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What changed in NOVANTA INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of NOVANTA INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+637 added−614 removedSource: 10-K (2025-02-25) vs 10-K (2024-02-28)

Top changes in NOVANTA INC's 2024 10-K

637 paragraphs added · 614 removed · 499 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

74 edited+14 added−35 removed87 unchanged
Biggest changeWe currently have the following employee-led ERGs, Affinity Groups and Working Teams that are open to all employees: • Multicultural & International ERG • Women’s ERG • Novanta Professionals Network ERG • Pride Affinity Group • Learning and Development Working Team • Localization and Development Working Team 9 Our Localization and Development Working Team collaborated with our business units on NovantaCARES, our voluntary community outreach program, to promote greater equity within marginalized and underserved communities and to protect the environment.
Biggest changeOur ERGs and Affinity Groups are open to all employees. Our Localization and Development Working Team collaborated with our business units on NovantaCARES, our voluntary community outreach program, to support marginalized and underserved communities and to protect the environment. Additionally, they supported our ERGs and Affinity Groups sponsoring our first annual ERG Festival held at 13 sites around the globe.
The following table summarizes significant acquisitions since 2014: Company Year of Acquisition Total Purchase Price (in millions) Motion Solutions Parent Corp. 2024 $ 192.2 MPH Medical Devices S.R.O. 2022 $ 22.6 ATI Industrial Automation, Inc. 2021 $ 223.9 Schneider Electric Motion USA, Inc. 2021 $ 118.6 ARGES GmbH 2019 $ 73.2 Zettlex Holdings Limited 2018 $ 32.0 Laser Quantum Limited (24%) (1) 2018 $ 45.1 Laser Quantum Limited (35%) 2017 $ 31.1 W.O.M.
The following table summarizes significant acquisitions since 2014: Company Year of Acquisition Total Purchase Price (in millions) Motion Solutions Parent Corp. 2024 $ 192.0 MPH Medical Devices S.R.O. 2022 $ 22.6 ATI Industrial Automation, Inc. 2021 $ 223.9 Schneider Electric Motion USA, Inc. 2021 $ 118.6 ARGES GmbH 2019 $ 73.2 Zettlex Holdings Limited 2018 $ 32.0 Laser Quantum Limited (24%) (1) 2018 $ 45.1 Laser Quantum Limited (35%) 2017 $ 31.1 W.O.M.
Our bonus and sales variable compensation plans allow for higher payouts when goals are exceeded and lower or no payouts when goals are not achieved as planned. Growth and Development We invest significant resources to develop the talent needed to remain at the forefront of innovation and make Novanta an employer of choice.
Our bonus and variable sales compensation plans allow for higher payouts when goals are exceeded and lower or no payouts when goals are not achieved as planned. Growth and Development We invest significant resources to develop the talent needed to remain at the forefront of innovation and make Novanta an employer of choice.
These include: • establishment registration and device listing with the FDA; • QSR requirements, which require manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the design and manufacturing process; • labeling and marketing regulations, which require that promotion is truthful, not misleading and fairly balanced, provide adequate directions for use and that all claims are substantiated, and also prohibit the promotion of products for unapproved or “off-label” uses and impose other restrictions on labeling; • FDA guidance on off-label dissemination of information and responding to unsolicited requests for information; • clearance or approval of product modifications to 510(k)-cleared devices that could significantly affect safety or effectiveness or that would constitute a major change in intended use of the cleared devices; • medical device reporting regulations, which require that a manufacturer report to the FDA if a device that it markets may have caused or contributed to a death or serious injury, or has malfunctioned and the device or a similar device that it markets would be likely to cause or contribute to a death or serious injury, if the malfunction were to recur; • correction, removal and recall reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health; • requirements governing Unique Device Identifiers on devices and also requiring the submission of certain information about each device to the FDA’s Global Unique Device Identification Database; • the FDA’s recall authority, whereby the agency can order device manufacturers to recall from the market a product that is in violation of governing laws and regulations; and • post-market surveillance activities and regulations, which apply when deemed by the FDA to be necessary to protect the public health or to provide additional safety and effectiveness data on the device.
These include: • establishment registration and device listing with the FDA; 10 • QSR requirements, which require manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the design and manufacturing process; • labeling and marketing regulations, which require that promotion is truthful, not misleading and fairly balanced, provide adequate directions for use and that all claims are substantiated, and also prohibit the promotion of products for unapproved or “off-label” uses and impose other restrictions on labeling; • FDA guidance on off-label dissemination of information and responding to unsolicited requests for information; • clearance or approval of product modifications to 510(k)-cleared devices that could significantly affect safety or effectiveness or that would constitute a major change in intended use of the cleared devices; • medical device reporting regulations, which require that a manufacturer report to the FDA if a device that it markets may have caused or contributed to a death or serious injury, or has malfunctioned and the device or a similar device that it markets would be likely to cause or contribute to a death or serious injury, if the malfunction were to recur; • correction, removal and recall reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health; • requirements governing Unique Device Identifiers on devices and also requiring the submission of certain information about each device to the FDA’s Global Unique Device Identification Database; • the FDA’s recall authority, whereby the agency can order device manufacturers to recall from the market a product that is in violation of governing laws and regulations; and • post-market surveillance activities and regulations, which apply when deemed by the FDA to be necessary to protect the public health or to provide additional safety and effectiveness data on the device.
Strategy Our strategy is to drive sustainable, profitable growth through short-term and long-term initiatives, including: • disciplined focus on our diversified business model of providing components and sub-systems to long life-cycle OEM customer platforms in attractive medical and advanced industrial niche markets; • improving our business mix to increase medical sales as a percentage of total revenue by: - introducing new products aimed at attractive medical applications, such as minimally invasive and robotic surgery, ophthalmology, patient monitoring, drug delivery, clinical laboratory testing and life science equipment; - deepening our key account management relationships with and driving cross selling of our product offerings to leading medical equipment manufacturers; and 1 - pursuing complementary medical technology acquisitions; • increasing our penetration of high growth advanced industrial applications, such as laser materials processing, intelligent end-of-arm robotic technology solutions, robotics, laser additive manufacturing, automation and metrology, by working closely with OEM customers to launch application specific products that closely match the requirements of each application; • broadening our portfolio of enabling proprietary technologies and capabilities through increased investment in new product development, and investments in application development to further penetrate existing customers, while expanding the applicability of our solutions to new markets; • broadening our product and service offerings through the acquisition of innovative and complementary technologies and solutions in medical and advanced industrial technology applications; • expanding sales and marketing channels to reach new target customers; • improving our existing operations to expand profit margins and improve customer satisfaction by implementing lean manufacturing principles, strategic sourcing across our major production sites, and optimizing and limiting the growth of our fixed cost base; and • attracting, retaining, and developing world-class talented, diverse, and motivated employees.
Strategy Our strategy is to drive sustainable, profitable growth through short-term and long-term initiatives, including: • disciplined focus on our diversified business model of providing components and sub-systems to long life-cycle OEM customer platforms in attractive medical and advanced industrial niche markets; • improving our business mix to increase medical sales as a percentage of total revenue by: - introducing new products aimed at attractive medical applications, such as minimally invasive and robotic surgery, ophthalmology, patient monitoring, drug delivery, clinical laboratory testing and life science equipment; 1 - deepening our key account management relationships with and driving cross selling of our product offerings to leading medical equipment manufacturers; and - pursuing complementary medical technology acquisitions; • increasing our penetration of high growth advanced industrial applications, such as laser materials processing, intelligent end-of-arm robotic technology solutions, robotics, laser additive manufacturing, automation and metrology, by working closely with OEM customers to launch application specific products that closely match the requirements of each application; • broadening our portfolio of enabling proprietary technologies and capabilities through increased investment in new product development, and investments in application development to further penetrate existing customers, while expanding the applicability of our solutions to new markets; • broadening our product and service offerings through the acquisition of innovative and complementary technologies and solutions in medical and advanced industrial technology applications; • expanding sales and marketing channels to reach new target customers; • improving our existing operations to expand profit margins and improve customer satisfaction by implementing lean manufacturing principles, strategic sourcing across our major production sites, and optimizing and limiting the growth of our fixed cost base; and • attracting, retaining, and developing world-class talented and motivated employees.
If the FDA determines that we failed to comply with applicable regulatory requirements, it can take a variety of compliance or enforcement actions, which may result in any of the following sanctions: • warning letters, untitled letters, fines, injunctions, consent decrees and civil penalties; • recalls, withdrawals, or administrative detention or seizure of our products; • operating restrictions or partial suspension or total shutdown of production; 12 • refusing or delaying requests for 510(k) marketing clearance or PMA approvals of new products or modified products; • withdrawing 510(k) clearances or PMA approvals that have already been granted; • refusal to grant export or import approvals for our products; or • criminal prosecution.
If the FDA determines that we failed to comply with applicable regulatory requirements, it can take a variety of compliance or enforcement actions, which may result in any of the following sanctions: • warning letters, untitled letters, fines, injunctions, consent decrees and civil penalties; • recalls, withdrawals, or administrative detention or seizure of our products; • operating restrictions or partial suspension or total shutdown of production; • refusing or delaying requests for 510(k) marketing clearance or PMA approvals of new products or modified products; • withdrawing 510(k) clearances or PMA approvals that have already been granted; • refusal to grant export or import approvals for our products; or • criminal prosecution.
Risk Factors—Risks Relating to Our Business— We are subject to extensive and dynamic 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.” Other Healthcare Laws and Regulations In the United States and other jurisdictions where we operate our business, there are healthcare laws and regulations that constrain our business operations, including our sales, marketing and promotional activities, and that limit the kinds of arrangements we may have with customers, physicians, healthcare entities and others in a position to purchase or recommend our products or other products or services we may develop and commercialize.
Risk Factors—Risks Relating to Our Business— We are subject to extensive and dynamic 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.” 13 Other Healthcare Laws and Regulations In the United States and other jurisdictions where we operate our business, there are healthcare laws and regulations that constrain our business operations, including our sales, marketing and promotional activities, and that limit the kinds of arrangements we may have with customers, physicians, healthcare entities and others in a position to purchase or recommend our products or other products or services we may develop and commercialize.
Certain U.S. facilities have a dedicated medical professional on site to provide basic and preventative healthcare services to employees, provide general first aid, assess employee health risks, and promote overall employee health. Additionally, all U.S. employees and their families have access to video and telephonic Telemedicine support seven days a week, twenty-four hours a day.
Certain U.S. facilities have a dedicated medical professional on site to provide basic and preventative healthcare services to employees, provide general first aid, assess employee health risks, and promote overall employee health. Additionally, all U.S. employees and their families have access to video and telephonic Telemedicine support seven 8 days a week, twenty-four hours a day.
A serious incident is any malfunction or deterioration in the characteristics or performance of a device on the market (e.g., inadequacy in the information supplied by the manufacturer, undesirable side-effect), which, directly or indirectly, might lead to either the death or serious deterioration of the health of a patient, user, or other persons, or to a serious public health threat.
A serious incident is any malfunction or deterioration in the characteristics or performance of a device on the market (e.g., inadequacy in the information supplied by the manufacturer, undesirable side-effect), which, directly or indirectly, might lead to either the death or serious 12 deterioration of the health of a patient, user, or other persons, or to a serious public health threat.
A typical OEM customer will usually evaluate our products and our ability to provide application knowledge and expertise, post-sales application support and services, supply chain management over long durations, manufacturing capabilities, product quality, global presence, and product customization before deciding to incorporate our products into their products or systems.
A typical OEM customer will usually evaluate our products and our ability to provide application knowledge and expertise, post-sales application support, supply chain management over long durations, manufacturing capabilities, product quality, global presence, and product customization before deciding to incorporate our products into their products or systems.
Such regulations went into effect in the European Union (“EU”) in 2006 (“The Restriction of Hazardous Substances Directive” (“RoHS”)) 10 and in 2007 (“Registration, Evaluation, Authorisation and Restriction of Chemicals” (“REACH”)), and in China in 2007 (“Management Methods for Controlling Pollution Caused by Electronic Information Products Regulation” (“China-RoHS”)).
Such regulations went into effect in the European Union (“EU”) in 2006 (“The Restriction of Hazardous Substances Directive” (“RoHS”)) and in 2007 (“Registration, Evaluation, Authorisation and Restriction of Chemicals” (“REACH”)), and in China in 2007 (“Management Methods for Controlling Pollution Caused by Electronic Information Products Regulation” (“China-RoHS”)).
After a device receives 510(k) marketing clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a major change or modification in its intended use, will require a new 510(k) marketing clearance or, depending 11 on the modification, a de novo classification or PMA approval.
After a device receives 510(k) marketing clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a major change or modification in its intended use, will require a new 510(k) marketing clearance or, depending on the modification, a de novo classification or PMA approval.
Certain countries also mandate implementation of commercial compliance programs. 14 In the EU, regulatory authorities have the power to carry out announced and, if necessary, unannounced inspections of companies, as well as suppliers and/or sub-contractors and, where necessary, the facilities of professional users.
Certain countries also mandate implementation of commercial compliance programs. In the EU, regulatory authorities have the power to carry out announced and, if necessary, unannounced inspections of companies, as well as suppliers and/or sub-contractors and, where necessary, the facilities of professional users.
In the United States, the Federal Food, Drug and Cosmetic Act (the “FDCA”) and related regulations govern the conditions of safety, efficacy, clearance, approval, manufacturing, quality system requirements, labeling, packaging, distribution, storage, recordkeeping, reporting, marketing, advertising, and promotion of medical devices.
In the United States, the Federal Food, Drug and Cosmetic Act (the “FDCA”) and related regulations govern the conditions of safety, efficacy, clearance, approval, manufacturing, 9 quality system requirements, labeling, packaging, distribution, storage, recordkeeping, reporting, marketing, advertising, and promotion of medical devices.
The aforementioned EU rules are generally applicable in the European Economic Area (“EEA”), which consists of the 27 EU member states plus Norway, Liechtenstein and Iceland. United Kingdom Since January 1, 2021, the Medicines and Healthcare Products Regulatory Agency (“MHRA”) has been the sovereign regulatory authority responsible for the medical device market in Great Britain (i.e. England, Wales and Scotland).
The aforementioned EU rules are generally applicable in the European Economic Area (“EEA”), which consists of the 27 EU member states plus Norway, Liechtenstein and Iceland. United Kingdom Since January 1, 2021, the Medicines and Healthcare Products Regulatory Agency (“MHRA”) has become the sovereign regulatory authority responsible for the medical device market in Great Britain (i.e. England, Wales and Scotland).
In addition to salaries and wages, these programs, which vary by country, can include annual bonuses, sales commissions, stock-based compensation awards, defined contribution retirement savings plans with company matching contributions, healthcare and other insurance benefits, flexible spending accounts, health savings accounts with company matching contributions, flexible time off, paid time off, paid family leave, and tuition assistance.
In addition to salaries and wages, these programs, which vary by country, can include annual bonuses, sales bonus plans, stock-based compensation awards, defined contribution retirement savings plans with company matching contributions, healthcare and other insurance benefits, flexible spending accounts, health savings accounts with company matching contributions, flexible time off, paid time off, paid family leave, and tuition assistance.
We provide training and education to our global workforce with respect to our Code of Ethics and Business Conduct, anti-bribery and anti-corruption policies, data privacy regulations and workplace harassment on an annual basis. Diversity and Inclusion The Novanta Way defines our performance culture and begins with building cohesive teams based on trust, commitment, and accountability.
We provide training and education to our global workforce with respect to our Code of Ethics and Business Conduct, anti-bribery and anti-corruption policies, data privacy regulations and workplace harassment on an annual basis. The Novanta Way The Novanta Way defines our performance culture and begins with building cohesive teams based on trust, commitment, and accountability.
The resource center provides a central information hub for all employees, with country-specific information on physical and mental health and wellness. Government Regulation Our current and contemplated activities and the products and processes that will result from such activities are subject to substantial government rules and regulations, both in the United States and internationally.
The resource center is a central information hub for all employees, with country-specific information on physical and mental health and wellness. Government Regulation Our current and contemplated activities and the products and processes that will result from such activities are subject to substantial government rules and regulations, both in the United States and internationally.
The regulations on medical devices in Great Britain continue to be based largely on the two EU Directives (the EU Medical Devices Directive and Directive 90/385/EEC, or “EU Active Implantable Medical Devices Directive”) which preceded the EU Medical Devices Regulation, as implemented into national law by the Medical Devices Regulations 2002 (“SI 2002 No 618”, as amended).
The regulations on medical devices in Great Britain continue to be based largely on the two EU Directives (the EU Medical Devices Directive and Directive 90/385/EEC, or “EU Active Implantable Medical Devices Directive”) which preceded the EU Medical Devices Regulation, as implemented into national law by the Medical Devices Regulations 2002 (“SI 2002 No 618”, as amended) (“UK Medical Devices Regulations”).
Patents and Intellectual Property We rely upon a combination of copyrights, patents, trademarks, trade secret laws and restrictions on disclosure to protect our intellectual property rights. We hold several registered and pending patents in the United States and other countries. In addition, we also have trademarks registered in the United States and other countries.
Patents and Intellectual Property We rely upon a combination of copyrights, patents, trademarks, trade secret laws and restrictions on disclosure to protect our intellectual property rights. We hold many registered and pending patents in the United States and other countries. In addition, we also have trademarks registered in the United States and other countries.
Throughout the term of the certificate of conformity, the manufacturer will be subject to periodic surveillance audits to verify continued compliance with the applicable requirements. In particular, there will be a new audit by the notified body before it will renew the relevant certificate(s).
Throughout the term of the certificate of conformity, the manufacturer will be subject to periodic surveillance audits to verify continued compliance with the applicable requirements. In particular, a new audit will be required by the notified body before it will renew the relevant certificate(s).
The 8 Chief Executive Officer (“CEO”) and the CHRO regularly update our board of directors on the operation and status of these human capital activities, including, but not limited to, talent management, talent development, and succession planning.
The Chief 7 Executive Officer (“CEO”) and the CHRO regularly update our board of directors on the operation and status of these human capital activities, including, but not limited to, talent management, talent development, and succession planning.
In accordance with its recently extended transitional provisions, both (i) devices lawfully placed on the market pursuant to the EU Medical Devices Directive prior to May 26, 2021 and (ii) legacy devices lawfully placed on the EU market after May 26, 2021 in accordance with the EU Medical Devices Regulation transitional provisions may generally continue to be made available on the market or put into service until May 26, 2025, provided that the requirements of the transitional provisions are fulfilled.
In accordance with its recently extended transitional 11 provisions, both (i) devices lawfully placed on the market pursuant to the EU Medical Devices Directive prior to May 26, 2021 and (ii) legacy devices lawfully placed on the EU market after May 26, 2021 in accordance with the EU Medical Devices Regulation transitional provisions may generally continue to be made available on the market or put into service, provided that the requirements of the transitional provisions are fulfilled.
In addition, certain state and non-U.S. laws, such as the California Consumer Privacy Act (“CCPA”), the California Privacy Rights Act (“CPRA”), and the General Data Protection Regulation (“GDPR”), govern the privacy and security of personal information, including health-related information in certain circumstances, some of which are more stringent than HIPAA and many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.
In addition, certain state and non-U.S. laws, such as the California Consumer Privacy Act, as amended by the California Privacy Rights Act (collectively, the “CCPA”), and the General Data Protection Regulation (“GDPR”), govern the privacy and security of personal information, including health-related information in certain circumstances, some of which are more stringent than HIPAA and many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.
Diversity, equity, and inclusion are an important part of our culture and are leader led and embedded into our ways of working. Our aim is to foster a collaborative and inclusive workplace, reflected in our governance, leadership, and technical expertise at all levels in the organization. Our policy is to not tolerate discrimination and harassment.
Inclusion and belonging are an important part of our culture and are leader led and embedded into our ways of working. Our aim is to foster a collaborative and inclusive workplace, reflected in our governance, leadership, and technical expertise at all levels in the organization. Our policy is to not tolerate discrimination and harassment.
If satisfied that a relevant product conforms to the relevant essential requirements, a notified body issues a certificate of conformity, which the manufacturer uses as a basis for its own declaration of conformity. The manufacturer may then apply the European Conformity (“CE”) mark to the device, which allows the device to be placed on the market throughout the EU.
If satisfied that a relevant product conforms to the relevant essential requirements, a notified body issues a certificate of conformity, which the manufacturer uses as a basis for its own declaration of conformity. The manufacturer may then apply the CE mark to the device, which allows the device to be placed on the market throughout the EU.
Class II devices are subject to the FDA’s General Controls and special controls as deemed necessary by the FDA to ensure the safety and effectiveness of the device. These special controls can include performance standards, postmarket surveillance, patient registries and FDA guidance documents.
Class II devices are subject to the FDA’s General Controls and special controls as deemed necessary by the FDA to ensure the safety and effectiveness of the device. These special controls can include performance standards, post-market surveillance, patient registries and FDA guidance documents.
We combine 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 us to engineer core components and sub-systems that deliver extreme precision and performance, tailored to our customers' demanding applications.
We combine deep proprietary technology expertise and competencies in precision medicine, precision manufacturing, robotics and automation, and advanced surgery with a proven ability to solve complex technical challenges. This enables us to engineer core components and sub-systems that deliver extreme precision and performance, tailored to our customers' demanding applications.
Safety and Wellbeing of Our Employees We provide mandatory safety training in our facilities, which are designed to focus on empowering our employees with the knowledge and tools they need to make safe choices and to mitigate risks. In further support of our employees, we maintained and promoted our global health and wellness resource center, “NovantaWELL”.
Safety and Wellbeing of Our Employees We provide mandatory safety training in our facilities, which are designed to focus on empowering our employees with the knowledge and tools they need to make safe choices and to mitigate risks. In further support of our employees, we offer a global health and wellness resource center, “NovantaWELL”.
Recent Developments Acquisition of Motion Solutions On January 2, 2024, we 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 $192.2 million in cash, subject to customary closing and net working capital adjustments.
Recent Developments On January 2, 2024, we 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.
Individuals from underrepresented groups (defined as individuals who self-identify as Black, African American, Hispanic or Latino, Asian, Native American, Alaskan Native, Native Hawaiian or Pacific Islander, or two or more races or ethnicities) continued at 13% representation on our board of directors as of December 31, 2023.
