Q4 2024 Novanta Inc Earnings Call

Good morning, My name is Gary and I will be your conference operator today.

Gary: Good morning, my name is Gary and I will be your conference operator today.

Gary: At this time, I would like to welcome everyone to the Novanta Incorporated's fourth quarter and full year 2024 earnings call. All lines have been placed on mute to prevent any background noise.

At this time I would like to welcome everyone to the know Vance Incorporated's fourth quarter and full year 'twenty 'twenty four earnings call.

All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Gary: 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 touch-tone phone. To withdraw your question, please press star then 2. Please note, this event is being recorded.

To ask a question you May Press Star then one on your Touchtone phone.

To withdraw your question. Please press Star then two.

Please note this event is being recorded.

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

Speaker Change: Now I'd like to turn the conference over to Ray Nash Corporate Finance leader for Nevada. Please go ahead.

Thank you very much good morning, and welcome to Novartis fourth quarter and full year 2024 earnings Conference call. This is Ray Nash corporate finance leader for an event.

Ray Nash: Good morning and welcome to Novanta's fourth quarter and full year 2024 earnings conference call. This is Ray Nash, Corporate Finance Leader for Novanta.

Ray Nash: 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.

Speaker Change: With me on today's call as our chair and Chief Executive Officer, but highest Gloucester and our Chief Financial Officer, Robert Buckley.

Speaker Change: If you've not received a copy of our earnings press release issued today you may obtain it from the Investor Relations section of our website at Www Dot in advance of the Dot 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.

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, 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.

Speaker Change: To differ materially from our current expectations any forward looking statements made today represent our views only as of this time we.

Speaker Change: 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. 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.

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.

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.

Speaker Change: I'm now pleased to introduce the chair and Chief Executive Officer of Nevada, The tightest cluster.

Matthijs Glastra: I'm now pleased to introduce the Chair and Chief Executive Officer of Novanta, Matthijs Glastra. Thank you, Ray. Good morning, everybody. And thanks for joining our call. Novanta achieved solid financial results in 2024, effectively navigating a challenging environment. In the fourth quarter, we returned to organic growth as expected. We beat expectations for profit and we achieved our best quarterly cash flow ever. For the full year of 2024, we had strong operating performance despite the choppy market demand, demonstrating strong core gross margin expansion, adjusted EBITDA growth, and record cash flow generation. We launched 50 new products and received initial orders from our customers supporting our new product revenue ramp in 2025.

Speaker Change: Thank you Ray good morning, everybody and thanks for joining our call November achieved solid financial results and 2024, effectively navigating a challenging environment.

Speaker Change: In the fourth quarter, we returned to organic growth as expected, we beat expectations for profit and we achieved our best quarterly cash flow ever.

Speaker Change: For the full year of 2024, we had strong operating performance. Despite the choppy market demand demonstrating strong core gross margin expansion adjusted EBITDA growth and record cash flow generation.

Speaker Change: We launched 50, new products have received initial orders from our customers supporting our new product revenue ramp in 2025.

Speaker Change: Overall, I'm incredibly proud of our team's resilience in managing through this volatile environment to deliver these results.

Matthijs Glastra: Overall, I'm incredibly proud of our team's resilience in managing through this volatile environment to deliver these results. The Novanta business model, with diversified exposure to high growth medical, life science, and advanced industrial markets, has proven resilient under multiple geopolitical and market economic scenarios. Our proprietary products and technologies are well-positioned in medical and advanced industry applications with long-term secular tailwinds such as precision manufacturing, robotics and automation, advanced surgery, and precision medicine. We feel that our winning growth strategy, focused on where we play and how we win, combined with the strength of our portfolio and our deployment of the Novanta growth system, is what drives our performance no matter the environment.

Speaker Change: The November business model with diversified exposure to high growth medical life Science and advanced industrial markets has proven resilient and our multiple geopolitical mark economic scenarios.

Our proprietary products and technologies are well positioned in medical and advanced industrial applications with long term secular tailwind such as precision manufacturing robotics and automation advanced surgery and precision medicine.

Speaker Change: We feel that our winning growth strategy focus on where we play and how we when combined with the strength of our portfolio and our deployment of the Nevada gross system is what drives our performance no matter the environment.

Matthijs Glastra: For the fourth quarter, we achieved $238 million in revenue, which was plus 3% organic growth year-over-year and plus 13% reported revenue growth. Our reported revenue would have been $2 million higher if exchange rates had stayed consistent with our fourth quarter guidance. Bookings grew 54% year-over-year and 5% sequentially, driven by major OEM customers confirming their 2025 new product launch. Adjusted gross margins were 47%, with core businesses, which exclude the Motion Solutions acquisition, expanding margins by 125 basis points. adjusted EBITDA grew 15% to $52 million. And operating cash flow hit a record $62 million up 58%. For the full year of 2024, we delivered $949 million in revenue with plus 8% reported revenue growth and a 2% organic decline.

Speaker Change: For the fourth quarter, we achieved $238 million of revenue, which was plus 3% organic growth year over year at plus 13% reported revenue growth.

Speaker Change: Our reported revenue would have been $2 million higher if exchange rates had stayed consistent with our fourth quarter guidance.

Speaker Change: Bookings grew 54% year over year and 5% sequentially.

Speaker Change: By major OEM customers confirming their.

Speaker Change: 200 to 2025, new product launches.

Speaker Change: Adjusted gross margins were 47% with core businesses, which exclude the motion solutions acquisition expanding margins by 125 basis points.

Speaker Change: Adjusted EBITDA grew 15% to $52 million in operating cash flow hit a record $62 million up 58%.

Speaker Change: For the full year or two.

Speaker Change: 2024.

Speaker Change: We delivered $949 million in revenue.

Speaker Change: With plus 8% reported revenue growth and a 2% organic decline.

Matthijs Glastra: Adjusted the gross margins for 47%, with our core businesses expanding margins by roughly 120 basis points year over year, and adjusted EBITDA grew 7% to $210 million. Operating cash flow reached a record $159 million, up 32%. Looking ahead to 2025, we remain optimistic despite market uncertainties. Our sales-to-healthcare markets continue to thrive, with strong patient procedure growth and hospital spending driving high single-digit growth in our medical business. In addition, we expect to grow faster than the health care market in 2025 from new product launches, allowing us to control our own destiny better. We are reconfirming $50 million of incremental new product revenue for 2025, mostly driven by new insufflators and pumps for hospitals and surgery centers, as well as surgical and warehouse automation robotics.

Speaker Change: Adjusted gross margins were 47% with our core business is expanding margins by roughly 120 basis points year over year, and adjusted EBITDA grew 7% to $210 million operating cash flow reached a record $159 million up 32%.

Speaker Change: Looking ahead to 2025, we remain optimistic despite market uncertainties are supposed to health care markets continue to thrive.

Speaker Change: With strong patient procedure grows in hospital spending driving high single digit growth in our medical business. In addition, we expect to grow faster than the health care market in 2020, fives from new product launches, allowing us to control our own destiny better.

Speaker Change: We are reconfirming $50 million of incremental new product revenue for 2025, mostly driven by new Insufflator, some bumps for hospitals and surgery centers as well as surgical on warehouse automation and robotics.

Speaker Change: We are confident in the long term growth outlook in our end markets and we feel we have a strong technology position in segments with secular growth.

Matthijs Glastra: We're confident in the long term growth outlook in our end markets, and we feel we have a strong technology position in segments with secular growth. In the short term, it's fair to say that there's an increasing amount of change and uncertainty. We do see signs of growth slowly returning to all of our end markets, as evident in certain robotics and automation applications in the fourth quarter, as well as some short cycle semiconductor applications. At the same time, the geopolitical disruptions and market economic uncertainty that we saw throughout 2024 are now being compounded by disruptions from trade war uncertainty, including tit-for-tat retaliatory responses, as well as uncertainty around government funding, such as from the U.S.

Speaker Change: In the short term it is fair to say that there is an increasing amount of change and uncertainty we do see signs of growth slowly returning to all of our end markets is evident in certain robotics and automation applications in the fourth quarter as well some short short cycle semiconductor applications at the same time, the geopolitical disruptions that market.

Speaker Change: Economic uncertainty that we saw throughout 2024, right now being compounded by disruptions from trade War uncertainty.

Speaker Change: Including tit for Tat retaliatory responses as well as uncertainty around government funding such as from the U S. National Institute of Health All of these factors create a more uncertain environment in 'twenty to 'twenty five for capital spending in industrial semiconductor bio processing and life Sciences.

Matthijs Glastra: National Institute of Health. All these factors create a more uncertain environment in 2025 for capital spending in industrial, semiconductor, bioprocessing, and life science. Our teams, however, are ready, stronger, and more resilient than ever to face these uncertainties. For example, our tariff and supply chain playbooks are in place, and thanks to the deeply embedded Novanta Growth System, you can expect us to deliver strong operating performance, no matter the environment. All of this leads us to be confident in the fundamentals of our business and upbeat about a better year in 2025. At the same time, given the increase in uncertainty and volatility right now versus at the time of our last call, we will be prudent with our initial financial guidance for this year.

Speaker Change: Our teams are ever are ready stronger and more resilient than ever to face. These uncertainties. For example, our tariff and supply chain Playbooks are in place and things have been deeply embedded November gross system. You have you can expect us to deliver strong operating performance no matter the environment.

Speaker Change: All of this leads us to be call for that and the fundamentals of our business and upbeat about a better year in 2025 at the same time, given the increase in uncertainty and volatility right now versus at the time over the last call we will be prudent with our initial financial guidance for this year Robert will cover guidance details in his section.

Ray Nash: Robert will cover guidance details in his section.

Speaker Change: Now I'll return to 'twenty to 'twenty four to give more detail on our results for the year for 2020 for a medical market sales made up 55% of total Nov at the sales growing high single digits on a reported basis, we saw strong growth in multiple application areas, particularly of minimally invasive surgery and robotics for surgery.

Matthijs Glastra: Now we'll return to 2024 to give more detail on our results for the year. For 2024, medical market sales made up 55% of total Novanta sales, growing high single digits on a reported basis. We saw strong growth in multiple application areas, particularly in minimally invasive surgery and robotics for surgery. This was offset by weakness in DNA sequencing, the headwind from discontinuing our surgical display products, and general softness in life sciences applications. Advanced Industrial Markets made up 45% of total sales, growing low double digits on a reported basis. Despite the challenges we've seen in this space, we remain confident in our long term exposure to secondly growing niches in the Zen market.

