ATS ATS Corporation

ATS Corporation (TSX and NYSE: ATS) (“ATS” or the “Company”) today reported its financial results for the three months ended June 30, 2024. All references to "$" or "dollars" in this news release are to Canadian dollars unless otherwise indicated.

First quarter highlights:

• Revenues decreased 7.9% year over year to $694.3 million.
• Net Income was $35.3 million compared to $47.7 million a year ago.
• Basic earnings per share were 36 cents, compared to 50 cents a year ago.
• Adjusted EBITDA1 was $106.0 million compared to $119.2 million a year ago.
• Adjusted basic earnings per share1 were 50 cents compared to 69 cents a year ago.
• Order Bookings2 were $817 million, 18.4% higher compared to $690 million a year ago.
• Order Backlog2 was $1,882 million at the end of the quarter.

"Today ATS reported our first quarter results for fiscal 2025, which included the second highest Order Bookings and the largest life sciences Order Backlog in company history," said Andrew Hider, Chief Executive Officer. "Strengthened by organic and acquisition growth within life sciences, our Order Backlog provides good revenue visibility throughout fiscal 2025."

Mr. Hider added, "In transportation, we are taking action to align our cost structure to a lower demand environment, with the expectation that Order Bookings in the Electric Vehicle ("EV") space will be a smaller part of our portfolio going forward. As we drive our strategic focus on expanding our presence in regulated markets such as food and beverage and life sciences, our recent acquisitions, including Avidity, as well as Paxiom, which we recently welcomed to the ATS portfolio, create opportunities for both organic and synergistic growth with accretive margin profiles."

1 Non-IFRS measure: see "Notice to Reader: Non-IFRS and Other Financial Measures".

2 Supplementary financial measure: see "Notice to Reader: Non-IFRS and Other Financial Measures". 

Financial results

(In millions of dollars, except per share and margin data)

 

 

Three Months

Ended

June 30, 2024

Three Months

Ended

July 2, 2023

Variance

Revenues

$

694.3

$

753.6

(7.9)%

Net income

$

35.3

$

47.7

(26.0)%

Adjusted earnings from operations1

$

86.2

$

102.1

(15.6)%

Adjusted earnings from operations margin2

 

12.4%

 

13.5%

(113)bps

Adjusted EBITDA1

$

106.0

$

119.2

(11.1)%

Adjusted EBITDA margin2

 

15.3%

 

15.8%

(55)bps

Basic earnings per share

$

0.36

$

0.50

(28.0)%

Adjusted basic earnings per share1

$

0.50

$

0.69

(27.5)%

Order Bookings3

$

817.0

$

690.0

18.4%

   

As At

June 30

2024

July 2

2023

Variance

Order Backlog3

$

1,882

$

2,023

(7.0)%

1 Non-IFRS financial measure - See “Non-IFRS and Other Financial Measures."

2 Non-IFRS ratio - See "Non-IFRS and Other Financial Measures"

3 Supplementary financial measure - See "Non-IFRS and Other Financial Measures"

Recent Acquisitions

On May 15, 2024, the Company announced it had entered into a definitive agreement to acquire 100% of the shares of Paxiom Group (“Paxiom”). With headquarters in Montreal, Quebec, Paxiom is a provider of primary, secondary, and end-of-line packaging machines in the food and beverage, cannabis, and pharmaceutical industries. Paxiom provides a vast product line that includes precision weigh filling, bagging, wrapping, labeling, conveyors, case forming, robotic case packing and end of line palletizing equipment that will complement ATS’ packaging and food technology businesses and allow ATS to offer complete packaging and end-of-line solutions. The transaction closed on July 24, 2024, subsequent to the end of the period.

On August 7, 2024, subsequent to the end of the period, the Company announced it had entered into a definitive agreement to purchase all material assets from Heidolph Instruments GmbH & Co. KG and Hans Heidolph GmbH ("Heidolph''), a leading manufacturer of premium lab equipment for the life sciences and pharmaceutical industries, with headquarters in Schwabach, Germany and facilities in the United States, South Korea and China. The transaction is expected to close in the third calendar quarter of 2024, subject to closing conditions in the agreement.

First quarter summary

Fiscal 2025 first quarter revenues were 7.9% or $59.3 million lower than in the corresponding period a year ago. This performance primarily reflected the year-over-year decrease in organic revenue (excluding contributions from acquired companies and foreign exchange translation) of $95.4 million or 12.7%, partially offset by increased revenues earned by acquired companies of $29.9 million, which included $26.1 million from Avidity Science, LLC ("Avidity"). Revenues generated from construction contracts decreased 22.4% or $113.8 million due to lower Order Backlog entering the period. Revenues from services increased 20.3% or $28.9 million due to organic revenue growth in addition to revenues earned by acquired companies of $8.7 million. Revenues from the sale of goods increased 25.0% or $25.6 million primarily due revenues earned by acquired companies of $20.9 million, primarily from Avidity, in addition to organic revenue growth.

By market, revenues generated in life sciences increased $43.4 million or 15.2% year over year. This was primarily due to contributions from acquisitions totalling $29.7 million and organic revenue growth on higher Order Backlog entering the quarter. Revenues in transportation decreased $74.1 million or 33.9%, due to lower Order Backlog entering the quarter. Revenues generated in food & beverage decreased $33.8 million or 25.9% due to timing of program execution. Revenues generated in consumer products increased $4.2 million or 5.0% due to timing of program execution. Revenues in energy increased $1.0 million or 2.8% due to higher Order Backlog entering the quarter.

Net income for the first quarter of fiscal 2025 was $35.3 million (36 cents per share basic), compared to $47.7 million (50 cents per share basic) for the first quarter of fiscal 2024. The decrease primarily reflected lower revenues and higher selling, general and administrative ("SG&A") expenses, partially offset by increased margins and lower stock-based compensation expenses. Adjusted basic earnings per share were 50 cents compared to 69 cents in the first quarter of fiscal 2024 (see “Reconciliation of Non-IFRS Measures to IFRS Measures”).

Depreciation and amortization expense was $37.4 million in the first quarter of fiscal 2025, compared to $35.7 million a year ago.

