[10-Q] Novanta Inc. Quarterly Earnings Report
VIGL 鈥� Form 4 (Cheryl R. Blanchard, Director)
On 5 Aug 2025, all of Ms. Blanchard鈥檚 Vigil Neuroscience equity was automatically disposed of at the closing of the company鈥檚 merger with Sanofi. Each VIGL share outstanding immediately before the effective time was converted into the right to receive $8.00 in cash plus one contingent value right (CVR) of up to $2.00, providing potential total consideration of $10.00 per share.
Holdings affected
- Common stock: 5,000 shares 鈥� disposed for cash & CVR.
- RSUs: unvested units accelerated, then cancelled for cash & CVR equivalent to underlying 5,000 shares.
- Stock options: eight grants totaling 141,035 options (exercise prices $1.89-$6.02) fully vested, cancelled and settled for the cash spread over $8 plus one CVR per underlying share.
Following these actions, the reporting person reports zero VIGL securities beneficially owned. The filing reflects completion of the take-private transaction, ending Section 16 reporting obligations.
VIGL 鈥� Modulo 4 (Cheryl R. Blanchard, Direttrice)
Il 5 agosto 2025, tutte le azioni di Vigil Neuroscience detenute dalla Sig.ra Blanchard sono state automaticamente cedute in occasione della chiusura della fusione della societ脿 con Sanofi. Ogni azione VIGL in circolazione immediatamente prima dell鈥檕perazione 猫 stata convertita nel diritto a ricevere 8,00 $ in contanti pi霉 un diritto di valore contingente (CVR) fino a 2,00 $, per un potenziale valore totale di 10,00 $ per azione.
Partecipazioni interessate
- Azioni ordinarie: 5.000 azioni 鈥� cedute per contanti e CVR.
- RSU: unit脿 non maturate accelerate, quindi annullate per un corrispettivo in contanti e CVR equivalenti a 5.000 azioni sottostanti.
- Opzioni su azioni: otto concessioni per un totale di 141.035 opzioni (prezzi di esercizio da 1,89 $ a 6,02 $) completamente maturate, annullate e liquidate per la differenza in contanti oltre gli 8 $ pi霉 un CVR per ogni azione sottostante.
Dopo queste operazioni, la persona segnalante dichiara di non possedere pi霉 alcun titolo VIGL. La comunicazione riflette il completamento della transazione di privatizzazione, con la cessazione degli obblighi di segnalazione ai sensi della Sezione 16.
VIGL 鈥� Formulario 4 (Cheryl R. Blanchard, Directora)
El 5 de agosto de 2025, todas las acciones de Vigil Neuroscience de la Sra. Blanchard se dispusieron autom谩ticamente al cierre de la fusi贸n de la compa帽铆a con Sanofi. Cada acci贸n VIGL en circulaci贸n justo antes del momento efectivo se convirti贸 en el derecho a recibir 8,00 $ en efectivo m谩s un derecho de valor contingente (CVR) de hasta 2,00 $, proporcionando una consideraci贸n total potencial de 10,00 $ por acci贸n.
Participaciones afectadas
- Acciones comunes: 5.000 acciones 鈥� dispuestas por efectivo y CVR.
- RSU: unidades no adquiridas aceleradas y luego canceladas por efectivo y CVR equivalentes a 5.000 acciones subyacentes.
- Opciones sobre acciones: ocho concesiones totalizando 141.035 opciones (precios de ejercicio entre 1,89 $ y 6,02 $) totalmente adquiridas, canceladas y liquidadas por la diferencia en efectivo sobre los 8 $ m谩s un CVR por cada acci贸n subyacente.
Tras estas acciones, la persona informante reporta cero valores VIGL en propiedad beneficiosa. La presentaci贸n refleja la finalizaci贸n de la transacci贸n de privatizaci贸n, poniendo fin a las obligaciones de reporte bajo la Secci贸n 16.
VIGL 鈥� 鞏戩嫕 4 (Cheryl R. Blanchard, 鞚挫偓)
2025雲� 8鞗� 5鞚�, Blanchard 鞌潣 Vigil Neuroscience 欤检嫕鞚� 須岇偓鞚� Sanofi鞕�鞚� 頃╇硲 膦呺 鞁� 鞛愲彊鞙茧 觳橂秳霅橃棃鞀惦媹雼�. 頃╇硲 須牓 氚滌儩 歆侅爠 氚滍枆霅� 氇摖 VIGL 欤检嫕鞚� 欤茧嫻 8.00雼煬 順勱笀瓿� 斓滊寑 2.00雼煬鞚� 臁瓣贝攵� 臧�旃橁秾(CVR) 1臧�毳� 氚涭潉 甓岆Μ搿� 鞝勴櫂霅橃柎, 欤茧嫻 齑� 10.00雼煬鞚� 鞛犾灛鞝� 雽�臧�毳� 鞝滉车頃╇媹雼�.
鞓來枼氚涭潃 氤挫湢 雮挫棴
- 氤错喌欤�: 5,000欤� 鈥� 順勱笀 氚� CVR搿� 觳橂秳霅�.
- RSU: 氙疙檿鞝� 雼渼電� 臁瓣赴 臧�靻嶍檾 頉�, 旮办磮 欤检嫕 5,000欤检棎 靸侅潙頃橂姅 順勱笀 氚� CVR搿� 旆唽霅�.
- 鞀ろ啞鞓奠厴: 8瓯� 齑� 141,035欤� (頄夓偓臧�瓴� 1.89雼煬~6.02雼煬) 鞝勲秬 鞕勳爠 旆摑霅橃柎 旆唽 氚� 旮办磮 欤检嫕雼� 8雼煬 齑堦臣 旮堨暋鞚� 順勱笀 彀暋瓿� CVR 1臧滊 鞝曥偘霅�.
鞚� 臁办箻霌� 鞚错泟, 氤搓碃鞛愲姅 VIGL 歃濌秾鞚� 鞝勴榾 靻岇湢頃橃 鞎婌潓鞚� 氤搓碃頃╇媹雼�. 鞚� 鞝滌稖鞚� 牍勳儊鞛� 鞝勴櫂 瓯半灅 鞕勲毳� 氚橃榿頃橂┌, 靹轨厴 16 氤搓碃 鞚橂臧� 膦呺霅潉 鞚橂頃╇媹雼�.
VIGL 鈥� Formulaire 4 (Cheryl R. Blanchard, Directrice)
Le 5 ao没t 2025, toutes les actions de Vigil Neuroscience d茅tenues par Mme Blanchard ont 茅t茅 automatiquement c茅d茅es lors de la cl么ture de la fusion de la soci茅t茅 avec Sanofi. Chaque action VIGL en circulation juste avant le moment effectif a 茅t茅 convertie en droit de recevoir 8,00 $ en esp猫ces plus un droit de valeur contingente (CVR) pouvant aller jusqu鈥櫭� 2,00 $, offrant une contrepartie totale potentielle de 10,00 $ par action.
D茅tentions affect茅es
- Actions ordinaires : 5 000 actions 鈥� c茅d茅es contre esp猫ces et CVR.
- RSU : unit茅s non acquises acc茅l茅r茅es, puis annul茅es contre esp猫ces et CVR 茅quivalents 脿 5 000 actions sous-jacentes.
- Options sur actions : huit attributions totalisant 141 035 options (prix d鈥檈xercice de 1,89 $ 脿 6,02 $) enti猫rement acquises, annul茅es et r茅gl茅es par la diff茅rence en esp猫ces au-dessus de 8 $ plus un CVR par action sous-jacente.
Suite 脿 ces op茅rations, la personne d茅clarante d茅clare ne plus poss茅der aucun titre VIGL. Le d茅p么t refl猫te l鈥檃ch猫vement de la transaction de privatisation, mettant fin aux obligations de d茅claration en vertu de la Section 16.
VIGL 鈥� Formular 4 (Cheryl R. Blanchard, Direktorin)
Am 5. August 2025 wurden alle Vigil Neuroscience Aktien von Frau Blanchard automatisch beim Abschluss der Fusion des Unternehmens mit Sanofi ver盲u脽ert. Jede unmittelbar vor dem Wirksamkeitszeitpunkt ausstehende VIGL-Aktie wurde in das Recht umgewandelt, 8,00 $ in bar plus ein bedingtes Wertrecht (CVR) von bis zu 2,00 $ zu erhalten, was eine potenzielle Gesamtverg眉tung von 10,00 $ pro Aktie ergibt.
Betroffene Beteiligungen
- Stammaktien: 5.000 Aktien 鈥� ver盲u脽ert gegen Bargeld & CVR.
- RSUs: nicht unverfallene Einheiten wurden beschleunigt und anschlie脽end gegen bar & CVR, entsprechend 5.000 zugrunde liegenden Aktien, storniert.
- Aktienoptionen: acht Zuteilungen mit insgesamt 141.035 Optionen (Aus眉bungspreise 1,89 $鈥�6,02 $), vollst盲ndig unverfallbar, wurden storniert und gegen die Barspanne 眉ber 8 $ plus ein CVR pro zugrunde liegender Aktie abgewickelt.
Nach diesen Ma脽nahmen meldet die berichtende Person keine VIGL-Wertpapiere mehr im wirtschaftlichen Eigentum. Die Meldung spiegelt den Abschluss der Privatisierungstransaktion wider und beendet die Meldepflichten gem盲脽 Abschnitt 16.
- $8.00 cash plus $2.00 CVR offers shareholders a clear liquidity event with additional milestone upside.
- Acceleration of unvested RSUs and options ensures insiders and employees realise full economic value at closing.
- Reporting person鈥檚 ownership reduced to zero, ending insider alignment with future CVR performance for public investors.
Insights
TL;DR: Cash-and-CVR merger delivers full exit; insider鈥檚 equity cancelled at attractive terms.
The Form 4 confirms mechanical settlement of equity in Vigil Neuroscience鈥檚 merger with Sanofi. The $8 cash component is well above every disclosed option strike, ensuring monetisation for both shares and options. Addition of a $2 CVR for a clinical milestone preserves upside for legacy holders while shifting development risk to Sanofi. From a deal-execution perspective the treatment is standard and shareholder-friendly: unvested awards were accelerated so employees capture value. Because all awards convert to cash, remaining dilution disappears. Impact rating: positive for legacy holders; neutral for Sanofi since price already fixed.
TL;DR: Insider exit signals completion of VIGL public-market story; position now closed.
The director鈥檚 beneficial ownership falls to zero, indicating the ticker will cease trading after merger close. Investors must rely on the CVR for any additional upside; its value is binary and contingent on a future clinical milestone. While the $8 cash provides liquidity, holders lose exposure to any long-term platform upside that might have accrued had VIGL remained independent. Overall market impact is limited because the transaction was pre-announced; this filing simply documents award settlement.
VIGL 鈥� Modulo 4 (Cheryl R. Blanchard, Direttrice)
Il 5 agosto 2025, tutte le azioni di Vigil Neuroscience detenute dalla Sig.ra Blanchard sono state automaticamente cedute in occasione della chiusura della fusione della societ脿 con Sanofi. Ogni azione VIGL in circolazione immediatamente prima dell鈥檕perazione 猫 stata convertita nel diritto a ricevere 8,00 $ in contanti pi霉 un diritto di valore contingente (CVR) fino a 2,00 $, per un potenziale valore totale di 10,00 $ per azione.
Partecipazioni interessate
- Azioni ordinarie: 5.000 azioni 鈥� cedute per contanti e CVR.
- RSU: unit脿 non maturate accelerate, quindi annullate per un corrispettivo in contanti e CVR equivalenti a 5.000 azioni sottostanti.
- Opzioni su azioni: otto concessioni per un totale di 141.035 opzioni (prezzi di esercizio da 1,89 $ a 6,02 $) completamente maturate, annullate e liquidate per la differenza in contanti oltre gli 8 $ pi霉 un CVR per ogni azione sottostante.
Dopo queste operazioni, la persona segnalante dichiara di non possedere pi霉 alcun titolo VIGL. La comunicazione riflette il completamento della transazione di privatizzazione, con la cessazione degli obblighi di segnalazione ai sensi della Sezione 16.
VIGL 鈥� Formulario 4 (Cheryl R. Blanchard, Directora)
El 5 de agosto de 2025, todas las acciones de Vigil Neuroscience de la Sra. Blanchard se dispusieron autom谩ticamente al cierre de la fusi贸n de la compa帽铆a con Sanofi. Cada acci贸n VIGL en circulaci贸n justo antes del momento efectivo se convirti贸 en el derecho a recibir 8,00 $ en efectivo m谩s un derecho de valor contingente (CVR) de hasta 2,00 $, proporcionando una consideraci贸n total potencial de 10,00 $ por acci贸n.
Participaciones afectadas
- Acciones comunes: 5.000 acciones 鈥� dispuestas por efectivo y CVR.
- RSU: unidades no adquiridas aceleradas y luego canceladas por efectivo y CVR equivalentes a 5.000 acciones subyacentes.
- Opciones sobre acciones: ocho concesiones totalizando 141.035 opciones (precios de ejercicio entre 1,89 $ y 6,02 $) totalmente adquiridas, canceladas y liquidadas por la diferencia en efectivo sobre los 8 $ m谩s un CVR por cada acci贸n subyacente.
Tras estas acciones, la persona informante reporta cero valores VIGL en propiedad beneficiosa. La presentaci贸n refleja la finalizaci贸n de la transacci贸n de privatizaci贸n, poniendo fin a las obligaciones de reporte bajo la Secci贸n 16.
VIGL 鈥� 鞏戩嫕 4 (Cheryl R. Blanchard, 鞚挫偓)
2025雲� 8鞗� 5鞚�, Blanchard 鞌潣 Vigil Neuroscience 欤检嫕鞚� 須岇偓鞚� Sanofi鞕�鞚� 頃╇硲 膦呺 鞁� 鞛愲彊鞙茧 觳橂秳霅橃棃鞀惦媹雼�. 頃╇硲 須牓 氚滌儩 歆侅爠 氚滍枆霅� 氇摖 VIGL 欤检嫕鞚� 欤茧嫻 8.00雼煬 順勱笀瓿� 斓滊寑 2.00雼煬鞚� 臁瓣贝攵� 臧�旃橁秾(CVR) 1臧�毳� 氚涭潉 甓岆Μ搿� 鞝勴櫂霅橃柎, 欤茧嫻 齑� 10.00雼煬鞚� 鞛犾灛鞝� 雽�臧�毳� 鞝滉车頃╇媹雼�.
鞓來枼氚涭潃 氤挫湢 雮挫棴
- 氤错喌欤�: 5,000欤� 鈥� 順勱笀 氚� CVR搿� 觳橂秳霅�.
- RSU: 氙疙檿鞝� 雼渼電� 臁瓣赴 臧�靻嶍檾 頉�, 旮办磮 欤检嫕 5,000欤检棎 靸侅潙頃橂姅 順勱笀 氚� CVR搿� 旆唽霅�.
- 鞀ろ啞鞓奠厴: 8瓯� 齑� 141,035欤� (頄夓偓臧�瓴� 1.89雼煬~6.02雼煬) 鞝勲秬 鞕勳爠 旆摑霅橃柎 旆唽 氚� 旮办磮 欤检嫕雼� 8雼煬 齑堦臣 旮堨暋鞚� 順勱笀 彀暋瓿� CVR 1臧滊 鞝曥偘霅�.
鞚� 臁办箻霌� 鞚错泟, 氤搓碃鞛愲姅 VIGL 歃濌秾鞚� 鞝勴榾 靻岇湢頃橃 鞎婌潓鞚� 氤搓碃頃╇媹雼�. 鞚� 鞝滌稖鞚� 牍勳儊鞛� 鞝勴櫂 瓯半灅 鞕勲毳� 氚橃榿頃橂┌, 靹轨厴 16 氤搓碃 鞚橂臧� 膦呺霅潉 鞚橂頃╇媹雼�.
VIGL 鈥� Formulaire 4 (Cheryl R. Blanchard, Directrice)
Le 5 ao没t 2025, toutes les actions de Vigil Neuroscience d茅tenues par Mme Blanchard ont 茅t茅 automatiquement c茅d茅es lors de la cl么ture de la fusion de la soci茅t茅 avec Sanofi. Chaque action VIGL en circulation juste avant le moment effectif a 茅t茅 convertie en droit de recevoir 8,00 $ en esp猫ces plus un droit de valeur contingente (CVR) pouvant aller jusqu鈥櫭� 2,00 $, offrant une contrepartie totale potentielle de 10,00 $ par action.
D茅tentions affect茅es
- Actions ordinaires : 5 000 actions 鈥� c茅d茅es contre esp猫ces et CVR.
- RSU : unit茅s non acquises acc茅l茅r茅es, puis annul茅es contre esp猫ces et CVR 茅quivalents 脿 5 000 actions sous-jacentes.
- Options sur actions : huit attributions totalisant 141 035 options (prix d鈥檈xercice de 1,89 $ 脿 6,02 $) enti猫rement acquises, annul茅es et r茅gl茅es par la diff茅rence en esp猫ces au-dessus de 8 $ plus un CVR par action sous-jacente.
Suite 脿 ces op茅rations, la personne d茅clarante d茅clare ne plus poss茅der aucun titre VIGL. Le d茅p么t refl猫te l鈥檃ch猫vement de la transaction de privatisation, mettant fin aux obligations de d茅claration en vertu de la Section 16.
VIGL 鈥� Formular 4 (Cheryl R. Blanchard, Direktorin)
Am 5. August 2025 wurden alle Vigil Neuroscience Aktien von Frau Blanchard automatisch beim Abschluss der Fusion des Unternehmens mit Sanofi ver盲u脽ert. Jede unmittelbar vor dem Wirksamkeitszeitpunkt ausstehende VIGL-Aktie wurde in das Recht umgewandelt, 8,00 $ in bar plus ein bedingtes Wertrecht (CVR) von bis zu 2,00 $ zu erhalten, was eine potenzielle Gesamtverg眉tung von 10,00 $ pro Aktie ergibt.
Betroffene Beteiligungen
- Stammaktien: 5.000 Aktien 鈥� ver盲u脽ert gegen Bargeld & CVR.
- RSUs: nicht unverfallene Einheiten wurden beschleunigt und anschlie脽end gegen bar & CVR, entsprechend 5.000 zugrunde liegenden Aktien, storniert.
- Aktienoptionen: acht Zuteilungen mit insgesamt 141.035 Optionen (Aus眉bungspreise 1,89 $鈥�6,02 $), vollst盲ndig unverfallbar, wurden storniert und gegen die Barspanne 眉ber 8 $ plus ein CVR pro zugrunde liegender Aktie abgewickelt.
Nach diesen Ma脽nahmen meldet die berichtende Person keine VIGL-Wertpapiere mehr im wirtschaftlichen Eigentum. Die Meldung spiegelt den Abschluss der Privatisierungstransaktion wider und beendet die Meldepflichten gem盲脽 Abschnitt 16.
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.:
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(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
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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.
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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, 2025, there were
NOVANTA INC.
TABLE OF CONTENTS
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PART I — FINANCIAL INFORMATION |
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ITEM 1. |
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FINANCIAL STATEMENTS |
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CONSOLIDATED BALANCE SHEETS (unaudited) |
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CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) |
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CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited) |
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CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) |
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ITEM 2. |
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
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ITEM 4. |
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CONTROLS AND PROCEDURES |
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PART II — OTHER INFORMATION |
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ITEM 1. |
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LEGAL PROCEEDINGS |
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ITEM 1A. |
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RISK FACTORS |
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UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
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DEFAULTS UPON SENIOR SECURITIES |
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MINE SAFETY DISCLOSURES |
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OTHER INFORMATION |
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ITEM 6. |
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EXHIBITS |
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SIGNATURES |
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PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
NOVANTA INC.
CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars or shares)
(Unaudited)
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June 27, |
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December 31, |
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2025 |
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2024 |
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ASSETS |
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Current assets |
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Cash and cash equivalents |
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Accounts receivable, net of allowance of $ |
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Prepaid income taxes and income taxes receivable |
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||
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 |
|
|
|
|
|
||
Commitments and contingencies (Note 15) |
|
|
|
|
|
||
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 |
|
|
Six Months Ended |
|
||||||||||
|
June 27, |
|
|
June 28, |
|
|
June 27, |
|
|
June 28, |
|
||||
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
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 |
|
|
Six Months Ended |
|
||||||||||
|
June 27, |
|
|
June 28, |
|
|
June 27, |
|
|
June 28, |
|
||||
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
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 June 27, 2025 |
|
|||||||||||||||||||||
Balance at March 28, 2025 |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
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 June 27, 2025 |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Six Months Ended June 27, 2025 |
|
|||||||||||||||||||||
Balance at December 31, 2024 |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
Net income |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Common shares issued under stock plans |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Common shares withheld for taxes on vested stock awards |
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Repurchases of common shares |
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Share-based compensation |
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Other comprehensive income (loss), net of tax |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Balance at June 27, 2025 |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Three Months Ended June 28, 2024 |
|
|||||||||||||||||||||
Balance at March 29, 2024 |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
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 June 28, 2024 |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Six Months Ended June 28, 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 June 28, 2024 |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
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 |
|
|||||
|
June 27, |
|
|
June 28, |
|
||
|
2025 |
|
|
2024 |
|
||
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 |
|
( |
) |
|
|
( |
) |
Write-off of unamortized deferred financing costs |
|
|
|
|
— |
|
|
Inventory acquisition fair value adjustments |
|
— |
|
|
|
|
|
Loss (gain) on disposal of fixed assets |
|
( |
) |
|
|
|
|
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 |
|
( |
) |
|
|
( |
) |
Proceeds from sale 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 debt issuance costs |
|
( |
) |
|
|
— |
|
Payments of withholding taxes from share-based awards |
|
( |
) |
|
|
( |
) |
Repurchases of common shares |
|
( |
) |
|
|
— |
|
Other financing activities |
|
( |
) |
|
|
( |
) |
Net cash provided by 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 JUNE 27, 2025
(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, precision manufacturing, robotics and automation, and advanced surgery 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, 2024. 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, with early adoption prohibited. |
|
The Company is currently evaluating the impact of ASU 2023-06 on its consolidated financial statement disclosures. |
6
NOVANTA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 27, 2025
(Unaudited)
Standard |
|
Description |
|
Effective Date |
|
Effect on the Financial Statements or Other Significant Matters |
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 amendments in this update affects financial statement disclosure only and, as a result, will have no impact on results of operations, cash flows or financial condition. |
In November 2024, the FASB issued ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” |
|
ASU 2024-03 improves financial reporting by requiring that public business entities disclose additional information about specific expense categories in the notes to financial statements at both interim and annual reporting periods. |
|
The amendments in ASU 2024-03 are effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027, with early adoption permitted. |
|
ASU 2024-03 affects financial statement disclosure only and, as a result, will have no impact on results of operations, cash flows or financial condition.
|
2. Revenue
The Company accounts for its revenue transactions in accordance with Accounting Standards Codification (“ASC”) Topic 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.
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.
7
NOVANTA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 27, 2025
(Unaudited)
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 June 27, 2025 and December 31, 2024, contract liabilities were $
Disaggregated Revenue
See Note 16 for the Company’s disaggregation of revenue by segment, geography and end market.
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
June 27, |
|
|
June 28, |
|
|
June 27, |
|
|
June 28, |
|
||||
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Precision Manufacturing |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Robotics and Automation |
|
|
|
|
|
|
|
|
|
|
|
||||
Automation Enabling Technologies |
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Precision Medicine |
|
|
|
|
|
|
|
|
|
|
|
||||
Advanced Surgery |
|
|
|
|
|
|
|
|
|
|
|
||||
Medical Solutions |
|
|
|
|
|
|
|
|
|
|
|
||||
Total Revenue |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
8
NOVANTA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 27, 2025
(Unaudited)
3. Business Combinations
On
The acquisition of Keonn has been accounted for as a business combination under ASC 805, Business Combinations (“ASC 805”). Under ASC 805, assets acquired and liabilities assumed in a business combination are recorded at their fair value as of the acquisition date. The Company’s consolidated financial statements include results of operations for Keonn from the April 8, 2025 acquisition date.
Consideration Transferred
Pursuant to the Share Purchase Agreement, the Company acquired all outstanding equity of Keonn for estimated total purchase consideration of $
Cash consideration |
$ |
|
|
Deferred consideration |
|
|
|
Estimated fair value of contingent consideration |
|
|
|
Estimated total purchase consideration |
$ |
|
Contingent consideration represents additional payments that the Company may be required to make in the future, between €
Allocation of Purchase Price
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 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 and trade name. 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
9
NOVANTA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 27, 2025
(Unaudited)
Based upon the Company’s preliminary valuation, the purchase price for Keonn 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 |
|
|
|
Debt |
|
|
|
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 fair value of intangible assets for Keonn is comprised of the following:
|
|
|
|
|
|
|
Estimated Fair |
|
|
Amortization |
|
|
Value |
|
|
Period |
|
Developed technologies |
$ |
|
|
||
Customer relationships |
|
|
|
||
Trade name |
|
|
|
||
Total |
$ |
|
|
|
|
The preliminary purchase price allocation resulted in $
The operating results of Keonn were included in the Company's results of operations beginning on April 8, 2025. Keonn contributed revenues of $
The pro forma financial information reflecting the operating results of Keonn, as if it had been acquired as of January 1, 2024, would not differ materially from the operating results of the Company as reported for the year ended December 31, 2024.
Acquisition Costs
Acquisition costs are expensed in the periods in which the costs are incurred and included in restructuring, acquisition and related costs in the consolidated statements of operations. Acquisition-related costs for Keonn were $
10
NOVANTA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 27, 2025
(Unaudited)
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, 2024 |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive income (loss) |
|
|
|
|
|
|
|
( |
) |
||
Amounts reclassified from accumulated other comprehensive loss |
|
|
|
|
— |
|
|
|
|
||
Balance at June 27, 2025 |
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
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 financial performance metrics (“attainment-based PSUs”), certain market conditions (“market-based PSUs”) or a hybrid of company financial performance metrics 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 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 |
|
|
Six Months Ended |
|
||||||||||
|
June 27, |
|
|
June 28, |
|
|
June 27, |
|
|
June 28, |
|
||||
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
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 and six months ended June 27, 2025,
11
NOVANTA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 27, 2025
(Unaudited)
For the three and six months ended June 28, 2024,
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 reporting period.
