NOVANTA INC - FORM 8-K - EX-99.1 - PRESENTATION

Attached files

file	filename
8-K - FORM 8-K - NOVANTA INC	d467865d8k.htm

Investor Presentation

January 2013

Exhibit 99.1

Factors affecting future performance…

…and use of Non-GAAP financial measures

Forward-Looking Statements

Non-GAAP Measurement

Discontinued Operations

The statements in this presentation that relate to guidance, pro forma presentations, future plans, goals, business

opportunities, events or performance are forward-looking statements that involve risks and uncertainties, including risks

associated with business and economic conditions, failure to achieve expected benefits of the NDS acquisition, failure to

comply with Food and Drug Administration regulations, customer and/or supplier contract cancellations, manufacturing

risks, competitive factors, ability to successfully introduce new products, uncertainties pertaining to customer orders,

demand for products and services, growth and development of markets for the Company's products and services, and

other risks identified in our filings made with the Securities and Exchange Commission, including, most recently, our Form

10-K for the year ended December 31, 2011. Actual results, events and performance may differ materially. Readers are

cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this

presentation. The Company disclaims any obligation to update these forward-looking statements as a result of

developments occurring after the date of this presentation. Readers are encouraged to refer to the risk disclosures

described in the Company’s Form 10-K for the year ended December 31, 2011 and subsequent filings with the SEC, as

applicable. Please see “Safe Harbor and Forward-Looking Information” in the Appendix to this presentation for more

information.

The Company’s statements regarding its adjusted EBITDA and net debt are non-GAAP financial measures. Please see “Use

of Non-GAAP Financial Measures” and the subsequent slides in the Appendix to this presentation for the reasons we use

these measures, a reconciliation of these measures to the most directly comparable GAAP measures and other information

relating to these measures.

The Company neither updates nor confirms any guidance regarding the future operating results of the Company which may

have been given prior to this presentation.

In June 2012, the Company committed to a plan for the sale of its Semiconductor Systems and Laser Systems businesses.

As a result, the Company began accounting for these businesses as discontinued operations beginning in the second

quarter of 2012. Unless otherwise noted, all financial results in this presentation are GAAP measures for continuing

operations.

We are a leading supplier…

…of precision motion and laser technology

Expertise to Drive Results

Capabilities to Innovate & Grow

Positioned in Growth Segments

Global Presence and Reach

•

Leading provider of precision laser, optical and motion control technology

•

Founded

1968,

headquartered

Bedford,

major

presence

North

America,

Europe, and Asia-Pacific

•

$271M in revenue and $43M in Adjusted EBITDA (LTM ending 9/30/12)

•

Approximately 1,200 employees for continuing operations

•

Trade on NASDAQ (GSIG)

Leading Technology Franchises

Our aspirations…

Focus growth efforts on building out

key

platforms

(organic

and

M&A

Improve mix (growth, volatility) –

Medical,

less

Semiconductor

Simplify footprint and infrastructure

Organic growth mid to high

single digits

>20% Adj. EBITDA margins

Long term shareholder returns

above peer average

A leading provider of precision photonic and

motion technologies for OEM’s in demanding

markets –

delivering attractive shareholder

returns through sustained profitable growth

Strategic Priorities

Performance Goals

Strategic Vision

)

…are

clear

and

achievable

At year end…

…we were midstream in our transformation

Revenue

Growth

Potential

Adj. EBITDA**

Value Chain

Focus

Structure

Mix

Growth

Strategy

Performance

Focus

* pro forma Excel Technologies + GSI Group Inc results as reported in GSI Group Inc. 8K filed on 07/18/08

