ATS Reports Third Quarter Fiscal 2025 Results

ATS Corporation (TSX and NYSE:ATS) ("ATS" or the "Company") today reported its financial results for the three and nine months ended December 29, 2024. All references to "$" or "dollars" in this news release are to Canadian dollars unless otherwise indicated.

Third quarter highlights:

• Revenues were $652.0 million compared to $752.0 million a year ago.
• Net income was $6.5 million compared to $47.2 million a year ago.
• Basic earnings per share were 7 cents, compared to 48 cents a year ago.
• Adjusted EBITDA¹ was $87.5 million compared to $119.3 million a year ago.
• Adjusted basic earnings per share¹ were 32 cents compared to 65 cents a year ago.
• Order Bookings² were $883 million, 32.2% higher compared to $668 million a year ago.
• Order Backlog² was $2,060 million, 8.0% higher compared to $1,907 million a year ago.

"Today ATS reported third quarter results for fiscal '25. Order Bookings this quarter reflected strong organic growth and contributions from our acquisitions," said Andrew Hider, Chief Executive Officer. "As anticipated, third quarter results were impacted by lower revenues as a result of reduced market demand in the North American EV market, partially offset by strong and diversified growth in life sciences and food and beverage."

Year-to-date highlights:

• Revenues were $1,959.0 million compared to $2,241.4 million a year ago.
• Net Income was $40.9 million compared to $145.7 million a year ago.
• Basic earnings per share were 42 cents, compared to $1.49 a year ago.
• Adjusted EBITDA¹ was $271.8 million compared to $354.6 million a year ago.
• Adjusted basic earnings per share¹ were $1.07 compared to $1.96 a year ago.
• Order Bookings¹ were $2,442 million, compared to $2,100 million a year ago.

Mr. Hider added: "Q3 was the second highest bookings quarter in company history. As we transition into the final quarter of the fiscal year and look ahead to fiscal 2026, our significant Order Backlog provides good revenue visibility and a solid foundation for ATS to drive customer and shareholder value creation."

Recent Acquisitions

On July 24, 2024, the Company acquired Paxiom Group ("Paxiom"). With headquarters in Montreal, Canada, Paxiom is a provider of primary, secondary, and end-of-line packaging machines in the food & beverage, cannabis, and pharmaceutical industries. Paxiom's product line is expected to complement ATS' packaging and food technology businesses and allow ATS to offer complete packaging and end-of-line solutions. The total purchase price paid (based on finalization of post-closing adjustments) was $146.4 million.

On August 30, 2024, the Company acquired all material assets of Heidolph Instruments GmbH & Co. KG and Hans Heidolph GmbH ("Hiedolph"), 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 ("U.S."), South Korea and China. The purchase price paid in the second quarter of fiscal 2025 was $45.1 million ($30.3 million Euros).

Third quarter summary

Third quarter of fiscal 2025 revenues were 13.3% or $100.0 million lower than in the corresponding period a year ago, primarily reflecting a year-over-year decrease in organic revenue (excluding contributions from acquired companies and foreign exchange translation) of $151.8 million or 20.2%, partially offset by revenues earned by acquired companies of $41.5 million, which included $18.7 million from Heidolph and $13.2 million from Paxiom. Revenues generated from construction contracts decreased 29.2% or $141.6 million from the prior period due to lower Order Backlog entering the period, primarily within the transportation market which included several large electric vehicle ("EV") Order Bookings a year ago. Revenues from services increased 3.3% or $5.0 million, primarily due to revenues earned by acquired companies of $4.8 million. Revenues from the sale of goods increased 32.2% or $36.6 million primarily due to revenues earned by acquired companies of $26.2 million, most notably from Avidity Science, LLC ("Avidity"), in addition to organic revenue growth on higher Order Backlog entering the period.

By market, revenues generated in life sciences increased $59.3 million or 18.7% year over year. This was primarily due to contributions from acquisitions totalling $28.3 million, notably from Avidity, and organic revenue growth on higher Order Backlog entering the quarter. Revenues generated in food & beverage increased $18.4 million or 19.4% from the corresponding period last year due to contributions from acquisitions of $13.2 million and organic revenue growth on higher Order Backlog entering the quarter. Revenues in transportation decreased $190.6 million or 79.3% year over year, due to lower Order Backlog entering the quarter, as the prior year included several large EV projects. Revenues generated in consumer products increased $16.2 million or 23.5% year over year due to higher Order Backlog entering the quarter, and execution on increased in-quarter Order Bookings compared to the previous quarter. Revenues in energy decreased $3.3 million or 10.7% due to timing of program execution.

Net income for the third quarter of fiscal 2025 was $6.5 million (7 cents per share basic), compared to net income of $47.2 million (48 cents per share basic) for the third quarter of fiscal 2024. The decrease primarily reflected lower revenues, and higher selling, general, and administrative ("SG&A"), partially offset by increased gross margin profitability and lower restructuring costs. Adjusted basic earnings per share were 32 cents compared to 65 cents in the third quarter of fiscal 2024 (adjusted basic earnings per share is a non-IFRS financial measure — see "Non-IFRS and Other Financial Measures" and "Reconciliation of Non-IFRS Measures to IFRS Measures").

Depreciation and amortization expense was $37.9 million in the third quarter of fiscal 2025, compared to $35.2 million a year ago.

EBITDA was $71.0 million (10.9% EBITDA margin) in the third quarter of fiscal 2025 compared to $113.7 million (15.1% EBITDA margin) in the third quarter of fiscal 2024. EBITDA for the third quarter of fiscal 2025 included $3.3 million of restructuring charges, $1.0 million of incremental costs related to acquisition activity, $2.1 million of acquisition-related fair value adjustments to acquired inventories, $8.7 million of one-time settlement costs for a canceled customer project, and $1.4 million of stock-based compensation expenses due to revaluation. EBITDA for the corresponding period in the prior year included $16.2 million of restructuring charges, $0.9 million of incremental costs related to acquisition activity, $0.8 million of acquisition-related fair value adjustments to acquired inventories, a $0.6 million recovery of stock-based compensation revaluation expenses, and an $11.7 million gain on sale of facilities. Excluding these costs, adjusted EBITDA was $87.5 million (13.4% adjusted EBITDA margin), compared to $119.3 million (15.9% 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 gross margin profitability. EBITDA and adjusted EBITDA are non-IFRS financial measures, and EBITDA margin is a non-IFRS ratio — see "Non-IFRS and Other Financial Measures."

Order Bookings

Third quarter of fiscal 2025 Order Bookings were $883 million, a 32.2% year-over-year increase, reflecting an increase of 21.9% in organic Order Bookings growth, in addition to 8.2% of growth from acquired companies and 2.1% from positive foreign exchange translation impacts. Order Bookings from acquired companies totalled $54.5 million. By market, Order Bookings in life sciences increased compared to the prior-year period primarily due to organic growth, along with $35.8 million of contributions from acquired companies, including $23.2 million from Heidolph. Order Bookings in food & beverage increased from the prior period due to contributions from acquired companies of $18.8 million. Order Bookings in transportation increased compared to the prior-year period due to timing of customer projects. Order Bookings in consumer products increased from the prior period primarily due to the timing of customer projects. Order Bookings in energy increased compared to the prior-year period primarily due to timing of customer projects.

Trailing twelve month book-to-bill ratio at December 29, 2024 was 1.18:1. Book-to-bill ratio, Order Bookings and organic Order Bookings growth are supplementary financial measures — see "Non-IFRS and Other Financial Measures."