Individuals from underrepresented groups (defined as individuals who self-identify as Black, African American, Hispanic or Latino, Asian, Native American, Alaskan Native, Native Hawaiian or Pacific Islander, or two or more races or ethnicities) continued at 11% representation on our board of directors as of December 31, 2024.
Many of our customers participate in several market industries. During the year ended December 31, 2023, revenue from an OEM customer primarily in the medical end market accounted for approximately 10% of our consolidated revenue. No customer accounted for 10% or more of our consolidated revenue during the years ended December 31, 2022 or 2021, respectively.
Many of our customers participate in several market industries. During the years ended December 31, 2024 and December 31, 2023, revenue from an OEM customer primarily in the medical end market accounted for approximately 10% of our consolidated revenue. No customer accounted for 10% or more of our consolidated revenue during the year ended December 31, 2022.
Precision Motors Advanced Industrial and Medical Celera Motion, Applimotion, IMS Direct drive motor components and integrated motion sub-assemblies for precision motion control in semiconductor and electronics manufacturing, industrial and medical robotics, autonomous vehicles, metrology, satellite communications, medical devices, and laboratory and diagnostics equipment.
Precision Motors and Integrated Stepper Motors Advanced Industrial and Medical Celera Motion, Applimotion, IMS Direct drive motor components, integrated motion control solutions, and integrated motion sub-assemblies for precision motion control in semiconductor and electronics manufacturing, industrial and medical robotics, autonomous vehicles, automation equipment, metrology, satellite communications, agricultural robotics, medical devices, and laboratory and diagnostics equipment.
Except for low-risk medical devices (Class I non-sterile, non-measuring devices), where the manufacturer can self-assess the conformity of its products with the essential requirements (except for any parts which relate to sterility or metrology), a conformity assessment procedure requires the intervention of a notified body.
Except for low-risk medical devices (Class I non-sterile, non-measuring devices), where the manufacturer can self-assess the conformity of its products with the general safety and performance requirements (except for any parts which relate to sterility or metrology), a conformity assessment procedure requires the intervention of a notified body.
Backlog As of December 31, 2023 and 2022, our consolidated backlog was approximately $473.1 million and $611.6 million, respectively. Most orders included in backlog represent open orders for products and services that, based on management’s projections, have a reasonable probability of being delivered over the subsequent twelve months.
Backlog As of December 31, 2024 and December 31, 2023, our consolidated backlog was approximately $445.5 million and $473.1 million, respectively. Most orders included in backlog represent open orders for products and services that, based on management’s projections, have a reasonable probability of being delivered over the subsequent twelve months.
For further information regarding EU and U.K. healthcare laws and regulations that our operations are subject to, see “Item 1A.
For further information regarding EU and UK healthcare laws and regulations that our operations are subject to, see “Item 1A.
This includes the acquisition, development, and retention of talent to deliver on our strategy as well as the design of employee compensation and benefits, and diversity, equity, and inclusion (“DEI”) initiatives.
This includes the acquisition, development, and retention of talent to deliver on our strategy as well as the design of employee compensation and benefits, and inclusion and belonging initiatives.
In certain countries, we offer college tuition reimbursement for eligible employees for undergraduate and graduate studies. In 2019, we founded Novanta University as a primary instrument of company-wide learning management that includes both internal and external training courses. We leverage the Novanta University processes and learning content to ensure all new employees have a common and complete onboarding experience.
In certain countries, we offer college tuition reimbursement for eligible employees for undergraduate and graduate studies. Novanta University is a company-wide learning management program that includes both internal and external training courses. We leverage the Novanta University processes and learning content to ensure all new employees have a common and complete onboarding experience.
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. 6 Advanced Industrial Market For the year ended December 31, 2023, the advanced industrial market accounted for approximately 46% of our revenue.
Revenue from our products sold to the medical market is generally affected by hospital, life science, and other healthcare provider capital spending, growth rates of surgical procedures, changes in regulatory requirements and laws, demand levels for life science automation technology, aggregation of purchasing by healthcare networks, changes in technology requirements, timing of OEM customers’ product development and new product launches, changes in customer or patient preferences, and general demographic trends. 5 Advanced Industrial Market For the year ended December 31, 2024, the advanced industrial market accounted for approximately 45% of our revenue.
Inductive Encoders Advanced Industrial and Medical Celera Motion, Zettlex Inductive encoders for precision motion control and sensing in satellite communications, medical devices, industrial and medical robotics, autonomous vehicles, and laboratory and diagnostics equipment.
Optical and Inductive Encoders Advanced Industrial and Medical Celera Motion, Zettlex Optical and inductive encoders for precision motion control and sensing in semiconductor and electronics manufacturing, industrial and medical robotics, metrology, satellite communications, autonomous vehicles, medical devices, and laboratory and diagnostics equipment.
Manufacturers are also notably responsible for entering the necessary data on Eudamed, which includes the UDI database, and for keeping it up to date. The obligations for registration in Eudamed will become applicable at a later date (as Eudamed is not yet fully functional).
Manufacturers are also notably responsible for entering the necessary data on EUDAMED, which includes the UDI database, and for keeping it up to date. Certain obligations for registration in EUDAMED are expected to become applicable in Q1 2026 (as EUDAMED is not yet fully functional).
To demonstrate compliance with the requirements in the EU Medical Devices Directive, medical device manufacturers must undergo a conformity assessment procedure, which varies according to the type of medical device and its risk classification.
To demonstrate compliance with the general safety and performance requirements, medical device manufacturers must undergo a conformity assessment procedure, which varies according to the type of medical device and its risk classification.
As of December 31, 2023, we employed approximately 2,900 people, of which approximately 41% were in the United States, 51% in Europe, and 8% in Asia. We win with our customers by delivering new technology innovations through our engineering teams of approximately 600 employees. We believe that our employees have a meaningful role in helping us develop our culture.
As of December 31, 2024, we employed approximately 3,000 people, of which approximately 41% were in the United States, 50% in Europe, and 9% in Asia. We win with our customers by delivering new technology innovations through our engineering teams of approximately 650 employees. We believe that our employees have a meaningful role in helping us develop our culture.
We expect our teams to respect our core values and conduct themselves ethically at all times in accordance with the Novanta Code of Ethics and Business Conduct. As of December 31, 2023, our board of directors was comprised of 50% men and 50% women, which is consistent with the prior year.
We expect our teams to respect our core values and conduct themselves ethically at all times in accordance with the Novanta Code of Ethics and Business Conduct. As of December 31, 2024, our board of directors was comprised of 56% men and 44% women.
Certain visualization solutions, imaging informatics, and medical insufflators, pumps, disposables, and accessories products are manufactured under current good manufacturing practices (cGMPs), which is a requirement for medical devices by the United States Food and Drug Administration (the “FDA”). 7 Marketing, Sales and Distribution We sell our products globally, primarily through our direct sales force.
Certain products, including medical insufflators and endoscopic pumps and related disposables, are manufactured under current good manufacturing practices (“cGMPs”), which is a requirement for medical devices by the United States Food and Drug Administration (the “FDA”). 6 Marketing, Sales and Distribution We sell our products globally, primarily through our direct sales force.
Our competitors range from large foreign and domestic organizations, which produce a comprehensive array of goods and services and may have greater financial and other resources than we do, to small organizations producing a limited number of highly specialized products or services for specialized applications.
Our competitors range from large foreign and domestic organizations, which produce a comprehensive array of goods and services, to small organizations producing a limited number of highly specialized products or services for specialized applications.
Our people leaders, with the support of our human resources organization, are accountable for ensuring the onboarding process is complete and effective. In addition to Novanta University, we utilize our Novanta Growth System, which provides processes, tools, and training with a focus on continuous improvement. In 2023, further investment was made in leadership development and diversity, equity, and inclusion training.
Our people leaders, with the support of our human resources organization, are accountable for ensuring that the onboarding process is complete and effective. In addition to Novanta University, we utilize our Novanta Growth System, which provides processes, tools, and training with a focus on continuous improvement. In 2024, we continued with Leadership Development programs for our front-line and mid-level leaders.
The segment serves highly demanding photonics-based applications for advanced industrial processes, medical and life science imaging, DNA sequencing, and medical laser procedures, particularly ophthalmology applications. The vast majority of the segment’s product offerings are sold to OEM customers.
The segment serves highly demanding applications for advanced industrial processes, advanced industrial and medical robotics, other medical and life science automation applications, and medical laser procedures such as ophthalmology applications. The vast majority of the segment’s product offerings are sold to OEM customers.
NovantaCARES - Voluntary Community Support We provide every employee with one paid day-off per year to volunteer at non-profit organizations supporting social charities or the environment. During 2023, we sponsored 575 community service days, compared to 314 days in 2022. During 2023, approximately 25% of our employees participated in at least one NovantaCARES event.
NovantaCARES - Voluntary Community Support We provide every employee with one paid day-off per year to volunteer at non-profit organizations supporting social charities or the environment. During 2024, approximately 33% of our employees participated in at least one NovantaCARES event, which was an increase of 8 percentage points compared to 2023.
Pursuing marketing of medical devices in the EU will notably require that our devices be certified under the new regime set forth in the EU Medical Devices Regulation.
Pursuing marketing of medical devices in the EU will notably require that our devices be certified under the new regime set forth in the EU Medical Devices Regulation described below. In the EU, there is currently no premarket government review of medical devices.
The Medical Solutions segment is comprised of the following nine product lines: Product Lines Key End Markets Brand Names Description Medical Insufflators, Pumps and Accessories Medical WOM Insufflators, pumps, light sources and video couplers, gamma probes and related accessories and consumables for minimally invasive surgery.
The Medical Solutions segment is comprised of the following ten product lines: Product Lines Key End Markets Brand Names Description Medical Insufflators, Endoscopic Pumps and related disposables Medical WOM Insufflators, endoscopic pumps, and related disposables, and other accessories for minimally invasive surgery.
Thermal Chart Recorders Medical JADAK Rugged thermal chart recorders for patient monitoring, defibrillator equipment, blood gas analyzers, and pulse oximeters.
Barcode Identification Medical and Advanced Industrial JADAK Embedded and handheld data collection products for barcode identification. Thermal Chart Recorders Medical JADAK Rugged thermal chart recorders for patient monitoring, defibrillator equipment, blood gas analyzers, and pulse oximeters.
Servo drives and motion control solutions Advanced Industrial and Medical Celera Motion, Ingenia Precision motion servo drives and control software used in industrial robotics, medical robotics, autonomous vehicles, satellite communications, and medical equipment. Integrated Stepper Motors Advanced Industrial and Medical IMS Integrated motion control solutions and electronic controls for automation equipment, agricultural robotics, industrial robotics, medical and life science applications.
Servo drives and motion control solutions Advanced Industrial and Medical Celera Motion, Ingenia Precision motion servo drives and control software used in industrial robotics, medical robotics, autonomous vehicles, satellite communications, and medical equipment.
The segment sells the majority of these products directly, utilizing a highly technical sales force, and also sells some indirectly, through resellers and distributors. 3 The Precision Medicine and Manufacturing segment is comprised of the following four product lines: Product Lines Key End Markets Brand Names Description Laser Beam Delivery Components Advanced Industrial and Medical Cambridge Technology Galvanometer and polygon optical scanning components.
The segment sells the majority of these products directly, utilizing a highly technical sales force, and also sells some indirectly, through resellers and distributors. 3 The Automation Enabling Technologies segment is comprised of the following eight product lines: Product Lines Key End Markets Brand Names Description Laser Beam Delivery Components Advanced Industrial and Medical Cambridge Technology Galvanometer and polygon optical scanning components that provide precise control and delivery of laser beams through motorized manipulation of mirrors and optical elements and are integrated by OEM manufacturers with their controlling hardware and software.
RFID Technologies Medical and Advanced Industrial JADAK, ThingMagic RFID technologies via High-Frequency (HF) and Ultra-High Frequency (UHF) readers, writers and antennas for applications such as surgical part tracking and counterfeit detection. Barcode Identification Medical and Advanced Industrial JADAK Embedded and handheld data collection products for barcode identification.
Machine Vision Medical and Advanced Industrial JADAK Camera-based machine vision products and solutions used for image analysis within medical devices and advanced industrial applications. RFID Technologies Medical and Advanced Industrial JADAK, ThingMagic RFID technologies via High-Frequency (HF) and Ultra-High Frequency (UHF) readers, writers and antennas for applications such as surgical part tracking and counterfeit detection.
The following table shows the external revenues, gross profit margin and operating profit for each of the segments for the year ended December 31, 2023 (dollars in millions): Revenue Gross Profit Margin Operating Profit Precision Medicine and Manufacturing $ 283.0 49.1 % $ 69.3 Medical Solutions $ 325.2 41.7 % $ 41.9 Robotics and Automation $ 273.5 47.9 % $ 48.4 See Note 18 to Consolidated Financial Statements for additional financial information about our reportable segments.
The following table shows the external revenues, gross profit margin and operating profit for each of the segments for the years ended December 31, 2024, December 31 2023, and December 31, 2022 (dollars in millions): 2024 2023 2022 Revenue Gross Profit Margin Operating Profit Revenue Gross Profit Margin Operating Profit Revenue Gross Profit Margin Operating Profit Automation Enabling Technologies $ 490.6 47.9 % $ 106.4 $ 499.2 47.0 % $ 96.3 $ 534.1 45.9 % $ 105.4 Medical Solutions $ 458.6 41.4 % $ 57.5 $ 382.4 44.7 % $ 63.3 $ 326.8 42.5 % $ 46.9 See Note 18 to Consolidated Financial Statements for additional financial information about our reportable segments.
Visualization Solutions Medical NDS High definition, 4K and 4K 3D visualization solutions for minimally invasive surgery. Video Processing, Streaming and Capture Medical NDS, Med X Change Imaging management for visual information, including real-time distribution, documentation, control, recording, and streaming for multiple imaging modalities for surgical applications. High definition wireless transmission of video signals in minimally invasive surgical equipment.
Video Processing and Streaming and Capture Medical NDS, Med X Change Imaging management, including real-time distribution, documentation, control, recording, and streaming for surgical applications. High definition wireless transmission of video in minimally invasive surgical equipment. Touch Panel Displays Medical and Advanced Industrial Reach Technology Embedded capacitive and resistive touch panel technology that delivers high-performance solutions.
Violations of these laws may result in substantial civil penalties, including treble damages, and criminal penalties, including imprisonment, fines, the curtailment or restructuring of our operations, and exclusion from participation in governmental healthcare programs. 15 Data Privacy and Security Laws and Regulations Numerous state, federal and foreign laws govern the collection, dissemination, use, access to, confidentiality, and security of personal information, including health-related information.
Violations of these laws may result in substantial civil penalties, including treble damages, and criminal penalties, including imprisonment, fines, the curtailment or restructuring of our operations, and exclusion from participation in governmental healthcare programs.
During 2023, our DEI roadmap included a series of strategic initiatives designed to foster an inclusive workforce with employees from all backgrounds. We remain committed to ensuring that our workforce represents the communities where we work and enhancing our recruiting processes to engage applicants from all communities.
During 2024, we included a series of strategic initiatives designed to foster an inclusive workforce with employees from all backgrounds. We remain committed to enhancing our recruiting processes to engage applicants from all communities. In 2024, we continued to find venues to connect with and identify qualified candidates from all backgrounds for our final interview slates.
Products offered by our Medical Solutions segment are primarily manufactured at facilities in Syracuse, New York; Mukilteo, Washington; Přelouč, Czech Republic; and Ludwigsstadt, Germany. Products offered by our Robotics and Automation segment are manufactured at facilities in Bedford, Massachusetts; Apex, North Carolina; Marlborough, Connecticut; Rocklin, California; and Suzhou, China.
Products offered by our Automation Enabling Technologies segment are manufactured at facilities in Apex, North Carolina; Bedford, Massachusetts; Marlborough, Connecticut; Mukilteo, Washington; Rocklin, California; Suzhou, China; and Taunton and Manchester, United Kingdom.
Optical light engine products that integrate lasers into light engines with full beam parameter control. Advanced industrial applications include additive manufacturing, packaging converting, laser marking, micromachining and metrology. Medical applications include DNA sequencing, optical coherence tomography imaging, microscopy, super-resolution imaging, and laser-based vision correction.
Advanced industrial applications include additive manufacturing, packaging converting, laser marking, micromachining and metrology. Medical applications include optical coherence tomography imaging, microscopy, and laser-based vision correction.
Due to the uncertainty around the duration of the conflict, future impacts are unknown to our businesses. 2 Acquisitions We continuously evaluate our business mix and financial performance and have executed a series of acquisitions in line with our strategy.
In addition, we continue to monitor geopolitical conflict in Israel, Russia and Ukraine for any potential impact on our businesses. 2 Acquisitions We continuously evaluate our business mix and financial performance and have executed a series of acquisitions in line with our strategy.
Light and Color Measurement Advanced Industrial Photo Research Light and color measurement devices, including spectroradiometers, photometers, and color characterization software, used in research and development and quality control testing. 5 Robotics and Automation The Robotics and Automation segment designs, manufactures and markets optical and inductive encoders, precision motors, servo drives and motion control solutions, integrated stepper motors, intelligent robotic end-of-arm technology solutions, and air bearing spindles to customers worldwide.
Automation Enabling Technologies The Automation Enabling Technologies segment designs, manufactures and markets laser beam delivery components, laser beam delivery solutions, CO 2 lasers, solid state lasers, ultrafast lasers, optical and inductive encoders, precision motors, integrated stepper motors, servo drives, motion control solutions, intelligent robotic end-of-arm technology solutions, and air bearing spindles to customers worldwide.
EU Medical Devices Directive Under the EU Medical Devices Directive, all medical devices placed on the market in the EU must meet the relevant essential requirements in the EU Medical Devices Directive, including the requirement that a medical device must be designed and manufactured in such a way that it will not compromise the clinical condition or safety of patients, or the safety and health of users and others.
However, all medical devices placed on the EU market must meet general safety and performance requirements, including the requirement that a medical device must be designed and manufactured in such a way that, during normal conditions of use, it is suitable for its intended purpose.
They also facilitated live peer-to-peer DEI educational programs to promote greater understanding of the benefits of diversity and inclusion. Compensation and Benefits We strive to provide market competitive compensation, benefits and services that help meet the varying needs of our employees.
The festival created greater awareness and aided in membership recruitment to drive greater inclusion and belonging. Compensation and Benefits We strive to provide market competitive compensation, benefits and services that help meet the varied needs of our employees.
Therefore, backlog as of any date should not be relied upon as a complete indicator of our revenues for any future period.
Therefore, backlog as of any date should not be relied upon as a complete indicator of our revenues for any future period. Manufacturing The majority of our manufacturing functions are performed internally, while a relatively small portion of our manufacturing processes are outsourced to highly qualified third parties primarily for cost related reasons.
CO 2 Lasers Advanced Industrial Synrad Continuous and pulsed CO 2 lasers with power ranges from 5 to 400 watts. Applications include coding, marking, engraving, cutting and trimming of non-metals, fine materials processing, additive manufacturing, packaging converting, and medical applications in dental and dermatology.
Diode-pumped solid-state lasers and ultrafast lasers in the visible to near-infrared. Applications include coding, marking, engraving, cutting and trimming of non-metals, fine materials processing, additive manufacturing, packaging converting, microscopy, micromachining, super-resolution imaging and medical applications in dental and dermatology.
We evaluate the performance of, and allocate resources to, our segments based on revenue, gross profit and operating profit.
Prior period segment financial information has been recast to align with the new reportable segments. Our reportable segments have been identified based on commonality and adjacency of end markets and customers amongst our individual product lines. We evaluate the performance of, and allocate resources to, our segments based on revenue, gross profit and operating profit.
The majority of our products are produced in manufacturing operations certified under either ISO 9001 certification or ISO 13485 certification. All of our manufacturing operations have been certified under ISO 14001. More than 50% of our manufacturing operations are certified under ISO 45001.
Products offered by our Medical Solutions segment are primarily manufactured at facilities in Irvine, California; Mukilteo, Washington; Syracuse, New York; Ludwigsstadt, Germany; Manchester, United Kingdom, and Přelouč, Czech Republic. The majority of our products are produced in manufacturing operations certified under either ISO 9001 certification or ISO 13485 certification. All of our manufacturing operations have been certified under ISO 14001.
Employees from underrepresented groups comprised 48% of our U.S.-based workforce as of December 31, 2023, an increase of 3 percentage points compared to December 31, 2022. We continue to foster an inclusive culture and promote lifelong learning by offering cultural awareness events and integrating them into our standard work.
We continue to foster an inclusive culture and promote lifelong learning by offering cultural awareness events and celebrations and integrate them into our standard work. Our Culture Council continues to support our Employee Resources Groups (“ERGs”) and Affinity Groups (“AG”) to increase inclusion and sense of belonging among our employees leading to greater employee engagement.
Applications include DNA sequencing, microscopy, micromachining and super-resolution imaging. 4 Medical Solutions The Medical Solutions segment designs, manufactures and markets a range of medical grade technologies, including medical insufflators, pumps and related disposables; visualization solutions; wireless technologies, video recorders, and video integration technologies for operating room integrations; optical data collection and machine vision technologies; radio frequency identification (“RFID”) technologies; thermal chart recorders; spectrometry technologies, and embedded touch screen solutions.
Applications include printed circuit board (“PCB”) manufacturing, automotive coating, and semiconductor manufacturing equipment. 4 Medical Solutions The Medical Solutions segment designs, manufactures and markets a range of medical grade technologies, including medical insufflators and endoscopic pumps and related disposables, laser beam delivery solutions, video processing and streaming and capture, machine vision technologies, radio frequency identification (“RFID”) technologies, barcode identification technologies, thermal chart recorders, light and color measurement technologies, touch panel displays, and advanced motion control solutions.
The MHRA has introduced legislation which provides that CE marked medical devices may be placed on the Great Britain market along following timelines: • general medical devices compliant with the EU Medical Devices Directive or EU Active Implantable Medical Devices Directive with a valid declaration and CE marking can be placed on the Great Britain market up until the sooner of the expiration of the certificate or June 30, 2028; and • general medical devices, including custom-made devices, compliant with the EU Medical Devices Regulation can be placed on the Great Britain market up until June 30, 2030.
