Earnings call transcript: ATS Corp sees revenue growth, stock falls Q1 2025

ATS Corp reported a 6.1% year-over-year increase in Q1 revenues to $737 million, but its stock fell 5.94% to $30.99 following the earnings call. Despite strong financial performance, the decline in order bookings by 15% and restructuring costs may have influenced market sentiment. According to InvestingPro data, the company has shown robust growth with a 5-year revenue CAGR of 12%. The company maintains a positive outlook, expecting revenue growth in the coming quarters.

Key Takeaways

• Q1 revenues rose 6.1% year-over-year to $737 million.
• Order bookings declined by 15% compared to the previous year.
• The stock dropped 5.94% to $30.99 post-earnings.
• The company launched a new interactive VR training platform.
• ATS expects revenue growth in the upcoming quarters.

Company Performance

ATS Corp demonstrated solid revenue growth in Q1 2025, with revenues increasing by 6.1% year-over-year. While the company faced a decline in order bookings by 15%, InvestingPro analysis shows strong financial health with a current ratio of 1.69, indicating sufficient liquidity to meet short-term obligations. The company continues to innovate with new product launches, including a virtual reality training platform and advancements in life sciences. InvestingPro subscribers can access 8 additional key financial metrics and insights about ATS Corp’s financial health.

Financial Highlights

• Revenue: $737 million, up 6.1% year-over-year
• Order bookings: $693 million, down 15% from last year
• Adjusted earnings from operations: $78.6 million (10.7% of revenues)
• Organic revenue growth: -1.2%

Market Reaction

Despite the revenue increase, ATS Corp’s stock fell 5.94% to $30.99. The decline in order bookings and restructuring costs may have contributed to investor concerns. Based on InvestingPro Fair Value analysis, the stock appears overvalued at current levels. The stock’s current price is closer to its 52-week high of $33.13, with InvestingPro data showing a notable 13.68% return over the past year despite high price volatility. For a comprehensive analysis of overvalued stocks, visit our Most Overvalued Stocks list.

Outlook & Guidance

ATS Corp projects Q2 revenues between $700 million and $740 million, reflecting continued optimism for growth. The company is also targeting leverage reduction to 2-3x this fiscal year and expects full-year revenue growth. Key strategic initiatives include margin expansion and further innovation in life sciences and automation.

Executive Commentary

CEO Andrew Hyder emphasized the company’s diversified opportunity funnel and strong order backlog, stating, "Our opportunity funnel is well diversified, and our current order backlog provides solid revenue visibility and a strong foundation for profitable growth." CFO Ryan McLeod highlighted the focus on operating margin improvement, noting, "We continue to expect operating margin improvement throughout fiscal twenty twenty six, although this may not be linear."

Risks and Challenges

• Decline in order bookings may impact future revenue growth.
• Restructuring costs could affect short-term financial performance.
• Market volatility and investor sentiment may pose challenges.
• Macroeconomic pressures could influence industry demand.
• Supply chain disruptions may impact production timelines.

Q&A

During the earnings call, analysts inquired about the impact of US research funding changes and tariffs. The company reported minimal impact from these factors and expressed confidence in its diversified customer base in the auto injector business. Opportunities in lab automation and life sciences were also highlighted as key growth areas.

Full transcript - ATS Corp (ATS) Q1 2026:

Conference Call Operator: Welcome to the ATS Corporation First Quarter Conference Call and Webcast. This call is being recorded on 08/07/2025 at 08:30 a. M. Eastern Time. Following the presentation, we will conduct a question and answer session.

I’ll now turn the call over to Arjun Kapoor, Investor Relations Associate at ATS.

Arjun Kapoor, Investor Relations Associate, ATS Corporation: Thank you, operator, and good morning, everyone. On the call today are Andrew Hyder, 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 webcast and 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 three of the slide deck. Now, it’s my pleasure to turn the call over to Andrew.

