Update on the previously announced industrial robotics order, 2026 revenue expectations, and follow-on orders.

Matthijs confirmed that momentum is building steadily for the industrial robotics order, with modest revenue expected in 2026 and sequential growth thereafter. He emphasized that this opportunity, along with other precision robotics applications (surgical, warehouse automation, humanoids), is a testament to Novanta's technology leadership in physical AI applications. “I mean we're -- we see that momentum building very steadily and our remarks stay consistent with what we said before, Lee. So it's a first phase of ramp, which will be modest this year, and then it will be sequentially building from there.”

How to bridge the strong top-line momentum (bookings, orders, backlog) with the ~9% EPS growth, and what investments are restraining earnings growth?

Robert explained that the reported EPS growth is impacted by two temporary headwinds: a $0.22-$0.24 dilution from the equity fundraise (expected to be offset by future M&A deployment) and a $0.14 impact in H1 2026 from a one-time all-employee equity grant. He clarified that the organic EPS growth is significantly higher when these temporary factors are considered. “So the EPS growth, don't forget, we did the fundraise, right? And so the fundraise generated $0.22 to $0.24 of a headwind. Obviously, we don't want that headwind to materialize. We would like to deploy the capital that we raised towards acquisitions.”

Is the GPU Boards opportunity new or surprising, and is it with new or existing customers?

Matthijs clarified that while the application is rapidly evolving, Novanta has always been a leader in drilling thick, precise boards with their spindles. He stated that the material set in Gen AI and GPU boards makes their technology uniquely suited, and they are the sole qualified supplier. The OEMs are existing customers, but the end-users are new, driven by the GPU space, creating a multi-year trajectory. “Yes. I mean, listen, we haven't talked about this business for a little while. It's -- we're the -- really by far the leader in this space in drilling really thick boards very precisely. And it so happens that the material set in Gen AI and GPU boards are getting tougher and thicker and the only way you can really do this with throughput and precision, it turns out is with our spindles.”

NOVT

Novanta (NOVT) Q4 FY25 earnings call: guidance and Q&A

Earnings call· Dec 2025 (Q4 FY25)· Information Technology· Feb 24, 2026

Source: earnings call transcript

Executive summary

Novanta Q4 FY25 — Strong Bookings and Organic Growth Return, AI Tailwinds Emerging

Novanta delivered on its promise of returning to organic growth and double-digit profit growth in Q4 FY25, driven by broad-based bookings momentum and strong new product adoption. While manufacturing transfer costs temporarily impacted margins and cash flow, management expects these issues to resolve in H1 2026, setting the stage for mid-single-digit organic growth and significant capital deployment for M&A in the coming year, particularly in medical technologies and embedded software.

Highlights

Record Q4 revenue with 9% reported growth and 2% organic growth.
Bookings surged 25% YoY and 12% sequentially, with a book-to-bill of 1.11 across all businesses.
Adjusted EBITDA grew 17% YoY to $61 million and adjusted diluted EPS grew 20% YoY to $0.91.
New product revenue grew over 80% in Q4, reaching 24% of sales.
Ended Q4 with negative net debt of $121 million, a positive net cash position.

Concerns

Q4 gross margins (45.5%) and operating cash flow ($9 million) came in below expectations due to higher dual running costs from prioritizing customer deliveries over regional manufacturing transfers, impacting gross margin by over 100 bps.
Net working capital increased by 400 basis points as a percent of sales in Q4 due to higher inventory builds and temporary AR timing.
Full-year 2026 EPS guidance includes a $0.22-$0.24 headwind from equity fundraise dilution and a $0.14 impact from a one-time employee equity grant in H1 2026.

