ATS Reports Fourth Quarter and Annual 2024 Results
ATS Corporation (TSX and NYSE: ATS) (“ATS” or the “Company”) today reported its financial results for the three and twelve months ended March 31, 2024. All references to "$" or "dollars" in this news release are to Canadian dollars unless otherwise indicated.
Fourth quarter highlights:
- Revenues increased 8.3% year over year to $791.5 million.
- Net Income was $48.5 million compared to $29.6 million a year ago.
- Basic earnings per share were 49 cents, compared to 32 cents a year ago.
- Adjusted EBITDA 1 was $115.8 million, 2.0% lower compared to $118.2 million a year ago.
- Adjusted basic earnings per share 1 were 65 cents compared to 73 cents a year ago.
- Order Bookings 1 were $791 million, 7.3% higher compared to $737 million a year ago.
- Order Backlog 1 was $1,793 million at the end of the quarter.
"Today ATS reported record fourth quarter revenues and strong Order Bookings," said Andrew Hider, Chief Executive Officer. "Our Order Backlog positions us well for fiscal '25 , and we look forward to the addition of Paxiom Group to ATS' portfolio, as we maintain our focus on long-term value creation."
Year-to-date highlights:
- Revenues increased 17.7% year over year to $3,032.9 million.
- Net Income increased 52.1% year over year to $194.2 million.
- Basic earnings per share increased 42.4% year over year to $1.98.
- Adjusted EBITDA 1 increased 17.3% year over year to $470.6 million.
- Adjusted basic earnings per share 1 increased 10.1% year over year to $2.61.
- Order Bookings 1 were $2,891 million, compared to $3,256 million a year ago.
Mr. Hider added: “In fiscal 2024 we delivered profitable growth on revenues of over $3 billion, the highest in company history, along with record adjusted earnings. Our global team of over 7,000 employees continues to execute across our strategic markets, and drive improvement in the business through ongoing application of our ATS Business Model."
Recent Acquisitions
On May 15, 2024, the Company announced it had entered into a definitive agreement to acquire Paxiom Group (“Paxiom”). With headquarters in Montreal, Quebec, Paxiom is a provider of primary, secondary, and end-of-line packaging machines in the food and beverage, cannabis, and pharmaceutical industries. Paxiom provides a vast product line that includes precision weight filling, bagging, wrapping, labeling, conveyors, case forming, robotic case packing and end of line palletizing equipment that will complement ATS’ businesses CFT S.p.A, Raytec Vision S.p.A, Marco Limited, IWK Verpackungstechnik GmbH, and NCC Automated Systems, Inc. and allow ATS to offer complete packaging and end-of-line solutions. The transaction is expected to close in the third calendar quarter of 2024, subject to customary closing conditions.
On January 1, 2024, the Company acquired IT.ACA. Engineering S.r.l ("IT.ACA"), an Italian automation system integrator. IT.ACA strengthens process automation solutions business ("PA") market position in southern Europe, while also adding strong capabilities aligned with PA's in automation integration, digitalization, and production process optimization.
Fourth quarter summary
Fiscal 2024 fourth quarter revenues were 8.3% or $60.7 million higher than in the corresponding period a year ago. This performance primarily reflected year-over-year organic revenue growth (growth excluding contributions from acquired companies and foreign exchange translation) of $25.3 million or 3.5%, and revenues earned by acquired companies of $34.0 million, which included $24.8 million from Avidity. Revenues generated from construction contracts increased 6.0% or $28.3 million due to organic revenue growth. Revenues from services increased 23.9% or $32.9 million due to organic revenue growth in addition to revenues earned by acquired companies of $12.9 million. Revenues from the sale of goods decreased 0.4% or $0.5 million primarily due to lower Order Backlog entering the quarter, partially offset by revenues earned by acquired companies of $20.6 million, primarily from Avidity.
By market, revenues generated in life sciences increased $50.7 million or 15.6% year over year. This was primarily due to contributions from acquisitions totalling $28.3 million and organic revenue growth on higher Order Backlog entering the quarter. Revenues in transportation increased $23.1 million or 11.6%, due to timing of program execution. Revenues generated in food & beverage increased $0.6 million or 0.6% due to revenues earned by acquired companies. Revenues generated in consumer products decreased $12.1 million or 14.7% due to timing of program execution. Revenues in energy decreased $1.6 million or 6.2% due to timing of program execution.
Net income for the fourth quarter of fiscal 2024 was $48.5 million (49 cents per share basic), compared to $29.6 million (32 cents per share basic) for the fourth quarter of fiscal 2023. The increase primarily reflected higher revenues, lower stock-based compensation expenses and lower restructuring charges, partially offset by higher cost of revenues and selling, general and administrative ("SG&A") expenses. Adjusted basic earnings per share were 65 cents compared to 73 cents in the fourth quarter of fiscal 2023 (see “Reconciliation of Non-IFRS Measures to IFRS Measures”).
Depreciation and amortization expense was $36.3 million in the fourth quarter of fiscal 2024, compared to $33.9 million a year ago; the increase was primarily related to incremental depreciation and amortization expense from recently acquired companies.
EBITDA was $111.1 million (14.0% EBITDA margin) in the fourth quarter of fiscal 2024 compared to $85.8 million (11.7% EBITDA margin) in the fourth quarter of fiscal 2023. EBITDA for the fourth quarter of fiscal 2024 included $6.6 million of restructuring charges, $4.6 million of incremental costs related to acquisition activity, $2.0 million of acquisition-related fair value adjustments to acquired inventories, and a $8.5 million recovery of stock-based compensation expenses due to revaluation. EBITDA for the corresponding period in the prior year included $1.5 million of incremental costs related to acquisition activity, $15.8 million of restructuring charges, and $15.1 million of stock-based compensation revaluation expenses. Excluding these costs, adjusted EBITDA was $115.8 million (14.6% adjusted EBITDA margin), compared to $118.2 million (16.2% adjusted EBITDA margin) for the corresponding period in the prior year. Lower adjusted EBITDA reflected increased SG&A expenses and cost of revenues, partially offset by higher revenues. EBITDA is a non-IFRS financial measure - see “Non-IFRS and Other Financial Measures.”
