I got an email this week saying that this is my 20-year anniversary. Wow. That means that this is actually my 22nd William Blair Conference. I'm Brian Drab, the industrial technology analyst in the research department, and analyst following Novanta. We're very happy to have with us today CEO of Novanta, Matthijs Glastra, and co-COO and head of the medical technologies division, John Lesica. I do have to inform you that you can find a full list of research disclosures on our website, williamblair.com. I apologize for the size of the room, and maybe could someone close that door there too just to cut the noise down? I feel like we should be in a much bigger room for Novanta. I don't know how many companies at this conference have exposure to the end markets. All of these end markets in one company. You have minimally invasive surgery, robotic surgery, extreme ultraviolet lithography for semiconductor manufacturing, LASIK surgery, precision machining, laser-based technologies, metal 3D printing. The list kind of goes on and on. We've got GPU board drilling. That's what I'm getting the most calls on lately. At this point, though, I will get out of the way, turn it over to Matthijs. I will tell everybody, though, that we have a breakout session. The last presentations of the day have the breakout session in the same room. When this is over, if you want to head out to the cocktails or whatever you need to do, you do that. The rest of you, if you want to stay for the breakout, it'll be in this room. Matthijs, over to you. Thanks for being here. Thanks, Brian. Can I get the mic on, please? Thanks. It's great to be here. Welcome. Sorry for those that are standing. Hopefully, it's not too inconvenient. This is one of my favorite conferences as well. It's great to work with Brian, and it's been some great meetings today with each one of you. Novanta is a technology supplier of mission-critical component subsystems that go inside- Matthijs, sorry, is your mic on? Mic is not. We're webcasting, so we got to make sure we got the right. I'm sorry to interrupt. You can hear it? Yeah, we're good? Through the speaker? Yeah. Sound's coming out of here. Okay. Okay. Thank you. Yes? No? Good. It's the one on your waist on. Okay. Yeah. I'll just keep going. Yeah, we're a technology supplier to medical equipment and advanced industrial equipment manufacturers. We work with the key leaders in robotic surgery, minimally invasive surgery, life sciences, as well as robotics and automation and industrial and semiconductor equipment. Our claim to fame is that mission-critical technology that we provide, less than 15% of the bill of material typically, but provide the key engine inside that makes that equipment perform better or different shape. For example, in robotics or surgical robotics, we're a leading provider of what's called end-of-arm technologies. Either sensing or motion control that makes for very precise motion movement, sensing of the, let's say, force, as well as the touch of robots. That's one thing we do. We're a leading provider of insufflator and other medical invasive technologies. Yeah, we're pleased to be here. Before we dive in, 200 sentences around safe harbor statements. We'll be making some forward-looking statements. You can find any further details on our website of statements that I'll be making today. We're about $1 billion in revenue. As I said, exposed to medical and advanced industrial. We've moved our portfolio from 10% to about 53% right now in medical end markets. It's been a very deliberate march. Reduced our cyclicality of the portfolio. Improved our exposure to robotics and automation. We're over, let's say, 98% of our business is sole source proprietary IP. We have an engineer-to-engineer design win process with our customers, and once we're designed in, we're typically sole source for the lifetime of that equipment, which typically lasts for about 10 years, 15 years for robotic surgery, maybe 7-8 for industrial equipment. Really, sustainable, sticky revenue streams across 40 applications with a bent towards medical and high-growth industrial end markets. About a $7 billion addressable market that is growing nicely. Our model is maybe simple, but it's taking years to perfect and to further build. You can imagine that our business, we're a high-technology business. We have over 700, 800 engineers developing a lot of proprietary technologies, and these design-in processes take two, three, four, five years. We better pick the right markets, and then we better pick the right customers. We're winning and want to win in those high-growth markets with secular growth trends, and within those markets, win with the winners. For example, the medical side, the high-growth segments we feel are attractive are minimally invasive surgery. That is a more productive way to perform care. When you need surgery, it's better to do that minimally invasively. Outpatients, you're in and out, so the length of stay is basically eliminated. You need sophisticated technologies for the surgeon to see, feel, move around. To be able to perform the procedure, and that's where we come in. Robotic surgery is a more complex, more sophisticated version of minimally invasive surgery, where the robot basically replaces the surgeon hands, and the robot or the surgeon is basically operating with a joystick. For that you need haptic touch, et cetera. We provide it. Winning in those high growth markets, putting our technologies there where structural growth is, and then winning with the leading players, and then putting more content in is really the basis of our growth. Therefore, the markets that we basically selected are on the healthcare side, those markets I just mentioned, as well as precision medicine, which we think is long-term relevant even though it's short-term a little challenged. On the industrial side, robotics and automation, for obvious reasons. The run for cheap labor is over, and companies and countries need to get on the productivity curves through robotics and automation, and we provide some mission critical technologies there. Those are just a few examples of our growth engine. Then we do that with an asset-light business model. 