Guidance & targets

Category	Target	Timeline	Confidence
GAAP revenue	$1030 million to $1050 million high materiality	FY26	High
Organic revenue growth	4% to 6% high materiality	FY26	High
Organic revenue growth	positive 1% to positive 3% medium materiality	Q1 · FY26	High
Reported revenue growth	positive 7% to positive 9% medium materiality	Q1 · FY26	High
GAAP revenue	$250 million to $255 million medium materiality	Q1 · FY26	High
Organic revenue growth	positive 5% to positive 7% medium materiality	Q2 · FY26	High
Adjusted gross margin	approximately 47% high materiality	FY26	High
R&D and SG&A expenses	approximately $294 million to $298 million medium materiality	FY26	Medium
Depreciation expense	approximately $17 million low materiality	FY26	High
Stock compensation expense	nearly $38 million low materiality	FY26	High
Stock compensation expense	approximately $12 million low materiality	Q1 · FY26	High
Stock compensation expense	approximately $11 million low materiality	Q2 · FY26	High
Stock compensation expense	approximately $8 million a quarter low materiality	H2 FY26	High
Adjusted EBITDA	$245 million and $250 million high materiality	FY26	High
Adjusted EBITDA	$56 million to $58 million medium materiality	Q1 · FY26	High
Interest expense, net of interest income	roughly $8 million low materiality	FY26	High
Interest expense	approximately $2 million low materiality	Q1 · FY26	High
Non-GAAP tax rate	around 21% low materiality	FY26	High
Non-GAAP tax rate	between 19% and 20% low materiality	Q1 · FY26	High
Diluted weighted average shares outstanding	approximately 41 million shares medium materiality	FY26	High
Diluted earnings per share	$3.50 and $3.65 high materiality	FY26	High
Diluted earnings per share	$0.75 to $0.80 medium materiality	Q1 · FY26	High
Operating cash flow	approximately $145 million to $185 million high materiality	FY26	Medium
Cash flow conversion	greater than 100% of GAAP net income medium materiality	Q1 · FY26	High
Automation Enabling Technology segment growth	low to mid-single-digit growth medium materiality	Q1 · FY26	High
Medical Solutions segment growth	high single-digit to low double-digit reported growth medium materiality	Q1 · FY26	High
Advanced Surgery business revenue growth	double-digit medium materiality	FY26	High
Robotics and Automation business growth	high single-digit medium materiality	FY26	High
Precision Manufacturing business growth	mid-single-digit medium materiality	FY26	High
Precision Medicine business sales	roughly flat low materiality	FY26	Medium
Advanced Surgery business revenue	approximately $400 million medium materiality	2030 · CY30	Medium

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Automation Enabling Technologies Better than expected revenue growth in Q4. Adjusted gross margins were up sequentially in Q4 but down year-over-year, driven by site regionalization dynamics. Expected to achieve low to mid-single-digit growth in Q1 FY26, an acceleration from Q4, based on building momentum in bookings and backlog. Book-to-bill: 1.16 (Q4 FY25)Bookings growth YoY: 33% (Q4 FY25)Full year sales growth: 2% (FY25)Full year bookings growth: 20% (FY25)Full year book-to-bill: 1.02 (FY25)New product revenue growth YoY: >80% (Q4 FY25)Full year new product revenue growth YoY: ~90% (FY25)Vitality Index: >20% (Q4 FY25)Vitality Index: high teens % (FY25)Customer design wins growth YoY: >30% (FY25)	—	2%	—	49% adjusted gross margins (FY25)
Medical Solutions Strong growth in Q4 driven by Advanced Surgery and the Keonn acquisition in Precision Medicine. Margin performance was impacted by manufacturing site dynamics. Expected to achieve high single-digit to low double-digit reported growth in Q1 FY26, with normal sequential decline due to seasonality but solid year-over-year growth. Book-to-bill: 1.07 (Q4 FY25)Bookings growth YoY: 17% (Q4 FY25)Full year sales growth: 5% (FY25)Full year bookings growth: 8% (FY25)Full year book-to-bill: 1.01 (FY25)New product sales growth YoY: ~80% (Q4 FY25)Vitality Index: ~28% (Q4 FY25)Full year new product sales growth YoY: >50% (FY25)Full year Vitality Index: 27% (FY25)	—	16%	—	43% adjusted gross margins (Q4 FY25)
Advanced Surgery Experienced strong growth in Q4, driven by patient procedural surgical growth rates and new product launches of second-generation insufflators. These growth dynamics are expected to continue into 2026 and beyond. Long-term, the business is on track to achieve approximately $400 million in revenue by 2030.	—	15%	—	—
Precision Medicine Experienced sequential revenue growth in Q4. Year-over-year growth was largely driven by the Keonn acquisition and favorable comparables. The business continues to gradually digest life science equipment end market dynamics. Sales are expected to be roughly flat in 2026 with some shifts in demand.	—	16%	4%	—
Precision Manufacturing Saw 4 consecutive quarters of double-digit bookings growth and accelerating sequential revenue momentum in H2 2025. Customer destocking has subsided, and strong design wins are coming to speed in 2026. Expected to see mid-single-digit growth in 2026.	—	-3%	8%	—
Robotics and Automation Continues to see a sustainable growth outlook with three distinct AI-driven tailwinds: physical AI applications, recovering semiconductor wafer fab equipment market, and GPU drilling. Expected to achieve high single-digit growth in 2026.	—	6%	2%	—

