplishing that despite the delusionary impact of motion solutions. As we get into next year, you know, we're still continuing to expect to drive robust internal gross margins, core gross margins. Obviously, motion solutions' growth characteristics could have a dilutive impact on that for one final year. But overall, I think, you know, the business is on a strong track for 2025. It is being driven by the Novanta growth system.

Speaker Change: I think things continue on track. So we were anticipating driving a 47% gross margin. You know, we are on track to accomplishing that despite the dilutionary impact of motion solutions.

Speaker Change: As we get into next year, you know, we're still continuing to expect to drive.

Speaker Change: Robust internal growth margins, core growth margins, obviously motion solutions growth characteristics could have a dilutive impact on that

Matthijs Glastra: But overall, I think, you know, the business is on a strong track for 2025. It is being driven by the Novanta gross system; we're driving that deep into our different business units. We're driving productivity improvements in our factories, material cost downs with the products that we sell to our customers. In addition to that, we have captured some price; we're not expecting to lose any of that price as we get into 2025. And we see additional opportunity to decrease our operating footprint to drive additional benefits there. So we feel pretty good that we have this pathway to continue to improve gross margins, eventually driving it up to that 50% level. Everything remains on track.

Robert Buckley: We're driving that deep into our different business units. We're driving productivity improvements in our factories, and material cost downs with the products that we sell to our customers. In addition to that, we have captured some price. We're not expecting to lose any of that price as we get into 2025. And we see additional opportunities to decrease our operating footprint to drive additional benefits there. So we feel pretty good that we have this pathway to continue to improve gross margins, eventually driving it up to that 50 percent level. Everything remains on track, and I think the last couple of years demonstrate that.

Lee Jagoda: Sure, then one more quick one for me if I can. Just Matthijs, I think in your prepared remarks, you mentioned the $50 million incremental opportunity from new products in 2025. I don't know if it's semantics or not, but I think prior, it was the $50 million from the insufflation product lines. Is there any change there? No, I think we've been pretty consistent.

Matthijs Glastra: And I think the last couple of years demonstrates that.

Matthijs Glastra: Sure, then one more quick one for me if I can. Just Matthias, I think in your prepared remarks, you mentioned the $50 million incremental opportunity from new products in 2025. I don't know if it's semantics or not, but I think prior, it was the 50 million from the inflation product lines. Is there any change there? No, I think we've been pretty consistent, and I realized there's been some confusion. I mean, we have said that there was the gross number of 50 million for the minimally evasive surgery product lines that includes insiflation, but there's another 50 million which I spoke about in this in this clip, which we have been speaking about in the last, I would say, four to five running schools, which is the total revenue from new products. The incremental total of new products revenue is 50 million.

Speaker Change: One more quick one for me if I can. Matthijs, I think in your prepared remarks you mentioned the $50 million incremental opportunity from new products in 2025. I don't know if it's semantics or not, but I think prior it was the $50 million from the insufflation product lines.

Matthijs Glastra: No, I think we've been pretty consistent, and I realize there's been some confusion. I mean, we have said that there was a gross number of $50 million for the minimally invasive surgery product line that includes insufflation. But there's another 50 million, which I spoke about in this script, which we have been speaking about in the last, I would say, four to five earnings calls, which is the total revenue from new products. The incremental total of new product revenue is 50 million.

Speaker Change: Is there any change there?

Speaker Change: No, I think we've been pretty consistent, and I realize there's been some confusion. I mean, we have said that there was the gross number of $50 million for the minimally invasive surgery product line that includes insufflation.

Matthijs Glastra: So that is net of any end of life for all the products generated. So that is really incremental to Novanta's product offerings. And so it's the absolute amount of revenue from new products we will realize next year. But it's not, though, the year-over-year variance, right?

Matthijs Glastra: So that is net of any end of life of all the products generating. So that is really incremental to Naventa's product offerings. And so it's the absolute amount of revenue from new product, we will realize next year. It's not though the year-over-year variance, right? So just to be clear because we realized that maybe there has been some confusion there. Hopefully, that's clear. And of course, some of this benefit is happening already in 24, because some of the products are ramping right now, right? As we shared in the prepared remarks, the larger impact will be, of course, in 2025, because AED ramps are further progressed, and B, we, of course, have to fool your fact of these ramps.

Speaker Change: And so it's the absolute amount of revenue from new products we will realize next year.

