管理層發言
Welcome to the ATS Corporation First Quarter Conference Call and Webcast. This call is being recorded on August 7, 2025 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 Arjun Kapur, Investor Relations Associate at ATS.
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 is available at atsautomation.com. We caution that the statements made on the 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 in Slide 3 of the slide deck. Now it's my pleasure to turn the call over to Andrew.
Thank you, Arjun. Good morning, everyone, and thank you for joining us. Before we discuss our Q1 results, I want to take a moment to acknowledge the leadership transition as they move on from ATS. I've been honored to lead this great company through a period of growth and transformation as we expanded our capabilities, strengthened our position in key markets, and created a solid foundation for the future. While the Board conducts its CEO search, the company will be in the very capable hands of Ryan McLeod as Interim CEO with the support of our experienced senior leadership team. During this transition, ATS will drive forward with its growth strategy, enabled by the ATS business model, our well-entrenched playbook for continuous improvement. Now to our Q1 results, which we reported today. I will update you on our business and markets and then Ryan will provide his report. ATS delivered revenue growth with solid contributions from recent acquisitions, and adjusted earnings margins in line with our expectations. Starting with our financial value drivers, Q1 revenues were $737 million, up 6% from Q1 last year. Order bookings were $693 million, with good diversification across our portfolio. Adjusted earnings from operations in Q1 were $79 million. On to our outlook, order backlog ended the quarter at approximately $2.1 billion as we continue to win and deliver across our diversified portfolio of offerings, including customer integration, standard equipment, and products and services. Our funnel remains healthy, reflecting the strategic nature of the customer programs we serve. As noted in past quarters, investment timing is variable. We are closely monitoring the business environment given the dynamics of cross-border tariffs. In parallel, we continue to advance our strategy to grow repeatable revenue through services, consumables, and digital offerings. Within Life Sciences, order backlog at quarter end was $1.2 billion. We secured wins across submarkets, including auto-injectors, radiopharma, and blood glucose monitoring wearables. Our diversified Life Sciences opportunity funnel remains strong, supported by our proven capabilities in regulated markets and deep customer relationships. By way of example, Comecer continues to be a partner of choice for radio pharma customers who value quality and a proven track record for execution. As more customer programs advance towards commercial readiness, Comecer is uniquely positioned to provide localized and specialized support from our new site in Indianapolis, which opened at the end of July. Separately and discussed previously, some customers in the lab research space are taking a more measured approach to capital spending as a result of changes in U.S. government funding, although this does not change our outlook for Life Sciences overall. In Food and Beverage, our total remains strong, and we ended the quarter with a backlog of $229 million, an increase of 6% compared to Q1 last year. We continue to see investment in primary processing solutions, including a strong focus on aftermarket service. In addition, we are actively executing on our growth strategy for secondary processing, packaging, and services further supported by the addition of Paxiom. In energy, our funnel includes a mix of short and long-term opportunities as the nuclear industry continues to benefit from renewed investment and favorable government policy. In the near term, there is momentum from ongoing CANDU refurbishment activity, while both large-scale new builds and emerging small module reactor programs provide further potential for growth. Drawing on our expertise in early-stage design through to modular assembly and waste handling, we are well positioned to support customers across their nuclear program life cycles. In Consumer Products, our funnel remains stable with attractive niche opportunities. Our capabilities in warehouse automation and packaging continue to resonate with customers. In transportation, our funnel remains stable, in line with expectations due to relatively lower electric vehicle end market demand. On services, we continue to advance our offerings, including our digital solutions across the range of markets we serve. Through our evolving capabilities, including our Connected Care Hub, ATS is well positioned to help customers proactively enhance system utilization and mitigate risk. From a strategic perspective, our services portfolio is designed to strengthen customer relationships over the full life cycle of equipment ownership, reinforce our role as a trusted partner, and drive recurring revenue. On the ATS business model, in Q1, our global team is actively engaged in key initiatives, including Kaizens, workshops, and problem-solving events focused on all of our value drivers. At our annual ABM awards, teams were recognized for excellence in