NOVT operating KPIs by quarter

NOVT operating KPIs stated on its earnings calls, by fiscal quarter
KPI	This call Dec 2025 Q4 FY25	Mar 2026 Q1 FY26	Jun 2026 Q2 FY26	Change vs prior quarter
Book-to-bill	1.11 ratio Bookings surged 25% year-over-year and 12% sequentially with a book-to-bill of 1.11. Source: earnings call transcript	1.1 ratio Bookings grew 37% year-over-year with a book-to-bill of 1.10 on continued new product momentum and strong commercial execution. Source: earnings call transcript	—	-0.9%
Vitality Index	24% New product sales in the fourth quarter grew over 80% year-over-year, raising the Vitality Index to 24% of sales. Source: earnings call transcript	27% In addition, new product sales grew over 50% year-over-year, raising the Vitality Index to 27% of sales. Source: earnings call transcript	~29% New product revenue grew by more than 50% in the quarter and is up over 60% year-to-date, lifting our vitality index to approximately 29% of sales from 21% a year ago. Source: earnings call transcript	—
Book-to-bill Automation Enabling Technologies	1.16 ratio The book-to-bill in this segment was 1.16 and bookings were up 33% year-over-year. Source: earnings call transcript	1.15 ratio The book-to-bill in this segment was 1.15 and bookings were up 35% year-over-year. Source: earnings call transcript	1.1 ratio The book-to-bill in this segment was 1.1 and bookings were up 18% year-over-year. Source: earnings call transcript	-4.3%
Book-to-bill Medical Solutions	1.07 ratio This segment saw a book-to-bill of 1.07 in the fourth quarter and bookings were up 17% year-over-year. Source: earnings call transcript	1.04 ratio This segment saw a book-to-bill of 1.04 in the quarter and bookings were up 40% year-over-year. Source: earnings call transcript	0.79 ratio This segment saw a book-to-bill of 0.79 in the second quarter and year-to-date had bookings growth of greater than 10% year-over-year. Source: earnings call transcript	-24%
Vitality Index Medical Solutions	<28% New product sales in the fourth quarter grew by nearly 80% year-over-year and the Vitality Index in this segment was nearly 28% of sales. Source: earnings call transcript	—	30%+ New product sales grew by nearly 50% year-over-year and the vitality index in this segment was above 30% of sales. Source: earnings call transcript	—

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Orderbook & backlog

Bookings growth 25% Q4 FY25

12% sequentially

Year-over-year growth; company-wide.

Bookings growth 14% FY25

Full year growth; company-wide.

