NOVANTA INC
For the period ended Jun 28, 2024. Filed Aug 6, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 28, 2024 · Filed Aug 6, 2024
NOVT$135.15+2.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-29; filed 2024-05-07.
0000950170-24-054007
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2024-06-28; filed 2024-08-06.
0000950170-24-091261
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 119 previous paragraphs and 142 current paragraphs.
72 unchanged; 45 reworded; 20 added; 1 removed; 1 previous and 5 current paragraphs rearranged.
Tables are not compared: 7 previous and 8 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (20)
Current report
Total revenue of $466.8 million for the six months ended June 28, 2024 increased $18.2 million, or 4.1%, from the prior year period primarily due to revenue from the Motion Solutions acquisition, partially offset by decreased demand in our advanced industrial end markets. The effect of our Motion Solutions acquisition resulted in an increase in revenue of $41.5 million, or 9.3%. In addition, foreign currency exchange rates unfavorably impacted our revenue by $1.8 million, or 0.4%, for the six months ended June 28, 2024.
Current report
Operating income of $51.3 million for the six months ended June 28, 2024 decreased $7.2 million, or 12.3%, from the prior year period. This decrease was attributable to an increase in selling, general and administrative expenses of $5.2 million, an increase in amortization expense of $2.4 million, and an increase in restructuring, acquisition, and related charges of $1.1 million, partially offset by an increase in gross profit of $2.4 million.
Current report
Basic EPS of $0.79 for the six months ended June 28, 2024 decreased $0.30 from the prior year period. Diluted EPS of $0.79 for the six months ended June 28, 2024 decreased $0.30 from the prior year period. The decreases were primarily due to a decrease in operating income and an increase in interest expense.
Current report
Precision Medicine and Manufacturing segment revenue for the six months ended June 28, 2024 decreased $14.7 million, or 10.2%, versus the prior year period, primarily due to weaker demand in our advanced industrial end markets.
Current report
Medical Solutions segment revenue for the six months ended June 28, 2024 increased $46.0 million, or 28.6%, versus the prior year period, primarily due to $41.5 million of revenue contributions from the current year acquisition, an increase in sales of our minimally invasive surgery and detection and analysis products, partially offset by a decrease in revenue from visualization solutions products as a result of exiting the product line.
Current report
Robotics and Automation segment revenue for the six months ended June 28, 2024 decreased $13.2 million, or 9.1%, versus the prior year period, primarily due to a decrease in demand in our advanced industrial end markets.
Current report
Precision Medicine and Manufacturing segment gross profit for the six months ended June 28, 2024 decreased $8.5 million, or 12.0%, versus the prior year period, primarily due to a decrease in both revenue and gross profit margin. Precision Medicine and Manufacturing segment gross profit margin was 48.3% for the six months ended June 28, 2024, versus a gross profit margin of 49.2% for the prior year period. The decrease in gross profit margin was primarily attributable to lower factory utilization due to a decline in production volumes.
Current report
Medical Solutions segment gross profit for the six months ended June 28, 2024 increased $13.6 million, or 20.6% versus the prior year period, primarily due to an increase in revenue. Medical Solutions segment gross profit margin was 38.5% for the six months ended June 28, 2024, versus a gross profit margin of 41.1% for the prior year period. The decrease was primarily due to an inventory related charge associated with our visualization solutions product line closure, which resulted in a 1.2 percentage point reduction in gross profit margin, and higher amortization expense on intangible assets and inventory fair value adjustments primarily from the current year acquisition, which resulted in a 2.2 percentage point reduction in gross profit margin. Improved efficiency in factory utilization in our minimally invasive surgery and detection and analysis products, partially offset by the dilutive effect of Motion Solution acquisition on gross profit margin, resulted in a 0.8 percentage point increase in gross profit margin.
Current report
Robotics and Automation segment gross profit for the six months ended June 28, 2024 decreased $3.8 million, or 5.6%, versus the prior year period, primarily due to a decrease in revenue. Robotics and Automation segment gross profit margin was 48.9% for the six months ended June 28, 2024, versus 47.1% for the prior year period. The increase in gross profit margin was primarily attributable to improved factory efficiency.