100% of net income, free cash flow conversion, and then we allocate that cash flow based on cash -on -cash returns, organic growth, and return on invested capital for our internal, let's say, businesses. Of course, cash -on- cash returns for our M&A flywheel that we basically acquired over 20 acquisitions over the last decade. You basically have that mid to high single-digit organic growth, let's say platform, that then gets compounded to double-digit and compounding the cash flows that way. Just keep on rinse and repeat, and using that customer base as the anchor point to acquire more technologies into the same customer base in those high growth markets. Organically keep on innovating, so you keep increasing the dollar content inside those customer platforms. That's basically the model. Of course, there's more to it. I will go through some examples of why we're winning and why we're excited with that growth in the company. The direction of the company has been, let's say from moving to less cyclical, more secular markets. We used to be exposed for close to 50% to semiconductor end markets. Now, I do know semiconductors is in vogue today. It's also very cyclical, and we felt that having that exposure reduced to probably 10%, 15% max was the right exposure. We've reduced that exposure from semiconductors from 40%, 50% to 10%, 15%, and increased the healthcare from 10% to 50%, 55%. That's a direction of travel we would like to continue. That's from an end market perspective. Inside the advanced industrial piece, we moved the portfolio to also more high cyclical growth in robotics and automation. Let's say a decade ago, our exposure to robotics was minimal. It was part of the semiconductor to markets, but now it's about 20% in terms of advanced industrial and surgical robotics exposure. Also, the makeup of our products is starting to change. We now have 15% of our portfolio is in medical consumables. That's kind of recurring revenue linked to medical procedure growth rates. That's up from 0% about eight years ago. We see that portfolio or that piece growing at double digits, so we see that piece further expanding, as well as intelligent subsystems. Combining different components that we make into a smart subsystem that has higher content and more embedded software that creates smarts that is really sticky. For example, an EUV lithography machine, we make complex light engines that have more than a million lines of software code to control laser light to accurately position masks, for example. That's an example of a business that you see more and more of. That's about 30% of our business today, these subsystems, and we see those rapidly improving, and that was maybe less than 5% a decade ago. You see a direction of travel to more systems intelligence, more recurring, more medical, more advanced robotics. We're an innovation company. The leaders in these markets will not choose us if we're not ahead or on top of the innovation curve. The way we work together with our customers is that we solve their toughest problems and complex needs. We're really an extended arm of their R&D team. We're really embedded in that R&D team, solving the toughest problems with proprietary technologies. Of course, we see a few key themes or key platforms where we're, let's say, over-indexing on our growth, and those are the five platforms here. I will touch on each one of them in a bit more detail. You can kind of see them here, and I think recently it's maybe worthwhile to say ideally, I should have added six, which is GenAI infrastructure. About 15% of our sales right now is linked to the production directly or indirectly of either the chips or the production processes linked to the data centers. Let's say we supply stuff to equipment that then produces stuff that then goes into, let's say, those data centers. That's about 15% of our sales growing 20% in the last quarter, and we think that growth will further accelerate. That's EUV lithography, some GPU drilling as well, sophisticated advanced manufacturing technologies. I'll just touch on each of these platforms one by one. We start with our insufflation and fluid management platform. These are almost full systems. Basically, we own the FDA certification process. We have all the IP, the medical OEM literally puts their label on it and then sells it. We have the key opinion leader connection, so basically the surgeon needs assessment that we then use to kind of inform us on the next, let's say, roadmap. The smoke evacuation, insufflation is an absolute category leader, and we've won most of the key OEMs in that space. We've also won the key leader in the robotic surgery space. The majority of the $50 million new product revenue last year came from this business, and what is cool about this business, it doesn't only have sophisticated technologies that leaders in this business want, it also has this recurring revenue stream of about 15% of total. It's about $150 million growing double digits in this area. Why is this so successful? It's because we're solving a clinical need of evacuating smoke and helping the surgeon to see in endoscopy procedures that are increasingly outpatient. We're by far the technology leader in this space. On the fluid management side, which is basically pumps for arthroscopy or