CAMBRIDGE, ON, Aug. 10, 2022 /CNW/ – ATS Automation Tooling Systems Inc. (TSX: ATA) (“ATS” or the “Company”) today reported its financial results for the three months ended July 3, 2022.
First quarter highlights:
- Revenues increased 19.6% year over year to $610.6 million.
- Net income increased 37.3% year over year to $39.4 million
- Basic earnings per share were 43 cents compared to 31 cents a year ago.
- Adjusted basic earnings per share1 were 64 cents compared to 48 cents a year ago.
- Order Bookings1 were $736 million, 15.5% higher compared to $637 million a year ago.
- Order Backlog1 increased 24.6% to $1,555 million at July 3, 2022 compared to $1,248 million a year ago.
“The first quarter featured record revenues, Order Bookings, Order Backlog and growth in profitability metrics due to ATS’ presence in strategic markets, on-plan contributions from recent acquisitions and the diligent application of the ATS Business Model,” said Andrew Hider, Chief Executive Officer. “These results were achieved in a business environment that required our global teams to find new ways to overcome supply chain constraints and address cost inflation to meet our commitments to customers. We are pleased and encouraged by our global teams’ performance.”
Mr. Hider added that “the systems, products and service capabilities now resident at ATS provide us with unique opportunities to serve our customers whether they are strengthening their supply chains, optimizing production costs, reducing labour dependence, expanding capacity or launching sophisticated new offerings. Guided by the ABM and in alignment with our Build, Grow and Expand strategies, we will continue to position ATS for long-term advantage and value creation using these capabilities. In the near term, we look forward to executing on Order Backlog to deliver results for customers and shareholders while maintaining strength in our balance sheet.”
| 1 Non-IFRS measure: see “Notice to Reader: Non-IFRS Measures and Additional IFRS Measures”. |
Financial results
(In millions of dollars, except per share data)
| Three Months Ended July 3, 2022 | Three Months Ended June 27, 2021 | Variance | |
| Revenues | $ 610.6 | $ 510.6 | 19.6 % |
| Net income | $ 39.4 | $ 28.7 | 37.3 % |
| Adjusted earnings from operations1 | $ 87.5 | $ 65.4 | 33.8 % |
| Adjusted earnings from operations margin1 | 14.3 % | 12.8 % | 152bps |
| Adjusted EBITDA1 | $ 100.8 | $ 77.9 | 29.4 % |
| Adjusted EBITDA margin1 | 16.5 % | 15.3 % | 125bps |
| Basic earnings per share | $ 0.43 | $ 0.31 | 38.7 % |
| Adjusted basic earnings per share1 | $ 0.64 | $ 0.48 | 33.3 % |
| Order Bookings1 | $ 736.0 | $ 637.0 | 15.5 % |
| As At | July 3, 2022 | June 27, 2021 | Variance |
| Order Backlog1 | $ 1,555 | $ 1,248 | 24.6 % |
| 1Non-IFRS Financial Measure: see “Non-IFRS Measures and Additional IFRS Measures”. |
First quarter summary
Fiscal 2023 first quarter revenues were 19.6% or $100.0 million higher than in the corresponding period a year ago and included $87.2 million of revenues earned by acquired companies, most notably $59.3 million from SP which was acquired in the third quarter of fiscal 2022. Fiscal 2023 first quarter year-over-year organic growth (growth excluding contributions from acquired companies and the impact of foreign exchange rate changes), was $28.0 million, or 5.5%. Foreign exchange translation negatively impacted revenu
es by $15.2 million or 3.0%, primarily reflecting the strengthening of the Canadian dollar relative to the Euro. Revenues generated from construction contracts increased 9.4% or $32.1 million due to a combination of revenues earned by acquired companies of $20.8 million, primarily from SP and NCC, and organic revenue growth. Revenues from services increased 13.5% or $13.6 million primarily due to revenues earned by acquired companies of $12.8 million. Revenues from the sale of goods increased 80.9% or $54.3 million due to revenues earned by acquired companies, primarily SP, that generates a higher percentage of its revenues from product sales.
By market, revenues generated in life sciences increased $47.9 million or 20.8% year over year. This was the result of revenues earned by acquisitions totalling $58.3 million, primarily SP, partially offset by $6.6 million of foreign exchange translation impact. Revenues generated in food & beverage decreased $5.2 million or 4.6% due to the timing of project performance. Revenues in transportation increased $21.9 million or 29.2%, on higher Order Backlog entering the first quarter of fiscal 2023 and the timing of project performance. Revenues generated in consumer products increased $32.7 million or 53.2%, on higher Order Backlog entering the first quarter of fiscal 2023. Revenues in energy increased $2.7 million or 9.2% due to higher Order Backlog entering the first quarter of fiscal 2023.
Net Income. Net income for the first quarter of fiscal 2023 was $39.4 million (43 cents per share basic), a $10.7 million (or 37.3%) increase compared to $28.7 million (31 cents per share basic) for the first quarter of fiscal 2022. The increase related primarily to decreased stock-based compensation and an increase in revenues coupled with higher gross margin from increased service revenues. Adjusted basic earnings per share were 64 cents compared to 48 cents in the first quarter of fiscal 2022 (see “Reconciliation of Non-IFRS Measures to IFRS Measures”).
