NOVANTA INC [NOVT] Filings

10-Q 1 novt-20240927.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 27, 2024


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File No.: 001-35083

NOVANTA INC.

(Exact name of registrant as specified in its charter)


New Brunswick, Canada		98-0110412
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

125 Middlesex Turnpike, Bedford, Massachusetts, USA		01730
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (781) 266-5700

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common shares, no par value	NOVT	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 29, 2024, there were 35,921,328 of the Registrant’s common shares, no par value, issued and outstanding.

NOVANTA INC.

TABLE OF CONTENTS


Item No.		Page No.

PART I — FINANCIAL INFORMATION		1

ITEM 1.	FINANCIAL STATEMENTS	1

	CONSOLIDATED BALANCE SHEETS (unaudited)	1

	CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)	2

	CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)	3

	CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)	4

	CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)	5

	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)	6

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	27

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	39

ITEM 4.	CONTROLS AND PROCEDURES	39

PART II — OTHER INFORMATION		40

ITEM 1.	LEGAL PROCEEDINGS	40

ITEM 1A.	RISK FACTORS	40

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	40

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	40

ITEM 4.	MINE SAFETY DISCLOSURES	40

ITEM 5.	OTHER INFORMATION	40

ITEM 6.	EXHIBITS	41

SIGNATURES		42

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

NOVANTA INC.

CONSOLIDATED BALANCE SHEETS

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

(Unaudited)


	September 27,			December 31,
	2024			2023
ASSETS
Current assets
Cash and cash equivalents	$	92,690		$	105,051
Accounts receivable, net of allowance of $630 and $571, respectively		164,502			139,410
Inventories		154,021			149,371
Prepaid income taxes and income taxes receivable		12,844			8,105
Prepaid expenses and other current assets		12,877			13,360
Total current assets		436,934			415,297
Property, plant and equipment, net		119,596			109,449
Operating lease assets		44,645			38,302
Deferred tax assets		19,239			27,862
Other assets		5,927			5,617
Intangible assets, net		198,394			145,022
Goodwill		594,088			484,507
Total assets	$	1,418,823		$	1,226,056
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current portion of long-term debt	$	5,016		$	4,968
Accounts payable		68,720			57,195
Income taxes payable		15,414			7,767
Current portion of operating lease liabilities		9,981			8,189
Accrued expenses and other current liabilities		57,469			61,056
Total current liabilities		156,600			139,175
Long-term debt		452,502			349,404
Operating lease liabilities		42,672			37,345
Deferred tax liabilities		14,324			16,305
Income taxes payable		5,340			4,435
Other liabilities		5,190			5,932
Total liabilities		676,628			552,596
Commitments and contingencies (Note 15)
Stockholders’ equity:
Preferred shares, no par value; Authorized shares: 7,000; No shares issued and outstanding		—			—
Common shares, no par value; Authorized shares: unlimited; Issued and outstanding: 35,916 and 35,814, respectively		423,856			423,856
Additional paid-in capital		79,928			70,180
Retained earnings		251,085			203,462
Accumulated other comprehensive loss		(12,674	)		(24,038	)
Total stockholders' equity		742,195			673,460
Total liabilities and stockholders’ equity	$	1,418,823		$	1,226,056

The accompanying notes are an integral part of these consolidated financial statements.

NOVANTA INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands of U.S. dollars or shares, except per share amounts)

(Unaudited)


	Three Months Ended						Nine Months Ended
	September 27,			September 29,			September 27,			September 29,
	2024			2023			2024			2023
Revenue	$	244,405		$	221,503		$	711,185		$	670,093
Cost of revenue		135,190			119,912			397,865			366,751
Gross profit		109,215			101,591			313,320			303,342
Operating expenses:
Research and development and engineering		23,253			22,022			70,230			68,230
Selling, general and administrative		44,319			39,648			132,642			122,758
Amortization of purchased intangible assets		6,589			5,131			19,246			15,344
Restructuring, acquisition, and related costs		2,499			4,481			7,325			8,191
Total operating expenses		76,660			71,282			229,443			214,523
Operating income		32,555			30,309			83,877			88,819
Interest income (expense), net		(8,079	)		(6,756	)		(24,599	)		(19,898	)
Foreign exchange transaction gains (losses), net		(202	)		(370	)		(787	)		(373	)
Other income (expense), net		(49	)		(189	)		(220	)		(546	)
Income before income taxes		24,225			22,994			58,271			68,002
Income tax provision		5,033			1,771			10,648			7,635
Net income	$	19,192		$	21,223		$	47,623		$	60,367