Current report
Unallocated corporate and shared services costs for the six months ended June 28, 2024 decreased $1.0 million versus the prior year period.
Current report
R&D expenses were $47.0 million, or 10.1% of revenue, during the six months ended June 28, 2024, versus $46.2 million, or 10.3% of revenue, during the prior year period.
Current report
SG&A expenses were $88.3 million, or 18.9% or revenue, during the six months ended June 28, 2024, versus $83.1 million, or 18.5% of revenue, during the prior year period. SG&A expenses increased in terms of total dollars and as a percentage of revenue primarily due to higher compensation related expenses and discretionary spending, mostly as a result of the current year acquisition.
Current report
We recorded restructuring, acquisition, and related costs of $4.8 million during the six months ended June 28, 2024, versus $3.7 million during the prior year period. The increase was primarily due to a $1.7 million increase in acquisition and related expenses related to the current year acquisition.
Current report
Precision Medicine and Manufacturing segment operating income was $12.7 million, or 19.9% of revenue, during the three months ended June 28, 2024, versus $19.6 million, or 26.4% of revenue, during the prior year period. The decrease in operating income was primarily due to a decrease in gross profit of $5.9 million, and an increase in restructuring, acquisition, and related costs of $1.3 million.
Current report
Precision Medicine and Manufacturing segment operating income was $28.5 million, or 22.1% of revenue, during the six months ended June 28, 2024, versus $36.3 million, or 25.2% of revenue, during the prior year period. The decrease in operating income was primarily due to a decrease in gross profit of $8.5 million, partially offset by a decrease in R&D expenses of $1.0 million.
Current report
Medical Solutions segment operating income was $12.3 million, or 11.7% of revenue, during the three months ended June 28, 2024, versus $10.1 million, or 12.1% of revenue, during the prior year period. The increase in operating income was primarily due to an increase in gross profit of $6.1 million, partially offset by an increase in R&D expenses of $1.1 million, and an increase in amortization expense of $2.3 million as a result of the current year acquisition.
Current report
Robotics and Automation segment operating income was $14.6 million, or 21.7% of revenue, during the three months ended June 28, 2024, versus $15.2 million, or 21.2% of revenue, during the prior year period. The decrease in operating income was primarily due to a decrease in gross profit of $1.5 million, partially offset by a decrease in R&D expenses of $0.7 million.
Current report
Unallocated corporate and shared services costs for the six months ended June 28, 2024 increased $3.3 million versus the prior year period. The increase in operating loss was primarily due to an increase in SG&A expenses of $2.5 million, and an increase in restructuring, acquisition and related expenses of $1.6 million.
Current report
Our effective tax rate for the three months ended June 28, 2024 was 19.7%, versus 17.4% for the prior year period. Our effective tax rate of 19.7% for the three 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, and R&D tax credits, partially offset by disallowed compensation deductions, uncertain tax position accruals, and Pillar Two inclusion.
Current report
Our effective tax rate of 17.4% for the three months ended June 30, 2023 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 and uncertain tax position accruals.
Removed paragraphs (1)
Previous report
Precision Medicine and Manufacturing segment operating income was $15.7 million, or 24.1% of revenue, during the three months ended March 29, 2024, versus $16.7 million, or 24.0% of revenue, during the prior year period. The decrease in operating income was primarily due to a decrease in gross profit of $2.5 million, partially offset by a decrease in restructuring, acquisition, and related costs of $0.9 million and a decrease in R&D expenses of $0.9 million.
Reworded paragraphs (45)
Previous wording
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; risks associated with epidemics, pandemics or other public health crises, 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 t…
Excerpt shortened here; the source contains the full paragraph.
Current wording
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; risks associated with epidemics, pandemics or other public health crises; our dependence upon our ability to respond to fluctuations in product demand; our ability to continuously innovate, introduce new products in a timely manner, and 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; 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; 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 relat…
Excerpt shortened here; the source contains the full paragraph.
Previous wording
For the three months ended March 29, 2024, the medical market accounted for approximately 55% of our revenue. Revenue from our products sold to the medical market is generally affected by hospital and other healthcare provider capital spending, growth rates of surgical procedures, changes in regulatory requirements and laws, 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.
