UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

Or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No.: 001-35083

NOVANTA INC.

(Exact name of registrant as specified in its charter)

New Brunswick, Canada	98-0110412
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
125 Middlesex Turnpike, Bedford, Massachusetts, USA	01730
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (781) 266-5700

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common shares, no par value	NOVT	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 1, 2022, there were 35,690,210 of the Registrant’s common shares, no par value, issued and outstanding.

NOVANTA INC.

TABLE OF CONTENTS

Item No.		Page No.
PART I — FINANCIAL INFORMATION		1
ITEM 1.	FINANCIAL STATEMENTS	1
	CONSOLIDATED BALANCE SHEETS (unaudited)	1
	CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)	2
	CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)	3
	CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)	4
	CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)	5
	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)	6
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	30
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	43
ITEM 4.	CONTROLS AND PROCEDURES	43
PART II — OTHER INFORMATION		44
ITEM 1.	LEGAL PROCEEDINGS	44
ITEM 1A.	RISK FACTORS	44
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	44
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	44
ITEM 4.	MINE SAFETY DISCLOSURES	44
ITEM 5.	OTHER INFORMATION	44
ITEM 6.	EXHIBITS	45
SIGNATURES		46

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

NOVANTA INC.

CONSOLIDATED BALANCE SHEETS

(In thousands of U.S. dollars or shares)

(Unaudited)

	September 30,			December 31,
	2022			2021
ASSETS
Current assets
Cash and cash equivalents	$	84,580		$	117,393
Accounts receivable, net of allowance of $741 and $556, respectively		144,633			115,617
Inventories		162,807			125,657
Prepaid income taxes and income taxes receivable		994			1,997
Prepaid expenses and other current assets		14,721			13,161
Total current assets		407,735			373,825
Property, plant and equipment, net		95,030			87,439
Operating lease assets		43,520			48,338
Deferred tax assets		11,538			12,206
Other assets		5,543			5,586
Intangible assets, net		179,113			220,989
Goodwill		465,052			479,500
Total assets	$	1,207,531		$	1,227,883
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current portion of long-term debt	$	4,366		$	5,097
Accounts payable		79,577			68,514
Income taxes payable		7,822			4,514
Current portion of operating lease liabilities		7,663			7,334
Accrued expenses and other current liabilities		58,629			98,479
Total current liabilities		158,057			183,938
Long-term debt		438,447			429,361
Operating lease liabilities		40,907			45,700
Deferred tax liabilities		16,519			33,738
Income taxes payable		5,153			4,217
Other liabilities		6,246			9,638
Total liabilities		665,329			706,592
Commitments and contingencies (Note 15)
Stockholders’ equity:
Preferred shares, no par value; Authorized shares: 7,000;    No shares issued and outstanding		—			—
Common shares, no par value; Authorized shares: unlimited;    Issued and outstanding: 35,689 and 35,601, respectively		423,856			423,856
Additional paid-in capital		51,951			53,768
Retained earnings		115,322			56,533
Accumulated other comprehensive loss		(48,927	)		(12,866	)
Total stockholders' equity		542,202			521,291
Total liabilities and stockholders’ equity	$	1,207,531		$	1,227,883

The accompanying notes are an integral part of these consolidated financial statements.

1

NOVANTA INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands of U.S. dollars or shares, except per share amounts)