Book-to-bill 1.11 Q4 FY25

Company-wide; all businesses had positive book-to-bill for the first time since 2022.

Book-to-bill 1.01 FY25

Company-wide.

Book-to-bill 1.16 Q4 FY25

Automation Enabling Technologies segment.

Bookings growth 33% Q4 FY25

Year-over-year growth for Automation Enabling Technologies segment.

Book-to-bill 1.2 Q4 FY25

Precision Manufacturing business.

Bookings growth nearly 50% Q4 FY25

Growth for Precision Manufacturing business.

Backlog about $100 million Q4 FY25

For Precision Manufacturing business, approximately 2x its quarterly revenue.

Book-to-bill 1.13 Q4 FY25

Robotics and Automation business.

Bookings growth close to 25% Q4 FY25

Growth for Robotics and Automation business.

Backlog roughly 1.5x Q4 FY25

For Robotics and Automation business, relative to actual quarterly revenue.

Book-to-bill 1.07 Q4 FY25

Medical Solutions segment.

Bookings growth 17% Q4 FY25

Year-over-year growth for Medical Solutions segment.

Book-to-bill 1.12 Q4 FY25

Advanced Surgery business.

Backlog roughly 2x Q4 FY25

For Advanced Surgery business, relative to quarterly revenue.

Book-to-bill 1.01 Q4 FY25

Precision Medicine business.

Bookings growth 22% Q4 FY25

Year-over-year growth for Precision Medicine business.

Backlog nearly 2x Q4 FY25

For Precision Medicine business, relative to quarterly revenue.

Product announcements

Product	Type	Timeline
Next-generation insufflator	launch	—
Intelligent laser beam steering subsystems	launch	—
Content in warehouse robotics space	launch	2026

Deals & partnerships

Keonn Acquisition of a company specializing in intelligent RFID solutions and advanced machine vision technologies.

The business has project-based revenue and a recurring revenue stream associated with software middleware for data control from RFID readers. This strategic element, particularly its applicability in the hospital environment, attracted Novanta.

Unnamed business in Spain Minority investment in a business with frontline access to the hospital environment. very small

Allows Novanta to beta test products in the hospital environment, understand market penetration, and navigate regulatory hurdles around data and patient privacy. The business is similar to Keonn.

Capital programs

Regionalized manufacturing initiative underway

Benefit:Solidify and expand preferred supplier status with leading OEMs globally, build manufacturing competence centers with better scale, stronger systems, and deeper talent with full in-region-for-region capability. Long-term benefits to profitability, cash flow, and resilience.

Designed to help customers thrive in a deglobalizing world. In Q4 FY25, prioritizing customer deliveries over transfer timing created temporary higher dual running costs and elevated inventory. Cost structure adjusted in January. Expected to drive approximately 100 basis points of gross margin expansion in FY26.

Risks & headwinds

Higher dual running costs and elevated inventory from regional manufacturing transfers Q4 FY25, expected to resolve by Q2 FY26

More than a 100 basis point impact to gross margin; 400 basis point increase to net working capital as a percent of sales.

Mitigation:Cost structure adjusted in January without disrupting deliveries or revenue momentum. Gross margins expected to step up sequentially in Q1, with transfers completed by end of Q2.

Dilution from equity fundraise Full year 2026

$0.22 to $0.24 unfavorable impact to FY26 EPS.

Mitigation:Management expects to deploy the raised capital towards acquisitions, which would generate income and offset the headwind.

Temporary unfavorable impact from one-time 2025 all-employee equity grant First half of 2026 only

$0.14 impact to H1 2026 EPS.

What to watch in Q1 FY26

Regional manufacturing transfer completion and margin recovery

Q1 2026, Q2 2026

Current Q4 FY25 gross margin 45.5%, impacted by >100 bps from dual running costs.

Target Gross margins step up sequentially in Q1, transfers completed by end of Q2.