innovation, recurring revenue, customer engagement, health and safety, and overall performance, underscoring the sustained impact of our ABM culture. On M&A, our teams are active in cultivating strategic opportunities that align with our long-term growth ambitions and contribute to value creation. In the near term, our focus is on returning leverage to our target range and on realizing further synergies from our recent acquisitions. On innovation, we continue to deploy capital and empower our teams to develop differentiated solutions that create value across our end markets. On digital innovation, we leveraged our acquisition of reality to develop and launch a new interactive and scalable virtual reality training platform for customers. In energy, we advanced the deployment of our multiplex system. Multiplex is a patent-protected concept designed for the safe, precise cutting and removal of large nuclear reactor components in decommissioning and waste handling applications. Multiplex is one example of our ability to innovate and deliver safe, efficient solutions within the highly regulated nuclear space. Finally, in June, we held our biannual ATS Automation Summit for customers and other partners at our Cambridge campus. This event showcased the most recent solutions from across our portfolio of companies, including ATS advancements in digital transformation, intelligent automation, and technology-enabled scalability. Through our workshops over several days, we focus on innovation trends in automation, including time to market as well as digitalization and AI advancements, further positioning ATS as a thought leader for global customers. In summary, our opportunity funnel is well diversified, and our current order backlog provides solid revenue visibility and a strong foundation for profitable growth. I'm also pleased to share that ATS was included in Time Magazine's inaugural list of Canada's best companies 2025, and we were #1 in the engineering, manufacturing, and medical technology category. This recognition and our results today reflect the continued progress we are making across our value drivers, the resilience of our business model, and the dedication of our exceptional talent. I'm proud of what we've accomplished together, and I look forward to watching ATS continue to grow and succeed. Now I will turn the call over to Ryan. Ryan, over to you.
Thank you, Andrew, and good morning, everyone. Beginning with our operating results for the quarter, order bookings were $693 million, down 15% compared to Q1 last year, due primarily to the lower expected run rate in transportation order bookings. Q1 last year also had several larger enterprise order bookings in life sciences, which reflects normal variability. Importantly, our trailing 12-month book-to-bill ratio at the end of Q1 remained above 1, at 1.7:1. Revenues for the first quarter were $737 million, up 6.1% compared to last year. Recently acquired companies contributed 4.1% to revenue growth, and foreign exchange translation added a 3.2% benefit. Q1 organic revenue growth was negative 1.2% as lower transportation revenues were only partially offset by growth in life sciences, consumer products, and food and beverage. Nevertheless, our outlook for revenue growth for the full year remains unchanged. Moving to earnings, first quarter adjusted earnings from operations were $78.6 million or 10.7% of revenues. This was in line with our expectations and represented an almost 40 basis point sequential improvement from Q4. Gross margin for Q1 was 29.8%, consistent with Q1 last year. On SG&A, excluding acquisition-related amortization and transaction costs, expenses in the first quarter totaled $136.4 million, a $20 million increase over the prior year. This increase included incremental SG&A from acquired companies and, to a lesser extent, both the impact of foreign exchange translation and employee costs. As always, we continue to focus on ongoing efficiency improvements in our operations. Excluding the mark-to-market impact related to changes in our share price, stock-based compensation expense was $4.8 million in Q1. Earnings per share were $0.41 on an adjusted basis. Turning to our outlook, we ended the quarter with order backlog of approximately $2.1 billion. Q2 revenues are expected to be in the range of $700 million to $740 million. As a reminder, this assessment is updated every quarter, taking into account revenue expectations from current order backlog and new orders booked and billed within the quarter. In the quarter, we incurred an additional $2.5 million of restructuring costs as a continuation of the program announced last year. We continue to expect operating margin improvement throughout fiscal '26, although this may not be linear. ABM tools remain a critically important element of our ongoing margin expansion focus. On tariffs, while the environment is still evolving, we have not seen a material impact to date. On order bookings intake, we continue to stay close with our customers to address their regional execution and capacity needs. On supply chain, our strategic sourcing approach is designed to protect margins and minimize disruption where possible. Of note, the majority of our exports from Canada into the U.S. are covered under the USMCA. Moving to the balance sheet, in Q1, cash flows from operating activities were $156 