Speaker Change: It was offset by weakness in DNA sequencing the headwind from discontinuing, our surgical display products and general softness in life Sciences applications.

Speaker Change: Advanced industrial markets made up 50, 45% of total sales growing low double digits on a reported basis. Despite the challenges we've seen in this space. We remain confident in our long term exposure to secondly, growing niches in does that market.

Speaker Change: Nevada is well positioned in many attractive applications and trends such as industry afford although gen AI and onshoring of near shoring, which is driving robotics and automation investments, particularly due to labor cost and shortages.

Matthijs Glastra: Novanta is well positioned in many attractive applications and trends, such as Industry 4.0, Gen AI, and on-shoring and near-shoring, which is driving robotics and automation investments, particularly due to labor costs and shortages.

Speaker Change: Now, let me touch on some of the event the strategic growth metrics, we saw solid design win activity with overall design wins growing by over 40% in the fourth quarter.

Matthijs Glastra: Now let me touch on some of Novanta's strategic growth metrics. We saw solid design activity with overall design growing by over 40% in the fourth quarter. We launched 50 major new products in 2024 with over 50% more planned for 2025 as our innovation pipeline is starting to gain steam. Our Vitality Index was mid-teens percentage of sales expected to climb in 2025 as we rev new products. Some of our new product launch highlights from the past year are we launched multiple new next-generation smoke evacuation insufflators with leading medical device OEMs. These intelligent subsystems are at different phases of their launches, some currently in soft launch and some now in full ramp as we head into 2025.

Speaker Change: We launched 50 major new products in 2024 with over 50% more planned for 2025 as our innovation pipeline is starting to gain steam.

Speaker Change: Our vitality index was mid teens percentage of sales expected to climb in 2025, as we have revenue products. So.

Speaker Change: Some of our new product launch highlights from the past year, our we launched multiple new next generation smoke evacuation insufflator with leading medical device Oems. These intelligent subsystems are at different phases of their lunches. Some currently in soft lines and some not at full ramp as we head into 2025.

Speaker Change: We launched one new endoscopic pump with a fast growing OEM, we have more next generation pumps, we're ready to hit the market with large OEM customers in 2025.

Matthijs Glastra: We launched one new endoscopic pump with a fast-growing OEM. We have more next-generation pumps ready to hit the market with large OEM customers in 2025. We are investing to significantly expand our position here in the coming years, leveraging our insufflator competencies and playbook. We also launched multiple new products specifically designed for advanced robotics applications, such as surgical robots, humanoids, and warehouse automation robots. These new products include ultra-compact servo drives, newly configured four-stork sensors, and miniaturized encoders. We have already received large initial purchase orders for these new products in the third and fourth quarter of 2024 and additional orders in January and February of this year.

Speaker Change: We are investing to significantly expand our position here in the coming years, leveraging our insufflator competencies and playbook.

Speaker Change: We also launched multiple new products, specifically designed for advanced robotics applications, such as surgical robots human origin warehousing automation robots. These new products include Overcalled back several derived newly configured for stork sensors, I mean, you were ties encoders.

Speaker Change: We have already received large initial purchase orders for these new products into third and fourth quarter of 2024 and additional orders in January and February of this year.

Matthijs Glastra: So our backlog is already filling up for the year. In addition, we received our first production order for a brand new DUV-EUV lithography intelligent subsystem product. which is set to launch later in 2025. With all these launches and more planned throughout 2025, we remain on track to deliver our goal of $50 million of incremental MPI revenue in 2025.

Speaker Change: So our backlog is already filling up 40 year. In addition, we received our first production order for our brand new <unk> lithography intelligent subsystem product.

Speaker Change: We just set to launch later in 2025 with all these launches and more planned throughout 2025, we remain on track to deliver our goal of $50 million of incremental NPI revenue in 2025.

Next I'd like to give you a brief update on event those acquisition activities, new acquisitions remain a top priority for capital allocation aligned with our operating model of being a cash flow compound or for.

Matthijs Glastra: Next, I'd like to give you a brief update on Novanta's acquisition activities. New acquisitions remain Novanta's top priority for capital allocation, aligned with her operating model of being a cash flow compounder.

Matthijs Glastra: For 2025, closing new acquisition is our executive team's top priority. We have a large and exciting pipeline of potential targets and are managing multiple active conversations. In today's volatile marketplace, valuations are becoming more attractive. and our balance sheet is well positioned for sizable transactions. We aim to close multiple transactions in 2025 while at the same time maintaining discipline on price and return.

Speaker Change: 2025 closing new acquisition is our executive team's top priority, we have a large and exciting pipeline of potential targets and are managing multiple active conversations in today's volatile marketplace valuations are becoming more attractive and our balance sheet is well positioned for sizable transactions we aim to.

Speaker Change: Closed multiple transactions in 2025, while at the same time, maintaining discipline on price and returns.

Speaker Change: To better prepare for scaling the event to organically and Inorganically. We also made some significant organizational changes as of January 2025, we have appointed two co chief operating officers or co C. O O student event, the leadership team reporting directly to me.

Matthijs Glastra: To better prepare for scaling Novanta organically and inorganically, we also made some significant organizational changes.

Matthijs Glastra: As of January 2025, we have appointed two Co-Chiefs Operating Officers, or Co-COOs, to the Novanta leadership team, reporting directly to me. Each of these co-CEOs will lead an operating segment, either automation enabling technologies, which will include the precision manufacturing and robotics and automation business unit. or medical solutions, which will include the advanced surgery and precision medicine business unit.

Speaker Change: Each of these co Ceos will lead an operating segment either automation, enabling technologies, which will include the precision manufacturing of robotics and automation business units or medical solutions, which will include the advanced surgery and precision medicine business units. In these roles. These leaders will will be responsible for organic growth.

Matthijs Glastra: In these roles, these leaders will be responsible for organic growth strategies and for creating a robust organization capability and capacity to receive new acquisitions.

Speaker Change: Tragedies, if we're creating a robust organization capability and capacity to receive new acquisitions.

Speaker Change: The automation, enabling technologies segment will be led by Chuck revert out. In addition to this role Chuck will also lead to November growth system or N G S or cross move into as we integrated deeper into our culture and operations.

Matthijs Glastra: The Automation Enabling Technologies segment will be led by Chuck Rivetto. In addition to this role, Chuck will also lead the Novanta Growth System, or NGS, across Novanta as we integrate it deeper into our culture and operations.

Matthijs Glastra: We're also excited to welcome John Leszeka to Novanta. John, as co-CEO, will be responsible for the medical solutions sector. This segment will focus on Novanta's growth strategy for the healthcare industry, with particular emphasis on surgical precision medicine and bioprocessing technology solutions. John brings extensive healthcare and life science markets experience from his 22-year career at Thermo Fisher Scientific, where he most recently led their $3.5 billion chromatography and mass spec division, serving biotech, academic, and pharma customers in the high-growth proteomics and multiomics space, as well as applied markets. His expertise will be invaluable as he leads our organic growth and acquisition strategy in the medical life science and bioprocessing market.

John Lesser: We're also excited to welcome John Lesser Catherine event, there John as co CEO will be responsible for the medical solutions segments.

John Lesser: This segment will focus on events those growth strategy for the health care industry with particular emphasis on surgical precision medicine in bio processing technology solutions.

John Lesser: John brings extensive health care and life science markets experience from his 22 year career at Thermo Fisher scientific.

Speaker Change: He most recently led their $3 5 billion, daughter, chromatography, and mass spec division, serving biotech academic and pharma customers into high growth proteomics, MLT IMAX space as well as applied markets. His expertise will be invaluable as he leads our organic growth and acquisition strategy in the medical lives.

John Lesser: Signs in bio processing markets.

John Lesser: Finally, let me also give an update on building the culture of Nevada, which we called an event. The way we believed in November the way he has been a differentiator in attracting retaining and developing core talent. We continue to focus on giving our employees a sense of belonging within the company and on improving our employee engagement scores and we have invested heavily.

Matthijs Glastra: Finally, let me also give an update on building the culture of Novanta, which we call the Novanta Way. We believe the Novanta Way has been a differentiator in attracting, retaining, and developing core talent. We continue to focus on giving our employees a sense of belonging within the company and on improving our employee engagement scores. And we have invested heavily into leadership development initiatives and employee training. As we're entering the year, we have the strongest leadership team and bench since my tenure as CEO, a team that is ready and able to scale and further transform the company.

John Lesser: Into a leadership development initiatives on employee training.

John Lesser: As we're entering the year, we have the strongest leadership team and bench since my tenure as CEO. It team that is ready and able to scale and further transform the company.

John Lesser: One of the most critical aspects of our company culture is embedding day November gross system known as N. G. S to drive excellence into the many ways we worked together in.

Matthijs Glastra: One of the most critical aspects of our company culture is embedding the Novanta Growth System, known as NGS, to drive excellence into the many ways we work together. In 2024, we leverage NGS to enhance performance across our factory teams, commercial organization, R&D, and product management. We hosted numerous Kaizen events and trained over 100 employees as NGS practitioners, driving continuous improvement. These efforts significantly boosted our operations by speeding up product launches, reducing lead times in inventory, improving gross margins on medical consumables, and expanding our commercial funnel with new OEM opportunities. In 2025, we'll continue using NGS to optimize operations.

John Lesser: In 2024, we leveraged M D. A N G S to enhance performance across our factory teams commercial organization R&D and product management, we hosted numerous kaizen events and trained over 100 employees is N. G. S practitioners driving continuous improvement these efforts significantly boosted our opera.

John Lesser: <unk> by speeding up product launches, reducing lead times and inventory improving gross margins for medical consumables and expanding our commercial funnel with new OEM opportunities.

John Lesser: In 2025, we will continue using and yes to optimize operations. This week during our annual President's Kaizen week, we're hosting multiple events at major sites across the globe engaging over 200 employees from all levels to achieve our 2025 goals and long term strategies and.

Matthijs Glastra: This week, during our annual President's Kaizen Week, we're hosting multiple events at major sites across the globe, engaging over 200 employees from all levels to achieve our 2025 goals and long-term strategy. NGS is integral to Novanta's identity, fostering cross-functional teamwork and effective problems. In summary, we're proud of the progress we made as an organization in 2024. Novanta achieved solid financial results in 2024 with strong operating performance, gross margin expansion, adjusted EBITDA growth, and record cash flow generation. In the fourth quarter, we returned to organic growth, we beat expectations for profit, and we achieved our best quarterly cash flow ever.

John Lesser: <unk> is integral to an event this identity fostering cross functional teamwork and effective problem solving.