Matthijs Glastra: So just to be clear, because we realize that maybe there has been some confusion there. Hopefully, that's clear. And of course, some of this benefit is happening already in 24, because some of the products are ramping right now, as we shared in the prepared remarks. But the larger impact will be, of course, in 2025, because A, the ramps are further advanced, and B, we, of course, have the full-year effect of these ramps.

Speaker Change: And of course, some of this benefit is happening already in 24, because some of the products are ramping right now, right, as we shared in the prepared remarks.

Speaker Change: But the larger impact will be, of course, in 2025 because, A, the ramps are further progressed and, B, we, of course, have the full-year effect of these ramps. So hopefully that is clear. It will, of course, include.

Matthijs Glastra: So hopefully that is, that is clear. It will, of course, include smoke evacuation, insurflating. Insurflation is a large driver, but it's not the only driver, which is why we're excited about it. There's much more of a broader set of new products contributions that are included in that incremental $50 million total.

Matthijs Glastra: So hopefully that is clear. It will, of course, include smoke evacuation and insufflation. Insufflation is a large driver, but it's not the only driver, which is why we're excited about it. There is much more of a broader set of new products contributions that are included in that incremental $50 million total.

Speaker Change: Smoke Evacuation Insufflation is a large driver, but it's not the only driver, which is why we're excited about it. It's much more of a broader set of new products contributions that are included in that incremental $50 million total revenue.

Lee Jagoda: Great, thanks very much.

Brian Drab: Thank you. The next question comes from Brian Drab with William Blair. Please go ahead. Hi, thanks for taking my question. If I had just listened to the comments on the call with so much detail from Robert, I might have been left with the impression that guidance changed. Quite a bit, but I just want to make sure I have this right. So the beginning of the year, the initial guidance was $9.75 million to $1 billion for revenue, midpoint, like $9.87.5, and you are moving away from $10 million in revenue from the display business, which would take the midpoint, if I was just using midpoint to $9.77.5, and now today we're at $9.7 million.

Brian Drab: The next question comes from Brian Drab with William Blair. Please go ahead.

Lee Yakoda: Thanks, Lee.

Speaker Change: Thank you. The next question comes from Brian Drab with William Blair. Please go ahead.

Robert Buckley: Hi, thanks for taking my question. If I had just listened to the comments on the call with so much detail from Robert, I might have been left with the impression that guidance has changed quite a bit, but I just want to make sure I have this right. So, at the beginning of the year, the initial guidance was $975 million to $1 billion for revenue, the midpoint being around $987.5, and you are moving away from $10 million in revenue from the display business, which would take the midpoint, if I was just using the midpoint, to 977.5, and now today we're at 975 million. Is that right, like the right way to think about it? I know there are so many other moving parts, but am I missing anything with that display adjustment?

Speaker Change: If I had just listened to the comments on the call with so much detail from Robert, I might.

Speaker Change: have been left with the impression that guidance changed quite a bit, but I just want to make sure I have this right, so

Speaker Change: The beginning of the year, the initial guidance was $975 million to $1 billion for revenue, midpoint like $987.5.

Speaker Change: and you are moving away from $10 million in revenue from the display business.

Speaker Change: which would take the midpoint, if I was just using the midpoint, to 977.5 and now today we're at 975 million. Is that right, like the right way to think about it? I know there's so many other moving parts, but am I missing anything with that display adjustment?

Robert Buckley: $9.75 million, is that right? Like the right way to think about that I know there's so many other moving parts, but am I missing anything with that display adjustment? Yeah, I think the easiest way to think about it is there's $10 million lower motion solutions, and then there's also an element of the display business. So in a motion solutions of $10 million less because the precision medicine and markets, life science tool and markets are not materializing in the way that customers anticipated. So it is fair to say that we gave a guidance range, which I talked about 9.75 to a billion, and we're at $9.75 right now, so the bottom end of the range based on the fact that the life science tools are taking a little bit of a double dip in the back half of the year.

Robert Buckley: Yeah, I think the easiest way to think about it is there's $10 million less in motion solutions, and then there's also an element of the display business. So emotion solutions is $10 million less because the precision medicine and markets life science tools and markets are not materializing the way the customers had anticipated. So it is fair to say that we gave a guidance range, which I talked about, 975 to a billion, and we're at 975 right now, so the bottom end of the range, based on the fact that life science tools are taking a little bit of a double dip in the back half of the year.