million. Our noncash working capital as a percentage of revenues was 17.3%, supported by the EV settlement payment that we received in the quarter. While there may be variability between periods, we remain focused on working capital efficiency across the business, and our target of 15% of revenues or less is unchanged. During the quarter, we invested $16.3 million in CapEx and intangible assets, and we continue to strategically invest to drive innovation and capability. On leverage, our net debt to adjusted EBITDA ratio was 3.6x on a pro forma basis in Q1, which includes full-year contributions from our most recent acquisitions. The improvement from Q4 was driven by the receipt of the EV settlement payment used primarily to reduce the amount owing on our credit facility. We remain committed to bringing our leverage to our target range of 2 to 3x. As we noted when we reported our year-end results, we were active on our share buyback program during Q1. The NCIB program remains an opportunistic component of our overall capital deployment strategy. In summary, first quarter results were in line with our expectations, with solid revenue generation and improved operating margins on a sequential basis. In addition, our strong order backlog supports our outlook for growth. Before we invite questions, I want to extend my thanks to Andrew. Since he joined ATS in 2017, his leadership has been instrumental to ATS' growth as well as to our future, with the legacy of disciplined execution, strategic focus, and continuous improvement that he has built. Andrew, thank you. During this leadership transition, it's business as usual. Our priorities and our plan remain unchanged. We will continue to focus on performance improvement across all of our value drivers, and we will seek to complement organic growth by cultivating strategic acquisitions. Our decentralized management structure, strong leadership team, and our global team's commitment to the ATS business model will continue to serve us well. Importantly, we remain committed to creating long-term value for our shareholders and customers through strong execution and continued growth in our targeted markets. Now we will open the call to questions from our analysts. Operator, could you please provide instructions? Thank you.
分析師問答
And your first question comes from Joe Ritchie with Goldman Sachs.
Andrew, congratulations. I'm going to miss talking to you on these conference calls and wish you nothing but the best of luck.
Thank you, Joe. Appreciate it.
Yes, absolutely. Can we discuss the adjusted demand environment in more detail? It appears that your business isn't experiencing much decline. However, I understand that orders can vary. So there might be a slower start to the year. Could you share your insights on the demand environment, what you're observing, feedback from your customers across key markets, and your outlook for the remainder of the year?
Yes, Joe, I'll start and then Ryan can provide more insights. To begin with, we do not evaluate any single quarter in isolation; instead, we consider a longer timeframe. Our trailing 12-month book-to-bill ratio stands at 1.17, which aligns with our growth target. We believe this year will be a growth year for ATS, as we indicated last quarter. As for our prepared remarks, our sales funnels remain strong, and we are having meaningful discussions with our customers about their strategic investments. We are active in several promising areas. In life sciences, for instance, support for GLP-1 drugs continues, and the number of new drug approvals is consistent with last year's figures, indicating an ongoing approval trend. We are engaging with customers regarding their launches in radiopharma and identifying both new and existing drugs for cancer treatment, as well as advancements in wearable devices and diabetes management like glucose monitors. Our nuclear business is stable and performing well, focusing on CANDU reactors, decommissioning, small modular reactors, and fuel needs for nuclear energy's revival. The food sector continues to thrive as we explore new technologies and innovations for our customers. Transportation has stabilized, and we are satisfied with our current position after adjusting the business to fit market conditions. Lastly, we are closely watching the consumer products market, which has held steady, including areas like warehouse automation and high-end cosmetics support. Overall, we are optimistic about the year ahead, supported by a strong backlog and a book-to-bill ratio that meets our growth expectations.
And Joe, I'll add one more data point. Looking at the first half of this calendar year, since tariffs have been in place, our orders are up over 10% year-over-year in the first six months, excluding transportation. As Andrew mentioned, we have a strong backlog, and we are well positioned to continue driving revenue growth for the year.
That's really helpful, and I appreciate it. Could I ask a quick follow-up on the energy business? Your backlog has increased significantly year-over-year and saw a noticeable rise sequentially. It's interesting because many other companies have reported project delays in the energy sector. What do you think contributed to the significant increase in your business this quarter? Is it related to nuclear? Any insights on this would be appreciated.