Order Bookings
Fourth quarter fiscal 2024 Order Bookings were $791 million, a 7.3% year over year increase, reflecting 5.2% growth from acquired companies, in addition to organic Order Bookings of 2.1%. Order Bookings from acquired companies totalled $38.7 million. By market, Order Bookings in life sciences increased compared to the prior-year period primarily due to organic growth, along with $28.7 million of contributions from acquired companies, including $22.7 million from Avidity. Order Bookings in transportation decreased compared to the prior-year period, which included Order Bookings of U.S. $119.9 million (approximately $162.2 million CAD) from a global automotive customer to move towards fully automated battery assembly systems for their North American manufacturing operations. Order Bookings in food & beverage increased primarily due to timing of customer projects. Order Bookings in consumer products decreased slightly as a result of the timing of customer projects, offset by contributions from acquired companies. Order Bookings in energy increased primarily due to timing of customer projects.
Trailing twelve month book-to-bill ratio at March 31, 2024 was 0.95:1. Book-to-bill ratio is a supplementary financial measure - see “Non-IFRS and Other Financial Measures.”
Backlog
At March 31, 2024, Order Backlog was $1,793 million, 16.7% lower than at March 31, 2023 primarily on account of lower Order Backlog within the transportation market which included several large 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 see 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, as well as opportunities to provide life science solutions that leverage integrated capabilities from across ATS. Management expects revenues from programs related to GLP-1 drugs and associated drug delivery solutions, such as auto- injectors, to move towards a high single digit percentage of total revenues over the next several years. In transportation, the funnel is comprised of smaller shorter-term opportunities, relative to the larger Order Bookings received throughout fiscal years 2023 and 2024, and some of those larger opportunities have also moved further into the future, reflecting Original Equipment Manufacturers taking a more measured approach, aligning capacity and platform costs with market demand. Management believes the Company's automated electric vehicle ("EV") battery pack and assembly capabilities position ATS well within the industry as the market continues to evolve. Funnel activity in food & beverage remains strong, particularly for energy-efficient solutions. The Company continues to benefit from strong brand recognition within the global tomato processing industry, and there is continued interest in automated solutions within the food & beverage market more broadly. Funnel activity in consumer products is stable; inflationary pressures continue to have an effect on discretionary spending by consumers, which may impact timing of some customer investments. 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.
Across all markets, customers are exercising normal caution in their approach to investment and spending. Funnel growth in markets where environmental, social and governance requirements are an increasing focus for customers — including grid battery storage, EV and nuclear, 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 $1,793 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. In the first quarter of fiscal 2025, management expects the conversion of Order Backlog to revenues to be in the 36% to 40% range. This estimate is calculated each quarter based on management’s assessment of project schedules across all customer contracts, expectations for faster- turn product and services revenues, expected delivery timing of third-party equipment and operational capacity. In the third quarter, management disclosed that approximately $200 million of Order Backlog with one of the Company's EV customers was delayed. During the fourth quarter, approximately $50 million of Order Backlog on this portion of the program was reduced to reflect scope changes, partially offset by increased scope changes in other areas of the overall program with this same customer. Management continues to work with this customer to support their revised timing as they realign their production schedules on this portion of the program. This delay is accounted for in the first-quarter revenue conversion range. Management expects some pressure on EV revenues in the short-term as ATS continues to execute on existing EV Order Backlog. For fiscal 2025, despite expected lower revenues from EV, Management believes that ATS is well-positioned to drive revenue growth in other markets, including life sciences and expects this growth, combined with the addition of Paxiom will largely offset reduced volumes from EV.
The timing of customer decisions on larger opportunities is expected to cause variability in Order Bookings from quarter to quarter. 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. Management estimates that reoccurring revenues are currently in the range of 25% to 35% of total revenues on a trailing twelve- month basis.
In the short term, ATS expects it will continue to mitigate supply chain volatility. Lead times have improved in most key categories; however, prolonged 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. In addition, short-term revenue pressure related to EV programs could impact margins. However, Management expects to be able to manage the Company's cost structure over time through flexible resourcing, including but not limited to subcontract labour and redeploying resources to other parts of the business. Over time, sustaining 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).
In the short term, the Company expects non-cash working capital to remain elevated as large enterprise programs progress through milestones. 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%. However, given the size and timing of milestone payments for certain large EV programs in Order Backlog, the Company could see its working capital exceed 15% of annualized revenues in certain periods as it did throughout fiscal 2024. 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 Activity
The Company periodically undertakes reviews of its operations to ensure alignment with strategic market opportunities. As a part of this review, the Company has identified and previously announced an opportunity to improve the cost structure of the organization and reallocate investment to growth areas. Resulting actions started in the third quarter of fiscal 2024 and continued through fiscal year end. Restructuring expenses of $6.6 million were recorded in the fourth quarter, and for the full year, total costs of $22.8 million were recorded, including actions to address expected lower EV volumes in fiscal 2025.
Quarterly Conference Call
ATS will host a conference call and webcast at 8:30 a.m. eastern on Thursday, May 16, 2024 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 May 23, 2024) 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 7,000 people at more than 65 manufacturing facilities and over 85 offices in North America, Europe, Southeast 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.
SOURCE: ATS Corporation
No comments:
Post a Comment