Current wording
For the six months ended June 28, 2024, the medical market accounted for approximately 57% of our revenue. Revenue from our products sold to the medical market is generally affected by hospital and other healthcare provider capital spending, growth rates of surgical procedures, changes in regulatory requirements and laws, 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.
Previous wording
For the three months ended March 29, 2024, the advanced industrial market accounted for approximately 45% of our revenue. Revenue from our products sold to the advanced industrial market is affected by several factors, including changing technology requirements and preferences of our customers, productivity or quality investments in a manufacturing environment, 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.
Current wording
For the six months ended June 28, 2024, the advanced industrial market accounted for approximately 43% of our revenue. Revenue from our products sold to the advanced industrial market is affected by several factors, including changing technology requirements and preferences of our customers, productivity or quality investments in a manufacturing environment, 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.
Previous wording
In the first quarter of 2024, we continued to experience higher than normal inflation of raw material and component prices and labor costs. We have generally been able to offset increases in these costs through various productivity cost reduction initiatives, as well as increasing our selling prices to pass through some of these higher costs to our customers. However, our ability to raise our selling prices depends on market conditions and competitive dynamics. Given the timing of our actions compared to the timing of these inflationary pressures, there may be periods during which we are unable to fully recover the increases in our costs. Additionally, the inflationary pressures have given rise to significant increases in interest rates as various governments used monetary policy to contain and reduce inflation. As a result, our weighted average interest rate increased from approximately 5.6% as of March 31, 2023 to approximately 6.4% as of March 29, 2024. These higher interest rates have caused access to credit to be more expensive and have impacted demand from some of our OEM customers, as they see some of their end market customers deferring new capital equipment orders due to the higher interest rate environment.
Current wording
In the first half of 2024, we continued to experience higher than normal inflation of raw material and component prices and labor costs. We have generally been able to offset increases in these costs through various productivity cost reduction initiatives, as well as increasing our selling prices to pass through some of these higher costs to our customers. Given the timing of our actions compared to the timing of these inflationary pressures, there may be periods during which we are unable to fully recover the increases in our costs. Additionally, the inflationary pressures have given rise to significant increases in interest rates as various governments used monetary policy to contain and reduce inflation. As a result, our year to date weighted average interest rate increased from approximately 5.8% as of June 30, 2023 to approximately 6.6% as of June 28, 2024. These higher interest rates have caused access to credit to be more expensive and have impacted demand from some of our OEM customers, as they see some of their end market customers deferring new capital equipment orders due to the higher interest rate environment.
Previous wording
Results of Operations for the Three Months Ended March 29, 2024 Compared with the Three Months Ended March 31, 2023
Current wording
Results of Operations for the Three and Six Months Ended June 28, 2024 Compared with the Three and Six Months Ended June 30, 2023
Previous wording
Total revenue of $230.9 million for the three months ended March 29, 2024 increased $11.8 million, or 5.4%, from the prior year period primarily due to revenue from the Motion Solutions acquisition, partially offset by decreased demand in our advanced industrial end markets and certain precision medicine applications within our medical end markets. The effect of our Motion Solutions acquisition resulted in an increase in revenue of $21.2 million, or 9.7%.
Current wording
Total revenue of $235.9 million for the three months ended June 28, 2024 increased $6.4 million, or 2.8%, from the prior year period primarily due to revenue from the Motion Solutions acquisition, partially offset by decreased demand in our advanced industrial end markets. The effect of our Motion Solutions acquisition resulted in an increase in revenue of $20.3 million, or 8.9%. In addition, foreign currency exchange rates unfavorably impacted our revenue by $1.7 million, or 0.8%, for the three months ended June 28, 2024.
Previous wording
Operating income of $25.6 million for the three months ended March 29, 2024 decreased $0.7 million, or 2.7%, from the prior year period. This decrease was attributable to an increase in selling, general and administrative expenses of $2.6 million, and an increase in amortization expense of $0.7 million, partially offset by an increase in gross profit of $2.8 million.