EBITDA was $105.0 million (15.1% EBITDA margin) in the first quarter of fiscal 2025 compared to $114.7 million (15.2% EBITDA margin) in the first quarter of fiscal 2024. EBITDA for the first quarter of fiscal 2025 included $1.3 million of incremental costs related to acquisition activity, $1.0 million of acquisition-related fair value adjustments to acquired inventories, and a $1.3 million recovery of stock-based compensation expenses due to revaluation. EBITDA for the corresponding period in the prior year included $0.1 million of incremental costs related to acquisition activity, and $4.4 million of stock-based compensation revaluation expenses. Excluding these costs, adjusted EBITDA was $106.0 million (15.3% adjusted EBITDA margin), compared to $119.2 million (15.8% adjusted EBITDA margin) for the corresponding period in the prior year. Lower adjusted EBITDA reflected lower revenues and increased SG&A expenses, partially offset by increased margins. EBITDA and adjusted EBITDA are non-IFRS financial measure - see “Non-IFRS and Other Financial Measures.”

Order Backlog Continuity

(In millions of dollars)

 

 

Three Months

Ended

June 30, 2024

 

Three Months

Ended

July 2, 2023

Opening Order Backlog

$

1,793

 

 

$

2,153

 

Revenues

 

(694

)

 

 

(754

)

Order Bookings

 

817

 

 

 

690

 

Order Backlog adjustments1

 

(34

)

 

 

(66

)

Total

$

1,882

 

 

$

2,023

 

1 Order Backlog adjustments include foreign exchange adjustments, scope changes and cancellations.

Order Bookings

First quarter fiscal 2025 Order Bookings were $817 million, an 18.4% year-over-year increase, reflecting 13.1% of organic Order Bookings growth, in addition to 4.2% growth from acquired companies. Order Bookings from acquired companies totalled $28.9 million. By market, Order Bookings in life sciences increased compared to the prior-year period primarily due to organic growth, along with $28.6 million of contributions from acquired companies, including $24.2 million from Avidity. Order Bookings in transportation decreased compared to the prior-year period, reflecting a more measured approach to Electric Vehicle ("EV") investment by transportation customers as they respond to dynamics in their markets, resulting in lower Order Bookings relative to the prior period. Order Bookings in food & beverage and energy decreased while Order Bookings in consumer products increased primarily due to the timing of customer projects.

Trailing twelve month book-to-bill ratio at June 30, 2024 was 1.02:1. Book-to-bill ratio, Order Bookings and organic Order Bookings growth are supplementary financial measures - see “Non-IFRS and Other Financial Measures.”

Backlog

At June 30, 2024, Order Backlog was $1,882 million, 7.0% lower than at July 2, 2023 primarily on account of lower Order Backlog within the transportation market which included several large Order Bookings a year ago.

Outlook

The life sciences funnel remains strong, with a focus on strategic submarkets of pharmaceuticals, radiopharmaceuticals, and medical devices. Management continues to see opportunities with both new and existing customers, including those who produce auto-injectors and wearable devices for diabetes and obesity treatments, contact lenses and pre-filled syringes, automated pharmacy solutions, as well as opportunities to provide life science solutions that leverage integrated capabilities from across ATS. In transportation, the funnel consists of smaller opportunities relative to the size of the Order Bookings received throughout fiscal years 2023 and 2024 as industry participants are moderating new capacity investment to match end market demand and reduce platform costs. Funnel activity in food & beverage remains strong. The Company continues to benefit from strong brand recognition within the global tomato processing, other soft fruits processing and vegetable processing industries, and there is continued interest in automated solutions within the food & beverage market more broadly. Funnel activity in consumer products is stable; inflationary pressures continue to have an effect on discretionary spending by consumers, which may impact timing of some customer investments. Funnel activity in energy remains strong and includes longer-term opportunities in the nuclear industry. The Company is focused on clean energy applications including solutions for the refurbishment of nuclear power plants, early participation in the small modular reactor market, and grid battery storage.

Funnel growth in markets where environmental, social and governance requirements are an increasing focus for customers — including grid battery storage and nuclear, as well as consumer goods packaging — provide ATS with opportunities to use its capabilities to respond to customer sustainability standards and goals, including global and regional requirements to reduce carbon emissions. Customers seeking to de-risk or enhance the resiliency of their supply chains, address a shortage of skilled workers or combat higher labour costs also provide future opportunities for ATS to pursue. Management believes that the underlying trends driving customer demand for ATS solutions including rising labour costs, labour shortages, production onshoring or reshoring and the need for scalable, high-quality, energy-efficient production remain favourable.

Order Backlog of $1,882 million is expected to help mitigate some of the impact of quarterly variability in Order Bookings on revenues in the short term. The Company’s Order Backlog includes several large enterprise programs that have longer periods of performance and therefore longer revenue recognition cycles. In the second quarter of fiscal 2025, management expects the conversion of Order Backlog to revenues to be in the 33% to 36% range. This estimate is calculated each quarter based on management’s assessment of project schedules across all customer contracts, expectations for faster-turn product and services revenues, expected delivery timing of third-party equipment and operational capacity. In the fourth quarter of fiscal 2024, management reported that approximately $150 million of Order Backlog with one of the Company's EV customers remained delayed. There is uncertainty as to if or when this portion of the program will restart. In light of reduced EV investment by automakers, and the uncertainty this creates in transportation funnel activity as well as the conversion of Order Backlog to revenues, management expects that transportation will be a smaller portion of ATS' overall business going forward. As a result, the Company is working to reduce its cost structure to reflect these expectations (see "Reorganization Activity"). In the short-term, management expects pressure on transportation revenues to negatively impact margins.

Supplier lead times have improved in most key categories; however, prolonged cost increases, price and lead-time volatility have and may continue to disrupt the timing and progress of the Company’s margin expansion efforts and affect revenue recognition. Over time, sustaining management's margin target assumes that the Company will successfully implement its margin expansion initiatives, and that such initiatives will result in improvements to its adjusted earnings from operations margin that offset these shorter-term pressures (see “Forward-Looking Statements” for a description of the risks underlying the achievement of the margin target in future periods).