Contingent Considerations
On April 8, 2025, the Company completed the acquisition of Keonn. Pursuant to the purchase and sale agreement, the former shareholders of Keonn (the “Sellers”) are eligible to receive contingent consideration based on the achievement of specified revenue targets by Keonn during fiscal years 2025 through 2027. Payment of this contingent consideration is also subject to Keonn maintaining certain minimum gross margin percentage during the applicable periods. The undiscounted range of potential contingent consideration is between €
12
NOVANTA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 27, 2025
(Unaudited)
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 June 27, 2025 (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 |
|
|
|
|
|
|
|
|
|
|
|
||||
Prepaid expenses and other current assets: |
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency forward contracts |
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
||||
Accrued expenses and other current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
||||
Contingent considerations - Current |
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Contingent considerations - Long term |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Foreign currency forward contracts |
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|||
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, 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 |
|
|
|
|
|
|
|
|
|
|
|
||||
Prepaid expenses and other current assets: |
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency forward contracts |
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
||||
Accrued expenses and other current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
||||
Contingent considerations - Current |
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Foreign currency forward contracts |
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|||
Changes in the fair value of Level 3 contingent considerations during the six months ended June 27, 2025 were as follows (in thousands):
|
Amount |
|
|
Balance at December 31, 2024 |
$ |
|
|
Acquisition of Keonn |
|
|
|
Payments |
|
— |
|
Fair value adjustments |
|
— |
|
Effect of foreign exchange rates |
|
|
|
Balance at June 27, 2025 |
$ |
|
|
13
NOVANTA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 27, 2025
(Unaudited)
The following table provides qualitative information associated with the fair value measurement of the Company’s Level 3 liabilities:
Liability |
|
June 27, 2025 Fair Value (in thousands) |
|
Valuation Technique |
|
Unobservable Inputs |
|
Percentage Applied |
Contingent consideration (Keonn) |
|
$ |
|
|
Historical and projected revenue from fiscal year 2025 to 2027 |
|
N/A |
|
|
|
|
|
|
|
Gross Profit Premium |
|
|
|
|
|
|
|
|
Revenue risk premium |
|
|
|
|
|
|
|
|
Gross Profit Volatility |
|
|
|
|
|
|
|
|
Revenue Volatility |
|
|
|
|
|
|
|
|
Credit spread |
|
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 June 27, 2025, the aggregate notional amount and fair value of the Company’s foreign currency forward contracts was $
The Company recognized an aggregate net loss of $
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 2025 and noted
The following table summarizes changes in goodwill during the six months ended June 27, 2025 (in thousands):
|
Amount |
|
|
Balance at beginning of the period |
$ |
|
|
Goodwill acquired from Keonn acquisition |
|
|
|
Effect of foreign exchange rate changes |
|
|
|
Balance at end of the period |
$ |
|
|
14
NOVANTA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 27, 2025
(Unaudited)
Goodwill by reportable segment as of June 27, 2025 was as follows (in thousands):
|
Reportable Segment |
|
|
|
|
||||||
|
Automation Enabling Technologies |
|
|
Medical Solutions |
|
|
Total |
|
|||
Goodwill |
$ |
|
|
$ |
|
|
$ |
|
|||
Accumulated impairment of goodwill |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total |
$ |
|
|
$ |
|
|
$ |
|
|||
|
Reportable Segment |
|
|
|
|
||||||
|
Automation Enabling Technologies |
|
|
Medical Solutions |
|
|
Total |
|
|||
Goodwill |
$ |
|
|
$ |
|
|
$ |
|
|||
Accumulated impairment of goodwill |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total |
$ |
|
|
$ |
|
|
$ |
|
|||
Intangible Assets
Intangible assets as of June 27, 2025 and December 31, 2024, respectively, are summarized as follows (in thousands):
|
June 27, 2025 |
|
|
December 31, 2024 |
|
||||||||||||||||||
|
Gross Carrying |
|
|
Accumulated |
|
|
Net Carrying |
|
|
Gross Carrying |
|
|
Accumulated |
|
|
Net Carrying |
|
||||||
Amortizable intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Patents and developed technologies |
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Customer relationships |
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Trademarks and trade names |
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Amortizable intangible assets |
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Non-amortizable intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Trade names |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Total intangible assets |
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
All definite-lived intangible assets are amortized either on a straight-line basis or an economic benefit basis over their remaining estimated useful life. Amortization expense for patents and developed technologies is included in cost of revenue in the accompanying consolidated statements of operations. Amortization expense for customer relationships and definite-lived trademarks, trade names and other intangibles is included in operating expenses in the accompanying consolidated statements of operations.
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
June 27, |
|
|
June 28, |
|
|
June 27, |
|
|
June 28, |
|
||||
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Amortization expense – cost of revenue |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Amortization expense – operating expenses |
|
|
|
|
|
|
|
|
|
|
|
||||
Total amortization expense |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
15
NOVANTA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 27, 2025
(Unaudited)
As of June 27, 2025, estimated amortization expense for each of the five succeeding years and thereafter was as follows (in thousands):
Year Ending December 31, |
|
Cost of Revenue |
|
|
Operating |
|
|
Total |
|
|||
2025 (remainder of year) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
2026 |
|
|
|
|
|
|
|
|
|
|||
2027 |
|
|
|
|
|
|
|
|
|
|||
2028 |
|
|
|
|
|
|
|
|
|
|||
2029 |
|
|
|
|
|
|
|
|
|
|||
Thereafter |
|
|
|
|
|
|
|
|
|
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|||
9. Supplementary Balance Sheet Information
The following tables provide the details of selected balance sheet items as of the periods indicated (in thousands):
Inventories
|
June 27, |
|
|
December 31, |
|
||
|
2025 |
|
|
2024 |
|
||
Raw materials |
$ |
|
|
$ |
|
||
Work-in-process |
|
|
|
|
|
||
Finished goods |
|
|
|
|
|
||
Demo and consigned inventory |
|
|
|
|
|
||
Total inventories |
$ |
|
|
$ |
|
||
Accrued Expenses and Other Current Liabilities
|
June 27, |
|
|
December 31, |
|
||
|
2025 |
|
|
2024 |
|
||
Accrued compensation and benefits |
$ |
|
|
$ |
|
||
Accrued warranty |
|
|
|
|
|
||
Contract liabilities, current portion |
|
|
|
|
|
||
Accrued restructuring |
|
|
|
|
|
||
Accrued earn-outs and contingent considerations |
|
|
|
|
|
||
Other |
|
|
|
|
|
||
Total |
$ |
|
|
$ |
|
||
Accrued Warranty
|
Six Months Ended |
|
|||||
|
June 27, |
|
|
June 28, |
|
||
|
2025 |
|
|
2024 |
|
||
Balance at beginning of the period |
$ |
|
|
$ |
|
||
Provision charged to cost of revenue |
|
|
|
|
|
||
Warranty liabilities acquired from acquisitions |
|
— |
|
|
|
|
|
Use of provision |
|
( |
) |
|
|
( |
) |
Foreign currency exchange rate changes |
|
|
|
|
( |
) |
|
Balance at end of the period |
$ |
|
|
$ |
|
||
16
NOVANTA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 27, 2025
(Unaudited)
Other Long-Term Liabilities
|
June 27, |
|
|
December 31, |
|
||
|
2025 |
|
|
2024 |
|
||
Finance lease obligations |
$ |
|
|
$ |
|
||
Other |
|
|
|
|
|
||
Total |
$ |
|
|
$ |
|
||
10. Debt
Outstanding debt consisted of the following (in thousands):
|
June 27, |
|
|
December 31, |
|
||
|
2025 |
|
|
2024 |
|
||
Senior Credit Facilities – term loans |
$ |
|
|
$ |
|
||
Less: unamortized debt issuance costs |
|
( |
) |
|
|
( |
) |
Total current portion of long-term debt |
$ |
|
|
$ |
|
||
|
|
|
|
|
|
||
Senior Credit Facilities – term loans |
$ |
|
|
$ |
|
||
Senior Credit Facilities – revolving credit facility |
|
|
|
|
|
||
Less: unamortized debt issuance costs |
|
( |
) |
|
|
( |
) |
Total long-term debt |
$ |
|
|
$ |
|
||
|
|
|
|
|
|
||
Total Senior Credit Facilities |
$ |
|
|
$ |
|
||
Senior Credit Facilities
On June 27, 2025, the Company entered into an amended and restated credit agreement (the “Fourth Amended and Restated Credit Agreement”) with existing and new lenders for an aggregate credit facility of approximately $
The outstanding principal balance under the Euro Term Loans is payable in
The Company is required to satisfy certain financial and non-financial covenants under the Fourth Amended and Restated Credit Agreement. The Fourth Amended and Restated Credit Agreement also contains customary events of default. The Company was in compliance with these covenants as of June 27, 2025.
Liens
The Company’s obligations under the Senior Credit Facilities are secured, on a senior basis, by a lien on substantially all of the assets of Novanta Inc.
17
NOVANTA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 27, 2025
(Unaudited)
Fair Value of Debt
As of June 27, 2025 and December 31, 2024, the outstanding balance of the Company’s debt approximated its fair value based on current rates available to the Company for debt of similar maturities. The fair value of the Company’s debt is classified as Level 2 under the fair value hierarchy.
11. Leases
Most leases held by the Company expire between
The following table summarizes the components of lease costs (in thousands):
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
June 27, |
|
|
June 28, |
|
|
June 27, |
|
|
June 28, |
|
||||
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Operating lease cost |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Finance lease cost |
|
|
|
|
|
|
|
|
|
|
|
||||
Amortization of right-of-use assets |
|
|
|
|
|
|
|
|
|
|
|
||||
Interest on lease liabilities |
|
|
|
|
|
|
|
|
|
|
|
||||
Variable lease cost |
|
|
|
|
|
|
|
|
|
|
|
||||
Total lease cost |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
18
NOVANTA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 27, 2025
(Unaudited)
The following table provides additional details of balance sheet information related to the Company’s leases (in thousands, except lease term and discount rate):
|
June 27, |
|
|
December 31, |
|
||
|
2025 |
|
|
2024 |
|
||
Operating leases |
|
|
|
|
|
||
Operating lease right-of-use assets |
$ |
|
|
$ |
|
||
|
|
|
|
|
|
||
Current portion of operating lease liabilities |
$ |
|
|
$ |
|
||
Operating lease liabilities |
|
|
|
|
|
||
Total operating lease liabilities |
$ |
|
|
$ |
|
||
|
|
|
|
|
|
||
Finance leases |
|
|
|
|
|
||
Property, plant and equipment, gross |
$ |
|
|
$ |
|
||
Accumulated depreciation |
|
( |
) |
|
|
( |
) |
Finance lease assets included in property, plant and equipment, net |
$ |
|
|
$ |
|
||
|
|
|
|
|
|
||
Accrued expenses and other current liabilities |
$ |
|
|
$ |
|
||
Other liabilities |
|
|
|
|
|
||
Total finance lease liabilities |
$ |
|
|
$ |
|
||
|
|
|
|
|
|
||
Weighted-average remaining lease term (in years): |
|
|
|
|
|
||
Operating leases |
|
|
|
|
|
||
Finance leases |
|
|
|
|
|
||
|
|
|
|
|
|
||
Weighted-average discount rate: |
|
|
|
|
|
||
Operating leases |
|
% |
|
|
% |
||
Finance leases |
|
% |
|
|
% |
||
The following table provides additional details of cash flow information related to the Company’s leases (in thousands):
|
Six Months Ended |
|
|||||
|
June 27, |
|
|
June 28, |
|
||
|
2025 |
|
|
2024 |
|
||
Cash paid for lease liabilities: |
|
|
|
|
|
||
Operating cash outflows related to finance leases |
$ |
|
|
$ |
|
||
Operating cash outflows related to operating leases |
$ |
|
|
$ |
|
||
Financing cash outflows related to finance leases |
$ |
|
|
$ |
|
||
|
|
|
|
|
|
||
Supplemental non-cash information: |
|
|
|
|
|
||
Right-of-use assets obtained in exchange for new operating lease liabilities(1) |
$ |
|
|
$ |
|
||
(1) The amount for the six months ended June 27, 2025 includes $
19
NOVANTA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 27, 2025
(Unaudited)
Future minimum lease payments under operating and finance leases expiring subsequent to June 27, 2025, including operating leases associated with facilities that have been vacated as a result of the Company’s restructuring actions, are summarized as follows (in thousands):
Year Ending December 31, |
Operating Leases |
|
|
Finance Leases |
|
||
2025 (remainder of year) |
$ |
|
|
$ |
|
||
2026 |
|
|
|
|
|
||
2027 |
|
|
|
|
|
||
2028 |
|
|
|
|
|
||
2029 |
|
|
|
|
|
||
Thereafter |
|
|
|
|
|
||
Total minimum lease payments |
|
|
|
|
|
||
Less: Interest |
|
( |
) |
|
|
( |
) |
Present value of lease liabilities |
$ |
|
|
$ |
|
||
12. Preferred and Common Shares and Share-Based Compensation
Preferred Shares
In May 2021, the Company’s shareholders approved a special resolution to amend the Company’s articles to authorize up to
Common Share Repurchases
In February 2020, the Company’s Board of Directors approved a share repurchase plan (the “2020 Repurchase Plan”), authorizing the repurchase of $
Share-Based Compensation Expense
The table below summarizes share-based compensation expense recorded in the consolidated statements of operations (in thousands):
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
June 27, |
|
|
June 28, |
|
|
June 27, |
|
|
June 28, |
|
||||
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Selling, general and administrative |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Research and development and engineering |
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of revenue |
|
|
|
|
|
|
|
|
|
|
|
||||
Total share-based compensation expense |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Share-based compensation expense reported in selling, general and administrative expenses included expenses related to restricted stock units granted to the members of the Company’s Board of Directors of $
Restricted Stock Units
The Company’s restricted stock units (“RSUs”) have generally been issued with vesting periods ranging from zero to
20
NOVANTA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 27, 2025
(Unaudited)
basis over the requisite service period. The Company reduces the compensation expense by an estimated forfeiture rate which is based on anticipated forfeitures and historical forfeiture experience.