Current wording
Operating income of $25.7 million for the three months ended June 28, 2024 decreased $6.5 million, or 20.1%, from the prior year period. This decrease was attributable to an increase in selling, general and administrative expenses of $2.6 million, an increase in amortization expense of $1.8 million, and an increase in restructuring, acquisition, and related charges of $1.3 million.
Previous wording
Basic earnings per common share (“Basic EPS”) of $0.41 for the three months ended March 29, 2024 decreased $0.10 from the prior year period. Diluted earnings per common share (“Diluted EPS”) of $0.41 for the three months ended March 29, 2024 decreased $0.10 from the prior year period. The decreases were primarily due to an increase in interest expense.
Current wording
Basic earnings per common share (“Basic EPS”) of $0.38 for the three months ended June 28, 2024 decreased $0.20 from the prior year period. Diluted earnings per common share (“Diluted EPS”) of $0.38 for the three months ended June 28, 2024 decreased $0.20 from the prior year period. The decreases were primarily due to a decrease in operating income and an increase in interest expense.
Previous wording
The following table sets forth external revenue by reportable segment for the periods noted (dollars in thousands):
Current wording
The following tables set forth external revenue by reportable segment for the periods noted (dollars in thousands):
Previous wording
Precision Medicine and Manufacturing segment revenue for the three months ended March 29, 2024 decreased $4.3 million, or 6.2%, versus the prior year period, primarily due to weaker demand in our advanced industrial end markets and certain precision medicine applications within our medical end markets.
Current wording
Precision Medicine and Manufacturing segment revenue for the three months ended June 28, 2024 decreased $10.4 million, or 14.0%, versus the prior year period, primarily due to weaker demand in our advanced industrial end markets.
Previous wording
Medical Solutions segment revenue for the three months ended March 29, 2024 increased $24.8 million, or 32.0%, versus the prior year period, primarily due to $21.2 million of revenue contributions from the current year acquisition and increase in sales from our detection and analysis products.
Current wording
Medical Solutions segment revenue for the three months ended June 28, 2024 increased $21.2 million, or 25.4%, versus the prior year period, primarily due to $20.3 million of revenue contributions from the current year acquisition, an increase in sales of our minimally invasive surgery and detection and analysis products, partially offset by a decrease in revenue from visualization solutions products as a result of exiting the product line.
Previous wording
Robotics and Automation segment revenue for the three months ended March 29, 2024 decreased $8.7 million, or 12.1%, versus the prior year period, primarily due to a decrease in demand in our advanced industrial end markets and some timing-related impacts of customers managing inventory levels related to their new product launch dynamics.
Current wording
Robotics and Automation segment revenue for the three months ended June 28, 2024 decreased $4.4 million, or 6.2%, versus the prior year period, primarily due to a decrease in demand in our advanced industrial end markets.
Previous wording
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 obsolescence and warranty expenses.
Current wording
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.
Previous wording
Precision Medicine and Manufacturing segment gross profit for the three months ended March 29, 2024 decreased $2.5 million, or 7.4%, versus the prior year period, primarily due to a decrease in both revenue and gross profit margin. Precision Medicine and Manufacturing segment gross profit margin was 48.7% for the three months ended March 29, 2024, versus a gross profit margin of 49.4% for the prior year period. The decrease in gross profit margin was primarily attributable to inefficient factory utilization and unfavorable product mix.
Current wording
Precision Medicine and Manufacturing segment gross profit for the three months ended June 28, 2024 decreased $5.9 million, or 16.2%, versus the prior year period, primarily due to a decrease in both revenue and gross profit margin. Precision Medicine and Manufacturing segment gross profit margin was 47.8% for the three months ended June 28, 2024, versus a gross profit margin of 49.1% for the prior year period. The decrease in gross profit margin was primarily attributable to lower factory utilization due to a decline in production volumes.
Previous wording
Medical Solutions segment gross profit for the three months ended March 29, 2024 increased $7.5 million, or 23.5%, versus the prior year period, primarily due to an increase in revenue, partially offset by a decrease in gross profit margin. Medical Solutions segment gross profit margin was 38.4% for the three months ended March 29, 2024, versus a gross profit margin of 41.1% for the prior year period. Gross profit margin versus prior year decreased by 3.8 percentage point due to $3.9 million of higher amortization expense on intangible assets and inventory fair value adjustments primarily from the current year acquisition, partially offset by a 1.1 percentage point increase in gross profit margin versus the prior year from our minimally invasive surgery products and detection and analysis products.
