UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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.:
(Exact name of registrant as specified in its charter)
|
||
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
|
|
|
|
||
(Address of principal executive offices) |
|
(Zip Code) |
Registrant’s telephone number, including area code: (
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 |
|
|
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.
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).
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.
|
|
|
☒ |
|
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 May 1, 2024, there were
NOVANTA INC.
TABLE OF CONTENTS
Item No. |
|
|
Page |
||
|
|
||||
|
1 |
||||
|
|
|
|||
ITEM 1. |
|
|
1 |
||
|
|
|
|||
|
|
|
1 |
||
|
|
|
|||
|
|
|
2 |
||
|
|
|
|||
|
|
|
3 |
||
|
|
|
|||
|
|
|
4 |
||
|
|
|
|
|
|
|
|
|
5 |
||
|
|
|
|||
|
|
|
6 |
||
|
|
|
|||
ITEM 2. |
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
|
28 |
|
|
|
|
|||
ITEM 3. |
|
|
38 |
||
|
|
|
|||
ITEM 4. |
|
|
38 |
||
|
|
||||
|
39 |
||||
|
|
|
|||
ITEM 1. |
|
|
39 |
||
|
|
|
|||
ITEM 1A. |
|
|
39 |
||
|
|
|
|||
ITEM 2. |
|
|
39 |
||
|
|
|
|||
ITEM 3. |
|
|
39 |
||
|
|
|
|||
ITEM 4. |
|
|
39 |
||
|
|
|
|||
ITEM 5. |
|
|
39 |
||
|
|
|
|||
ITEM 6. |
|
|
40 |
||
|
|
||||
|
41 |
||||
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
NOVANTA INC.
CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars or shares)
(Unaudited)
|
March 29, |
|
|
December 31, |
|
||
|
2024 |
|
|
2023 |
|
||
ASSETS |
|
|
|
|
|
||
Current assets |
|
|
|
|
|
||
Cash and cash equivalents |
$ |
|
|
$ |
|
||
Accounts receivable, net of allowance of $ |
|
|
|
|
|
||
Inventories |
|
|
|
|
|
||
Prepaid income taxes and income taxes receivable |
|
|
|
|
|
||
Prepaid expenses and other current assets |
|
|
|
|
|
||
Total current assets |
|
|
|
|
|
||
Property, plant and equipment, net |
|
|
|
|
|
||
Operating lease assets |
|
|
|
|
|
||
Deferred tax assets |
|
|
|
|
|
||
Other assets |
|
|
|
|
|
||
Intangible assets, net |
|
|
|
|
|
||
Goodwill |
|
|
|
|
|
||
Total assets |
$ |
|
|
$ |
|
||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
||
Current liabilities |
|
|
|
|
|
||
Current portion of long-term debt |
$ |
|
|
$ |
|
||
Accounts payable |
|
|
|
|
|
||
Income taxes payable |
|
|
|
|
|
||
Current portion of operating lease liabilities |
|
|
|
|
|
||
Accrued expenses and other current liabilities |
|
|
|
|
|
||
Total current liabilities |
|
|
|
|
|
||
Long-term debt |
|
|
|
|
|
||
Operating lease liabilities |
|
|
|
|
|
||
Deferred tax liabilities |
|
|
|
|
|
||
Income taxes payable |
|
|
|
|
|
||
Other liabilities |
|
|
|
|
|
||
Total liabilities |
|
|
|
|
|
||
|
|
|
|
|
|||
Stockholders’ equity: |
|
|
|
|
|
||
Preferred shares, |
|
|
|
|
|
||
Common shares, |
|
|
|
|
|
||
Additional paid-in capital |
|
|
|
|
|
||
Retained earnings |
|
|
|
|
|
||
Accumulated other comprehensive loss |
|
( |
) |
|
|
( |
) |
Total stockholders' equity |
|
|
|
|
|
||
Total liabilities and stockholders’ equity |
$ |
|
|
$ |
|
||
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 |
|
|||||
|
March 29, |
|
|
March 31, |
|
||
|
2024 |
|
|
2023 |
|
||
Revenue |
$ |
|
|
$ |
|
||
Cost of revenue |
|
|
|
|
|
||
Gross profit |
|
|
|
|
|
||
Operating expenses: |
|
|
|
|
|
||
Research and development and engineering |
|
|
|
|
|
||
Selling, general and administrative |
|
|
|
|
|
||
Amortization of purchased intangible assets |
|
|
|
|
|
||
Restructuring, acquisition, and related costs |
|
|
|
|
|
||
Total operating expenses |
|
|
|
|
|
||
Operating income |
|
|
|
|
|
||
Interest income (expense), net |
|
( |
) |
|
|
( |
) |
Foreign exchange transaction gains (losses), net |
|
( |
) |
|
|
( |
) |
Other income (expense), net |
|
( |
) |
|
|
( |
) |
Income before income taxes |
|
|
|
|
|
||
Income tax provision |
|
|
|
|
|
||
Net income |
$ |
|
|
$ |
|
||
|
|
|
|
|
|
||
Earnings per common share (Note 5): |
|
|
|
|
|
||
Basic |
$ |
|
|
$ |
|
||
Diluted |
$ |
|
|
$ |
|
||
|
|
|
|
|
|
||
Weighted average common shares outstanding—basic |
|
|
|
|
|
||