** adjusted EBITDA, non-GAAP financial metric

***Continuing Operations 3Q 2012 LTM

~$480M*

Low single digit

~$70M

33% systems

67% OEM

<20 distinct P&L’s

>30 sites

>50% Semi

<10% Medical

Unrelated

acquisitions

Maximize margins

Pre

2008

~$271M

Mid single digit

~$43M

~95% OEM

2 focused groups

<15 sites

~20% Semi

~20% Medical

Build out growth

platforms via focused

R&D and bolt-on M&A

Profit growth

Current

***

$500M+

High single digit

$100M+

~100% OEM

2 focused groups

<10 sites

<15% Semi

~40% Medical

Current approach

plus selective

transformative M&A

Sustained profitable

revenue growth

Vision

We have positioned the business…

…for success in 2013

Key

Accomplishments

2012

•

12 X 12 program substantially complete (India JV Pending)

•

Laser

Systems

divested

–

Semiconductor

Systems

process

•

H2 2012 Restructuring Plan complete

•

Growth Platforms delivered +$8M of incremental growth

•

Significant talent upgrades across organization

•

SOX compliant financial controls in place

•

Balance

sheet

strengthened

new

credit

agreement

place

•

Strong progress on M&A pipeline

Closed Monday on Acquisition of

NDS Surgical Imaging for $82.5M

We now have a strong foundation…

…to achieve our strategic goals

NDS Surgical Imaging

“A catalyst for realignment of our portfolio and a platform for

continued growth in the medical market.”

“Highly engineered photonic components, sold exclusively to the

medical market, with high barriers to entry.”

“A more predictable and sustainable revenue and profit stream.”

We sought additional capabilities…

…to expand our medical market position

GSI Medical Strategy

•

Gain overall scale & growth foundation

•

Obtain foundation for further growth

•

Leverage OEM sales channels

•

Play in highly differentiated segments

•

Strong bias for photonics

•

Seek leading market positions

•

Focus on surgical & critical care

•

Leverage strength in peripherals

•

Thermal Printers: Patient

Monitoring, EKG, Pacemakers

•

Encoders: Robotic Surgery, DNA

sequencing

•

Scanners: OCT Retinal Scanning,

Laser Surgery, Drug Discovery

Analysis

•

Color Measurement: Robotic

Surgery, Displays

Strategic Goals

Medical Applications

Medical Market Study

NDS is the global leader…

…in surgical visualization

NDS Profile

•

Leading global player in surgical & radiology displays and related accessories

•

#1 market position in surgical, #2 in radiology

•

Based in San Jose, CA –

180 employees -

privately owned (Riverside Capital)

•

Revenue +$80M, Adjusted EBITDA margins in mid teens

•

Products sold to OEM’s for integration into surgical endoscopic systems

•

Class I and Class II medical devices (FDA controlled), extremely

high performance

•

Highly

proprietary

color

correction

algorithms

custom

matched

OEM

designs

A complete offering…

…in surgical visualization

Product Offering

Displays

•

Wireless Imaging

•

Informatics

•

ConductOR –all-in-one platform,

enabling video format conversion,

image scaling, routing, switching

and IP streaming.

ScaleOR

–

medical-grade video

converter/scaler, supporting

analog and digital video in HD or

SD formats

Ultra high resolution (full HD to 55”)

120Hz refresh rate

Proprietary LED backlight design

Full Multi Mode Imaging (MMI)

Pixel-by-pixel custom color correction

Proprietary software algorithms match

correction to each OEM spec’s

Advanced image processing, digital signal

processing

ZeroWire

real-time full HD surgical video

Medical grade wireless connectivity

Full HD with less than one frame latency

Ultra Wide Band (UWB) frequency spectrum –

allows usage in the OR

NDS is the leader in the premium segment…

…of this ~$500M market

Market Overview

Market Growth Drivers

•

Aging population -

increased procedures

•

Rising standard of care in developing world (China,

Brazil, Turkey)

•

Minimally Invasive Surgery (MIS) drives need for

integrated OR’s

•

New technologies (3D surgical cameras, LED and

OLED displays)

•

New applications (e.g. robotic surgery)

Product Requirements

•

FDA quality system compliance

•

Full HD pixel resolution with multi mode capability

•

Highly consistent unit-to-unit color rendition in

varying operating conditions

•

Compatibility with & correction for varying OEM

camera and optic system specifications

•

Wide range of supported input types including

ultra die band wireless capability

*Management Estimates

Medical Display Market ($M)

$450

$500

$540

$580

$625

2011

2012

2013

2014

2015

NDS color correction technology…

…provides a distinct advantage in the market

NDS Technology

•

Real-time

pixel-by-pixel

Color

Response

Correction

•

Proprietary

technology

exclusive

NDS

•

Displays

conform

the

BT.709

HDTV

color

standard

•

Each display is fully factory characterized (unique

to NDS) –

no field calibration

•

Characterization data and the color correction are

stored in the display

•

Color correction is monitored and adjusted as the

operating conditions change

•

Most accurate calibration algorithms in market

Surgical Displays

Radiology Displays

IP Portfolio: 46 patents with ~50% issued

NDS

provides

substantial

platform…

…for

our

medical

components

growth

strategy

Strategic Fit

•

Substantial

base

medical

revenue

affordable

multiple

(less

than

EBITDA)