Current wording
Medical Solutions segment gross profit for the three months ended June 28, 2024 increased $6.1 million, or 17.8%, versus the prior year period, primarily due to an increase in revenue. Medical Solutions segment gross profit margin was 38.6% for the three months ended June 28, 2024, versus a gross profit margin of 41.1% for the prior year period. The decrease was primarily due to an inventory related charge associated with our visualization solutions product line closure, which resulted in a 2.4 percentage point reduction in gross profit margin, and higher amortization expense on intangible assets primarily from the current year acquisition, which resulted in a 0.9 percentage point reduction in gross profit margin. Improved factory utilization in our minimally invasive surgery and detection and analysis products, partially offset by the dilutive effect of Motion Solution acquisition on gross profit margin, resulted in a 0.8 percentage point increase in gross profit margin.
Previous wording
Robotics and Automation segment gross profit for the three months ended March 29, 2024 decreased $2.3 million, or 6.9%, versus the prior year period, primarily due to a decrease in revenue. Robotics and Automation segment gross profit margin was 48.3% for the three months ended March 29, 2024, versus 45.6% for the prior year period. The increase in gross profit margin was primarily attributable to improved factory efficiency.
Current wording
Robotics and Automation segment gross profit for the three months ended June 28, 2024 decreased $1.5 million, or 4.4%, versus the prior year period, primarily due to a decrease in revenue. Robotics and Automation segment gross profit margin was 49.5% for the three months ended June 28, 2024, versus 48.6% for the prior year period. The increase in gross profit margin was primarily attributable to improved factory efficiency.
Previous wording
Unallocated corporate and shared services costs primarily represent costs of corporate and shared services functions that are not allocated to the operating segments. These costs for the three months ended March 29, 2024 decreased $0.1 million versus the prior year period.
Current wording
Unallocated corporate and shared services costs primarily represent costs of corporate and shared services functions that are not allocated to the operating segments. These costs for the three months ended June 28, 2024 decreased $0.9 million versus the prior year period.
Previous wording
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 $23.2 million, or 10.1% of revenue, during the three months ended March 29, 2024, versus $22.8 million, or 10.4% of revenue, during the prior year period. The increase in R&D expenses in terms of total dollars was primarily due to higher compensation related expenses as a result of the current year acquisition.
Current wording
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 $23.7 million, or 10.1% of revenue, during the three months ended June 28, 2024, versus $23.4 million, or 10.2% of revenue, during the prior year period.
Previous wording
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 $43.5 million, or 18.9% of revenue, during the three months ended March 29, 2024, versus $40.9 million, or 18.7% of revenue, during the prior year period. The increase in SG&A expenses in terms of total dollars and as a percentage of revenue was primarily due to increases in compensation related expenses and discretionary spending, mostly as a result of the current year acquisition.
Current wording
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 $44.8 million, or 19.0% of revenue, during the three months ended June 28, 2024, versus $42.2 million, or 18.4% of revenue, during the prior year period. The increase in SG&A expenses in terms of total dollars and as a percentage of revenue was primarily due to increases in compensation related expenses and discretionary spending, mostly as a result of the current year acquisition.
Previous wording
Amortization of purchased intangible assets, excluding amortization of developed technologies which is included in cost of revenue, was $5.8 million, or 2.5% of revenue, during the three months ended March 29, 2024, versus $5.1 million, or 2.3% of revenue, during the prior year period. The increase in terms of total dollars and as a percentage of revenue was the result of more acquired intangible assets from the current year acquisition.
Current wording
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 28, 2024, versus $5.1 million, or 2.2% of revenue, during the prior year period. The increase in terms of total dollars and as a percentage of revenue was the result of more acquired intangible assets from the current year acquisition.
Previous wording
We recorded restructuring, acquisition, and related costs of $2.3 million during the three months ended March 29, 2024, versus $2.5 million during the prior year period.