Weighted average common shares outstanding—diluted |
|
|
|
|
|
||
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 |
|
|||||
|
March 29, |
|
|
March 31, |
|
||
|
2024 |
|
|
2023 |
|
||
Net income |
$ |
|
|
$ |
|
||
Other comprehensive income (loss): |
|
|
|
|
|
||
Foreign currency translation adjustments, net of tax (1) |
|
( |
) |
|
|
|
|
Pension liability adjustments, net of tax (2) |
|
|
|
|
|
||
Total other comprehensive income (loss) |
|
( |
) |
|
|
|
|
Total consolidated comprehensive income |
$ |
|
|
$ |
|
||
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 March 29, 2024 |
|
|||||||||||||||||||||
Balance at December 31, 2023 |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
Net income |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Common shares issued under stock plans |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Common shares withheld for taxes on vested stock awards |
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Share-based compensation |
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Other comprehensive income (loss), net of tax |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance at March 29, 2024 |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Three Months Ended March 31, 2023 |
|
|||||||||||||||||||||
Balance at December 31, 2022 |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
Net income |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Common shares issued under stock plans |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Common shares withheld for taxes on vested stock awards |
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Share-based compensation |
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Other comprehensive income (loss), net of tax |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Balance at March 31, 2023 |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
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)
|
Three Months Ended |
|
|||||
|
March 29, |
|
|
March 31, |
|
||
|
2024 |
|
|
2023 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
||
Net income |
$ |
|
|
$ |
|
||
Adjustments to reconcile net income to |
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
||
Provision for inventory excess and obsolescence |
|
|
|
|
|
||
Share-based compensation |
|
|
|
|
|
||
Deferred income taxes |
|
( |
) |
|
|
( |
) |
Inventory acquisition fair value adjustments |
|
|
|
|
— |
|
|
Other |
|
|
|
|
|
||
Changes in assets and liabilities which (used)/provided cash, excluding |
|
|
|
|
|
||
Accounts receivable |
|
( |
) |
|
|
( |
) |
Inventories |
|
( |
) |
|
|
|
|
Prepaid income taxes, income taxes receivable, prepaid expenses |
|
( |
) |
|
|
|
|
Accounts payable, income taxes payable, accrued expenses |
|
|
|
|
( |
) |
|
Other non-current assets and liabilities |
|
|
|
|
( |
) |
|
Net cash provided by operating activities |
|
|
|
|
|
||
Cash flows from investing activities: |
|
|
|
|
|
||
Cash paid for business acquisitions, net of working capital adjustments |
|
( |
) |
|
|
— |
|
Purchases of property, plant and equipment |
|
( |
) |
|
|
( |
) |
Net cash used in investing activities |
|
( |
) |
|
|
( |
) |
Cash flows from financing activities: |
|
|
|
|
|
||
Borrowings under revolving credit facilities |
|
|
|
|
— |
|
|
Repayments under term loan and revolving credit facilities |
|
( |
) |
|
|
( |
) |
Payments of withholding taxes from share-based awards |
|
( |
) |
|
|
( |
) |
Other financing activities |
|
( |
) |
|
|
( |
) |
Net cash provided by (used in) financing activities |
|
|
|
|
( |
) |
|
Effect of exchange rates on cash and cash equivalents |
|
( |
) |
|
|
|
|
Decrease in cash and cash equivalents |
|
( |
) |
|
|
( |
) |
Cash and cash equivalents, beginning of the period |
|
|
|
|
|
||
Cash and cash equivalents, end of the period |
$ |
|
|
$ |
|
||
Supplemental disclosure of cash flow information: |
|
|
|
|
|
||
Cash paid for interest |
$ |
|
|
$ |
|
||
Cash paid for income taxes |
$ |
|
|
$ |
|
||
Income tax refunds received |
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these consolidated financial statements.