•

Transforms

GSI

nearly

40%

medical

–

expect

less

cyclical

revenue

earnings

•

Significant

platform

for

further

medical

growth,

including

follow-on

acquisitions

•

Customer

overlap

with

GSI

medical

applications

–

OEM

sales

channel

leverage

enables deeper key account penetration

•

Technology is comparable

to GSI product lines:

OEM-focused

medical

peripherals

Application

oriented,

highly

engineered

photonics

Not

operations

intensive

light

assembly,

test

operations,

supply

chain

Proprietary

software

key

differentiator

–

leverages

GSI

color

measurement

Medium

volume

“tens

thousands”

units

per

year

•

Rationalization

opportunity

Bay

Area

–

key

location

for

GSI

Revenue

Growth

Potential

Adj. EBITDA**

Value Chain

Focus

Structure

Mix

Growth

Strategy

Performance

Focus

The NDS acquisition …

…a major milestone in our transformation

* pro forma Excel Technologies + GSI Group Inc results as reported in GSI Group Inc. 8K filed on 07/18/08

** adjusted EBITDA, non-GAAP financial metric

~$480M*

Low single digit

~$70M

33% systems

67% OEM

<20 distinct P&L’s

>30 sites

>50% Semi

<10% Medical

Unrelated

acquisitions

Maximize margins

Pre

2008

$355M+

Mid to high single digit

$55M+

~95% OEM

2 focused groups

<15 sites

~16% Semi

~38% Medical

Build out growth

platforms via focused

R&D and bolt-on M&A

Profit growth

Pro

Forma

NDS

$500M+

High single digit

$100M+

~100% OEM

2 focused groups

<10 sites

<15% Semi

~40% Medical

Current approach

plus selective

transformative M&A

Sustained profitable

revenue growth

Vision

GSI in 2013

Medical

now

38%

portfolio…

…with Microelectronics down to 16%

Laser

Precision

Scientific

Medical

Micro-

electronics

2013 Pro Forma Breakdown

Industrial

*Includes Beam delivery technologies

55%

45%

38%

35%

16%

11%

We are investing for growth…

…in our three major platforms

Growth Platforms Updates

•

Beam

delivery

for

lasers –

market

growth

~8%

•

Leverage our #1 position in Galvanometers to enter Scan

Head market (modules)

•

Double addressable market up to ~$200M

•

FY’12

growth

forecast

~30%

numerous

new

design

wins

•

~$25M revenue opportunity by 2015

Scanning Solutions

•

~$600M market growing ~20%

•

Strong offering in mid-power

•

Products to 3kW

•

Converting installed base to fiber

•

FY’12 growth forecast +180%

•

Major investments underway:

Lower cost architecture

Stronger global sales capability

New applications centers in U.S. and China

Fiber Lasers

Source: Strategies Unlimited, Management Estimates

•

~$135M pro forma with NDS

•

Numerous opportunities with OEM’s

•

Significant channel leverage

•

Key Applications:

Surgical/Radiological Visualization

Robotic Surgery

OCT Retinal Scanning

Patient Monitoring

Defibrillation/EKG

Medical Components

We faced market challenges…

…driven by semiconductor market and macro economy

Challenges faced in 2012

•

Prolonged downturn in semiconductor equipment market had

significant impact

No demand recovery in 2H’12

Divestitures processes impacted

•

Organization bandwidth fully consumed with change initiatives

•

Talent

became

bottleneck

within

the

businesses

–

numerous

upgrades were necessary

•

Economic/tax uncertainty impacted some M&A efforts

Economic Uncertainty for 2013

NDS

acquisition

provides

increased

scale…

…with conservative view of base business

~$270M

$304M

$286M

Revenue

Outlook

$355-$365M

2010 Actual

2011 Actual

2012 Forecast

2013 Outlook

w/ NDS

Base EBITDA growth from 2012 cost actions…

…with NDS adding ~$12M of EBITDA

+$41M

$56M

Adjusted

EBITDA

Outlook

$55-$60M

2010 Actual

2011 Actual

2012 Forecast

2013 Outlook

w/ NDS

Demonstrated history of strong cash generation…

…enables pursuit of strategic goals

$108M

$68M

$48M

($50.8M)