Why it matters

Successful completion is key to achieving full-year gross margin expansion target of 100 bps and strong cash flow rebound.

Gross margins are expected to step up sequentially in the first quarter and the transfer will be completed by the end of the second quarter. As a result, our full year 2026 gross margin expansion target of approximately 100 basis points of expansion versus 2025 is intact.

Find out whether NOVT delivers this. Inve re-checks your case every morning.

Q&A highlights

What drove the sequential increase in AET bookings, which businesses/products, and what is the mix of longer lead time vs. book-and-ship?

Management stated the bookings growth was broad-based across Robotics & Automation (precision robotics, recovering semi, GPU board drilling) and Precision Manufacturing (customer destocking subsided, strong design wins, new laser beam steering subsystems). Specific book-to-bill and backlog figures were provided for each business unit, indicating strong momentum and growing backlogs across the board.

“Yes, Lee, it's pretty broad-based, right? We commented that all our businesses, so including also the Medical Solutions businesses had double-digit bookings growth and a positive book-to-bill for the first time since 2022.”

asked by Lee Jagoda · answered by Matthijs Glastra

2 min read 6 chapters

Detailed narrative

Q4 Performance Highlights

Novanta delivered record Q4 revenue with 9% reported growth and 2% organic growth, exceeding expectations. Bookings surged 25% year-over-year and 12% sequentially, achieving a book-to-bill of 1.11 across all businesses for the first time since 2022. New product revenue grew over 80% in Q4, contributing 24% to sales, demonstrating strong commercial excellence and innovation.

Full-year revenue reached $981 million, the biggest year ever for the company.

Strategic Growth Pillars and Market Opportunity

The company's long-term strategy focuses on winning in high-growth end markets with durable secular tailwinds, including AI-driven robotics and automation, minimally invasive and robotic surgery, digital manufacturing, and precision medicine. Novanta holds leading technology positions and established long-term collaborative partnerships with OEM customers.

These growth platforms represent a $4 billion incremental market opportunity by 2030, with a strategic focus on expanding medical technologies, medical consumables, and embedded software.

Acquisition Strategy and Capacity

Acquisitions are a key pillar for double-digit reported revenue growth and compounding cash flows. Novanta has built its largest acquisition pipeline, focusing on mid-to-larger opportunities in medical technologies, medical consumables, bioprocessing, and embedded software. Following a $600 million fundraise in November, the company now has nearly $1.5 billion in total acquisition capacity and expects to deploy meaningful capital in 2026, adhering to disciplined value creation metrics.

AI-Driven Tailwinds in Robotics and Automation

The Robotics and Automation business benefits from three distinct AI-driven tailwinds: Novanta's technology leadership in physical AI applications for precision robotics (e.g., warehouse automation, humanoids), a recovering semiconductor wafer fab equipment market, and a unique position as the sole qualified supplier for drilling AI-driven GPU boards.

This GPU board application is growing at a strong double-digit rate, directly benefiting from the ongoing build-out of AI compute infrastructure.

Manufacturing Regionalization and Margin/Cash Flow Impact

A deliberate decision in Q4 to prioritize customer deliveries over the pace of regional manufacturing transfers led to higher dual running costs and elevated inventory, impacting gross margins by over 100 basis points and increasing net working capital by 400 basis points.

Management adjusted the cost structure in January and expects gross margins to step up sequentially in Q1 2026, with transfers completed by Q2 2026, supporting a full-year 2026 gross margin expansion target of 100 basis points.

Financial Position and Capital Allocation

Novanta ended Q4 with a positive net cash position, with net debt of negative $121 million, a first in over a decade. This was achieved by using fundraise proceeds to pay down over $300 million of its revolving credit facility.

While M&A is the top capital allocation priority, the company repurchased $19 million of stock in Q4 and nearly $40 million for the full year 2025 under its approved program, demonstrating a balanced approach to capital deployment.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.