sports medicine applications, you can imagine that the drive there is that people stay more active, and they get hurt on a pickleball court and need some repair, and so yeah. You go to an outpatient procedure, and for the surgeon to actually see, you need to irrigate the surgical area with saline, and we have kind of sophisticated technologies to make that happen. That business, by the way, is, I would say, less than 10% market share. The insufflator business, we have absolute category leadership. While we're going to rinse and repeat the same, let's say, playbook in the pump side as well as the, let's say, insufflator side. We said that this business will double by 2030 off of 2024 base. It was about $200 million will double to $400 million based on the innovation and the customer leadership that we have. This is a picture of the medical consumables. This is an increasing competence of the company. We didn't have this a decade ago. This is now $150 million business growing strong double digits. The good news here is it's not tied to capital investment. It is really linked to procedural growth rate, and you can imagine that is mid-teens for surgical robotics, and it's high single digits, low double digits for the endoscopy piece. There's sophisticated technologies in there in terms of heating, humidification, filtering. An insufflator basically insufflates the belly of a patient so that the surgeon can better see. When the surgeon starts to cauterize human tissue, it creates surgical plume. That smoke is toxic. If you're staff and you're operating for a day, it's like smoking a pack of cigarettes, right? There's legislation being passed to avoid that. Hospitals have to evacuate smoke. It can do it two ways. Either you make an additional hole in the patient body and use another way of evacuating smoke, or you integrate it into what is already there, which is the insufflator, and that's what we've done. We have unique technology to do so. You can imagine you're both pushing gas and evacuating and how to do that the patient body stays stable is a key clinical need, and we've solved that clinical need with sophisticated technology. The robotic surgery side, in addition to the smoke evacuation, what do we do? We have unique sensing and motion control capabilities that is really at the heart of the legacy of the company. We started as a company in robotics, semiconductors to robotics and migrated that from semiconductors to surgical robotics. Our claim to fame is that we have really small form factor sensors as well as servo drives, as well as haptic feedback for the surgeon. The surgeon can sense like if the surgeon was touching organs in real time. We feel that robotic surgery is still early in its penetration, maybe 10%-15% max, There's a long runway to go, We're working with the leader and actually people that are, or companies that are coming on stream this year and next year, next few years. We're kind of basically supplying the majority of the industry in this area. Massive growth opportunity for us. Staying with robotics, we see that with AI coming, we see that the biggest threshold or gating item of robotics was actually you had to have a PhD in coding to basically deploy a robot. The gating factor was really skilled labor to get these robots to work on the floor. With AI, you get these learning models to have these robots to really be able to get employed on the floor much quicker. You need basically the sensing and the perception of a human. I sometimes jokingly say a robot is actually not very smart. It's like trying to pick up that bottle blindfolded with a boxing glove on. That's really what a robot is. What we do is we remove the boxing glove and really replace it by touch. It can kind of feel your way. A robot can feel its way around, and then we have a servo drive, which is basically reacting to that touch. Think about you're burning your hand and you're pulling your hand away in a second. That's that reaction to that sensory environment and that perception. You need that in AI to be able to react to your environment, right? Humans are really good at reacting to unstructured environments, and you need that sensing to be able to react. Whether that's in warehouse automation or precision robotics applications or more speculative, it's still early stage humanoids. We basically make the servo drives for all the joints in these robots so that it increases the perception. We have unique proprietary IP in that. The key aspect here is not only the sensing, but it's also safety, right? You can imagine that these type of robotic applications are starting to happen more and more next to humans. If you take kind of a extreme example like a humanoid standing next to you of 80 kg, who wants to be standing next to that robot knowing that that robot is not safe? I wouldn't, right? Because it will fall on you, and it will crush you. Right? How to make sure that when a robot fails, which it will, it actually does so safely in the last 40 microseconds of energy left, when it fails, it can actually kneel down safely into a neutral position without falling on you, is unique technology that we have developed over the last five years that we think is highly applicable in these warehouse automation and human settings. It's still early stages for these applications, but we started to see prototypes and deployments happening. It's probably more 2028 to 2030 that we see kind of serious volume there. Nevertheless, a good example of the advanced robotic solutions that we provide that we think have a lot of future. Let's move to another aspect of kind of a core competence of the company. We're really strong on the precision motion side, but also really strong in manipulating light, the two are