($13.2M)

$5.4M

($68M)

Net Debt*

$57M

$55M

$53M

Total Debt

Cash Balance

1.9x

1.2x

1.1x

~1.9x

Debt/Adj

EBITDA

~$40M

~$108M

Capital Structure

*Estimated Proforma as of March 31, 2013

2010 A

2011 A

3Q 2012 A

Proforma Fcst

w/ NDS

We are fully committed…

…to

delivering

our

agenda

for

2013

Key Priorities for 2013

•

Integrate NDS and pursue opportunities

•

Deliver on financial commitments in uncertain economy

•

Finalize remaining divestiture

•

Build momentum on Growth Platforms

•

Operational Excellence and cash generation

•

Continued

focus

acquisition

pipeline

–

follow-on

deals

•

Successful close-out of IRS settlement

Appendix

Safe Harbor and Forward Looking Information

Certain statements in this presentation are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and are based

on current expectations and assumptions that are subject to risks and uncertainties. All statements contained in this presentation that do not relate to matters of

historical fact should be considered forward-looking statements, and are generally identified by words such as “expect,” “intend,” “anticipate,” “estimate,” “plan,”

“aim,” “pro forma,” and other similar expressions. These forward-looking statements include, but are not limited to, statements related to: the Company’s expected

future financial performance as a result of the acquisition of NDS; the expected share of the Company’s future revenues generated from the medical market; the

Company’s expectations regarding its ability to leverage its medical OEM sales channels and the NDS acquisition; the expected opportunities for growth as a

result of the NDS acquisition; anticipated sales performance; industry trends; market conditions; size and growth of market potential; the Company’s optimism

regarding its prospects for the future; and other statements that are not historical facts.

These forward-looking statements are neither promises nor guarantees, but involve risks and uncertainties that may cause actual results to differ materially from

those contained in the forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements for many

reasons, including, but not limited to, the following: economic and political conditions and the effects of these conditions on our customers’ businesses and level of

business activity; our significant dependence upon our customers’ capital expenditures, which are subject to cyclical market fluctuations; our dependence upon our

ability to respond to fluctuations in product demand; our ability to continually innovate; delays in our delivery of new products; our reliance upon third party

distribution channels subject to credit, business concentration and business failure risks beyond our control; fluctuations in our quarterly results and our failure to

meet or exceed the expectations of securities analysts or investors; customer order timing and other similar factors beyond our control; changes in interest rates,

credit ratings or foreign currency exchange rates; risk associated with our operations in foreign countries; our increased use of outsourcing in foreign countries; our

failure to comply with local import and export regulations in the jurisdictions in which we operate; our history of operating losses and our ability to sustain our

profitability; our exposure to the credit risk of some of our customers and in weakened markets; violations of our intellectual property rights and our ability to protect

our intellectual property against infringement by third parties; risk of losing our competitive advantage; our ability to make acquisitions or divestitures that provide

business benefits; our failure to successfully integrate current and future acquisitions, including NDS, into our business; our failure to achieve the expected benefits

from our acquisitions, including our acquisition of NDS; our ability to retain key personnel; our restructuring and realignment activities and disruptions to our

operations as a result of consolidation of our operations; product defects or problems integrating our products with other vendors’ products; failure to maintain

satisfactory compliance with the regulations of the United States Food and Drug Administration and other governmental agencies; disruptions in the supply of or

defects in raw materials, certain key components or other goods from our suppliers, including certain sole-source suppliers for certain products; production

difficulties and product delivery delays or disruptions; changes in governmental regulation of our business or products; disruption in our information technology

systems or our failure to implement new systems and software successfully; our failure to realize the full value of our intangible assets; any requirement to make

additional tax payments and/or recalculate certain of our tax attributes depending on the resolution of the complaint we filed against the U.S. government; our

ability to utilize our net operating loss carry-forwards and other tax attributes; fluctuations in our effective tax rates and audit of our estimates of tax liabilities; being

subject to U.S. federal income taxation even though we are a non-U.S. corporation; being subject to the Alternative Minimum Tax for U.S. federal income tax

purposes; any need for additional capital to adequately respond to business challenges or opportunities and repay or refinance our existing indebtedness, which

may not be available on acceptable terms or at all; volatility in the market for our common shares; our dependence on significant cash flow to service our

indebtedness and fund our operations; our ability to access cash and other assets of our subsidiaries; the influence over our business of several significant

shareholders; provisions of our articles of incorporation may delay or prevent a change in control; our significant existing indebtedness and restrictions in our new

senior secured credit agreement that may limit our ability to engage in certain activities; our intention not to pay dividends in the near future; and our failure to

maintain appropriate internal controls in the future.