John Lesser: In summary, we're proud of the progress we've made as an organization in 2024 event that achieved solid financial results in 'twenty to 'twenty four with strong operating performance gross margin expansion adjusted EBITDA grows and record cash flow generation.

John Lesser: Fourth quarter, we returned to organic growth, we'd beat expectations for profit and we achieved our best quarterly cash flow ever.

Matthijs Glastra: Our new product ramps are on track for 2025 with plans to launch 50% more new products than 2024. We've reorganized the skill better organically and through acquisitions, strengthened our leadership bends and talent. We remain confident in our strategy, our business fundamentals, and the resilience of our portfolio and team.

John Lesser: New product ramps are on track for 20 to 25 with plans to launch 50% more new products than 2024.

John Lesser: We've reorganized the skilled better organically and through acquisitions strengthened our leadership bench and talent pool.

John Lesser: We remain confident in our strategy, our business fundamentals and resilience of our portfolio and teams.

Matthijs Glastra: As we look at 2025, Novanta's top three priorities will be, first, wrap all our planned new products and achieve the $50 million of growth from new products this year. Second, further expand our profit margins and cash flow by driving NGS deep into our culture and the way we work. And finally, acquire additional companies that fit our strategy and attractive returns to drive double-digit reported growth in the year.

John Lesser: As we look at 2025 and event those top three priorities will be first revpar, all our planned new products and achieved a $50 million of growth from new products. This year second further expand our profit margins and cash flow by driving and he is deep into our culture and the way we work and finally our core.

John Lesser: Higher additional companies that fit our strategy strategy at attractive returns to drive double digit reported growth of the year.

Robert Buckley: With that, I will turn the call over to Robert to provide more details on our operations and financial performance. Robert. Thank you. Our fourth quarter 2024 non-gap adjusted gross profit was $112 million or a 47% adjusted gross margin compared to $100 million or a 47% adjusted gross margin in the fourth quarter of 2023. Adjusted gross margins were flat year over year, but our core adjusted gross margins, which excluded the impact of the motion solutions acquisitions, were up 125 basis. For the full year of 2024, non-gap adjusted gross profit was $442 million, or a 47% adjusted gross margin compared to $413 million, or a 47% adjusted gross margin for the full year of 2023.

Robert Buckley: With that I will turn the call over to Robert to provide more details on our operations and financial performance Robert Thank.

Robert Buckley: Thank you our fourth quarter 2024, non-GAAP adjusted gross profit was $112 million or a 47% adjusted gross margin compared to 100 billion or 47% adjusted gross margin in the fourth quarter of 2023.

Robert Buckley: Adjusted gross margins were flat year over year, but our core adjusted gross margins, which excluded the impact of the motion solutions acquisitions were up 125 basis points.

Robert Buckley: For the full year of 2024, non-GAAP adjusted gross profit was $442 million or a 47% adjusted gross margin compared to $413 million or 47% adjusted gross margin for the full year of 2023.

Robert Buckley: Our growth margin performance was better than expected in the quarter as a result of strong execution of our teams from embracing the Novanta growth system to better manage factory volumes, improve customer on-time performance, and drive cost productivity deep into our supply chains and production processes. For the full year, adjusted gross margins were nearly flat year over year, but core adjusted gross margins were up 120 basis. For the fourth quarter, R&D expenses were $25 million, and for the full year, R&D expenses were $96 million, or approximately 10% of sales. Fourth quarter, SG&A expenses were $43 million, and for the full year, $175 million, or roughly 18% of sales.

Robert Buckley: Our gross margin performance was better than expected in the quarter as a result of strong execution of our teams from an embracing that I've asked the gross system to better manage factory volumes improve customer on time performance and drive cost productivity deep into our supply chain and production processes.

Robert Buckley: For the full year adjusted gross margins were nearly flat year over year, but core adjusted gross margins were up 120 basis points.

Robert Buckley: For the fourth quarter R&D expenses were $25 million for the full year R&D expenses were 96 million or approximately 10% of sales fourth quarter SG&A expenses were 43 million and for the full year of $175 million or roughly 18% of sales.

Robert Buckley: Adjusted EBITDA was $52 million in the fourth quarter, a 22% adjusted EBITDA margin, versus $45 million in the prior year, demonstrating growth of 15% year-over-year. For the full year of 2024, adjusted EBITDA was approximately $210 million versus $196 million in the prior year. On the tax front, our non-GAAP tax rate in the fourth quarter was 24%. Our tax rate for the full year of 2024 was 20% versus 16% in the prior year. Our tax rate increased year-over-year due to changes in jurisdictional mix of pre-tax income, pillar-two implications, and the increased geographical tax Our non-gap adjusted earnings per share was $0.76 in the fourth quarter, up 21% versus the prior year.

Robert Buckley: Adjusted EBITDA was $52 million in the fourth quarter, and 22% adjusted EBITDA margin versus $45 million in the prior year demonstrating growth of 15% year over year for the full year 2024, adjusted EBITDA was approximately $210 million versus $196 million in the prior year.

Robert Buckley: On the tax front, our non-GAAP tax rate in the fourth quarter was 24% our tax rate for the full year 'twenty 'twenty four was 20% versus 16% in the prior year, our tax rate increased year over year due to changes in jurisdictional mix of pre tax income pillar two implications and the increased geographical tax rates.

Robert Buckley: Our non-GAAP adjusted earnings per share was <unk> 76 cents in the fourth quarter up 21% versus the prior year for the full year of 2024, our non-GAAP adjusted earnings per share was $3 80.

Robert Buckley: For the full year of 2024, our non-gap adjusted earnings per share was $3.08. Fourth quarter operating cash flow was nearly $62 million, up 58% year-over-year, and represents a record for cash flow in a single quarter. For the full year of 2024, operating cash flow was approximately $159 million, up 32% versus 2023, and up 75% from 2022. 2024 was our best-ever year for cash flow performance, driven by solid improvements in reducing our networking capital needs, improving our profitability, and delivering our more efficient manufacturing processes to enhance product quality and improve on-time delivery. We ended the fourth quarter with gross debt of $419 million, with a gross leverage ratio of less than two times, and our net debt was $305 million, giving us a net leverage ratio of approximately 1.4 times.

Robert Buckley: Fourth quarter operating cash flow was nearly $62 million up 58% year over year and represents a record for cash flow in a single quarter for.

Robert Buckley: For the full year 2020 for operating cash flow was approximately 159 million up 32% versus 2023 and up 75% from 'twenty to 'twenty two.

Robert Buckley: 2024 was our best every year for cash flow performance driven by solid improvements in reducing our net working capital needs, improving our profitability and delivering a more efficient manufacturing processes to enhance product quality and improve on time delivery.

We ended the fourth quarter with gross debt of $419 million with a gross leverage ratio of less than two times and our net debt was $305 million, giving us a net leverage ratio of approximately one four times.

Robert Buckley: We achieved our goal of reducing our growth and net leverage by a year end, putting Novanta's balance sheet in a great position to execute on our acquisition pipeline. For the fourth quarter, Novanta booked a bill with $0.96. bookings were up 54% year-over-year and 5% sequential. We saw continued strength in bookings in our advanced surgery business, formerly known as the minimum evasive surgical business. posting a 1.14 book-to-bill as we took orders for our new insufflators and endoscopic pump products that are ramping in 2025.

Robert Buckley: We achieved our goal of reducing our gross and net leverage by year end, putting novartis balance sheet in a great position to execute on our acquisition pipeline.

Robert Buckley: For the fourth quarter, Nevada book to Bill was 0.96.

Robert Buckley: Bookings were up 54% year over year and 5% sequentially.

Robert Buckley: We saw continued strength in bookings in our advanced surgery business, formerly known as the minimum invasive surgical business.

Robert Buckley: Hosting a 1.14 book to Bill as we took orders for our new <unk> and endoscopic pump products that are ramping in 2025.

Speaker Change: Offsetting this was further softness of demand and OEM customers in the life Sciences, DNA sequencing and advanced industrial applications now turning to our new operating segments. As <unk> has just explained we've updated our operating segments into two segments first our automation, enabling technologies segment, which mainly serves our advanced industrial OEM.

Robert Buckley: Offsetting this was further softness of demand at OEM customers in the life sciences, DNA sequencing, and advanced industrial applications.

Robert Buckley: Now turning to our new operating segments, as Matthijs just explained, we've updated our operating segments into two segments. First, our automation enabling technology segment, which mainly serves our advanced industrial OEM customers in precision manufacturing and robotics and automation applications. And second, the medical solutions segment, which mainly serves our medical OEM customers serving the healthcare industry, our life science industry, and our bioprocessing OEM customers in the precision medicine.

Robert Buckley: Customers and precision manufacturing and robotics and automation applications.

Robert Buckley: Second the medical solutions segment, which mainly serves our medical OEM customers, serving the health care industry.

Robert Buckley: Our life science industry at our bio processing OEM customers in the precision medicine space.

Robert Buckley: These updated segments also reflect our new leadership structure and also better consolidate our end market exposures into common groups. So now turning to the automation enabling technology segment, fourth quarter sales grew 9% year-over-year, driven by a continued recovery in robotics and automation applications. For the full year, sales declined 2%. The book to bill in this segment of the fourth quarter was 0.89. and for the full year was $0.87, which reflects the continued softness in demand and industrial capital spending as evident in the Purchasing Managers Index. This was somewhat offset by returning demand in robotic and automation applications from industry investments in warehouse automation, mobile robotics, and other niche industrial robotic applications.

Robert Buckley: These updated segments also reflect our new leadership structure and also better consolidate our end market exposures into common groups.

Robert Buckley: So now turning to the automation, enabling technologies segment fourth quarter sales grew 9% year over year, driven by continued recovery in robotics and automation applications for the full year sales declined 2% the book to Bill in this segment in the fourth quarter was 0.89.

Robert Buckley: And for the full year was 0.87, which reflects the continued softness in demand in the industrial capital spending is evident in the purchasing managers index.

Robert Buckley: Was somewhat offset by returning demand in robotic and automation applications from industry investments in warehouse automation mobile robotics and other niche industrial robotic applications.

Robert Buckley: Adjusted gross margins in this segment were 51% in the fourth quarter, up nearly 350 basis points year-over-year, driven by strong productivity in our factories. For the full year, this segment saw a 49% adjusted gross margin up 70 basis points year-over-year. Design wins in this segment. We're up high single digits year over year in the fourth quarter, driven by solid execution of our sales team to win new sockets in upcoming customer platform. New product revenues grew strong double-digit year-over-year in the fourth quarter with Vitality Index in the teens percent of sales, similar to the prior year and in line with expectations and guidance.