5
NOVANTA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF March 29, 2024
(Unaudited)
1. Basis of Presentation
Novanta Inc. (collectively with its subsidiaries, referred to as “Novanta”, the “Company”, “we”, “us”, “our”) is a leading global supplier of core technology solutions that give medical and advanced industrial original equipment manufacturers (“OEMs”) a competitive advantage. Novanta combines deep proprietary technology expertise and competencies in precision medicine and manufacturing, medical solutions and robotics and automation with a proven ability to solve complex technical challenges. This enables Novanta to engineer core components and sub-systems that deliver extreme precision and performance, tailored to the customers’ demanding applications.
The accompanying unaudited interim consolidated financial statements have been prepared by the Company in United States (“U.S.”) dollars and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”), the instructions to Form 10-Q and the provisions of Regulation S-X pertaining to interim financial statements. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the U.S. have been condensed or omitted. The interim consolidated financial statements and notes included in this report should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. In the opinion of management, these interim consolidated financial statements include all adjustments and accruals of a normal and recurring nature necessary to fairly state the results of the interim periods presented. The results for interim periods are not necessarily indicative of results to be expected for the full year or for any future periods.
The Company’s unaudited interim consolidated financial statements are prepared for each quarterly period ending on the Friday closest to the end of the calendar quarter, with the exception of the fourth quarter which always ends on December 31.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. Estimates and assumptions are reviewed on an on-going basis and the effects of revisions are reflected in the period in which such revisions are deemed to be necessary. The Company evaluates its estimates based on historical experience, current conditions, and various other assumptions that it believes are reasonable under the circumstances. Actual results could differ significantly from these estimates.
Recent Accounting Pronouncements
The following table provides a brief description of recent Accounting Standards Updates (“ASU”) issued by the Financial Accounting Standards Board (“FASB”):
Standard |
|
Description |
|
Effective Date |
|
Effect on the Financial Statements or Other Significant Matters |
In October 2023, the FASB issued ASU 2023-06, “Disclosure Improvements: Codification Amendments in Response to SEC’s Disclosure Update and Simplification Initiative.” |
|
ASU 2023-06 clarifies or improves disclosure and presentation requirements of a variety of topics, which allow users to easily compare entities subject to the SEC’s existing disclosure requirements with those entities that were not previously subject to such requirements and align the requirements in the FASB Accounting Standards Codification with the SEC’s regulations. |
|
The effective date for each amendment in ASU 2023-06 will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective. Early adoption is prohibited. |
|
The Company is currently evaluating the impact of ASU 2023-06 on its consolidated financial statements. |
6
NOVANTA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF March 29, 2024
(Unaudited)
Standard |
|
Description |
|
Effective Date |
|
Effect on the Financial Statements or Other Significant Matters |
In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280) -Improvements to Reportable Segment Disclosures." |
|
ASU 2023-07 clarifies or improves financial reporting by requiring disclosure of incremental segment information. The amendments require disclosure, on an annual and interim basis for all public entities, of significant segment expenses included in segment profit or loss, an amount and description of "other segment items" included in segment profit or loss, and an explanation of how reported segment profit or loss is assessed and allocated. |
|
The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. |
|
The Company is currently evaluating the impact of ASU 2023-07 on its consolidated financial statement disclosures. |
In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740) -Improvements to Income Tax Disclosures." |
|
ASU 2023-09 provides more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid. |
|
The amendments in ASU 2023-09 are effective for annual periods beginning after December 15, 2024. Early adoption is permitted. |
|
The Company is currently evaluating the impact of ASU 2023-09 on its consolidated financial statement disclosures. |
2. Revenue
The Company accounts for its revenue transactions in accordance with ASC 606, “Revenue from Contracts with Customers,” which requires entities to recognize revenue in a way that depicts the transfer of control over goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
The Company recognizes revenue when control of promised goods or services is transferred to the customer. The transfer of control generally occurs upon shipment when title and risk of loss pass to the customer. The vast majority of the Company’s revenue is generated from the sale of distinct products. Revenue is measured as the amount of consideration the Company expects to receive in exchange for such products, which is generally at contractually stated prices. Sales taxes and value added taxes collected concurrently with revenue generating activities are excluded from revenue.
Performance Obligations
Substantially all of the Company’s revenue is recognized at a point in time, upon shipment, rather than over time.