Within energy, most of the growth is coming in nuclear, as we've talked about. A lot of what we're doing in that space and the bulk of the growth is coming in refurbishment activity, so primarily around CANDU reactors. And we've seen a very strong demand environment in that space and continue to see a good outlook there. In terms of other areas, as Andrew talked about, in the SMR space and in fuel handling, that's a smaller part of our business today. And we've talked about it; I mean, our view on the SMR market is a lot of this is in the development phase today and represents an exciting opportunity, but more of a future opportunity for the business.
And your next question comes from the line of Maxim Sytchev with National Bank Financial.
And Andrew, obviously, all the best in the future, and definitely, it's been a pleasure. Congrats.
Thanks. It's mutual.
Wonderful. So maybe the first question, I was wondering if it's possible to get a bit of an update on the integration process and some of the cross-selling opportunity ABM kind of acceptance on the part of Avidity, Heidolph; that could be helpful.
Yes, absolutely. I'll start with a bit of a headline on this. Our funnel continues to grow, and we see strong opportunities, particularly with ATS life sciences systems working with BioDot, as well as Avidity and Heidolph bringing solution sets to their markets. We did have some awards during the quarter, but looking ahead, the funnel remains healthy, and the addition of Heidolph has been beneficial for enhancing our offerings in the lab space and aligning with our Gen vac business unit. We are excited about the future and believe ATS can provide greater value to our customers.
Helpful. Please continue.
Sorry, just on the overall integration progress across all three going very well. Very much in line with our expectations, ABM deployments and uptake have been very strong in all three businesses, some of the cost synergies as it relates to cost structure improvements, supply chain integration. We're very pleased with the process across all three assets.
Okay. That's good to hear. And Andrew and, I guess, your comment around some of the research funding being under pressure in the U.S. right now. Correct me if I'm wrong, this represents less than kind of like single-digit exposure for the life sciences space, but can you just please clarify that?
That's correct, Max. It's a low single-digit percentage of our business that is in that space. And so we have seen impact, but as I think Andrew said in his prepared remarks, not a material impact to our overall business or overall Life Sciences business.
Okay. Okay. Good to hear. And then just in terms of the margin profile, I think in the past, you've mentioned that Life Sciences typically has a higher gross margin. I guess as the product mix is shifting right now, I mean, restaurants, transportation, more life sciences, food, et cetera, how should we think about the progression on margin for basis? And I don't know if you can talk about kind of like short term versus medium term, but any color would be helpful.
Yes. I mean, I'll speak more to the medium term, Max, because we will continue to see variability quarter-to-quarter, and that's largely driven by the project portfolio and what's getting executed and kind of driving revenues within a quarter. But generally speaking, where we're targeting and expect to drive margin expansion is through gross margin. And there's some operating leverage we expect as well from where we're operating today. But some of that is mix tied to life sciences, and some of that is mix tied to the product and services portfolio, and then the improvement initiatives that we're driving around supply chain labor productivity in other areas. So most of that does, again, show in our gross margin over the medium term.
Okay. And is there anything in the project pipeline, which is kind of restraining the progress when it comes to margins in the short term?
No, no. No. There's nothing unusual, nothing to call out.
Okay. And then maybe just last question. I mean, obviously, with the leadership transition, I'm just curious around the M&A pipeline? And what were you guys seeing in the market specifically? And I guess your ability to act if something were to come through tomorrow.
Yes. So, I mean, like I think we said in the prepared remarks, it's really business as usual. So we've got a plan for the year. The team is fully engaged in executing that plan and as well as our strategy. And that strategy is centered on both organic and acquisition-related growth. So M&A activity is continuing, cultivation activity is continuing. In terms of doing a deal or getting something over the finish line in the short term, that's going to be more governed by our leverage than support from the board or the ability to act in this interim period. And so we've talked about our focus is on deleveraging, bringing our leverage to that 2x to 3x range. That doesn't mean we can't do smaller tuck-in acquisitions in the short term. But again, from a capital deployment standpoint, our focus is on deleveraging.
And your next question comes from the line of Justin Keywood with Stifel.
Echo the congrats to Andrew and all the success and value creation at ATS.
Thank you.
Just on the tariffs. We've seen several major U.S. CapEx announcements from ATS' Life Sciences customers. Is that translating to any increased activity with ATS, assuming that there's going to be increased automation over the next several years? Or is it just announcements at this stage?
