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 1, 2022 

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 2, 2022, there were 35,642,770 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	41
ITEM 4.	CONTROLS AND PROCEDURES	41
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	43
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	43
ITEM 4.	MINE SAFETY DISCLOSURES	43
ITEM 5.	OTHER INFORMATION	43
ITEM 6.	EXHIBITS	44
SIGNATURES		45

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

NOVANTA INC.

CONSOLIDATED BALANCE SHEETS

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

(Unaudited)

	July 1,			December 31,
	2022			2021
ASSETS
Current assets
Cash and cash equivalents	$	100,489		$	117,393
Accounts receivable, net of allowance of $671 and $556, respectively		129,808			115,617
Inventories		153,887			125,657
Prepaid income taxes and income taxes receivable		1,081			1,997
Prepaid expenses and other current assets		14,102			13,161
Total current assets		399,367			373,825
Property, plant and equipment, net		87,924			87,439
Operating lease assets		45,575			48,338
Deferred tax assets		7,379			12,206
Other assets		5,688			5,586
Intangible assets, net		193,499			220,989
Goodwill		466,411			479,500
Total assets	$	1,205,843		$	1,227,883
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current portion of long-term debt	$	4,678		$	5,097
Accounts payable		77,351			68,514
Income taxes payable		6,825			4,514
Current portion of operating lease liabilities		7,561			7,334
Accrued expenses and other current liabilities		101,985			98,479
Total current liabilities		198,400			183,938
Long-term debt		402,679			429,361
Operating lease liabilities		42,580			45,700
Deferred tax liabilities		17,688			33,738
Income taxes payable		5,320			4,217
Other liabilities		7,007			9,638
Total liabilities		673,674			706,592
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: 35,623 and 35,601, respectively		423,856			423,856
Additional paid-in capital		46,146			53,768
Retained earnings		92,832			56,533
Accumulated other comprehensive loss		(30,665	)		(12,866	)
Total stockholders' equity		532,169			521,291
Total liabilities and stockholders’ equity	$	1,205,843		$	1,227,883

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 1,			July 2,			July 1,			July 2,
	2022			2021			2022			2021
Revenue	$	215,356		$	167,523		$	419,572		$	330,107
Cost of revenue		120,111			95,117			234,051			188,961
Gross profit		95,245			72,406			185,521			141,146
Operating expenses:
Research and development and engineering		21,588			16,954			42,517			35,636
Selling, general and administrative		40,538			31,240			79,890			62,893
Amortization of purchased intangible assets		7,173			3,586			14,515			7,161
Restructuring, acquisition, and related costs		2,655			4,634			1,025			8,365
Total operating expenses		71,954			56,414			137,947			114,055
Operating income		23,291			15,992			47,574			27,091
Interest income (expense), net		(2,757	)		(1,378	)		(5,866	)		(2,786	)
Foreign exchange transaction gains (losses), net		152			(76	)		221			(333	)
Other income (expense), net		68			(97	)		(477	)		(167	)
Income before income taxes		20,754			14,441			41,452			23,805
Income tax provision (benefit)		3,275			2,777			5,153			831
Consolidated net income	$	17,479		$	11,664		$	36,299		$	22,974
Earnings per common share (Note 4):
Basic	$	0.49		$	0.33		$	1.02		$	0.65
Diluted	$	0.49		$	0.33		$	1.01		$	0.64
Weighted average common shares outstanding—basic		35,609			35,374			35,573			35,326
Weighted average common shares outstanding—diluted		35,933			35,763			35,857			35,775

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 1,			July 2,		July 1,			July 2,
	2022			2021		2022			2021
Consolidated net income	$	17,479		$	11,664	$	36,299		$	22,974
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax (1)		(13,927	)		136		(18,699	)		(353	)
Pension liability adjustments, net of tax (2)		587			262		900			383
Total other comprehensive income (loss)		(13,340	)		398		(17,799	)		30
Total consolidated comprehensive income	$	4,139		$	12,062	$	18,500		$	23,004

⁽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 (Deficit)		Comprehensive Loss			Total
	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		—			36,299
Common shares issued under stock plans		171			—		—			—		—			—
Common shares withheld for taxes on vested stock awards		(65	)		—		(9,477	)		—		—			(9,477	)
Repurchases of common shares		(84	)		—		(10,000	)		—		—			(10,000	)
Share-based compensation		—			—		11,855			—		—			11,855
Other comprehensive income (loss), net of tax		—			—		—			—		(17,799	)		(17,799	)
Balance at July 1, 2022		35,623		$	423,856	$	46,146		$	92,832	$	(30,665	)	$	532,169
	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	)
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	)