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,			October 1,			September 30,			October 1,
	2022			2021			2022			2021
Revenue	$	222,958		$	177,726		$	642,530		$	507,833
Cost of revenue		124,550			101,428			358,601			290,389
Gross profit		98,408			76,298			283,929			217,444
Operating expenses:
Research and development and engineering		21,349			17,468			63,866			53,104
Selling, general and administrative		40,301			31,296			120,191			94,189
Amortization of purchased intangible assets		6,472			4,139			20,987			11,300
Restructuring, acquisition, and related costs		1,625			8,120			2,650			16,485
Total operating expenses		69,747			61,023			207,694			175,078
Operating income		28,661			15,275			76,235			42,366
Interest income (expense), net		(4,062	)		(1,710	)		(9,928	)		(4,496	)
Foreign exchange transaction gains (losses), net		2,086			34			2,307			(299	)
Other income (expense), net		87			(71	)		(390	)		(238	)
Income before income taxes		26,772			13,528			68,224			37,333
Income tax provision (benefit)		4,282			(75	)		9,435			756
Consolidated net income	$	22,490		$	13,603		$	58,789		$	36,577
Earnings per common share (Note 5):
Basic	$	0.63		$	0.38		$	1.65		$	1.03
Diluted	$	0.63		$	0.38		$	1.64		$	1.02
Weighted average common shares outstanding—basic		35,729			35,447			35,625			35,366
Weighted average common shares outstanding—diluted		35,928			35,764			35,881			35,771

The accompanying notes are an integral part of these consolidated financial statements.

2

NOVANTA INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands of U.S. dollars)

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,			October 1,			September 30,			October 1,
	2022			2021			2022			2021
Consolidated net income	$	22,490		$	13,603		$	58,789		$	36,577
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax (1)		(18,972	)		(3,248	)		(37,672	)		(3,602	)
Pension liability adjustments, net of tax (2)		710			448			1,611			832
Total other comprehensive income (loss)		(18,262	)		(2,800	)		(36,061	)		(2,770	)
Total consolidated comprehensive income	$	4,228		$	10,803		$	22,728		$	33,807

(1)The tax effect on this component of comprehensive income (loss) was nominal for all periods presented.

(2)The tax effect on this component of comprehensive income (loss) was nominal for all periods presented. See Note 4 to the Consolidated Financial Statements for the total amount of pension liability adjustments reclassified out of accumulated other comprehensive income (loss).

The accompanying notes are an integral part of these consolidated financial statements.

3

NOVANTA INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands of U.S. dollars or shares)

(Unaudited)

	Common Shares					Additional Paid-In			Retained		Accumulated Other Comprehensive
	# of Shares			Amount		Capital			Earnings		Loss			Total
	Three Months Ended September 30, 2022
Balance at July 1, 2022		35,623		$	423,856	$	46,146		$	92,832	$	(30,665	)	$	532,169
Consolidated net income		—			—		—			22,490		—			22,490
Common shares issued under stock plans		67			—		—			—		—			—
Common shares withheld for taxes on vested stock awards		(1	)		—		(149	)		—		—			(149	)
Repurchases of common shares		—			—		—			—		—			—
Share-based compensation		—			—		5,954			—		—			5,954
Other comprehensive income (loss), net of tax		—					—			—		(18,262	)		(18,262	)
Balance at September 30, 2022		35,689		$	423,856	$	51,951		$	115,322	$	(48,927	)	$	542,202
	Nine Months Ended September 30, 2022
Balance at December 31, 2021		35,601		$	423,856	$	53,768		$	56,533	$	(12,866	)	$	521,291
Consolidated net income		—			—		—			58,789		—			58,789
Common shares issued under stock plans		238			—		—			—		—			—
Common shares withheld for taxes on vested stock awards		(66	)		—		(9,626	)		—		—			(9,626	)
Repurchases of common shares		(84	)		—		(10,000	)		—		—			(10,000	)
Share-based compensation		—			—		17,809			—		—			17,809
Other comprehensive income (loss), net of tax		—			—		—			—		(36,061	)		(36,061	)
Balance at September 30, 2022		35,689		$	423,856	$	51,951		$	115,322	$	(48,927	)	$	542,202
	Three Months Ended October 1, 2021
Balance at July 2, 2021		35,489		$	423,856	$	52,243		$	29,176	$	(12,211	)	$	493,064
Consolidated net income		—			—		—			13,603		—			13,603
Common shares issued under stock plans		199			—		—			—		—			—
Common shares withheld for taxes on vested stock awards		(88	)		—		(12,244	)		—		—			(12,244	)
Share-based compensation		—			—		8,490		<