However, certain medical devices in compliance with: (1) the EU Medical Devices Directive can continue to be placed on the Great Britain market until the sooner of certificate expiration or June 30, 2028; or (2) the EU Medical Devices Regulation can continue to be placed on the Great Britain market until the sooner of certificate expiration or June 30, 2030.
However, under the terms of the Protocol on Ireland/Northern Ireland, the EU Medical Devices Regulation applies to Northern Ireland. On June 26, 2022, the MHRA published its response to a 10-week consultation on the post-Brexit regulatory framework for medical devices and diagnostics.
However, under the terms of the Ireland/Northern Ireland Protocol, the EU Medical Devices Regulation applies to Northern Ireland. Furthermore, on December 16, 2024, the UK government published an amendment to the UK Medical Devices Regulations to clarify and strengthen the post-market surveillance requirements for medical devices in Great Britain.
These products provide precise control and delivery of laser beams through motorized manipulation of mirrors and optical elements and are integrated by OEM manufacturers with their controlling hardware and software. Advanced industrial applications include additive manufacturing, packaging converting, laser marking, micromachining and metrology. Medical applications include optical coherence tomography imaging, microscopy, and laser-based vision correction.
Advanced industrial applications include additive manufacturing, packaging converting, laser marking, micromachining and metrology. Medical applications include optical coherence tomography imaging, microscopy, super-resolution imaging, and laser-based vision correction. CO 2 ,Solid State and Ultrafast Lasers Advanced Industrial Synrad, Laser Quantum Continuous and pulsed CO 2 lasers with power ranges from 5 to 400 watts.
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Motion Solutions acquisition will be included in our Medical Solutions reportable segment. Business Environment Inflationary Pressures In 2023, we continued to experience higher than normal inflation of raw materials and component prices and labor costs.
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The acquisition was financed with borrowings under our revolving credit facility. The addition of Motion Solutions enhances our product portfolio and further expands our presence in attractive medical and precision medicine applications. The Motion Solutions acquisition is included in our Medical Solutions reportable segment.
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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.
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Business Environment In recent years, the global economy has faced significant challenges, including inflation, supply chain disruptions, business slowdowns, labor shortages, and market volatility. We address macroeconomic challenges by continuing to execute our strategy. There have been improvements in the supply chain with better on-time deliveries, and recent efforts have successfully addressed talent shortages.
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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.
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However, uncertainty remains about overall macroeconomic conditions due to geopolitical tensions and possible changes in trade policies. Economic tensions and changes in trade policies, such as higher tariffs, retaliatory measures, renegotiated free trade agreements, changes in government funding, and the ongoing impact from prolonged inflationary pressures could impact the global market for our products.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn addition, efforts to find alternate sources of supply may increase our costs or lower the quality of our product, which could negatively affect our profitability, financial condition and business. Our business success depends upon our ability to respond to fluctuations in product demand, but doing so may require us to incur costs despite limited visibility into future business declines.
Biggest changeOur business success depends upon our ability to respond to fluctuations in product demand, but doing so may require us to incur costs despite limited visibility into future business declines. During a period of increasing demand and rapid growth, we must be able to increase manufacturing capacity quickly.
If we were to experience a significant period of disruption in IT Systems that involve our interactions with customers or suppliers, it could result in the loss of revenue and customers as well as significant response and mitigation costs, which would adversely affect our business.
If we were to experience a significant period of disruption in our IT Systems that involve our interactions with customers or suppliers, it could result in the loss of revenue and customers as well as significant response and mitigation costs, which would adversely affect our business.
There can be no assurance that other companies are not investigating or developing other technologies similar to ours, that any patents will be issued from any applications filed by us, or that the claims allowed, even if patents are issued, will be sufficient to deter or prohibit others from marketing similar products.
There can be no assurance that other companies are not investigating or developing other technologies similar to ours, that any patents will be issued from applications filed by us, or that the claims allowed, even if patents are issued, will be sufficient to deter or prohibit others from marketing similar products.
This level of debt could have significant consequences on our future operations, including: • reducing the availability of our cash flow to fund working capital, capital expenditures, research and development efforts, acquisitions and other general corporate purposes, and limiting our ability to obtain additional financing for these purposes; • limiting our flexibility in planning for or reacting to, and increasing our vulnerability to, changes in our business, changes in the general economic environment, and market changes in the industries in which we operate; and • placing us at a competitive disadvantage compared to our competitors that have less debt or are less leveraged.
This level of debt could have significant consequences on our future operations, including: • reducing the availability of our cash flow to fund working capital, capital expenditures, research and development efforts, acquisitions and other general corporate purposes, and limiting our ability to obtain additional financing for these purposes; • limiting our flexibility in planning for or reacting to, and increasing our vulnerability to, changes in our business, changes in the general economic environment, and market changes in the industries in which we operate; and 27 • placing us at a competitive disadvantage compared to our competitors that have less debt or are less leveraged.
We may experience increased costs in order to execute upon our sustainability goals and comply with future climate-change related government mandates as well as stricter environmental protection laws, which could have an adverse impact on our results of operations and financial condition. Certain regulations may require us to redesign our products to ensure compliance with the applicable standards.
We may experience increased costs in 26 order to execute upon our sustainability goals and comply with future climate-change related government mandates as well as stricter environmental protection laws, which could have an adverse impact on our results of operations and financial condition. Certain regulations may require us to redesign our products to ensure compliance with the applicable standards.
In addition, security breaches of our IT Systems could result in the misappropriation or unauthorized disclosure of confidential business or personal information belonging to us or to our employees, customers, suppliers or other business partners, which could result in significant financial or reputational damage to us, as well as litigation, regulatory enforcement actions, or other liabilities that could lead to substantial damages, fines, penalties and legal costs.
In addition, security breaches of our IT Systems could result in the misappropriation or unauthorized disclosure of Confidential Information belonging to us or to our employees, customers, suppliers or other business partners, which could result in significant financial or reputational damage to us, as well as litigation, regulatory enforcement actions, or other liabilities that could lead to substantial damages, fines, penalties and legal costs.
These laws include: 24 • the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, to induce, or in return for, the purchase or recommendation of an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs.
These laws include: • the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, to induce, or in return for, the purchase or recommendation of an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs.
We expect the frequency and magnitude of cyberattacks to continue to accelerate as attackers are becoming increasingly sophisticated, for example, by using techniques designed to circumvent controls, avoid detection, and obfuscate forensic evidence, such that we may be unable to timely or effectively detect, identify, investigate or remediate attacks in the future.
We expect the frequency and magnitude of cyberattacks to continue to accelerate as attackers are becoming increasingly more sophisticated, for example, by using techniques designed to circumvent controls, avoid detection, and obfuscate forensic evidence, such that we may be unable to timely or effectively detect, identify, investigate or remediate attacks in the future.
If we are unable to satisfy the conditions in the Third Amended and Restated Credit Agreement or our needs exceed the amounts available under the revolving credit facility, we may need to obtain equity or debt financing. If we raise additional funds through further issuances of equity or convertible debt securities, our existing shareholders 28 could suffer significant dilution.
If we are unable to satisfy the conditions in the Third Amended and Restated Credit Agreement or our needs exceed the amounts available under the revolving credit facility, we may need to obtain equity or debt financing. If we raise additional funds through further issuances of equity or convertible debt securities, our existing shareholders could suffer significant dilution.
A failure, or perceived failure, to respond to expectations of all key stakeholders could cause harm to our business and reputation and have a negative impact on the market price of our common shares. Further, organizations that provide information to investors on corporate governance and related matters have developed rating processes for evaluating companies on sustainability matters.
A failure, or perceived failure, to respond to expectations of all key stakeholders could cause harm to our business and reputation and have a negative impact on the market price of our common shares. Further, organizations that provide information to investors on corporate governance and related matters have developed rating processes for evaluating companies on sustainability and corporate responsibility matters.
The FDA and other worldwide regulatory agencies can take action against a company that promotes "off-label" uses. The FDA may also enjoin and restrain a company for certain violations of the FDCA and regulations pertaining to medical devices, or initiate action for criminal prosecution of such violations. Similar requirements apply in foreign jurisdictions.
The FDA and other worldwide regulatory agencies can take action against a company that promotes “ off-label ” uses. The FDA may also enjoin and restrain a company for certain violations of the FDCA and regulations pertaining to medical devices, or initiate action for criminal prosecution of such violations. Similar requirements apply in foreign jurisdictions.
Despite our efforts, there is a risk that we may be subject to fines and penalties for non-compliance and experience litigation, reputational harm and business interruption if we fail to protect the privacy of third-party data or to comply with the GDPR, CCPA, CPRA and other applicable data privacy and protection regimes.
Despite our efforts, there is a risk that we may be subject to fines and penalties for non-compliance and experience litigation, reputational harm and business interruption if we fail to protect the privacy of third-party data or to comply with the GDPR, CCPA, and other applicable data privacy and protection regimes.
In addition, as we are dependent upon our ability to gather and promptly transmit accurate information to key decision makers, our business, results of operations and financial condition may be materially and adversely affected if our 26 information technology infrastructure does not allow us to transmit accurate information, even for a short period of time.
In addition, as we are dependent upon our ability to gather and promptly transmit accurate information to key decision makers, our business, results of operations and financial condition may be materially and adversely affected if our information technology infrastructure does not allow us to transmit accurate information, even for a short period of time.
Any significant changes could reduce demand for our products or increase our expenses, which in turn could adversely affect our business, financial condition and results of operations. Actual or perceived failures to comply with applicable data protection, privacy and security laws, regulations, standards, and other requirements may adversely impact our business and financial results.
Any significant changes in government regulations could reduce demand for our products or increase our expenses, which in turn could adversely affect our business, financial condition and results of operations. Actual or perceived failures to comply with applicable data protection, privacy and security laws, regulations, standards, and other requirements may adversely impact our business and financial results.
The FDA and other regulatory agencies worldwide can ban certain medical devices; detain or seize adulterated or misbranded medical devices; order recall, repair, replacement or refund of these devices; and require notification of healthcare professionals and others with regard to medical devices that present unreasonable risks of substantial harm to the public health.
The FDA and other regulatory agencies worldwide can ban certain medical devices; detain or seize adulterated 21 or misbranded medical devices; order recall, repair, replacement or refund of these devices; and require notification of healthcare professionals and others with regard to medical devices that present unreasonable risks of substantial harm to the public health.
We produce complex products that can contain latent defects or performance problems. This could happen to both existing and new products. Such defects or performance problems could result in litigation against us and be detrimental to our business and reputation. In addition, customers frequently integrate our products with other vendors’ products.
We produce complex products that can contain latent defects or performance problems. This could happen to both existing and new products. Such defects or performance problems could result in litigation against us and be detrimental to our business and reputation. 19 In addition, customers frequently integrate our products with other vendors’ products.
For example, in February 2024, the FDA issued a final rule to amend and replace the Quality System Regulation (“QSR”), which sets forth the FDA’s current good manufacturing practice requirements for medical devices, to align more closely with the International Organization for Standardization standards.
For example, in February 2024, the FDA issued a final rule to amend and replace the Quality System Regulation (“QSR”), which sets forth the FDA’s current good manufacturing practice requirements for medical devices, to align more closely with the International Organization for Standardization (“ISO”) standards.
The continuing efforts of governments, insurance companies and other payors of healthcare costs to contain or reduce those costs could lead to patients being unable to obtain approval for payment from these third-party payors for procedures in which our products are used.
The continuing efforts of governments, insurance companies and other payors of healthcare costs to contain or reduce those costs could lead to patients being unable to obtain approval 23 for payment from these third-party payors for procedures in which our products are used.
Specifically, this final rule, which the FDA expects to go into effect on February 2, 2026, establishes the “Quality Management System Regulation” (“QMSR”), which among other things, incorporates by reference the quality management system requirements of ISO 13485:2016.
Specifically, this final rule, which the FDA expects to go into effect on February 2, 2026, establishes the “Quality Management System Regulation”, which among other things, incorporates by reference the quality management system requirements of ISO 13485:2016.
The FDA, other worldwide regulatory agencies, and notified bodies actively monitor compliance with local laws and regulations through review, inspection and audit of design and manufacturing practices, recordkeeping, reporting of adverse events, labeling and 23 promotional practices.
The FDA, other worldwide regulatory agencies, and notified bodies actively monitor compliance with local laws and regulations through review, inspection and audit of design and manufacturing practices, recordkeeping, reporting of adverse events, labeling and promotional practices.
Material weaknesses in our internal control over financial reporting could also reduce our ability to obtain financing or could increase the cost of any financing we obtain. Item 1B. Unresolved Staff Comments None.
Material weaknesses in our internal control over financial reporting could also reduce our ability to obtain financing or could increase the cost of any financing we obtain. Item 1B. Unresolved Staff Comments None. 28
Our acquisition activities may divert management’s attention from our 20 regular operations. Managing a larger and more geographically dispersed operation and product portfolio could also pose challenges for our management team.
Our acquisition activities may divert management’s attention from our regular operations. Managing a larger and more geographically dispersed operation and product portfolio could also pose challenges for our management team.
Our reliance upon OEM customers subjects us to credit, inventory, business concentration, and business failure risks beyond our control. Our sales depend upon the ability of our OEM customers to develop and sell systems that incorporate our products.
Our reliance upon OEM customers subjects us to credit, inventory, and business failure risks beyond our control. Our sales depend upon the ability of our OEM customers to develop and sell systems that incorporate our products.
Further changes in U.S. trade policies, tariffs, taxes, export restrictions or other trade barriers, or restrictions on raw materials or components may limit our ability to produce products, increase our manufacturing costs, decrease our profit margins, reduce the competitiveness of our products, or inhibit our ability to sell products or purchase raw materials or components, which would have a material adverse effect on our business, results of operations and financial condition.
Further changes in trade policies, tariffs, taxes, export restrictions or other trade barriers, or restrictions on raw materials or components may limit our ability to produce products, increase our manufacturing costs, decrease our profit margins, reduce the competitiveness of our products, or inhibit our ability to sell products or purchase raw materials or components, which would have a material adverse effect on our business, results of operations and financial condition.
While our management and our independent registered public accounting firm concluded that our internal control over financial reporting was effective as of December 31, 2023, it is possible that material weaknesses may be identified in the future. As part of our growth strategy, we intend to make additional acquisitions of privately held businesses.
While our management and our independent registered public accounting firm concluded that our internal control over financial reporting was effective as of December 31, 2024, it is possible that material weaknesses may be identified in the future. As part of our growth strategy, we intend to make additional acquisitions of privately held businesses.
Such ratings are 27 used by some investors to inform their investment or voting decisions. Unfavorable sustainability ratings could lead to negative investor sentiment towards us and/or our industry, which could have a negative impact on our access to and costs of capital. The effects of climate change and related regulatory responses may adversely impact our business.
Such ratings are used by some investors to inform their investment or voting decisions. Unfavorable ratings could lead to negative investor sentiment towards us and/or our industry, which could have a negative impact on our access to and costs of capital. The effects of climate change and related regulatory responses may adversely impact our business.
Our insurance policies may not cover all types of cybersecurity risks and liabilities, and even if coverages exist, they may not be sufficient to cover all costs or losses that we may incur. 18 Our reliance on international operations subjects us to risks not typically faced by companies operating exclusively in the U.S.
Our insurance policies may not cover all types of cybersecurity risks and liabilities, and even if coverages exist, they may not be sufficient to cover all costs or losses that we may incur. 16 Our reliance on international operations subjects us to risks not typically faced by companies operating exclusively in the U.S.
We have invested, and continue to invest, human and technology resources in our data compliance efforts that may be time-intensive and costly.
We have invested, and continue to invest, human 24 and technology resources in our data compliance efforts that may be time-intensive and costly.
There has been increased public focus and scrutiny from investors, governmental and nongovernmental organizations, customers and other stakeholders and third parties on corporate sustainability practices in recent years, including with respect to global warming and climate change, diversity, equity and inclusion, and labor and human rights, among other sustainability issues.
There has been increased public focus and scrutiny from investors, governmental and nongovernmental organizations, customers, and other stakeholders and third parties on corporate sustainability and responsibility practices in recent years, including with respect to global warming and climate change, diversity, equity and inclusion, and labor and human rights, among other similar issues.
Despite a recent increase in designations, the current number of notified bodies designated under the new regulation remains significantly lower than the number of notified bodies designated under the previous regime. The current designated notified bodies are therefore facing a backlog of requests as a consequence of which review times have lengthened.
Despite a recent increase in designations, the current number of notified bodies designated under the new regulation remains significantly lower than the number of notified bodies designated under the previous regime. The current designated notified bodies are therefore facing a backlog of requests, and as a consequence, review times have lengthened.
Although our quality system is currently designed to comply with ISO 13485:2016 in connection with our activities outside of the United States, and although the FDA has stated that the standards contained in ISO 13485:2106 are substantially similar to those set forth in the QSR, it is unclear the extent to which this final rule, once effective, could impose additional or different regulatory requirements on us that could increase the costs of compliance or otherwise negatively affect our business.
Although our quality system is currently designed to comply with ISO 13485:2016 in connection with our activities outside of the U.S., and although the FDA has stated that the standards contained in ISO 13485:2106 are substantially similar to those set forth in the QSR, it is unclear the extent to which this final rule, once effective, could impose additional or different regulatory requirements on us that could increase the costs of compliance or otherwise negatively affect our business.
Increasing scrutiny and changing expectations from investors, customers, governments and other stakeholders and third parties with respect to corporate sustainability policies and practices may cause us to incur additional costs or expose us to additional risks.
Increasing scrutiny and changing expectations from investors, customers, governments and other stakeholders and third parties with respect to corporate sustainability and responsibility practices may cause us to incur additional costs or expose us to additional risks.
These interactions include, but are not limited to, ordering and managing materials from suppliers, converting materials to finished products, shipping product to customers, processing transactions, summarizing and reporting results of operations, complying with regulatory, legal and tax requirements, and other processes necessary to manage our business.
These activities include, but are not limited to, ordering and managing materials from suppliers, converting materials to finished products, shipping products to customers, processing transactions, summarizing and reporting results of operations, complying with regulatory, legal and tax requirements, and other processes necessary to manage our business.
Certain single source suppliers of key components for us could decide or have decided to stop producing some of these components. If we fail to find alternative 21 sources, redesign our products or otherwise manage this transition effectively, our business would be adversely impacted.
Certain single source suppliers of key components for us could decide to stop producing some of these components. If we fail to find alternative sources, redesign our products or otherwise manage this transition effectively, our business would be adversely impacted.
In addition, implementing changes to mitigate risks associated with such events may result in substantial additional operational expenses in the short- and long-term, which may materially affect our profitability. In addition, concerns over climate change and sustainability have led to foreign and domestic legislative and regulatory initiatives directed at limiting carbon dioxide and other greenhouse gas emissions.
In addition, implementing changes to mitigate risks associated with such events may result in substantial additional operational expenses in the medium- and long-term, which may materially affect our profitability. In addition, concerns over climate change and sustainability have led to some foreign, domestic and local legislative and regulatory initiatives directed at limiting carbon dioxide and other greenhouse gas emissions.
For the foreseeable future, our operations will continue to depend upon industries that are subject to market cycles which, in turn, could adversely affect the market demand for our products. We have also faced increases in inflationary conditions in materials and components, and we expect these inflationary conditions to continue in 2024.
For the foreseeable future, our operations will continue to depend upon industries that are subject to market cycles which, in turn, could adversely affect the market demand for our products. We have also faced increases in inflationary conditions in materials and components.
Products 19 we sell into certain other foreign markets could also become subject to retaliatory tariffs, making our products uncompetitive to similar products not subjected to such import tariffs.
Products we sell into certain other foreign markets 17 could also become subject to retaliatory tariffs, making our products uncompetitive to similar products not subjected to such import tariffs.
However, the outsourcing of these products to such third parties could increase our exposure to geopolitical, economic, trade, and climate related risks, which could substantially impact our ability to obtain critical parts needed in the timely manufacture of our products or could substantially increase the costs of these parts.
However, the outsourcing of these products to such third parties could increase our exposure to geopolitical, economic, trade, natural disasters and other climate related risks, which could substantially impact our ability to obtain critical parts needed in the timely manufacture of our products or could substantially increase the costs of these parts.
Both the standard setting and regulatory landscapes are extremely complex and present significant compliance challenges. Such increased complexity and scrutiny may result in increased costs, increased risk of litigation or reputational damage relating to our sustainability practices or performance, enhanced compliance or disclosure obligations, or other adverse impacts on our business, financial condition or results of operations.
Both the standard setting and regulatory landscapes are evolving and extremely complex, presenting significant compliance challenges. Such increased complexity and scrutiny may result in increased costs, increased risk of litigation or reputational damage relating to our sustainability and responsibility practices or performance, enhanced compliance or disclosure obligations, or other adverse impacts on our business, financial condition or results of operations.
If we overestimate our component and raw material requirements, we may have excess inventory, which would increase our costs. If we underestimate our component and raw material requirements, we may have inadequate inventory, which could interrupt production and delay delivery of our products to customers.
If we overestimate our component and raw material requirements, we may have excess inventory, which would increase our costs. If we underestimate our component and raw material requirements, we may encounter material shortages, which could interrupt production and delay delivery of our products to customers.
Increased competition may also result in price reductions, reduced profit margins, loss of market share and an inability to generate cash flows that are sufficient to maintain or expand our new product development programs. Our results of operations will be adversely affected if we fail to successfully integrate recent and future acquisitions or to grow the acquired businesses as planned.
Increased competition may also result in price reductions, reduced profit margins, loss of market share and an inability to generate cash flows that are sufficient to maintain or expand our new product development programs. 18 Our results of operations will be adversely affected if we fail to identify suitable acquisition candidates, complete acquisitions, successfully integrate recent and future acquisitions or grow the acquired businesses as planned.
For example, we may be subject to, among others, the requirements of the EU Corporate Sustainability Reporting Directive, other EU directives, EU and EU member state regulations, various disclosure requirements (such as information on greenhouse gas emissions, climate risks, use of offsets, and emissions reduction claims) from the State of California as well as the SEC’s proposed rule on climate related disclosures, if finalized.