Andrew Hyder, Chief Executive Officer (Outgoing), ATS Corporation: 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 I 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 MacLeod 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 end 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 $737,000,000 up 6% from Q1 last year. Order bookings were $693,000,000 with good diversification across our portfolio. Adjusted earnings from operations in Q1 were $79,000,000 Onto our outlook. Order backlog ended the quarter at approximately 2,100,000,000 as we continue to win and deliver across our diversified portfolio of offerings, including custom 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 $1,200,000,000 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 radiopharma customers who value quality and a proven track record for execution. As more customer programs advance towards commercial readiness, HomeAchair is uniquely positioned to provide localized and specialized support from our new site in Indianapolis, which opened at the 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 funnel remains strong and we ended the quarter with a backlog of $229,000,000 an increase of six percent 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 Paxium. 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 newbuilds and emerging small modular 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 EV 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 reoccurring revenue. On the ATS business model, in Q1, our global teams 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, reoccurring revenue, customer engagement, health and safety and overall performance, underscoring the sustained impact of our ABM culture. On M and A, our teams remain 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 uReality to develop and launch a new interactive and scalable virtual reality training platform for customers. In energy, we advanced the deployment of our Multiflex system. Multiflex 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 bi annual 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 focused 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 number one 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.

Ryan McLeod, Chief Financial Officer/Interim CEO, ATS Corporation: Thank you, Andrew, and good morning, everyone. Beginning with our operating results for the quarter. Order bookings were $693,000,000 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 twelve month book to bill ratio at the end of Q1 remained above one at 1.17:one.

Revenues for the first quarter were $737,000,000 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 CAD78.6 million or 10.7% of revenues. This was in line with our expectations and represented an almost 40 basis points sequential improvement from Q4. Gross margin for Q1 was 29.8% consistent with Q1 last year. On SG and A, excluding acquisition related amortization and transaction costs, expenses in the first quarter totaled $136,400,000 a $20,000,000 increase over the prior year. This increase included incremental SG and 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 $4,800,000 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 $2,100,000,000 Q2 revenues are expected to be in the range of $700,000,000 to $740,000,000 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 CAD 2,500,000.0 of restructuring costs as a continuation of the program announced last year. We continue to expect operating margin improvement throughout fiscal twenty twenty six, 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 CAD156 billion. Our non cash 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 $16,300,000 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 3.6 times on a pro form a basis at 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 amounts owing on our credit facility. We remain committed to bring our leverage to our target range of two to three times. 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 a 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.

Conference Call Operator: And your first question comes from the line of Joe Ritchie with Goldman Sachs. Joe, please go ahead.

Joe Ritchie, Analyst, Goldman Sachs: Hey, good morning, guys. And Andrew, congratulations. You know, gonna gonna miss, talking to you on these conference calls and, but wish you nothing but the best of luck.

Andrew Hyder, Chief Executive Officer (Outgoing), ATS Corporation: Thank you, Joe. Appreciate it.

Joe Ritchie, Analyst, Goldman Sachs: Yeah. You bet. Hey, guys. Can we just we just talk about the just the demand environment a little further? It doesn’t seem like you guys are seeing, you know, much slippage in your business.

At the same time, fully recognize that orders can be lumpy, right? And so a little bit maybe slower start to the year. But maybe just kind of talk through the demand environment, what you’re seeing, what your customers are saying across your key end markets, and and kind of how you’re thinking about the outlook for the rest of the year.

Andrew Hyder, Chief Executive Officer (Outgoing), ATS Corporation: Yeah. Hey, Joe. Maybe I’ll start, and then Ryan can can add on. You know, if we step back a couple couple data points. First, as you’re well aware, we don’t look at any single quarter in isolation.

We we we look over a period of time, and our trailing twelve month book to bill ratio is 1.17. So so really aligned around that growth target and and really what we outlined last quarter around this will be a growth year for for ATS, and we expect that to hold true.

Ryan McLeod, Chief Financial Officer/Interim CEO, ATS Corporation: If you then go

Andrew Hyder, Chief Executive Officer (Outgoing), ATS Corporation: in the prepared remarks, you know, what you’ll find is in large part, our funnels remain healthy, and the conversations are very engaging with our customers around their target and their approach to strategic investments. And we’re in many attractive areas. You know, if you just look at life sciences, whether it’s, you know, the continued support around GLP one drugs and and and, you know, a little bit of data around that, the novel drug approvals are in line with last year, which effectively mean more, you know, drugs continue to be approved, and we continue to engage with customers about their launches to radiopharma and and and, you know, the continued identification of of new drugs or existing drugs to support cancer treatment around identification and or treatment after you receive surgery to wearable devices and and as you know, in the treatment of diabetes or or even glucose monitors to and we’ve talked about this in the past, even the ongoing support for for pharmacy automation or or even contact lenses. So many, many key opportunities around that space. We then go to energy.