Robert Buckley: Adjusted gross margins in this segment were 51% in the fourth quarter up nearly 350 basis points year over year, driven by strong productivity in our factories for.

Robert Buckley: For the full year the segment saw a 49% adjusted gross margin up 70 basis points year over year.

Robert Buckley: Design wins in this segment were up high single digits year over year in the fourth quarter, driven by solid execution of our sales team to win new sockets and upcoming customer platforms, new product revenues grew strong double digit year over year in the fourth quarter with the vitality index in the teens percent of sales similar to the prior.

Robert Buckley: A year and in line with expectations and guidance.

Robert Buckley: Next, the medical solutions segment experienced reported revenue growth of 17% year-over-year and decline on an organic basis for The organic decline was largely caused by a decline in sales in the DNA sequencing applications, which we discussed in our last call, as well as broader weakness in the life science applications. This was partially offset by double-digit growth in our advanced surgery applications, which saw high levels of demand for minimum evasive surgical technologies, as well as our new product sales from the launch of our next generation insufflator. For the full year, recorded sales in the segment grew by 20%, and saw an organic decline of 2%, with revenue strength and advanced surgery being offset by declines in DNA sequencing and the end of life of surgical displays products, as well as some general weakness in the life science application.

Robert Buckley: Next the medical solutions segment experienced reported revenue growth of 17% year over year decline in our organic basis, 4%.

Robert Buckley: The organic decline was largely caused by a decline in sales into DNA sequencing applications, which we discussed in our last call as well as broader weakness in the life science applications.

Robert Buckley: This was partially offset by double digit growth in our advanced surgery applications, which saw high levels of band for minimum invasive surgical technologies as well as our new product sales from the launch of our next generation Thats up later.

Robert Buckley: For the full year reported sales in this segment grew by 20% and saw an organic decline of 2% with revenue strength in advanced surgery being offset by declines in DNA sequencing and the end of life of surgical display products as well as some general weakness in the life science applications.

Robert Buckley: This segment saw a book-to-bill of 1.05 in the fourth quarter and core bookings grew 60% year-over-year. For the full year, the book-to-bill was 0.98. As already mentioned, advanced surgery applications had a book-to-bill of 1.14 as we continue to see customers placing large orders for new product launches scheduled for 2025. This strong result was partially offset by continued weakness in our precision medicine business line. We saw a book-to-bill below 1. Design wins in the segment nearly tripled year-over-year in the fourth quarter, driven by solid wins in advanced surgery business. The vitality index in the Sigma was above 20% of sales in the fourth quarter and on the full year.

Robert Buckley: This segment saw a book to Bill of 1.05 in the fourth quarter and core bookings grew 60% year over year.

Robert Buckley: For the full year. The book to Bill was 0.98 as already mentioned advanced surgery applications had a book to Bill of 114, as we continue to see customers, placing large orders for new product launches scheduled for 2025.

Robert Buckley: This strong result was partially offset by continued weakness in our precision medicine business line, we saw a book to bill below one.

Robert Buckley: Design wins in the segment nearly tripled year over year in the fourth quarter driven by solid wins in advanced surgery business. The vitality index in the SYGMA was above 20% of sales in the fourth quarter and on the full year.

Robert Buckley: adjusted gross margin in this segment, decreased roughly 500 basis points year over year in the fourth quarter, driven by a higher mix of revenue for our motion solutions acquisition and lower factory utilization in our Manchester facility caused by the before mentioned production stoppage of our products in the DNA sequencing market. Excluding motion solutions, gross margins of the quarter decreased by approximately 280 basis points. And for the full year, adjusted gross margins declined roughly 160 basis points, but excluding the impact of motion solutions increased 130 basis points, mainly driven by the margin improvements in our advanced surgery business.

Robert Buckley: Adjusted gross margin in this segment decreased roughly 500 basis points year over year in the fourth quarter, driven by a higher mix of revenue for our motion solutions acquisition and lower factory utilization in our Manchester facility caused by the performance and production stoppage of our products in the DNA sequencing market.

Robert Buckley: Excluding motion solutions gross margins in the quarter decreased by approximately 280 basis points and for the full year adjusted gross margins declined roughly a 160 basis points, but excluding the impact of motion solutions increased 130 basis points, mainly driven by the margin improvements in our advanced surgery business.

Robert Buckley: Now turning to guns. We saw strong growth in our medical business and confidently reconfirm our outlook for $50 million in incremental new product sales in 2025. As mentioned in the past calls, the majority of these new products are targeting surgical equipment sales at the hospital operating rooms and surgical centers. And although capital spending and industrial and semiconductor remains depressed and capital spending and life science and bioprocessing markets are volatile due to the evolving geopolitical environment, impacting trade and government spending, we continue to see demand gradually improving.

Now turning to guidance.

Robert Buckley: We saw strong growth in our medical business and confidently reconfirm, our outlook for $50 million of incremental new product sales in 2025 as mentioned in the past calls the majority of these new products are targeting surgical equipment sales at the hospital operating rooms and surgical centers.

Robert Buckley: And although capital spending in industrial and semiconductor remains depressed and capital spending of life science in bio processing markets are volatile due to the evolving geopolitical environment impacting trade and government spending we continue to see demand gradually improve it.

Robert Buckley: However, due to the volatility in customers' ordering behavior from these ever-changing policy decisions and associated retaliatory trade actions, we would characterize our full-year outlook as cautiously optimistic. We are extremely confident in our ability to successfully launch new products into a strong demand environment for their specific application areas. This gives us confidence in delivering $50 million of incremental revenue from these products in 2025, which is the basis for our full-year revenue outlook. Our full-year forecast presumes capital spending in industrial, semiconductors, life science, and bioprocessing remains volatile and deferred. Effectively, we are presuming disruptions in line with the first quarter news cycle caused by terrorist and retaliatory trade actions such as China blacklisting of certain OEM customers.

Robert Buckley: Due to the volatility and customers ordering behavior from these ever changing policy decisions and associated a retaliatory trade actions, we would characterize our full year outlook as cautiously optimistic.

Robert Buckley: We are extremely confident in our ability to successfully launch new products into a strong demand environment for their specific application areas. This gives us confidence in delivering $50 million of incremental revenue from these products in 2025, which is the basis for our full year revenue outlook.

Robert Buckley: Our full year forecast presumes capital spending in industrial semiconductors life science in bio processing remains volatile and deferred.

Robert Buckley: Secondly, we are presuming disruptions in line with the first quarter new cycle caused by terrorism retaliatory trade actions, such as China blacklisting of certain OEM customers. We are also incorporating into our outlook prolonged macroeconomic weakness in Europe, and China demand pressures with the U S federal spending cuts, including the U S national.

Robert Buckley: We are also incorporating to our outlook prolonged macroeconomic weakness in Europe and China, demand pressures with the U.S. federal spending cuts, including the U.S. National Institute of Health, and overall customer order volatility in line with what we experienced in January and February. However, despite these dynamics, there are still strong signs of growth slowly recovering in these end markets. After experiencing a three-year recession in capital spending in industrial and semiconductor markets, customers are leaning in on new product launches and investments are gradually improving. We see good demand already from robotics and automation applications and some short-cycle semiconductor and industrial applications.

Robert Buckley: The Institute of Health and overall customer order volatility in line with what we experienced in January and February.

Robert Buckley: However, despite these dynamics theres still strong signs of growth slowly recovering in these end markets after experiencing a three year recession in capital spending in industrial and semiconductor markets customers are leaning in on new product launches and investments are gradually improving we see good demand already from robotics and.

Robert Buckley: Nation applications as some short cycles semiconductor and industrial applications.

Robert Buckley: Furthermore, we continue to see excellent strength in our medical business for hospitals, specifically operating rooms, surgical centers, and critical care units. Patient volumes and hospital spending remain strong at upper single-digit growth, despite creating a solid backdrop for our new product launches in this space, some of which are already contributing to our near-term financial performance.

Robert Buckley: Furthermore, we continue to see excellent strength in our medical business for hospitals, specifically operating rooms surgical centers in critical care units.

Robert Buckley: Patient volumes and hospital spending will remain strong at upper single digit growth, despite creating a solid backdrop for our new product launches in this space some of which are already contributing to our near term financial performance.

Robert Buckley: So, given these early positive signs, we are more optimistic of a better year in our end markets, but we believe it is prudent to be conservative with our initial full year 2025 guidance and to the growth trend strengthened enough to eliminate the risks associated with volatility. Therefore, our full-year revenue guidance is based on delivering $50 million of incremental new product sales for 5% growth overall in Novanta. And so starting with the full year 2025, we now expect gap revenue to be approximately a billion dollars, which represents the overall revenue growth of approximately 5% just mentioned.

Robert Buckley: So given these early positive signs, we are more optimistic or a better year in our end markets, but we believe it is prudent to be conservative with our initial full year 2025 guidance until the growth trends strengthened enough to eliminate the risks associated with volatility.

Robert Buckley: Therefore, our full year revenue guidance is based on delivering 50 million of incremental new product sales were 5% growth overall, Nevada.

Robert Buckley: And so starting with the full year of 2025, we now expect GAAP revenue to be approximately $1 billion, which represents the overall revenue growth of approximately 5% just mentioned.

Robert Buckley: For adjusted gross margins, we expect to deliver 100 basis points of margin expansion for the total company versus the full year results of 2024, which is approximately 47% to 47.5%. We expect to continue to lean heavily on the Novanta growth system that drives strong operating results, even in a difficult environment. We demonstrated our ability to do this in 2024 and 2023, and we believe we have continued momentum to achieve this again in 2025. We expect R&D and SG&A expenses for the full year to be approximately 29% of sales, or between $285 million and $290 million, which is a similar percent of sales as to what they were in 2024.

Robert Buckley: For adjusted gross margins, we expect to deliver 100 basis points of margin expansion for the total company versus the full year results of 2024, which is approximately 47% to 47, 5%.

Robert Buckley: We expect to continue to lean heavily on the Nevada Grocers drive strong operating results even in a difficult environment, we demonstrated our ability to do this in 2024 and 2023 and we believe we have continued momentum to achieve this again in 2025.

Robert Buckley: We expect R&D and SG&A expenses for the full year to be approximately 29% of sales or between $285 million and $290 million, which is a similar percentage of sales as to what they were in 2024.