For example, we may be subject to, among others, the requirements of the EU Corporate Sustainability Reporting Directive, other EU directives, EU and EU member state regulations, various disclosure requirements (such as information on greenhouse gas emissions, climate risks, use of offsets, and emissions reduction claims) from the State of California as well as the SEC’s stayed rule on climate related disclosures, if put in place.
Certain of the raw materials and components we purchase from China are or were subject to these tariffs, which have increased our manufacturing costs and have made our products less competitive than those of our competitors whose inputs are not subject to these tariffs.
Certain of the raw materials and components we purchase from China are or were subject to these tariffs, which have increased our manufacturing costs and have made our products less competitive than those of our competitors whose inputs are not subject to these tariffs. Such tariffs may increase in the future.
Failure to comply with these laws may affect our reputation and operating results negatively, subject us to significant liability, cost or expense, and may require significant management time and attention. In some cases, these legal requirements may be either unclear in their interpretation and application or they may have inconsistent or conflicting requirements with each other.
Failure to comply with these laws may affect our reputation and operating results negatively, subject us to significant liabilities, costs or expenses, and may require significant management time and attention. In some cases, these legal requirements may be either unclear in their interpretation and application or they may have inconsistent or conflicting requirements with each other.
As a result of these factors, our results of operations for any quarter are not necessarily indicative of results to be expected in future periods. Cyberattacks or other incidents could cause significant disruption in, or breach the security of, our or our third-party providers’ information technology systems, and our business may be adversely affected as a result.
As a result of these factors, our results of operations for any quarter are not necessarily indicative of results to be expected in future periods. Our business may be adversely affected by cyberattacks or other incidents that cause significant disruption in, or breach the security of, our information technology systems or those of our third-party providers.
Our sales channels and supply chain in the international marketplace make us subject to tariffs, trade restrictions and other taxes when the raw materials or components we purchase, and the products we sell, cross international borders. Trade tensions between the U.S. and China, as well as those between the U.S. and some other countries, escalated in recent years.
Our sales channels and supply chain in the international marketplace make us subject to tariffs, trade restrictions and other taxes when the raw materials or components we purchase, and the products we sell, cross international borders. Trade tensions between countries, escalated in recent years.
We rely on information technology systems, software and services (collectively, “IT Systems”) for internal and external operations. We operate some of these IT Systems ourselves and also rely on IT Systems provided by third parties to run our business, including to interact with our employees and our customers and suppliers.
We rely on information technology systems, software and services for internal and external operations that are critical to our business (collectively “IT Systems”). We operate some of these IT Systems ourselves and also rely on IT Systems provided by third parties to operate our business activities, including interactions with our employees and our customers and suppliers.
In addition, continued remote and hybrid working arrangements following the COVID-19 pandemic have increased the risk of cybersecurity incidents given the prevalence of phishing and vulnerabilities inherent in non-corporate and home computing environments.
In addition, remote and hybrid working arrangements have increased the risk of cybersecurity incidents given the prevalence of phishing and vulnerabilities inherent in non-corporate and home computing environments.
The EU’s General Data Protection Regulation (the “GDPR”), the California Consumer Privacy Act (“CCPA”), the California Privacy Rights Act (“CPRA”), and the data protection and security laws of other states and countries impose additional requirements with respect to disclosure and deletion of personal information of their residents, imposing penalties for violations and, in some cases, private right of action for data breaches.
The EU’s General Data Protection Regulation (the “GDPR”), the CCPA, and the data protection and security laws of other states and countries impose additional requirements with respect to disclosure and deletion of personal information of their residents, imposing penalties for violations and, in some cases, private right of action for data breaches.
This dynamic may adversely impact our relationship with these suppliers. For example, these suppliers could increase the price of those components or reduce their supply of those components to us, which could have a significant adverse effect on our business operations or lead to permanent loss of customer orders.
For example, these suppliers could increase the price of those components or reduce their supply of those components to us, which could have a significant adverse effect on our business operations or lead to permanent loss of customer orders.
Our results of operations will be adversely affected if we fail to realize the full value of our intangible assets. As of December 31, 2023, we had $629.5 million of net intangible assets, including goodwill, on our consolidated balance sheet. Net intangible assets consist principally of goodwill, customer relationships, patents, trademarks, core technologies and technology licenses.
Our results of operations will be adversely affected if we fail to realize the full value of our intangible assets. As of December 31, 2024, we had $769.9 million of net intangible assets, including goodwill, on our consolidated balance sheet. Net intangible assets consist principally of goodwill, customer relationships, patents, trademarks, tradenames, and core technologies.
During the year ended December 31, 2023, approximately 53% of our revenues were from customers outside of the U.S.
During the year ended December 31, 2024, approximately 49% of our revenues were from customers outside of the U.S.
For example, diminished growth expectations, economic and political uncertainty in regions across the globe and effects of the COVID-19 pandemic adversely impacted our customers’ financial condition and ability to maintain product order levels and reduced the demand for our products in 2020.
For example, diminished growth expectations, economic and political uncertainty in regions across the globe and effects of the COVID-19 pandemic adversely impacted our customers’ financial condition and ability to maintain product order levels and reduced the demand for our products in 2020, and other pandemics and public health crises could have similar consequences.
Like other global companies, there are constant cyber related threats and risks to our IT Systems and data, including by internal and external perpetrators of random or targeted malicious cyberattacks, computer viruses, malware, worms, bot attacks or other destructive or disruptive software (for example, ransomware) and attempts to misappropriate customer information and cause system failures and disruptions, as well as power outages, catastrophes, hardware and software bugs, misconfigurations or failures, and other unforeseen events.
Like other global companies, there are constant cyber related threats and risks from internal and external perpetrators of random or targeted malicious cyberattacks, computer viruses, malware, worms, bot attacks or other destructive or disruptive software (for example, ransomware) and attempts to misappropriate customer information and cause system failures and disruptions, malfeasance by insiders, human or technological error, as well as power outages, natural disasters, hardware and software bugs, misconfigurations or failures, and other unforeseen events.
In addition, our sales are reactive to changes in our customers’ businesses. For instance, a customer that placed a large order in one period could subsequently experience a downturn in business and, as a result, could reduce the amount of products it purchases from us in future periods.
For instance, a customer that placed a large order in one period could subsequently experience a downturn in business and, as a result, could reduce the amount of products it purchases from us in future periods.
Various elements of healthcare reforms, such as comparative effectiveness research, an independent payment advisory board, payment system reforms, including shared savings pilots, and other provisions, could meaningfully change the way healthcare is developed and delivered and may have material adverse impact on numerous aspects of our business, results of operations and financial condition. 25 Changes in government regulations related to our business or our products could reduce demand for our products or increase our expenses.
Various elements of healthcare reforms, such as comparative effectiveness research, an independent payment advisory board, payment system reforms, including shared savings pilots, and other provisions, could meaningfully change the way healthcare is developed and delivered and may have material adverse impact on numerous aspects of our business, results of operations and financial condition.
If there is insufficient UK Approved Body capacity, there is a risk that our product certification could be delayed which might impact our ability to market products in Great Britain after the respective transition periods. From time to time, legislation is drafted and introduced in Congress that could significantly change the statutory provisions governing the regulation of medical devices.
If there is insufficient UK approved body capacity, there is a risk that our product certification could be delayed which might impact our ability to market products in Great Britain after the respective transition periods. From time to time, legislation is drafted and introduced in the U.S.
In the EU, notified bodies must be officially designated to certify products and services in accordance with the EU Medical Devices Regulation. Their designation process, which is significantly stricter under the new regulation, has experienced considerable delays due to the COVID-19 pandemic.
In the EU, notified bodies must be officially designated to certify products and services in accordance with the EU Medical Devices Regulation. Their designation process is significantly stricter under the new regulation.
As of December 31, 2023, we had outstanding debt of $358.1 million under our amended and restated senior secured credit agreement (as amended, the “Third Amended and Restated Credit Agreement”) and $416.6 million additional borrowing capacity available under the revolving credit facility.
As of December 31, 2024, we had outstanding debt of $419.2 million under our amended and restated senior secured credit agreement (as amended, the “Third Amended and Restated Credit Agreement”) and $346.2 million of additional borrowing capacity available under the revolving credit facility.
In addition, the terms of any additional equity or debt issuances may adversely affect the value and price of our common shares. Our existing indebtedness could adversely affect our future business, financial condition and results of operations.
In addition, the terms of any additional equity or debt issuances may adversely affect the value and price of our common shares. Our existing indebtedness could adversely affect our future business, financial condition and results of operations. As of December 31, 2024, we had $419.2 million of outstanding debt.
A prolonged inability to obtain certain raw materials, key components or other goods is possible and could have a significant adverse effect on our business operations, damage our relationships with customers, or even lead to permanent loss of customer orders. In addition, certain of our businesses buy components, including limited or sole source items, from competitors of our other businesses.
A prolonged inability to obtain or increase in the prices of certain raw materials, key components or other goods is possible and could have a significant adverse effect on our business operations, damage our relationships with customers, or even lead to permanent loss of customer orders.
Such factors include: • fluctuations in our customers’ businesses; • decisions by customers to reduce their purchases of our products; • timing and recognition of revenues from customer orders; • timing and market acceptance of new products or enhancements introduced by us or our competitors; 17 • availability and pricing of parts from our suppliers and the manufacturing capacity of our subcontractors; • changes in the prices of our products or of our competitors’ products; and • fluctuations in foreign currency exchange rates.
Such factors include: fluctuations in our customers’ businesses; decisions by customers to reduce their purchases of our products; timing and recognition of revenues from customer orders; timing and market acceptance of new products or enhancements introduced by us or our competitors; availability and pricing of parts from our suppliers and the manufacturing capacity of our subcontractors; changes in the prices of our products or of our competitors’ products; and fluctuations in foreign currency exchange rates. 15 We received in the past, and may receive in the future, several large orders in one quarter from a customer and then receive no orders from that customer in the next quarter.
Others may violate our intellectual property rights and cause us to incur significant costs to protect our rights. Our future success depends in part upon the protection of our intellectual property rights, including patents, trade secrets, know-how and continuing technological innovation. We do not have personnel dedicated to the oversight, organization and management of our intellectual property.
Our future success depends in part upon the protection of our intellectual property rights, including patents, trade secrets, know-how and continual technological innovation. We do not have personnel fully dedicated to the oversight, organization and management of our intellectual property.
Later discovery of previously unknown problems with a product or manufacturer could result in fines, delays or suspensions of regulatory clearances, approvals or certification, seizures or recalls of products, physician advisories or other field actions, operating restrictions and/or criminal prosecution. We may also initiate field actions as a result of a failure to strictly comply with our internal quality policies.
Later discovery of previously unknown problems with a product or manufacturer could result in fines, delays or suspensions of regulatory clearances, approvals or certification, seizures or recalls of products, physician advisories or other field actions, operating restrictions and/or criminal prosecution.
We do not control our third-party service providers and we do not maintain redundant systems for some of such services, increasing our vulnerability to problems with such services. In addition, in the ordinary course of business, we and our third-party service providers collect, process and maintain confidential business information as well as personal information.
We do not control our third-party service providers and we do not maintain redundant systems for some of such services, increasing our vulnerability to problems with such services.
Such events could cause us to incur increased shipping costs that could not be passed on to our customers, negatively impacting our profitability and our relationships with customers. 22 We are subject to extensive and dynamic 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.
We are subject to extensive and dynamic 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.
Our customers’ failure to pay and/or our failure to maintain sufficient reserves could have a material adverse effect on our future cash flows and financial condition. 29 If we fail to maintain appropriate internal controls in the future, we may not be able to report our financial results accurately, which may adversely affect our stock price and our business.
If we fail to maintain appropriate internal controls in the future, we may not be able to report our financial results accurately, which may adversely affect our stock price and our business.
In addition, to the extent that turmoil in the credit markets or increases in interest rates make it more difficult for some customers to obtain financing, their ability to pay may be adversely impacted.
In addition, to the extent that turmoil in the credit markets or increases in interest rates make it more difficult for some customers to obtain financing, their ability to pay may be adversely impacted. Our customers’ failure to pay and/or our failure to maintain sufficient reserves could have a material adverse effect on our future cash flows and financial condition.
Adverse economic conditions, large inventory positions, limited marketing resources and other factors influencing these OEM customers could have a substantial adverse effect on our financial results. We cannot assure investors that our OEM customers will not experience financial or other difficulties that could adversely affect their operations and, in turn, adversely affect our results of operations and financial condition.
Adverse economic conditions, large inventory positions, limited marketing resources and other factors influencing these OEM customers could have a substantial adverse effect on our financial results.
In addition, if we are unable to successfully anticipate changes in economic and political conditions, we may be unable to effectively plan for and respond to those changes, and our business could be negatively affected. 16 Our business and operations, and the operations of our suppliers and customers, have been, and may in the future be adversely affected by epidemics, pandemics or other public health crises such as the COVID-19 pandemic outbreak.
In addition, if we are unable to successfully anticipate changes in economic and political conditions, we may be unable to effectively plan for and respond to those changes, and our business could be negatively affected.
We received in the past, and may receive in the future, several large orders in one quarter from a customer and then receive no orders from that customer in the next quarter. As a result, the timing of revenue recognition from customer orders can cause significant fluctuations in our operating results from quarter to quarter.
As a result, the timing of revenue recognition from customer orders can cause significant fluctuations in our operating results from quarter to quarter. In addition, our sales are reactive to changes in our customers’ businesses.
For example, subject to transitional periods for validly-certified devices, the new Great Britain regulations are likely to require medical devices placed on the Great Britain market to be “UKCA” certified by a UK Approved Body in order to be lawfully placed on the market.
Under the UK Medical Devices Regulations, in order to be lawfully placed on the Great Britain market, Class I (non-sterile, non-measuring or non-re-useable) medical devices need to be self-certified, in accordance with United Kingdom Conformity Assessment (“UKCA”), and other medical devices need to be “UKCA” certified by a UK approved body.
As we continue to focus on developing our sustainability practices, such practices may not meet the standards of all of our stakeholders and advocacy groups may campaign for further changes. Many of our large, global customers are also committing to long-term targets to reduce greenhouse gas emissions within their supply chains.
There has similarly been an increase in activism and litigation alleging that corporate diversity, equity and inclusion programs may discriminate against certain groups. Many of our large, global customers are also committing to long-term targets to reduce greenhouse gas emissions within their supply chains.
The U.K. government has stated that the amended regulations are likely to apply starting in July 2024. Understanding and ensuring compliance with any new requirements is likely to lead to further complexity and increased costs to our business.
If this change is implemented, we may no longer be required to affix the physical UKCA mark to our devices, but we may need to assign and affix a UDI. Understanding and ensuring compliance with any new requirements is likely to lead to further complexity and increased costs to our business.
Removed
We may face risks related to health epidemics and pandemics or other outbreaks of communicable diseases. The COVID-19 pandemic and governments’ measures taken in response had a significant adverse impact, both direct and indirect, on our business and on the broader economy.
Added
Political conditions, including n ew and changing laws or tariffs, regulations, government funding, executive orders and enforcement priorities, may impact customer budgets and create uncertainty about how such laws and regulations will be interpreted and applied, which may impact 14 customer demand and adversely impact our business .
Removed
We have, at times, experienced, and may in the future experience, weakened demand from certain customers as a result of a public health crisis, which adversely affected our revenues. For example, healthcare providers have, at times, deferred elective medical procedures in order to focus on combating the COVID-19 pandemic, which significantly reduced demand for certain of our medical products.
Added
For example, changes in the regulatory environment affecting life sciences and pharmaceutical companies, and reduced budget allocations to government agencies that fund research and development activities, such as the U.S. National Institutes of Health, or NIH, or targeted cancellations by the U.S. federal government of certain grants or contracts, could adversely affect our business or results of operations.
Removed
We also faced difficulty sourcing some materials and components necessary to fulfill production requirements and meeting scheduled shipments due to suppliers’ capacity constraints and shipping and transportation disruptions during the COVID-19 pandemic. These disruptions adversely affected our ability to manufacture our products and meet our customers’ schedules.
Added
In addition, in the ordinary course of business, we and our third-party service providers collect, process and maintain data about customers, employees, business partners and others, including personal information as well as proprietary business information (collectively “Confidential Information”).

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeWe have not identified any material risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected us, including our operations, business strategy, results of operations, or financial condition. 30 Cybersecurity Governance The Board of Directors recognizes the need for continually monitoring our information security risks and cybersecurity initiatives.
Biggest changeWe face risks from cybersecurity threats that, if realized, are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition. We have not experienced any incidents that have materially affected us, including our operations, business strategy, results of operations, or financial condition.
Both the Audit Committee and the ESG Committee report to the full Board regarding its activities, including those related to our cybersecurity risks and program. The full Board also receives briefings from management at least once a year on our cybersecurity risk management program.
Both the Audit Committee and the ESG Committee report to the full Board regarding their activities, including those related to our cybersecurity risks and program. The full Board also receives briefings from management at least once a year on our cybersecurity risk management program.
The CISO, who is also our CIO, has over 22 years of experience managing global IT operations, including strategy, applications, infrastructure, information security, support and execution. The CISO/CIO holds a Master of Science degree in computer science and engineering (with a specialization in Information Assurance) and a Doctorate of Engineering Management/Systems Engineering degree.
The CISO, who is also our CIO, has over 23 years of experience managing global IT operations, including strategy, applications, infrastructure, information security, support and execution. The CISO/CIO holds a Master of Science degree in computer science and engineering (with a specialization in Information 29 Assurance) and a Doctorate of Engineering Management/Systems Engineering degree.
In addition to the role the Audit Committee plays in overseeing enterprise and cybersecurity risks, the Environmental, Social and Governance (“ESG”) Committee reviews and oversees our overall cybersecurity program, including its strategy and processes, and is updated by company management at each of the ESG Committee’s meetings on the status and developments of the cybersecurity program.
In addition to the role the Audit Committee plays in overseeing enterprise and cybersecurity risks, the Environmental, Social and Governance (“ESG”) Committee reviews and oversees our overall cybersecurity program, including its strategy and processes, and is updated by management on the status and development of the cybersecurity programs at each of the ESG Committee’s meetings.
Item 1C. Cybersecurity Cybersecurity Risk Management and Strategy We have developed and implemented a cybersecurity risk management program intended to protect the confidentiality, integrity, and availability of our critical systems and information. Our cybersecurity risk management program includes a cybersecurity incident response plan.
Item 1C. Cybersecurity Cybersecurity Risk Management and Strategy We have developed and implemented a cybersecurity risk management program intended to protect the confidentiality, integrity, and availability of our critical systems and information.
Our management team oversees efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefings from internal security personnel, threat intelligence and other information obtained from governmental, public, or private sources, including external consultants engaged by us, and alerts and reports produced by security tools deployed in the information technology environment. 31
Our management team takes steps to stay informed about and monitor efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefings from internal security personnel, threat intelligence and other information obtained from governmental, public, or private sources, including external consultants engaged by us, and alerts and reports produced by security tools deployed in the information technology environment.
We design and assess our program based on various cybersecurity frameworks, such as the National Institute of Standards and Technology (“NIST”). We use these cybersecurity frameworks and information security standards as a guide to help us identify, assess, and manage cybersecurity risks relevant to our business.
We design and assess our program based on various cybersecurity frameworks, such as the National Institute of Standards and Technology (“NIST”) as well as International Organization for Standardization (“ISO”) 27001. We use these cybersecurity frameworks and information security standards as a guide to help us identify, assess, and manage cybersecurity risks relevant to our business.
The Audit Committee of our Board of Directors (the “Board”) undertakes the primary oversight responsibility over our cybersecurity risks and information security controls. Management briefs the Audit Committee on information security matters at each quarterly meeting of the Audit Committee.
Cybersecurity Governance The Board of Directors (the “Board”) recognizes the need for continually monitoring our information security risks and cybersecurity initiatives. The Audit Committee of our Board undertakes the primary oversight responsibility over our cybersecurity risks and information security controls. Management briefs the Audit Committee on information security matters at each quarterly meeting of the Audit Committee.
Specifically, our cybersecurity risk management program includes: • risk assessments designed to help identify material cybersecurity risks to our critical systems and enterprise information technology (“IT”) environment; • a security team and an external service provider principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity threats and incidents; • the use of external service providers, where appropriate, to assess, test, or otherwise assist with aspects of our cybersecurity security controls; • cybersecurity awareness training for our employees, incident response personnel, and senior management on a quarterly basis as part of the risk mitigation strategy; • quarterly testing of the effectiveness of the cybersecurity awareness training; • a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; • a third-party risk management process for service providers, suppliers, and vendors; and • cybersecurity internal and external penetration testing.
Key elements of our cybersecurity risk management program, include but are not limited, to the followings: • risk assessments designed to help identify material risks from cybersecurity threats to our critical systems and information; • a security team and an external service provider principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity threats and incidents; • the use of external service providers, where appropriate, to assess, test, or otherwise assist with aspects of our cybersecurity security processes; • cybersecurity awareness training for our employees, including incident response personnel and senior management, on a quarterly basis as part of the risk mitigation strategy; • quarterly testing of the effectiveness of the cybersecurity awareness training; • a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; • a third-party risk management process for key service providers, based on our assessment of their criticality to our operations and respective risk profile, suppliers, and vendors; and • cybersecurity internal and external penetration testing.
Our cybersecurity risk management program is integrated into our overall enterprise risk management program, sharing common methodologies and governance processes across the enterprise risk management program.
Our cybersecurity risk management program is designed to be integrated into our overall risk management program, and shares common methodologies and governance processes across the risk management program.
Our DCISO has served in various roles in information security for over 12 years and holds a Certified Information System Security Professional (“CISSP”) certification.
Our DCISO has served in various roles in information security for over 16 years and holds a Bachelor of Science degree in mathematics and computer science and a Master of Science degree in computer science.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe consider our facilities suitable and adequate for the purposes for which they are used and do not anticipate difficulty in renewing existing leases or in finding alternative facilities. We believe all our properties have been properly maintained. Ite m 3.
Biggest changeThese additional facilities cover approximately 670,000 square feet, of which approximately 560,000 square feet are leased and approximately 110,000 square feet are owned. We consider our facilities suitable and adequate for the purposes for which they are used and do not anticipate difficulty in renewing existing leases or in finding alternative facilities.
