Earnings call transcript: Atlas Engineered Products Q2 2025 misses estimates

Atlas Engineered Products (AEP) reported its Q2 2025 earnings, revealing a miss on both earnings per share (EPS) and revenue forecasts. The company posted an EPS of -$0.01, falling short of the $0.015 forecast, while revenue reached $13.65 million, below the expected $16.4 million. This led to an 8.86% drop in the stock price, closing at $0.72, reflecting investor disappointment. According to InvestingPro data, two analysts have recently revised their earnings expectations downward for the upcoming period, suggesting continued near-term challenges.

Key Takeaways

• AEP missed EPS and revenue forecasts significantly, with a surprise of -166.67% and -16.77%, respectively.
• The stock price fell by 8.86% in reaction to the disappointing earnings report.
• The company is focusing on strategic acquisitions and geographic diversification.
• Despite the miss, AEP anticipates improved margins in Q3 2025.
• Competitive market pressures and pricing challenges persist.

Company Performance

Atlas Engineered Products faced challenges in Q2 2025, with revenues of $13.65 million and a gross profit margin of 17%. The company’s strategic acquisitions and geographic diversification efforts are noteworthy, but the financial results reflect ongoing competitive pressures and pricing challenges in the market.

Financial Highlights

• Revenue: $13.65 million, down from the forecast.
• Earnings per share: -$0.01, missing the $0.015 forecast.
• Gross profit: $2.3 million with a 17% margin.
• Operating losses: $546,000.
• Normalized EBITDA: $1.1 million.

Earnings vs. Forecast

Atlas Engineered Products reported an EPS of -$0.01, missing the forecast of $0.015 by 166.67%. Revenue came in at $13.65 million, below the expected $16.4 million, marking a surprise of -16.77%. This miss is significant and reflects the company’s ongoing challenges in meeting financial expectations.

Market Reaction

Following the earnings announcement, AEP’s stock price dropped by 8.86%, closing at $0.72. This decline reflects investor disappointment with the earnings miss and positions the stock closer to its 52-week low of $0.67, highlighting the market’s negative sentiment. InvestingPro analysis indicates the stock is currently overvalued based on its proprietary Fair Value model, though the company maintains strong liquidity with assets exceeding short-term obligations. Discover more insights about AEP and other overvalued stocks at Most Overvalued Stocks.

Outlook & Guidance

Looking forward, AEP expects improved margins in Q3 2025 and is optimistic about potential government housing incentive announcements. The company continues to focus on automation and strategic acquisitions to drive growth. InvestingPro data shows the company’s net income is expected to grow this year, with analysts predicting a return to profitability. Get access to 6 more exclusive ProTips and comprehensive financial analysis in the Pro Research Report, available to subscribers.

Executive Commentary

CEO Patti Abbasi noted, "We are seeing the activity is picking up right now," highlighting optimism about future performance. CFO Melissa McCray acknowledged the persistent competitive market, emphasizing the company’s efforts to maintain market share.

Risks and Challenges

• Competitive market pressures could impact pricing and margins.
• Continued operating losses may affect financial stability.
• Market saturation and geographic variations in housing starts pose challenges.
• Macroeconomic factors, such as interest rate changes, could influence demand.

Q&A

During the earnings call, analysts inquired about the company’s acquisition strategy and margin improvement plans. AEP expressed confidence in its creative M&A strategies and anticipated pent-up demand benefiting future quarters.

Full transcript - Atlas Engineered Products Ltd (AEP) Q2 2025:

Jake Bauma, IR Consultant, Atlas Engineered Products: Good morning, everyone. Welcome and thank you for joining Atlas Engineered Products Q2 twenty twenty five Earnings Call. My name is Jake Bauma, an IR Consultant for AEP and moderator for this call. Today on the line discussing AEP’s Q2 twenty twenty five financial results and company highlights is company President and CEO and Founder, Patti Abbasi and CFO, Melissa McCray. Following their remarks, we will open up the call for an analyst Q and A session.

Before handing over the call to Hadi, please note that information we present today could contain forward looking information that is based on management’s expectations, estimates and projections. Please consider the risk factors, including those in the filings made by Atlas on SEDAR when reviewing this information. Also, all amounts discussed will be in Canadian dollars unless otherwise noted. Patti, please proceed with your remarks.

Patti Abbasi, President, CEO and Founder, Atlas Engineered Products: Thank you, Jake. Good morning, everyone. Welcome to Atlas Engineered Products earning call to discuss our 2025. Thank you for joining us, and we are very excited to be on the call with you. Despite the challenges faced by our industry and many other industry as a result of Canada and United States political and trade uncertainties during the three and six months period ended 06/30/2025, Atlas showcased its resilience by delivering year over year growth to start 2025 compared to 02/2024.