Robert Buckley: Depreciation expense should be approximately $17 million for the full year. Stock compensation expense should be approximately $28 million for the full year. For adjusted EBITDA for the full year 2025, we expect it to be between $225 million and $235 million, or approximately a 23% EBITDA margin. Interest expense which was nearly $32 million in 2024 is expected to be roughly $24 million for the full year 2025. The lower interest expense year-over-year is driven by debt pay down and the current levels of market interest This does not assume any future debt drawdowns and potential acquisitions. We expect our non-GAAP tax rate to be around 22% to 23% for the full year of 2025.

Depreciation expense should be approximately $17 million for the full year stock compensation expense should be approximately $28 million for the full year.

Robert Buckley: For adjusted EBITDA for the full year 2025, we expect it to be between $225 million and $235 million or approximately a 23% EBITDA margin.

Interest expense, which was nearly $32 million in 'twenty 'twenty four is expected to be roughly $24 million for the full year 2025, the lower interest expense year over year is driven by debt pay down in the current levels of market interest rates.

Robert Buckley: This does not assume any future debt drawdown from potential acquisitions.

Robert Buckley: We expect our non-GAAP tax rate to be around 22% to 23% for the full year of 2025. This guidance includes our current view of jurisdictional mix of pre tax income and increase in geographical tax rate and the impact of OECD pillar two global minimum tax rates.

Robert Buckley: This guidance includes our current view of jurisdictional mix of pre-tax income, an increase in geographical tax rates, and the impact of OECD Pillar 2 Global Minimum Tax Rates. Diluted weighted average shares outstanding will be approximately 36 million. for the full year 2025 to adjusted diluted earnings per share. We expect approximately $3.35 and $3.55. This represents growth of nine to 15% year over year. Finally, we expect cash flows to demonstrate solid growth for the full year of 2025, and we expect to achieve a cash conversion rate greater than 100% of non-GAAP net income and a cash flow to EBITDA conversion at similar ratios or greater than we witnessed in 2024.

Robert Buckley: Diluted weighted average shares outstanding will be approximately 36 million.

Robert Buckley: For the full year 2025, adjusted diluted earnings per share.

We expect approximately $3 35 and $3 55.

Robert Buckley: This represents growth of 9% to 15% year over year.

Robert Buckley: Finally, we expect cash flows to demonstrate solid growth for the full year 2025, and we expect to achieve a cash conversion rate greater than 100% of non-GAAP net income and cash flow to EBITDA conversion at similar ratios are greater than we witnessed in 2024.

Robert Buckley: As an acquisition compounder, Novanta's cash flow growth is a central component of this strategy.

Robert Buckley: As an acquisition compound or novartis cash flow growth is essential component of this strategy two years ago, we changed the compensation plans and our teams to incentivize cash flow compounding while training the entire manufacturing teams on Ngls.

Robert Buckley: Two years ago, we changed the compensation plans on our teams to incentivize cash flow compounding while training the entire manufacturing teams on NGS. and the last two years have seen the rewards of that change. Through the deployment of NGS and by maintaining these compensation incentives, we expect to maintain and even accelerate our progress here, establishing a terrific foundation to deploy that capital towards acquisition.

Robert Buckley: And the last two years and seeing the rewards of that change through the deployment of Ngls and by maintaining these compensation incentives, we expect to maintain and even accelerate our progress here, establishing a terrific foundation and deploy that capital towards acquisitions move.

Robert Buckley: Moving now to guidance for the first quarter of 2025. We expect gap revenue in the range of $232 million and $236 million, which represents revenue growth of flat to plus 2%. The volatility in the marketplace from trade war actions, U.S. government spending cuts, particularly at the NIH, China blacklisting certain OEM customers, and other geopolitical disruptions is causing customers to be conservative and increases the volatility of their ordering and shipping. Therefore, while customer sentiment has been improving, these factors had a significant impact on the near-term ordering and shipping of product and therefore we feel it's prudent to guide consumers.

Robert Buckley: Moving now to guidance for the first quarter of 2025.

Robert Buckley: We expect GAAP revenue in the range.

Robert Buckley: $232 million, and 236 million, which represents revenue growth of flat to plus 2%.

Robert Buckley: The volatility in the market place from trade War actions U S government spending cuts, particularly at the NIH, China blacklisting certain OEM customers and other geopolitical disruptions is causing customers to be conservative and increases the volatility of their ordering and shipments.

Robert Buckley: Therefore, while customer sentiment has been improving these factors that has significant impact on the near term ordering and shipping a product and therefore, we feel it's prudent guide conservatively.

Robert Buckley: At the segment level in the first quarter, we expect automation enabling technology segment revenue to grow low to mid-single-digit percent year-over-year, driven by continued growth in robotics and automation category, offset by continued weakness in precision manufacturing. Our medical solutions segment is expected to show flat to low single-digit growth, as the ramp-up of new products and advanced surgery is mostly offset by continued weakness in precision medicine, and where our customers are now being impacted by uncertainty surrounding U.S. NIH funding and China retaliatory trade acts. Moving on to adjusted gross margin for the first quarter, we expect to be at approximately 46% to 46.5%.

Robert Buckley: At the segment level in the first quarter, we expect automation, enabling technologies segment revenue to grow low to mid single digit percent year over year, driven by continued growth in robotics and automation category offset by continued weakness in precision manufacturing our medical solutions segment is expected to show flat to low.

Robert Buckley: Single digit growth as the ramp up of new products in advanced surgery is mostly offset by continued weakness in precision medicine, where our customers are now being impacted by uncertainty surrounding the U S. NIH funding in China retaliatory trade actions.

Robert Buckley: Moving on to adjusted gross margin for the first quarter, we expect to be approximately 46% to 46, 5%.

Robert Buckley: As a reminder, our margins are typically lower in the first quarter due to seasonality of some expenses. In the segment, we expect gross margins to be flat to down for the automation enabling technologies due to normal seasonality, whereas we expect medical solutions to be flat to up as the segment sees better factory utilization than was witnessed in the fourth quarter. We expect R&D and SG&A expenses in the first quarter to be $70 to $71 million, depreciation expense at $4 million, stock compensation expense at $8 million. For adjusted EBITDA in the first quarter, we expect a range of $48 to $51 million.

Robert Buckley: As a reminder, our margins are typically lower in the first quarter due to the seasonality of some expenses in the segment, we expect gross margins to be flat to down for the automation, enabling technologies due to normal seasonality, whereas we expect medical solutions to be flat to up as the segment sees better factory utilization then was witnessed in the fourth.

Robert Buckley: Quarter.

Robert Buckley: We expect R&D and SG&A expenses in the first quarter to be 70% to 71 million depreciation expense of 4 million and stock compensation expense of $8 million for adjusted EBITDA in the first quarter, we expect a range of $48 million to $51 million interest expense will be approximately $6 billion in the first quarter than we expected.

Robert Buckley: Interest expense will be approximately $6 million in the first quarter, and we expect our non-cap tax rate to be 22% in the first quarter. Higher tax rate increases in geographical tax rates, particularly in Europe, and pillar 2 changes in jurisdictional mix of income. For adjusted diluted earnings per share, we expect a range of $0.63 to $0.71. While we expect first quarter cash flows to be somewhat low due to timing of incentive compensation payments, equity compensation vesting events, and the timing of seasonal tax payments, we also expect cash flow to strengthen as the year progresses, putting us in a great position to accelerate our acquisition strategy.

Robert Buckley: non-GAAP tax rate to be 22% in the first quarter as higher tax rate as the increases in geographical tax rates, particularly in Europe and pillar two changes in jurisdictional mix of income for us.

Robert Buckley: Adjusted diluted earnings per share, we expect a range of 63 to <unk> 71.

Robert Buckley: While we expect first quarter cash flows to be somewhat low due to the timing of incentive compensation payments equity compensation vesting events and the timing of seasonal tax payments. We also expect cash flow has strengthened as the year progresses, putting us in a great position to accelerate our acquisition strategy.

Robert Buckley: As always, this guidance does not assume any significant changes to foreign exchange rates. As seen in the fourth quarter, FX markets had more volatility due in part to some of the geopolitical and trade policy dynamics. And so while it's difficult to predict, the trend of exchange rates month to month may have a more meaningful impact on our reported revenue results than we have experienced in the recent past. Finally, our guidance does not include any anticipated acquisitions at this time.

Robert Buckley: As always this guidance does not assume any significant changes in foreign exchange rates as seen in the fourth quarter FX markets had more volatility due in part to some of the geopolitical and trade policy dynamics and so while it's difficult to predict the trend of exchange rates, but the month may have a more meaningful impact on our reported revenue results than we've experienced in the recent.

Robert Buckley: Pat.

Robert Buckley: Finally, our guidance does not include any anticipated acquisitions at this time.

Robert Buckley: In summary, we remain optimistic about our long term growth prospects and we continue to work diligently to support our customers with their successful launches of multiple new platforms. The long term secular growth outlook of our end markets remains intact, and we feel we're well positioned to see 5% sales growth in 2025 on the strength of new product launches.

Robert Buckley: In summary, we remain optimistic about our long-term growth prospects, and we continue to work diligently to support our customers with their successful launches of multiple new platforms. The long-term secular growth outlook of our end markets remains intact, and we feel we're well-positioned to see 5% sales growth in 2025 on the strength of new product launches, with more potential upside that depends on the resiliency of our customers and their end markets. As a company, we are confident in our long-term strategy and the fundamentals of the business remain strong. We are pleased with the team's deeper adoption of the NovantaGrow system operating model, which is giving us the ability to consistently execute and deliver on our promises, and as evidenced by the solid results in the fourth quarter in the full year 2024.

Robert Buckley: With more potential upside that depends on the resiliency of our customers and their end markets.

Robert Buckley: As a company we are confident in our long term strategy and the fundamentals of the business remains strong. We are pleased with the team's deeper adoption in the <unk> growth system operating model, which is giving us the ability to consistently execute and deliver on our promises and as evidenced by the solid results in the fourth quarter and the full year 2024, as a company remain folk.

Robert Buckley: As a company, we remain focused on controlling what we can't control and executing with excellence on our top priorities for 2025, no matter the business environment.

Robert Buckley: On controlling what we can control and executing with excellence on our top priorities for 2025, no matter the business environment brings us.

Gary: This concludes the prepared remarks. We will now open the call up for questions. 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 key. To withdraw your question, please press star then 2.

Robert Buckley: This concludes the prepared remarks, we'll now open the call up for questions.

Robert Buckley: We will now begin the question and answer session.

