NOVANTA INC Fair Value Disclosure
7. 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. The Company determines the fair value of cash equivalents using a market approach based on quoted prices in active markets. The fair values of cash equivalents, accounts receivable, income taxes receivable, accounts payable, income taxes payable and accrued expenses and other current liabilities approximate their carrying values because of their short-term nature.
Foreign Currency Contracts
The Company addresses market risks from changes in foreign currency exchange rates through a risk management program that includes the use of derivative financial instruments to mitigate certain balance sheet foreign currency transaction exposures. The Company uses foreign currency forward contracts as a part of its strategy to manage exposures related to foreign currency denominated monetary assets and liabilities.
Contingent Consideration
On April 8, 2025, the Company completed the acquisition of Keonn. Pursuant to the purchase and sale agreement, the former shareholders of Keonn (the “Sellers”) are eligible to receive contingent consideration based on the achievement of specified revenue targets by Keonn during fiscal years 2025 through 2027. Payment of this contingent consideration is also subject to Keonn maintaining certain minimum gross margin percentage during the applicable periods. The undiscounted range of potential contingent consideration is between €0 and €20.0 million (approximately $21.9 million). If the performance conditions are met, the contingent consideration will be payable annually, with the first payment due in the first half of 2026. As of the acquisition date, the estimated fair value of the contingent consideration was €4.1 million (approximately $4.5 million), determined using the Monte Carlo valuation method. This amount was recorded as part of the purchase price. Subsequent changes in the estimated fair value are recognized in the consolidated statement of operations in restructuring, acquisition, and related costs until the liability is fully settled. During 2025, the fair value of the contingent consideration was adjusted to €4.9 million ($5.7 million).
The following table summarizes the fair values of the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2025 (in thousands):
|
Fair Value |
|
|
Quoted Price in |
|
|
Significant Other |
|
|
Significant Other |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds |
$ |
291,629 |
|
|
$ |
291,629 |
|
|
$ |
— |
|
|
$ |
— |
|
Prepaid expenses and other current assets: |
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency forward contracts |
|
110 |
|
|
|
— |
|
|
|
110 |
|
|
|
— |
|
|
$ |
291,739 |
|
|
$ |
291,629 |
|
|
$ |
110 |
|
|
$ |
— |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
||||
Accrued expenses and other current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
||||
Contingent considerations - Current |
$ |
4,465 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
4,465 |
|
Contingent considerations - Long term |
|
1,291 |
|
|
|
— |
|
|
|
— |
|
|
|
1,291 |
|
Foreign currency forward contracts |
|
134 |
|
|
|
— |
|
|
|
134 |
|
|
|
— |
|
|
$ |
5,890 |
|
|
$ |
— |
|
|
$ |
134 |
|
|
$ |
5,756 |
|
The following table summarizes the fair values of the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2024 (in thousands):
|
Fair Value |
|
|
Quoted Price in |
|
|
Significant Other |
|
|
Significant Other |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
||||
Prepaid expenses and other current assets: |
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency forward contracts |
$ |
1,226 |
|
|
$ |
— |
|
|
$ |
1,226 |
|
|
$ |
— |
|
|
$ |
1,226 |
|
|
$ |
— |
|
|
$ |
1,226 |
|
|
$ |
— |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
||||
Accrued expenses and other current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
||||
Contingent considerations - Current |
$ |
57 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
57 |
|
Foreign currency forward contracts |
|
1,401 |
|
|
|
— |
|
|
|
1,401 |
|
|
|
— |
|
|
$ |
1,458 |
|
|
$ |
— |
|
|
$ |
1,401 |
|
|
$ |
57 |
|
Changes in the fair value of Level 3 contingent considerations during the twelve months ended December 31, 2025 were as follows (in thousands):
|
Contingent Considerations |
|
|
Balance at December 31, 2024 |
$ |
57 |
|
Acquisition of Keonn |
|
4,537 |
|
Payments |
|
— |
|
Fair value adjustments |
|
830 |
|
Effect of foreign exchange rates |
|
332 |
|
Balance at December 31, 2025 |
$ |
5,756 |
|
The following table provides qualitative information associated with the fair value measurement of the Company’s Level 3 liabilities:
Liability |
|
December 31, 2025 Fair Value (in thousands) |
|
Valuation Technique |
|
Unobservable Inputs |
|
Percentage Applied |
Contingent consideration (Keonn) |
|
$5,692 |
|
Monte Carlo method |
|
Historical and projected revenue and gross profit margin from fiscal year 2025 to 2027 |
|
N/A |
|
|
|
|
|
|
Gross Profit Premium |
|
9.3% |
|
|
|
|
|
|
Revenue risk premium |
|
8.4% |
|
|
|
|
|
|
Gross Profit Volatility |
|
38.5% |
|
|
|
|
|
|
Revenue Volatility |
|
35.0% |
|
|
|
|
|
|
Credit spread |
|
1.9% |
During the years ended December 31, 2025 and 2024, there were no transfers between fair value levels.
See Note 11 for a discussion of the estimated fair value of the Company’s outstanding debt and Note 15 for a discussion of the estimated fair value of the Company’s pension plan assets.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 23, 2026 | Showing above |
| 2024 | Feb 25, 2025 | |
| 2023 | Feb 28, 2024 | |
| 2022 | Mar 1, 2023 | |
| 2021 | Mar 1, 2022 | |
| 2020 | Mar 1, 2021 | |
| 2019 | Feb 26, 2020 | |
| 2018 | Feb 27, 2019 | |
| 2017 | Feb 28, 2018 | |
| 2016 | Mar 6, 2017 | |
| 2015 | Mar 2, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.