Earnings per common share (Note 5):
Basic	$	0.53		$	0.59		$	1.33		$	1.68
Diluted	$	0.53		$	0.59		$	1.32		$	1.68

Weighted average common shares outstanding—basic		35,959			35,856			35,940			35,839
Weighted average common shares outstanding—diluted		36,129			36,041			36,116			36,024

The accompanying notes are an integral part of these consolidated financial statements.

NOVANTA INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands of U.S. dollars)

(Unaudited)


	Three Months Ended						Nine Months Ended
	September 27,			September 29,			September 27,		September 29,
	2024			2023			2024		2023
Net income	$	19,192		$	21,223		$	47,623	$	60,367
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax (1)		14,869			(8,786	)		11,053		(1,980	)
Pension liability adjustments, net of tax (2)		(159	)		515			311		676
Total other comprehensive income (loss)		14,710			(8,271	)		11,364		(1,304	)
Total consolidated comprehensive income	$	33,902		$	12,952		$	58,987	$	59,063

(1)

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

(2)

The tax effect on this component of comprehensive income (loss) was nominal for all periods presented. See Note 4 to the Consolidated Financial Statements for the total amount of pension liability adjustments reclassified out of accumulated other comprehensive income (loss).

The accompanying notes are an integral part of these consolidated financial statements.

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 September 27, 2024
Balance at June 28, 2024		35,895		$	423,856	$	73,627		$	231,893	$	(27,384	)	$	701,992
Net income		—			—		—			19,192		—			19,192
Common shares issued under stock plans		23			—		—			—		—			—
Common shares withheld for taxes on vested stock awards		(2	)		—		(63	)		—		—			(63	)
Share-based compensation		—			—		6,364			—		—			6,364
Other comprehensive income (loss), net of tax		—			—		—			—		14,710			14,710
Balance at September 27, 2024		35,916		$	423,856	$	79,928		$	251,085	$	(12,674	)	$	742,195

	Nine Months Ended September 27, 2024
Balance at December 31, 2023		35,814		$	423,856	$	70,180		$	203,462	$	(24,038	)	$	673,460
Net income		—			—		—			47,623		—			47,623
Common shares issued under stock plans		159			—		—			—		—			—
Common shares withheld for taxes on vested stock awards		(57	)		—		(8,924	)		—		—			(8,924	)
Share-based compensation		—			—		18,672			—		—			18,672
Other comprehensive income (loss), net of tax		—			—		—			—		11,364			11,364
Balance at September 27, 2024		35,916		$	423,856	$	79,928		$	251,085	$	(12,674	)	$	742,195

	Three Months Ended September 29, 2023
Balance at June 30, 2023		35,808		$	423,856	$	57,488		$	169,728	$	(25,042	)	$	626,030
Net income		—			—		—			21,223		—			21,223
Common shares issued under stock plans		3			—		—			—		—			—
Common shares withheld for taxes on vested stock awards		(1	)		—		(163	)		—		—			(163	)
Share-based compensation		—			—		6,037			—		—			6,037
Other comprehensive income (loss), net of tax		—			—		—			—		(8,271	)		(8,271	)
Balance at September 29, 2023		35,810		$	423,856	$	63,362		$	190,951	$	(33,313	)	$	644,856

	Nine Months Ended September 29, 2023
Balance at December 31, 2022		35,711		$	423,856	$	55,155		$	130,584	$	(32,009	)	$	577,586
Net income		—			—		—			60,367		—			60,367
Common shares issued under stock plans		167			—		—			—		—			—
Common shares withheld for taxes on vested stock awards		(68	)		—		(10,171	)		—		—			(10,171	)
Share-based compensation		—			—		18,378			—		—			18,378
Other comprehensive income (loss), net of tax		—			—		—			—		(1,304	)		(1,304	)
Balance at September 29, 2023		35,810		$	423,856	$	63,362		$	190,951	$	(33,313	)	$	644,856

The accompanying notes are an integral part of these consolidated financial statements.