Our nuclear business remains strong, continues to be strong. Four key themes in that, and I’ve walked through those in the past, but it’s canned reactors. It’s it’s it’s decommissioning. It’s it’s SMRs, and it’s and it’s fuel requirement needed for the the resurgence of of nuclear energy to our food business that that remains continued, you know, successful in its pursuit of not only ongoing business, but but but new areas of technology and and innovation and and bringing value to our customers. Transportation has has really steadied out, and and and when we look at that business, we’re winning work and and pleased, you know, with where we sit.

We’ve rightsized the business for for the our view of the market. And then lastly, consumer products. And and, you know, we we we look at that that market and, you know, and and we’re monitoring that space, but we’ve seen it hold up. And and, you know, whether it’s warehouse automation or or even in in our ability to support high end cosmetics. And and so it’s remained, call it, rather steady.

So overall, our view on the on on the on the year and the market is is we’re in a strong position, strong backlog, and our book to bill ratio remains in line with with our expectations on growth.

Ryan McLeod, Chief Financial Officer/Interim CEO, ATS Corporation: And, Joe, I’ll just I’ll jump in with one more data point as well. So if we look over the first half of this calendar year, so really since tariffs have become part of the part of the environment or have been in place. And and if we exclude transportation, our orders are up over 10% year over year in the first six months of the calendar year. So as Andrew said, we’ve got a strong backlog, and and we’re very well positioned to continue to drive revenue growth for the year.

Joe Ritchie, Analyst, Goldman Sachs: That’s super, super helpful. Appreciated that. Can I just maybe quickly just kinda double click on the the energy business specifically because your backlog is suddenly up a lot year over year? It was saw a pretty material uptick sequentially. What I find interesting about that is that a lot of other companies that we look at have been talking about project delays in the energy sector.

So what was it about, you know, this your business this quarter that saw, a material uptick? Is it on the nuclear side? Just any any color around that would be helpful.

Ryan McLeod, Chief Financial Officer/Interim CEO, ATS Corporation: Within energy, most of the growth is is coming in nuclear as as we’ve talked about. A lot of what we’re doing in that space and it the, you know, the bulk of the growth is coming in refurbishment activity, so primarily around CANDU reactors. And we’ve we’ve seen a a very strong demand environment in that space and and continue to see a a good outlook there. In terms of other areas, as 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 our view on the SMR market is a lot of this is in the development phase today and and represents an exciting opportunity, but more of a future opportunity for the business.

Joe Ritchie, Analyst, Goldman Sachs: Great. Thank you.

Conference Call Operator: And your next question comes from the line of Maxim Stishev with National Bank Financial. Maxim, please go ahead.

Maxim Stishev, Analyst, National Bank Financial: Hi. Good morning, gentlemen.

Andrew Hyder, Chief Executive Officer (Outgoing), ATS Corporation: Good morning.

Joe Ritchie, Analyst, Goldman Sachs: Andrew, obviously,

Maxim Stishev, Analyst, National Bank Financial: the best in future endeavors. It’s been a pleasure. Congrats.

Andrew Hyder, Chief Executive Officer (Outgoing), ATS Corporation: Your line is mutual.

Maxim Stishev, Analyst, National Bank Financial: 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, ADM kind of acceptance on the part of Aditi, Hydorf. That could be super helpful. Thank you so much.

Andrew Hyder, Chief Executive Officer (Outgoing), ATS Corporation: Yeah. And I’ll start with a bit of a headline on this. Look. Our funnel continues to grow here, and and we we see strong opportunity. And and, you know, there is traditional with with, you know, ATS life sciences systems working with with with BioDot as well as AVIDITY and Heidolph bringing solution sets to their markets.

And so, you know, we we did have some some awards within the quarter, but but more future view is is the funnel continues to be healthy. And and the addition of Heidolph has certainly been a a welcome addition for for the ability to bring more to the lab space and and and really align with Ability and as well as one of the business units in SP, our Genovac business. And so exciting future and and see this as an area that that we as as as ATS can bring higher value to our customers.