Speaker Change: Yeah, I think the easiest way to think about it is there's 10 million dollar lower motion solutions and then there's also an element of the display business.

Speaker Change: So, in emotion solutions, it's $10 million less because the precision medicine and markets, life science tool and markets, are not materializing the way that customers had anticipated.

Speaker Change: So it is fair to say that we gave a guidance range, which I talked about, 975 to a billion, and we're at 975 right now, so the bottom end of the range, based on the fact that the life science tools are taking a little bit of a double dip in the back half of the year. And that's most representative in our motion solutions business.

Robert Buckley: And that's most representative in our motion solutions business. There's, of course, a little bit of a dilutionary impact from the display business. At the same time, we're getting stronger growth in the insulators that are being launched in the back half of the year, and so there's a minor offset to that discontinuous of that product line. And then I would also emphasize that from a profit perspective, you know, we're above where we were. You know, we're kind of on the higher end of the range that we provide at the beginning of the year. So from a pure profit, you know, the businesses are doing a good job to drive that stronger growth margin that's flowing down to a much stronger EPS and then obviously a strong cash flow as well.

Robert Buckley: And that's most representative of our motion solutions. There's, of course, a little bit of a dilutionary impact from the display business, but at the same time, we're getting stronger growth in the inflators that are being launched in the back half of the year. And so there's a minor offset to that, to that discontinuance of that product line. And then I would also emphasize that from a profit perspective, you know, we're above where we were. We're kind of on the higher end of the range that we provided at the beginning of the year. So from a pure profit point of view, you know, the businesses are doing a good job to drive that stronger gross margin that's flowing down to a much stronger EPS and then, obviously, a strong cash flow.

Speaker Change: There's, of course, a little bit of a dilutionary impact from the display business. At the same time, we're getting stronger growth in the inflators that are being launched in the back half of the year, and so there's a minor offset to that discontinuance of that product line.

Speaker Change: And then I would also emphasize that from a profit perspective, you know, we're above.

Speaker Change: where we were, you know, we're kind of on the higher end of the range that we provided at the beginning of the year. So from a pure profit, you know, the businesses are doing a good job to drive that stronger gross margin that's flowing down to a much stronger EPS and then obviously a strong cash flow as well.

Robert Buckley: Right. I mean, if that margin barely changing took the low end of the EPS, I see that. So I guess at the beginning of the year, maybe the aspiration is obviously to get to the high end of the range and then. And I think your comments were, well, if things get worse, maybe we get to the low end and it's kind of, you know, things got a little worse in life sciences than everyone expected, but still no major. And I would, yeah, this is the capital equipment piece, I would say. So it's, you know, I talked about there is if you listen to the earnings calls of the people in the end market.

Speaker Change: Right. I mean, the EBITDA margin barely changed, and you took the low end of the EPS up. I see that. So I guess at the beginning of the year, maybe the aspiration was obviously to get to the high end of the range, and then ...

Speaker Change: and I think your comments were well if things get worse so then maybe we get to the low end and and it's kind of you know things got a little worse in life sciences than everyone expected but uh

Brian Drab: Thank you for your time. There's just the capital equipment piece, I would say. So as Matthijs talked about, there is, if you listen to the earnings calls of the people in the end market, they're all talking about a lot of pickup and activities there. But if you dissect it, it gets into the assays, the services, and the consumables associated with it. So effectively, activity in the labs and activity in the manufacturing space has increased in the back half of the year, and now it's just about when capital starts turning on.

Speaker Change: Still no major changes. Yeah, that's just the capital equipment piece, I would say. So it's, you know, as Matthijs talked about,

Speaker Change: There is, if you listen to the earnings calls of the people in the end market, they're all talking about a lot of pickup and activities there, but if you dissect it, it gets into the assays, the services, the...

Matthijs Glastra: They're all talking about a lot of pickup and activities there, but if you dissect it, it gets into the assay services, the, you know, the consumables associated to effectively activity in the labs and activity in the manufacturing space as has increased in the back half of the year. And now it's just about when, when does the capital start turning on? Part of that is as you introduce new drugs, and part of that is an improving environment increases the utilization requiring a capacity. And then clearly, some of the more impactful upcoming product launches or current product launches are in the MIS business in that end market, which is doing really well.

Speaker Change: you know the consumables associated. So effectively activity in the labs and activity in the manufacturing space.