The timing of customer decisions on larger opportunities is expected to cause variability in Order Bookings from quarter to quarter. Revenues in a given period are dependent on a combination of the volume of outstanding projects the Company is contracted to perform, the size and duration of those projects, and the timing of project activities including design, assembly, testing, and installation. Given the specialized nature of the Company’s offerings, the size and scope of projects vary based on customer needs. The Company seeks to achieve revenue growth organically and by identifying strategic acquisition opportunities that provide access to attractive end-markets and new products and technologies and deliver hurdle-rate returns. After-sales revenues and reoccurring revenues, which ATS defines as revenues from ancillary products and services associated with equipment sales, and revenues from customers who purchase non-customized ATS product at regular intervals, are expected to provide some balance to customers' capital expenditure cycles.

In the short term, the Company also expects non-cash working capital to remain elevated as large enterprise programs progress through milestones. Management anticipates that working capital improvements will start to materialize in the second half of the fiscal year as milestones are achieved on larger programs in Order Backlog. Not withstanding the foregoing, given the size and timing of milestone payments for certain large EV programs in Order Backlog, the Company could still see its non-cash working capital remain elevated until these milestone payments are received. Over the long-term, the Company expects to continue investing in non-cash working capital to support growth, with fluctuations expected on a quarter-over-quarter basis. The Company’s long-term goal is to maintain its investment in non-cash working capital as a percentage of annualized revenues below 15%. The Company expects that continued cash flows from operations, together with cash and cash equivalents on hand and credit available under operating and long-term credit facilities will be sufficient to fund its requirements for investments in non-cash working capital and capital assets, and to fund strategic investment plans including some potential acquisitions. Acquisitions could result in additional debt or equity financing requirements for the Company. Non-cash working capital as a percentage of revenues is a non-IFRS ratio - see “Non-IFRS and Other Financial Measures.”

The Company continues to make progress in line with its plans to integrate acquired companies, and expects to realize cost and revenue synergies consistent with announced integration plans.

Reorganization Activity

The North American EV market is experiencing a slowdown in sales growth, and this has given rise to reduced investment, program cancellations, deferrals, and production volume reductions by various automakers. In response to the resulting lower demand for the Company's solutions in this space, the Company intends to reduce the cost structure of its transportation-related businesses. This is expected to include reallocation of resources to other parts of the business, along with workforce reductions. These actions are expected to commence in the second quarter of fiscal 2025, with an estimated cost of between $15 million and $20 million.

Quarterly Conference Call

ATS will host a conference call and webcast at 8:30 a.m. eastern on Thursday, August 8, 2024 to discuss its quarterly results. The listen-only webcast can be accessed live at www.atsautomation.com. The conference call can be accessed live by dialing (888) 660-6652 or (646) 960-0554 five minutes prior. A replay of the conference will be available on the ATS website following the call. Alternatively, a telephone recording of the call will be available for one week (until midnight August 15, 2024) by dialing (800) 770-2030 and using the access code 8782510.

About ATS

ATS Corporation is an industry-leading automation solutions provider to many of the world's most successful companies. ATS uses its extensive knowledge base and global capabilities in custom automation, repeat automation, automation products and value-added solutions including pre-automation and after-sales services, to address the sophisticated manufacturing automation systems and service needs of multinational customers in markets such as life sciences, transportation, food & beverage, consumer products, and energy. Founded in 1978, ATS employs over 7,000 people at more than 65 manufacturing facilities and over 85 offices in North America, Europe, Southeast Asia and Oceania. The Company's common shares are traded on the Toronto Stock Exchange ("TSX") and the New York Stock Exchange ("NYSE") under the symbol ATS. Visit the Company's website at www.atsautomation.com.

Consolidated Revenues

(In millions of dollars)

 

Revenues by type

Three Months

Ended

June 30, 2024

 

Three Months

Ended

July 2, 2023

Revenues from construction contracts

$

395.0

 

$

508.8

Services rendered

 

171.2

 

 

142.3

Sale of goods

 

128.1

 

 

102.5

Total revenues

$

694.3

 

$

753.6

 

Revenues by market

Three Months

Ended

June 30, 2024

 

Three Months

Ended

July 2, 2023

Life Sciences

$

328.4

 

$

285.0

Transportation

 

144.4

 

 

218.5

Food & Beverage

 

96.8

 

 

130.6

Consumer Products

 

87.8

 

 

83.6

Energy

 

36.9

 

 

35.9

Total revenues

$

694.3

 

$

753.6

Consolidated Operating Results

(In millions of dollars)

 

 

Three Months

Ended

June 30, 2024

 

Three Months

Ended

July 2, 2023

Earnings from operations

$

67.6

 

 

$

79.0

Amortization of acquisition-related intangible assets

 

17.6

 

 

 

18.6

Acquisition-related transaction costs

 

1.3

 

 

 

0.1

Acquisition-related inventory fair value charges

 

1.0

 

 

 

—

Mark to market portion of stock-based compensation

 

(1.3

)

 

 

4.4

Adjusted earnings from operations1

$

86.2

 

 

$

102.1

1 Non-IFRS Financial Measure, See “Non-IFRS and Other Financial Measures”

 

Three Months

Ended

June 30, 2024

 

Three Months

Ended

July 2, 2023

Earnings from operations

$

67.6

 

 

$

79.0

Depreciation and amortization

 

37.4

 

 

 

35.7

EBITDA1

$

105.0

 

 

$

114.7

Acquisition-related transaction costs

 

1.3

 

 

 

0.1

Acquisition-related inventory fair value charges

 

1.0

 

 

 

—

Mark to market portion of stock-based compensation

 

(1.3

)

 

 

4.4

Adjusted EBITDA1

$

106.0

 

 

$

119.2

1 Non-IFRS Financial Measure, See “Non-IFRS and Other Financial Measures”

Order Backlog by Market

(In millions of dollars)

 

As at

June 30, 2024

 

July 2, 2023

Life Sciences

$

990

 

$

783

Transportation

 

417

 

 

834

Food & Beverage

 

216

 

 

188

Consumer Products

 

150

 

 

134

Energy

 

109

 

 

84

Total

$

1,882

 

$

2,023

Reconciliation of Non-IFRS Measures to IFRS Measures (In millions of dollars, except per share data)

The following table reconciles adjusted EBITDA and EBITDA to the most directly comparable IFRS measure (net income):

 

Three Months

Ended

June 30, 2024

 

Three Months

Ended

July 2, 2023

Adjusted EBITDA

$

106.0

 

 

$

119.2

Less: acquisition-related transaction costs

 