This is a testament to our team’s ability to execute in our market environment. So I would like to acknowledge their work ethic and commitment to our company and their commitment to our investors that keep us on a solid footing to achieve our strategic goals over time. While AEP’s low exposure to US cross border transactions and the inclusion of its products in the USMCA limits tariff exposure, great uncertainties impacted broader macroeconomic stability. This uncertainty resulted in project delays and more competitive markets for sales, which impacted pricing and margins in q two. Despite this, we notably realized record quoting activities from January to July from January to July 2025, increasing $34,000,000 versus the previous year period.

Increased port footage output by 12% for the first half of the year compared to the prior period, close the acquisition of trustworthy construction system of operations, and land near around the Toronto, and advance our automation investment with our new building progressing on time. The strength of AEP’s national platform expertise and financial flex flexibility provide us competitive advantage to manage revenue and gross margin during this environment. To determine whether to reduce margin to generate more revenue and maintain and increase market share over time, this will allow us deepen our market penetration and leadership position across the Canada in support of addressing the country’s housing shortage and affordability crisis. That requires more construction activity, driving demand for our products. The government continues to signal the announcement of a new program and incentive to capitalize these activity levels sometime this fall, which we expect.

If fulfilled, we’ll positively impact our business growth and margins. As we know, Canada is extremely large and diverse geographically. This translates to significant variances in activity levels from province to province, with some provinces seeing a strong housing start and favorable market condition and others experiencing the opposite. For example, recent RBC economic reporting shows rest of Canada housing starts are reaching fifteen year high relative to Ontario market, which is significantly lagging on a six months moving average basis. AEP recognizes this and continues to utilize its m and a strategy and expertise to diversify exposure and capture growth.

We continue to evaluate the optional optimal capital allocation decision, notably advancing our automation effort in Ontario, enhancing our financial flexibility, and optionality with our banking partners, and remaining active on our share buyback purchasing just over a 118,000 additional shares in q two two thousand and twenty five at an average approximately 81¢ per share. Subsequent to quarter end, we also announced the acquisition of Penthrush, our first location in Saskatchewan. We saw housing start rise over a 100% in the first five months of 02/2025, ranking it first in the nation for growth. We also realized a 14% increase in revenue for July 2025 to $6,000,000, excluding recent acquisition for now and continue to experience a strong coating levels. These paired with potential interest rate cuts, favorable government policy announcement, and further trade certainty creates a solid foundation to execute and build on this momentum during the remainder of twenty two thousand and twenty five and beyond.

I would like I would now like to introduce Melissa McCray, CFO of IEP, to provide commentary on our financial performance through q two. Go ahead, Matt.

Melissa McCray, CFO, Atlas Engineered Products: Thank you, Hadi. Results for our Q2 twenty twenty five include revenues of $13,600,000 for the second quarter and twenty four point six million dollars for the year to date gross profits of $2,300,000 and gross margins of 17% for the second quarter and $4,000,000 in gross profits and 16% gross margin for the year to date operating losses of $546,000 for the second quarter and $1,300,000 for the year to date. The competitive market has been persistent. And despite revenues declining for the quarter, they are and still higher for the year to date compared to prior periods, internal manufacturing metrics show increased board footage output for truss manufacturing. This is a KPI that we track internally, showing that we are producing more than the comparative period for trusses specifically, but a competitive market is dictating lower pricing still.

The company has been working hard to gain market share and keep staff busy even in the competitive market, which has meant sacrificing margins and profits at this time in order to be better prepared for the turnaround in the market. Skilled staff and a strong customer base will be necessary for quarter three twenty twenty five and moving forward as the company’s sales initiatives start to show more results in top line revenues moving forward. Additionally, design and sales work has already been put in to building up our quoting and future pipelines that are reflected in our year to date results. Normalized EBITDA was $1,100,000 for the second quarter and $1,700,000 for the year to date results. Normalized EBITDA does not include adjustments to onetime costs for legal and consulting fees related to the new automation facility in Ontario and acquisition projects that we had on the go, which include Trustworthy and Penn Trust.

No adjustment has also been made has been made for some other costs associated for future automation, which would be ongoing moving forward, but incurred now to prepare for that future expansion in organic growth. These costs continue to include the expansion of sales teams and management teams and consulting for to ensure that we are ready to go with the automation as soon as possible. Additionally, there are no adjustments for management labor costs related to two acquisitions, one of which was completed subsequent to quarter two twenty twenty five. Let me just touch quickly on the balance sheet as we have major projects in progress that are utilizing our cash flow. We have been using our cash for the new automation building and the Trustworthy acquisition as seen on these financial statements.