Backlog

At December 29, 2024, Order Backlog was $2,060 million, 8.0% higher than at December 31, 2023, primarily on account of higher Order Backlog in life sciences, consumer products, food & beverage and energy markets, partially offset by lower Order Backlog within the transportation market which included several large EV 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 identify 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. 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. In transportation, the funnel consists of smaller opportunities relative to the size of the Order Bookings received throughout fiscal years 2023 and 2024 as North American industry participants continue to moderate new capacity investment to match end market demand and reduce platform costs. See "Update on Large EV Customer" below. Funnel activity in consumer products is stable, although discretionary spending by consumers, influenced by factors such as inflationary pressures, may impact timing of some customer investments in the Company's solutions. 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 nuclear and grid battery storage, 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 $2,060 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, particularly in life sciences. In the fourth quarter of fiscal 2025, management expects to generate revenues in the range of $650 million to $710 million. This estimate is calculated each quarter based on management's assessment of project schedules across all customer contracts in Order Backlog, expectations for faster-turn product and services revenues, expected delivery timing of third-party equipment and operational capacity. In the short-term, management expects lower transportation revenues to continue to negatively impact margins, until reorganization actions are fully implemented.

Supplier lead times are generally acceptable across key categories; however, inflationary or other 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, achieving 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, and may be influenced as a result of tariffs. 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.

Except for the delays related to working capital as noted in ATS' Q2F25 MD&A and as outlined in "Update on Large EV Customer" herein, the Company continues to target improvements in non-cash working capital in other parts of the business by the end of the fiscal year. 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 Activities

In the third quarter of fiscal 2025, restructuring expenses of $3.3 million were recorded in relation to the Company's previously disclosed reorganization activities. For the nine months ended December 29, 2024, total costs of $20.4 million were recorded.

Update on Large EV Customer

As disclosed in the Company's Q2F25 MD&A, management has been, and continues to be, engaged in discussions with a particular customer of certain large EV programs with respect to outstanding payments owed and completing the commissioning of these projects in order to receive final milestone payments. While work remains paused on these projects, management has been and continues to be focused on efforts to resolve disagreements with the customer. The Company is prepared to consider all legal avenues available to it, including dispute resolution mechanisms and litigation, if necessary (see "Risk Factors").

The Company has outstanding and overdue accounts receivable of approximately $165 million from this customer and approximately $175 million of contract assets reflecting work completed and remaining to be invoiced. Foreign currency revaluation drove the change in these amounts compared to the values disclosed in the Company's Q2F25 MD&A. The Company believes that it has fulfilled its obligations under the contracts with this customer and that it is owed these amounts for work completed.

Tariffs

With respect to potential tariffs by the U.S. on goods from Canada, and related responses by Canada, management is monitoring the situation closely. Although ATS' global footprint and decentralized operating model, along with ABM tools, provide some flexibility to address potential disruptions over the longer term, the Company could see short-term impacts if tariffs are effected. The Company's equipment and product revenues from its Canadian operations being sold into the U.S. has represented a mid-teens percentage of the Company's total revenues for the nine months ended December 29, 2024. Management is assessing possible impacts and actively working with ATS' customers and suppliers to mitigate challenges that tariffs could pose (see "Risk Factors").

Risk Factors

Risks applicable to ATS' business operations are described in the Company's AIF under "Risk Factors." The AIF is available on SEDAR+ at www.sedarplus.com and on the U.S. Securities Exchange Commission's EDGAR at www.sec.gov. Such risks described in the AIF remain substantially unchanged. In addition, with respect to the information provided in "Update on Large EV Customer" herein, the risks titled "Litigation risk" and "Customer concentration risk" in the AIF specifically apply and are supplemented by an additional "Customer disagreement risk" in the Company's management's discussion and analysis for the third quarter of fiscal 2025 (the "Q3F25 MD&A") (see "Risk Factors" in the Q3F25 MD&A). In addition, the risk titled "International trade risk" in the AIF is supplemented as described in the Q3F25 MD&A.

Quarterly Conference Call

ATS will host a conference call and webcast at 8:30 a.m. eastern on Wednesday, February 5, 2025 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 February 12, 2025) 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 7,500 people at more than 65 manufacturing facilities and over 85 offices in North America, Europe, 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.

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):

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 (loss) and basic earnings (loss) per share):

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

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

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

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

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:

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.

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.