Speaker Change: has increased in the back half of the year and now it's just about when does the capital start turning on. Part of that is as you introduce new drugs and part of that is an improving environment increases the utilization requiring a capacity expansion.

Brian Drab: Part of that is as you introduce new drugs, and part of that is an improving environment increases the utilization, requiring more capacity. Okay, thanks. And then, you know, clearly, some of the more impactful upcoming product launches or current product launches are in the MIS business in that end market, which is doing really well. But are you seeing any risk to any of the new product launches or timing related to some of the macro?

Speaker Change: Okay, thanks. And then, you know, clearly, some of the more impactful upcoming product launches or current product launches are in the MIS business, in that end market, which is, which is doing really well. But are you seeing any risk to

Matthijs Glastra: But are you seeing any risk to any of the new product launches or timing related to some of the macro? Yeah, I think listen, there is. We spoke about some pluses or minuses in the past. Of course, you see certain customers being impacted by the macro and are pushing things out, and certain other launches are running a little bit better than expected. So, right now, the average we feel is right there where we want to be. And I think the diversification of the amount of products that we're launching is also helping. But yeah, listen, there are, you can clearly see that the certainty is not improved macro, right, rise in let's say the last few weeks a month.

Speaker Change: Any of the new product launches or timing related to some of the macro?

Brian Drab: Yeah, I think listen, that there are some pluses or minuses in the past. Of course, you see certain customers being impacted by the macro and are pushing things out, and certain other launches are running a little bit better than expected. So right now, the average we feel is right there where we want to be. And I think the diversification of the amount of products that we're launching is also helping. But yeah, I mean, listen, I mean, there is, you can clearly see that the certainty is not improved macro, right, right.

Speaker Change: Yeah, I think, listen, we spoke about some pluses and minuses in the past. Of course, you see certain customers being impacted by the macro and they're pushing things out and certain other launches are running a little bit better than expected. So right now, the average we feel is right there where we want to be.

Speaker Change: And I think the diversification of the amount of products that we're launching is also helping. But yeah, I mean, listen, I mean, there are, you can clearly see that the certainty is not improved macro, right? Why it's in, let's say the last.

Operator: And let's say the last Robert Buckley, Lee Jagoda, Matthijs Glastra, Ray Nash, Ron Mason, Novanta Inc. If YouRE A FAT AND TIGHT WAITH, succeed in this, but you need a diet, choose the right DSM Express gift card thanks and be sure to include ALL the sponsors SP A EVERY THANK YOU.

Matthijs Glastra: So, yeah, it might have an impact on time. Right now, we're not seeing this. So, as we're sitting here today, our customers are still, on average, tracking to that. And that's why we're reconfirming that number. Okay. And the bulk of the new products in the back after the year associated with the minimum base of surgical business. So it's associated with more of the inflators and other types of products going into the OR suite. Right, got it.

Brian Drab: Okay, and the bulk of the new products in the back half of the year are associated with the minimum evasive surgical business, so it's associated with more of the inflators and other types of products going into the OR. Right, got it.

Speaker Change: Okay and the bulk of the new products in the back half of the year associated with the minimum evasive surgical business so it's associated with more the inflators and other types of products going into the OR suite.

Brian Drab: And I'll accept a no comment on this, but I'm just going to ask it, you know, as you look into 2020, sorry, 2025, and you think about the new products and you're going to be exiting the year. You said again, double-digit organic revenue growth. Can you just comment on how much visibility you have on that double-digit organic revenue growth persisting into 2025?

Matthijs Glastra: And I'll accept a no comment on this, but I'm just going to ask it.

Speaker Change: Right, got it. And I'll accept a no comment on this, but I'm just going to ask it, you know, as you...

Matthijs Glastra: You know, as you look into 2020, sorry, 2025, and you think about the new products and you're going to be exiting the year, you said again, a double-digit organic revenue growth. Can you just comment on how much visibility you have to that double-digit organic revenue growth persisting into 2025? Yeah, I think a very astute that if you're growing at a double digit in the fourth quarter, you know, you kind of run rate that forward and it's tough to see how you wouldn't at least deliver, you know, about a 10% growth in 2025.

Speaker Change: You know look into 2020 sorry 2025 and you think about the new products and you're going to be exiting the year You said again a double-digit organic revenue growth

Speaker Change: Can you just comment on how much visibility you have to that double-digit organic revenue growth persisting into 2025?