1.3

 

 

 

0.1

Less: acquisition-related inventory fair value charges

 

1.0

 

 

 

—

Less: mark to market portion of stock-based compensation

 

(1.3

)

 

 

4.4

EBITDA

$

105.0

 

 

$

114.7

Less: depreciation and amortization expense

 

37.4

 

 

 

35.7

Earnings from operations

$

67.6

 

 

$

79.0

Less: net finance costs

 

19.5

 

 

 

16.9

Less: provision for income taxes

 

12.8

 

 

 

14.4

Net income

$

35.3

 

 

$

47.7

The following table reconciles adjusted earnings from operations, adjusted net income, and adjusted basic earnings per share to the most directly comparable IFRS measures (net income and basic earnings per share):

 

Three Months Ended June 30, 2024

 

Three Months Ended July 2, 2023

 

Earnings

from

operations

 

 

 

Finance

costs

 

Provision

for income

taxes

 

Net

income

 

Basic

EPS

 

Earnings

from

operations

 

 

 

Finance

costs

 

Provision

for income

taxes

 

Net

income

 

Basic

EPS

Reported (IFRS)

$

67.6

 

 

$

(19.5

)

 

$

(12.8

)

 

$

35.3

 

 

$

0.36

 

 

$

79.0

 

$

(16.9

)

 

$

(14.4

)

 

$

47.7

 

 

$

0.50

 

Amortization of acquisition-related intangibles

 

17.6

 

 

 

—

 

 

 

—

 

 

 

17.6

 

 

 

0.18

 

 

 

18.6

 

 

—

 

 

 

—

 

 

 

18.6

 

 

 

0.20

 

Acquisition-related inventory fair value charges

 

1.0

 

 

 

—

 

 

 

—

 

 

 

1.0

 

 

 

0.01

 

 

 

—

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Acquisition-related transaction costs

 

1.3

 

 

 

—

 

 

 

—

 

 

 

1.3

 

 

 

0.01

 

 

 

0.1

 

 

—

 

 

 

—

 

 

 

0.1

 

 

 

—

 

Mark to market portion of stock-based compensation

 

(1.3

)

 

 

—

 

 

 

—

 

 

 

(1.3

)

 

 

(0.01

)

 

 

4.4

 

 

—

 

 

 

—

 

 

 

4.4

 

 

 

0.05

 

Tax effect adjustments1

 

—

 

 

 

—

 

 

 

(4.7

)

 

 

(4.7

)

 

 

(0.05

)

 

 

—

 

 

—

 

 

 

(5.8

)

 

 

(5.8

)

 

 

(0.06

)

Adjusted (non-IFRS)

$

86.2

 

 

 

 

 

 

$

49.2

 

 

$

0.50

 

 

$

102.1

 

 

 

 

 

$

65.0

 

 

$

0.69

 

1 Adjustments to provision for income taxes relate to the income tax effects of adjustment items that are excluded for the purposes of calculating non-IFRS based adjusted net income.

The following table reconciles organic revenue to the most directly comparable IFRS measure (revenue):

 

Three Months

Ended

June 30, 2024

 

Three Months

Ended

July 2, 2023

Organic revenue

$

658.2

 

$

704.7

Revenues of acquired companies

 

29.9

 

 

15.3

Impact of foreign exchange rate changes

 

6.2

 

 

33.6

Total revenue

$

694.3

 

$

753.6

Organic revenue growth

 

(12.7)%

 

 

The following table reconciles non-cash working capital as a percentage of revenues to the most directly comparable IFRS measures:

As at

June 30

2024

 

March 31

2024

Accounts receivable

$

568.2

 

 

$

471.3

 

Income tax receivable

 

13.3

 

 

 

13.4

 

Contract assets

 

726.4

 

 

 

704.7

 

Inventories

 

304.7

 

 

 

295.9

 

Deposits, prepaids and other assets

 

105.2

 

 

 

98.2

 

Accounts payable and accrued liabilities

 

(587.4

)

 

 

(604.5

)

Income tax payable

 

(39.5

)

 

 

(44.7

)

Contract liabilities

 

(365.4

)

 

 

(312.2

)

Provisions

 

(29.8

)

 

 

(36.0

)

Non-cash working capital

$

695.7

 

 

$

586.1

 

Trailing six-month revenues annualized

$

2,971.5

 

 

$

3,087.0

 

Working capital %

 

23.4

%

 

 

19.0

%

The following table reconciles net debt to the most directly comparable IFRS measures:

As at

June 30

2024

 

March 31

2024

Cash and cash equivalents

$

185.1

 

 

$

170.2

 

Bank indebtedness

 

(9.5

)

 

 

(4.1

)

Current portion of lease liabilities

 

(28.6

)

 

 

(27.6

)

Current portion of long-term debt

 

(0.2

)

 

 

(0.2

)

Long-term lease liabilities

 

(85.7

)

 

 

(83.8

)

Long-term debt

 

(1,289.8

)

 

 

(1,171.8

)

Net Debt

$

(1,228.7

)

 

$

(1,117.3

)

Adjusted EBITDA (TTM)

$

457.3

 

 

$

470.6

 

Net Debt to Adjusted EBITDA

2.7x

 

2.4x

The following table reconciles free cash flow to the most directly comparable IFRS measures:

(in millions of dollars)

Three Months

Ended

June 30, 2024

 

Three Months

Ended

July 2, 2023

Cash flows used in operating activities

$

(35.4

)

 

$

(107.8

)

Acquisition of property, plant and equipment

 

(7.1

)

 

 

(18.6

)

Acquisition of intangible assets

 

(8.8

)

 

 

(4.4

)

Free cash flow

$

(51.3

)

 

$

(130.8

)

Certain non-IFRS financial measures exclude the impact on stock-based compensation expense of the revaluation of deferred share units and restricted share units resulting specifically from the change in market price of the Company's common shares between periods. Management believes the adjustment provides further insight into the Company's performance.