The table below summarizes activities relating to RSUs issued and outstanding under the Company’s Amended and Restated 2010 Incentive Plan during the six months ended June 27, 2025:
|
Shares |
|
|
Weighted |
|
||
Unvested at December 31, 2024 |
|
|
|
$ |
|
||
Granted |
|
|
|
$ |
|
||
Vested |
|
( |
) |
|
$ |
|
|
Forfeited |
|
( |
) |
|
$ |
|
|
Unvested at June 27, 2025 |
|
|
|
$ |
|
||
Expected to vest as of June 27, 2025 |
|
|
|
|
|
||
The total fair value of RSUs that vested during the six months ended June 27, 2025 was $
Performance Stock Units
The Company typically grants PSUs that are based on the Company’s financial performance metrics, market conditions, or a hybrid of company financial performance metrics and market conditions. These PSUs generally cliff vest on the first day following the end of the specified performance period.
The number of common shares to be issued upon settlement following vesting of attainment-based PSUs is determined based on the Company’s financial performance metrics over the specified performance period against the targets established by the Company’s Board of Directors at the time of grant and will be in the range of
The number of common shares to be issued upon settlement following vesting of market-based PSUs is determined based on the relative market performance of the Company’s common shares compared to the Russell 2000 Index over the specified performance period using a payout formula established by the Company’s Board of Directors at the time of grant and will be in the range of
The number of common shares to be issued upon settlement following vesting of PSU awards that are based on the achievement of a hybrid of company financial performance metrics and market conditions (“Hybrid PSUs”) is determined based on the Company's financial performance metrics achieved over the specified performance period against the targets established by the Company's Board of Directors at the time of grant and a market-based multiplier based on the percentile ranking of the relative market performance of the Company’s common shares compared to the Russell 2000 Index companies. The payout will be in the range of
21
NOVANTA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 27, 2025
(Unaudited)
The table below summarizes the activities relating to the performance-based awards issued and outstanding under the Company’s Amended and Restated 2010 Incentive Plan during the six months ended June 27, 2025:
|
Shares |
|
|
Weighted |
|
||
Unvested at December 31, 2024 |
|
|
|
$ |
|
||
Granted |
|
|
|
$ |
|
||
Performance adjustments(1) |
|
( |
) |
|
$ |
|
|
Vested |
|
( |
) |
|
$ |
|
|
Forfeited |
|
( |
) |
|
$ |
|
|
Unvested at June 27, 2025 |
|
|
|
$ |
|
||
Expected to vest as of June 27, 2025 |
|
|
|
|
|
||
(1) The amount shown represents performance adjustments related to the performance-based awards vested during the six months ended June 27, 2025.
The unvested PSUs are shown at target payout levels in the table above. As of June 27, 2025, the maximum number of common shares that could be earned under these PSU grants was approximately
The total fair value of PSUs that vested during the six months ended June 27, 2025 was $
The grant-date fair value per unit of the hybrid PSUs granted during the six months ended June 27, 2025 was estimated using the Monte Carlo valuation method with the following assumptions:
|
Six Months Ended June 27, 2025 |
|
|
Grant-date stock price |
$ |
|
|
Expected volatility |
|
% |
|
Risk-free interest rate |
|
% |
|
Expected annual dividend yield |
|
|
|
Fair value |
$ |
|
|
Stock Options
The table below summarizes the activities relating to stock options issued and outstanding under the Company’s Amended and Restated 2010 Incentive Plan during the six months ended June 27, 2025:
|
|
|
|
|
|
||
|
|
|
|
|
|
||
|
Shares |
|
|
Weighted |
|
||
Outstanding as of December 31, 2024 |
|
|
|
$ |
|
||
Granted |
|
|
|
$ |
— |
|
|
Exercised |
|
( |
) |
|
$ |
|
|
Forfeited or expired |
|
( |
) |
|
$ |
|
|
Outstanding as of June 27, 2025 |
|
|
|
$ |
|
||
Exercisable as of June 27, 2025 |
|
|
|
|
|
||
Expected to vest as of June 27, 2025 |
|
|
|
|
|
||
13. Income Taxes
The Company determines its estimated annual effective tax rate at the end of each interim period based on full year forecasted pre-tax income and facts known at that time. The estimated annual effective tax rate is applied to the year-to-date pre-tax income at the end of each interim period with the cumulative effect of any changes in the estimated annual effective tax rate being recorded in
22
NOVANTA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 27, 2025
(Unaudited)
the period in which the changes are determined. The tax effect of significant unusual items is reflected in the period in which they occur. Since the Company is incorporated in Canada, it is required to use Canada’s statutory tax rate of
The Company maintains a valuation allowance on balances of certain U.S. state net operating losses, credits and certain non-U.S. tax attributes that the Company has determined are not more likely than not to be realized. A valuation allowance is required when, based upon an assessment of various factors, including recent operating loss history, anticipated future earnings, and prudent and reasonable tax planning strategies, it is more likely than not that some portion of the deferred tax assets will not be realized. In conjunction with the Company’s ongoing review of its actual results and anticipated future earnings, the Company continuously reassesses the possibility of adding a new or additional valuation allowance or releasing the valuation allowance currently in place on its deferred tax assets.
The Company’s effective tax rate of
The Company’s effective tax rate of
The Company’s effective tax rate of
The Company’s effective tax rate of
On July 4, 2025, the U.S. enacted H.R.1 - One Big Beautiful Bill Act (the “Act”). The Act contains numerous income tax provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act and modifications to the international tax framework. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The Company is currently assessing its impact on our consolidated financial statements.
14. Restructuring, Acquisition, and Related Costs
The following table summarizes restructuring, acquisition, and related costs in the accompanying consolidated statements of operations (in thousands):
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
June 27, |
|
|
June 28, |
|
|
June 27, |
|
|
June 28, |
|
||||
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
2025 restructuring |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
2024 restructuring |
|
|
|
|
|
|
|
|
|
|
|
||||
2020 restructuring |
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total restructuring charges |
|
|
|
|
|
|
|
|
|
|
|
||||
Acquisition and related charges |
|
|
|
|
|
|
|
|
|
|
|
||||
Total restructuring, acquisition, and related costs |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
23
NOVANTA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 27, 2025
(Unaudited)
2025 Restructuring
The following table summarizes restructuring costs associated with the 2025 restructuring program by reportable segment (in thousands):
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
June 27, |
|
|
June 28, |
|
|
June 27, |
|
|
June 28, |
|
||||
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Automation Enabling Technologies |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Medical Solutions |
|
|
|
|
|
|
|
|
|
|
|
||||
Unallocated |
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
2024 Restructuring
The following table summarizes restructuring costs associated with the 2024 restructuring program by reportable segment (in thousands):
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
June 27, |
|
|
June 28, |
|
|
June 27, |
|
|
June 28, |
|
||||
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Automation Enabling Technologies |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Medical Solutions |
|
|
|
|
|
|
|
|
|
|
|
||||
Unallocated |
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
2020 Restructuring
24
NOVANTA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 27, 2025
(Unaudited)
Roll-forward of Accrued Expenses Related to Restructuring
The following table summarizes the accrual activities, by component, related to the Company’s restructuring plans recorded in the accompanying consolidated balance sheets (in thousands):
|
Total |
|
|
Employee Related |
|
|
Facility Related |
|
|
Facility Sale |
|
|
Other |
|
|||||
Balance at December 31, 2024 |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Restructuring charges |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Cash payments |
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Non-cash write-offs and other adjustments |
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||
Balance at June 27, 2025 |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Acquisition and Related Charges
Acquisition costs in connection with business combinations, including advisor, legal, valuation, and other professional or consulting fees, totaled $
15. Commitments and Contingencies
Purchase Commitments
There have been no material changes to the Company’s purchase commitments since December 31, 2024.
Legal Contingencies
The Company is subject to various legal proceedings and claims that arise in the ordinary course of business. The Company reviews the status of each significant matter and assesses the potential financial exposure on a quarterly basis. If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated, the Company accrues a liability for the estimated loss. Significant judgment is required in both the determination of probability and the determination as to whether an exposure is reasonably estimable. Because of uncertainties related to these matters, accruals are based only on the best information available as of the date of the consolidated balance sheet. As additional information becomes available, the Company reassesses the potential liability related to any pending claims and litigation and may revise its estimates. When a material loss contingency is considered reasonably possible but not probable, the Company does not record a liability, but instead discloses the nature and the amount of the claim, and an estimate of the potential loss or a range of potential losses, if such an estimate can be reasonably made. Legal fees are expensed as incurred. The Company does not believe that the outcome of outstanding claims will have a material adverse effect on its consolidated financial statements but there can be no assurance that any such claims, or any similar claims, would not have a material adverse effect on its consolidated financial statements.
Guarantees and Indemnifications
In the normal course of its operations, the Company executes agreements that provide for indemnification and guarantees to counterparties in transactions such as business dispositions, sale of assets, sale of products, and operating leases. Additionally, the by-laws of the Company require it to indemnify certain current or former directors, officers, and employees of the Company against expenses incurred by them in connection with each proceeding in which they are involved as a result of serving or having served in certain capacities. Indemnification is not available with respect to a proceeding as to which it has been adjudicated that the person did not act in good faith in the reasonable belief that the action was in the best interests of the Company. Certain of the Company’s officers and directors are also a party to indemnification agreements with the Company. These indemnification agreements provide, among other things, that the director or officer shall be indemnified to the fullest extent permitted by applicable law against all expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by such director or officer in connection with any proceeding by reason of their relationship with the Company. In addition, the indemnification agreements provide for the advancement of expenses incurred by such director or officer in connection with any proceeding covered by the indemnification agreement, subject to the conditions set forth therein and to the extent such advancement is not prohibited by law. The indemnification agreements also set out the procedures for determining entitlement to indemnification, the requirements relating to
25
NOVANTA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 27, 2025
(Unaudited)
notice and defense of claims for which indemnification is sought, the procedures for enforcement of indemnification rights, the limitations on and exclusions from indemnification, and the minimum levels of directors and officers liability insurance to be maintained by the Company.
16. Segment Information
Reportable Segments
The Company’s Chief Operating Decision Maker (“CODM”) is the Chief Executive Officer.
During the fourth quarter of 2024, the Company updated its organizational structure and re-aligned its financial reporting structure under
Automation Enabling Technologies
The Automation Enabling Technologies segment designs, manufactures and markets laser beam delivery components, laser beam delivery solutions, CO2 lasers, solid state lasers, ultrafast lasers, optical and inductive encoders, precision motors, integrated stepper motors, servo drives, motion control solutions, intelligent robotic end-of-arm technology solutions, and air bearing spindles to customers worldwide. The segment serves highly demanding applications for advanced industrial processes, advanced industrial and medical robotics, other medical and life science automation applications, and medical laser procedures such as ophthalmology applications. The vast majority of the segment’s product offerings are sold to OEM customers. The segment sells the majority of these products directly, utilizing a highly technical sales force, and also sells some indirectly, through resellers and distributors.
Medical Solutions
The Medical Solutions segment designs, manufactures and markets a range of medical grade technologies, including medical insufflators and endoscopic pumps and related disposables, laser beam delivery solutions, video processing and streaming and capture, machine vision technologies, radio-frequency identification (“RFID”) technologies, barcode identification technologies, thermal chart recorders, light and color measurement technologies, touch panel displays, and advanced motion control solutions. The vast majority of the segment’s product offerings are sold to OEM customers. The segment sells the majority of these products directly, utilizing a highly technical sales force, and also sells some indirectly, through resellers and distributors.