Location Principal Use Current Segment Approximate Square Feet Owned/Leased Bedford, Massachusetts United States Manufacturing, R&D, Marketing, Sales and Administration Precision Medicine and Manufacturing, Medical Solutions, Robotics and Automation & Corporate 147,000 Leased; expires in 2031 Apex, North Carolina United States Manufacturing, R&D, Marketing, Sales and Administration Robotics and Automation 117,000 Leased; expires in 2028 Ludwigsstadt Germany Manufacturing, and Administration Medical Solutions 105,000 Owned Přelouč Czech Republic Manufacturing, and Administration Medical Solutions 95,000 Owned Wackersdorf Germany R&D Precision Medicine and Manufacturing 68,000 Owned Mukilteo, Washington, United States Manufacturing, R&D, Marketing, Sales and Administration Precision Medicine and Manufacturing 63,000 Owned Additional manufacturing, research and development, sales, service and logistics sites are located in California, Connecticut, Florida, Michigan, New York, and Oregon within the United States, and in China, Czech Republic, Germany, Italy, Japan, Spain and the United Kingdom.
Location Principal Use Current Segment Approximate Square Feet Owned/Leased Bedford, Massachusetts United States Manufacturing, R&D, Marketing, Sales and Administration Automation Enabling Technologies, Medical Solutions, Corporate 147,000 Leased; expires in 2031 Apex, North Carolina United States Manufacturing, R&D, Marketing, Sales and Administration Automation Enabling Technologies 117,000 Leased; expires in 2028 Ludwigsstadt Germany Manufacturing and Administration Medical Solutions 105,000 Owned Přelouč Czech Republic Manufacturing and Administration Medical Solutions 95,000 Owned Wackersdorf Germany R&D Automation Enabling Technologies 68,000 Owned Mukilteo, Washington, United States Manufacturing, R&D, Marketing, Sales and Administration Automation Enabling Technologies 63,000 Owned Additional manufacturing, research and development, sales, service and logistics sites are located in California, Connecticut, Florida, Michigan, New York, and Oregon within the United States, and in China, Czech Republic, Germany, Italy, Japan, Spain and the United Kingdom.
Item 2. P roperties Our principal owned and leased properties as of December 31, 2023 are listed in the table below.
Item 2. P roperties Our principal owned and leased properties as of December 31, 2024 are listed in the table below.
Legal Proceedings The Company is subject to various legal proceedings and claims that arise in the ordinary course of business. See Note 17 to Consolidated Financial Statements for additional information about legal proceedings involving the Company. Ite m 4. Mine Safety Disclosures Not applicable. 32 PA RT II
We believe all our properties have been properly maintained. Ite m 3. Legal Proceedings The Company is subject to various legal proceedings and claims that arise in the ordinary course of business. See Note 17 to Consolidated Financial Statements for additional information about legal proceedings involving the Company. Ite m 4. Mine Safety Disclosures Not applicable. 30 PA RT II
Removed
These additional facilities cover approximately 630,000 square feet, of which approximately 520,000 square feet are leased and approximately 110,000 square feet are owned. These facilities are used by our Precision Medicine and Manufacturing, Medical Solutions and Robotics and Automation segments.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

99 edited+28 added−21 removed82 unchanged
Biggest changeRobotics and Automation Robotics and Automation segment revenue in 2023 decreased by $34.8 million, or 11.3%, versus 2022, primarily due to a decrease in demand in advanced industrial markets, driven by microelectronics markets. 38 Gross Profit The following table sets forth the gross profit and gross profit margin for each of our reportable segments for 2023 and 2022 (dollars in thousands): 2023 2022 Gross profit: Precision Medicine and Manufacturing $ 139,060 $ 129,173 Medical Solutions 135,640 108,713 Robotics and Automation 130,885 146,150 Unallocated Corporate and Shared Services (5,688 ) (5,564 ) Total $ 399,897 $ 378,472 Gross profit margin: Precision Medicine and Manufacturing 49.1 % 47.0 % Medical Solutions 41.7 % 39.1 % Robotics and Automation 47.9 % 47.4 % Total 45.4 % 44.0 % 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, headcount, inventory obsolescence and warranty expenses.
Biggest changeMedical Solutions segment revenue in 2023 increased $55.6 million, or 17.0%, versus 2022, primarily due to increases in sales from our advanced surgery and precision medicine products, and $8.1 million of revenue contributions from our 2022 acquisition. 35 Gross Profit The following table sets forth the gross profit and gross profit margin for each of our reportable segments for 2024, 2023 and 2022 (dollars in thousands): 2024 2023 2022 Gross profit: Automation Enabling Technologies $ 234,975 $ 234,798 $ 245,005 Medical Solutions 189,957 170,787 139,031 Unallocated (3,387 ) (5,688 ) (5,564 ) Total $ 421,545 $ 399,897 $ 378,472 Gross profit margin: Automation Enabling Technologies 47.9 % 47.0 % 45.9 % Medical Solutions 41.4 % 44.7 % 42.5 % Total 44.4 % 45.4 % 44.0 % 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, headcount, inventory obsolescence and fair value adjustments, warranty expenses, and intangible amortization.
The First Amendment increased the revolving credit facility commitment under the Third Amended and Restated Credit Agreement by $145.0 million, from $350.0 million to $495.0 million, and reset the uncommitted accordion feature to $200.0 million for potential future expansion. On June 2, 2020, we entered into an amendment (the “Second Amendment”) to the Third Amended and Restated Credit Agreement.
The First Amendment increased the revolving credit facility commitment under the Third Amended and Restated Credit Agreement by $145.0 million, from $350.0 million to $495.0 million, and reset the uncommitted accordion feature to $200.0 million for potential future expansion. On June 2, 2020, we entered into an amendment (the “Second Amendment”) to the Credit Agreement.
Income and foreign withholding taxes have not been recognized on the excess of the amount for financial reporting purposes over the tax basis of investments in foreign subsidiaries that are essentially permanent in nature. This amount becomes taxable upon a repatriation of assets from a subsidiary or a sale or liquidation of a subsidiary.
Income and foreign withholding taxes have not been recognized on the excess of the amount for financial reporting purposes over the tax basis of investments in foreign subsidiaries that are essentially permanent in nature. This amount becomes taxable upon the repatriation of assets from a subsidiary or a sale or liquidation of a subsidiary.
Factors which may trigger an impairment of our goodwill, intangible assets and other long-lived assets include the following: • significant underperformance relative to historical or projected future operating results; • changes in our use of the acquired assets or the strategy for our overall business; • long-term negative industry or economic trends; • technological changes or developments; • changes in competition; • loss of key customers or personnel; • adverse judicial or legislative outcomes or political developments; 48 • significant declines in our stock price for a sustained period of time; and • the decline of our market capitalization below net book value as of the end of any reporting period.
Factors which may trigger an impairment of our goodwill, intangible assets and other long-lived assets include the following: • significant underperformance relative to historical or projected future operating results; • changes in our use of the acquired assets or the strategy for our overall business; • long-term negative industry or economic trends; • technological changes or developments; • changes in competition; • loss of key customers or personnel; • adverse judicial or legislative outcomes or political developments; • significant declines in our stock price for a sustained period of time; and • the decline of our market capitalization below net book value as of the end of any reporting period.
Revenue is measured as the amount of consideration we expect 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. Substantially all of our revenue is recognized at a point in time, upon shipment, rather than over time.
Revenue is measured as the amount of consideration we expect 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. 43 Substantially all of our revenue is recognized at a point in time, upon shipment, rather than over time.
If actual market conditions are more favorable than 46 anticipated, inventory previously written down may be sold, resulting in lower cost of revenue and higher operating income than expected in that period. Share-Based Compensation. We record expenses associated with share-based compensation awards to employees and directors based on the fair value of awards as of the grant date.
If actual market conditions are more favorable than anticipated, inventory previously written down may be sold, resulting in lower cost of revenue and higher operating income than expected in that period. Share-Based Compensation. We record expenses associated with share-based compensation awards to employees and directors based on the fair value of awards as of the grant date.
Management’s projections are revised, if necessary, in subsequent periods when underlying factors change the estimated probability of achieving the performance targets as well as the levels of achievement. When the estimated achievement levels are adjusted at a later date, a cumulative adjustment to the share-based compensation expense previously recognized would be required.
Management’s projections are revised, if necessary, in subsequent periods when underlying factors change the estimated probability of achieving the performance targets as well as the levels 44 of achievement. When the estimated achievement levels are adjusted at a later date, a cumulative adjustment to the share-based compensation expense previously recognized would be required.
We expect to fund share repurchases through cash on hand and cash generated from operations. In February 2020, our Board of Directors approved a new share repurchase plan (the “2020 Repurchase Plan”) authorizing the repurchase of $50.0 million worth of common shares, effective after our prior repurchase plan was completed.
We expect to fund share repurchases through cash on hand and cash generated from operations. In February 2020, our Board of Directors approved a share repurchase plan (the “2020 Repurchase Plan”) authorizing the repurchase of $50.0 million worth of common shares, effective after our prior repurchase plan was completed.
In addition to service-based awards granted to a wider employee base and stock options granted to certain members of the executive management team, we typically grant three types of performance-based awards to certain members of the executive management team: performance-based restricted stock units with company-specific financial performance conditions (“attainment-based PSUs”), performance-based restricted stock units with market-based performance conditions (“market-based PSUs”), and performance-based restricted stock units with a hybrid of company financial metrics and market-based performance conditions (“hybrid PSUs”).
In addition to service-based awards granted to a wider employee base and stock options granted to certain members of the executive management team, we typically grant three types of performance-based awards to certain members of the executive management team: performance-based restricted stock units with company-specific financial performance conditions (“attainment-based PSUs”), performance-based restricted stock units with market-based performance conditions (“market-based PSUs”), and performance-based restricted stock units with a hybrid of company-specific financial performance conditions and market-based performance conditions (“hybrid PSUs”).
Such revisions in the estimates of the potential liabilities could have a material impact on our results of operations and financial position. We expense legal fees as incurred. 49 Recent Accounting Pronouncements See Note 2 to Consolidated Financial Statements for recent accounting pronouncements that could have a significant effect on us.
Such revisions in the estimates of the potential liabilities could have a material impact on our results of operations and financial position. We expense legal fees as incurred. Recent Accounting Pronouncements See Note 2 to Consolidated Financial Statements for recent accounting pronouncements that could have a significant effect on us.
There is no assurance that such capital will be available on reasonable terms or at all. Significant factors affecting the management of our ongoing cash requirements are the adequacy of available bank lines of credit and our ability to attract long-term capital with satisfactory terms.
There is no assurance that such capital will be available on reasonable terms or at all. 39 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.
Likewise, should we determine that we will not be able to realize all or part of our net deferred tax assets in the future, an adjustment to the valuation allowance for the deferred tax assets will be recorded and will reduce our net income in the period in which such determination is made.
Likewise, should we determine that we will not be able to realize all or part of our net 46 deferred tax assets in the future, an adjustment to the valuation allowance for the deferred tax assets will be recorded and will reduce our net income in the period in which such determination is made.
Included in net interest expense was non-cash interest expense of approximately $1.2 million for both 2023 and 2022, related to the amortization of deferred financing costs on our debt. Foreign Exchange Transaction Gains (Losses), Net Foreign exchange transaction gains (losses) were nominal in both 2023 and 2022.
Included in net interest expense was non-cash interest expense of approximately $1.2 million for both 2023 and 2022, related to the amortization of deferred financing costs on our debt. Foreign Exchange Transaction Gains (Losses), Net Foreign exchange transaction gains (losses) were nominal in 2024, 2023, and 2022.
The DCF calculations also include a terminal value calculation that is based upon an expected long-term growth rate for the applicable reporting unit. The carrying values of each reporting unit include assets and liabilities which relate to the reporting unit’s operations.
The DCF calculations also include a terminal value calculation that is based upon an expected long-term growth rate for the applicable reporting unit. The carrying values of each 45 reporting unit include assets and liabilities which relate to the reporting unit’s operations.
The results of funding valuations depend on both the funding deficit and the assumptions used, such as asset returns, discount rates, mortality rates, retail price inflation and other market driven assumptions. Each assumption used represents one estimate of many possible future outcomes.
The results of funding valuations depend on both the funding deficit and the assumptions used, such as asset returns, discount rates, 42 mortality rates, retail price inflation and other market driven assumptions. Each assumption used represents one estimate of many possible future outcomes.
The Second Amendment revised our consolidated leverage ratio definition (as defined in the Third Amended and Restated Credit Agreement) allowing for the use of up to $25 million unrestricted cash and cash equivalents as a reduction to consolidated funded indebtedness (as defined in the Third Amended and Restated Credit Agreement).
The Second Amendment revised our consolidated leverage ratio definition (as defined in the Third Amended and Restated Credit Agreement) allowing for the 40 use of up to $25 million unrestricted cash and cash equivalents as a reduction to consolidated funded indebtedness (as defined in the Third Amended and Restated Credit Agreement).
These estimates are based on current interest rates on floating rate obligations, as defined in the Third Amended and Restated Credit Agreement, for the remainder of the contractual life of both the term loan and outstanding borrowings under the revolving credit facility, and the current commitment fee rate was used for the unused commitments under the revolving credit facility as of December 31, 2023.
These estimates are based on current interest rates on floating rate obligations, as defined in the Third Amended and Restated Credit Agreement, for the remainder of the contractual life of both the term loan and outstanding borrowings under the revolving credit facility, and the current commitment fee rate was used for the unused commitments under the revolving credit facility as of December 31, 2024.
The increase in net interest expense was primarily due to an increase in the weighted average interest rate, partially offset by a decrease in average debt levels under our senior credit facilities. The weighted average interest rate on our outstanding debt was 6.21% and 3.24% during 2023 and 2022, respectively.
The increase in net interest expense was primarily due to an increase in the weighted average interest rate, partially offset by a decrease in average debt levels under our senior credit facilities. The weighted average interest rate on our outstanding debt was 6.21% and 3.24% for 2023 and 2022, respectively.
The comparison assumes an investment of $100 was made on December 31, 2018 in the Company’s common shares and in each of the indices and, in the case of the indices, it also assumes reinvestment of all dividends. The performance shown is not necessarily indicative of future performance.
The comparison assumes an investment of $100 was made on December 31, 2019 in the Company’s common shares and in each of the indices and, in the case of the indices, it also assumes reinvestment of all dividends. The performance shown is not necessarily indicative of future performance.
On March 10, 2022, the Company entered into an amendment (the “Fifth Amendment”) to the Third Amended and Restated 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 feature from $200.0 million to $350.0 million.
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 feature from $200.0 million to $350.0 million.
The borrowings outstanding under the Senior Credit Facilities bear interest at rates based on (a) the Base Rate, as defined in the Third Amended and Restated Credit Agreement, plus a margin ranging between 0.00% to 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 Third Amended and Restated Credit Agreement, plus a margin ranging between 0.75% and 1.75% per annum, determined by reference to our consolidated leverage ratio.
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% to 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.
The increase in gross profit margin was primarily attributable to improved factory productivity, favorable product mix and the impact of business interruption insurance recovery payments, partially offset by an increase in inventory reserves as a result of a demand decline in the advanced industrial market and higher cost of poor quality.
The increase in gross profit margin was primarily attributable to improved factory productivity and the impact of business interruption insurance recovery payments, partially offset by an increase in inventory reserves as a result of a demand decline in the advanced industrial market and higher cost of poor quality.
In addition, the Third Amended and Restated Credit Agreement contains various other customary representations, warranties and covenants applicable to the Company and its subsidiaries, including: (i) limitations on certain payments; (ii) limitations on fundamental changes involving the Company; (iii) limitations on the disposition of assets; and (iv) limitations on indebtedness, investments, and liens.
In addition, the Credit Agreement contains various other customary representations, warranties and covenants applicable to the Company and its subsidiaries, including: (i) limitations on certain payments; (ii) limitations on fundamental changes involving the Company; (iii) limitations on the disposition of assets; and (iv) limitations on indebtedness, investments, and liens.
In conjunction with our ongoing review of our actual results and anticipated future earnings, we continuously reassess the adequacy of the valuation allowance currently in place on our deferred tax assets. In 2023, we established a valuation allowance of $2.1 million recorded on net operating losses, various credits, and other timing items in certain tax jurisdictions.
In conjunction with our ongoing review of our actual results and anticipated future earnings, we continuously reassess the adequacy of the valuation allowance currently in place on our deferred tax assets. In 2024, we established a valuation allowance of $1.9 million recorded on net operating losses, various credits, and other timing items in certain tax jurisdictions.
As of December 31, 2023, the Company’s total amount of unrecognized tax benefits was $4.3 million, of which $3.8 million would favorably affect our effective tax rate, if recognized. Over the next twelve months, we may need to recognize up to $0.3 million of previously unrecognized tax benefits due to statute of limitations closures.
As of December 31, 2024, the Company’s total amount of unrecognized tax benefits was $4.8 million, of which $4.1 million would favorably affect our effective tax rate, if recognized. Over the next twelve months, we may need to recognize up to $0.8 million of previously unrecognized tax benefits due to statute of limitations closures.
As of December 31, 2023, the Company had $49.5 million available for future share repurchases under the 2020 Repurchase Plan.
As of December 31, 2024, the Company had $49.5 million available for future share repurchases under the 2020 Repurchase Plan.
The most recent annual goodwill and indefinite-lived intangible asset impairment test was performed as of the beginning of the second quarter of 2023, using a quantitative assessment, noting no impairment. As of December 31, 2023, there were no indicators of impairment of our long-lived assets. Accounting for Income Taxes .
The most recent annual goodwill and indefinite-lived intangible asset impairment test was performed as of the beginning of the second quarter of 2024, using a qualitative assessment, noting no impairment. As of December 31, 2024, there were no indicators of impairment of our long-lived assets. Accounting for Income Taxes .
Holders As of the close of business on February 21, 2024, there were approximately 30 holders of record of the Company’s common shares. Since many of the common shares are registered in “nominee” or “street” names, the Company believes that the total number of beneficial owners is considerably higher.
Holders As of the close of business on February 17, 2025, there were approximately 30 holders of record of the Company’s common shares. Since many of the common shares are registered in “nominee” or “street” names, the Company believes that the total number of beneficial owners is considerably higher.
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.
Revenue from our products sold to the medical market is generally affected by hospital, life science, and other healthcare provider capital spending, growth rates of surgical procedures, changes in regulatory requirements and laws, demand levels for life science automation technology, aggregation of purchasing by healthcare networks, changes in technology requirements, timing of OEM customers’ product development and new product launches, changes in customer or patient preferences, and general demographic trends.
We combine deep proprietary technology expertise and competencies in precision medicine, medical solutions and robotics and automation with a proven ability to solve complex technical challenges. This enables us to engineer core components and sub-systems that deliver extreme precision and performance, tailored to our customers' demanding applications.
We combine deep proprietary technology expertise and competencies in precision medicine, precision manufacturing, robotics and automation, and advanced surgery with a proven ability to solve complex technical challenges. This enables us to engineer core components and sub-systems that deliver extreme precision and performance, tailored to our customers' demanding applications.
We may pay down our revolving credit facility with cash on hand and cash generated from future operations at any time until maturity. On March 27, 2020, we entered into an amendment (the “First Amendment”) to the Third Amended and Restated Credit Agreement and exercised a portion of the uncommitted accordion feature.
We may pay down our revolving credit facility with cash on hand and cash generated from future operations at any time. On March 27, 2020, we entered into an amendment (the “First Amendment”) to the Credit Agreement and exercised a portion of the uncommitted accordion feature.
Our effective tax rate for 2022 differed from the Canadian statutory rate of 29.0% primarily due to the mix of income earned in jurisdictions with varying tax rates, $4.5 million benefit for foreign derived intangible income, $3.1 million benefit from U.K. patent 41 box deductions and $2.3 million benefit from R&D and other tax credits, partially offset by $2.0 million increase in valuation allowances and a $2.1 million detriment related to disallowed compensation.
Our effective tax rate for 2024 differed from the Canadian statutory rate of 29.0% primarily due to the mix of income earned in jurisdictions with varying tax rates, $3.0 million benefit for foreign derived intangible income, $4.0 million benefit from U.K. patent box deductions and $2.6 million benefit from R&D and other tax credits, partially offset by a $1.9 million increase in valuation allowances and a $1.7 million detriment related to disallowed compensation.
We believe that the Purchasing Managers Index 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. 36 Strategy Our strategy is to drive sustainable, profitable growth through short-term and long-term initiatives, including: • disciplined focus on our diversified business model of providing functionality to long life-cycle OEM customer platforms in attractive medical and advanced industrial niche markets; • improving our business mix to increase medical sales as a percentage of total revenue by: - introducing new products aimed at attractive medical applications, such as minimally invasive and robotic surgery, ophthalmology, patient monitoring, drug delivery, clinical laboratory testing and life science equipment; - deepening our key account management relationships with and driving cross selling of our product offerings to leading medical equipment manufacturers; and - pursuing complementary medical technology acquisitions; • increasing our penetration of high growth advanced industrial applications, such as laser materials processing, intelligent end-of-arm robotic technology solutions, robotics, laser additive manufacturing, automation and metrology, by working closely with OEM customers to launch application specific products that closely match the requirements of each application; • broadening our portfolio of enabling proprietary technologies and capabilities through increased investment in new product development, and investments in application development to further penetrate existing customers, while expanding the applicability of our solutions to new markets; • broadening our product and service offerings through the acquisition of innovative and complementary technologies and solutions in medical and advanced industrial technology applications; • expanding sales and marketing channels to reach new target customers; • improving our existing operations to expand profit margins and improve customer satisfaction by implementing lean manufacturing principles, strategic sourcing across our major production sites, and optimizing and limiting the growth of our fixed cost base; and • attracting, retaining, and developing world-class talented, diverse, and motivated employees.
Strategy Our strategy is to drive sustainable, profitable growth through short-term and long-term initiatives, including: • disciplined focus on our diversified business model of providing functionality to long life-cycle OEM customer platforms in attractive medical and advanced industrial niche markets; • improving our business mix to increase medical sales as a percentage of total revenue by: - introducing new products aimed at attractive medical applications, such as minimally invasive and robotic surgery, ophthalmology, patient monitoring, drug delivery, clinical laboratory testing and life science equipment; - deepening our key account management relationships with and driving cross selling of our product offerings to leading medical equipment manufacturers; and - pursuing complementary medical technology acquisitions; • increasing our penetration of high growth advanced industrial applications, such as laser materials processing, intelligent end-of-arm robotic technology solutions, robotics, laser additive manufacturing, automation and metrology, by working closely with OEM customers to launch application specific products that closely match the requirements of each application; • broadening our portfolio of enabling proprietary technologies and capabilities through increased investment in new product development, and investments in application development to further penetrate existing customers, while expanding the applicability of our solutions to new markets; • broadening our product and service offerings through the acquisition of innovative and complementary technologies and solutions in medical and advanced industrial technology applications; • expanding sales and marketing channels to reach new target customers; • improving our existing operations to expand profit margins and improve customer satisfaction by implementing lean manufacturing principles, strategic sourcing across our major production sites, and optimizing and limiting the growth of our fixed cost base; and • attracting, retaining, and developing world-class talented and motivated employees.
The following table summarizes these financial covenants and our compliance therewith as of December 31, 2023: Requirement Actual as of December 31, 2023 Maximum consolidated leverage ratio (1) 3.50 1.70 Minimum consolidated fixed charge coverage ratio 1.50 4.67 (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.
The following table summarizes these financial covenants and our compliance therewith as of December 31, 2024: Requirement Actual as of December 31, 2024 Maximum consolidated leverage ratio (1) 3.50 1.86 Minimum consolidated fixed charge coverage ratio 1.50 4.69 (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.
In 2024, we are contractually required to make $5.0 million in repayments under our term loan facility. In addition, we may make optional repayments under our revolving credit facility from time to time with available cash generated from future operating activities. Other Liquidity Matters Pension Plans We maintain a defined benefit pension plan (the “U.K. Plan”) in Novanta Technologies U.K.
In 2025, we are contractually required to make $4.7 million in repayments under our term loan facility. In addition, we may make optional repayments under our revolving credit facility from time to time with available cash generated from future operating activities. Other Liquidity Matters Pension Plans We maintain a defined benefit pension plan (the “U.K. Plan”) in Novanta Technologies U.K.
The term loan is payable in quarterly installments of approximately €1.1 million ($1.2 million) with the final installment of €58.5 million ($64.7 million) due upon maturity in March 2027. Borrowings under the revolving credit facility are due at maturity in March 2027.
The term loan is payable in quarterly installments of approximately €1.1 million ($1.2 million) with the final installment of €58.5 million ($61.0 million) due upon maturity in March 2027. Borrowings under the revolving credit facility are due at maturity in March 2027.
Senior Credit Facilities In December 2019, we entered into the Third Amended and Restated Credit Agreement, originally consisting of a $100.0 million U.S. dollar equivalent euro-denominated (approximately €90.2 million) 5-year term loan facility and a $350.0 million 5-year revolving credit facility (collectively, the “Senior Credit Facilities”).
Senior Credit Facilities In December 2019, we entered into the Third Amended and Restated Credit Agreement (as amended from time to time, the “Credit Agreement”), originally consisting of a $100.0 million U.S. dollar equivalent euro-denominated (approximately €90.2 million) 5-year term loan facility and a $350.0 million 5-year revolving credit facility (collectively, the “Senior Credit Facilities”).
There is no expiration date for the 2020 Repurchase Plan. 33 Performance Graph The following graph compares the cumulative total return on the Company’s common shares with the cumulative total return on the Nasdaq Composite Index and the Russell 2000 Index for the period from December 31, 2018 through December 31, 2023.
There is no expiration date for the 2020 Repurchase Plan. 31 Performance Graph The following graph compares the cumulative total return on the Company’s common shares with the cumulative total return on the Nasdaq Composite Index and the Russell 2000 Index for the period from December 31, 2019 through December 31, 2024.
These estimates also assume only quarterly term loan payments are made and outstanding revolving credit facility remains unchanged throughout the contractual term. The actual interest payments will vary due to changes in our debt level and interest rate.
These estimates also assume only quarterly term loan payments are made and outstanding revolving credit facility remains unchanged throughout the remainder of the contractual term. Actual future interest payments will vary due to changes in our debt level and interest rates.
The final cost to us will be determined by events as they actually become known, including actual return on plan assets and pension payments to plan participants. As of December 31, 2023, the fair value of plan assets exceeded the projected benefit obligation under the U.K. Plan by $3.1 million.
The final cost to us will be determined by events as they actually become known, including actual return on plan assets and pension payments to plan participants. As of December 31, 2024, the fair value of plan assets exceeded the projected benefit obligation under the U.K. Plan by $4.2 million.
Financing Cash Flows Cash used in financing activities was $97.9 million in 2023, primarily due to $86.6 million of term loan and revolving credit facility repayments and $10.6 million of payroll withholding tax payments related to net share settlement upon vesting of share-based compensation awards. 44 Cash used in financing activities was $60.2 million in 2022, primarily due to $59.0 million of term loan and revolving credit facility repayments, $46.3 million of contingent consideration payments related to prior year acquisitions, $11.7 million of payroll withholding tax payments related to net share settlement upon vesting of share-based compensation awards, $10.0 million of repurchases of common shares, and $2.5 million of debt issuance costs in connection with the Fifth Amendment, partially offset by $69.9 million of borrowings under our revolving credit facility used to fund the contingent consideration paid for the ATI acquisition and the cash consideration paid for the MPH acquisition.
Net cash used in financing activities was $60.2 million in 2022, primarily due to $59.0 million of term loan and revolving credit facility repayments, $46.3 million of contingent consideration payments related to prior year acquisitions, $11.7 million of payroll withholding tax payments related to net share settlement upon vesting of share-based compensation awards, $10.0 million of repurchases of common shares, and $2.5 million of debt issuance costs in connection with the Fifth Amendment, partially offset by $69.9 million of borrowings under our revolving credit facility used to fund the contingent consideration payment for our 2021 acquisition and the cash consideration for our 2022 acquisition.
All rights reserved. 34 Ite m 6. [Reserved] 35 Ite m 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the Consolidated Financial Statements and Notes included in Item 8 of this Annual Report on Form 10-K.
All rights reserved. 32 Ite m 6. [Reserved] Ite m 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations ( “ MD&A”) should be read in conjunction with the Consolidated Financial Statements and Notes included in Item 8 of this Annual Report on Form 10-K.
Net Income Net income was $72.9 million for the year ended December 31, 2023, compared to $74.1 million for the year ended December 31, 2022, reflecting the impact of the factors described above. Liquidity and Capital Resources We assess our liquidity in terms of our ability to generate cash to fund our operating, investing, and financing activities.
Net Income Net income was $64.1 million for 2024, compared to $72.9 million for 2023, and $74.1 million for 2022, reflecting the impact of the factors described above. Liquidity and Capital Resources We assess our liquidity in terms of our ability to generate cash to fund our operating, investing, and financing activities.
These forward-looking statements include, but are not limited to, our financial results and our financial condition; our belief that the Purchasing Managers Index 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; anticipated revenue performance; 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; expectations regarding tax exposures; anticipated reinvestment of future earnings and dividend policy; anticipated expenditures in regard to the Company’s benefit plans; future acquisitions and integration and anticipated benefits from acquisitions and dispositions; anticipated economic benefits and expected costs of restructuring programs; 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.
These forward-looking statements include, but are not limited to, our future financial results and our financial condition; our belief that the Purchasing Managers Index may provide an indication of the impact of general economic conditions on our sales into the advanced industrial end market; our strategy; 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; anticipated revenue performance; industry trends; market conditions; our competitive position; the loss of sales, or significant reduction in orders from, any major customers; our ability to contain or reduce costs; changes in economic and political conditions; changes in accounting principles; changes in actual or assumed tax liabilities; expectations regarding tax exposures; anticipated reinvestment of future earnings and dividend policy; anticipated expenditures in regard to the Company’s benefit plans; future acquisitions and integration and anticipated benefits from acquisitions and dispositions; anticipated economic benefits and expected costs of restructuring programs; 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.
End Markets We primarily operate in two end markets: the medical market and the advanced industrial market. Medical Market For the year ended December 31, 2023, the medical market accounted for approximately 54% of our revenue.
End Markets We primarily operate in two end markets: the medical market and the advanced industrial market. Medical Market For the year ended December 31, 2024, the medical market accounted for approximately 55% of our revenue.
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 December 31, 2023, we had outstanding borrowings under the Third Amended and Restated Credit Agreement denominated in Euro and U.S.
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 December 31, 2024, we had outstanding borrowings under the Senior Credit Facilities denominated in Euro and U.S.
No shares were repurchased during the three months or the year ended December 31, 2023. As of December 31, 2023, we had $49.5 million available for share repurchases under the 2020 Repurchase Plan.
No shares were repurchased during the years ended December 31, 2024 or 2023. As of December 31, 2024, we had $49.5 million available for share repurchases under the 2020 Repurchase Plan.
The decreases in basic EPS and diluted EPS were primarily attributable to an increase in interest expense, partially offset by an increase in operating income and a decrease in income tax provision. Specific components of our operating results for 2023 and 2022 are further discussed below.
The decreases in basic EPS and diluted EPS were primarily attributable to an increase in interest expense and an increase in income tax provision. Specific components of our operating results for 2024, 2023 and 2022 are further discussed below.
Restructuring, Acquisition and Related Costs Restructuring, acquisition and related charges primarily relate to our restructuring programs, acquisition related costs incurred for completed acquisitions, acquisition costs related to future potential acquisitions and failed acquisitions, and changes in fair value of contingent considerations. We recorded restructuring, acquisition and related costs of $12.8 million in 2023, versus $4.4 million in 2022.
Restructuring, Acquisition and Related Costs Restructuring, acquisition and related costs primarily relate to our restructuring programs, acquisition related costs incurred for completed acquisitions, acquisition costs related to future potential acquisitions and failed acquisitions, and changes in fair value of contingent considerations. We recorded restructuring, acquisition and related costs of $13.7 million in 2024, versus $12.8 million in 2023.
Approximately $126.1 million of our outstanding borrowings under our senior credit facilities were held in our subsidiaries outside of North America as of December 31, 2023. Additionally, we may use intercompany loans to address short-term cash flow needs from various subsidiaries.
Approximately $86.6 million of the outstanding borrowings under our senior credit facilities were held in our subsidiaries outside of North America as of December 31, 2024. Additionally, we may use intercompany loans to address short-term cash flow needs from various subsidiaries.
The increase in operating income was primarily due to an increase in gross profit of $26.9 million and a decrease in amortization expenses of $1.0 million, partially offset by an increase in R&D spending of $8.5 million, an increase in SG&A expenses of $5.0 million and an increase in restructuring, acquisition and related costs of $0.8 million.
The increase in operating income was primarily due to an increase in gross profit of $31.8 million and a decrease in amortization expense of $1.2 million, partially offset by an increase in R&D expenses of $9.0 million, an increase in SG&A expenses of $6.6 million, and an increase in restructuring, acquisition and related costs of $0.9 million.
Interest Income (Expense), Foreign Exchange Transaction Gains (Losses), and Other Income (Expense), Net The following table sets forth interest income (expense), foreign exchange transaction gains (losses), and other income (expense) for 2023 and 2022 (in thousands): 2023 2022 Interest income (expense), net $ (25,818 ) $ (15,616 ) Foreign exchange transaction gains (losses), net $ (255 ) $ 67 Other income (expense), net $ (675 ) $ (371 ) Interest Income (Expense), Net Net interest expense was $25.8 million in 2023 versus $15.6 million in 2022.
Interest Income (Expense), Foreign Exchange Transaction Gains (Losses), and Other Income (Expense), Net The following table sets forth interest income (expense), foreign exchange transaction gains (losses), and other income (expense) for 2024, 2023, and 2022 (in thousands): 2024 2023 2022 Interest income (expense), net $ (31,489 ) $ (25,818 ) $ (15,616 ) Foreign exchange transaction gains (losses), net $ 413 $ (255 ) $ 67 Other income (expense), net $ (442 ) $ (675 ) $ (371 ) Interest Income (Expense), Net Net interest expense was $31.5 million in 2024 versus $25.8 million in 2023.
Dollars of $126.1 million and $232.0 million, respectively. 43 The Third Amended and Restated Credit Agreement contains various covenants that, we believe, are usual and customary for this type of agreement, including a maximum allowed leverage ratio and a minimum required fixed charge coverage ratio (as defined in the Third Amended and Restated Credit Agreement).
Dollars of $86.6 million and $332.6 million, respectively. The Credit Agreement contains various covenants that, we believe, are usual and customary for this type of agreement, including a maximum allowed leverage ratio and a minimum required fixed charge coverage ratio (as defined in the Third Amended and Restated Credit Agreement).
Operating Expenses The following table sets forth operating expenses for 2023 and 2022 (dollars in thousands): % Change 2023 2022 2023 vs. 2022 Research and development and engineering $ 91,682 $ 85,770 6.9 % Selling, general and administrative 164,460 158,901 3.5 % Amortization of purchased intangible assets 20,445 26,338 (22.4 )% Restructuring, acquisition and related costs 12,814 4,384 192.3 % Total $ 289,401 $ 275,393 5.1 % 39 Research and Development and Engineering Expenses Research and development and engineering (“R&D”) expenses are primarily comprised of employee compensation and related expenses and cost of materials for R&D projects.
Operating Expenses The following table sets forth operating expenses for 2024, 2023, and 2022 (dollars in thousands): % Change % Change 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Research and development and engineering $ 95,515 $ 91,682 $ 85,770 4.2 % 6.9 % Selling, general and administrative 175,943 164,460 158,901 7.0 % 3.5 % Amortization of purchased intangible assets 25,794 20,445 26,338 26.2 % (22.4 )% Restructuring, acquisition and related costs 13,709 12,814 4,384 7.0 % 192.3 % Total $ 310,961 $ 289,401 $ 275,393 7.4 % 5.1 % 36 Research and Development and Engineering Expenses Research and development and engineering (“R&D”) expenses are primarily comprised of employee compensation and related expenses and cost of materials for R&D projects.
Our Board of Directors may designate and issue one or more series of preferred shares in order to raise additional capital, provided that no shares of any series may be entitled to more than one vote per share.
Our Board of Directors may designate and issue one or more series of preferred shares in order to raise additional capital, provided that no shares of any series may be entitled to more than one vote per share. As of December 31, 2024, no preferred shares were issued and outstanding.
The following table summarizes our cash and cash equivalent balances, cash flows and unused borrowing capacity available under our revolving credit facility for the years indicated (in thousands): 2023 2022 Cash and cash equivalents, end of year $ 105,051 $ 100,105 Net cash provided by operating activities $ 120,075 $ 90,779 Net cash used in investing activities $ (19,892 ) $ (42,541 ) Net cash provided by (used in) financing activities $ (97,853 ) $ (60,154 ) Unused borrowing capacity available under the revolving credit facility, end of year $ 416,596 $ 336,587 Operating Cash Flows Cash provided by operating activities was $120.1 million in 2023, versus $90.8 million in 2022.
The following table summarizes our cash and cash equivalent balances, cash flows and unused borrowing capacity available under our revolving credit facility for the years indicated (in thousands): 2024 2023 2022 Cash and cash equivalents, end of year $ 113,989 $ 105,051 $ 100,105 Net cash provided by operating activities $ 158,512 $ 120,075 $ 90,779 Net cash used in investing activities $ (208,189 ) $ (19,892 ) $ (42,541 ) Net cash provided by (used in) financing activities $ 56,943 $ (97,853 ) $ (60,154 ) Unused borrowing capacity available under the revolving credit facility, end of year $ 346,249 $ 416,596 $ 336,587 41 Operating Cash Flows Net cash provided by operating activities was $158.5 million in 2024, versus $120.1 million in 2023.
This increase was primarily attributable to an increase in gross profit of $21.4 million primarily attributable to higher revenue and a decrease in amortization expense of $5.9 million, partially offset by an increase in restructuring, acquisition and related charges of $8.4 million, research and development and engineering (“R&D”) expenses of $5.9 million, and selling, general and administrative (“SG&A”) expenses of $5.6 million.
This was primarily attributable to an increase in gross profit of $21.6 million, partially offset by an increase in selling, general and administrative (“SG&A”) expenses of $11.5 million, an increase in amortization expense of $5.3 million, an increase in research and development and engineering (“R&D”) expenses of $3.8 million, and an increase in restructuring, acquisition and related costs of $0.9 million.
As of December 31, 2023, $62.6 million of our $105.1 million of cash and cash equivalents was held by our subsidiaries outside of North America. 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.
As of December 31, 2024, $71.7 million of our $114.0 million of cash and cash equivalents was held by our subsidiaries outside of North America. 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.
Other Income (Expense), Net Net other expenses were nominal in both 2023 and 2022. Income Tax Provision We recorded a tax provision of $10.9 million in 2023, compared to a tax provision of $13.1 million in 2022.
Other Income (Expense), Net Net other expenses were nominal in 2024, 2023, and 2022. Income Tax Provision We recorded a tax provision of $15.0 million in 2024, compared to a tax provision of $10.9 million in 2023.
Advanced Industrial Market For the year ended December 31, 2023, the advanced industrial market accounted for approximately 46% of our revenue.
Advanced Industrial Market For the year ended December 31, 2024, the advanced industrial market accounted for approximately 45% of our revenue.
The effective tax rate for 2023 was 13.0% of income before income taxes, compared to an effective tax rate of 15.0% of income before income taxes for 2022.
The effective tax rate for 2024 was 18.9% of income before income taxes, compared to an effective tax rate of 13.0% of income before income taxes for 2023.
The decrease in operating income was primarily due to a decrease in gross profit of $15.3 million, and an increase in restructuring, acquisition and related costs of $3.8 million, partially offset by a decrease in SG&A expenses of $0.7 million, a decrease in R&D spending of $1.8 million and a decrease in amortization of purchased intangible assets of $4.7 million.
The decrease in operating income was primarily due to a decrease in gross profit of $10.2 million, and an increase in restructuring, acquisition and related costs of $6.8 million, partially offset by a decrease in amortization expense of $4.7 million, a decrease in R&D expenses of $2.4 million, and a decrease in SG&A expenses of $0.7 million.
As of December 31, 2023, the future interest payments under our Senior Credit Facilities are expected to be approximately $72.0 million through maturity based on the current contractual term, with $23.0 million payable within the next twelve months.
As of December 31, 2024, future interest payments under our Senior Credit Facilities are estimated to be approximately $52.7 million through maturity based on the current contractual term, with $24.4 million payable within the next twelve months.
Cash Flows Cash and cash equivalents totaled $105.1 million as of December 31, 2023, versus $100.1 million as of December 31, 2022.
Cash Flows Cash and cash equivalents totaled $114.0 million as of December 31, 2024, versus $105.1 million as of December 31, 2023.
The amount of undistributed earnings of foreign subsidiaries totaled $405.8 million as of December 31, 2023. The estimated unrecognized income and foreign withholding tax liabilities on these undistributed earnings is approximately $5.5 million. Loss Contingencies.
The amount of undistributed earnings of foreign subsidiaries totaled $494.9 million as of December 31, 2024. The estimated unrecognized income and foreign withholding tax liabilities on these undistributed earnings is approximately $7.3 million. Loss Contingencies.
The Fourth Amendment increased the revolving credit facility commitment under the Third Amended and Restated Credit Agreement by $200.0 million, from $495.0 million to $695.0 million, and reset the uncommitted accordion feature to $200.0 million for potential future expansion.
On October 5, 2021, we entered into an amendment (the “Fourth Amendment”) to the Credit Agreement to exercise the accordion feature. The Fourth Amendment increased the revolving credit facility commitment under the Third Amended and Restated Credit Agreement by $200.0 million, from $495.0 million to $695.0 million, and reset the uncommitted accordion feature to $200.0 million for potential future expansion.
We recorded a tax provision of $13.1 million in 2022. The effective tax rate for 2022 was 15% of income before income taxes.
We recorded a tax provision of $10.9 million in 2023. The effective tax rate for 2023 was 13.0% of income before income taxes.
Recent Sales of Unregistered Securities None Purchases of Equity Securities by the Issuer and Affiliated Purchaser In February 2020, the Company's Board of Directors approved a new share repurchase plan (the "2020 Repurchase Plan"), authorizing the repurchase of $50.0 million worth of the Company's common shares.
Recent Sales of Unregistered Securities None Purchases of Equity Securities by the Issuer and Affiliated Purchaser In February 2020, the Company's Board of Directors approved a share repurchase plan (the “2020 Repurchase Plan”), authorizing the repurchase of $50.0 million worth of the Company's common shares. No shares were repurchased during the three months and year ended December 31, 2024.
Amortization of developed technologies is included in cost of revenue in the consolidated statement of operations. Amortization of customer relationships, trademarks, trade names, backlog and other intangibles are included in operating expenses in the consolidated statement of operations.
Amortization of Purchased Intangible Assets Amortization of purchased intangible assets is charged to our Automation Enabling Technologies and our Medical Solutions segments. Amortization of developed technologies is included in cost of revenue in the consolidated statement of operations. Amortization of customer relationships, trademarks, trade names, backlog and other intangibles are included in operating expenses in the consolidated statement of operations.
Cash provided by operating activities increased from 2022 primarily as a result of higher operating income and less cash outflows from changes in net working capital, partially offset by higher income tax payments and higher interest payments. Investing Cash Flows Cash used in investing activities was $19.9 million in 2023, primarily related to capital expenditures of $20.0 million.
Cash provided by operating activities increased from 2022 primarily as a result of higher operating income and less cash outflows from changes in net working capital, partially offset by higher income tax payments and higher interest payments.
Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various important factors, including those set forth in Item 1A of this Annual Report on Form 10-K under the heading “Risk Factors.” The words “anticipates,” “believes,” “expects,” “intends,” “future,” “estimates,” “plans,” “could,” “would,” “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.
Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various important factors, including those set forth in Item 1A of this Annual Report on Form 10-K under the heading “ Risk Factors.” The words “ anticipates,” “ believes,” “ expects,” “ intends,” “ future,” “ estimates,” “ plans,” “ could,” “ would,” “ 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.
Unallocated Corporate and Shared Services Unallocated corporate and shared services costs primarily represent costs of corporate and shared SG&A functions and other public company costs that are not allocated to the operating segments, including certain restructuring and most acquisition related costs. Unallocated corporate and shared services costs for 2023 decreased by $0.2 million, or 0.4%, from 2022.
Unallocated costs Unallocated costs primarily represent costs of corporate and shared SG&A functions and other public company costs that are not allocated to the reportable segments, including certain restructuring and most acquisition related costs. Unallocated costs for 2024 increased by $4.3 million, or 8.8%, from 2023. The increase in operating loss was primarily due to an increase in SG&A expenses.
R&D expenses were $91.7 million, or 10.4% of revenue, in 2023, versus $85.8 million, or 10.0% of revenue, in 2022. R&D expenses increased in terms of total dollars primarily due to higher compensation related expenses.
R&D expenses were $95.5 million, or 10.1% of revenue, in 2024, versus $91.7 million, or 10.4% of revenue, in 2023. R&D expenses increased in terms of total dollars primarily due to an increase in costs from our 2024 acquisition. R&D expenses were $91.7 million, or 10.4% of revenue, in 2023, versus $85.8 million, or 10.0% of revenue, in 2022.
The direct capitalization and replacement value approaches use key assumptions such as market rent estimates, capitalization rates, local multipliers and remaining useful life of the real estate assets.
The direct capitalization and replacement value approaches use key assumptions such as market rent estimates, capitalization rates, local multipliers and remaining useful life of the real estate assets. Assumptions used are subject to management judgment and changes in those assumptions could impact the estimation of the fair value.
Basic earnings per common share (“basic EPS”) of $2.03 in 2023 decreased $0.05 from the basic EPS of $2.08 in 2022. Diluted earnings per common share (“diluted EPS”) of $2.02 in 2023 decreased $0.04 from the diluted EPS of $2.06 in 2022.
Basic earnings per common share (“basic EPS”) of $1.78 in 2024 decreased $0.25 from basic EPS of $2.03 in 2023. Diluted earnings per common share (“diluted EPS”) of $1.77 in 2024 decreased $0.25 from diluted EPS of $2.02 in 2023.
Robotics and Automation Robotics and Automation segment operating income was $48.4 million, or 17.7% of revenue, in 2023, versus $60.3 million, or 19.6% of revenue, in 2022.
Automation Enabling Technologies segment operating income was $96.3 million, or 19.3% of revenue, in 2023, versus $105.4 million, or 19.7% of revenue, in 2022.
The net increase in cash and cash equivalents is primarily attributable to cash provided by operating activities of $120.1 million, partially offset by $86.6 million of debt repayments, $20.0 million of capital expenditures, and $10.6 million of payroll withholding tax payments related to net share settlement upon vesting of share-based compensation awards.
The net increase in cash and cash equivalents is primarily attributable to cash provided by operating activities of $158.5 million, and $198.0 million of borrowings under our revolving credit agreement, partially offset by $191.2 million of cash consideration for the 2024 acquisition, $131.1 million of debt repayments, $17.2 million of capital expenditures, and $9.7 million of payroll withholding tax payments related to net share settlement upon vesting of share-based compensation awards.
Medical Solutions Medical Solutions segment gross profit for 2023 increased $26.9 million, or 24.8%, versus 2022, primarily due to an increase in both revenue and gross profit margin. Medical Solutions segment gross profit margin was 41.7% for 2023, compared with a gross profit margin of 39.1% for 2022.
Medical Solutions segment gross profit for 2023 increased by $31.8 million, or 22.8%, versus 2022, primarily due to an increase in both revenue and gross profit margin. Medical Solutions gross profit margin was 44.7% for 2023, versus a gross profit margin of 42.5% for 2022. The increase in gross profit margin was primarily due to improved factory efficiency.
(“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 $192.2 million in cash, subject to customary closing and net working capital adjustments. Motion Solutions acquisition will be included in our Medical Solutions reportable segment.
Significant Events and Updates Acquisition of Motion Solutions On January 2, 2024, we 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.
Precision Medicine and Manufacturing Precision Medicine and Manufacturing segment gross profit for 2023 increased $9.9 million, or 7.7%, versus 2022, primarily due to an increase in both revenue and gross profit margin. Precision Medicine and Manufacturing segment gross profit margin was 49.1% for 2023, versus a gross profit margin of 47.0% for 2022.
Automation Enabling Technologies Automation Enabling Technologies segment gross profit for 2024 increased $0.2 million, or 0.1%, versus 2023, primarily due to an increase in gross profit margin, partially offset by a decrease in revenue. Automation Enabling Technologies segment gross profit margin was 47.9% in 2024, versus a gross profit margin of 47.0% for 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) AS OF DECEMBER 31, 2023 The following table provides the details of balance sheet information related to leases as of the dates indicated (in thousands, except lease term and discount rate): December 31, 2023 2022 Operating leases: Operating lease right-of-use assets $ 38,302 $ 43,317 Current portion of operating lease liabilities $ 8,189 $ 7,793 Operating lease liabilities 37,345 40,808 Total operating lease liabilities $ 45,534 $ 48,601 Finance leases: Property, plant and equipment, gross $ 9,582 $ 9,582 Accumulated depreciation ( 6,272 ) ( 5,670 ) Finance lease assets included in property, plant and equipment, net $ 3,310 $ 3,912 Accrued expenses and other current liabilities $ 718 $ 668 Other liabilities 3,934 4,652 Total finance lease liabilities $ 4,652 $ 5,320 Weighted-average remaining lease term (in years): Operating leases 7.6 8.2 Finance leases 5.5 6.5 Weighted-average discount rate: Operating leases 4.84 % 4.64 % Finance leases 5.54 % 5.54 % The following table provides the details of cash flow information related to leases for the periods indicated (in thousands): Year Ended December 31, 2023 2022 2021 Cash paid for amounts included in lease liabilities: Operating cash flows from finance leases $ 274 $ 308 $ 340 Operating cash flows from operating leases $ 7,826 $ 7,876 $ 7,818 Financing cash flows from finance leases $ 657 $ 599 $ 9,310 Supplemental non-cash information: Right-of-use assets obtained in exchange for new operating lease liabilities $ 4,046 $ 4,757 $ 22,574 Right-of-use assets obtained in exchange for new finance lease liabilities $ - $ - $ - During the year ended December 31, 2021, the Company paid $ 8.7 million upon the exercise of an option to purchase a building under a finance lease agreement in Germany.
Biggest changeThe following table summarizes the components of lease costs included in the statements of operations for the periods indicated (in thousands): Year Ended December 31, 2024 2023 2022 Operating lease cost $ 12,109 $ 10,475 $ 10,387 Finance lease cost Amortization of right-of-use assets 602 602 602 Interest on lease liabilities 236 274 308 Variable lease cost 1,192 1,007 1,145 Total lease cost $ 14,139 $ 12,358 $ 12,442 The following table provides the details of balance sheet information related to leases as of the dates indicated (in thousands, except lease term and discount rate): December 31, 2024 2023 Operating leases: Operating lease right-of-use assets $ 42,908 $ 38,302 Current portion of operating lease liabilities $ 9,879 $ 8,189 Operating lease liabilities 40,548 37,345 Total operating lease liabilities $ 50,427 $ 45,534 Finance leases: Property, plant and equipment, gross $ 9,582 $ 9,582 Accumulated depreciation ( 6,874 ) ( 6,272 ) Finance lease assets included in property, plant and equipment, net $ 2,708 $ 3,310 Accrued expenses and other current liabilities $ 759 $ 718 Other liabilities 3,175 3,934 Total finance lease liabilities $ 3,934 $ 4,652 Weighted-average remaining lease term (in years): Operating leases 7.4 7.6 Finance leases 4.5 5.5 Weighted-average discount rate: Operating leases 4.82 % 4.84 % Finance leases 5.54 % 5.54 % 77 NOVANTA INC.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.
Performance Stock Units The Company typically grants PSUs that are based on the Company's financial metrics, market conditions, or a hybrid of company financial metrics and market conditions. These PSUs generally cliff vest on the first day following the end of the specified performance period.
Performance Stock Units The Company typically grants PSUs that are based on the Company’s financial performance metrics, market conditions, or a hybrid of company financial performance metrics and market conditions. These PSUs generally cliff vest on the first day following the end of the specified performance period.
The number of common shares to be issued upon settlement following vesting of attainment-based PSUs is determined based on the Company’s financial metrics over the specified performance period against the targets established by the Company’s Board of Directors at the time of grant and will be in the range of zero to 200 % of the target number of shares.
The number of common shares to be issued upon settlement following vesting of attainment-based PSUs is determined based on the Company’s financial performance metrics over the specified performance period against the targets established by the Company’s Board of Directors at the time of grant and will be in the range of zero to 200 % of the target number of shares.
This program was focused on reducing operating complexity in the Company, including reducing infrastructure costs and streamlining the Company’s operating model to better serve its customers. In addition, the program was focused on cost reduction actions to improve gross margins for the overall company.
This program was focused on reducing operating complexity in the Company, including reducing infrastructure costs and streamlining the Company’s operating model to better serve its customers. In addition, the program was focused on cost reduction actions to improve gross margins for the overall company.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) AS OF DECEMBER 31, 2023 Recent Accounting Pronouncements The following table provides a brief description of recent Accounting Standards Updates (“ASU”) issued by the Financial Accounting Standards Board (“FASB”): Standard Description Effective Date Effect on the Financial Statements or Other Significant Matters In October 2023, the FASB issued ASU 2023-06, “Disclosure Improvements: Codification Amendments in Response to SEC’s Disclosure Update and Simplification Initiative.” ASU 2023-06 clarifies or improves disclosure and presentation requirements of a variety of topics, which allow users to easily compare entities subject to the SEC’s existing disclosure requirements with those entities that were not previously subject to such requirements and align the requirements in the FASB Accounting Standards Codification with the SEC’s regulations.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) AS OF DECEMBER 31, 2024 Recent Accounting Pronouncements The following table provides a brief description of recent Accounting Standards Updates (“ASU”) issued by the Financial Accounting Standards Board (“FASB”): Standard Description Effective Date Effect on the Financial Statements or Other Significant Matters In October 2023, the FASB issued ASU 2023-06, “Disclosure Improvements: Codification Amendments in Response to SEC’s Disclosure Update and Simplification Initiative.” ASU 2023-06 clarifies or improves disclosure and presentation requirements of a variety of topics, which allow users to easily compare entities subject to the SEC’s existing disclosure requirements with those entities that were not previously subject to such requirements and align the requirements in the FASB Accounting Standards Codification with the SEC’s regulations.
Basis of Presentation The consolidated financial statements have been prepared by the Company in United States (“U.S.”) dollars and in accordance with accounting principles generally accepted in the U.S., applied on a consistent basis. These consolidated financial statements include the accounts of Novanta Inc. and its subsidiaries. Intercompany accounts and transactions have been eliminated.
Basis of Presentation The consolidated financial statements have been prepared by the Company in United States (“U.S.”) dollars and in accordance with accounting principles generally accepted in the U.S., applied on a consistent basis. These consolidated financial statements include the accounts of Novanta Inc. and its subsidiaries. Intercompany accounts and transactions have been eliminated. 2.
Segment Information Reportable Segments The Company’s Chief Operating Decision Maker (“CODM”) is the Chief Executive Officer. The CODM utilizes financial information to make decisions about allocating resources and assessing performance for the entire Company. The Company evaluates the performance of, and allocates resources to, its segments based on revenue, gross profit and operating profit.
Segment Information Reportable Segments The Company’s Chief Operating Decision Maker (“CODM”) is the Chief Executive Officer . The CODM utilizes financial information to make decisions about allocating resources and assessing performance for the entire Company. The CODM evaluates the performance of, and allocates resources to, its segments based on revenue, gross profit and operating income.
The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
The Company’s most significant intangible assets are customer relationships, patents and developed technologies, trademarks and trade names. The fair values of intangible assets are based on valuations using an income approach, with estimates and assumptions provided by management of the acquired companies and the Company.
The Company’s most significant identifiable intangible assets are customer relationships, patents and developed technologies, trademarks and trade names. The fair values of identifiable intangible assets are based on valuations using an income approach, with estimates and assumptions provided by management of the acquired companies and the Company.
Fair Value Measurements ASC 820, “Fair Value Measurement,” establishes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the third is considered unobservable: Level 1: Quoted prices for identical assets or liabilities in active markets which the Company can access Level 2: Observable inputs other than those described in Level 1 Level 3: Unobservable inputs Current Assets and Liabilities The Company’s cash equivalents are highly liquid investments with original maturities of three months or less, which represent an asset the Company measures at fair value on a recurring basis.
Fair Value Measurements ASC 820, “Fair Value Measurement,” establishes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the third is considered unobservable: Level 1: Quoted prices for identical assets or liabilities in active markets which the Company can access Level 2: Observable inputs other than those described in Level 1 Level 3: Unobservable inputs Current Assets and Liabilities The Company’s cash equivalents are highly liquid investments with original maturities of three months or less, which represent assets the Company measures at fair value on a recurring basis.
T he total purchase price for MPH was allocated as follows (in thousands): Purchase Price Allocation Cash $ 182 Accounts receivable 1,658 Inventories 957 Property, plant and equipment 12,094 Goodwill 9,863 Other assets 163 Total assets acquired 24,917 Accounts payable 562 Deferred tax liabilities 1,124 Other liabilities 664 Total liabilities assumed 2,350 Total assets acquired, net of liabilities assumed 22,567 Less: cash acquired 182 Purchase price, net of cash acquired $ 22,385 The purchase price allocation resulted in $ 9.9 million of goodwill.
The total purchase price for MPH was allocated as follows (in thousands): Purchase Price Allocation Cash $ 182 Accounts receivable 1,658 Inventories 957 Property, plant and equipment 12,094 Goodwill 9,863 Other assets 163 Total assets acquired 24,917 Accounts payable 562 Deferred tax liabilities 1,124 Other liabilities 664 Total liabilities assumed 2,350 Total assets acquired, net of liabilities assumed 22,567 Less: cash acquired 182 Total purchase price, net of cash acquired $ 22,385 The purchase price allocation resulted in $ 9.9 million of goodwill.
("MPH"), a Czech Republic-based manufacturer of medical consumables with plastics specialization in making medical disposable tube set products, for a total purchase price of € 21.8 million ($ 22.4 million), net of cash acquired. The acquisition was financed with borrowings under the Company's revolving credit facility and cash available on hand.
( “MPH” ), a Czech Republic-based manufacturer of medical consumables with plastics specialization in making medical disposable tube set products, for a total purchase price of € 21.8 million ($ 22.4 million), net of cash acquired. The acquisition was financed with borrowings under the Company's revolving credit facility and cash available on hand.
As of December 31, 2023 , the Company had $ 49.5 million available for future share repurchases under the 2020 Repurchase Plan. Amended and Restated 2010 Incentive Plan In November 2010, the Company’s shareholders approved the 2010 Incentive Award Plan under which the Company may grant share-based compensation awards to employees, consultants and directors.
As of December 31, 2024 , the Company had $ 49.5 million available for future share repurchases under the 2020 Repurchase Plan. Amended and Restated 2010 Incentive Plan In November 2010, the Company’s shareholders approved the 2010 Incentive Award Plan under which the Company may grant share-based compensation awards to employees, consultants and directors.
PA RT III Certain information required by Part III is omitted from this Annual Report on Form 10-K and is incorporated herein by reference to the Company’s Definitive Proxy Statement for the 2024 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission. Ite m 10.
PA RT III Certain information required by Part III is omitted from this Annual Report on Form 10-K and is incorporated herein by reference to the Company’s Definitive Proxy Statement for the 2025 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission. Ite m 10.
The time duration of these foreign currency contracts approximates the underlying foreign currency transaction exposures, generally less than three months. These foreign currency contracts are not designated as cash flow, fair value or net investment hedges. Changes in the fair value of these foreign currency contracts are recognized in income before income taxes. 63 NOVANTA INC.
The time duration of these foreign currency contracts approximates the underlying foreign currency transaction exposures, generally less than three months. These foreign currency contracts are not designated as cash flow, fair value or net investment hedges. Changes in the fair value of these foreign currency contracts are recognized in income before income taxes. 62 NOVANTA INC.
Evaluation of Disclosure Controls and Procedures as of December 31, 2023 Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of December 31, 2023.
Evaluation of Disclosure Controls and Procedures as of December 31, 2024 Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of December 31, 2024.
As of December 31, 2023 , the Company’s outstanding equity awards for which compensation expense will be recognized in the future consisted of time-based RSUs, performance stock units (“PSUs”) and stock options granted under the Amended and Restated 2010 Incentive Plan.
As of December 31, 2024 , the Company’s outstanding equity awards for which compensation expense will be recognized in the future consisted of time-based RSUs, performance stock units (“PSUs”) and stock options granted under the Amended and Restated 2010 Incentive Plan.
Plan for the years ended December 31, 2023 and 2022 , respectively, primarily resulted from changes in the discount rate assumptions. The funded status of the U.K. Plan was included in other long term assets on the accompanying consolidated balance sheet as of December 31, 2023 and December 31, 2022, respectively.
Plan for the years ended December 31, 2024 and December 31, 2023 , respectively, primarily resulted from changes in the discount rate assumptions. The funded status of the U.K. Plan was included in other long term assets on the accompanying consolidated balance sheet as of December 31, 2024 and December 31, 2023, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) AS OF DECEMBER 31, 2023 Deferred income taxes result principally from temporary differences in the recognition of certain revenue and expense items and operating loss and tax credit carryforwards for financial and tax reporting purposes.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) AS OF DECEMBER 31, 2024 Deferred income taxes result principally from temporary differences in the recognition of certain revenue and expense items and operating loss and tax credit carryforwards for financial and tax reporting purposes.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) AS OF DECEMBER 31, 2023 2020 Restructuring As a result of the Company’s ongoing evaluations and efforts to reduce its operating costs, while improving efficiency and effectiveness, the Company initiated the 2020 restructuring program in the third quarter of 2020.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) AS OF DECEMBER 31, 2024 2020 Restructuring As a result of the Company’s ongoing evaluations and efforts to reduce its operating costs, while improving efficiency and effectiveness, the Company initiated the 2020 restructuring program in the third quarter of 2020.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2023. In making their assessment, our management utilized the criteria set forth in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2024. In making their assessment, our management utilized the criteria set forth in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
On March 10, 2022, the Company entered into an amendment (the "Fifth Amendment") to the Third Amended and Restated Credit Agreement to extend the maturity date 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 $ 200.0 million to $ 350.0 million.
On March 10, 2022, the Company entered into an amendment (the “Fifth Amendment” ) to the Third Amended and Restated Credit Agreement to extend the maturity date 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 $ 200.0 million to $ 350.0 million.
Fair Value of Debt As of December 31, 2023 and 2022 , the outstanding balance of the Company’s debt approximated its fair value based on current rates available to the Company for debt of the same maturities. The fair value of the Company’s debt is classified as Level 2 under the fair value hierarchy. 12.
Fair Value of Debt As of December 31, 2024 and December 31, 2023 , the outstanding balance of the Company’s debt approximated its fair value based on current rates available to the Company for debt of the same maturities. The fair value of the Company’s debt is classified as Level 2 under the fair value hierarchy. 12.
As of December 31, 2023 , no preferred shares had been issued and outstanding. Common Shares The Company has an unlimited number of no-par value common shares authorized for issuance. Holders of common shares are entitled to one vote per share.
As of December 31, 2024 , no preferred shares had been issued and outstanding. Common Shares The Company has an unlimited number of no-par value common shares authorized for issuance. Holders of common shares are entitled to one vote per share.
Performance-based restricted stock units are considered contingently issuable shares, the vesting of which may be based on achievement of specified company performance conditions (“attainment-based PSUs”), certain market conditions (“market-based PSUs”) or a hybrid of specified company performance conditions and market conditions (“hybrid PSUs”).
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”).
Each Guarantor may be released from its obligations under its respective Guarantee and its obligations under the Third Amended and Restated Credit Agreement upon the occurrence of certain events, including, but not limited to: (i) the Guarantor ceasing to be a subsidiary; or (ii) payment in full of the principal and accrued and unpaid interest on the Senior Credit Facilities and all other obligations. 77 NOVANTA INC.
Each Guarantor may be released from its obligations under its respective Guarantee and its obligations under the Third Amended and Restated Credit Agreement upon the occurrence of certain events, including, but not limited to: (i) the Guarantor ceasing to be a subsidiary; or (ii) payment in full of the principal and accrued and unpaid interest on the Senior Credit Facilities and all other obligations.
The primary foreign currency denominated transactions include revenue and expenses and the resulting accounts receivable and accounts payable balances reflected on our consolidated balance sheet and with intercompany trading partners that are eliminated in consolidation.
The primary foreign currency denominated transactions include revenue and expenses and the resulting accounts receivable and accounts payable balances reflected on our consolidated balance sheet as well as accounts receivable and accounts payable balances with intercompany trading partners that are eliminated in consolidation.
Plan. In estimating the expected return on plan assets, the Company considered the historical performance of the major asset classes held by the U.K. Plan and current forecasts of future rates of return for these asset classes. 85 NOVANTA INC.
Plan. In estimating the expected return on plan assets, the Company considered the historical performance of the major asset classes held by the U.K. Plan and current forecasts of future rates of return for these asset classes. 83 NOVANTA INC.
Changes in Internal Control Over Financial Reporting There has been no change to our internal control over financial reporting during the fiscal quarter ended December 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Changes in Internal Control Over Financial Reporting There has been no change to our internal control over financial reporting during the fiscal quarter ended December 31, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Accordingly, share-based compensation expenses for awards with hybrid conditions may differ significantly from period to period based on changes to both the probability and the level of achievement against the performance targets.
Accordingly, share-based compensation expenses for awards with hybrid conditions may differ significantly from period to period based on changes to both the probability and the level of achievement against the specified company performance targets.
Leases Most leases held by the Company expire between 2024 and 2036 . In the U.K., where longer lease terms are more common, the Company has a land lease that extends through 2078 .