NOVANTA INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. dollars)

(Unaudited)


	Nine Months Ended
	September 27,			September 29,
	2024			2023
Cash flows from operating activities:
Net income	$	47,623		$	60,367
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		41,200			35,065
Provision for inventory excess and obsolescence		7,325			6,563
Impairment of assets		—			1,421
Share-based compensation		18,672			18,378
Deferred income taxes		(11,908	)		(12,328	)
Inventory acquisition fair value adjustments		2,777			—
Other		1,273			1,289
Changes in assets and liabilities which (used)/provided cash, excluding effects from business acquisitions:
Accounts receivable		(16,087	)		(6,371	)
Inventories		416			5,619
Prepaid income taxes, income taxes receivable, prepaid expenses and other current assets		(2,378	)		(3,444	)
Accounts payable, income taxes payable, accrued expenses and other current liabilities		7,506			(24,759	)
Other non-current assets and liabilities		531			(717	)
Net cash provided by operating activities		96,950			81,083
Cash flows from investing activities:
Cash paid for business acquisitions, net of working capital adjustments		(191,200	)		—
Purchases of property, plant and equipment		(14,913	)		(13,741	)
Net cash used in investing activities		(206,113	)		(13,741	)
Cash flows from financing activities:
Borrowings under revolving credit facilities		198,000			—
Repayments under term loan and revolving credit facilities		(95,983	)		(82,047	)
Payments of withholding taxes from share-based awards		(8,924	)		(10,171	)
Other financing activities		(534	)		(565	)
Net cash provided by (used in) financing activities		92,559			(92,783	)
Effect of exchange rates on cash and cash equivalents		4,243			1,297
Decrease in cash and cash equivalents		(12,361	)		(24,144	)
Cash and cash equivalents, beginning of the period		105,051			100,105
Cash and cash equivalents, end of the period	$	92,690		$	75,961
Supplemental disclosure of cash flow information:
Cash paid for interest	$	25,376		$	19,290
Cash paid for income taxes	$	18,807		$	28,684
Income tax refunds received	$	1,069		$	275

The accompanying notes are an integral part of these consolidated financial statements.

NOVANTA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 27, 2024

(Unaudited)

1. Basis of Presentation

Novanta Inc. (collectively with its subsidiaries, referred to as “Novanta”, the “Company”, “we”, “us”, “our”) is a leading global supplier of core technology solutions that give medical and advanced industrial original equipment manufacturers (“OEMs”) a competitive advantage. Novanta combines deep proprietary technology expertise and competencies in precision medicine and manufacturing, medical solutions and robotics and automation with a proven ability to solve complex technical challenges. This enables Novanta to engineer core components and sub-systems that deliver extreme precision and performance, tailored to the customers’ demanding applications.

The accompanying unaudited interim consolidated financial statements have been prepared by the Company in United States (“U.S.”) dollars and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”), the instructions to Form 10-Q and the provisions of Regulation S-X pertaining to interim financial statements. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the U.S. have been condensed or omitted. The interim consolidated financial statements and notes included in this report should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. In the opinion of management, these interim consolidated financial statements include all adjustments and accruals of a normal and recurring nature necessary to fairly state the results of the interim periods presented. The results for interim periods are not necessarily indicative of results to be expected for the full year or for any future periods.

The Company’s unaudited interim consolidated financial statements are prepared for each quarterly period ending on the Friday closest to the end of the calendar quarter, with the exception of the fourth quarter which always ends on December 31.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. Estimates and assumptions are reviewed on an on-going basis and the effects of revisions are reflected in the period in which such revisions are deemed to be necessary. The Company evaluates its estimates based on historical experience, current conditions, and various other assumptions that it believes are reasonable under the circumstances. Actual results could differ significantly from these estimates.