Current wording
We recorded restructuring, acquisition, and related costs of $2.5 million during the three months ended June 28, 2024, versus $1.2 million during the prior year period. The increase in restructuring, acquisition and related costs is primarily due to expenses related to the 2024 restructuring plan.
Previous wording
Medical Solutions segment operating income was $12.0 million, or 11.7% of revenue, during the three months ended March 29, 2024, versus $9.8 million, or 12.7% of revenue, during the prior year period. The increase in operating income was primarily due to an increase in gross profit of $7.5 million, partially offset by an increase in SG&A expenses of $2.0 million, an increase in R&D expenses of $1.8 million, and an increase in amortization expense of 1.2 million as a result of the current year acquisition.
Current wording
Medical Solutions segment operating income was $24.3 million, or 11.7% of revenue, during the six months ended June 28, 2024, versus $19.9 million, or 12.4% of revenue, during the prior year period. The increase in operating income was primarily due to an increase in gross profit of $13.6 million, partially offset by an increase in R&D expenses of $2.9 million, an increase in SG&A expenses of $2.4 million and an increase in amortization expense of $3.5 million as a result of the current year acquisition.
Previous wording
Robotics and Automation segment operating income was $12.2 million, or 19.3% of revenue, during the three months ended March 29, 2024, versus $12.0 million, or 16.7% of revenue, during the prior year period. The increase in operating income was primarily due to a decrease in restructuring, acquisition, and related costs of $1.1 million, a decrease in R&D expenses of $0.7 million, a decrease in amortization expense of $0.4 million due to certain intangible assets being fully amortized in 2023, and a decrease in SG&A expense of $0.3 million, partially offset by a decrease in gross profit of $2.3 million.
Current wording
Robotics and Automation segment operating income was $26.9 million, or 20.6% of revenue, during the six months ended June 28, 2024, versus $27.2 million, or 19.0% of revenue, during the prior year period. The decrease in operating income was primarily due to a decrease in gross profit of $3.8 million, partially offset by a decrease in R&D expenses of $1.4 million, a decrease in restructuring, acquisition and related costs of $1.4 million and a decrease in amortization expense of $0.8 million due to certain intangible assets being fully amortized in 2023.
Previous wording
Unallocated corporate and shared services 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 March 29, 2024 increased $2.1 million versus the prior year period. The increase in operating loss was primarily due to an increase in acquisition related costs of $1.4 million and an increase in SG&A expenses of $0.6 million.
Current wording
Unallocated corporate and shared services 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 28, 2024 increased $1.2 million versus the prior year period. The increase in operating loss was primarily due to an increase in compensation related expenses.
Previous wording
Net interest expense was $8.3 million for the three months ended March 29, 2024, versus $6.3 million for the prior year period. The increase in net interest expense was primarily due to an increase in average debt levels to fund the Motion Solutions acquisition and an increase in the weighted average interest rate on our senior credit facilities, partially offset by an increase in interest income.
Current wording
Net interest expense was $8.3 million for the three months ended June 28, 2024, versus $6.8 million for the prior year period. The increase in net interest expense was primarily due to an increase in average debt levels to fund the Motion Solutions acquisition and an increase in the weighted average interest rate on our senior credit facilities, partially offset by an increase in interest income. The weighted average interest rate on our senior credit facilities was 6.74% during the three months ended June 28, 2024, versus 6.14% during the prior year period.
Previous wording
Foreign exchange transaction gains (losses) were nominal for both the three months ended March 29, 2024 and the three months ended March 31, 2023.
Current wording
Foreign exchange transaction gains (losses) were nominal for both the three and six months ended June 28, 2024 and the three and six months ended June 30, 2023.
Previous wording
Net other expense was nominal for both the three months ended March 29, 2024 and the three months ended March 31, 2023.
Current wording
Net other expense was nominal for both the three and six months ended June 28, 2024 and the three and six months ended June 30, 2023.