We still have a cash balance of just over $5,000,000 plus a line of credit still available to us at $7,500,000 on top of the 5 Additionally, with the seasonality of our industry, typically, our free cash generation is noticeable from both July, August through to January, February of each year. We are seeing and we are seeing this trend continue this year. Additionally, we have strong asset backing in our real estate that we own with a net carrying value of just over $15,000,000 most of which hasn’t been appraised in the last four years. So moving forward, we’re confident with our balance sheet to continue these projects that we have on the go. I’d like to open up the call for your questions.

Operator, please provide the appropriate instructions.

Call Moderator: Thank you, Melissa, and thank you, Hadi. At this time, we’ll be conducting a question and answer session from our analysts. So please raise your hand if you have a question, and we will address each analyst in order. If there’s any outstanding questions at the end of the call, there will be an email show up on the screen, and we’ll be happy to take them all by email. So the first question is from Fredrik.

You can go ahead, Frederick.

Patti Abbasi, President, CEO and Founder, Atlas Engineered Products: Sorry about that. Good morning. Morning.

Fredrik, Analyst: The first question is just, you know, with the builder delays and and potential announcement from the Karman and Karman government in the fall, do you think that the pent up demand could benefit not only q three, but also q four relative to, you know, prior years? Just trying to get your sense on on on what the timing of orders and deliveries could be for the balance of 2025.

Patti Abbasi, President, CEO and Founder, Atlas Engineered Products: Okay. Patrick, even on q two, we had a lot of completed orders sitting on the ground that due to various delays that happens in any businesses, especially construction with so many different trading mark that they sat on the ground and the number didn’t show on the actual revenue side. And those orders now, after a week or ten day, they were all delivered. And then that will continue. Right now, to answer honestly from being a quote and the orders and activities we have, there is one area that I’m paying a lot of attention right now is is on the margin because there’s a fine balance being aggressive and protecting your clients and extending your market share to another way to making money.

And those are we are managing. Our biggest anxiety in all the operation is the labor and being able to deliver because we can see that is coming right now. That is happening. And to answer your question in a long way, yes. But I can see it.

And that and there’s still there has been no announcement from the government. They’re just talking right now. They haven’t said anything. Even when they they announced that in fall, we introduced a program. I wish they handled on it because that put more projects on hold with people wondering, oh, what is this magic government gonna come?

What is this magic solution? And right now, this without all of those announcements stuff there, I can see the wave right now coming that, the demand is gonna get bigger and bigger, and then the next issue is the is the labor shortage and everything that that we deal with that every day. Anyway, it doesn’t matter. But the reason I’m saying that is it’s not a worry about the labor. It’s more of it is where we are paying our attention right now because of we’ve seen the activity is picking up right now.

It’s picking up across the country, and you can see it. And that’s been one advantage from us. We get exposure to what’s coming in next six months, and we can see the activity is happening. Right?

Fredrik, Analyst: Okay. Yeah. That’s interesting on the on the activity picking up. And is that is that reflected in pricing as well? Like, is there less pricing pressure in recent weeks?

And what does that imply for margins relative to q two? Like, are you confident that you can improve margins in q three relative to to the q two?

Patti Abbasi, President, CEO and Founder, Atlas Engineered Products: Yes. Yes. We can improve that and the margin will go up by the revenue goes up and different part of it. Yes. We can do that.

And especially there is with m and a’s, everything. We spent all the money with that. Not we spent all the money. Their expenses were higher because of the two previous m and a we had and all of that stuff there. So, yes, I can see that the margin’s been improving quite drastically.

Fredrik, Analyst: Okay. I’ll leave it there for now and get back in the queue. Thank you.

Patti Abbasi, President, CEO and Founder, Atlas Engineered Products: Thank you, Per.

Call Moderator: Thank you. And next question is from Andrew Sempol from Bantam Capital Markets. Go ahead, Andrew.

Andrew Sempol, Analyst, Bantam Capital Markets: Great. Thank you. Good morning, everyone.

Patti Abbasi, President, CEO and Founder, Atlas Engineered Products: Hey, Andrew. I’ll start

Andrew Sempol, Analyst, Bantam Capital Markets: with the outlook. You provided some color on July sales being up year over year relative to July 2024. Just wondering, we’re most of the way through August here. What have you been seeing in August kind of month to date? Do you are you still seeing revenue trend higher year over year?

Patti Abbasi, President, CEO and Founder, Atlas Engineered Products: Yes. The I is the the trend is year over year and that the one week in August and usually the last ten days in August before the school holiday, sometimes you see a little bit of a holiday season for everybody and stuff that the indication that it could look like maybe a slowdown, but it’s not. Because then first two week in September, it will go crazy again once the kids go back to school. But the way the trends are right now is is going up and up right now. Like, the the revenue and everything the orders, everything’s increasing at the moment.

Like, there is a trend in there going up right now. Yes.

Andrew Sempol, Analyst, Bantam Capital Markets: Great. And then maybe in terms of, you know, margin expectations for the second half of this year, You you highlighted that it’s number it’s a key metric. The team’s watching closely and and trying to balance out the sales growth. Mhmm. What should we expect from margins in the second half compared to what we saw in q two here?