So just to understand your question, you're saying ATS announcements or tariff announcements?
So ATS' life sciences customers. We've seen several increased CapEx announcements in the U.S., presumably to combat potential tariffs. Is that leading to increased conversations or order activity with ATS, assuming that there's going to be related increased automation.
Yes. I'm going to answer your question by breaking it down into phases. If you take a step back, any investment, whether it involves tariff onshoring or supply chain de-risking, can often be linked to labor shortages impacting output, which generally points to a favorable environment for automation. This situation is similar. However, I would note that it's been somewhat unusual for customers to cite tariffs as the reason for placing orders. Typically, customers are focused on building their capabilities and capacity where there is demand, and we are noticing that trend. There are many discussions about future production locations, and we have observed some customers deciding to shift their production to the U.S. rather than overseas. Overall, we haven't seen a significant impact on our investment in ATS orders yet. Nevertheless, when conditions are favorable, it usually results in increased automation and a stronger position for ATS.
Understood. That's helpful. And then I want to come back on the balance sheet. Very healthy free cash flow quarter, $140 million. I assume that includes all of the EV settlement. But just trying to understand if there was any part of that settlement that was maybe pushed into the next quarter? Or was it fully received?
That was fully received and that issue is closed and behind us.
Was there any tax portion of that payment because it was announced at $194 million? So just trying to square that with the free cash flow in the quarter.
No, no tax impact. I mean there's a future tax benefit tied to the write-off. But no, there is no tax impact to the cash inflow.
Okay. And then just on the deleveraging outlook targeting to get to the 2x to 3x, any indication on timing when that could be achieved?
Yes. Our expectation is we get there this year. Our biggest opportunity in addition to continuing to operate profitably is really in working capital. And I talked about this in my prepared remarks, but our goal is to maintain working capital below 15%. We're above that target right now. And some of that is structural as we've added some acquisitions which are more product-related businesses; those have put pressure on our ability to achieve that target. And then there's normal course variability in our larger projects and custom automation business. But we do see the opportunity to improve and get that below our target this year.
And that's fiscal year, just to clarify.
Yes. Yes, correct.
And your next question comes from the line of Patrick Baumann with JPMorgan.
Andrew, congrats on the great run at ATS and the opportunity, how you go back to. Best of luck.
Thank you.
Yes, no problem. On the margin dynamics, I know you were talking a little bit longer term, Ryan. If sales are down a little bit sequentially in the second quarter, do you think you can still drive sequential margin expansion? Or do you think margins come down a little bit in the second quarter and then resume that expansion in the second half? Because I think previously, we expect to kind of progression sequentially through the year. I just want to make sure everything is kind of lined up the way you guys are thinking about it?
Yes, Patrick. Our outlook for the year remains unchanged regarding both growth and margin expansion. I want to emphasize that I do not anticipate significant sequential increases in our margin, and there will continue to be some variability. It's not expected to follow a linear pattern. However, we do expect margin expansion for the year. I previously discussed the initiatives we have in place related to material productivity, labor pricing, and other efficiency areas. Therefore, I believe what we observed this quarter reflects a reasonable run rate for ongoing improvement, although it won't be strictly linear.
Okay. That makes sense. Can you talk a little bit about the food and beverage CapEx outlook in North America? I think you have a decent view there with Paxiom. Just curious what you're seeing from customers in terms of their investment plans in that specific end market.
Absolutely. So we've continued to see this market not only be stable but additional opportunities in areas where we've invested in technology and innovation. And whether it's Paxiom or our business with CFT or even Raytec in optical inspection, we've continued to see this be supportive around how we enable customers to bring food to market and meet the requirements as needed for the end consumer. And so pleased with the performance year-to-date, and really look forward to seeing this business continue to expand.
Okay. And then lastly, just on the portfolio. Is there anything in the portfolio that at this stage you'd consider to be noncore? And you can maybe look for opportunities to kind of wind down over time or divest as you replace it with other acquired assets?
So I mean the short answer is no. But we've talked about in the past our approach on capital deployment and value creation, and that includes looking at ongoing investments in the portfolio as well. And so that view of the portfolio and ongoing strategy work, that's something we refresh every year. And so that's going to continue to be how we approach it and view with a critical eye where we're generating value and what makes sense in terms of being part of ATS.