26
NOVANTA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 27, 2025
(Unaudited)
Reportable Segment Financial Information
Results of operations, depreciation and amortization expenses by reportable segments for the periods indicated were as follows (in thousands):
|
Three Months Ended June 27, 2025 |
|
|
Six Months Ended June 27, 2025 |
|
||||||||||||||||||
|
Automation Enabling Technologies |
|
|
Medical Solutions |
|
|
Total |
|
|
Automation Enabling Technologies |
|
|
Medical Solutions |
|
|
Total |
|
||||||
Revenue |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Cost of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Amortization of purchased intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Segment gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Research and development and engineering |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Selling, general and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Amortization of purchased intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Restructuring, acquisition, and related costs |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||
Segment operating income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Unallocated costs |
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Interest income (expense), net |
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Other income (expense), net |
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Income before income taxes |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
|
Three Months Ended June 28, 2024 |
|
|
Six Months Ended June 28, 2024 |
|
||||||||||||||||||
|
Automation Enabling Technologies |
|
|
Medical Solutions |
|
|
Total |
|
|
Automation Enabling Technologies |
|
|
Medical Solutions |
|
|
Total |
|
||||||
Revenue |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Cost of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Amortization of purchased intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Segment gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Research and development and engineering |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Selling, general and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Amortization of purchased intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Restructuring, acquisition, and related costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Segment operating income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Unallocated costs |
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Interest income (expense), net |
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Other income (expense), net |
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Income before income taxes |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
27
NOVANTA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 27, 2025
(Unaudited)
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
June 27, |
|
|
June 28, |
|
|
June 27, |
|
|
June 28, |
|
||||
Depreciation and Amortization Expenses |
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Automation Enabling Technologies |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Medical Solutions |
|
|
|
|
|
|
|
|
|
|
|
||||
Unallocated |
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
June 27, |
|
|
December 31, |
|
||
|
2025 |
|
|
2024 |
|
||
Accounts Receivable |
|
|
|
|
|
||
Automation Enabling Technologies |
$ |
|
|
$ |
|
||
Medical Solutions |
|
|
|
|
|
||
Total accounts receivable |
$ |
|
|
$ |
|
||
Inventories |
|
|
|
|
|
||
Automation Enabling Technologies |
$ |
|
|
$ |
|
||
Medical Solutions |
|
|
|
|
|
||
Total inventories |
$ |
|
|
$ |
|
||
Total segment assets |
$ |
|
|
$ |
|
||
Revenue by Geography
The Company aggregates geographic revenue based on the customer locations where products are shipped to. Revenue by geography was as follows (in thousands):
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
June 27, |
|
|
June 28, |
|
|
June 27, |
|
|
June 28, |
|
||||
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
United States |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Germany |
|
|
|
|
|
|
|
|
|
|
|
||||
Rest of Europe |
|
|
|
|
|
|
|
|
|
|
|
||||
China |
|
|
|
|
|
|
|
|
|
|
|
||||
Rest of Asia-Pacific |
|
|
|
|
|
|
|
|
|
|
|
||||
Other |
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The majority of revenue from the Automation Enabling Technologies and Medical Solutions segments are generated from sales to customers within the United States and Europe. Each segment also generates revenue across the other geographies, with no significant concentration of any segment’s remaining revenue.
Revenue by End Market
The Company primarily operates in
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
June 27, |
|
|
June 28, |
|
|
June 27, |
|
|
June 28, |
|
||||
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Medical |
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Advanced Industrial |
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Total |
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
28
NOVANTA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 27, 2025
(Unaudited)
The majority of the revenue from the Automation Enabling Technologies segment is generated from sales to customers in the advanced industrial market. The majority of the revenue from the Medical Solutions segment is generated from sales to customers in the medical market.
29
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the Consolidated Financial Statements and Notes included in Item 1 of this Quarterly Report on Form 10-Q. The MD&A contains certain forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. These forward-looking statements include, but are not limited to, our financial results and our financial condition; our belief that the Purchasing Managers Index (“PMI”) may provide an indication of the impact of general economic conditions on our sales into the advanced industrial end market; our strategy; anticipated financial performance; expected liquidity and capitalization; drivers of revenue growth and our growth expectations in various markets; management’s plans and objectives for future operations, expenditures and product development, and investments in research and development; business prospects; potential of future product releases and expansion of our product and service offerings; industry trends; market conditions; our competitive positions; changes in economic and political conditions, including supply chain disruptions and constraints and inflationary pressures; changes in accounting principles; changes in actual or assumed tax liabilities and tax law; expectations regarding tax exposures; anticipated reinvestment of future earnings and dividend policy; anticipated expenditures in regard to our benefit plans; future acquisitions and integration and anticipated benefits from acquisitions and dispositions; anticipated economic benefits and expected costs of restructuring programs; our ability to repay our indebtedness; our intentions regarding the use of cash; expectations regarding legal and regulatory requirements, including environmental requirements, and our compliance thereto; and other statements that are not historical facts.
Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various important factors, including, but not limited to, the following: economic and political conditions and the effects of these conditions on our customers’ businesses, capital expenditures and level of business activities; our dependence upon our ability to respond to fluctuations in product demand; our ability to continuously innovate, to introduce new products in a timely manner, and to manage transitions to new product innovations effectively; customer order timing and other similar factors; disruptions or breaches in security of our or our third-party providers’ information technology systems; risks associated with our operations in foreign countries; our increased use of outsourcing in foreign countries; risks associated with increased outsourcing of components manufacturing; our exposure to increased tariffs, trade restrictions or taxes on our products; our ability to contain or reduce costs; violations of our intellectual property rights and our ability to protect our intellectual property against infringement by third parties; risk of losing our competitive advantage; our failure to successfully integrate recent and future acquisitions into our business; our ability to attract and retain key personnel; our restructuring and realignment activities; product defects or problems integrating our products with other vendors’ products; disruptions in the supply of certain key components and other goods from our suppliers; our failure to accurately forecast component and raw material requirements leading to additional costs and significant delays in shipments; production difficulties and product delivery delays or disruptions; our exposure to extensive medical device regulations, which may impede or hinder the approval, certification or sale of our products and, in some cases, may ultimately result in an inability to obtain approval or certification of certain products or may result in the recall or seizure of previously approved or certified products; potential penalties for violating foreign and U.S. federal and state healthcare laws and regulations; impact of healthcare industry cost containment and healthcare reform measures; changes in governmental regulations related to our business or products; actual or perceived failures to comply with applicable data protection, privacy and security laws, regulations, standards, and other requirements; our failure to implement new information technology systems successfully; changes in foreign currency rates; our failure to realize the full value of our intangible assets; our reliance on original equipment manufacturer customers; the loss of sales, or significant reduction in orders from, any major customers; increasing scrutiny and changing expectations from investors, customers, governments and other stakeholders and third parties with respect to corporate sustainability policies and practices; the effects of climate change and related regulatory responses; our exposure to the credit risk of some of our customers and in weakened markets; being subject to U.S. federal income taxation even though we are a non-U.S. corporation; changes in tax laws and fluctuations in our effective tax rates; any need for additional capital to adequately respond to business challenges or opportunities and repay or refinance our existing indebtedness, which may not be available on acceptable terms or at all; our existing indebtedness limiting our ability to engage in certain activities; volatility in the market price for our common shares; and our failure to maintain appropriate internal controls in the future. Other important risk factors that could affect the outcome of the events set forth in these statements and that could affect the Company’s operating results and financial condition are discussed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 under the heading “Risk Factors”, as updated in our other filings with the Securities and Exchange Commission.
In this Quarterly Report on Form 10-Q, the words “expects,” “intends,” “anticipates,” “estimates,” “believes,” “future,” “plans,” “aims,” “would,” “could,” “should,” “potential,” “continues,” and similar words or expressions (as well as other words or expressions referencing future events, conditions, or circumstances) identify forward-looking statements. Readers should not place undue reliance on any such forward-looking statements, which speak only as of the date they are made. Management and the Company disclaim any obligation to publicly update or revise any such forward-looking statements to reflect any changes in its expectations or in events, conditions, or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those contained in the forward-looking statements, except as required under applicable law.
30
Accounting Period
The interim consolidated financial statements of Novanta Inc. (the “Company”, “Novanta”, “we”, “us”, “our”) are prepared for each quarterly period ending on the Friday closest to the end of the calendar quarter, except for the fourth quarter which always ends on December 31.
Business Overview
We are a leading global supplier of core technology solutions that give medical and advanced industrial original equipment manufacturers (“OEMs”) a competitive advantage. We combine deep proprietary technology expertise and competencies in precision medicine, precision manufacturing, robotics and automation, and advanced surgery with a proven ability to solve complex technical challenges. This enables us to engineer core components and sub-systems that deliver extreme precision and performance, tailored to our customers' demanding applications.
Reportable Segments
Reporting Segment Change
During the fourth quarter of 2024, we updated our organizational structure and re-aligned our financial reporting structure under two reportable segments: Automation Enabling Technologies and Medical Solutions. Prior to the reorganization, our historical reportable segments were: Precision Medicine and Manufacturing, Robotics and Automation, and Medical Solutions. Prior period segment financial information has been recast to align with the new reportable segments.
We operate in two reportable segments: Automation Enabling Technologies and Medical Solutions. The reportable segments and their principal activities are summarized below.
Automation Enabling Technologies
The Automation Enabling Technologies segment designs, manufactures and markets laser beam delivery components, laser beam delivery solutions, CO2 lasers, solid state lasers, ultrafast lasers, optical and inductive encoders, precision motors, integrated stepper motors, servo drives, motion control solutions, intelligent robotic end-of-arm technology solutions, and air bearing spindles to customers worldwide. The segment serves highly demanding applications for advanced industrial processes, advanced industrial and medical robotics, other medical and life science automation applications, and medical laser procedures such as ophthalmology applications. The vast majority of the segment’s product offerings are sold to OEM customers. The segment sells the majority of these products directly, utilizing a highly technical sales force, and also sells some indirectly, through resellers and distributors.
Medical Solutions
The Medical Solutions segment designs, manufactures and markets a range of medical grade technologies, including medical insufflators and endoscopic pumps and related disposables, laser beam delivery solutions, video processing and streaming and capture, machine vision technologies, radio frequency identification (“RFID”) technologies, barcode identification technologies, thermal chart recorders, light and color measurement technologies, touch panel displays, and advanced motion control solutions. The vast majority of the segment’s product offerings are sold to OEM customers. The segment sells the majority of these products directly, utilizing a highly technical sales force, and also sells some indirectly, through resellers and distributors.
End Markets
We primarily operate in two end markets: the medical market and the advanced industrial market.
Medical Market
For the six months ended June 27, 2025, the medical market accounted for approximately 54% of our revenue. Revenue from our products sold to the medical market is generally affected by hospital, life science, and other healthcare provider capital spending, growth rates of surgical procedures, changes in regulatory requirements and laws, demand level for life science automation technology, aggregation of purchasing by healthcare networks, changes in technology requirements, timing of OEM customers’ product development and new product launches, changes in customer or patient preferences, and general demographic trends.
31
Advanced Industrial Market
For the six months ended June 27, 2025, the advanced industrial market accounted for approximately 46% of our revenue. Revenue from our products sold to the advanced industrial market is affected by a number of factors, including changing technology requirements and preferences of our customers, productivity or quality investments in a manufacturing environment, the financial conditions of our customers, changes in regulatory requirements and laws, and general economic conditions. We believe that the PMI on manufacturing activities specific to different regions around the world may provide an indication of the impact of general economic conditions on our sales into the advanced industrial market.
Strategy
Our strategy is to drive sustainable, profitable growth through short-term and long-term initiatives, including:
Significant Events and Updates
Acquisition of Keonn Technologies, S.L.
On April 8, 2025, we acquired 100% of the outstanding stock of Keonn Technologies, S.L. (“Keonn”), a Barcelona, Spain-based leader in Radio-Frequency Identification (“RFID”) solutions for an initial purchase price of €65.1 million ($71.4 million), net of cash acquired, including €4.1 million ($4.5 million) estimated fair value of contingent consideration and €3.4 million ($3.7 million) related to a purchase price holdback and customary closing and net working capital adjustments. The purchase includes up to €20.0 million ($21.9 million) in contingent consideration payable upon the achievement of certain revenue targets through December 2027. In addition, we have granted equity totaling €9.0 million ($9.9 million) to Keonn employees. Keonn is included in the Medical Solutions segment.
Fourth Amended and Restated Credit Agreement
On June 27, 2025, we entered into the Fourth Amended and Restated Credit Agreement. The Fourth Amended and Restated Credit Agreement amends and restates, in its entirety, the Third Amended and Restated Credit Agreement dated as of December 31, 2019 (the “Third Agreement”). The Fourth Amended and Restated Credit Agreement provides for an aggregate credit facility of approximately $1.0 billion, comprised of a €65.3 million euro-denominated 5-year term loan facility (the “Euro Term Loans”), a $75.0 million U.S. dollar denominated 5-year term loan facility (the “U.S. Term Loans”), and an $850.0 million 5-year revolving credit
32
facility (the “Revolving Facility”, and together with the Euro Term Loans and the U.S. Term Loans, collectively, the “Senior Credit Facilities”). The Senior Credit Facilities mature in June 2030 and include an uncommitted “accordion” feature pursuant to which the commitments thereunder may be increased by an additional $350.0 million in aggregate, subject to the satisfaction of certain customary conditions.