The following table reconciles total stock-based compensation expense to its components:

(in millions of dollars)

Q1 2025

 

Q4 2024

 

Q3 2024

 

Q2 2024

 

Q1 2024

 

Q4 2023

 

Q3 2023

 

Q2 2023

Total stock-based compensation expense

$

3.7

 

 

$

(4.3

)

 

$

4.7

 

 

$

3.5

 

 

$

10.0

 

$

19.3

 

$

9.9

 

$

5.3

Less: Mark to market portion of stock-based compensation

 

(1.3

)

 

 

(8.5

)

 

 

(0.6

)

 

 

(2.0

)

 

 

4.4

 

 

15.1

 

 

5.6

 

 

1.0

Base stock-based compensation expense

$

5.0

 

 

$

4.2

 

 

$

5.3

 

 

$

5.5

 

 

$

5.6

 

$

4.2

 

$

4.3

 

$

4.3

INVESTMENTS, LIQUIDITY, CASH FLOW AND FINANCIAL RESOURCES

(In millions of dollars, except ratios)

 

As at

June 30, 2024

 

March 31, 2024

Cash and cash equivalents

$

185.1

 

$

170.2

Debt-to-equity ratio1

0.88:1

 

0.79:1

1 Debt is calculated as bank indebtedness, long-term debt and lease liabilities. Equity is calculated as total equity less accumulated other comprehensive income.

 

Three Months

Ended

June 30, 2024

 

Three Months

Ended

July 2, 2023

Cash, beginning of period

$

170.2

 

 

$

159.9

 

Total cash provided by (used in):

 

 

 

Operating activities

 

(35.4

)

 

 

(107.8

)

Investing activities

 

(15.4

)

 

 

(20.3

)

Financing activities

 

65.2

 

 

 

92.4

 

Net foreign exchange difference

 

0.5

 

 

 

(0.7

)

Cash, end of period

$

185.1

 

 

$

123.5

 

ATS CORPORATION

Interim Condensed Consolidated Statements of Financial Position

(in thousands of Canadian dollars - unaudited)

  As at

 

June 30

2024

 

March 31

2024

ASSETS

 

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

 

$

185,086

 

$

170,177

Accounts receivable

 

 

568,205

 

 

471,345

Income tax receivable

 

 

13,278

 

 

13,428

Contract assets

 

 

726,427

 

 

704,703

Inventories

 

 

304,738

 

 

295,880

Deposits, prepaids and other assets

 

 

105,155

 

 

98,161

 

 

 

1,902,889

 

 

1,753,694

Non-current assets

 

 

 

 

Property, plant and equipment

 

 

297,428

 

 

296,977

Right-of-use assets

 

 

108,044

 

 

105,661

Other assets

 

 

17,841

 

 

18,416

Goodwill

 

 

1,236,540

 

 

1,228,600

Intangible assets

 

 

671,665

 

 

679,547

Deferred income tax assets

 

 

7,875

 

 

5,904

 

 

 

2,339,393

 

 

2,335,105

Total assets

 

$

4,242,282

 

$

4,088,799

LIABILITIES AND EQUITY

 

 

 

 

Current liabilities

 

 

 

 

Bank indebtedness

 

$

9,470

 

$

4,060

Accounts payable and accrued liabilities

 

 

587,442

 

 

604,488

Income tax payable

 

 

39,458

 

 

44,732

Contract liabilities

 

 

365,359

 

 

312,204

Provisions

 

 

29,755

 

 

35,978

Current portion of lease liabilities

 

 

28,568

 

 

27,571

Current portion of long-term debt

 

 

173

 

 

176

 

 

 

1,060,225

 

 

1,029,209

Non-current liabilities

 

 

 

 

Employee benefits

 

 

24,915

 

 

24,585

Long-term lease liabilities

 

 

85,741

 

 

83,808

Long-term debt

 

 

1,289,758

 

 

1,171,796

Deferred income tax liabilities

 

 

78,582

 

 

81,353

Other long-term liabilities

 

 

15,506

 

 

14,101

 

 

 

1,494,502

 

 

1,375,643

Total liabilities

 

$

2,554,727

 

$

2,404,852

 

 

 

 

 

EQUITY

 

 

 

 

Share capital

 

$

856,145

 

$

865,897

Contributed surplus

 

 

29,503

 

 

26,119

Accumulated other comprehensive income

 

 

74,650

 

 

64,155

Retained earnings

 

 

723,725

 

 

724,495

Equity attributable to shareholders

 

 

1,684,023

 

 

1,680,666

Non-controlling interests

 

 

3,532

 

 

3,281

Total equity

 

 

1,687,555

 

 

1,683,947

Total liabilities and equity

 

$

4,242,282

 

$

4,088,799

Please refer to complete Interim Condensed Consolidated Financial Statements for supplemental notes which can be found on the Company’s profile on SEDAR+ at www.sedarplus.com, the Company's profile on the U.S. Securities and Exchange Commission's website at www.sec.gov, and on the Company’s website at www.atsautomation.com.

ATS CORPORATION

Interim Condensed Consolidated Statements of Income

(in thousands of Canadian dollars, except per share amounts - unaudited)

  For the three months ended

 

June 30

2024

 

July 2

2023

 

 

 

 

 

Revenues

 

$

694,270

 

$

753,649

 

 

 

 

 

Operating costs and expenses

 

 

 

 

Cost of revenues

 

 

487,623

 

 

540,925

Selling, general and administrative

 

 

135,331

 

 

123,684

Stock-based compensation

 

 

3,723

 

 

9,990

 

 

 

 

 

Earnings from operations

 

 

67,593

 

 

79,050

 

 

 

 

 

Net finance costs

 

 

19,518

 

 

16,946

 

 

 

 

 

Income before income taxes

 

 

48,075

 

 

62,104

 

 

 

 

 

Income tax expense

 

 

12,748

 

 

14,380

 

 

 

 

 

Net income

 

$

35,327

 

$

47,724

 

 

 

 

 

Attributable to

 

 

 

 

Shareholders

 

$

35,282

 

$

47,563

Non-controlling interests

 

 

45

 

 

161

 

 

$

35,327

 

$

47,724

 

 

 

 

 

Earnings per share attributable to shareholders

 

 

 

 

Basic and diluted

 

$

0.36

 

$

0.50

Please refer to complete Interim Condensed Consolidated Financial Statements for supplemental notes which can be found on the Company’s profile on SEDAR+ at www.sedarplus.com, the Company's profile on the U.S. Securities and Exchange Commission's website at www.sec.gov, and on the Company’s website at www.atsautomation.com.