Robert Buckley: To ask a question you May Press Star then one on your Touchtone phone.

Robert Buckley: If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.

Speaker Change: Our first question today is from Lee Jagoda with C. J S Securities. Please go ahead.

Lee Jagoda: Our first question today is from Lee Jagoda with CJS Securities, please go ahead. Hi, good morning. Hey, Lee. So I guess just starting with the outlook, versus the outlook you gave in November, there were some items that were not in the 50 million of new products and sort of not macro-related that were expected to be resolved in 2025, and I guess in particular the DNA sequencing piece of the equation.

Lee Jagoda: Hi, good morning.

Speaker Change: Hey, Lee.

Speaker Change: So I guess, just starting with the outlook versus the outlook you gave in November there were some items that were.

Speaker Change: We're not in the $50 million.

Speaker Change: Of new product and sort of not macro related that were expected to be resolved in 2025, and I guess in particular, the DNA sequencing piece of the equation could you could you comment on the DNA sequencing product lines and the issues that you faced and when we should expect the recovery there and then.

Matthijs Glastra: Could you comment on the DNA sequencing product lines and the issues that you faced and when we should expect the recovery there? And then if there's anything else like that, that may be not explicitly being included in the guidance, that could be a positive outside of the macro.

Speaker Change: If theres anything else like that that maybe not explicitly being.

Being included in the guidance that could be a positive outside of the macro.

Yes, Thanks, Lee let me, let me try to take this.

Matthijs Glastra: Yeah, thankfully, let me, let me try to take this. Well, first off, in the short term, in the DNA sequencing, or I mean, shipments are more or less normalized again, but obviously, this area has been substantially in the news and life sciences in general. So what has changed, of course, is the funding cuts in the National Institute of Health, which is driving, let's say, research funding, which is actually an important end customer of our customers, right? So that's, that's a change. And customers are cautious, not fully knowing what that environment will bring them. And then, of course, there are some retaliatory responses as a result of tit for tat behavior as a result of trade policies that recently just got enacted.

Speaker Change: Well first off in the short term in the DNA sequencing or shipments are more or less normalized again, but obviously this area has been.

Speaker Change: Substantially in the news.

Speaker Change: <unk>.

Speaker Change: And life Sciences in general So what has changed of course is the <unk>.

Speaker Change: Funding cuts and the National Institute of Health, which is driving.

Speaker Change: Let's say research funding, which is actually an important end customer of our customers right. So that's that's a change and customers are cautious not fully knowing what that environment will bring them and then of course there is some retaliatory responses.

Speaker Change: As a result of that for tax Bill.

Speaker Change: Behavior as a result of trade policies that recently.

Speaker Change: Just got enacted.

Matthijs Glastra: All of these elements were, of course, not in our previous call guidance, and to be honest, have substantially changed, you know, the volatility and short term uncertainty, I would also say, and maybe midterm DNA sequencing headwinds, you know, should be considered higher, given that some of the elements could be more prolonged in that market.

Speaker Change: All of these elements we're of course not.

Speaker Change: Not in our previous call our guidance and.

Speaker Change: To be honest has substantially changed.

You know the volatility and short term uncertainty I would also say.

Speaker Change: And maybe mid <unk> DNA sequencing headwinds.

Speaker Change: Should be considered higher given that some of the the elements could be more prolonged in that market. So should dose that's maybe the major the major drivers of the changes versus the last call.

Matthijs Glastra: So those, that's maybe the major drivers of the changes versus the last call.

Speaker Change: Okay, and then I guess looking even further ahead because.

Lee Jagoda: Okay, and then I guess looking even further ahead, because might as well do that. The, if I look out to 2026, and I think about what's embedded in your guidance in 2025 in terms of 50 million of new products. I think you've said previously that that 50 million dollar number, because of the timing of the sell-in, should at least be maintained if not potentially grow over the next couple of years. So if I take that as sort of a baseline, assuming that's correct, and then layer in the macro environment, either stabilizing or potentially improving. All of that to say, like, should we see accelerating organic growth in 2026 versus 2025 sitting here today?

Speaker Change: Might as well do that.

Speaker Change: If I look out to 2026, and I think about what's embedded in your guidance in 'twenty five in terms of $50 million of new product I think you've said.

Speaker Change: Previously that that $50 million number because of the timing of the sell in should at least be maintained if not potentially grow over the next couple of years.

Speaker Change: So if I take that as sort of a baseline assuming that's correct and then layer in the macro environment, either stabilizing or potentially improving.

Speaker Change: And all of that to say like should we see accelerating organic growth in 2026 versus 2025 sitting here today.

Speaker Change: Yeah, I mean, we remain very confident of consistent about the the growth driver driven by innovation right. So as we stated before.

Matthijs Glastra: Yeah, I mean, we remain very confident and consistent about the growth driver driven by innovation, right? So as we stated before, you know, we're reconfirming the 50 million, which we feel in this environment should say a lot about our ability to control our destiny there and the demand for our innovation. So let's start with that. Secondly, it's the first year of launch of these products, and therefore, the momentum around the demand for these products with our customers will only increase over time. So therefore, just on the back of that, we expect that new product revenue of this same base to increase.

Speaker Change: We're reconfirming the $50 million away two ratio in different environment is is should say a lot about our ability to control our destiny, there and the demand over for our innovation, So let's start with that.

Speaker Change: Secondly, it's the first year of lounge of these products and therefore.

Speaker Change: The momentum around the demand for these products with our customers and.

Speaker Change: It will only increase over time. So therefore, just on the back of that we expect that new product revenue off the same base to increase secondly.

Matthijs Glastra: Secondly, not an insignificant part of the future growth will be driven by the consumables part in the advanced surgery business. And as we're booking, you know, to a large extent, the capital goods piece of that business, as systems of our customers are starting to get placed and introduced, the procedural growth rate will go up, and therefore, the consumable parts of the business will compound in a not insignificant matter for the rest of the decade.

Speaker Change: And a significant part of the future growth will be driven by the consumables part in the advanced surgery business.

Speaker Change: And as we are we're booking.

Speaker Change: To a large extent the capital goods fees all of that business.

Speaker Change: Our systems of our customers are starting to get placed and introduced the procedure growth rate will go up and therefore, the consumable parts of the business will compound in a not insignificant matter.

Speaker Change: For the rest of the decade third we will launch additional new products that are not in the $50 million, we comment on that.

Matthijs Glastra: Third, we will launch additional new products that are not in the 50 million. We commented that we expect at least 50% more new products over, you know, the 15 that we've introduced last year to be introduced in 2025. The contribution of those products in the revenue is still, you know, modest, but you can of course expect that contribution to compound over the next years as well. So in short, the answer to your question is yes, we expect the innovation and new product side to be a more significant impact to our growth going forward.

Speaker Change: We expect at least 50% more new products over the 15 that we've introduced last year to be introduced in 2025.

The contribution of those products in the revenue is still modest but you can of course expect that contribution to combat over the next years as well so in short the.

Speaker Change: The answer to your question is yes, we expect the innovation of new products side to be.

Speaker Change: A more significant impact to our growth going forward.

Speaker Change: Got it I'll hop back in queue, and let others ask some thanks very much.

Lee Jagoda: Got it. I will hop back in queue and let others ask some. Thanks very much.

Speaker Change: Yeah.

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

Brian Drab: The next question is from Brian Drab with William Blair. Please go ahead. Hi, thanks for taking my questions.

Brian Drab: Hi, Thanks for taking my questions.

Brian Drab: I wanted to first, hey, good morning, just wanted to first clarify, make sure I heard this correctly, on the EUV and DUV side, I think that you talked about, you know, getting some initial orders for a subsystem product, is that? You know, it's expected to materially increase your content with your customer there. And is that, you know, something that is going to be pretty broadly rolled out over their existing installed base? Or is it in new products?

Brian Drab: Hey, good morning, just wanted to first.

Brian Drab: Just clarify make sure I heard this correctly on that.

Brian Drab: <unk> and <unk> side.

Brian Drab: I think that you talked about.

Brian Drab: Getting some initial orders for sub system product is that.

Brian Drab: It's expected to.

Brian Drab: Materially increase your con.

Brian Drab: Content with your customer there and is that something that is going to be.

Brian Drab: Pretty broadly rolled out.

Brian Drab: There.

Brian Drab: Existing installed base or is it the new products and how does the timing of that revenue throughout the year.

Matthijs Glastra: And how does the timing of that revenue look throughout the year? Yeah, yeah, Brian, thanks for the question. Well, we're excited that that we're, we're starting to ramp this product, or this product category router. Yes, it's an intelligent subsystem, and yes, it will increase the content with in this particular category with this particular customer set. And it will be the first year of ramp, and it will be more geared towards the second half of the year, which is what we thought what would happen, but it's good to see that confirmed. We're resolving a major set of issues for this customer set, and therefore the value that we bring to their customers is actually quite significant.

Brian Drab: Yeah, Yeah, Brian Thanks for the question.

Brian Drab: We're excited that that were we're starting to ramp this product or this product category router.

Brian Drab: Yes, it's an intelligent subsystem and yes, it will increase our content with in this particular category with this.

Speaker Change: Our customer set.

Speaker Change: And it will be the first year of ramp.

Speaker Change: And it will be more geared towards the second half of the year, which is what we thought would happen, but it's good to see that confirmed.

Speaker Change: We are resolving a major set of issues for a dish customer sat in and therefore, the value that we bring to their customers.

Speaker Change: Is actually quite significant.

Matthijs Glastra: So.

Speaker Change: So.

Matthijs Glastra: I won't go into, I think, further detail, because it will then start to breach some, I think, confidentiality agreements that we have. But it's fair to say that, yeah, we and our customer are excited about it. The impact of this launch is part of the $50 million. and we expect the contribution of that of course to grow in the coming years because we're just only starting to ramp in the latter part of this year and then there's further opportunity to further expand content and expand scope and reach but I'd rather not comment on that at this stage but it looks promising.

Speaker Change: I'm going to I think further detail because it will then start to breach some I think going for damaged the confidentiality agreements that we have but it's fair to say that.

Speaker Change: We and our customer are excited about it.

Speaker Change: The impact of these there's lot of just part of the $50 million.

Speaker Change: And we expect the contribution of that of course to grow in the coming years, because we're just only starting to ramp in the latter part of this year and then there is further opportunity to further expand content and expand scope and reach but I'd rather not comment.

Speaker Change: On that at this stage, but but but.

Speaker Change: It looks promising.

Speaker Change: Okay. Thanks, and then you commented again in the prepared remarks on humanoids.