Robert Buckley: Yeah, I think it's very astute that if you're growing at a double digit rate in the fourth quarter, and you kind of run that rate forward, then it's tough to see how you wouldn't at least deliver, you know, about 10% growth in 2025. I think that's, you know, we would say as we sit here today, given the uncertainty in the different environments and the recovery rates and, and so on and so forth, like it, you know, we feel pretty good, regardless of that, growing about 10% in 2025.

Speaker Change: Yeah, I think it's very astute that if you're growing at a double-digit in the fourth quarter, you know, you kind of run rate that forward and it's tough to see how you wouldn't at least deliver.

Matthijs Glastra: I think that's, you know, we would say as we sit here today, you know, given the uncertainty in the different environments and the recovery rates, and so on and so forth. Like it, you know, we feel pretty good, regardless of that, grow about 10% in 2025. But I think we'll continue to monitor this and get back to you over the course of the year. As we see how the life science tool market unfolds, how the industrial recovery happens, and if there's any other disruptions that occur due to the geopolitical, you know, factors in the marketplace.

Speaker Change: about a 10% growth in 2025. I think that's, you know, we would say as we sit here today, you know, given the uncertainty in the different environments and the recovery rates.

Speaker Change: and so on and so forth like it you know we feel pretty good regardless of that grow about 10% in 2025 but I think we'll continue to monitor this and get back to you

Robert Buckley: But I think we'll continue to monitor this and get back to you over the course of the year as we see how the life science tool market unfolds, how the industrial recovery happens, and if there's any other disruptions that occur due to geopolitical, you know, factors in the marketplace. Right, okay. Thanks very much.

Speaker Change: over the course of the year as we see how the life science tool market unfolds, how the industrial recovery happens, and if there's any other disruptions that occur due to geopolitical factors in the marketplace.

Matthijs Glastra: Right. Okay.

Matthijs Glastra: Thanks very much.

Matthijs Glastra: Thanks, right. Thank you.

Speaker Change: Right. Okay. Thanks very much.

Rob Mason: We have the next question from Rob Mason with Beard. Please go ahead. Yes, good morning. Good morning. I understand this question could be at the risk of asking you to repeat yourself.

Rob Mason: We have the next question from Rob Mason with Baird. Please go ahead.

Mike: Thanks, Mike.

Mike: Thank you.

Speaker Change: We have the next question from Rob Mason with Baird. Please go ahead.

Rob Mason: Yes, good morning. Good morning, Ron. Good morning. I understand this question may be at the risk of asking you to repeat yourself, but, you know, could you walk through again just what would be the major pieces that drive the sequential increase in revenue in the fourth quarter versus the third quarter that we should be looking for?

Speaker Change: Yes, good morning. Good morning, Rob.

Rob Mason: Good morning. I understand this question may be at the risk of asking you to repeat yourself, but you know could you walk through again just you know what would be the major pieces that drive the sequential increase in revenue in the fourth quarter versus the third quarter that we should be looking for?

Rob Mason: But, you know, could you walk through again, just, you know, what would be the major pieces that drive the sequential increase in revenue in the fourth quarter versus the third quarter that we should be looking for? Yeah, so I think if you look at the individual segments, you know, if you're going, you know, one of the drivers over the increase, maybe that's the easiest way of looking at it is you got precision medicine and manufacturing up high single digit, robotics and automation up mid single digit, and medical solutions up low double digit. So obviously, the medical solutions will be the larger element of it.

Robert Buckley: Yeah, so I think if you look at the individual segments, you know, if you're going, you know, what are the drivers of the increase? Maybe that's the easiest way of looking at it. You got precision medicine and manufacturing up high single digits, robotics and automation up mid single digits, and medical solutions up low double digits. So obviously, the medical solutions will be the larger element of it.

Speaker Change: Yeah, so I think if you look at the individual segments, you know, if you're going, you know, what are the drivers of the increase? Maybe that's the easiest way of looking at it is you got precision medicine and manufacturing up high single-digit Robotics and automation up mid single-digit and medical solutions upload double digits So obviously the medical solutions will be the larger element of it

Robert Buckley: So if I summarize it, you know, the sequential uptick is really new product introductions, the largest segment of which is materializing in the medical solutions area, and continued strength in medical device demand, which is around hospital capital spending, which is, you know, for the large part, on track. So the backdrop, new products going into a very strong, you know, hospital capital spending market around OR-based technologies, and then continued strength in robotics, automation, and even a little bit of micro electronics and seeing some order book strength there.