At the request of its customers, the Company may perform professional services, generally for the maintenance and repair of products previously sold to those customers and for engineering services. Professional services are typically short in duration and aggregate to less than
The Company occasionally sells separately priced non-standard/extended warranty services or preventative maintenance plans with the sale of products. The transfer of control over the service plans is over time. The Company recognizes the related revenue ratably over the terms of the service plans. The transaction price of a contract is allocated to each performance obligation based on its relative standalone selling price. Standalone selling prices are generally determined based on the prices charged to customers or using the expected cost plus a margin.
7
NOVANTA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF March 29, 2024
(Unaudited)
Shipping & Handling Costs
The Company accounts for shipping and handling activities that occur after the transfer of control over the related goods as fulfillment activities rather than performance obligations. Shipping and handling fees charged to customers are recognized as revenue and the related costs are recorded in cost of revenue at the time of transfer of control.
Warranties
Practical Expedients and Exemptions
Contract Liabilities
Contract liabilities consist of deferred revenue and advance payments from customers, including amounts that are refundable. These contract liabilities are classified as either current or long-term liabilities in the consolidated balance sheet based on the timing of when the Company expects to recognize the related revenue. As of March 29, 2024 and December 31, 2023, contract liabilities were $
Disaggregated Revenue
See Note 16 for the Company’s disaggregation of revenue by segment, geography and end market.
3. Business Combinations
On
Allocation of Purchase Price
The acquisition of Motion Solutions has been accounted for as a business combination. The purchase price is allocated based upon a valuation of the fair values of assets acquired and liabilities assumed. Assets acquired and liabilities assumed have been recorded at their estimated fair values as of the acquisition date. The excess of the purchase price over the fair values of the acquired
8
NOVANTA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF March 29, 2024
(Unaudited)
tangible assets, identifiable intangible assets and assumed liabilities was recorded as goodwill. The fair values of identifiable intangible assets were based on valuations using an income approach, specifically the multi-period excess earnings method for customer relationships and the relief-from-royalty method for developed technologies. The process for estimating the fair values of identifiable intangible assets requires the use of significant estimates and assumptions, including revenue growth rates, customer attrition rates, royalty rates, discount rates, technology obsolescence curves, and EBITDA margins. The Company’s estimates and assumptions in determining the estimated fair value of certain assets and liabilities are subject to change within the measurement period (up to
Based upon the Company’s preliminary valuation, the purchase price for Motion Solutions was allocated as follows (in thousands):
|
Purchase Price |
|
|
|
Allocation |
|
|
Cash |
$ |
|
|
Accounts receivable |
|
|
|
Inventory |
|
|
|
Property, plant and equipment |
|
|
|
Operating lease assets |
|
|
|
Intangible assets |
|
|
|
Goodwill |
|
|
|
Other assets |
|
|
|
Total assets acquired |
|
|
|
Accounts payable |
|
|
|
Operating lease liabilities |
|
|
|
Deferred tax liabilities |
|
|
|
Other liabilities |
|
|
|
Total liabilities assumed |
|
|
|
Total assets acquired, net of liabilities assumed |
|
|
|
Less: cash acquired |
|
|
|
Purchase price, net of cash acquired |
$ |
|
|
The purchase price allocation is preliminary as the Company is in the process of collecting additional information.
The fair value of intangible assets for Motion Solutions is comprised of the following:
|
|
|
|
|
|
|
Estimated Fair |
|
|
Amortization |
|
|
Value |
|
|
Period |
|
Developed technologies |
$ |
|
|
||
Customer relationships |
|
|
|
||
Backlog |
|
|
|
||
Total |
$ |
|
|
|
|
The preliminary purchase price allocation resulted in $
The operating results of Motion Solutions were included in the Company’s results of operations beginning January 2, 2024. Motion Solutions contributed revenues of $
9
NOVANTA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF March 29, 2024
(Unaudited)
acquisition date through March 29, 2024 included amortization of inventory fair value adjustments of $
Unaudited Pro Forma Information
The pro forma information for all periods presented below includes the effect of business combination accounting resulting from the acquisition of Motion Solutions, including amortization of inventory fair value adjustments, amortization of intangible assets, interest expense on borrowings in connection with the acquisition, and the related tax effects, assuming that the acquisition had been consummated as of January 1, 2023. The pro forma financial information is presented for comparative purposes only and is not necessarily indicative of the results of operations that actually would have been achieved if the acquisitions had taken place on January 1, 2023.