ATS CORPORATION

Interim Condensed Consolidated Statements of Cash Flows

(in thousands of Canadian dollars - unaudited)

  For the three months ended

 

June 30

2024

 

July 2

2023

 

 

 

 

 

Operating activities

 

 

 

 

Net income

 

$

35,327

 

 

$

47,724

 

Items not involving cash

 

 

 

 

Depreciation of property, plant and equipment

 

 

7,771

 

 

 

6,792

 

Amortization of right-of-use assets

 

 

8,082

 

 

 

7,117

 

Amortization of intangible assets

 

 

21,589

 

 

 

21,729

 

Deferred income taxes

 

 

(4,896

)

 

 

(10,010

)

Other items not involving cash

 

 

200

 

 

 

1,309

 

Stock-based compensation

 

 

3,403

 

 

 

1,997

 

Change in non-cash operating working capital

 

 

(106,874

)

 

 

(184,454

)

Cash flows used in operating activities

 

$

(35,398

)

 

$

(107,796

)

 

 

 

 

 

Investing activities

 

 

 

 

Acquisition of property, plant and equipment

 

$

(7,106

)

 

$

(18,566

)

Acquisition of intangible assets

 

 

(8,809

)

 

 

(4,409

)

Business acquisitions, net of cash acquired

 

 

—

 

 

 

(5,148

)

Proceeds from disposal of property, plant and equipment

 

 

517

 

 

 

7,858

 

Cash flows used in investing activities

 

$

(15,398

)

 

$

(20,265

)

 

 

 

 

 

Financing activities

 

 

 

 

Bank indebtedness

 

$

5,399

 

 

$

(2,484

)

Repayment of long-term debt

 

 

(6,993

)

 

 

(445,922

)

Proceeds from long-term debt

 

 

118,664

 

 

 

184,095

 

Proceeds from exercise of stock options

 

 

60

 

 

 

950

 

Proceeds from U.S. initial public offering, net of issuance fees

 

 

—

 

 

 

362,757

 

Repurchase of common shares

 

 

(44,983

)

 

 

—

 

Principal lease payments

 

 

(6,950

)

 

 

(7,021

)

Cash flows provided by financing activities

 

$

65,197

 

 

$

92,375

 

Effect of exchange rate changes on cash and cash equivalents

 

 

508

 

 

 

(661

)

Increase (decrease) in cash and cash equivalents

 

 

14,909

 

 

 

(36,347

)

Cash and cash equivalents, beginning of period

 

 

170,177

 

 

 

159,867

 

Cash and cash equivalents, end of period

 

$

185,086

 

 

$

123,520

 

Supplemental information

 

 

 

 

Cash income taxes paid

 

$

17,226

 

 

$

11,791

 

Cash interest paid

 

$

23,029

 

 

$

22,318

 

Please refer to complete Interim Condensed Consolidated Financial Statements for supplemental notes which can be found on the Company’s profile on SEDAR+ at www.sedarplus.com, the Company's profile on the U.S. Securities and Exchange Commission's website at www.sec.gov, and on the Company’s website at www.atsautomation.com.

Notice to Reader: Non-IFRS and Other Financial Measures

Throughout this document, management uses certain non-IFRS financial measures, non-IFRS ratios and supplementary financial measures to evaluate the performance of the Company.

The terms “EBITDA”, "organic revenue", “adjusted net income”, “adjusted earnings from operations”, “adjusted EBITDA”, “adjusted basic earnings per share”, and “free cash flow”, are non-IFRS financial measures, “EBITDA margin”, “adjusted earnings from operations margin”, “adjusted EBITDA margin”, "organic revenue growth", “non-cash working capital as a percentage of revenues”, and “net debt to adjusted EBITDA” are non-IFRS ratios, and "operating margin", “Order Bookings”, "organic Order Bookings", "organic Order Bookings growth", “Order Backlog”, and “book-to-bill ratio” are supplementary financial measures, all of which do not have any standardized meaning prescribed within IFRS and therefore may not be comparable to similar measures presented by other companies. Such measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. In addition, management uses “earnings from operations”, which is an additional IFRS measure, to evaluate the performance of the Company. Earnings from operations is presented on the Company’s consolidated statements of income as net income excluding income tax expense and net finance costs. Operating margin is an expression of the Company’s earnings from operations as a percentage of revenues. EBITDA is defined as earnings from operations excluding depreciation and amortization. EBITDA margin is an expression of the Company’s EBITDA as a percentage of revenues. Organic revenue is defined as revenues in the stated period excluding revenues from acquired companies for which the acquired company was not a part of the consolidated group in the comparable period. Organic revenue growth compares the stated period organic revenue with the reported revenue of the comparable prior period. Adjusted earnings from operations is defined as earnings from operations before items excluded from management’s internal analysis of operating results, such as amortization expense of acquisition-related intangible assets, acquisition-related transaction and integration costs, restructuring charges, the mark-to-market adjustment on stock-based compensation and certain other adjustments which would be non-recurring in nature (“adjustment items”). Adjusted earnings from operations margin is an expression of the Company’s adjusted earnings from operations as a percentage of revenues. Adjusted EBITDA is defined as adjusted earnings from operations excluding depreciation and amortization. Adjusted EBITDA margin is an expression of the entity’s adjusted EBITDA as a percentage of revenues. Adjusted basic earnings per share is defined as adjusted net income on a basic per share basis, where adjusted net income is defined as adjusted earnings from operations less net finance costs and income tax expense, plus tax effects of adjustment items and adjusted for other significant items of a non-recurring nature. Non-cash working capital as a percentage of revenues is defined as the sum of accounts receivable, contract assets, inventories, deposits, prepaids and other assets, less accounts payable, accrued liabilities, provisions and contract liabilities divided by the trailing two fiscal quarter revenues annualized. Free cash flow is defined as cash provided by operating activities less property, plant and equipment and intangible asset expenditures. Net debt to adjusted EBITDA is the ratio of the net debt of the Company (cash and cash equivalents less bank indebtedness, long-term debt, and lease liabilities) to adjusted EBITDA. Order Bookings represent new orders for the supply of automation systems, services and products that management believes are firm. Organic Order Bookings are defined as Order Bookings in the stated period excluding Order Bookings from acquired companies for which the acquired company was not a part of the consolidated group in the comparable period. Organic Order Bookings growth compares the stated period organic Order Bookings with the reported Order Bookings of the comparable prior period. Order Backlog is the estimated unearned portion of revenues on customer contracts that are in process and have not been completed at the specified date. Book to bill ratio is a measure of Order Bookings compared to revenue.