Maxim Stishev, Analyst, National Bank Financial: And that’s helpful. And then Sorry. Just Go ahead, Ryan. Of course.

Ryan McLeod, Chief Financial Officer/Interim CEO, ATS Corporation: Just on the overall integration progress across all three, going very well, very much in line with our expectations, ABM deployments, and and uptake has been very strong in all three businesses. Some of the cost synergies as it relates to, you know, cost structure improvements, supply chain integration. I do we’re very pleased with the process across across all three assets.

Maxim Stishev, Analyst, National Bank Financial: Okay. That’s good to hear. And and, Andrew, Ryan, I I guess your comment around some of the research funding being under pressure in The US 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?

Ryan McLeod, Chief Financial Officer/Interim CEO, ATS Corporation: That’s correct, Max. It it’s it’s a low single digit percentage of our business that is in that space. And and so we have seen impact, but as as I think Andrew said in his prepared remarks, not a material impact to our overall business or overall life sciences business.

Maxim Stishev, Analyst, National Bank Financial: Okay. Okay. Good to hear. And then just in terms of the the margin profile, I I think in the past, you’ve mentioned that life sciences typically has a higher gross margin. I I guess as the product mix is shifting right now, I mean, we have less transportation, more life sciences, food, etcetera.

How should we think about the progression on margin on going forward 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. Thank you.

Ryan McLeod, Chief Financial Officer/Interim CEO, ATS Corporation: Yeah. I I mean, I’ll I’ll speak more to the medium term, Max, because we we will continue to see variability quarter to quarter, and that’s largely driven by the project portfolio and what’s getting executed and kinda driving revenues within a quarter. But but generally speaking, where we’re targeting and expect to drive margin expansion is through gross margin. And and there’s some operating leverage we expect as well from where we’re operating today. But and and some of that is mix tied to tied to life sciences.

Some of that is mix tied to the product and services portfolio. And then, you know, the the the improvement initiatives that we’re driving around supply chain, labor productivity, and and other areas. So most of that does does, again, show in our gross margin over over the medium term.

Maxim Stishev, Analyst, National Bank Financial: Okay. And is is there anything in the project pipeline which is kind of restraining restraining the progress when it comes to margins in in the short term?

Ryan McLeod, Chief Financial Officer/Interim CEO, ATS Corporation: No. No. No. There there’s nothing unusual. Nothing nothing to call out.

Maxim Stishev, Analyst, National Bank Financial: Okay. And then maybe just last question. I I mean, obviously, with the leadership transition, I’m just curious around,

Patrick Sullivan, Analyst, TD Cowen: you know,

Maxim Stishev, Analyst, National Bank Financial: the the m and a pipeline and what you guys are seeing in in the market specifically, and I guess your your ability to act if something were to come through, you know, tomorrow. Yeah.

Ryan McLeod, Chief Financial Officer/Interim CEO, ATS Corporation: So, I mean, like like, I think we said in the prepared remarks, it’s really business as usual. So, you know, we’ve got a a plan for the year. The team is is fully engaged on on executing to that plan and and and as well as our strategy. And that that strategy is centered on both organic and acquisition related growth. So m and a activity is continuing, cultivation activity is continuing.

In terms of, you know, doing a deal or or getting something, you know, to over the finish line in in the short term, that’s gonna be more governed by our leverage than than, you know, than than support from from the board or or the ability to act in in this interim period. And so we’ve talked about our our focus is on deleveraging, bring the bring our leverage to that two to three times range. Now that doesn’t mean we can’t do we can’t do smaller tuck in acquisitions in the short term. But again, that’s from a capital deployment standpoint. Our focus is on on deleveraging.

Maxim Stishev, Analyst, National Bank Financial: Okay. Super helpful. Thank you so much, gentlemen.

Andrew Hyder, Chief Executive Officer (Outgoing), ATS Corporation: Thank you.

Conference Call Operator: And your next question comes from the line of Justin Keywood with Stifel.

Arjun Kapoor, Investor Relations Associate, ATS Corporation0: Echo the congrats, Andrew, all the success value creation at ATS.