|
Three Months Ended |
|
|
Three Months Ended |
|
||
|
March 29, |
|
|
March 31, |
|
||
|
2024 |
|
|
2023 |
|
||
Revenue |
$ |
|
|
$ |
|
||
Net income |
$ |
|
|
$ |
|
||
Acquisition Costs
Acquisition costs are included in restructuring and acquisition related costs in the consolidated statements of operations. Acquisition-related costs for Motion Solutions was $
4. Accumulated Other Comprehensive Loss
Changes in accumulated other comprehensive loss were as follows (in thousands):
|
Total Accumulated |
|
|
|
|
|
|
|
|||
|
Other |
|
|
Cumulative |
|
|
Pension |
|
|||
|
Comprehensive |
|
|
Translation |
|
|
Liability |
|
|||
|
Loss |
|
|
Adjustments |
|
|
Adjustments |
|
|||
Balance at December 31, 2023 |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive income (loss) |
|
( |
) |
|
|
( |
) |
|
|
|
|
Amounts reclassified from accumulated other comprehensive loss |
|
|
|
|
— |
|
|
|
|
||
Balance at March 29, 2024 |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
The amounts reclassified from accumulated other comprehensive loss were included in other income (expense) in the consolidated statements of operations.
5. Earnings per Common Share
Basic earnings per common share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Fully vested restricted stock units and deferred stock units granted to members of the Company’s Board of Directors are included in the calculation of weighted average number of common shares outstanding.
For diluted earnings per common share, the denominator includes the dilutive effect of outstanding common share equivalents. The dilutive effects of outstanding common share equivalents, including outstanding service-based restricted stock units, stock options and performance-based restricted stock units, are determined using the treasury stock method. Performance-based restricted stock units are considered contingently issuable shares, the vesting of which may be based on achievement of specified company performance conditions (“attainment-based PSUs”), certain market conditions (“market-based PSUs”) or a hybrid of company performance conditions and market conditions (“hybrid PSUs”). The dilutive effects of market-based PSUs are included in the weighted average common share calculation based on the number of shares, if any, that would be issuable as of the end of the reporting period, assuming the end of the reporting period is also the end of the performance period. The dilutive effects of attainment-based and hybrid PSUs are included in the weighted average common share calculation based on the cumulative
10
NOVANTA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF March 29, 2024
(Unaudited)
achievement against the performance targets only when the performance targets have been achieved as of the end of the reporting period.
The following table sets forth the computation of basic and diluted earnings per common share (amounts in thousands, except per share data):
|
Three Months Ended |
|
|||||
|
March 29, |
|
|
March 31, |
|
||
|
2024 |
|
|
2023 |
|
||
Numerators: |
|
|
|
|
|
||
Net income |
$ |
|
|
$ |
|
||
|
|
|
|
|
|
||
Denominators: |
|
|
|
|
|
||
Weighted average common shares outstanding— basic |
|
|
|
|
|
||
Dilutive common share equivalents |
|
|
|
|
|
||
Weighted average common shares outstanding— diluted |
|
|
|
|
|
||
Antidilutive common share equivalents excluded from above |
|
|
|
|
|
||
|
|
|
|
|
|
||
Earnings per Common Share: |
|
|
|
|
|
||
Basic |
$ |
|
|
$ |
|
||
Diluted |
$ |
|
|
$ |
|
||
For the three months ended March 29, 2024,
For the three months ended March 31, 2023,
6. Fair Value Measurements
ASC 820, “Fair Value Measurements,” establishes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the third is considered unobservable:
Current Assets and Liabilities
The Company’s cash equivalents are highly liquid investments with original maturities of three months or less, which represent assets measured at fair value on a recurring basis. The Company determines the fair value of cash equivalents using a market approach based on quoted prices in active markets. The fair values of cash equivalents, accounts receivable, income taxes receivable, accounts payable, income taxes payable and accrued expenses and other current liabilities approximate their carrying values because of their short-term nature.
Foreign Currency Contracts
The Company addresses market risks from changes in foreign currency exchange rates through a risk management program that includes the use of derivative financial instruments to mitigate certain balance sheet foreign currency transaction exposures. The Company uses foreign currency forward contracts as a part of its strategy to manage exposures related to foreign currency denominated monetary assets and liabilities. The fair value of these foreign currency forward contracts is reported either in other current assets or in other current liabilities as of the end of the period.
11
NOVANTA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF March 29, 2024
(Unaudited)
Contingent Considerations
On
Summary by Fair Value Hierarchy
The following table summarizes the fair values of the Company’s assets and liabilities measured at fair value on a recurring basis as of March 29, 2024 (in thousands):
|
|
|
|
Quoted Prices in |
|
|
|
|
|
Significant Other |
|
||||
|
|
|
|
Active Markets for |
|
|
Significant Other |
|
|
Unobservable |
|
||||
|
|
|
|
Identical Assets |
|
|
Observable Inputs |
|
|
Inputs |
|
||||
|
Fair Value |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents |
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
||
Prepaid expenses and other current assets: |
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency forward contracts |
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
||||
Accrued expenses and other current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
||||
Contingent considerations - Current |
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Foreign currency forward contracts |
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Other liabilities: |
|
|
|
|
|
|
|
|
|
|
|
||||
Contingent considerations - Long-term |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|||
12
NOVANTA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF March 29, 2024
(Unaudited)
The following table summarizes the fair values of the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2023 (in thousands):
|
|
|
|
Quoted Prices in |
|
|
|
|
|
Significant Other |
|
||||
|
|
|
|
Active Markets for |
|
|
Significant Other |
|
|
Unobservable |
|
||||
|
|
|
|
Identical Assets |
|
|
Observable Inputs |
|
|
Inputs |
|
||||
|
Fair Value |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents |
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
||
Prepaid expenses and other current assets: |
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency forward contracts |
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
||||
Accrued expenses and other current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
||||
Contingent considerations - Current |
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Foreign currency forward contracts |
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Other liabilities: |
|
|
|
|
|
|
|
|
|
|
|
||||
Contingent considerations - Long-term |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|||
Changes in the fair value of Level 3 contingent considerations during the three months ended March 29, 2024 were as follows (in thousands):
|
Amount |
|
|
Balance at December 31, 2023 |
$ |
|
|
Payments |
|
— |
|
Fair value adjustments |
|
— |
|
Effect of foreign exchange rates |
|
( |
) |
Balance at March 29, 2024 |
$ |
|
|
See Note 10 to Consolidated Financial Statements for a discussion of the estimated fair value of the Company’s outstanding debt.
7. Foreign Currency Contracts
The Company addresses market risks from changes in foreign currency exchange rates through a risk management program that includes the use of derivative financial instruments to mitigate certain foreign currency transaction exposures from future settlement of non-functional currency monetary assets and liabilities as of the end of a period. The Company does not enter into derivative transactions for speculative purposes. Gains and losses on these derivative financial instruments substantially offset losses and gains on the underlying hedged exposures and are included in foreign exchange transaction gains (losses) in the consolidated statements of operations. Furthermore, the Company manages its exposures to counterparty risks on derivative instruments by entering into contracts with a diversified group of major financial institutions and by actively monitoring outstanding positions.
As of March 29, 2024, the aggregate notional amount and fair value of the Company’s foreign currency forward contracts was $
The Company recognized an aggregate net gain of $
13
NOVANTA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF March 29, 2024
(Unaudited)
8. Goodwill and Intangible Assets
Goodwill
Goodwill is recorded when the consideration paid for a business combination exceeds the fair value of net tangible and identifiable intangible assets acquired. The Company tests its goodwill balances for impairment annually as of the beginning of the second quarter or more frequently if indicators are present or changes in circumstances suggest that an impairment may exist. The Company performed the most recent annual goodwill and indefinite-lived intangible asset impairment test as of the beginning of the second quarter of 2023 and noted
The following table summarizes changes in goodwill during the three months ended March 29, 2024 (in thousands):
Balance at beginning of the period |
$ |
|
|
Goodwill acquired from Motion Solutions acquisition |
|
|
|
Effect of foreign exchange rate changes |
|
( |
) |
Balance at end of the period |
$ |
|
Goodwill by reportable segment as of March 29, 2024 was as follows (in thousands):
|
Reportable Segment |
|
|
|
|
||||||||||
|
Precision Medicine and Manufacturing |
|
|
Medical Solutions |
|
|
Robotics and Automation |
|
|
Total |
|
||||
Goodwill |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Accumulated impairment of goodwill |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
Reportable Segment |
|
|
|
|
||||||||||
|
Precision Medicine and Manufacturing |
|
|
Medical Solutions |
|
|
Robotics and Automation |
|
|
Total |
|
||||
Goodwill |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Accumulated impairment of goodwill |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total |
$ |
|
|
$ |
|
||||||||||