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 June 30, 2023

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 August 1, 2023, there were 35,808,329 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	26
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	38
ITEM 4.	CONTROLS AND PROCEDURES	38
PART II — OTHER INFORMATION		39
ITEM 1.	LEGAL PROCEEDINGS	39
ITEM 1A.	RISK FACTORS	39
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES	39
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	39
ITEM 4.	MINE SAFETY DISCLOSURES	40
ITEM 5.	OTHER INFORMATION	40
ITEM 6.	EXHIBITS	40
SIGNATURES		42

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

NOVANTA INC.

CONSOLIDATED BALANCE SHEETS

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

(Unaudited)

	June 30,			December 31,
	2023			2022
ASSETS
Current assets
Cash and cash equivalents	$	91,330		$	100,105
Accounts receivable, net of allowance of $1,316 and $995, respectively		144,837			137,697
Inventories		162,904			167,997
Prepaid income taxes and income taxes receivable		3,144			1,508
Prepaid expenses and other current assets		12,128			13,212
Total current assets		414,343			420,519
Property, plant and equipment, net		103,801			103,186
Operating lease assets		43,280			43,317
Deferred tax assets		21,215			15,113
Other assets		5,718			4,414
Intangible assets, net		160,956			175,766
Goodwill		483,409			478,897
Total assets	$	1,232,722		$	1,241,212
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current portion of long-term debt	$	4,906		$	4,800
Accounts payable		64,653			75,225
Income taxes payable		6,592			13,660
Current portion of operating lease liabilities		7,881			7,793
Accrued expenses and other current liabilities		51,946			63,044
Total current liabilities		135,978			164,522
Long-term debt		403,586			430,662
Operating lease liabilities		40,729			40,808
Deferred tax liabilities		16,175			17,194
Income taxes payable		4,661			4,355
Other liabilities		5,563			6,085
Total liabilities		606,692			663,626
Commitments and contingencies (Note 14)
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: 35,808 and 35,711, respectively		423,856			423,856
Additional paid-in capital		57,488			55,155
Retained earnings		169,728			130,584
Accumulated other comprehensive loss		(25,042	)		(32,009	)
Total stockholders' equity		626,030			577,586
Total liabilities and stockholders’ equity	$	1,232,722		$	1,241,212

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						Six Months Ended
	June 30,			July 1,			June 30,			July 1,
	2023			2022			2023			2022
Revenue	$	229,464		$	215,356		$	448,590		$	419,572
Cost of revenue		125,341			120,111			246,839			234,051
Gross profit		104,123			95,245			201,751			185,521
Operating expenses:
Research and development and engineering		23,380			21,588			46,208			42,517
Selling, general and administrative		42,187			40,538			83,110			79,890
Amortization of purchased intangible assets		5,124			7,173			10,213			14,515
Restructuring, acquisition, and related costs		1,234			2,655			3,710			1,025
Total operating expenses		71,925			71,954			143,241			137,947
Operating income		32,198			23,291			58,510			47,574
Interest income (expense), net		(6,810	)		(2,757	)		(13,142	)		(5,866	)
Foreign exchange transaction gains (losses), net		74			152			(3	)		221
Other income (expense), net		(191	)		68			(357	)		(477	)
Income before income taxes		25,271			20,754			45,008			41,452
Income tax provision (benefit)		4,392			3,275			5,864			5,153
Consolidated net income	$	20,879		$	17,479		$	39,144		$	36,299
Earnings per common share (Note 4):
Basic	$	0.58		$	0.49		$	1.09		$	1.02
Diluted	$	0.58		$	0.49		$	1.09		$	1.01
Weighted average common shares outstanding—basic		35,851			35,609			35,830			35,573
Weighted average common shares outstanding—diluted		36,032			35,933			36,015			35,857

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					Six Months Ended
	June 30,		July 1,			June 30,		July 1,
	2023		2022			2023		2022
Consolidated net income	$	20,879	$	17,479		$	39,144	$	36,299
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax (1)		1,577		(13,927	)		6,807		(18,699	)
Pension liability adjustments, net of tax (2)		89		587			160		900
Total other comprehensive income (loss)		1,666		(13,340	)		6,967		(17,799	)
Total consolidated comprehensive income	$	22,545	$	4,139		$	46,111	$	18,500

(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 3 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
	# of Shares			Amount		Capital			Earnings		Comprehensive Loss			Total
	Three Months Ended June 30, 2023
Balance at March 31, 2023		35,802		$	423,856	$	52,020		$	148,849	$	(26,708	)	$	598,017
Consolidated net income		—			—		—			20,879		—			20,879
Common shares issued under stock plans		9			—		—			—		—			—
Common shares withheld for taxes on vested stock awards		(3	)		—		(407	)		—		—			(407	)
Share-based compensation		—			—		5,875			—		—			5,875
Other comprehensive income (loss), net of tax		—					—					1,666			1,666
Balance at June 30, 2023		35,808		$	423,856	$	57,488		$	169,728	$	(25,042	)	$	626,030
	Six Months Ended June 30, 2023
Balance at December 31, 2022		35,711		$	423,856	$	55,155		$	130,584	$	(32,009	)	$	577,586
Consolidated net income		—			—		—			39,144		—			39,144
Common shares issued under stock plans		164			—		—			—		—			—
Common shares withheld for taxes on vested stock awards		(67	)		—		(10,008	)		—		—			(10,008	)
Share-based compensation		—			—		12,341			—		—			12,341
Other comprehensive income (loss), net of tax		—					—					6,967			6,967
Balance at June 30, 2023		35,808		$	423,856	$	57,488		$	169,728	$	(25,042	)	$	626,030
	Three Months Ended July 1, 2022
Balance at April 1, 2022		35,684		$	423,856	$	52,809		$	75,353	$	(17,325	)	$	534,693
Consolidated net income		—			—		—			17,479		—			17,479
Common shares issued under stock plans		37			—		—			—		—			—
Common shares withheld for taxes on vested stock awards		(14	)		—		(1,744	)		—		—			(1,744	)
Repurchases of common shares		(84	)				(10,000	)							(10,000	)
Share-based compensation		—			—		5,081			—		—			5,081
Other comprehensive income (loss), net of tax		—			—		—			—		(13,340	)		(13,340	)
Balance at July 1, 2022		35,623		$	423,856	$	46,146		$	92,832	$	(30,665	)	$	532,169
	Six Months Ended July 1, 2022
Balance at December 31, 2021		35,601		$	423,856	$	53,768		$	56,533	$	(12,866	)	$	521,291
Consolidated net income		—			—		—			36,299