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 29, 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 October 30, 2023, there were 35,810,370 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	27
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	39
ITEM 4.	CONTROLS AND PROCEDURES	39
PART II — OTHER INFORMATION		40
ITEM 1.	LEGAL PROCEEDINGS	40
ITEM 1A.	RISK FACTORS	40
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES	40
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	40
ITEM 4.	MINE SAFETY DISCLOSURES	41
ITEM 5.	OTHER INFORMATION	41
ITEM 6.	EXHIBITS	41
SIGNATURES		43

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

NOVANTA INC.

CONSOLIDATED BALANCE SHEETS

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

(Unaudited)

	September 29,			December 31,
	2023			2022
ASSETS
Current assets
Cash and cash equivalents	$	75,961		$	100,105
Accounts receivable, net of allowance of $1,307 and $995, respectively		143,086			137,697
Inventories		153,809			167,997
Prepaid income taxes and income taxes receivable		5,299			1,508
Prepaid expenses and other current assets		13,167			13,212
Total current assets		391,322			420,519
Property, plant and equipment, net		103,323			103,186
Operating lease assets		40,527			43,317
Deferred tax assets		24,714			15,113
Other assets		5,653			4,414
Intangible assets, net		151,096			175,766
Goodwill		477,642			478,897
Total assets	$	1,194,277		$	1,241,212
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current portion of long-term debt	$	4,736		$	4,800
Accounts payable		63,983			75,225
Income taxes payable		7,223			13,660
Current portion of operating lease liabilities		8,072			7,793
Accrued expenses and other current liabilities		54,375			63,044
Total current liabilities		138,389			164,522
Long-term debt		347,879			430,662
Operating lease liabilities		38,577			40,808
Deferred tax liabilities		14,439			17,194
Income taxes payable		4,932			4,355
Other liabilities		5,205			6,085
Total liabilities		549,421			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: 35,810 and 35,711, respectively		423,856			423,856
Additional paid-in capital		63,362			55,155
Retained earnings		190,951			130,584
Accumulated other comprehensive loss		(33,313	)		(32,009	)
Total stockholders' equity		644,856			577,586
Total liabilities and stockholders’ equity	$	1,194,277		$	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						Nine Months Ended
	September 29,			September 30,			September 29,			September 30,
	2023			2022			2023			2022
Revenue	$	221,503		$	222,958		$	670,093		$	642,530
Cost of revenue		119,912			124,550			366,751			358,601
Gross profit		101,591			98,408			303,342			283,929
Operating expenses:
Research and development and engineering		22,022			21,349			68,230			63,866
Selling, general and administrative		39,648			40,301			122,758			120,191
Amortization of purchased intangible assets		5,131			6,472			15,344			20,987
Restructuring, acquisition, and related costs		4,481			1,625			8,191			2,650
Total operating expenses		71,282			69,747			214,523			207,694
Operating income		30,309			28,661			88,819			76,235
Interest income (expense), net		(6,756	)		(4,062	)		(19,898	)		(9,928	)
Foreign exchange transaction gains (losses), net		(370	)		2,086			(373	)		2,307
Other income (expense), net		(189	)		87			(546	)		(390	)
Income before income taxes		22,994			26,772			68,002			68,224
Income tax provision		1,771			4,282			7,635			9,435
Consolidated net income	$	21,223		$	22,490		$	60,367		$	58,789
Earnings per common share (Note 4):
Basic	$	0.59		$	0.63		$	1.68		$	1.65
Diluted	$	0.59		$	0.63		$	1.68		$	1.64
Weighted average common shares outstanding—basic		35,856			35,729			35,839			35,625
Weighted average common shares outstanding—diluted		36,041			35,928			36,024			35,881

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 29,			September 30,			September 29,			September 30,
	2023			2022			2023			2022
Consolidated net income	$	21,223		$	22,490		$	60,367		$	58,789
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax (1)		(8,786	)		(18,972	)		(1,980	)		(37,672	)
Pension liability adjustments, net of tax (2)		515			710			676			1,611
Total other comprehensive income (loss)		(8,271	)		(18,262	)		(1,304	)		(36,061	)
Total consolidated comprehensive income	$	12,952		$	4,228		$	59,063		$	22,728

(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 September 29, 2023
Balance at June 30, 2023		35,808		$	423,856	$	57,488		$	169,728	$	(25,042	)	$	626,030
Consolidated net income		—			—		—			21,223		—			21,223
Common shares issued under stock plans		3			—		—			—		—			—
Common shares withheld for taxes on vested stock awards		(1	)		—		(163	)		—		—			(163	)
Share-based compensation		—			—		6,037			—		—			6,037
Other comprehensive income (loss), net of tax		—			—		—			—		(8,271	)		(8,271	)
Balance at September 29, 2023		35,810		$	423,856	$	63,362		$	190,951	$	(33,313	)	$	644,856
	Nine Months Ended September 29, 2023
Balance at December 31, 2022		35,711		$	423,856	$	55,155		$	130,584	$	(32,009	)	$	577,586
Consolidated net income		—			—		—			60,367		—			60,367
Common shares issued under stock plans		167			—		—			—		—			—
Common shares withheld for taxes on vested stock awards		(68	)		—		(10,171	)		—		—			(10,171	)
Share-based compensation		—			—		18,378			—		—			18,378
Other comprehensive income (loss), net of tax		—			—		—			—		(1,304	)		(1,304	)
Balance at September 29, 2023		35,810		$	423,856	$	63,362		$	190,951	$	(33,313	)	$	644,856
	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

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

4

NOVANTA INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. dollars)

(Unaudited)

	Nine Months Ended
	September 29,			September 30,
	2023			2022
Cash flows from operating activities:
Consolidated net income	$	60,367		$	58,789
Adjustments to reconcile consolidated net income to    net cash provided by operating activities:
Depreciation and amortization		35,065			40,999
Provision for inventory excess and obsolescence		6,563			1,940
Impairment of assets		1,421			—
Share-based compensation		18,378			17,809
Deferred income taxes		(12,328	)		(14,628	)
Write-off of unamortized deferred financing costs		—			624
Other		1,289			(152	)
Changes in assets and liabilities which (used)/provided cash, excluding    effects from business acquisitions:
Accounts receivable		(6,371	)		(34,444	)
Inventories		5,619			(46,552	)
Prepaid income taxes, income taxes receivable, prepaid expenses      and other current assets		(3,444	)		(