Leases Most leases held by the Company expire between 2025 and 2036 . In the U.K., where longer lease terms are more common, the Company has a land lease that extends through 2078 .
Based on our evaluation under the framework in Internal Control—Integrated Framework (2013 ) , issued by COSO, our management concluded that our internal control over financial reporting was effective as of December 31, 2023.
Based on our evaluation under the framework in Internal Control—Integrated Framework (2013 ) , issued by COSO, our management concluded that our internal control over financial reporting was effective as of December 31, 2024.
The goodwill recorded represents the anticipated incremental value of future cash flows potentially attributable to: (i) ATI’s ability to grow the business with existing and new customers, including leveraging the Company’s customer base; (ii) ATI’s ability to grow the business through new product introductions; and (iii) cost improvements due to the integration of ATI’s operations into the Company’s existing infrastructure.
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 effective date for each amendment in ASU 2023-06 will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. The Company is currently evaluating the impact of ASU 2023-06 on its consolidated financial statements.
The effective date for each amendment in ASU 2023-06 will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. The Company is currently evaluating the impact of ASU 2023-06 on its consolidated financial statement disclosures.
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.
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.
Carpenter 62 Director Independent Lead Director Chair of the Compensation Committee Member of the Environmental, Social and Governance (“ESG”) Committee Former Group President of Stryker Corporation, a medical technologies company Barbara B.
Carpenter 63 Director Independent Lead Director Chair of the Compensation Committee Member of the Environmental, Social and Governance (“ESG”) Committee Former Group President of Stryker Corporation, a medical technologies company Barbara B.
Practical Expedients and Exemptions The Company expenses incremental direct costs of obtaining a contract when incurred if the expected amortization period is one year or less. These costs are recorded within selling, general and administrative expenses in the consolidated statement of operations.
Practical Expedients and Exemptions The Company expenses incremental direct costs of obtaining a contract when incurred if the expected amortization period is one year or less. These costs are recorded within selling, general and administrative expenses in the consolidated statement of operations. 64 NOVANTA INC.
Approximately $ 3.0 million relates to the U.S. and other immaterial foreign jurisdictions that will expire through 2039 , and $ 0.7 million tax credit carryforwards relate to Canada that can be carried forward indefinitely. The Company had a $ 2.9 million valuation allowance on the tax credit carryforwards.
Approximately $ 3.0 million relates to the U.S. and other immaterial foreign jurisdictions and will expire through 2039 , and $ 0.7 million relates to Canada and can be carried forward indefinitely. The Company had a $ 2.9 million valuation allowance on these tax credit carryforwards.
In addition, the Company had capital loss carryforwards of $ 5.6 million, which can be carried forward indefinitely and had a full valuation allowance. Of this amount, approximately $ 4.9 million related to Canada and the remaining $ 0.7 million relates to the U.K, respectively.
In addition, the Company had capital loss carryforwards of $ 5.6 million, which can be carried forward indefinitely and had a full valuation allowance. Of this amount, $ 4.9 million related to Canada and the remaining $ 0.7 million related to the U.K.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) AS OF DECEMBER 31, 2023 The following table provides a reconciliation of benefit obligations and plan assets of the U.K.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) AS OF DECEMBER 31, 2024 The following table provides a reconciliation of benefit obligations and plan assets of the U.K.
The Company’s matching contributions to the plans were $ 6.8 million, $ 5.9 million and $ 4.4 million for the years ended December 31, 2023, 2022 and 2021, respectively. Defined Benefit Plan The Company maintains a frozen defined benefit pension plan in the U.K. (the “U.K. Plan”). The U.K.
The Company’s matching contributions to the plans were $ 6.8 million, $ 6.8 million and $ 5.9 million for the years ended December 31, 2024, December 31, 2023 and December 31, 2022, respectively. Defined Benefit Plan The Company maintains a frozen defined benefit pension plan in the U.K. (the “U.K. Plan”). The U.K.
A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
The Company reviews the useful life assumptions, including the classification of certain intangible assets as “indefinite-lived,” on a periodic basis to determine if changes in circumstances warrant revisions to them. Costs associated with patent and intellectual property applications, renewals or extensions are typically expensed as incurred.
The Company reviews the useful life assumptions, including the classification of certain identifiable intangible assets as “indefinite-lived,” on a periodic basis to determine if changes in circumstances warrant revisions to them. Costs associated with patent and intellectual property applications, renewals or extensions are typically expensed as incurred. 59 NOVANTA INC.
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. 73 NOVANTA INC.
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.
Of this amount, approximately $ 5.2 million relates to Canada and begins to expire starting in 2033 and had a full valuation allowance. The remaining $ 0.5 million relates to various U.S. jurisdictions, which will begin to expire in 2024 through 2043 .
Of this amount, approximately $ 5.2 million relates to Canada and begins to expire starting in 2033 and had a full valuation allowance. The remaining $ 0.5 million relates to various U.S jurisdictions, which will expire between 2024 and 2043 .
Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2023.
Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2024.
Secor 53 Director Member of the Audit Committee Member of the ESG Committee Managing Director of Morningside Heights Capital, an investment firm Darlene J. S. Solomon 65 Director Member of the Compensation Committee Former Senior Vice President and Chief Technology Officer of Agilent Technologies, Inc. a global leader in the life sciences, diagnostics and applied chemical markets Frank A.
Secor 54 Director Member of the Audit Committee Member of the ESG Committee Managing Director of Morningside Heights Capital, an investment firm Darlene J. S. Solomon 66 Director Member of the Compensation Committee Former Senior Vice President and Chief Technology Officer of Agilent Technologies, Inc. a global leader in the life sciences, diagnostics and applied chemical markets Frank A.
From time to time, certain of these instruments may subject the Company to concentrations of credit risk whereby one institution may hold a significant portion of the cash and cash equivalents, or one customer may represent a large portion of the accounts receivable balances. 93 NOVANTA INC.
From time to time, certain of these instruments may subject the Company to concentrations of credit risk whereby one institution may hold a significant portion of the cash and cash equivalents, or one customer may represent a large portion of the accounts receivable balances.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required to be disclosed by this item is contained in the Proxy Statement for the Company’s Annual Meeting of Shareholders scheduled to be held on May 8, 2024 and is incorporated herein by reference. 100 Ite m 13.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required to be disclosed by this item is contained in the Proxy Statement for the Company’s Annual Meeting of Shareholders scheduled to be held on May 29, 2025 and is incorporated herein by reference. 100 Ite m 13.
The Company believes there are no jurisdictions in which the outcome of unresolved issues or claims is likely to be material to its consolidated results of operations, financial position or cash flows. Furthermore, the Company believes that it has adequately provided for all significant income tax uncertainties.
Furthermore, the Company believes there are no jurisdictions in which the outcome of unresolved issues or claims is likely to be material to its results of operations, financial position or cash flows. Furthermore, the Company believes that it has adequately provided for all significant income tax uncertainties. 88 NOVANTA INC.
Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO.
From the inception of the 2018 Repurchase Plan, the Company repurchased a cumulative total of 264 thousand shares for an aggregate purchase price of $ 25.0 million at an average price of $ 94.57 per share. 80 NOVANTA INC.
From the inception of the 2018 Repurchase Plan, the Company repurchased a cumulative total of 264 thousand shares for an aggregate purchase price of $ 25.0 million at an average price of $ 94.57 per share.
The Company also grants share-based awards that vest based on specified company performance conditions, market conditions or a hybrid of specified company performance conditions and market conditions.
The Company also grants share-based awards that vest based on employment and certain specified company performance conditions, market conditions or a hybrid of specified company performance conditions and market conditions.
The aggregate Black-Scholes fair value of $ 3.0 million for the stock options granted during 2023 was estimated using the following assumptions as of the grant date: Year Ended December 31, 2023 Expected option term in years 4.5 Expected volatility 40.7 % Risk-free interest rate 4.00 % Expected annual dividend yield — The expected option term was calculated using the simplified method permitted under Codification of Staff Accounting Bulletins Topic 14, “Share-Based Payment”.
The aggregate Black-Scholes fair value of $ 3.3 million for the stock options granted during the year ended December 31, 2024 was estimated using the following assumptions as of the grant date: Year Ended December 31, 2024 Expected option term in years 4.5 Expected volatility 40.3 % Risk-free interest rate 4.2 % Expected annual dividend yield — The expected option term was calculated using the simplified method permitted under Codification of Staff Accounting Bulletins Topic 14, “Share-Based Payment”.
Certain Relationships and Related Transactions, and Director Independence The information required to be disclosed by this item is contained in the Proxy Statement for the Company’s Annual Meeting of Shareholders scheduled to be held on May 8, 2024 and is incorporated herein by reference. It em 14.
Certain Relationships and Related Transactions, and Director Independence The information required to be disclosed by this item is contained in the Proxy Statement for the Company’s Annual Meeting of Shareholders scheduled to be held on May 29, 2025 and is incorporated herein by reference. It em 14.
Outstanding DSUs are converted into common shares upon Board members' resignation or retirement from the Board. There were 41 thousand and 38 thousand DSUs outstanding as of December 31, 2023 and December 31, 2022, respectively, which were included in the calculation of weighted average basic shares outstanding for the respective period.
Outstanding DSUs are converted into common shares upon Board members' resignation or retirement from the Board. There were 40 thousand and 41 thousand DSUs outstanding as of December 31, 2024 and December 31, 2023, respectively, which were included in the calculation of weighted average basic shares outstanding for the respective period.
It em 9A. Controls and Procedures The required certifications of our Chief Executive Officer and Chief Financial Officer are included in Exhibits 31.1 and 31.2 to this Annual Report on Form 10-K.
Controls and Procedures The required certifications of our Chief Executive Officer and Chief Financial Officer are included in Exhibits 31.1 and 31.2 to this Annual Report on Form 10-K.
Principal Accountant Fees and Services The information required to be disclosed by this item is contained in the Proxy Statement for the Company’s Annual Meeting of Shareholders scheduled to be held on May 8, 2024 and is incorporated herein by reference. PA RT IV
Principal Accountant Fees and Services The information required to be disclosed by this item is contained in the Proxy Statement for the Company’s Annual Meeting of Shareholders scheduled to be held on May 29, 2025 and is incorporated herein by reference. PA RT IV
As of December 31, 2023 , the notional amount and fair value of the Company’s foreign currency forward contracts was $ 172.3 million and a net gain of $ 0.1 million, respectively.
As of December 31, 2023 , the notional amount and fair value of the Company’s foreign currency forward contracts was $ 172.3 million and a net gain of $ 0.1 million, respectively. 71 NOVANTA INC.
The Company allocated the deferred financing costs between the term loan and the revolving credit facility based on the maximum borrowing capacity and amortizes the costs on a straight-line basis over the term of the Senior Credit Facilities.
Deferred Financing Costs The Company allocated the deferred financing costs between the term loan and the revolving credit facility based on the maximum borrowing capacity and are amortized on a straight-line basis over the term of the Senior Credit Facilities.
Wilson 65 Director Chair of the Audit Committee Member of the Compensation Committee Former Chief Financial Officer and Senior Vice President of PerkinElmer, Inc., a life sciences diagnostics, discovery and analytical solutions company The remainder of the response to this item is contained in the Proxy Statement for the Company’s Annual Meeting of Shareholders scheduled to be held on May 8, 2024 and is incorporated herein by reference.
Wilson 66 Director Chair of the Audit Committee Member of the Compensation Committee Former Chief Financial Officer and Senior Vice President of PerkinElmer, Inc., a life sciences diagnostics, discovery and analytical solutions company The remainder of the response to this item is contained in the Proxy Statement for the Company’s Annual Meeting of Shareholders scheduled to be held on May 29, 2025 and is incorporated herein by reference.
Ite m 11. Executive Compensation The information required to be disclosed by this item is contained in the Proxy Statement for the Company’s Annual Meeting of Shareholders scheduled to be held on May 8, 2024 and is incorporated herein by reference. Ite m 12.
Ite m 11. Executive Compensation The information required to be disclosed by this item is contained in the Proxy Statement for the Company’s Annual Meeting of Shareholders scheduled to be held on May 29, 2025 and is incorporated herein by reference. Ite m 12.
The Third Amended and Restated Credit Agreement contains various customary representations, warranties and covenants applicable to the Company and its subsidiaries, including, among others: (i) limitations on restricted payments, including dividend payments and stock repurchases, provided that the Company and its subsidiaries may repurchase their equity interests so long as, immediately after giving effect to the repurchase, the Company’s consolidated leverage ratio is no more than 3.25 :1.00, with a step up to 3.75 :1.00 for four consecutive quarters following an acquisition with an aggregate consideration greater than or equal to $50.0 million, and the satisfaction of certain other customary conditions; (ii) limitations on fundamental changes involving the Company 76 NOVANTA INC.
The Third Amended and Restated Credit Agreement contains various customary representations, warranties and covenants applicable to the Company and its subsidiaries, including, among others: (i) limitations on restricted payments, including dividend payments and stock repurchases, provided that the Company and its subsidiaries may repurchase their equity interests so long as, immediately after giving effect to the repurchase, the Company’s consolidated leverage ratio is no more than 3.25 :1.00, with a step up to 3.75 :1.00 for four consecutive quarters following an acquisition with an aggregate consideration greater than or equal to $ 50.0 million, and the satisfaction of certain other customary conditions; (ii) limitations on fundamental changes involving the Company and its subsidiaries; (iii) limitations on the disposition of assets; and (iv) limitations on indebtedness, investments, and liens.
The probability assessment is performed quarterly and the cumulative effect of a change in the estimated compensation expense, if any, is recognized in the period in which such determination is made.
The probability assessment is performed quarterly and the cumulative effect of a change in the estimated compensation expense, if any, is recognized in the consolidated statement of operations in the period in which such determination is made.
By contrast, a hypothetical 10% weakening of the U.S. dollar against other currencies would result in an approximately $0.8 million decrease in the net fair value of our foreign currency contracts as of December 31, 2023. Interest Rates Our exposure to market risk associated with changes in interest rates relates primarily to our borrowings under our Senior Credit Facilities.
By contrast, a hypothetical 10% weakening of the U.S. dollar against other currencies would result in an approximately $0.7 million increase in the net fair value of our foreign currency contracts as of December 31, 2024. Interest Rates Our exposure to market risk associated with changes in interest rates relates primarily to our borrowings under our Senior Credit Facilities.
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 Company combines deep proprietary technology expertise and competencies in precision medicine, precision manufacturing, robotics and automation, and advanced surgery with a proven ability to solve complex technical challenges. This enables Novanta to engineer core components and sub-systems that deliver extreme precision and performance, tailored to the customers' demanding applications.
The amendments require disclosure, on an annual and interim basis for all public entities, 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 require disclosure, on an annual and interim basis for all public entities, 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.
Acquisition and Related Charges Acquisition and related costs incurred in connection with business combinations, primarily including finders’ fees, legal, valuation and other professional or consulting fees, totaled $ 1.0 million, $ 1.4 million, and $ 5.9 million during 2023, 2022, and 2021, respectively.
Acquisition and Related Charges Acquisition costs incurred in connection with business combinations, primarily including finders’ fees, legal, valuation and other professional or consulting fees, totaled $ 3.5 million, $ 1.0 million, and $ 1.4 million during 2024, 2023, and 2022 , respectively.
As of December 31, 2023 and 2022, the Company had approximately $ 0.7 million and $ 0.7 million, respectively, of accrued interest and penalties related to uncertain tax positions.
As of December 31, 2024 and 2023, the Company had approximately $ 0.8 million and $ 0.7 million, respectively, of accrued interest and penalties related to uncertain tax positions.
At the election of the Company, and so long as no default shall have occurred, the Company may reinvest all, or any portion, of the net proceeds from such asset dispositions or incurrence of debt within a year. As of December 31, 2023 , the Company had $ 416.6 million additional borrowing capacity available under the revolving credit facility.
At the election of the Company, and so long as no default shall have occurred, the Company may reinvest all, or any portion, of the net proceeds from such asset dispositions or incurrence of debt within a year. As of December 31, 2024, the Company had $ 346.2 million additional borrowing capacity available under the revolving credit facility.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2023 1. Organization and Basis of Presentation Novanta Inc. and its subsidiaries (collectively 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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2024 1. Organization and Basis of Presentation Novanta Inc. and its subsidiaries (collectively referred to as the “Company”, or “Novanta”) is a leading global supplier of core technology solutions that give medical and advanced industrial original equipment manufacturers (“OEMs”) a competitive advantage.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America.
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America.
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.
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.
As of December 31, 2023 and December 31, 2022 , contract liabilities were $ 5.8 million and $ 8.4 million, respectively, and are included in accrued expenses and other current liabilities and other liabilities in the accompanying consolidated balance sheets.
As of December 31, 2024 and December 31, 2023 , contract liabilities were $ 5.9 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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) AS OF DECEMBER 31, 2023 Impairment Charges Impairment analyses of goodwill and indefinite-lived intangible assets are conducted in accordance with ASC 350, “Intangibles — Goodwill and Other.” The Company performs its goodwill impairment test annually at a reporting unit level, which is generally at least one level below a reportable segment, as of the beginning of the second quarter or more frequently if indicators are present or changes in circumstances suggest that an impairment may exist.
Impairment Charges Impairment analyses of goodwill and indefinite-lived intangible assets are conducted in accordance with ASC 350, “Intangibles — Goodwill and Other.” The Company performs its goodwill impairment test annually at a reporting unit level, which is generally at least one level below a reportable segment, as of the beginning of the second quarter or more frequently if indicators are present or changes in circumstances suggest that an impairment may exist.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) AS OF DECEMBER 31, 2023 The net periodic pension cost is included in other income (expense) in the consolidated statements of operations and consisted of the following components (in thousands): Year Ended December 31, 2023 2022 2021 Components of the net periodic pension cost: Interest cost $ 1,185 $ 669 $ 554 Expected return on plan assets ( 1,440 ) ( 1,286 ) ( 1,120 ) Amortization of actuarial losses 990 380 928 Amortization of prior service cost 30 32 31 Net periodic pension cost $ 765 $ ( 205 ) $ 393 The actuarial assumptions used to compute the net periodic pension cost for the years ended December 31, 2023, 2022 and 2021, respectively, were as follows: Year Ended December 31, 2023 2022 2021 Weighted-average discount rate 4.8 % 1.8 % 1.2 % Weighted-average long-term rate of return on plan assets 5.3 % 3.2 % 2.5 % The actuarial assumptions used to compute the benefit obligations as of December 31, 2023 and 2022, respectively, were as follows: December 31, 2023 2022 Weighted-average discount rate 4.5 % 4.8 % Rate of inflation 2.8 % 2.7 % The discount rates used are derived from (AA) corporate bonds that have maturities approximating the terms of the pension obligations under the U.K.
The net periodic pension cost is included in other income (expense) in the consolidated statements of operations and consisted of the following components (in thousands): Year Ended December 31, 2024 2023 2022 Components of the net periodic pension cost: Interest cost $ 1,158 $ 1,185 $ 669 Expected return on plan assets ( 1,466 ) ( 1,440 ) ( 1,286 ) Amortization of actuarial losses 851 990 380 Amortization of prior service cost 30 30 32 Net periodic pension cost $ 573 $ 765 $ ( 205 ) The actuarial assumptions used to compute the net periodic pension cost for the years ended December 31, 2024, December 31, 2023 and December 31, 2022, respectively, were as follows: Year Ended December 31, 2024 2023 2022 Weighted-average discount rate 4.5 % 4.8 % 1.8 % Weighted-average long-term rate of return on plan assets 5.1 % 5.3 % 3.2 % The actuarial assumptions used to compute the benefit obligations as of December 31, 2024 and December 31, 2023, respectively, were as follows: December 31, 2024 2023 Weighted-average discount rate 5.5 % 4.5 % Rate of inflation 3.1 % 2.8 % The discount rates used are derived from (AA) corporate bonds that have maturities approximating the terms of the pension obligations under the U.K.
As of December 31, 2023, the Company’s total amount of unrecognized tax benefits was $ 4.3 million, of which $ 3.8 million would favorably affect the effective tax rate if benefited. Over the next twelve months, the Company may need to reverse up to $ 0.3 million of previously recorded unrecognized tax benefits due to statute of limitations closures.
As of December 31, 2024, the Company’s total amount of gross unrecognized tax benefits was $ 4.8 million, of which $ 4.1 million would favorably affect the effective tax rate if benefited. Over the next twelve months, the Company may need to recognize up to $ 0.8 million of previously recorded unrecognized tax benefits due to statute of limitations closures.
Other Information Rule 10b5-1 Trading Plans No officers or directors adopted , modified , and/or terminated a "Rule 10b5-1 trading agreement" or a "non-Rule 10b5-1 trading agreement," as defined in Item 408 of Regulation S-K, during the three months ended December 31, 2023 . 98 Item 9C . Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable.
Other Information Rule 10b5-1 Trading Plans No officers or directors adopted , modified , and/or terminated a “Rule 10b5-1 trading agreement” or a “non-Rule 10b5-1 trading agreement,” as defined in Item 408 of Regulation S-K, during the three months ended December 31, 2024 . Item 9C . Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm – PricewaterhouseCoopers LLP 52 Consolidated Balance Sheets as of December 31, 2023 and 2022 54 Consolidated Statements of Operations for the years ended December 31, 2023, 2022 and 2021 55 Consolidated Statements of Comprehensive Income for the years ended December 31, 2023, 2022 and 2021 56 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2023, 2022 and 2021 57 Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021 58 Notes to Consolidated Financial Statements 59 51 Report of Independent Regist ered Public Accounting Firm To the Board of Directors and Stockholders of Novanta Inc.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm – Deloitte & Touche LLP 50 Report of Independent Registered Public Accounting Firm – PricewaterhouseCoopers LLP 52 Consolidated Balance Sheets as of December 31, 2024 and 2023 53 Consolidated Statements of Operations for the years ended December 31, 2024, 2023 and 2022 54 Consolidated Statements of Comprehensive Income for the years ended December 31, 2024, 2023 and 2022 55 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2024, 2023 and 2022 56 Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022 57 Notes to Consolidated Financial Statements 58 49 Report of Independent Regist ered Public Accounting Firm To the Board of Directors and Stockholders of Novanta Inc.

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