Previous wording
Our effective tax rate for the three months ended March 29, 2024 was 13.2%, versus 7.5% for the prior year period. Our effective tax rate of 13.2% for the three months ended March 29, 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 tax benefits of share-based compensation awards, partially offset by disallowed compensation deductions, uncertain tax position accruals, and estimated Pillar Two inclusion. For the three months ended March 29, 2024, the windfall tax benefits upon vesting of certain stock-based compensation awards had a benefit of 6.8% on our effective tax rate.
Current wording
Our effective tax rate for the six months ended June 28, 2024 was 16.5%, versus 13.0% for the prior year period. 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 share-based compensation awards, partially offset by disallowed compensation deductions, uncertain tax position accruals, and Pillar two inclusion. For the six months ended June 28, 2024, the windfall tax benefits upon vesting of certain share-based compensation awards had a benefit of 3.5% on our effective tax rate.
Previous wording
Our effective tax rate for the three months ended March 31, 2023 was 7.5% which 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 tax benefits of share-based compensation awards, partially offset by disallowed compensation deductions and uncertain tax position accruals. For the three months ended March 31, 2023, the windfall tax benefits upon vesting of certain stock-based compensation awards had a benefit of 8.2% on our effective tax rate.
Current wording
Our effective tax rate of 13.0% for the six months ended June 30, 2023 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 and uncertain tax position accruals. For the six months ended June 30, 2023, the tax benefits upon vesting of certain share-based compensation awards had a benefit of 4.0% on our effective tax rate.
Previous wording
On December 12, 2022, the EU member states agreed to implement the Organization for Economic Co-operation and Development (“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 35 countries. Additional countries are actively considering changes to their tax laws to adopt certain parts of the OECD’s proposals. We have estimated the impact of this minimum tax in our effective tax rate analysis, and it does not have a material impact on the Company’s financial results in the current period. We continue to monitor developments and anticipate further legislative activity in 2024.
Current wording
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 45 countries. Additional countries are actively considering changes to their tax laws to adopt certain parts of the OECD’s proposals. We have estimated the impact of this minimum tax in our effective tax rate analysis, which did not have a material impact on our financial results in the current period. We continue to monitor developments and anticipate further legislative activity in 2024.
Previous wording
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 global pandemics and geopolitical conflicts, monetary policy changes in the U.S. and other countries and their impact on the global financial markets, supply chain disruptions and electronics and other material shortages, 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, 2023.
Current wording
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 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, 2023.
Previous wording
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, 2023. Through March 29, 2024, we have not entered into any other material new or modified contractual obligations since December 31, 2023.
Current wording
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
Previous wording
As of March 29, 2024, $51.2 million of our $93.5 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 $99.1 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 March 29, 2024. Additionally, we may use intercompany loans to address short-term cash flow needs for various subsidiaries.
Current wording
As of June 28, 2024, $58.6 million of our $98.5 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 $95.0 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 28, 2024. Additionally, we may use intercompany loans to address short-term cash flow needs for various subsidiaries.
Previous wording
On October 5, 2021, the Company entered into an amendment (the “Fourth Amendment”) to the Credit Agreement to exercise the accordion option. The Fourth Amendment increased the revolving credit facility commitment under the Credit Agreement by $200.0 million, from $495.0 million to $695.0 million, and reset the uncommitted accordion option to $200.0 million for potential future expansion.
Current wording
On October 5, 2021, we entered into an amendment (the “Fourth Amendment”) to the Credit Agreement to exercise the accordion option. The Fourth Amendment increased the revolving credit facility commitment under the Credit Agreement by $200.0 million, from $495.0 million to $695.0 million, and reset the uncommitted accordion option to $200.0 million for potential future expansion.
Previous wording
On March 10, 2022, the Company entered into an amendment (the “Fifth Amendment”) to the Credit Agreement to extend the maturity date thereof from December 31, 2024 to March 10, 2027, update the pricing grid, replace LIBOR with SOFR as the reference rate for U.S. dollar borrowings, and increase the uncommitted accordion option from $200 million to $350 million.
Current wording
On March 10, 2022, we entered into an amendment (the “Fifth Amendment”) to the Credit Agreement to extend the maturity date thereof from December 31, 2024 to March 10, 2027, update the pricing grid, replace LIBOR with SOFR as the reference rate for U.S. dollar borrowings, and increase the uncommitted accordion option from $200 million to $350 million.