NOVANTA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 27, 2024

(Unaudited)

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 November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280) -Improvements to Reportable Segment Disclosures."	ASU 2023-07 clarifies or improves financial reporting by requiring disclosure of incremental segment information. The amendments require disclosure, on an annual and interim basis for all public entities, of significant segment expenses included in segment profit or loss, an amount and description of "other segment items" included in segment profit or loss, and an explanation of how reported segment profit or loss is assessed and allocated.	The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted.	The Company is currently evaluating the impact of ASU 2023-07 on its consolidated financial statement disclosures.
In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740) -Improvements to Income Tax Disclosures."	ASU 2023-09 provides more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid.	The amendments in ASU 2023-09 are effective for annual periods beginning after December 15, 2024. Early adoption is permitted.	The Company is currently evaluating the impact of ASU 2023-09 on its consolidated financial statement disclosures.

2. Revenue

The Company accounts for its revenue transactions in accordance with 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 3% of the Company’s consolidated revenue. Revenue is typically recognized at a point in time when control transfers to the customer upon completion of professional services. These services generally involve a single distinct performance obligation. The consideration expected to be received in exchange for such services is normally the contractually stated amount.

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

NOVANTA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 27, 2024

(Unaudited)

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.

Warranties

The standard warranty periods for the Company’s products are typically 12 months to 36 months. The Company recognizes estimated liabilities associated with standard warranty periods for its products in accordance with the provisions of ASC 450, “Contingencies,” as the Company has the ability to ascertain the likelihood of the liabilities and can reasonably estimate the amount of the liabilities. A provision for the estimated cost related to standard warranties is recorded as cost of revenue at the time revenue is recognized. The Company’s estimate of the costs to service the warranty obligations is based on historical experience and expectations of future conditions. To the extent that the Company’s experience in warranty claims or costs associated with servicing those claims differ from the original estimates, revisions to the estimated warranty liabilities are recorded at that time, with offsetting adjustments to cost of revenue.

Practical Expedients and Exemptions

The Company expenses incremental direct costs of obtaining a contract when incurred because the expected amortization period is typically one year or less. These costs are recorded within selling, general and administrative expenses in the consolidated statement of operations.

The Company does not adjust the promised amount of consideration for the effects of a financing component because the transfer of a promised good to a customer and the customer’s payment for that good are typically one year or less. The Company does not disclose the value of the remaining performance obligation for contracts with an original expected length of one year or less.

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 September 27, 2024 and December 31, 2023, contract liabilities were $8.3 million and $5.8 million, respectively, and are included in accrued expenses and other current liabilities and other liabilities in the accompanying consolidated balance sheets. The increase in the contract liability balance during the nine months ended September 27, 2024 is primarily due to cash payments received in advance of satisfying performance obligations, partially offset by $4.5 million of revenue recognized during the period that was included in the contract liability balance as of December 31, 2023.

Disaggregated Revenue

See Note 16 for the Company’s disaggregation of revenue by segment, geography and end market.

3. Business Combinations

On January 2, 2024, the Company completed the acquisition of Motion Solutions Parent Corp. (“Motion Solutions”), an Irvine, California-based provider of highly engineered integrated solutions, specializing in proprietary precision motion and advanced motion control solutions, for a total purchase price of $192.0 million in cash, net of working capital adjustments. The acquisition was financed with borrowings under the Company’s revolving credit facility. The addition of Motion Solutions enhances the Company’s product portfolio and further expands its presence in attractive medical and precision medicine spaces. Motion Solutions is included in the Medical Solutions reportable segment.

NOVANTA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 27, 2024

(Unaudited)

Allocation of Purchase Price

The acquisition of Motion Solutions has been accounted for as a business combination. The purchase price is allocated based upon a valuation of the fair values of assets acquired and liabilities assumed. Assets acquired and liabilities assumed have been recorded at their estimated fair values as of the acquisition date. The excess of the purchase price over the fair values of the acquired tangible assets, identifiable intangible assets and assumed liabilities was recorded as goodwill. The fair values of identifiable intangible assets were based on valuations using an income approach, specifically the multi-period excess earnings method for customer relationships and the relief-from-royalty method for developed technologies. The process for estimating the fair values of identifiable intangible assets requires the use of significant estimates and assumptions, including revenue growth rates, customer attrition rates, royalty rates, discount rates, technology obsolescence curves, and EBITDA margins. The Company’s estimates and assumptions in determining the estimated fair value of certain assets and liabilities are subject to change within the measurement period (up to one year from the acquisition date) as a result of additional information to be obtained with regard to facts and circumstances that existed as of the acquisition date.