Other important risk factors that could affect the outcome of the events set forth in these statements and that could affect the Company’s operating results and

financial condition are discussed in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2011, and in the Company’s subsequent

filings with the SEC made prior to or after the date hereof. Such statements are based on the Company’s management’s beliefs and assumptions and on

information currently available to the Company’s management. The Company disclaims any obligation to update any forward-looking statements as a result of

developments occurring after the date of this document except as required by law.

Use of Non-GAAP Financial Measures

This press release includes a financial measure, Adjusted EBITDA, which is not a financial measure prepared in accordance with generally

accepted accounting principles (“GAAP”). The Company defines Adjusted EBITDA as the net income attributable to GSI Group Inc. before

deducting interest, income taxes, depreciation, amortization, non-cash share-based compensation, restructuring, restatement, acquisition and

other non-recurring costs, income from discontinued operations, net of tax, and other non-operating income/expense items, including foreign

exchange gains/losses and earnings from equity investment. Management believes Adjusted EBITDA provides meaningful supplementary

information regarding the Company’s operating results because it excludes amounts that management does not consider as part of operating

results when assessing and measuring the operational and financial performance of the Company. Adjusted EBITDA is used by management to

evaluate operating performance, communicate financial results to the Board of Directors, benchmark results against historical performance and

the performance of peers, evaluate investment opportunities including acquisitions and discontinued operations, and determine the bonus

payments for senior management and employees. The Company believes this non-GAAP measure provides greater transparency and insight into

management’s method of analysis.

Because of the forward-looking nature of the forecasted Adjusted EBITDA figure included in this press release, specific quantification of the

amounts that would be required to reconcile net income to Adjusted EBITDA are not available. The Company believes that there is a degree of

volatility with respect to the Company’s and NDS’s net income which preclude it from providing accurate forecasted GAAP to non-GAAP

reconciliations. Based on the above, the Company believes that providing estimates of the amounts that would be required to reconcile the

forecasted Adjusted EBITDA figure would imply a degree of precision that would be confusing or misleading to investors for the reasons identified

above.

Last Twelve Months Ended

Twelve Months Ended

September 28, 2012

December 31, 2011

December 31, 2010

(in thousands of dollars)

Income from operations (GAAP)

$ 15,495

$ 35,848

$ 36,027

Depreciation and amortization

13,618

14,467

14,687

Share-based compensation

4,237

3,276

1,871

Restructuring, restatement and other nonrecurring costs (a)

9,370

2,406

3,319

Net income attributable to noncontrolling interest

(38)

(28)

(48)

Adjusted EBITDA (Non-GAAP)

$ 42,682

$ 55,969

$ 55,856

Non-GAAP EBITDA Reconciliation

(a)

Restructuring, restatement and other nonrecurring costs includes restructuring costs, pre-petition and post-emergence professional fees associated with our

bankruptcy proceedings and fees related to third parties for services performed in connection with the review and investigation of revenue transactions examined

and the restatement of the Company’s 2004 through 2008 financial statements.

Net Debt & Leverage Ratios

Non-GAAP Net Debt and Leverage Ratios

Twelve Months Ended

September 28, 2012

December 31, 2011

December 31, 2010

(in thousands of dollars, except ratio information)

Debt

($47,500)

($68,000)

($107,575)

Less: cash and cash equivalents

52,863

54,835

56,781

Net debt (a)

$5,363

($13,165)

($50,794)

Total Debt

($47,500)

($68,000)

($107,575)

Adjusted EBITDA (non-GAAP) (b)

$42,682

$55,969

$55,856

Total Debt/Adjusted EBITDA

1.1

1.2

1.9

Total Equity

$219,091

$209,360

$178,678

Total Debt/Total Equity

22%

32%

60%

(a)

Net debt is defined as total debt less cash and cash equivalents.

(b)

For Adjusted EBITDA calculation, refer to the Non-GAAP EBITDA Reconciliation page.

Attached files

Stock widget

Investing forum

NOVANTA INC Reports