Good afternoon, ladies and gentlemen. Welcome to the Novanta Third Quarter of 2016 Earnings Call. My name is Ronnie and I will be your conference operator today. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the conference over to Robert Buckley, Chief Financial Officer. Please go ahead.

Thank you very much. Good afternoon and welcome to Novanta’s third quarter 2016 earnings conference call. I’m Robert Buckley, Chief Financial Officer of Novanta. With me on today’s call is Chief Executive Officer, Matthijs Glastra. 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.novanta.com. Please note this call is being webcast live and will be archived on our website. 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 this afternoon and also those in our SEC filings. We may make some comments today both in our prepared remarks and in 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 today. 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 today’s forward-looking statements as representing our views as of any date after today. During this call, we will be referring to certain non-GAAP financial measures. A reconciliation of such non-GAAP financial measures to the most directly comparable GAAP measures is available as an attachment to our earnings press release. To the extent that we use non-GAAP financial measures during this call that are not reconciled to GAAP measures in the earnings press release, we will provide reconciliations promptly on the Investor Relations section of our website. Now, I’m pleased to introduce Chief Executive Officer of Novanta, Matthijs Glastra.

Thank you, Robert. Good afternoon, everybody and welcome to our call. We're pleased with our third quarter results, as our team continued to execute well, despite the macroeconomic environment. Our business delivered 6% reported revenue growth and organic revenue growth accelerated to 4.4%, with strong operating cash flows and double digit growth in operating income. Our revenue was $97.8 million and our adjusted EBITDA, $17.8 million, both at the upper end of our guidance. In the third quarter, we recorded 11% year-over-year growth in adjusted EBITDA and 21% year-over-year growth in adjusted earnings per share. We believe that the strength of our team, our robust business model and diversified end markets and our increasing exposure to the medical market is serving us well in this modest growth environment. Our customer demand continued to be solid in the third quarter. Our JADAK data collection business and our Celera Motion business were strongest with double digit revenue growth in the quarter. Bookings performance was also solid with growth of 9% versus last year. This was our second quarter this year with bookings over $100 million. Our book-to-bill performance in the quarter was 1.03 and year-to-date, 1.07. Our backlog positions us well to execute on a sequentially higher revenue quarter in Q4 with broad based momentum across the company. You will hear more details on the quarter and the outlook from Robert, but the strong Q3 results positioned the company very well to execute on our full year guidance. Let me talk a little bit about what we're seeing in our core markets. The medical market was robust. Life sciences, clinical equipment, diabetes care and minimally invasive surgery segments are all doing well. Within the life sciences market, DNA sequencing is an attractive segment that is going to grow double-digit for the foreseeable…

Thank you, Matthijs. Good afternoon, everyone. We deliver 97.8 million in revenue in the third quarter of 2016, an increase of 6%. The impact of foreign currency on revenue in the quarter was approximately 0.6 points, while acquisitions and divestitures contributed 2.2 points. Organic growth was a positive 4.4% year-over-year. Third quarter GAAP gross profit was 41.2 million or 42.1% of sales. This compared to 39.9 million or 43.3% margin in the third quarter of 2015. On a non-GAAP basis, the second quarter adjusted gross profit was 42.3 million or 43.3% of sales, compared to 41.1 million or 44.5% in the third quarter of 2015. The decline in gross margins year-over-year was driven by a drop in gross margins in our photonics segment in the quarter. This was driven predominantly by temporary manufacturing inefficiencies as a consequence of a three week production shortage from challenges within ERP implementation. We've now fully resolved this and expect our gross margins to recover in the fourth quarter. R&D expenses were 8 million or 8.1% of sales versus 7.7 million or 8.3% of sales in the prior year. SG&A expenses were 21 million or 21.4% of sales. This compares to 20 million or 21.7% of sales in the third quarter of 2015. The increase in SG&A dollars was driven primarily by 1.3 million of CEO transition related costs. GAAP operating income was 11 million in the third quarter of 2016 compared to 9 million in the third quarter of 2015 whereas non-GAAP operating income was 14.7 million or 15% of sales compared to 13.4 million or 14.6% of sales in the prior year. As Matthijs mentioned adjusted EBITDA was up nearly 11% year over year at 17.8 million or 18.2% of sales in the quarter versus 16 million in the prior year. Interest expense…

[Operator Instructions] Your first question comes from the line of Lee Jagoda.

If I look at your revenue and look at the new products as a percentage of that, if you could just give us your definition of how do you define a new product and then what percent of the revenue comes from those products today and maybe your expectation for that metric over time based on the backlog of product wins even though they haven't reached full production?

Yeah Lee, this is Matthijs. We're not splitting out or specifying a percentage of sales in NPI at this stage. The way we define it is, revenue from new products introduced in the last three years and we started this effort a good two years ago. So, the impact is still relatively modest but we're seeing as we reported good momentum and we think it’s irrelevant to report on that.

And then looking at the balance sheet, it obviously continues to strengthen and it would appear there's ample flexibility outside of acquisitions to return cash to shareholders and I know you mentioned that 10b5-1 was halted just due to the share price but are you comfortable at this point deploying cash in other ways while you wait for acquisitions to occur?

Normally I would answer yes, I think what we mentioned in the transcript a little bit was that we expect to be signing one or two deals within the next few months. And so as a consequence of that I think we see the use of that cash in the near term and so we’ll have to revisit that. If those don’t materialize, then I think we can get a little bit - we can change our strategy around that. But we feel pretty good about where things are at this stage.

[Operator Instructions] And there are no more questions at this time.

All right, so to summarize, I would say we're pleased with our solid organic growth profitability and operating cash flow performance in the third quarter. The diversity and strength of our businesses have served as well in this modest growth environment. We feel that our strategic direction with an increasing exposure for medical markets positions as well. The rebranding of our company to Novanta has been very well received by customers, employees and investors as it marks a new era for the company focused on growth. As discussed before, we're now entering the growth phase in our transformation journey focused on multiple growth drivers. We have leading positions in secular growth markets; we are expanding our served markets through innovation in M&A, with focus on expanding our medical presence. We're achieving deeper market penetration globally through a stronger and larger sales force. All of this while maintaining our commitment to disciplined execution and our continuous improvement business system. Our acquisition pipeline is strong and we're able to - and we expect to be able to sign multiple deals in the coming months, so stay tuned for more developments on that front. We appreciate your interest in the company and your participation in today's call. I look forward to joining all of you in several months on our fourth quarter earnings call. Thank you very much and this call is now adjourned.

Thank you for participating in today's conference call, you may now disconnect your lines.