Following amendments to ATS’ Restricted Share Unit ("RSU") Plan in 2022 to provide the Company with the option for settlement in shares purchased in the open market and the creation of the employee benefit trust to facilitate such settlement, ATS began to account for equity-settled RSUs using the equity method of accounting. However, prior RSU grants which will be cash-settled and deferred share unit ("DSU") grants which will be cash-settled are accounted for as described in the Company's annual consolidated financial statements and have volatility period over period based on the fluctuating price of ATS’ common shares. Certain non-IFRS financial measures (EBITDA, adjusted EBITDA, net debt to adjusted EBITDA, adjusted earnings from operations and adjusted basic earnings per share) exclude the impact on stock-based compensation expense of the revaluation of DSUs and RSUs resulting specifically from the change in market price of the Company's common shares between periods. Management believes that this adjustment provides insight into the Company's performance, as share price volatility drives variability in the Company's stock-based compensation expense.

Operating margin, adjusted earnings from operations, EBITDA, EBITDA margin, adjusted EBITDA, and adjusted EBITDA margin are used by the Company to evaluate the performance of its operations. Management believes that earnings from operations is an important indicator in measuring the performance of the Company’s operations on a pre-tax basis and without consideration as to how the Company finances its operations. Management believes that organic revenue and organic revenue growth, when considered with IFRS measures, allow the Company to better measure the Company's performance and evaluate long-term performance trends. Organic revenue growth also facilitates easier comparisons of the Company's performance with prior and future periods and relative comparisons to its peers. Management believes that EBITDA and adjusted EBITDA are important indicators of the Company’s ability to generate operating cash flows to fund continued investment in its operations. Management believes that adjusted earnings from operations, adjusted earnings from operations margin, adjusted EBITDA, adjusted net income and adjusted basic earnings per share are important measures to increase comparability of performance between periods. The adjustment items used by management to arrive at these metrics are not considered to be indicative of the business’ ongoing operating performance. Management uses the measure “non-cash working capital as a percentage of revenues” to assess overall liquidity. Free cash flow is used by the Company to measure cash flow from operations after investment in property, plant and equipment and intangible assets. Management uses net debt to adjusted EBITDA as a measurement of leverage of the Company. Order Bookings provide an indication of the Company’s ability to secure new orders for work during a specified period, while Order Backlog provides a measure of the value of Order Bookings that have not been completed at a specified point in time. Both Order Bookings and Order Backlog are indicators of future revenues that the Company expects to generate based on contracts that management believes to be firm. Organic Order Bookings and organic Order Bookings growth allow the Company to better measure the Company's performance and evaluate long-term performance trends. Organic Order Bookings growth also facilitates easier comparisons of the Company's performance with prior and future periods and relative comparisons to its peers. Book to bill ratio is used to measure the Company’s ability and timeliness to convert Order Bookings into revenues. Management believes that ATS shareholders and potential investors in ATS use these additional IFRS measures and non-IFRS financial measures in making investment decisions and measuring operational results.

A reconciliation of (i) adjusted EBITDA and EBITDA to net income, (ii) adjusted earnings from operations to net income, (iii) adjusted net income to net income, (iv) adjusted basic earnings per share to basic earnings per share (v) free cash flow to its IFRS measure components and (vi) organic revenue to revenue, in each case for the three months ended June 30, 2024 and July 2, 2023 is contained in this document (see “Reconciliation of Non-IFRS Measures to IFRS Measures”). This document also contains a reconciliation of (i) non-cash working capital as a percentage of revenues and (ii) net debt to their IFRS measure components, in each case at both June 30, 2024 and March 31, 2024 (see “Reconciliation of Non-IFRS Measures to IFRS Measures”). A reconciliation of Order Bookings and Order Backlog to total Company revenues for the three months ended June 30, 2024 and July 2, 2023 is also contained in this news release (see “Order Backlog Continuity”).

Note to Readers: Forward-Looking Statements

This news release contains certain statements that may constitute forward-looking information and forward-looking statements within the meaning of applicable Canadian and United States securities laws ("forward-looking statements"). All such statements are made pursuant to the “safe harbour” provisions of Canadian provincial and territorial securities laws and the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that are not historical facts regarding possible events, conditions or results of operations that ATS believes, expects or anticipates will or may occur in the future, including, but not limited to: the value creation strategy; the Company’s strategy to expand organically and through acquisition, and the expected benefits to be derived; the ABM; disciplined acquisitions; various market opportunities for ATS; expanding in emerging markets; expectation on transportation revenues; conversion of opportunities into Order Bookings; the announcement of new Order Bookings and the anticipated timeline for delivery; potential impacts on the time to convert opportunities into Order Bookings; the Company’s Order Backlog partially mitigating the impact of variable Order Bookings; rate of Order Backlog conversion to revenue; the expected benefits where the Company engages with customers on enterprise-type solutions; the potential impact of the Company’s approach to market and timing of customer decisions on Order Bookings, performance period, and timing of revenue recognition; expected benefits with respect to the Company’s efforts to grow its product portfolio and after-sale service revenues; the ability of after-sales revenues and reoccurring revenues to provide some balance to customers’ capital expenditure cycles; initiatives in furtherance of the Company’s goal of expanding its adjusted earnings from operations margin over the long term and potential impact of supply chain disruptions; the range of reoccurring revenues as a percentage of total revenues; expectation of realization of cost and revenue synergies from integration of acquired businesses; the closing and completion of any planned acquisitions as anticipated; non-cash working capital levels as a percentage of revenues in the short-term and the long-term; reorganization activity, and its ability to improve the cost structure of the Company, and to be reallocated to growth areas, and the expected timing and cost of this reorganization activity; expectation in relation to meeting liquidity and funding requirements for investments; potential to use debt or equity financing to support strategic opportunities and growth strategy; underlying trends driving customer demand; potential impacts of variability in bookings caused by the strategic nature and size of electric vehicle programs; revenue growth in other markets and due to acquisitions to offset any reduced volumes from the electric vehicle program in fiscal 2025; expected capital expenditures for fiscal 2025; the uncertainty and potential impact on the Company’s business and operations due to the current macroeconomic environment including the impacts of infectious diseases or any epidemic or pandemic outbreak or resurgence, inflation, supply chain disruptions, interest rate changes, energy shortages, global price increases, events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry generally, and regional conflicts; and the Company’s belief with respect to the outcome of certain lawsuits, claims and contingencies.