Arjun Kapoor, Investor Relations Associate, ATS Corporation1: Thank Thank On

Arjun Kapoor, Investor Relations Associate, ATS Corporation0: 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?

Andrew Hyder, Chief Executive Officer (Outgoing), ATS Corporation: So just to understand your question, you’re saying ATS announcements or tariff announcements?

Arjun Kapoor, Investor Relations Associate, ATS Corporation0: So ATS is life sciences customers. We’ve seen several increase CapEx announcements in The US 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?

Andrew Hyder, Chief Executive Officer (Outgoing), ATS Corporation: Yeah. I mean, if you so so so I’m gonna answer your question, but I’m gonna walk through it in a bit of phases here. So so if you step back, whenever whenever there’s investment, whether it’s tariff, onshoring, supply chain derisking, I mean, we can go down labor and and and the lack of labor to support, output. All that equates to generally a favorable automation, position. And so this would be no different.

That said, it has been, I would say, more the anomaly today in the orders that that customers have cited tariff being the the the reason for an order. And and I would just say that that is not the norm. What we’ve aligned to more is that customers are building capability and capacity where they have demand. And and we’re seeing customers really align around that. Now there is a lot of discussions for future and where they want to build the product.

And so we are seeing that, and we have seen a a few customers pull their decision into into The US versus outside of US. But overall, I would say we haven’t seen a in in large part in our investment in in in ATS orders today. That said, whenever it’s favorable like this, it would generally lead to a higher automation play and a higher position for ATS.

Arjun Kapoor, Investor Relations Associate, ATS Corporation0: Understood. That’s helpful. And then I want to come back on the balance sheet. Very healthy free cash flow quarter, 140,000,000. I assume that includes all of the EV settlement.

But just trying to understand if there was any part of that EV settlement that was maybe pushed into the next quarter? Or was it fully received?

Ryan McLeod, Chief Financial Officer/Interim CEO, ATS Corporation: That was fully received, and that issue is is closed and behind us.

Arjun Kapoor, Investor Relations Associate, ATS Corporation1: Was there any

Arjun Kapoor, Investor Relations Associate, ATS Corporation0: tax portion of that payment? Because it was announced at at a 194,000,000. So just trying to square that with the free cash flow in the quarter.

Ryan McLeod, Chief Financial Officer/Interim CEO, ATS Corporation: No. No no tax impact.

Ryan McLeod, Chief Financial Officer/Interim CEO, ATS Corporation: I mean, there’s there’s a future tax benefit tied to tied to the the of the write off. But but, no, there was no no tax impact to the to the cash inflow.

Arjun Kapoor, Investor Relations Associate, ATS Corporation0: Okay. And then just on the deleveraging outlook, targeting to get to the two to three times, any indication on on timing when that could be achieved?

Ryan McLeod, Chief Financial Officer/Interim CEO, ATS Corporation: Yeah. Our expectation is is we get there this year. You know, our our our biggest opportunity in in addition to continuing to operate profitably in in in is really in working capital. And, you know, 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 is structural as we’ve added some acquisitions, which are more product related businesses. Those have put pressure on on our ability to achieve that target. And then there’s normal course variability in our in our larger projects and custom automation business. But we do see opportunity to improve and and get that below our target this year.

Arjun Kapoor, Investor Relations Associate, ATS Corporation0: And that’s fiscal year, just just to clarify?

Ryan McLeod, Chief Financial Officer/Interim CEO, ATS Corporation: Yes. Yes. Correct.

Arjun Kapoor, Investor Relations Associate, ATS Corporation0: Great. Thank you for taking my questions.

Andrew Hyder, Chief Executive Officer (Outgoing), ATS Corporation: Thank you.

Conference Call Operator: And your next question comes from the line of Patrick Bowman with JPMorgan. Patrick, please go ahead.

Ryan McLeod, Chief Financial Officer/Interim CEO, ATS Corporation: Thanks. Andrew, congrats on the great run at ATS and the opportunity ahead of you, Baxter. Best of luck.

Andrew Hyder, Chief Executive Officer (Outgoing), ATS Corporation: Thank you.

Ryan McLeod, Chief Financial Officer/Interim CEO, ATS Corporation: Yes, no problem. On margin dynamics, know you were talking a little bit longer term, Ryan. 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 expected kind of progression sequentially through the year.

