ATS Corp. Q4 FY2024 earnings call

• Fiscal year had highest revenues and earnings; Q4 delivered strong bookings and record revenues. Adjusted earnings in line with expectations. - Completed 4 acquisitions in fiscal '24, increased patent portfolio by almost 10%. - Deployed $45 million to repurchase over 1 million shares since late March. - Hosted Annual President's Kaizen events focusing on improvement areas like new product launches and process automation. - Developed MODULIS for miniaturized diagnostics and PA Fax platform for digital services.

Life Sciences: Q4 order bookings were $791 million, with backlog at $871 million, 14% higher than Q4 last year, supported by wins in autoinjector assembly, automated pharmacy, etc. Revenues in Q4 increased by 15.6%. Food & Beverage: Q4 bookings were strong, ending backlog $230 million, and acquired Paxiom, a global packaging machine provider. Energy: Funnel strong with focus on nuclear reactor refurbishment and new projects. Transportation: Backlog $425 million, with year-over-year pressure on EV revenues. Consumer Products: Funnel stable with niche opportunities. Digital Offerings: Funnel strong, developed capabilities for an IoT platform.

• Backlog remains strong at $1.8 billion, with Life Sciences backlog $871 million. - Expect growth in Life Sciences and other markets to offset EV revenue decline in fiscal '25. - Acquisition of Paxiom to largely offset reduced EV volumes. - Expect gross margin improvement going forward, with SG&A expected to normalize next year.

• Delayed EV projects impacting revenue and working capital. - Supply chain lead times improving but taking a few quarters, material cost pressures. - Short-term uncertainty in Transportation funnel due to market conditions.

Q: Concern about the large enterprise EV program reduction and recourse for adjustments?

A: Under contract terms, customers responsible for compensating up until work stop; expectations to recover investment as part of cancellation.

Q: Potential further EV reductions given EV demand softness?

A: Not expected, normal core scope changes happen, cancellations unusual.

Q: Net working capital bloated, any milestone payments to normalize?

A: There are milestones, but they'll be in Q2-Q3 timeframe.

Q: Commentary on revenue outlook excluding revised EV order?

A: Tied to timing uncertainty of EV program restart, but growth in other markets to offset.

Q: Margin contribution of GLP-1?

A: Largely in line with Life Sciences business gross margin.

Q: Paxiom acquisition margins and synergies?

A: Paxiom has strong brand and customer service, fits well with business, synergies in offsetting seasonality and aligning with portfolio.

Q: Backlog decline reason?

A: Impact of EV cancellation, normal course scope changes, FX headwinds.

Q: EV sales outlook for 2025 and growth flip?

A: EV sales expected lower, growth in other markets to offset, bigger ramp in second half.

Q: Impact of protectionist measures on ATS?

A: Favorable as it drives onshoring, supply chain de-risking, and increased automation.

Q: Capital allocation between NCIB and M&A?

A: NCIB opportunistic, M&A typically higher priority, also focus on internal investment.