Business Environment
In recent years, the global economy has faced significant challenges, including inflation, supply chain disruptions, business slowdowns, labor shortages, and market volatility, and recently new and proposed tariffs announced by the U.S. Presidential Administration have introduced additional uncertainty. We address macroeconomic challenges by continuing to execute our strategy. There have been improvements in the supply chain with better on-time deliveries, and recent efforts have successfully addressed talent shortages. However, uncertainty remains about overall macroeconomic conditions due to geopolitical tensions and changes in trade policies.
Economic tensions and changes in trade policies, such as higher tariffs, retaliatory measures, renegotiated free trade agreements, changes in government funding, and the ongoing impact from prolonged inflationary pressures have impacted the global market for our products and the cost to manufacture.
Results of Operations for the Three and Six Months Ended June 27, 2025 Compared with the Three and Six Months Ended June 28, 2024
Overview of Financial Results
Total revenue of $241.0 million for the three months ended June 27, 2025 increased $5.2 million, or 2.2%, from the prior year period primarily due to revenue from our current year acquisition and an increase in revenue in the Automation Enabling Technologies segment, partially offset by a decrease in revenue in the remaining portions of the Medical Solutions segment. The net effect of our acquisition resulted in an increase in revenue of $5.3 million, or 2.3%. In addition, foreign currency exchange rates favorably impacted our revenue by $4.8 million, or 2.0%, for the three months ended June 27, 2025.
Total revenue of $474.4 million for the six months ended June 27, 2025 increased $7.6 million, or 1.6%, from the prior year period, primarily due to revenue from our current year acquisition and an increase in revenue in the Automation Enabling Technologies segment, partially offset by a decrease in revenue in the remaining portions of the Medical Solutions segment. The net effect of our acquisition resulted in an increase in revenue of $5.3 million, or 1.1%. In addition, foreign currency exchange rates favorably impacted our revenue by $3.3 million, or 0.7%, for the six months ended June 27, 2025.
Operating income of $14.9 million for the three months ended June 27, 2025 decreased $10.8 million, or 42.0%, from the prior year period. This decrease was attributable to an increase in restructuring, acquisition and related costs of $10.0 million, an increase in selling, general and administrative expenses of $2.3 million, and an increase in research and development and engineering expenses of $1.6 million, partially offset by an increase in gross profit of $3.1 million.
Operating income of $47.3 million for the six months ended June 27, 2025 decreased $4.0 million, or 7.8%, from the prior year period. This decrease was attributable to an increase in restructuring, acquisition and related costs of $5.3 million, an increase in selling, general and administrative expenses of $4.4 million, and an increase in research and development and engineering expenses of $1.6 million, partially offset by an increase in gross profit of $7.0 million.
Basic earnings per common share (“Basic EPS”) of $0.12 for the three months ended June 27, 2025 decreased $0.26 from the prior year period. Diluted earnings per common share (“Diluted EPS”) of $0.12 for the three months ended June 27, 2025 decreased $0.26 from the prior year period. The decreases were primarily due to a decrease in operating income.
Basic earnings per common share (“Basic EPS”) of $0.71 for the six months ended June 27, 2025 decreased $0.08 from the prior year period. Diluted earnings per common share (“Diluted EPS”) of $0.71 for the six months ended June 27, 2025 decreased $0.08 from the prior year period. The decreases were primarily due to a decrease in operating income and an increase in foreign exchange transaction losses, partially offset by a decrease in interest expense.
33
Revenue
The following tables set forth external revenue by reportable segment for the periods noted (dollars in thousands):
|
Three Months Ended |
|
|
|
|
|
|
|
|||||||
|
June 27, |
|
|
June 28, |
|
|
Increase |
|
|
Percentage |
|
||||
|
2025 |
|
|
2024 |
|
|
(Decrease) |
|
|
Change |
|
||||
Automation Enabling Technologies |
$ |
121,672 |
|
|
$ |
116,729 |
|
|
$ |
4,943 |
|
|
|
4.2 |
% |
Medical Solutions |
|
119,377 |
|
|
|
119,135 |
|
|
|
242 |
|
|
|
0.2 |
% |
Total |
$ |
241,049 |
|
|
$ |
235,864 |
|
|
$ |
5,185 |
|
|
|
2.2 |
% |
|
Six Months Ended |
|
|
|
|
|
|
|
|||||||
|
June 27, |
|
|
June 28, |
|
|
Increase |
|
|
Percentage |
|
||||
|
2025 |
|
|
2024 |
|
|
(Decrease) |
|
|
Change |
|
||||
Automation Enabling Technologies |
$ |
244,839 |
|
|
$ |
234,118 |
|
|
$ |
10,721 |
|
|
|
4.6 |
% |
Medical Solutions |
|
229,576 |
|
|
|
232,662 |
|
|
|
(3,086 |
) |
|
|
(1.3 |
)% |
Total |
$ |
474,415 |
|
|
$ |
466,780 |
|
|
$ |
7,635 |
|
|
|
1.6 |
% |
Automation Enabling Technologies
Automation Enabling Technologies segment revenue for the three months ended June 27, 2025 increased $4.9 million, or 4.2%, versus the prior year period, primarily due to increased demand in robotics and automation products, partially offset by a decrease in demand in precision manufacturing products.
Automation Enabling Technologies segment revenue for the six months ended June 27, 2025 increased $10.7 million, or 4.6% versus the prior year period, primarily due to increased demand in robotics and automation products, partially offset by a decrease in demand in precision manufacturing products.
Medical Solutions
Medical Solutions segment revenue for the three months ended June 27, 2025 increased $0.2 million, or 0.2%, versus the prior year period, primarily due to the net impact of $5.3 million revenue contributions from the current year acquisition, and an increase in sales of advanced surgery products, partially offset by a decrease in sales of precision medicine products.
Medical Solutions segment revenue for the six months ended June 27, 2025 decreased $3.1 million, or 1.3%, versus the prior year period, primarily due to a decrease in sales of precision medicine products, partially offset by net impact of $5.3 million of revenue contributions from the current year acquisition and an increase in sales of advanced surgery products.
Gross Profit and Gross Profit Margin
The following table sets forth the gross profit and gross profit margin for each of our reportable segments for the periods noted (dollars in thousands):
|
Three Months Ended |
|
|
Six Months Ended |
|
|
||||||||||
|
June 27, |
|
|
June 28, |
|
|
June 27, |
|
|
June 28, |
|
|
||||
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
|
||||
Gross profit: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Automation Enabling Technologies |
$ |
58,206 |
|
|
$ |
54,995 |
|
|
$ |
117,591 |
|
|
$ |
110,497 |
|
|
Medical Solutions |
|
49,514 |
|
|
|
49,337 |
|
|
|
95,475 |
|
|
|
95,559 |
|
|
Unallocated |
|
(974 |
) |
|
|
(643 |
) |
|
|
(1,966 |
) |
|
|
(1,951 |
) |
|
Total |
$ |
106,746 |
|
|
$ |
103,689 |
|
|
$ |
211,100 |
|
|
$ |
204,105 |
|
|
Gross profit margin: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Automation Enabling Technologies |
|
47.8 |
% |
|
|
47.1 |
% |
|
|
48.0 |
% |
|
|
47.2 |
% |
|
Medical Solutions |
|
41.5 |
% |
|
|
41.4 |
% |
|
|
41.6 |
% |
|
|
41.1 |
% |
|
Total |
|
44.3 |
% |
|
|
44.0 |
% |
|
|
44.5 |
% |
|
|
43.7 |
% |
|
34
Gross profit and gross profit margin can be influenced by a number of factors, including product mix, pricing, volume, manufacturing efficiencies and utilization, costs for raw materials and outsourced manufacturing, trade tariffs, freight costs, headcount, inventory excess and obsolescence, and warranty expenses.
Automation Enabling Technologies
Automation Enabling Technologies segment gross profit for the three months ended June 27, 2025 increased $3.2 million, or 5.8%, versus the prior year period, primarily due to an increase in both revenue and gross profit margin. Automation Enabling Technologies segment gross profit margin was 47.8% for the three months ended June 27, 2025, versus a gross profit margin of 47.1% for the prior year period. The increase in gross profit margin was primarily attributable to a favorable product mix, partially offset by higher tariff costs.
Automation Enabling Technologies segment gross profit for the six months ended June 27, 2025 increased $7.1 million, or 6.4%, versus the prior year period, primarily due to an increase in both revenue and gross profit margin. Automation Enabling Technologies segment gross profit margin was 48.0% for the six months ended June 27, 2025, versus a gross profit margin of 47.2% for the prior year period. The increase in gross profit margin was primarily attributable to a favorable product mix, partially offset by higher tariff costs.
Medical Solutions
Medical Solutions segment gross profit for the three months ended June 27, 2025 increased $0.2 million, or 0.4%, versus the prior year period, primarily due to an increase in both revenue and gross profit margin. Medical Solutions segment gross profit margin was 41.5% for the three months ended June 27, 2025, versus a gross profit margin of 41.4% for the prior year period. The increase in gross profit margin was primarily due to a prior year one-time inventory related charge associated with a product line closure, which resulted in a 2.1 percentage point reduction in prior year gross profit margin, partially offset by an unfavorable product mix.
Medical Solutions segment gross profit for the six months ended June 27, 2025 decreased $0.1 million, or 0.1%, versus the prior year period, primarily due to a decrease in revenue, partially offset by an increase in gross profit margin. Medical Solutions segment gross profit margin was 41.6% for the six months ended June 27, 2025, versus a gross profit margin of 41.1% for the prior year period. The increase in gross profit margin was primarily due to a prior year one-time inventory related charge associated with a product line closure, and a prior year amortization of inventory fair value adjustment associated with our 2024 acquisition, partially offset by unfavorable product mix.
Operating Expenses
The following table sets forth operating expenses for the periods noted (in thousands):
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
June 27, |
|
|
June 28, |
|
|
June 27, |
|
|
June 28, |
|
||||
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Research and development and engineering |
$ |
25,289 |
|
|
$ |
23,731 |
|
|
$ |
48,527 |
|
|
$ |
46,977 |
|
Selling, general and administrative |
|
47,103 |
|
|
|
44,793 |
|
|
|
92,699 |
|
|
|
88,323 |
|
Amortization of purchased intangible assets |
|
6,871 |
|
|
|
6,907 |
|
|
|
12,425 |
|
|
|
12,657 |
|
Restructuring, acquisition, and related costs |
|
12,572 |
|
|
|
2,543 |
|
|
|
10,117 |
|
|
|
4,826 |
|
Total |
$ |
91,835 |
|
|
$ |
77,974 |
|
|
$ |
163,768 |
|
|
$ |
152,783 |
|
Research and Development and Engineering Expenses
Research and Development and Engineering (“R&D”) expenses are primarily comprised of employee compensation related expenses and cost of materials for R&D projects. R&D expenses were $25.3 million, or 10.5% of revenue, during the three months ended June 27, 2025, versus $23.7 million, or 10.1% of revenue, during the prior year period.
R&D expenses were $48.5 million, or 10.2% of revenue, during the six months ended June 27, 2025, versus $47.0 million, or 10.1% of revenue, during the prior year period.
35
Selling, General and Administrative Expenses
Selling, general and administrative (“SG&A”) expenses include costs for sales and marketing, sales administration, finance, human resources, legal, information systems, and executive management functions. SG&A expenses were $47.1 million, or 19.5% of revenue, during the three months ended June 27, 2025, versus $44.8 million, or 19.0% of revenue, during the prior year period. The increase in SG&A expenses, both in total dollars and as a percentage of revenue, was primarily driven by costs associated with planning and design phase of our enterprise resource planning (“ERP”) system implementation.
SG&A expenses were $92.7 million, or 19.5% of revenue, during the six months ended June 27, 2025, versus $88.3 million, or 18.9% of revenue, during the prior year period. The increase in SG&A expenses, both in total dollars and as a percentage of revenue, was primarily driven by costs related to the costs associated with planning and design phase of the ERP system implementation.
Amortization of Purchased Intangible Assets
Amortization of purchased intangible assets, excluding amortization of developed technologies which is included in cost of revenue, was $6.9 million, or 2.9% of revenue, during the three months ended June 27, 2025, versus $6.9 million, or 2.9% of revenue, during the prior year period.
Amortization of purchased intangible assets, excluding amortization of developed technologies which is included in cost of revenue, was $12.4 million, or 2.6% of revenue, during the six months ended June 27, 2025, versus $12.7 million, or 2.7% of revenue, during the prior year period.
Restructuring, Acquisition, and Related Costs
We recorded restructuring, acquisition, and related costs of $12.6 million during the three months ended June 27, 2025, versus $2.5 million during the prior year period. The increase in restructuring, acquisition and related costs was primarily due to expenses related to the 2025 restructuring program, and an increase in acquisition and related expenses related to our current year acquisition.