Brian Drab: Okay, thanks.

Brian Drab: And then you commented again in the prepared remarks on humanoids. And I wasn't sure, as I was taking notes here, if you made a comment on orders picking up broadly, or did you specifically say with humanoids you saw orders picking up in the fourth quarter and into January and February?

Speaker Change: And.

Speaker Change: I wasn't sure as I was taking notes here, if you're if you've made a comment on orders picking up broadly or did you specifically say with human noisy so orders picking up in the fourth quarter and into January and February.

Matthijs Glastra: So can you just clarify that, and then can you elaborate on how that business is building?

Speaker Change: Can you just clarify that and then can you elaborate on.

Speaker Change: How that.

Speaker Change: Business is building is this is this really a revenue generating business for you and maybe 2025 2026.

Matthijs Glastra: Is this really a revenue-generating business for you, maybe 2025, 2026? Yeah, I mean, the humanoid category is still small, but it's growing rapidly. I would just argue that what we're trying to message here is that we're getting a lot of questions like, hey, why are you growing robotics and automation, whereas the overall market seems to be more subdued? And our answer is, we're more geared towards specialty robotics and high performance robotics, high precision robotics that includes surgical robotics, obviously, but also browser automation and humanoids, right? And as a result, of course, rapid advances in gen AI, there's things possible in these precision robotics categories that will drive further adoption.

Speaker Change: Yes, I mean, the humanoid category is still is still small, but it's growing rapidly I would just argue that what we're trying to.

Speaker Change: <unk> here is is that we're getting a lot of questions like Hey, why are you growing of robotics and automation, whereas the overall market seems to be more subdued and our answer is we are more geared towards specialty robotics and high performance robotics high precision robotics that include surgical robotics, obviously, but also warehouse automation.

Speaker Change: Human rights right and as a result of course rapid advances in Gen AI.

Speaker Change: There is there's things possible end's precision robotics categories.

Speaker Change: It will drive further adoption now it's too early to say that this category.

Matthijs Glastra: Now, it's too early to say that this category will become a prevalent category in the world, and therefore, for Novanta's, let's say, portfolio. But it's fair to say, and this is why we're commenting on it, it's a testament to the incredible capability of Novanta's technology that is recognized by the majority of the humanoid players in terms of incredibly precise, small form factor, high power density, extremely compact, and embedded safety, which is all incredibly important in these type of applications. And we're uniquely positioned to actually sell multiple products, whether it's servo drives, whether it's actually four-star sensing, whether it's compact encoders, all of which provide a sense of touch and precision motion at low latency that are unmatched.

Speaker Change: We will become a prevalent category in the world and therefore F for Novartis.

Speaker Change: Let's say portfolio, but it's fair to say and this is why we're commenting on it it's a testament to the incredible capability of of November a technology that is recognized by the majority of the new humanoid players in terms of incredibly precise small form factor high power.

Speaker Change: Your density and extremely compact.

Speaker Change: Embedded safety, which is all incredibly important in these type of applications and we're uniquely positioned to actually sell multiple products.

Speaker Change: Buttered serve hors derives whether it's actually a four store expensing whether it's.

Speaker Change: You know come back to Encoders, all of which provide a sense of touch and precision motion at low latency.

Speaker Change: That are matched that that's why we're commenting on it because we do see demand there long term I think on humanoids.

Matthijs Glastra: That's why we're commenting on it, because we do see a demand there.

Brian Drab: Long term, I think on humanoids, you know, let's kind of wait and see how the application evolves. But so far, we're working with all the key leaders. Okay, thanks. I'll get out of the way and maybe jump back in to ask one more later. Thanks.

Speaker Change: Let's kind of wait and see how the application evolves, but so far we're working with all the key leaders.

Speaker Change: Okay. Thanks, I'll get out of the way and maybe jump back and ask one more later thanks.

Thanks, Brian.

Rob Mason: Thanks, Brian. The next question is from Rob Mason with Baird.

Speaker Change: The next question is from Rob Mason with Baird. Please go ahead.

Rob Mason: Please go ahead. Yes, good morning. I wanted to say you already touched Matthijs just on EUV, DUV is probably more second half weighted, but just at a high level around the 50 million of incremental revenue.

Rob Mason: Oh, yes, good morning.

Rob Mason: I wanted to ask you already touched multi is just on <unk>.

Rob Mason: <unk> D V is probably more second half weighted but just at a high level around the $50 million of incremental revenue.

Matthijs Glastra: I mean, can you give us any help on just how we should think on cadencing? You know, I don't know, maybe even first half, second half. just around the contribution from that overall $50 million.

Rob Mason: Can you give us any help.

Rob Mason: Just how we should think on cadent seeing I don't know, maybe even first half second half.

Rob Mason: Just around the contribution from that overall.

Rob Mason: 50 million yeah.

Rob Mason: Yeah, I mean, let me.

Matthijs Glastra: Yeah, I mean, let me let me start in and just give a high level answer and then Robert can provide more specifics. And when we, you know, as you would expect, you see the crescendo, of course, increasing as the year progresses. So every quarter will get will get steadily better, right? And, and as I also said, there's the lounges, I mean, a large chunk is focused on the hospital and surgical center market, very robust market. So there's a lot of pull for the product, but there's, of course, also some timing of when, what, which OEM will launch what product.

Speaker Change: Let me start and then just gave at a high level answer and then Robert can provide more specifics and we you know as you would.

Rob Mason: Fact.

Rob Mason: You see the crescendo of core is increasing as the year progresses. So every quarter, we will get <unk>.

Rob Mason: Get steadily better right and as I also said there is the launches I mean, a large chunk is focused on the hospital and surgical center market, a very robust market.

Rob Mason: So theres a lot of full for the product that areas. There's of course also some timing of when what which OEM or lounge vault products. Some of them are soft launches and it will be coming in full launch kind of at the middle of the year. Some of them are already lounge and are starting to ramp right.

Robert Buckley: Some of them are soft launches, and it will be coming full launch kind of at the middle of the year. Some of them are already launched and are starting to ramp, right? So there's all these dynamics, but I think the upshot is it's a gradually, but very steadily increasing momentum throughout the year, quarter over quarter.

Rob Mason: So there's all these dynamics, but I think the upshot is it's a gradually but very steadily increasing momentum throughout the year quarter over quarter anything else. Yeah, I would say by the time you get to the third quarter Youre, probably in the high single digit and then low double digit in the fourth quarter.

Robert Buckley: Anything else? Yeah, I would say, you know, by the time you get to the third quarter, you're probably in the high single digit and then low double digit in the fourth quarter type of revenue. And that's consistent with the ramp of predominantly the insulators of the pumps. And then a little bit in the fourth quarter, you're picking up some semiconductor new product revenue as well.

Rob Mason: Type of revenue and Thats consistent with the ramp of <unk>.

Rob Mason: Predominantly the insulators of the pumps.

Rob Mason: And then a little bit in the fourth quarter, you are picking up some semiconductor new product revenue as well.

Rob Mason: I see okay.

Robert Buckley: I see. Okay.

Robert Buckley: In the just last quarter, we talked about, you know, some early signs in the short cycle businesses, picking up some, you know, the electronics area, you know, some of the precision manufacturing, I'm just, you know, around those early green shoots that you saw in the third quarter, how did those Sustain, or move around, I guess, as you've entered 2025 and through, I guess, the fourth quarter as well. Any updates? Yeah, I would say they are sustained. They were still up strongly in the fourth quarter. They've sustained that growth for what we could see is at least for the first half, bookings have come in to cover demand for the first half around that.

Rob Mason: And then just last quarter, we talked about.

Rob Mason: Some early signs in the short cycle businesses picking up to meet the electronics area.

Rob Mason: Some of the precision manufacturing I'm, just you know.

Rob Mason: Around those early green shoots that you saw in the third quarter how did those.

Rob Mason: <unk>.

Rob Mason: We will move around I guess.

Rob Mason: Our 2025 and through I guess, the fourth quarter as well any update there.

Rob Mason: Yeah, I would say they are sustained they were still up for <unk>.

Rob Mason: <unk> in the fourth quarter, they sustain that growth for for what we can see is that at least for the first half bookings have come in to cover the band.

Rob Mason: For the first half around that so there are some positive signs like that.

Robert Buckley: So there are some positive signs like that right now that are holding that momentum forward.

Rob Mason: Right now that are holding holding that momentum forward.

Robert Buckley: So it does get back to like we're trying to be prudent with the guidance here, given the volatility of orders and shipments with people's disturbances around all the geopolitical changes that are occurring. But I think for the most part, at the same time, we're seeing demand starting to fill in and we're seeing that short cycle business remain strong and we're seeing the MPIs accelerate. And so there's more positives than there are negatives, but there's a new cycle that's very difficult to Sure.

Rob Mason: It does get back to that like we're trying to be prudent with the guidance here given the volatility of orders and shipments where peoples disturbances around all the all the geopolitical.

Rob Mason: Changes that are occurring but I think for the most part at the same time, we're seeing demand is starting to fill in and we're seeing that short cycle business remains strong and we're seeing the MPI is accelerating and so theres more positives than there are negatives, but there is a new cycle, that's very difficult to ignore.

Rob Mason: Sure.

Rob Mason: Just last question.

Rob Mason: Just last question.

Matthijs Glastra: Matthijs, you sound, you know, reasonably optimistic around actionability on M&A this year. Pipeline sounds, you know, fairly robust as well. You just, you know, as you think about the opportunity set and understanding, you know, these opportunities, you know, are just episodic in the way that they play out. How are you thinking about your, you know, comfort level, upper levels around leverage and just, you know, what you would be. you know, willing to commit to. Yeah, well, first of all, I mean, if you're a cynic, you say, well, you were confident last quarter. So what happened?

Rob Mason: Matthias you sound.

Rob Mason: Reasonably optimistic around <unk>.

Rob Mason: Action ability on M&A this year pipeline, it sounds fairly robust as well.

Rob Mason: If you think about the opportunity set and.

Rob Mason: Understanding these opportunities.

Rob Mason: Or just episodic in the way that they play out.

Rob Mason: How are you thinking about your comfort level up upper levels around leverage.

Rob Mason: And just what you would be.

<unk> two.

Rob Mason: Commit to.

Rob Mason: Yeah, well first of all I mean.

Speaker Change: If you're a cynic would say well you were confident last quarter. So what happened and I would just say, let's say we have multiple active conversations.