And your next question comes from the line of Cherilyn Radbourne with TD Cowen.
This is actually Patrick Sullivan on the line for Cherilyn. And congrats, Andrew, on the next opportunity for you. I appreciated the color on what you're watching in the lab space. I just want to clarify, would that be more tied to consumable side of things in the portfolio? And I just asked this because there's a recent White House action plan that outlined an interest in heavily investing in automated labs across private regulatory and academic sector. So I wanted to know kind of what capabilities ATS might have in lab automation and then kind of parse that away from the consumable lab equipment stuff.
Yes, I can start here. We are somewhat involved in both areas. When examining our cloud segment, it aligns with lab automation, providing support in that field. We believe this aligns well with labs’ future automation efforts. Moving to Avidity, while there will be some impact on the research side, they also facilitate automation and advanced technology to enhance lab monitoring. This is also part of the consumables segment. Regarding SP, their focus is on lab Lio, which supports automation initiatives, especially when conducting multiple drug trials through their vial process alongside the Genevac business. Lastly, Heidolph contributes to the overall laboratory space, aiding in activities like mixing and other processes. In summary, we expect some impact on research, but it will be relatively minor for ATS. As for automation initiatives, they align with ATS’s goals, but they still represent a small portion of our overall business.
Okay. Great. And then I guess just one more. So can you just elaborate on the multiplex system that you've recently highlighted in the opening remarks, what kind of applications are they used for? Is that used in the CANDU related work that you guys do? Is that something that's in more in the innovation phase side of things right now?
Yes. So multiplex, very excited about this patent-protected business. It is around the decommissioning area of the business, and decommissioning is used in traditional nuclear reactors. It is a normal course process, and they go through decommissioning and then often they'll recommission a new nuclear reactor. This allows them to be more efficient, more space-conscious, and it is an area that truly helps in the process around decommissioning. And we have won awards, and we do have a funnel that's built around this business in this market.
And your next question comes from the line of Michael Glen with Raymond James.
This is actually Fred Gatali on for Michael Glen, and congrats, Andrew. Let me start with Life Sciences regarding the ordering sector business; how diversified is the business outside of GLP-1 applications? Is the book revenue concentrated in GLP-1? Or are there other emerging or growing categories for auto injectors?
Yes. The majority of our auto-injector business is related to GLP-1. Currently, we have 10 active customers in this area, indicating a good level of diversification. Additionally, while much of the demand for these drugs stems from weight loss and obesity treatments, as well as diabetes management, plenty of research is being conducted by these pharmaceutical companies on new applications such as cardiovascular health and neurological disorders. This is a rapidly expanding field where we continue to see significant opportunities.
Great. And then on Life Sciences further, so this is a slowdown from a much lower pace in fiscal '25. Can you just indicate what categories of products or that slower piece of bookings?
So you're asking about the quarter itself?
Correct.
Yes. As I mentioned, there were some larger programs in the first quarter of the previous year. Some of these were related to wearables. The auto-injector also constituted a significant portion of Q1 bookings, but it declined year-over-year. It really reflects the normal variability we discussed, which is just the timing of some larger programs.
All right. And then the last question for me. Can you discuss the timeline for bringing working capital back into the 15% range? Additionally, could you highlight which segments or product lines currently have elevated working capital?
Yes. I talked a little bit about this. I think our expectation is to get there by the end of the year. And it's really in two areas. Part of it is kind of the structural change I talked about with adding more product-based businesses. And there, the opportunity is primarily in inventory terms and a little bit on payment terms in the order-to-cash cycle. In the custom automation business, that's more of a timing, and we're going to see that variability quarter-to-quarter. That's normal course for us. But overall, the opportunity there is primarily in payment terms and that order-to-cash cycle.
There are no further questions at this time. I will now turn the call over to Andrew Hider for closing remarks. Andrew?
Yes. Thank you, operator, and I invite you all to participate in our Annual Shareholders Meeting, which will be all virtually today at 10:30 a.m. Eastern Time. Details are certainly in the management info circular. Lastly, thank you for joining us. Stay safe, and goodbye for now.
That concludes today's call. Thank you all for joining. You may now disconnect.