ATS Corp. Q1 FY2025 earnings call

Bookings for the quarter were $817 million, up 18% YOY, led by organic growth in life sciences and consumer products. Q1 revenues were $694 million, down 8% due to lower transportation revenues. Backlog ended at $1.9 billion, with life sciences backlog at $990 million, the highest in ATS history. The company welcomed Paxiom to the portfolio and signed to acquire Heidolph Instruments. Operational highlights included launching Symphoni cell conductor, my CFT, and CABLIblue. The service experience center in Cambridge was launched, and the Illuminate platform and PA Facts platform were emphasized. The ABM culture was highlighted with teams engaged in continuous improvement efforts. The EV business was realigned, and cost structure adjusted with resource redeployment.

Order bookings for the quarter were $817 million, up 18% year-over-year. Q1 revenues were $694 million, down 8% from Q1 last year. By segment: Life sciences backlog was $990 million, the highest in ATS history, up 26% YOY, with large orders in wearable devices, GLP-1 auto-injectors, and radioisotope production lines. Food and beverage backlog was $216 million, up 15% YOY. Energy had a strong funnel with CANDU reactor refurbishment, SMRs, and energy storage opportunities. Transportation backlog was $417 million, with smaller sales funnel and resource redeployment. Consumer products funnel remained stable. After sales services launched a service experience center in Cambridge and utilized the Illuminate platform. Digital offerings had a strong funnel with the PA Facts platform and new AI-based monitoring systems.

Q2 revenue conversion is estimated to be in the 33% to 36% range of order backlog. Lower conversion due to early phases of large life science programs and $150 million of delayed transportation backlog. Margins expected to be negatively impacted in Q2, with actions like resource reallocation and workforce reduction ($15M-$20M over several quarters) to mitigate. Backlog remains strong with good revenue visibility, particularly in life sciences.

Working capital increase due to timing of program progress and invoicing. Potential obsolescence risk for equipment in EV, but no expectation of charges as contractually building to expectations. Tax rate elevated due to geographic split of profitability and changes in operating jurisdictions, expecting effective tax rate to be higher in fiscal '25.

Q: Hello, everyone, and welcome to the ATS Corporation First Quarter Conference Call and Webcast. This call is being recorded on August 8, 2024 at 8:30 a.m. Eastern time. Following the presentation, we will conduct a question-and-answer session. I will now turn the call over to David Galison, Head of Investor Relations at ATS. Please go ahead.

A: Thank you, operator, and good morning, everyone. On the call today are Andrew Hider, Chief Executive Officer of ATS; and Ryan McLeod, Chief Financial Officer. Please note that our remarks today are accompanied by a slide deck, which can be viewed via our webcast and available at atsautomation.com. We caution that the statements made on our webcast and conference call may contain forward-looking information and our cautionary statement regarding such information, including the material factors that could cause actual results to differ materially from the statements and the material factors or assumptions applied in making the statements are detailed on Slide 2 of the slide deck. Now it's my pleasure to turn the call over to Andrew.

Q: Michael Glen from Raymond James asks about working capital situation and obsolescence risk.

A: Ryan McLeod says working capital increase was due to timing in life sciences and EV, with programs progressing and expected to be invoiced and collected, no obsolescence expected.

Q: Pat Sullivan on behalf of Cherilyn Radbourne asks about energy opportunities.

A: Andrew Hider discusses CANDU reactor refurbishment, SMRs, decommissioning, and energy storage as areas of strength.

Q: Joe Ritchie from Goldman Sachs asks about Q2 guidance and margin trajectory.

A: Ryan McLeod explains Q2 revenue range sensitivity to project progress and materials, and margin pressure due to revenue decline but actions in place.

Q: Justin Keywood from Stifel asks about life sciences backlog composition and growth beyond GLP-1.

A: Andrew Hider talks about strength in radiopharmaceutical, wearable devices, pharmacy automation, and Ryan McLeod mentions GLP-1 orders make up roughly 20% of life sciences backlog.

Q: Maxim Sytchev from National Bank Financial asks about M&A, NCIB, and margin exit.

A: Ryan McLeod discusses NCIB as opportunistic and margin exit alignment with market reality. Andrew Hider adds on M&A funnel strength.

Q: David Ocampo from Cormark Securities asks about EV facility repurposing and tax rate.

A: Ryan McLeod says no facility exit, tax rate elevated due to geographic profitability and jurisdiction changes.

Q: Patrick Baumann from JPMorgan asks about 2025 revenue outlook and margin sustainability.

A: Ryan McLeod updates revenue outlook and discusses margin improvement and future variability.