We recorded restructuring, acquisition, and related costs of $10.1 million during the six months ended June 27, 2025, versus $4.8 million during the prior year period. The increase in restructuring, acquisition and related costs was primarily due expenses related to the 2025 restructuring program, and an increase in acquisition and related expenses related to our current year acquisition, partially offset by a gain on the sale of an owned facility.
Operating Income (Loss) by Segment
The following table sets forth operating income (loss) by segment for the periods noted (in thousands):
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
June 27, |
|
|
June 28, |
|
|
June 27, |
|
|
June 28, |
|
||||
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Operating Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
||||
Automation Enabling Technologies |
$ |
26,874 |
|
|
$ |
21,519 |
|
|
$ |
58,363 |
|
|
$ |
45,449 |
|
Medical Solutions |
|
6,625 |
|
|
|
18,149 |
|
|
|
20,654 |
|
|
|
34,168 |
|
Unallocated |
|
(18,588 |
) |
|
|
(13,953 |
) |
|
|
(31,685 |
) |
|
|
(28,295 |
) |
Total |
$ |
14,911 |
|
|
$ |
25,715 |
|
|
$ |
47,332 |
|
|
$ |
51,322 |
|
Automation Enabling Technologies
Automation Enabling Technologies segment operating income was $26.9 million, or 22.1% of revenue, during the three months ended June 27, 2025, versus $21.5 million, or 18.4% of revenue, during the prior year period. The increase in operating income was primarily due to an increase in gross profit of $3.2 million, a decrease in R&D expenses of $0.7 million, and a decrease in SG&A expenses of $0.6 million.
Automation Enabling Technologies segment operating income was $58.4 million, or 23.8% of revenue, during the six months ended June 27, 2025, versus $45.4 million, or 19.4% of revenue, during the prior year period. The increase in operating income was primarily due to an increase in gross profit of $7.1 million, a decrease in restructuring, acquisition and related costs of $3.8 million, a decrease in R&D expenses of $1.3 million and a decrease in amortization expenses of $0.8 million.
36
Medical Solutions
Medical Solutions segment operating income was $6.6 million, or 5.5% of revenue, during the three months ended June 27, 2025, versus $18.1 million, or 15.2% of revenue, during the prior year period. The decrease in operating income was primarily due to an increase in restructuring, acquisition and related costs of $6.8 million, an increase in SG&A expenses of $2.2 million, and an increase of R&D expenses of $2.3 million.
Medical Solutions segment operating income was $20.7 million, or 9.0% of revenue, during the six months ended June 27, 2025, versus $34.2 million, or 14.7% of revenue, during the prior year period. The decrease in operating income was primarily due to an increase in restructuring, acquisition and related costs of $6.5 million, an increase in SG&A expenses of $3.4 million, an increase in R&D expenses of $3.0 million, and an increase in amortization expenses of $0.6 million.
Unallocated
Unallocated costs primarily represent costs of corporate and shared services functions that are not allocated to the operating segments, including certain restructuring and most acquisition costs. These costs for the three months ended June 27, 2025 increased $4.6 million versus the prior year period. The increase in operating loss was primarily due to an increase in restructuring, acquisition and related charges of $3.7 million.
These costs for the six months ended June 27, 2025 increased $3.4 million versus the prior year period. The increase in operating loss was primarily due to an increase in restructuring, acquisition and related charges of $2.6 million, and an increase in SG&A expenses of $0.9 million.
Other Income and Expense Items
The following table sets forth other income and expense items for the periods noted (in thousands):
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
June 27, |
|
|
June 28, |
|
|
June 27, |
|
|
June 28, |
|
||||
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Interest income (expense), net |
$ |
(5,815 |
) |
|
$ |
(8,266 |
) |
|
$ |
(11,459 |
) |
|
$ |
(16,520 |
) |
Foreign exchange transaction gains (losses), net |
$ |
(2,744 |
) |
|
$ |
(264 |
) |
|
$ |
(3,112 |
) |
|
$ |
(585 |
) |
Other income (expense), net |
$ |
(563 |
) |
|
$ |
(55 |
) |
|
$ |
(554 |
) |
|
$ |
(171 |
) |
Interest Income (Expense), Net
Net interest expense was $5.8 million for the three months ended June 27, 2025, versus $8.3 million for the prior year period. The decrease in net interest expense was primarily due to a decrease in the average debt levels under our senior credit facilities and a decrease in the weighted average interest rate. The weighted average interest rate on our senior credit facilities was 5.35% during the three months ended June 27, 2025, versus 6.74% during the prior year period.
Net interest expense was $11.5 million for the six months ended June 27, 2025, versus $16.5 million for the prior year period. The decrease in net interest expense was primarily due to a decrease in the average debt levels under our senior credit facilities and a decrease in the weighted average interest rate. The weighted average interest rate on our senior credit facilities was 5.50% during the six months ended June 27, 2025, versus 6.64% during the prior year period.
Foreign Exchange Transaction Gains (Losses), Net
Foreign exchange transaction gains (losses) were $(2.7) million for the three months ended June 27, 2025 versus $(0.3) million for the prior year period. The increase in net foreign exchange transaction losses was primarily due to changes in the value of the U.S. Dollar against the British Pound and Euro, and realized losses on foreign currency contracts.
Foreign exchange transaction gains (losses) were $(3.1) million for the six months ended June 27, 2025 and $(0.6) million for the prior year period. The increase in net foreign exchange transaction losses was primarily due to changes in the value of the U.S. Dollar against the British Pound and Euro, and realized losses on foreign currency contracts.
Other Income (Expense), Net
Net other expense was nominal for the three and six months ended June 27, 2025 and the three and six months ended June 28, 2024.
37
Income Tax Provision (Benefit)
Our effective tax rate for the three months ended June 27, 2025 was 22.3%, versus 19.7% for the prior year period. Our effective tax rate of 22.3% for the three months ended June 27, 2025 differs from the Canadian statutory tax rate of 29.0% primarily due to the mix of income earned in jurisdictions with varying tax rates, estimated U.S. tax benefits for Foreign Derived Intangible Income (“FDII”) and R&D tax credits, and U.K. patent box deductions; partially offset by various non-deductible transaction-related and compensation expenses and uncertain tax position accruals.
Our effective tax rate for the three months ended June 28, 2024 of 19.7% differs from the Canadian statutory tax rate of 29.0% primarily due to the mix of income earned in jurisdictions with varying tax rates, estimated deductions for Foreign Derived Intangible Income, U.K. patent box deductions and R&D tax credits, partially offset by disallowed compensation deductions, uncertain tax position accruals, and Pillar Two inclusion.
Our effective tax rate for the six months ended June 27, 2025 was 20.2%, versus 16.5% for the prior year period. Our effective tax rate of 20.2% for the six months ended June 27, 2025 differs from the Canadian statutory tax rate of 29.0% primarily due to the mix of income earned in jurisdictions with varying tax rates, estimated U.S. tax benefits for Foreign Derived Intangible Income (“FDII”) and R&D tax credits, and U.K. patent box deductions; partially offset by various non-deductible transaction-related and compensation expenses and uncertain tax position accruals.
Our effective tax rate of 16.5% for the six months ended June 28, 2024 differs from the Canadian statutory tax rate of 29.0% primarily due to the mix of income earned in jurisdictions with varying tax rates, estimated deductions for Foreign Derived Intangible Income, U.K. patent box deductions, R&D tax credits and windfall tax benefits upon vesting of certain share-based compensation awards, partially offset by disallowed compensation deductions, uncertain tax position accruals, and Pillar Two inclusion.
On December 12, 2022, the EU member states agreed to implement the Organization for Economic Co-operation and Development’s (“OECD”) Pillar Two Model Rules. These rules, which impose a global corporate minimum income tax rate of 15%, have been enacted or introduced in proposed legislation in numerous countries worldwide, including many jurisdictions in which we operate. Additional countries are actively considering changes to their tax laws to adopt certain parts of the OECD’s proposals. We fall under the transitional safe harbor rules in the majority of jurisdictions in which we operate and are therefore not subject to Pillar Two global minimum tax in those jurisdictions. Where we cannot apply the safe harbor rules, we have estimated the impact of this minimum tax in our effective tax rate analysis. We continue to closely monitor the progression of legislative activities.
On July 4, 2025, the U.S. enacted H.R.1 - One Big Beautiful Bill Act (the “Act”). The Act contains numerous income tax provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act and modifications to the international tax framework. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. We are currently assessing its impact on our consolidated financial statements.
Liquidity and Capital Resources
We assess our liquidity in terms of our ability to generate cash to fund our operating, investing, and financing activities. Our primary ongoing cash requirements are funding operations, capital expenditures, investments in businesses, and repayment of our debt and related interest payments. Our primary sources of liquidity are cash flows from operations and borrowings under our revolving credit facility. We believe our future operating cash flows will be sufficient to meet our future operating and capital expenditure cash needs for the foreseeable future, including at least the next 12 months. The availability of borrowing capacity under our revolving credit facility provides another potential source of liquidity for any future capital expenditures and other liquidity needs. In addition, we have the ability to expand our borrowing capacity by up to $350.0 million by exercising the accordion option under our revolving credit agreement. We may also seek to raise additional capital, which could be in the form of bonds, convertible debt or preferred or common equity, to fund business development activities or other future investing cash requirements, subject to approval by the lenders in the Fourth Amended and Restated Credit Agreement (as amended, the “Credit Agreement”). There is no assurance that such capital will be available on reasonable terms or at all.
Significant factors affecting the management of our ongoing cash requirements are the adequacy of available bank lines of credit and our ability to attract long term capital with satisfactory terms. The sources of our liquidity are subject to all of the risks of our business and could be adversely affected by, among other factors, risks associated with events outside of our control, such as economic consequences of geopolitical conflicts, monetary, fiscal, tax or trade policy changes in the U.S. and other countries and their impact on the global financial markets, a decrease in demand for our products, our ability to integrate current and future acquisitions, deterioration in certain financial ratios, availability of borrowings under our revolving credit facility, and other market changes in general. See “Risks Relating to Our Common Shares and Our Capital Structure” included in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
38
Our cash requirements primarily consist of principal and interest payments associated with our Senior Credit Facilities (as defined below), operating and finance leases, purchase commitments, and pension obligations. Such contractual obligations are described in our Management’s Discussion and Analysis of Financial Condition and Results of Operations and in the Notes to Consolidated Financial Statements, each included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
Our ability to make payments on our indebtedness and to fund our operations may be dependent upon the operating income and the distribution of funds from our subsidiaries. However, as local laws and regulations and/or the terms of our indebtedness restrict certain of our subsidiaries from paying dividends and transferring assets to us, there is no assurance that our subsidiaries will be permitted to provide us with sufficient dividends, distributions or loans when necessary.
As of June 27, 2025, $67.1 million of our $109.9 million cash and cash equivalents was held by subsidiaries outside of Canada and the U.S. Generally, our intent is to use cash held in these foreign subsidiaries to fund our local operations or acquisitions by those local subsidiaries and to pay down borrowings under our Senior Credit Facilities. Approximately $171.0 million of our outstanding term loan and revolver borrowings under our Senior Credit Facilities were held in our subsidiaries outside of Canada and the U.S. as of June 27, 2025. Additionally, we may use intercompany loans to address short-term cash flow needs for various subsidiaries.
Senior Credit Facilities
On June 27, 2025, we entered into the Fourth Amended and Restated Credit Agreement (the “Credit Agreement”), consisting of a €65.3 million euro-denominated 5-year term loan facility (the “Euro Term Loans”, a $75.0 million U.S. Dollar denominated 5-year term loan facility (the “U.S. Term Loans”), and an $850.0 million 5-year revolving credit facility (the “Revolving Facility”, and together with the Euro Term Loans and the U.S. Term Loans, collectively, the “Senior Credit Facilities”). The Senior Credit Facilities mature in June 2030 and include an uncommitted “accordion” feature pursuant to which the commitments thereunder may be increased by an additional $350.0 million in aggregate, subject to the satisfaction of certain customary conditions.
The term loan facilities require quarterly scheduled principal repayments of €1.1 million beginning in September 2025 (with respect to the Euro Term Loans), and $0.5 million beginning in September 2026, increasing to $0.9 million in September 2027 (with respect the U.S. Term Loans), with the remaining principal balance of the term loans due on June 27, 2030, if the maturity date of the term loan facility is not otherwise extended. We may make additional principal payments at any time, which will reduce the next quarterly installment payment due. We may pay down outstanding borrowings under our revolving credit facility with cash on hand and cash generated from future operations at any time.
As of June 27, 2025, we had $151.6 million term loans and $313.5 million revolver borrowings outstanding under our Senior Credit Facilities. Borrowings under the Credit Agreement bear interest at the Base Rate (as defined in the Credit Agreement) plus a margin ranging between zero and 0.75% per annum, determined by reference to the our consolidated leverage ratio, or SOFR, SONIA or EURIBOR, as applicable, plus a margin ranging between 1.00% and 1.75% per annum, determined by reference to our consolidated leverage ratio. In addition, we are obligated to pay a commitment fee on the unused portion of the Revolving Facility. As of June 27, 2025, we had outstanding borrowings under the Credit Agreement denominated in Euro and U.S. dollars of $171.0 million and $294.1 million, respectively.