Patti Abbasi, President, CEO and Founder, Atlas Engineered Products: You can expect to improve margin, much more improved margin, but I can’t give you the actual number there, Andrew. I apologize for that. Like but you can expand the much improved margin much improved margin.

Andrew Sempol, Analyst, Bantam Capital Markets: Great. Okay. And then maybe another one, if I may. You know, looking at the cash resources on the balance sheet at quarter end q two, you know, you also have Penn Trust which is closing subsequent to quarter end. Do you feel like you have additional financial flexibility for M and A or, you know, is it like cash and kind of credit facility resources you have available to you today, is that mostly geared towards Clinton?

I just wanna kinda gauge, what sort of liquidity buffer you feel you have to, continue to pursue M and A.

Patti Abbasi, President, CEO and Founder, Atlas Engineered Products: On the liquidity buffer on right now on the other potential m and a that coming up there, we are working more, creative ways of, doing the deal rather than depending on the cash and the moment. Because the one disadvantage of a slow marketplace is that you fight for margin, you fight for business, everything, and the numbers don’t look good. But the other positive side is the m and a is pretty good, and the appetite is gums much higher. And out of that, it becomes a bias market. And right now, we’re looking at different creative way of making a deal rather than using the cash because we are managing the cash flow pretty good right now.

And we are pretty disciplined on it, and the main concentration right now for this for the automation to be in effect by next spring that everything’s on time. So we manage it, and we all I’m looking at other creative deals rather than just going to the market or spending the cash money at the moment.

Andrew Sempol, Analyst, Bantam Capital Markets: Great. Appreciate you taking my questions. I’ll get back to queue. Thank you.

Patti Abbasi, President, CEO and Founder, Atlas Engineered Products: Thank you, Andrew.

Call Moderator: And next we have Russell Stanley from Beacon Securities. Go ahead,

Russell Stanley, Analyst, Beacon Securities: Good morning. Thanks for taking my question. Maybe first, just around the price pressure that you’re seeing. Wondering if you can provide some colors to how broad based that is across product categories. Are you seeing any categories be particularly hit or any categories showing particular resilience or is it fairly even?

Any color there would be great. Thanks.

Patti Abbasi, President, CEO and Founder, Atlas Engineered Products: Hey, Russell. It’s really when I look at it is is about on all the categories because especially the two provinces, British Columbia and Ontario, that the common correlation was the housing prices is over millions of dollars. Right? So whenever there is a job available right now, there is the amount of people that you fight for it, and then it reduces the margin. So it’s it’s just the price category affects all the products you have.

Now we have advantage on a lot of products with our buying power and our strength that it doesn’t hurt us as much as it hurts the competition. And but to to answer your question, I think it’s all across the board that you receive products to products that once it comes to it and if the people need that business to keep their lights on and keep the business moving, so they dropped the margin in those areas. And that’s what’s happened. Got it.

Russell Stanley, Analyst, Beacon Securities: Thanks for that. And and maybe if I could just around CapEx expectations for H2 and perhaps early twenty six, appreciating Melissa’s comments earlier around the balance sheet flexibility, but what should we expect for CapEx in H2 and then how much more spillover might we see in q one as Clinton’s finished?

Patti Abbasi, President, CEO and Founder, Atlas Engineered Products: Okay. I I will let Mac to answer that one and stuff there, please. Yeah.

Melissa McCray, CFO, Atlas Engineered Products: Yeah. No worries. So for through quarter three into the end of the year, we’re expecting the building completion to be done and into quarter one a little bit. So expecting about 50% of that still to to go here about 3,000,000, 3,500,000.0. So the way we are starting deposits onto the equipment, but that won’t show into our CapEx necessarily the way you’re expecting until it’s in use, later next year with the vast majority of those payments actually being in quarter one and quarter two of next year, to just because the way we’ve negotiated the payment plan through that project.

A CapEx outside of pet like, the acquisitions and the automation facility, we’re still expecting to be minimal. We we have a lot of equipment throughout the group that can support our operations as it is until we get these projects on the go.

Russell Stanley, Analyst, Beacon Securities: Got it. That’s great color. Thanks for that. I’ll get back in the queue.

Patti Abbasi, President, CEO and Founder, Atlas Engineered Products: Thank you, Russell.

Call Moderator: Thanks, everyone. So it looks like there’s no more analyst questions. So that marks the end of our question and answer session. And we’ll be available post call to answer all of your questions that you may still have via email or through the contact form on the website. And also the recording of this call will be available on the website short shortly today.

So at this time, you may now disconnect, and have a great day.

Patti Abbasi, President, CEO and Founder, Atlas Engineered Products: Have a great day.

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