Matthijs Glastra: And I would just say, listen, we have multiple active conversations. We're actually very excited about them, but it doesn't mean we should just jump on any, any opportunity. We remain very disciplined on price, and some of the timing of these discussions, where we don't want to have time be the determining factor.

Speaker Change: We're actually very excited about them that it doesn't mean wish we should just jump on any any opportunity we remain very disciplined on price and some of the timing of these discussions where we don't want to have time.

Speaker Change: The determining factor.

Matthijs Glastra: So let me just start with that. So a lot of these conversations are still ongoing. So that's one. And there is actually multiple news added. We feel the overall environment for M&A is very supportive, is improving. And we see more and more assets coming on the market, as well as, you know, founders and private owners becoming, you know, more willing to have conversations. That's not, you know, dissimilar from what we've seen. When there is a lot of macro uncertainty, particularly for a prolonged period of time, that's actually the moment when people are becoming more, you know, willing to have conversations.

So let me just start with that so a lot of these conversations are still ongoing so that's one and there is actually multiple news at it we feel the overall environment for M&A is very supportive is improving and we see more and more assets coming on the market as well as.

Speaker Change: Founders and private owners.

Speaker Change: Becoming.

Speaker Change: And are more willing to have conversations that's not.

Speaker Change: Dissimilar from what we've seen.

Speaker Change: When there is a lot of macro uncertainty.

Speaker Change: Particularly for a prolonged period of time, that's actually that moment when people are becoming more.

Speaker Change: Willing to have conversations we saw that with Brexit for example, and we saw that with the previous trade.

Robert Buckley: We saw that with Brexit, for example. We saw that with the previous trade, trade wars, et cetera. So that, I would just say, provides, all that provides the support from our commons that we're very confident and excited about it, while remaining disciplined, you know, on price and returns. high IP component. So that's kind of the direction, and that's where kind of the majority of the conversations are happening. Embedded software is part of that, too. So those are aspects that we're pushing.

Speaker Change: Trade wars et cetera, so so that I would just say it provides.

Speaker Change: All of that provides the support from our comments that we're very confident and excited about it while remaining disciplined.

Speaker Change: On pricing and returns then of course, where we're looking and what type of you know.

Speaker Change: The spaces, we're looking at would it be a surprise that it's just it's furthers our strategy to either.

Speaker Change: In secular markets that we're excited about whether it's health care.

Speaker Change: Particularly given the environment that is as robust as well as intelligent subsystems or when possible.

Speaker Change: Find.

Speaker Change: Consumables that have a high IP component. So so that's kind of the direction and Thats, where kind of the majority of the conversations are happening embedded software as part of that too.

Speaker Change: So those are those are aspects that we're that we're that we're pushing in.

Robert Buckley: In terms of leverage, I mean, I think we've been very consistent about that, but Robert, you know, you can reiterate or further comment on that. Yeah, I would say we don't have an interest in putting the company in a levered position. So, you know, we have been pretty consistent about that saying below three times, you look at on a net basis, we're 1.4 right now. So I think we're in a fairly good position to to do what we want to do and more meaningful acquisitions within the bandwidth and within the scope of our parameters. And I do reiterate what Matthijs said, you know, we're focused on the returns.

Robert Buckley: In terms of leverage I mean, I think we've been very consistent about that for Robert you can you can reiterate or further comment on that.

Robert Buckley: I would say, we don't have an interest in putting the company on a levered position. So we've been pretty consistent about that staying below three times.

Robert Buckley: Look it on a net basis were one four right now so.

Robert Buckley: I think we're in a fairly good position to do what we want to do and more meaningful acquisitions within the bandwidth within the scope of our parameters.

Robert Buckley: And I do reiterate what <unk> said, we're focused on the returns there are attractive returns out there most of the deals we pursue a proprietary in nature.

Robert Buckley: There are attractive returns out there. You know, most of the deals we pursue are proprietary in nature. As a consequence, they're less predictable on closing because they're not run in some sort of process. And so, but at the same time, you know, we're going to make sure we do the right things and compound the cash flows of this business in the right way without putting any sort of jeopardy or risk, undue risk, onto the business. Very good.

Robert Buckley: As a consequence.

Robert Buckley: They're less predictable on closing.

Robert Buckley: Because they're not running some sort of process and so but at the same time, we're going to make sure. We do the right things and compound the cash flows of this business in the right way without putting any sort of jeopardy.

Robert Buckley: Risks undue risk on to the business.

Robert Buckley: Very good I appreciate it.

Speaker Change: The next question is follow up from Brian Drab with William Blair. Please go ahead.

Brian Drab: The next question is a follow-up from Brian Drab with William Blair. Please go ahead. Hi, just a quick question.

Brian Drab: Alright, just say Bryan question, Hey, so.

Matthijs Glastra: Hey, so last quarter, there was a discussion of, I guess, a minor pause in your sales into robotic surgery with one customer. And I'm just wondering if you could comment on, is that resolved? And then also, can you just talk about, are you seeing continued diversification of your revenue into robotic surgery across a broader customer base at this point? So the first thing is the shipments into the robotic surgery space have been resolved. They're back to normal in January, and so, and there's no disruptions there. So, we feel pretty good about the position there. Obviously, we've increased our content with that customer and done fairly well.

Speaker Change: Last quarter, there was a discussion of.

Speaker Change: I guess, a minor pause in your sales into <unk>.

Speaker Change: Robotic surgery.

Speaker Change: With one customer and I'm just wondering if you could comment on is that resolved and then also can you just talk about are you seeing continued diversification of your <unk>.

Speaker Change: Our revenue into robotic surgery across a broader customer customer base at this point.

Speaker Change: So the first is our shipments into the robotic surgery space have been resolved they are back to normal in January.

Speaker Change: So theres no disruptions there.

Speaker Change: So we feel pretty good about the position there obviously, we've increased our content.

Speaker Change: With that customer.

Speaker Change: And done fairly well in terms of diversifying with additional players. It really comes down to the success of those additional players we've been designed into a multitude of Oems.

Matthijs Glastra: In terms of diversifying with additional players, it really comes down to the success of those additional players. We've been divided into a multitude of OEMs for a long period of time. They just haven't shipped at the volumes that be meaningful with one or two exceptions. And so, it really comes down ultimately to their own commercial success in the marketplace. We continue to work with a large variety of customers in that marketplace. We continue to be optimistic that there will be additional robotic plays in the hospital environment and into different modalities. It could be orthopedics. It could be into spine.

Speaker Change: For a long period of time, they just haven't shifted the volumes that would be meaningful.

With one or two exceptions and so it really comes down ultimately to their own commercial success in the marketplace.

Speaker Change: We continue to work with a large variety of customers in that marketplace. We will continue to be optimistic that there will be additional robotic plays in the hospital environment and then into different modalities that can be orthopedics it could be.

Speaker Change: Spine it could be into neuro.

Matthijs Glastra: It could be into neurological. It could be a number of different application areas, and we feel good about being a participant in all those areas that they begin to grow.

Speaker Change: Neurological it could be a number of different application areas and we feel good about being a participant in all those areas if they begin to grow.

Speaker Change: Great. That's helpful. Thank you very much.

Brian Drab: Thank you very much. Thanks, Brian.

Brian Drab: Thanks, Brian.

Matthias: This concludes our question and answer session I would like to turn the conference back over to Matthias <unk> for any closing remarks.

Gary: This concludes our question and answer session.

Matthijs Glastra: I would like to turn the conference back over to Matthijs Glastra for any closing remarks. Thank you, operator. And so to recap, we're proud of the progress we've made in 2024 with strong operating performance, core gross margin expansion, adjusted EBITDA growth, record cash flow, and a return to organic growth in the fourth quarter. Our new product ramps are on track for 2025, and we've reorganized to scale better organically and through acquisitions. Our top leadership has strengthened our talent pool. I'm incredibly proud of our team's achievement.

Brian Drab: Thank you operator.

Brian Drab: And so to recap we are proud of the progress we've made in 2024 with strong operating performance core gross margin expansion adjusted EBITDA growth record cash flow and.

Brian Drab: <unk> returned to organic growth in the fourth quarter, our new product ramps are on track for 2025, and we've reorganized to scale better organically and through acquisitions, our top leadership and strengthened our talent pool I'm incredibly proud of our team's achievements.

Matthijs Glastra: For more information visit www.FEMA.gov Looking ahead, we remain focused on the three top priorities for 2025. First, ramp up all our planned new products and achieve our new product sales growth. Second, further expand our margins and cash flow using the Novanta growth system. And finally, acquire additional companies that fit our strategy and attractive returns. Despite the global macro dynamics, the Novanta remains extremely well positioned in the medical and advanced industrial end markets with diversified exposure to long-term secular macro trends in precision manufacturing, robotics and automation, precision medicine and advanced surgery. We feel that our winning strategy and our deployment of the Novanta growth system to continuously improve our company operations is what drives our performance no matter the environment.

Brian Drab: Looking ahead, we remain focused on the three top priorities for 2025 first ramp our all our planned new products and achieve our new product.

Brian Drab: Sales growth second further expand our margins and cash flow using the November gross system and finally acquire additional companies that fit our strategy at attractive returns.

Brian Drab: <unk> the global macro dynamics than November remains extremely well positioned in the medical and advanced industrial end markets with diversified exposure to long term secular macro trends and precision manufacturing robotics and automation precision medicine and advanced surgery.

Brian Drab: We feel that our winning strategy.

Brian Drab: Our deployment of an event the gross system to continuously improve our company operations is what drives our performance no matter the environment in closing as always I would like to thank our customers our employees and our shareholders for their ongoing support continued to be.

Matthijs Glastra: In closing, as always, I would like to thank our customers, our employees and our shareholders for their ongoing support. I continue to be specifically grateful for the continued and persistent efforts of all our Novanta employees who work together every day to take on new challenges and strive to make the company a great place to work. We appreciate your interest in the company and your participation in today's call.

Brian Drab: Specifically grateful.

Brian Drab: <unk> continued our persistent efforts of or an event to employees, who work together every day to take on new challenges of strive to make the company great place to work.

Brian Drab: 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 fourth quarter and full year.

Matthijs Glastra: I look forward to joining all of you in several months on our fourth quarter and full year, or the first quarter of 2025 earnings call. Sorry. Thank you very much.

Brian Drab: For the first quarter.

Brian Drab: 2025 earnings call sorry, Thank you very much this call is now adjourned.

Gary: This call is now adjourned.

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

Gary: The conference is now concluded. Thank you for attending today's presentation.

Gary: You may now disconnect.

Brian Drab: [music].