Based upon the Company’s preliminary valuation, the purchase price for Motion Solutions was allocated as follows (in thousands):


	Purchase Price
	Allocation
Cash	$	776
Accounts receivable		8,515
Inventory		14,032
Property, plant and equipment		3,126
Operating lease assets		8,076
Intangible assets		83,000
Goodwill		106,569
Other assets		1,002
Total assets acquired		225,096
Accounts payable		5,305
Operating lease liabilities		8,514
Deferred tax liabilities		18,171
Other liabilities		1,130
Total liabilities assumed		33,120
Total assets acquired, net of liabilities assumed		191,976
Less: cash acquired		776
Purchase price, net of cash acquired	$	191,200

The purchase price allocation is preliminary as the Company is in the process of collecting additional information. The estimated purchase price allocation previously disclosed in the Form 10-Q for the period ended March 29, 2024 was revised during the second and third quarter of 2024 as new information was received and analyzed resulting in an increase in Inventory of $0.5 million, an increase in Intangible assets of $2.6 million, an increase in Other assets of $0.4 million, an increase in Deferred tax liabilities of $0.6 million, an increase in Other liabilities of $0.7 million and a decrease in Goodwill of $2.2 million.

The fair value of intangible assets for Motion Solutions is comprised of the following:



	Estimated Fair		Amortization
	Value (In thousands)		Period
Developed technologies	$	34,400	7 years
Customer relationships		43,100	13 years
Backlog		5,500	1 year
Total	$	83,000

The preliminary purchase price allocation resulted in $83.0 million of identifiable intangible assets and $106.6 million of goodwill. As the Motion Solutions acquisition was structured as a stock acquisition for income tax purposes, the goodwill is not

NOVANTA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 27, 2024

(Unaudited)

deductible. The goodwill recorded represents the anticipated incremental value of future cash flows potentially attributable to: (i) Motion Solution’s ability to grow the business with existing and new customers, including leveraging the Company’s customer base; (ii) Motion Solution’s ability to grow the business through new product introductions; and (iii) cost improvements due to the integration of Motion Solution’s operations into the Company’s existing infrastructure.

The operating results of Motion Solutions were included in the Company’s results of operations beginning January 2, 2024. Motion Solutions contributed revenues of $62.6 million and a loss before income taxes of $1.3 million to the Company’s operating results for the nine months ended September 27, 2024. The loss before income taxes from Motion Solutions for the period from the acquisition date through September 27, 2024 included amortization of inventory fair value adjustments of $2.8 million and amortization of purchased intangible assets of $9.7 million.

Unaudited Pro Forma Information

The pro forma information for all periods presented below includes the effect of business combination accounting resulting from the acquisition of Motion Solutions, including amortization of inventory fair value adjustments, amortization of intangible assets, interest expense on borrowings in connection with the acquisition, and the related tax effects, assuming that the acquisition had been consummated as of January 1, 2023. The pro forma financial information is presented for comparative purposes only and is not necessarily indicative of the results of operations that actually would have been achieved if the acquisition had taken place on January 1, 2023.


	Three Months Ended				Nine Months Ended
	September 27,		September 29,		September 27,		September 29,
	2024		2023		2024		2023
Revenue	$	244,405	$	244,686	$	711,185	$	734,378
Net income	$	19,003	$	17,159	$	50,184	$	45,555

Acquisition Costs

Acquisition costs are included in restructuring and acquisition related costs in the consolidated statements of operations. Acquisition-related costs for Motion Solutions was $1.0 million for the nine months ended September 27, 2024.

4. Accumulated Other Comprehensive Loss

Changes in accumulated other comprehensive loss were as follows (in thousands):


	Total Accumulated
	Other			Cumulative			Pension
	Comprehensive			Translation			Liability
	Loss			Adjustments			Adjustments
Balance at December 31, 2023	$	(24,038	)	$	(16,604	)	$	(7,434	)
Other comprehensive income (loss)		10,699			11,053			(354	)
Amounts reclassified from accumulated other comprehensive loss		665			—			665
Balance at September 27, 2024	$	(12,674	)	$	(5,551	)	$	(7,123	)

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.

NOVANTA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 27, 2024

(Unaudited)

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

        Nine Months Ended

         
        September 27,

        September 29,

        September 27,

        September 29,

        Numerators: