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 October 2, 2020 

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 5, 2020, there were 35,160,618 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	28
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	42
ITEM 4.	CONTROLS AND PROCEDURES	42
PART II — OTHER INFORMATION		43
ITEM 1.	LEGAL PROCEEDINGS	43
ITEM 1A.	RISK FACTORS	43
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)

	October 2,			December 31,
	2020			2019
ASSETS
Current assets
Cash and cash equivalents	$	106,630		$	78,944
Accounts receivable, net of allowance of $398 and $297, respectively		82,050			91,078
Inventories		101,737			116,618
Prepaid income taxes and income taxes receivable		4,923			5,905
Prepaid expenses and other current assets		7,492			11,967
Total current assets		302,832			304,512
Property, plant and equipment, net		76,115			77,556
Operating lease assets		33,841			35,180
Deferred tax assets		12,689			8,890
Other assets		2,921			2,713
Intangible assets, net		149,613			166,175
Goodwill		279,523			274,710
Total assets	$	857,534		$	869,736
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current portion of long-term debt	$	5,264		$	5,031
Accounts payable		40,906			52,585
Income taxes payable		5,594			1,861
Current portion of operating lease liabilities		5,553			5,043
Accrued expenses and other current liabilities		76,236			70,326
Total current liabilities		133,553			134,846
Long-term debt		188,089			215,334
Operating lease liabilities		32,499			34,108
Deferred tax liabilities		27,424			26,676
Income taxes payable		5,132			4,713
Other liabilities		19,588			36,887
Total liabilities		406,285			452,564
Commitments and contingencies (Note 15)
Stockholders’ equity:
Common shares, no par value; Authorized shares: unlimited;    Issued and outstanding: 35,160 and 35,052, respectively		423,856			423,856
Additional paid-in capital		52,197			49,748
Accumulated deficit		(6,454	)		(38,319	)
Accumulated other comprehensive loss		(18,350	)		(18,113	)
Total stockholders' equity		451,249			417,172
Total liabilities and stockholders’ equity	$	857,534		$	869,736

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
	October 2,			September 27,			October 2,			September 27,
	2020			2019			2020			2019
Revenue	$	142,929		$	154,066		$	443,125		$	466,397
Cost of revenue		83,824			90,012			260,873			270,272
Gross profit		59,105			64,054			182,252			196,125
Operating expenses:
Research and development and engineering		15,231			13,811			45,005			41,196
Selling, general and administrative		26,788			27,926			82,451			88,977
Amortization of purchased intangible assets		3,533			3,970			10,388			11,740
Restructuring, acquisition, and related costs		1,687			5,546			5,591			11,913
Total operating expenses		47,239			51,253			143,435			153,826
Operating income		11,866			12,801			38,817			42,299
Interest income (expense), net		(1,698	)		(2,153	)		(5,077	)		(6,357	)
Foreign exchange transaction gains (losses), net		(136	)		387			(164	)		455
Other income (expense), net		(14	)		(48	)		47			(186	)
Income before income taxes		10,018			10,987			33,623			36,211
Income tax provision		1,760			2,064			1,758			4,655
Consolidated net income	$	8,258		$	8,923		$	31,865		$	31,556
Earnings per common share (Note 5):
Basic	$	0.23		$	0.25		$	0.91		$	0.90
Diluted	$	0.23		$	0.25		$	0.89		$	0.89
Weighted average common shares outstanding—basic		35,142			35,074			35,144			35,012
Weighted average common shares outstanding—diluted		35,688			35,585			35,609			35,523

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
	October 2,			September 27,			October 2,			September 27,
	2020			2019			2020			2019
Consolidated net income	$	8,258		$	8,923		$	31,865		$	31,556
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax (1)		4,302			(2,821	)		(1,006	)		(3,144	)
Pension liability adjustments, net of tax (2)		(68	)		490			769			1,060
Total other comprehensive income (loss)		4,234			(2,331	)		(237	)		(2,084	)
Total consolidated comprehensive income (loss)	$	12,492		$	6,592		$	31,628		$	29,472

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

(2)  The tax effect on this component of comprehensive income was nominal for all periods presented. See Note 4 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			Accumulated			Accumulated Other Comprehensive
	# of Shares			Amount		Capital			Deficit			Loss			Total
	Three Months Ended October 2, 2020
Balance at July 3, 2020		35,155		$	423,856	$	45,338		$	(14,712	)	$	(22,584	)	$	431,898
Consolidated net income		—			—		—			8,258			—			8,258
Common shares issued under stock plans		8			—		—			—			—			—
Common shares withheld for taxes on vested stock awards		(3	)		—		(366	)		—			—			(366	)
Share-based compensation		—			—		7,225			—			—			7,225
Other comprehensive income (loss), net of tax		—			—		—			—			4,234			4,234
Balance at October 2, 2020		35,160		$	423,856	$	52,197		$	(6,454	)	$	(18,350	)	$	451,249
	Nine Months Ended October 2, 2020
Balance at December 31, 2019		35,052		$	423,856	$	49,748		$	(38,319	)	$	(18,113	)	$	417,172
Consolidated net income		—			—		—			31,865			—			31,865
Common shares issued under stock plans		264			—		179			—			—			179
Common shares withheld for taxes on vested stock awards		(91	)		—		(8,302	)		—			—			(8,302	)
Repurchases of common shares		(65	)		—		(5,500	)		—			—			(5,500	)
Share-based compensation		—			—		16,072			—			—			16,072
Other comprehensive income (loss), net of tax		—			—		—			—			(237	)		(237	)
Balance at October 2, 2020		35,160		$	423,856	$	52,197		$	(6,454	)	$	(18,350	)	$	451,249
	Three Months Ended September 27, 2019
Balance at June 28, 2019		34,972		$	423,856	$	41,065		$	(56,459	)	$	(22,280	)	$	386,182
Consolidated net income		—			—		—			8,923			—			8,923
Common shares issued for a business combination		124			—		10,900			—			—			10,900
Common shares issued under stock plans		36			—		425			—			—			425
Common shares withheld for taxes on vested stock awards		(1	)		—		(120	)		—			—			(120	)
Repurchases of common shares		(42	)		—		(3,345	)		—			—			(3,345	)
Share-based compensation		—			—		2,243			—			—			2,243
Other comprehensive income (loss), net of tax		—			—		—			—			(2,331	)		(2,331	)
Balance at September 27, 2019		35,089		$	423,856	$	51,168		$	(47,536	)	$	(24,611	)	$	402,877
	Nine Months Ended September 27, 2019
Balance at December 31, 2018		34,886		$	423,856	$	46,018		$	(79,092	)	$	(22,527	)	$	368,255
Consolidated net income		—			—		—			31,556			—			31,556
Common shares issued for a business combination		124			—		10,900			—			—			10,900
Common shares issued under stock plans		245			—		425			—			—			425
Common shares withheld for taxes on vested stock awards		(85	)		—		(6,839	)		—			—			(6,839	)
Repurchases of common shares		(81	)		—		(6,684	)		—			—			(6,684	)
Share-based compensation		—			—		7,348			—			—			7,348
Other comprehensive income (loss), net of tax