The Credit Agreement contains various covenants that we believe are usual and customary for this type of agreement, including a maximum consolidated leverage ratio and a minimum consolidated fixed charge coverage ratio (as defined in the Credit Agreement). The following table summarizes these financial covenants and our compliance therewith as of June 27, 2025:
|
Requirement |
|
Actual |
Maximum consolidated leverage ratio (1) |
3.50 |
|
1.93 |
Minimum consolidated fixed charge coverage ratio |
1.25 |
|
5.29 |
(1) Maximum consolidated leverage ratio shall be increased to 4.00 for four consecutive quarters following a designated acquisition, as defined in the Fourth Amended and Restated Credit Agreement.
Share Repurchase Plans
Our Board of Directors may approve share repurchase plans from time to time. Under these repurchase plans, shares may be repurchased at our discretion based on ongoing assessment of the capital needs of the business, the market price of our common shares, and general market conditions. Shares may also be repurchased through an accelerated share purchase agreement, on the open market or in privately negotiated transactions in accordance with applicable federal securities laws. Repurchases may be made under certain SEC regulations, which would permit common shares to be repurchased when we would otherwise be prohibited from doing so under insider trading laws. While the share repurchase plans are generally intended to offset dilution from equity awards granted to our employees and directors, the plans do not obligate us to acquire any particular amount of common shares. No time limit is
39
typically set for the completion of the share repurchase plans, and the plans may be suspended or discontinued at any time. We expect to fund share repurchases through cash on hand and cash generated from operations.
In February 2020, our Board of Directors approved a share repurchase plan (the “2020 Repurchase Plan”) authorizing the repurchase of $50.0 million worth of common shares. Share repurchases have been made under the 2020 Repurchase Plan pursuant to Rule 10b-18 under the Securities Exchange Act of 1934. We repurchased 46 thousand shares under the 2020 Repurchase Plan for an aggregate purchase price of $6.2 million and average price of $134.54 per share during the six months ended June 27, 2025. We had $43.3 million available for share repurchases under the 2020 Repurchase Plan as of June 27, 2025.
Cash Flows for the Six Months Ended June 27, 2025 and June 28, 2024
The following tables summarize our cash flows, cash and cash equivalents, and unused and available funds under our revolving credit facility for the periods indicated (in thousands):
|
Six Months Ended |
|
|||||
|
June 27, |
|
|
June 28, |
|
||
|
2025 |
|
|
2024 |
|
||
Net cash provided by operating activities |
$ |
46,756 |
|
|
$ |
73,924 |
|
Net cash used in investing activities |
$ |
(65,308 |
) |
|
$ |
(202,552 |
) |
Net cash provided by financing activities |
$ |
12,101 |
|
|
$ |
121,440 |
|
|
|
|
|
|
|
||
|
June 27, |
|
|
December 31, |
|
||
|
2025 |
|
|
2024 |
|
||
Cash and cash equivalents |
$ |
109,912 |
|
|
$ |
113,989 |
|
Unused and available funds under the revolving credit facility |
$ |
536,505 |
|
|
$ |
346,249 |
|
Operating Cash Flows
Cash provided by operating activities was $46.8 million for the six months ended June 27, 2025, versus $73.9 million for the prior year period. Cash provided by operating activities for the six months ended June 27, 2025 decreased from the prior year period primarily as a result of an increase in inventory and higher cash paid for income taxes.
Investing Cash Flows
Cash used in investing activities was $65.3 million for the six months ended June 27, 2025, primarily driven by $63.2 million of cash considerations (net of cash acquired) paid for our 2025 acquisition and $7.7 million for capital expenditures, partially offset by $5.5 million of cash received from the sale of properties.
Cash used in investing activities was $202.6 million for the six months ended June 28, 2024, primarily related to the $191.2 million of cash considerations (net of cash acquired) paid for our 2024 acquisition and $11.4 million for capital expenditures.
We expect to use an aggregate of approximately $15 million to $20 million in 2025 for capital expenditures related to investments in new property, plant and equipment for our existing businesses.
Financing Cash Flows
Cash provided by financing activities was $12.1 million for the six months ended June 27, 2025, primarily driven by $72.8 million of borrows under our revolving credit facility to fund our 2025 acquisition, partially offset by $41.0 million of term loan and revolving credit facility repayments, $7.2 million of payroll tax payments upon vesting of share-based compensation awards and $6.2 million related to the repurchase of common shares.
Cash provided by financing activities was $121.4 million for the six months ended June 28, 2024, primarily driven by $198.0 million of borrowings under our revolving credit facility to fund our 2024 acquisition, partially offset by $67.3 million of term loan and revolving credit facility repayments and $8.9 million of payroll tax payments upon vesting of share-based compensation awards.
Critical Accounting Policies and Estimates
The critical accounting policies that we believe impact significant judgments and estimates used in the preparation of our consolidated financial statements presented in this periodic report on Form 10-Q are described in our Management’s Discussion and
40
Analysis of Financial Condition and Results of Operations and in the Notes to Consolidated Financial Statements, each included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. There have been no material changes to our critical accounting policies and estimates through June 27, 2025 from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
Recent Accounting Pronouncements
See Note 1 to Unaudited Interim Consolidated Financial Statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Our primary market risk exposures are foreign currency exchange rate fluctuations and interest rate sensitivity. During the three months ended June 27, 2025, there have been no material changes to the information included under Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) under the Securities and Exchange Act of 1934 (the “Exchange Act”), our management carried out an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of June 27, 2025, the end of the period covered by this report. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of June 27, 2025.
Changes in Internal Control Over Financial Reporting
There has been no change to our internal control over financial reporting during the fiscal quarter ended June 27, 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
41
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
We are subject to various legal proceedings and claims that arise in the ordinary course of business. We do not believe that the outcome of these claims will have a material adverse effect upon our financial condition or results of operations but there can be no assurance that any such claims, or any similar claims, would not have a material adverse effect upon our financial condition or results of operations.
Item 1A. Risk Factors
Our operations and financial results are subject to various risks and uncertainties, including the factors discussed in Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2024, which could adversely affect our business, financial conditions and future results. Other than the risk factor set forth below, there have been no material changes from the risk factors discussed in our Annual Report.
Our results of operations could be adversely affected by economic and political conditions and the effects of these conditions on our customers’ businesses, capital expenditures and levels of business activities.
A large portion of our product sales are dependent on our customers’ need for increased capacity, productivity and cost saving initiatives, improved product quality and performance, and new investments. Weaknesses in our end markets could negatively impact our revenue and gross margin and consequently have a material adverse effect on our business, financial condition and results of operations. A severe and/or prolonged overall economic downturn or a negative or uncertain political climate could lead to weaknesses in our end markets and adversely affect our customers’ financial condition and the timing or levels of our customers’ capital expenditures or business activities. We have experienced significant cyclical end market fluctuations in the past. For example, diminished growth expectations, economic and political uncertainty in regions across the globe and effects of the COVID-19 pandemic adversely impacted our customers’ financial condition and ability to maintain product order levels and reduced the demand for our products in 2020, and other pandemics and public health crises could have similar consequences. Political conditions, including new and changing laws or tariffs, regulations, government funding, executive orders and enforcement priorities, may impact customer budgets and create uncertainty about how such laws and regulations will be interpreted and applied, which may impact customer demand and adversely impact our business. For example, changes in the regulatory environment affecting life sciences, bioprocessing, and pharmaceutical companies, and reduced headcount and budget allocations to government agencies that fund research and development activities, such as the U.S. Food and Drug Administration (‘FDA’), U.S. National Institutes of Health (“NIH”), or targeted headcount reductions or cancellations of certain grants or contracts by the U.S. federal government, could adversely affect our business or results of operations. In addition, certain sub-segments of the advanced industrial market that we serve, including the microelectronics and industrial capital equipment sector, are cyclical and have historically experienced periods of oversupply, resulting in downturns in demand for capital equipment in which many of our products are used. It is difficult to predict the timing, length and severity of these downturns and their impact on our business. Further, our order levels or results of operations for a given period may not be indicative of order levels or results of operations for subsequent periods. For the foreseeable future, our operations will continue to depend upon industries that are subject to market cycles which, in turn, could adversely affect the market demand for our products.
We have also faced increases in inflationary conditions in materials and components. These inflationary conditions have caused us to increase prices; however, such price increases may not be accepted by our customers or may not adequately offset the increases in our costs, thereby negatively affecting our results of operations. Changes in global economic conditions, including inflationary conditions, could also shift demand for products or services for which we do not have competitive advantages. This could negatively affect the amount of business that we are able to obtain. In addition, if we are unable to successfully anticipate changes in economic and political conditions, we may be unable to effectively plan for and respond to those changes, and our business could be negatively affected.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
42
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
None.
None.
No officers or directors
43
Item 6. Exhibits
|
|
|
|
Incorporated by Reference |
||||||||
Exhibit Number |
|
Exhibit Description |
|
Form |
|
File No. |
|
Exhibit |
|
Filing Date |
|
Filed/ Furnished |
|
|
|
|
|
|
|
||||||
3.1 |
|
Certificate and Articles of Continuance of the Registrant, dated March 22, 1999 |
|
S-3 |
|
333-202597 |
|
3.1 |
|
03/09/2015 |
|
|
|
|
|
|
|
|
|
||||||
3.2 |
|
By-Laws of the Registrant, as amended |
|
10-K |
|
001-35083 |
|
3.2 |
|
03/01/2021 |
|
|
|
|
|
|
|
|
|
||||||
3.3 |
|
Articles of Reorganization of the Registrant, dated July 23, 2010 |
|
8-K |
|
000-25705 |
|
3.1 |
|
07/23/2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.4 |
|
Articles of Amendment of the Registrant, dated May 26, 2005 |
|
10-K |
|
001-35083 |
|
3.4 |
|
3/1/2023 |
|
|
|
|
|
|
|
|
|
||||||
3.5 |
|
Articles of Amendment of the Registrant, dated December 29, 2010 |
|
8-K |
|
000-25705 |
|
3.1 |
|
12/29/2010 |
|
|
|
|
|
|
|
|
|
||||||
3.6 |
|
Articles of Amendment of the Registrant, dated May 11, 2016 |
|
8-K |
|
001-35083 |
|
10.1 |
|
05/12/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.7 |
|
Articles of Amendment of the Registrant, dated April 29, 2022 |
|
10-Q |
|
001-35083 |
|
3.6 |
|
05/10/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.1 |
|
Fourth Amended and Restated Credit Agreement, dated as of June 27, 2025, by and among the Company, Novanta Corporation, Novanta UK Investments Holding Limited, Novanta Europe GmbH, Bank of America, N.A., as Administrative Agent, Swing Line Lender, L/C Issuer and lender, BofA Securities, Inc., as joint lead arranger and joint book runner, JP Morgan Chase Bank, N.A., as joint lead arranger, joint book runner, co-syndication agent and lender, Wells Fargo Securities LLC, as joint lead arranger and joint book runner, Wells Fargo Bank, National Association, as co-syndication agent and lender, PNC Capital Markets LLC, as joint lead arranger and joint book runner, PNC Bank, National Association, as co-syndication agent and lender, U.S. Bank National Association, as joint lead arranger and co-syndication agent, Silicon Valley Bank, a Division of First Citizens Bank & Trust Company, as documentation agent and lender, Citibank N.A. as lender, and the other parties thereto. |
|
8-K |
|
001-35083 |
|
10.1 |
|
07/02/2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.1 |
|
Chief Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
|
|
|
|
* |
|
|
|
|
|
|
|
||||||
31.2 |
|
Chief Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
|
|
|
|
* |
|
|
|
|
|
|
|
||||||
32.1 |
|
Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
|
|
|
|
** |
|
|
|
|
|
|
|
||||||
32.2 |
|
Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
|
|
|
|
** |
|
|
|
|
|
|
|
|
|
|
|
|
|
101.INS |
|
Inline eXtensible Business Reporting Language (XBRL) Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
|
|
|
|
|
|
|
|
|
* |
|
|
|
|
|
|
|
||||||
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document |
|
|
|
|
|
|
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
104 |
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
|
|
|
|
|
|
|
|
|
* |
† Certain schedules or appendices to this exhibit have been omitted pursuant to Regulation S-K Item 601(a)(5). A copy of any omitted schedule will be furnished to the Securities and Exchange Commission or its staff upon request.
* Filed herewith
** Furnished herewith
44
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Novanta Inc. (Registrant)
Name |
|
Title |
|
Date |
|
|
|
|
|
/s/ Matthijs Glastra |
|
Chair of the Board of Directors and Chief Executive Officer |
|
August 5, 2025 |
Matthijs Glastra |
|
|
|
|
|
|
|
||
/s/ Robert J. Buckley |
|
Chief Financial Officer |
|
August 5, 2025 |
Robert J. Buckley |
|
|
|
|
45
Source:
FAQ
What consideration will Vigil Neuroscience (VIGL) shareholders receive?
When did the Sanofi鈥揤IGL merger become effective?
How were outstanding restricted stock units treated in the merger?
What happened to Vigil Neuroscience stock options?
Does the insider still hold any VIGL securities after the transaction?
