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 July 2, 2021 

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 July 28, 2021, there were 35,489,022 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	40
ITEM 4.	CONTROLS AND PROCEDURES	40
PART II — OTHER INFORMATION		41
ITEM 1.	LEGAL PROCEEDINGS	41
ITEM 1A.	RISK FACTORS	41
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	41
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	41
ITEM 4.	MINE SAFETY DISCLOSURES	41
ITEM 5.	OTHER INFORMATION	41
ITEM 6.	EXHIBITS	42
SIGNATURES		43

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

NOVANTA INC.

CONSOLIDATED BALANCE SHEETS

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

(Unaudited)

	July 2,			December 31,
	2021			2020
ASSETS
Current assets
Cash and cash equivalents	$	133,853		$	125,054
Accounts receivable, net of allowance of $246 and $274, respectively		90,078			75,054
Inventories		94,974			92,737
Prepaid income taxes and income taxes receivable		5,829			3,203
Prepaid expenses and other current assets		11,013			8,125
Total current assets		335,747			304,173
Property, plant and equipment, net		80,164			78,676
Operating lease assets		33,407			34,444
Deferred tax assets		9,941			10,491
Other assets		2,577			2,894
Intangible assets, net		133,450			148,521
Goodwill		282,659			285,980
Total assets	$	877,945		$	865,179
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current portion of long-term debt	$	5,330		$	5,508
Accounts payable		54,053			42,966
Income taxes payable		4,752			5,787
Current portion of operating lease liabilities		6,430			6,188
Accrued expenses and other current liabilities		55,989			53,780
Total current liabilities		126,554			114,229
Long-term debt		186,866			194,927
Operating lease liabilities		32,248			32,802
Deferred tax liabilities		22,350			24,134
Income taxes payable		4,429			5,112
Other liabilities		12,434			17,166
Total liabilities		384,881			388,370
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: 35,489 and 35,163, respectively		423,856			423,856
Additional paid-in capital		52,243			58,992
Retained earnings		29,176			6,202
Accumulated other comprehensive loss		(12,211	)		(12,241	)
Total stockholders' equity		493,064			476,809
Total liabilities and stockholders’ equity	$	877,945		$	865,179

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
	July 2,			July 3,			July 2,			July 3,
	2021			2020			2021			2020
Revenue	$	167,523		$	144,728		$	330,107		$	300,196
Cost of revenue		95,117			86,026			188,961			177,049
Gross profit		72,406			58,702			141,146			123,147
Operating expenses:
Research and development and engineering		16,954			14,440			35,636			29,774
Selling, general and administrative		31,240			24,908			62,893			55,663
Amortization of purchased intangible assets		3,586			3,410			7,161			6,855
Restructuring, acquisition, and related costs		4,634			2,243			8,365			3,904
Total operating expenses		56,414			45,001			114,055			96,196
Operating income		15,992			13,701			27,091			26,951
Interest income (expense), net		(1,378	)		(1,701	)		(2,786	)		(3,379	)
Foreign exchange transaction gains (losses), net		(76	)		(282	)		(333	)		(28	)
Other income (expense), net		(97	)		(22	)		(167	)		61
Income before income taxes		14,441			11,696			23,805			23,605
Income tax provision (benefit)		2,777			36			831			(2	)
Consolidated net income	$	11,664		$	11,660		$	22,974		$	23,607
Earnings per common share (Note 4):
Basic	$	0.33		$	0.33		$	0.65		$	0.67
Diluted	$	0.33		$	0.33		$	0.64		$	0.66
Weighted average common shares outstanding—basic		35,374			35,137			35,326			35,145
Weighted average common shares outstanding—diluted		35,763			35,579			35,775			35,570

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
	July 2,		July 3,		July 2,			July 3,
	2021		2020		2021			2020
Consolidated net income	$	11,664	$	11,660	$	22,974		$	23,607
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax (1)		136		1,498		(353	)		(5,308	)
Pension liability adjustments, net of tax (2)		262		100		383			837
Total other comprehensive income (loss)		398		1,598		30			(4,471	)
Total consolidated comprehensive income	$	12,062	$	13,258	$	23,004		$	19,136

⁽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 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			Earning (Deficit)			Loss			Total
	Three Months Ended July 2, 2021
Balance at April 2, 2021		35,384		$	423,856	$	47,364		$	17,512		$	(12,609	)	$	476,123
Consolidated net income		—			—		—			11,664			—			11,664
Common shares issued under stock plans		106			—		—			—			—			—
Common shares withheld for taxes on vested stock awards		(1	)		—		(156	)		—			—			(156	)
Share-based compensation		—			—		5,035			—			—			5,035
Other comprehensive income (loss), net of tax		—			—		—			—			398			398
Balance at July 2, 2021		35,489		$	423,856	$	52,243		$	29,176		$	(12,211	)	$	493,064
	Six Months Ended July 2, 2021
Balance at December 31, 2020		35,163		$	423,856	$	58,992		$	6,202		$	(12,241	)	$	476,809
Consolidated net income		—			—		—			22,974			—			22,974
Common shares issued under stock plans		460			—		—			—			—			—
Common shares withheld for taxes on vested stock awards		(134	)		—		(18,428	)		—			—			(18,428	)
Repurchases of common shares		—			—		—			—			—			—
Share-based compensation		—			—		11,679			—			—			11,679
Other comprehensive income (loss), net of tax		—			—		—			—			30			30
Balance at July 2, 2021		35,489		$	423,856	$	52,243		$	29,176		$	(12,211	)	$	493,064
	Three Months Ended July 3, 2020
Balance at April 3, 2020		35,122		$	423,856	$	39,801		$	(26,372	)	$	(24,182	)	$	413,103
Consolidated net income		—			—		—			11,660			—			11,660
Common shares issued under stock plans		34			—		—			—			—			—
Common shares withheld for taxes on vested stock awards		(1	)		—		(111	)		—			—			(111	)
Share-based compensation		—			—		5,648			—			—			5,648
Other comprehensive income (loss), net of tax		—			—		—			—			1,598			1,598
Balance at July 3, 2020		35,155		$	423,856	$	45,338		$	(14,712	)	$	(22,584	)	$	431,898
	Six Months Ended July 3, 2020
Balance at December 31, 2019		35,052		$	423,856	$	49,748		$	(38,319	)	$	(18,113	)	$	417,172
Consolidated net income		—			—		—			23,607			—			23,607
Common shares issued under stock plans		256			—		179			—			—			179
Common shares withheld for taxes on vested stock awards		(88	)		—		(7,936	)		—			—			(7,936	)
Repurchases of common shares		(65	)		—		(5,500	)		—			—			(5,500	)
Share-based compensation		—			—		8,847			—			—			8,847
Other comprehensive income (loss), net of tax		—			—		—			—			(4,471	)		(4,471	)
Balance at July 3, 2020		35,155		$	423,856	$	45,338		$	(14,712	)	$	(22,584	)	$	431,898

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)

	Six Months Ended
	July 2,	July 3,
	2021	2020
Cash flows from operating activities: