Release Date: November 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- ATS Corp (ATS, Financial) reported record order backlog in Life Sciences, with a 32% increase compared to the previous year.
- The company successfully completed the acquisitions of Paxi and HDA, which are expected to complement existing portfolios in food and beverage and Life Sciences.
- ATS Corp (ATS) achieved its highest ever quarterly bookings in Life Sciences, driven by organic growth and recent acquisitions.
- The company is expanding its recurring revenue streams, with a target to reach or exceed 40% in the future.
- ATS Corp (ATS) was recognized as one of Canada's most responsible companies for 2025 by Newsweek, highlighting its commitment to innovation and customer-centric approaches.
Negative Points
- Q2 revenues were down 17% from the previous year, primarily due to lower revenues in the transportation sector.
- The company is facing ongoing discussions with a customer regarding outstanding payments on large projects, impacting cash flow and working capital.
- ATS Corp (ATS) had to realign its cost structure, including workforce reductions, to address lower revenues in the transportation business.
- The transportation segment is expected to be a smaller portion of the overall business moving forward, reflecting market challenges.
- The company's leverage ratio is currently above its target range, with a commitment to reduce it back to the desired levels.
Q & A Highlights
Q: Can you provide more color on the backlog, particularly in life sciences, food and beverage, and the outlook for the next fiscal year?
A: Bookings for the quarter were $742 million, with life sciences showing a record backlog up 32% year over year. The backlog in food and beverage increased by 30%, and energy remained strong. We feel confident about the backlog and expect growth in the next fiscal year, driven by life sciences and other verticals, excluding transportation.
Q: What cost reductions or reallocations have been made in the transportation business, and what remains to be done?
A: We spent about $17 million on headcount reductions and resource reallocations, primarily to life sciences. Most actions are complete, with a few remaining to be finalized in the third quarter. The savings from these actions exceed the costs, aligning our cost structure with market activity.
Q: Regarding the EV projects, are you still working on them while resolving payment issues, and is there a timeline for resolution?
A: We have delivered equipment according to contracts, and where fully commissioned, it meets or exceeds expectations. Discussions with the customer are ongoing, and while we hope for a resolution, we are prepared to exercise our rights for payment. The timeline will depend on how discussions progress.
Q: What is the expected mix of the EV segment in the future, and how diversified is it?
A: The EV segment is expected to be about 11% of our order backlog, with a diversified customer base and smaller-scale projects. We are focusing on high-value customer projects, and the segment will be a smaller portion of ATS moving forward.
Q: Can you provide details on the organic growth in life sciences bookings and their margin profile?
A: Organic growth in life sciences bookings was over 20% in the quarter. Life sciences generally have a higher gross margin, contributing positively to our overall margin profile. Despite current margin pressures, life sciences remain a margin-accretive segment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