I just wanna make sure everything’s kinda lined up the way you guys are thinking about it.

Ryan McLeod, Chief Financial Officer/Interim CEO, ATS Corporation: Yeah, Patrick. So our our outlook for the year has not changed, and that’s both in terms of of growth for the year and margin expansion for the year. I I do wanna reiterate that I mean, first, I don’t expect we’re gonna see big jumps in our margins sequentially, and there is gonna continue to be variability. You know, it’s it’s not necessarily a linear ramp. But we do expect, you know, margin expansion for the year.

And I I talked through earlier a little bit on on the initiatives that that we have in place tied to material productivity, labor, pricing, other areas of efficiency. And so I think what we saw this quarter is probably a reasonable run rate in terms of ongoing improvement, but not necessarily linear.

Ryan McLeod, Chief Financial Officer/Interim CEO, ATS Corporation: Okay. That makes sense. Can you talk a little bit about the food and beverage CapEx CapEx outlook in North America? I think you have a decent view there with Paxium. Just curious what you’re seeing from customers in terms of their investment plans in that specific end market?

Andrew Hyder, Chief Executive Officer (Outgoing), ATS Corporation: Absolutely. So we’ve continued to see this market not only be stable, but but but additional opportunities in areas where we’ve invested in technology and innovation. And whether it’s PacSim or or our business with CFT or or even Raytec in in optical inspection. We’ve continued to to see this be, you know, supportive around how we enable customers to to bring food to market and and and meet the requirements that’s needed for the end consumer. And so pleased with with the performance year to date and really look forward to seeing this business continue to expand.

Ryan McLeod, Chief Financial Officer/Interim CEO, ATS Corporation: Okay. Thank you. And then lastly, just on the portfolio, is there anything in the portfolio that at this stage you’d consider to be non core? And you can maybe look for opportunities to kind of you know, wind down over time or divest as you as you replace it with other, you know, acquired assets?

Ryan McLeod, Chief Financial Officer/Interim CEO, ATS Corporation: So, mean, the short answer is no. But, you know, we’ve talked about in the past our our approach on on capital deployment and and value creation, and that includes looking at ongoing investments in in the portfolio as well. And so that that view of the portfolio and and, you know, ongoing strategy work, that’s something we refresh every year. And and so that’s gonna continue to be how we approach it and, you know, view with a critical eye where we’re generating value and and and what makes sense in terms of in terms of, you know, being part of ATS.

Ryan McLeod, Chief Financial Officer/Interim CEO, ATS Corporation: K. Makes a ton of sense. Thanks a lot for your time.

Conference Call Operator: And your next question comes from the line of Cherilyn Radbourne with TD Cowen. Cherilyn, please go ahead.

Patrick Sullivan, Analyst, TD Cowen: Hi, good morning. This is actually Patrick Sullivan on the line for Cherilyn. Thank you for taking my questions. 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 it 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 our side away from the the consumable lab equipment stuff.

Andrew Hyder, Chief Executive Officer (Outgoing), ATS Corporation: Yeah. So so maybe I’ll start here. So we we are in, I would say, a bit of bit of both around this. And and if you look no. And and not to get too specific, but I’m gonna walk through the businesses a little bit.

When you look at BioDot, that’s a bit more in the lab automation side, and they support that area of business. And and we do view that that that it is in line with with the ability to to to help labs as they look at automation for the future. When you then go to Avinity, they’re gonna have some impact on on the research side, but they do have as well support for enabling their portion of the process for if you do wanna automate or bring a higher level of technology and insight into monitoring the lab space. And and we all know where they are in that in that position. That is also a consumable area.

And then and then when we look at SP with with their business, it is lab. Lyo. Again, that is one around it it certainly can support the initiative around automation, but but it is more around if you’re gonna run multiple drugs as a trial, they would then do the Lyle process for that with the Genovac business. And then lastly, Hyde Office is is more the the supporting overall lab laboratory space and and and what they want to do, whether it’s during mixing or or part of their process within within the lab area. So overall, I would say within research, we’re gonna see some impact, but it’s relatively small than ATS.

If you then go to the initiative around automation, it is something that is in line with ATS, but but it is still relatively small of our overall business.

Patrick Sullivan, Analyst, TD Cowen: Okay. Great. And then I guess with one more. So can you just elaborate on the Multiflex system that you briefly highlighted in the opening remarks? What kind of applications is that used for?

That used in the Kandi related work that you guys do? Is that something that’s in the more in the the the, you know, innovation based side of things right now?

Andrew Hyder, Chief Executive Officer (Outgoing), ATS Corporation: Yeah. So so the Multiplex, you know, very excited about this this this patent protected business. It is around the decommissioning area of the business, and and decommissioning is is used in the traditional nuclear reactors. It is a normal course process, and they go through decommissioning. And then often, a a they’ll they’ll recommission a new a new nuclear reactor.

This allows them to be more efficient, and more space conscious, and and and it is an area that 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.

Conference Call Operator: Excellent. Thank you. And your next question comes from the line of Michael Glenn with Raymond James. Michael, please go ahead.

Arjun Kapoor, Investor Relations Associate, ATS Corporation1: Hey, good morning. This is actually Fred Katali on for Michael Glenn and congrats Andrew. So let me start with Life Sciences. Regarding the order injector business, how diversified is the business outside of GLP-one applications? Is the book heavily concentrated in GLP one, or are there other emerging or growing categories for auto injectors?

Ryan McLeod, Chief Financial Officer/Interim CEO, ATS Corporation: Yeah. So so good morning, Fred. The majority is the majority of our auto injector business is is tied to GLP one. In terms of diversification, we have 10 active customers in that space today, so it is fairly well diversified. You know?

And and the other the other area I would point out is while a lot of these a lot of the demand for these drugs is being driven by weight loss and obesity treatments in in addition to diabetes treatment. There’s there’s a lot of research and work being done by these drug manufacturers around new applications. So things like cardiovascular health, neurological disorders. So it’s it’s a it’s a fast growing area and and an area we continue to see a lot of opportunity in.

Arjun Kapoor, Investor Relations Associate, ATS Corporation1: Great. And then on life science further, so this year slowed down from

Maxim Stishev, Analyst, National Bank Financial: a much higher pace in fiscal twenty five. Can you

Arjun Kapoor, Investor Relations Associate, ATS Corporation1: just indicate what categories of products saw that slower pace of bookings?

Ryan McLeod, Chief Financial Officer/Interim CEO, ATS Corporation: So you’re asking about the quarter itself?

Ryan McLeod, Chief Financial Officer/Interim CEO, ATS Corporation: Correct.

Ryan McLeod, Chief Financial Officer/Interim CEO, ATS Corporation: Yeah. I mean, like I said, it it’s there’s there’s some larger programs in the in the prior year first quarter. Some were tied to wearables in the space. I think the auto injector, it was still a big piece of of q one bookings or a significant piece, but but was lower year over year. I I mean, it it really is, as we talked about, kinda normal course variability with just timing of some larger programs.

Arjun Kapoor, Investor Relations Associate, ATS Corporation1: Alright. And then last one for me. Just on the timeline associated with bringing the working capital back into the 15% range, can you talk about that? And then in addition, maybe highlight where working capital remains elevated right now, what segments and product lines?

Ryan McLeod, Chief Financial Officer/Interim CEO, ATS Corporation: Yeah. I I I talked a little bit about this. Think our our our expectation is to get there for the end of the year. And, you know, it it’s really in two areas. Part of it is is kind of the structural change I talked about with adding more product based businesses.

And and there, the opportunity is primarily in inventory terms, a little bit on on payment terms and and the order to cash cycle. In the custom automation business, that’s more of a timing. And and, you know, we’re gonna see that variability quarter to quarter. That’s normal course for us. But overall, the opportunity there is is primarily in payment terms in that that order to cash cycle.

Arjun Kapoor, Investor Relations Associate, ATS Corporation1: Thank you. Welcome.

Conference Call Operator: There is no further question at this time. I will now turn the call over to Andrew Heider for closing remarks. Andrew?

Andrew Hyder, Chief Executive Officer (Outgoing), ATS Corporation: Yes. Thank you, operator. And I invite you all to participate in our annual shareholders meeting, which will be held 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.

Conference Call Operator: That concludes today’s call. Thank you all for joining. You may now disconnect.

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