Forward-looking statements are inherently subject to significant known and unknown risks, uncertainties, and other factors that may cause the actual results, performance, or achievements of ATS, or developments in ATS’ business or in its industry, to differ materially from the anticipated results, performance, achievements, or developments expressed or implied by such forward-looking statements. Important risks, uncertainties, and factors that could cause actual results to differ materially from expectations expressed in the forward-looking statements include, but are not limited to: the impact of regional or global conflicts; general market performance including capital market conditions and availability and cost of credit; performance of the markets that ATS serves; industry challenges in securing the supply of labour, materials, and, in certain jurisdictions, energy sources such as natural gas; impact of inflation; interest rate changes; foreign currency and exchange risk; the relative strength of the Canadian dollar; risks related to customer concentration; risks related to a recession, slowdown, and/or sustained downturn in the economy; impact of factors such as increased pricing pressure, increased cost of energy and supplies, and delays in relation thereto, and possible margin compression; the regulatory and tax environment; the emergence of new infectious diseases or any epidemic or pandemic outbreak or resurgence, and collateral consequences thereof, including the disruption of economic activity, volatility in capital and credit markets, and legislative and regulatory responses; the effect of events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transaction counterparties, or other companies in the financial services industry generally, or concerns or rumours about any events of these kinds or other similar risks, that have in the past and may in the future lead to market-wide liquidity problems; energy shortages and global prices increases; inability to successfully expand organically or through acquisition, due to an inability to grow expertise, personnel, and/or facilities at required rates or to identify, negotiate and conclude one or more acquisitions; or to raise, through debt or equity, or otherwise have available, required capital; that the ABM is not effective in accomplishing its goals; that ATS is unable to expand in emerging markets, or is delayed in relation thereto, due to any number of reasons, including inability to effectively execute organic or inorganic expansion plans, focus on other business priorities, or local government regulations or delays; that the timing of completion of new Order Bookings is other than as expected due to various reasons, including schedule changes or the customer exercising any right to withdraw the Order Booking or to terminate the program in whole or in part prior to its completion, thereby preventing ATS from realizing on the full benefit of the program; that some or all of the sales funnel is not converted to Order Bookings due to competitive factors or failure to meet customer needs; that the market opportunities ATS anticipates do not materialize or that ATS is unable to exploit such opportunities; failure to convert Order Backlog to revenue and/or variations in the amount of Order Backlog completed in any given quarter; timing of customer decisions related to large enterprise programs and potential for negative impact associated with any cancellations or non-performance in relation thereto; that the Company is not successful in growing its product portfolio and/or service offering or that expected benefits are not realized; that efforts to expand adjusted earnings from operations margin over long-term are unsuccessful, due to any number of reasons, including less than anticipated increase in after-sales service revenues or reduced margins attached to those revenues, inability to achieve lower costs through supply chain management, failure to develop, adopt internally, or have customers adopt, standardized platforms and technologies, inability to maintain current cost structure if revenues were to grow, and failure of ABM to impact margins; that after-sales or reoccurring revenues do not provide the expected balance to customers’ expenditure cycles; that reoccurring revenues are not in the expected range; that planned acquisitions are not closed as anticipated or at all; that acquisitions made are not integrated as quickly or effectively as planned or expected and, as a result, anticipated benefits and synergies are not realized; non-cash working capital as a percentage of revenues operating at a level other than as expected due to reasons, including, the timing and nature of Order Bookings, the timing of payment milestones and payment terms in customer contracts, and delays in customer programs; that planned reorganization activity does not succeed in improving the cost structure of the Company or that the investment is not reallocated to growth areas, or is not completed at the cost or within the timelines expected, or at all; underlying trends driving customer demand will not materialize or have the impact expected; that capital expenditure targets are increased in the future or the Company experiences cost increases in relation thereto; risk that the ultimate outcome of lawsuits, claims, and contingencies give rise to material liabilities for which no provisions have been recorded; the consequence of activist initiatives on the business performance, results, or share price of the Company; the impact of analyst reports on price and trading volume of ATS’ shares; and other risks and uncertainties detailed from time to time in ATS' filings with securities regulators, including, without limitation, the risk factors described in ATS’ annual information form for the fiscal year ended March 31, 2024, which are available on the System for Electronic Data Analysis and Retrieval+ (SEDAR+) at www.sedarplus.com and on the U.S. Securities Exchange Commission’s Electronic Data Gathering, Analysis and Retrieval System (EDGAR) at www.sec.gov. ATS has attempted to identify important factors that could cause actual results to materially differ from current expectations, however, there may be other factors that cause actual results to differ materially from such expectations.

Forward-looking statements are necessarily based on a number of estimates, factors, and assumptions regarding, among others, management's current plans, estimates, projections, beliefs and opinions, the future performance and results of the Company’s business and operations; the ability of ATS to execute on its business objectives; initiatives in furtherance of the Company’s goal of expanding its adjusted earnings from operations margin over the long term and potential impact of supply chain disruptions; and general economic and political conditions, and global events, including any epidemic or pandemic outbreak or resurgence.

Forward-looking statements included in this news release are only provided to understand management’s current expectations relating to future periods and, as such, are not appropriate for any other purpose. Although ATS believes that the expectations reflected in such forward-looking statements are reasonable, such statements involve risks and uncertainties, and ATS cautions you not to place undue reliance upon any such forward-looking statements, which speak only as of the date they are made. ATS does not undertake any obligation to update forward-looking statements contained herein other than as required by law.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240808941832/en/

For more information, contact: David Galison Head of Investor Relations ATS Corporation 730 Fountain Street North Cambridge, ON, N3H 4R7 (519) 653-6500 dgalison@atsautomation.com

For general media inquiries, contact: Matthew Robinson Director, Corporate Communications ATS Corporation 730 Fountain Street North Cambridge, ON, N3H 4R7 (519) 653-6500 mrobinson@atsautomation.com