Previous wording
As of March 29, 2024, we had $76.5 million term loan and $440.6 million revolver borrowings outstanding under our Senior Credit Facilities. The borrowings outstanding under the Senior Credit Facilities bear interest at rates based on (a) the Base Rate, as defined in the Credit Agreement, plus a margin ranging between 0.00% and 0.75% per annum, determined by reference to our consolidated leverage ratio, or (b) the Term SOFR Screen Rate, the Alternative Currency Daily Rate or the Alternative Currency Term Rate, as defined in the Credit Agreement, plus a margin ranging between 0.75% 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 credit facility, ranging between 0.20% and 0.30% per annum, determined by reference to our consolidated leverage ratio. As of March 29, 2024, we had outstanding borrowings under the Credit Agreement denominated in Euro and U.S. dollars of $99.1 million and $418.0 million, respectively.
Current wording
As of June 28, 2024, we had $74.7 million term loan and $410.3 million revolver borrowings outstanding under our Senior Credit Facilities. The borrowings outstanding under the Senior Credit Facilities bear interest at rates based on (a) the Base Rate, as defined in the Credit Agreement, plus a margin ranging between 0.00% and 0.75% per annum, determined by reference to our consolidated leverage ratio, or (b) the Term SOFR Screen Rate, the Alternative Currency Daily Rate or the Alternative Currency Term Rate, as defined in the Credit Agreement, plus a margin ranging between 0.75% 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 credit facility, ranging between 0.20% and 0.30% per annum, determined by reference to our consolidated leverage ratio. As of June 28, 2024, we had outstanding borrowings under the Credit Agreement denominated in Euro and U.S. dollars of $95.0 million and $390.0 million, respectively.
Previous wording
Maximum consolidated leverage ratio shall be increased to 4.00 for four consecutive quarters following a designated acquisition, as defined in the Fifth Amendment.
Current wording
(1)Maximum consolidated leverage ratio shall be increased to 4.00 for four consecutive quarters following a designated acquisition, as defined in the Fifth Amendment.
Previous wording
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 did not repurchase any shares during the three months ended March 29, 2024. We had $49.5 million available for share repurchases under the 2020 Repurchase Plan as of March 29, 2024.
Current wording
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 did not repurchase any shares during the six months ended June 28, 2024. We had $49.5 million available for share repurchases under the 2020 Repurchase Plan as of June 28, 2024.
Previous wording
Cash Flows for the Three Months Ended March 29, 2024 and March 31, 2023
Current wording
Cash Flows for the Six Months Ended June 28, 2024 and June 30, 2023
Previous wording
The following table summarizes our cash flows, cash and cash equivalents, and unused and available funds under our revolving credit facility for the periods indicated (in thousands):
Current wording
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):
Showing the first 40 of 45 pairs. Open the source sections for the rest.
Rearranged current paragraphs (5)
Current report — wording carried from elsewhere
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.
Current report — wording carried from elsewhere
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.
Current report — wording carried from elsewhere
Amortization of purchased intangible assets, excluding amortization of developed technologies which is included in cost of revenue, was $12.7 million, or 2.7% of revenue, during the six months ended June 28, 2024, versus $10.2 million, or 2.3% of revenue, during the prior year period. The increase in terms of total dollars and as a percentage of revenue was the result of more acquired intangible assets from the current year acquisition.
Current report — wording carried from elsewhere
Net interest expense was $16.5 million for the six months ended June 28, 2024, versus $13.1 million for the prior year period. The increase in net interest expense was primarily due to an increase in average debt levels to fund the Motion Solutions acquisition and an increase in the weighted average interest rate on our senior credit facilities, partially offset by an increase in interest income. The weighted average interest rate on our senior credit facilities was 6.64% during the six months ended June 28, 2024, versus 5.84% during the prior year period.
Current report — wording carried from elsewhere
Consolidated Financial Statements, each included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. Through June 28, 2024, we have not entered into any other material new or modified contractual obligations since December 31, 2023.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
The weighted average interest rate on our senior credit facilities was 6.54% during the three months ended March 29, 2024, versus 5.55% during the prior year period.