Matthijs Glastra: So if I summarize it, you know, the sequential uptick is really new product introductions, which the largest segment of which is materializing in the medical solutions area, continued strength in the medical device demand, which is around hospital capital spending, which is, you know, for the large part remains on track. So the backdrop of new products going into a very strong, you know, hospital capital spending market around the OR-based technologies and then continue strength in the robotics automation and even a little bit of microelectronics and seeing some order books right there. And then if you go back and look at the bookings, the bookings are somewhat support that now. The robotics and automation up high single digit sequential improvement is supported by a stronger book, the bill that's expected to maintain as we get to the back half of the year. And then similar medical solutions despite having a step down on the precision medicine side is a step up on the hospital capital spending.

Speaker Change: So, if I summarize it, you know, the sequential uptick is really...

Speaker Change: New Product Introductions, which the larger...

Speaker Change: segment of which is materializing in the medical solutions area.

Speaker Change: in the medical device demand, which is around hospital capital spending,

Speaker Change: you know for the large part remains on track so the backdrop new products going into a very strong you know hospital capital spending market around the OR based technologies and then continued strength in the robotics automation and even a little bit of microelectronics and seeing some order book strength there.

Robert Buckley: And then if you go back and look at the bookings, the bookings are somewhat supportive of now that robotics and automation, up high single-digit sequential improvement is supported by a stronger book the bill that's expected to maintain as we get to the back half of the year. And then, similar to medical solutions, despite having a step down on the precision medicine side, there's a step up on hospital capital spending, and so that's all kind of supported by that.

Speaker Change: And then if you go back and look at the bookings, the bookings somewhat support that now, that robotics and automation, up high single digits, sequential improvement is supported by a stronger book-the-bill that's expected to maintain as we get to the back half of the year.

Speaker Change: and then similar to medical solutions, despite having a step down on the precision medicine side, there's a step up on the hospital capital spending.

Matthijs Glastra: So that's all kind of supported by that.

Matthijs Glastra: We have acted in the double dip in life science tools and the weaker industrial outlook, but obviously we can't factor in if the macro environment, you know, falls off the cliff, you know. So what we can feel confident of is that, you know, we can maintain the profitability outlook for the full year and we have a lot of nice moving parts that come with new product introductions in the right spaces at the right time, and so that's where you see the largest step up happening. So that's helpful. That's helpful.

Robert Buckley: We have factored in the double dip and life science tools in the weaker industrial outlook. But obviously, we can't factor in if the macro environment falls off a cliff, you know, so what we can't feel confident of is that, you know, we can maintain the profitability outlook for the full year, and we have a lot of nice moving parts that come with new product introductions in the right spaces at the right time.

Speaker Change: And so that's all kind of supported by that. We have factored in the double dip and life science tools in the weaker industrial outlook.

Rob Mason: And so that's where you see the largest step up happening. Oh, that's helpful. That's helpful. And then just, um,

Speaker Change: but obviously we can't factor in if the macro environment you know falls off the cliff you know so we can't feel confident of is that

Speaker Change: You know, we can maintain the profitability outlook for the full year. And we have a lot of nice moving parts that come with new product introductions in the right spaces at the right time. And so that's where you see the largest step-up happening.

Matthijs Glastra: And then you noted the robotics and automation bookings did accelerate sequentially. Can you, you know, pull that apart a little bit as well? Just, you know, how much of that sequential acceleration and bookings was, you know, related to the medical portions of that business relative to the industrial and maybe even relative to the microelectronics piece? Yeah, I mean, I understand it.

Matthijs Glastra: And then just, you noted the robotics and automation bookings did accelerate sequentially. Can you, you know, pull that apart a little bit as well and just, you know, how much of that sequential acceleration and bookings was, you know, related to the medical portions of that business relative to the industrial and maybe even relative to the microelectronics piece sequentially. Yeah, I mean, I can take that, and then we can, you know, Robert will further, further, you know, add to it. And listen, I mean, you see within that market, you see puts and takes, right? Of course, that the medical side continues to be solid and on the other side, of course, and I think many players have reported on that just a very slow automotive and EV battery environment, right?

Speaker Change: Oh, that's helpful. That's helpful. And then just, you noted the robotics and automation bookings did accelerate sequentially. Can you, you know, pull that apart a little bit as well? It just, you know, how much of that sequential acceleration and bookings was

Speaker Change: related to the medical portions of that business, relative to the industrial, and maybe even relative to the microelectronics piece.

Speaker Change: I can take that and then we can, you know, Robert will further, you know, add to it.

Matthijs Glastra: Listen, I mean, within that market, you see puts and takes, right? Of course, the medical side continues to be solid. And on the other side, of course, and I think many players have reported on that, just a very slow automotive and EV battery environment, right? And we're seeing that as well. But what we're seeing as well is kind of in other industrial robotics markets, some solid momentum, so humanoids, warehouse automation, but also momentum from recently launched products. So that's kind of what we're seeing, and those are kind of the drivers of the growth that Robert talked about. And Robert, I don't know if you want to add further to that.

Speaker Change: Listen, I mean, you see within that market, you see puts and takes, right? Of course, the medical side continues to be...

Speaker Change: to be solid and on the other side, of course, and I think many players have reported on that, just a very slow automotive and EV battery environment, right? And we're seeing that as well.

Matthijs Glastra: And we're seeing that as well. But what we're seeing as well is kind of in other industrial robotics markets, you know, some some full of momentum. So humanoids, whereas automation, but also momentum from recently launched products. So that's kind of what we're seeing, and those are kind of the drivers of all the growth that Robert talked about. And Robert, I don't know if you want to shoot a rap. to that. Yeah, no, I think that's a good characterization. So, you know, solid medical actually pretty decent semi-slash microelectronics and then an impact or an uptick in kind of the smaller robotic space, whereas the off-sense would be, you know, big industrial robotics down in automotive, down in EV, down in battery.

Speaker Change: But what we're seeing as well is kind of in other industrial robotics markets, you know, some solid momentum. So humanoids, warehouse automation, but also momentum from recently launched products. So that's kind of what we're seeing. And those are kind of the drivers of.

Speaker Change: All of the growth that Robert talked about, and Robert, I don't know if you want to further answer that.

Robert Buckley: Yeah, no, I think that's a good characterization. So, you know, solid medical, actually pretty decent, semi-slash microelectronics, and then an impact or an uptick in kind of the smaller robotics space, whereas the offsets would be, you know, big industrial robotics, down in automotive, down in EV, down in battery. But the net net of that is the other areas are growing stronger. Now they benefit from the fact, as Matthijs said, that there's new products happening in the same exact place.

Robert: Yeah, no, I think that's a good characterization. So, you know, solid medical, actually pretty decent semi-slash-microelectronics, and then an impact or an uptick in kind of the smaller robotics space.

Speaker Change: whereas the offsets would be, you know, big industrial robotics.

Speaker Change: down in automotive, down in EV, down in battery. But the net net of that is the other areas are growing stronger. Now they benefit from the fact, as Matthijs said, that there's new products happening in the same exact space.

Matthijs Glastra: But the net net of that is the other areas are growing stronger. Now they benefit from the fact that Matthijs said that there's new products happening in the same exact space. Okay, okay, that's all.

Rob Mason: Okay, okay, that's all right, and maybe just one last question there to remind us again what portion of robotics and automation is industrial versus medical? Actually, we've never gotten into that.

Matthijs Glastra: And maybe just one last question there. Remind us again, what portion of robotics and automation is industrial versus medical? Actually, we've never gotten into that breakout before. I will, and I understand you've asked that question before. It's a good question. I will I will have to get back to you on how we do that in a consistent manner. So let me let me get back to you on that. Okay. Thank you.

Speaker Change: Okay, okay. And maybe just one last question there. Remind us again what what portion of robotics and automation is industrial versus medical?

Robert Buckley: Actually, we've never gotten into that breakout before, and I understand you've asked that question before. It's a good question. I will have to get back to you on how we do that in a consistent manner. So, let me get back to you on that.

Speaker Change: Actually we've never gotten into that breakout before. I will and I understand you've asked that question before it's a good question. I will I will have to get back to you on on how we do that in a consistent manner so let me let me get back to you on that. Okay, thank you.

Rob Mason: Thanks, Rob.

Operator: Thank you.

Rob Mason: Thanks Rob.

Matthijs Glastra: This concludes our question and answer session.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Mr. Matthijs Glastra for any closing remarks. Thank you, operator.

Rob Mason: Thanks.

Rob Mason: Thank you.

Matthijs Glastra: I would like to turn the conference back over to Mr. Matthijs Glaston for any closing remarks. Thank you, operator. So to recap, Noventa had outstanding operating performance in the second quarter. We beat expectations for sales, margin, profit, and cash flows, and we made great progress on our top priorities. This came despite some challenges and near-term softness in some of the end marks as we serve. We see our business improving sequentially, and we continue to expect accelerating momentum for Noventa on the back of our new product launches. We also make great progress in integrating the motion solutions acquisition, which we will which will be an attractive long-term growth platform for us.

Speaker Change: This concludes our question and answer session.

Speaker Change: I would like to turn the conference back over to Mr. Matthijs Glastra for any closing remarks.

Matthijs Glastra: Thank you, operator. So to recap, Novanta had outstanding operating performance in the second quarter; we beat expectations for sales, margin, profit, and cash flows, and we made great progress on our top priorities. This came despite some challenges and near-term softness in some of the end markets we served. We see our business improving sequentially, and we continue to expect accelerating momentum for Novanta on the back of our new product launch. We also made great progress in integrating the Motion Solutions acquisition, which will be an attractive long-term growth platform.

Matthijs Glastra: Thank you, operator. So to recap, Novanta had outstanding operating performance in the second quarter. We beat expectations for sales, margin, profit, and cash flows, and we made great progress on our top priorities.

Matthijs Glastra: This came despite some challenges and near-term softness in some of the end markets we serve. We see our business improving sequentially, and we continue to expect accelerating momentum for Novanta on the back of our new product launches.

Matthijs Glastra: We also made great progress in integrating the Motion Solutions acquisition, which will be an attractive long-term growth platform for us.

Matthijs Glastra: Novanta remains well positioned in the medical and advanced industrial end markets, with diversified exposure to long-term secular macrotrends in robotics and automation, precision medicine, minimally invasive surgery, and industry 4.0. We're excited for the large product launches starting in the next few quarters. We will continue to focus on additional design wins in high growth applications as well as double down on the Novanta growth system to continue to drive strong cash flows and gross margin.

Matthijs Glastra: Noventa remains well positioned in the medical and advanced industrial end markets with diversified exposure to long-term secular micro trends and robotic interimation precision medicine, minimally invasive surgery, and industry 4.0. We're excited for the large product launches starting over the next few quarters. We will continue to focus on additional designs in high growth applications as well as doubling down on the Noventa growth system to continue to drive strong cash flows and grow margin expansion.

Matthijs Glastra: Novanta remains well positioned in the medical and advanced industrial end markets with diversified exposure to long-term secular macrotrends in robotics and automation, precision medicine, minimally invasive surgery, and industry 4.0.

Matthijs Glastra: We're excited for the large product launches starting over the next few quarters. We will continue to focus on additional design wins in high-growth applications, as well as doubling down on the Novanta growth system to continue to drive strong cash flows and gross margin expansion.

Matthijs Glastra: In closing, as always, I would like to thank our customers, our employees, and our shareholders for their ongoing support and continue to be specially grateful for the dedicated efforts of all of our Noventa employees who work diligently every day, taking on new challenges and striving to make the company a great place to work. We appreciate your interest in the company and make make the company great place to work, and we appreciate your interest in the company. You're participating in today's call.

Matthijs Glastra: In closing, as always, I would like to thank our customers, our employees, and our shareholders for their ongoing support. We continue to be especially grateful for the dedicated efforts of all of our Novanta employees who work diligently every day, taking on new challenges and striving to make the company a great place to work. We appreciate your interest in the company and your commitment to making the company a great place to work. And 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 on our third quarter 2024 earnings call. Thank you very much. This call is now adjourned.

Matthijs Glastra: In closing, as always, I would like to thank our customers, our employees, and our shareholders for their ongoing support.

Matthijs Glastra: I continue to be especially grateful for the dedicated efforts of all of our Novanta employees who work diligently every day, taking on new challenges and striving to make the company a great place to work.

Matthijs Glastra: We appreciate your interest in the company and make the company a great place to work. And we appreciate your interest in the company and your participating in today's call. I look forward to joining all of you in several months on our third quarter 2024 earnings call. Thank you very much. This call is now adjourned.

Matthijs Glastra: I look forward to joining all of you in several months on our third quarter, um, 2024 and in school. Thank you very much.

Operator: This call is now adjourned.

Operator: Thank you.

Operator: The conference has now concluded. Thank you for attending today's presentation.

Operator: Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: You may now disconnect. Thank you.

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