actually connected. The precision detection legacy of the company started with actually using light to detect position. Then we started to get into the light part of the business, with that we started to get experts into light manipulation. This is a really complex laser beam subsystem. It probably costs anywhere between $25,000 to $40,000, just to give you an idea. If you think about it, there is a strong trend towards smaller form factors that need to be produced very reliably, very accurately, consistently. If you want to build an airplane part through 3D printing, laser additive manufacturing, chances are this thing sits in that system, right? If you have your artificial knee being produced. What needs to happen is, of course, it is basically a bunch of powder that gets sintered by a laser. You can imagine that what takes hours or sometimes days to build, that needs to be done additively. You cannot make. The thing needs to be extremely stable, needs to produce in high volume, so actually the costs are coming down. In that box, there is a lot of controls and smarts that only we have. For these super advanced applications, these type of scan systems are being used. I will give you one other example that is just a recent example that speaks to the need of producing at any more accurate and fine structures, is to test these GPU chips, you need what I call a probe card. You need to test 100,000 points on this chip at size of, let us say, a letter size. You need to drill to guide these 100,000 wires to test. You need to drill 100,000 holes very accurately, and that's only possible with this type of probe setup. Finally, on the precision medicine side, we're bringing basically the competence of light and motion together for precision medicine or basically life sciences applications. In this case, we're not using materials or high power, but we're using human tissue to get analyzed and/or human specimen. There's basically physics processes of scattering of the light that gets analyzed. You can imagine that for these blood samples or other samples to be cheap, you need high throughput and precise motion. We bring both these elements to bear for that application. We feel long-term, even though short to medium-term maybe that analytical market is, I would say, challenged as a result of multiple drivers, post-COVID as well as biotech being down, as well as NIH funding cuts. Long-term, I think we probably will agree that early detection of disease is actually a huge productivity driver. Let's take this example. If you can detect cancer from stage 2 to stage 1, you've basically solved cancer, right? How to get more accurate on the diagnostic side, it's still early stages, but long-term, this is an attractive space that we acquire companies. Maybe just a few words on how we're driving our business. We would like to get the optimum of both worlds. On one hand, having entrepreneurial businesses that are decentralized, that are provided with capital with smart people, so they can target certain technologies and market combinations with an owner mindset. On the other hand, we want to make sure that these businesses are not hopelessly local, right? Nor do we want to be mindlessly central, right? You want that happy medium where you leverage the scale of Novanta. For example, when we talk with the leader in surgical robotics, there's probably three business units that really serve that customer. We have a key account management structure to coordinate. That's an example of things that we leverage together. Of course, there's M&A, there's talent and resource allocation. There's a Novanta Growth System. There's basically our lean system to drive improvement operationally, but also promotionally. Culture and ownership is a key aspect so that the business and a company has agility to react to different market circumstances and customer needs. The last but not least, of course, we're a acquisition compounder. We've deployed about $1.2 billion, actually a little bit more than that, over 20 acquisitions, using cash-on-cash returns metrics and making sure that, of course, when we do, we further advance our strategy of more medical consumables at less cyclical, more secular, solving more problems for the core customers that we already have. Through that, when you have the cash returns that you can kind of rinse and repeat and keep compounding, driving double-digit report growth through the cycle. That's basically the algorithm of the business, mid to high single-digit organic growth, double digit with through acquisitions, 100 basis points of gross margin expansion by year, per year, driven by a few factors, manufacturing consolidation, new product innovation. About high 20% of our revenue is coming from our products introduced in the last four years, and that group in the last quarter has grown 50% year-over-year. That's a strong growth engine, but it's also a margin expansion engine. Those intelligent subsystems are margin accretive as well. As well as driving the manufacturing consolidation, of course, the lean production system, and then keep the business at the 100% free cash flow conversion. With that, Brian, I give the floor to you. All right. Can we turn this one on? Yeah. We have two minutes for Q&A in this session, this 30-minute window, and then we'll break and maybe we should just break now. I guess, let's just do that because it doesn't make any sense to do two minutes of Q&A and then 30 minutes of Q&A. If anyone does not want to stay for the breakout session, this would be a great time to find your way to the door, and anyone who's standing that wants to stick around, please find a seat. Sorry that there weren't seats for everybody. Matthijs, thank you very much for that presentation.