Fiscal 2023 first quarter earnings from operations were $61.6 million (10.1% operating margin) compared to $44.9 million (8.8% operating margin) in the first quarter a year ago. Fiscal 2023 earnings from operations included $5.2 million of acquisition-related fair value adjustments to acquired inventories recorded in cost of revenues, $20.3 million related to amortization of acquisition-related intangible assets and $0.4 million of incremental costs related to the Company’s acquisition activity recorded to SG&A expenses. First quarter of fiscal 2022 earnings from operations included $12.8 million of amortization of acquisition-related intangible assets and $2.1 million of incremental costs related to the Company’s acquisition activity.
Excluding these items in both quarters, adjusted earnings from operations were $87.5 million (14.3% margin), compared to $65.4 million (12.8% margin) a year ago. Contributions from acquired companies were $11.7 million, with SP contributing $7.1 million. First quarter fiscal 2023 adjusted earnings from operations reflected lower stock- based compensation costs and higher revenues coupled with higher gross margin due to increased revenues from after-sales services.
Depreciation and amortization expense was $33.6 million in the first quarter of fiscal 2023, compared to $25.3 million a year ago. The increase was primarily due to the addition of identifiable intangible assets recorded on the acquisition of SP.
EBITDA was $95.2 million (15.6% EBITDA margin) in the first quarter of fiscal 2023 compared to $70.2 million (13.7% EBITDA margin) in the first quarter of fiscal 2022. EBITDA for the first quarter of fiscal 2023 included $0.4 million of incremental costs related to the Company’s acquisition activity, and $5.2 million of acquisition-related inventory fair value charges. EBITDA for the corresponding period in the prior year included $2.1 million of incremental costs related to the Company’s acquisition activity, and $5.6 million of acquisition-related inventory fair value changes. Excluding these costs, adjusted EBITDA was $100.8 million (16.5% adjusted EBITDA margin), compared to $77.9 million (15.3% adjusted EBITDA margin) a year ago. Higher adjusted EBITDA margin reflected decreased stock-based compensation costs and increased revenues coupled with higher gross margin due to increased after-sales service revenues. EBITDA margin is a non-IFRS ratio; see “Non-IFRS and Other Financial Measures.”
Order Backlog Continuity
| Three MonthsEnded | Three MonthsEnded | |
| July 3, 2022 | June 27, 2021 | |
| Opening Order Backlog | $ 1,438 | $ 1,160 |
| Revenues | (611) | (511) |
| Order Bookings | 736 | 637 |
| Order Backlog adjustments1 | (8) | (38) |
| Total | $ 1,555 | $ 1,248 |
| 1Order Backlog adjustments include incremental Order Backlog of acquired companies ($nil for the first quarter of fiscal 2023, $24 million acquired with BioDot in the first quarter of fiscal 2022), foreign exchange adjustments, scope changes and cancellations. |
Order Bookings
First quarter fiscal 2023 Order Bookings were $736 million. The 15.5% year-over-year increase reflected organic growth of 5.3% and 11.9% growth from acquired companies, partially offset by a 1.7% decrease due to foreign exchange rate translation of Order Bookings from foreign-based ATS subsidiaries, primarily reflecting the strengthening of the Canadian dollar relative to the Euro. Growth in Order Bookings from acquired companies totalled $75.7 million, of which SP contributed $51.1 million. By market, Order Bookings in life sciences decreased compared to the prior-year period, which included a single $120 million Order Booking. Order Bookings in food & beverage increased due to the acquisition of NCC Automated Systems. Order Bookings in transportation increased primarily due to a significant Order Booking from an existing global automotive customer to move towards fully automated battery assembly systems for their Canadian and U.S. manufacturing operations. Additionally other EV automation orders were received reflecting ATS’ proven expertise in battery assembly as other global automotive companies expand their EV production. Order Bookings in consumer products increased due to a combination of contributions from acquisitions of $23.7 million and timing of customer projects. Order Bookings in energy were flat.
Trailing twelve month book-to-bill ratio at July 3, 2022 was 1.12:1. Book-to-bill ratio is a supplementary financial measure, see “Non-IFRS and Other Financial Measures.”
Backlog
At July 3, 2022, Order Backlog was $1,555 million, 24.6% higher than at June 27, 2021. Order Backlog growth was primarily driven by higher Order Bookings in fiscal 2023 within the transportation market, and Order Backlog from acquired businesses.
Outlook
The Company’s funnel (which includes customer requests for proposal and ATS-identified customer opportunities) remains significant; however, persistent industry challenges in securing the supply of materials and labour have led to cost inflation and contributed to a fluid and uncertain operating environment for customers and ATS. These factors may impact the timing to convert opportunities into Order Bookings and may present increased pressure on future results.
By market, the life sciences funnel remains robust as a result of strong activity in medical devices, pharmaceuticals and radiopharmaceuticals. Funnel activity in food & beverage continues to be strong as a result of improved exposure to opportunities in this vertical following the acquisition of CFT. In transportation, the funnel largely includes strategic opportunities related to electric vehicles, a growing market. Funnel activity in energy is stable and includes some longer-term opportunities. Funnel activity in consumer products has improved. Overall, management expects some customers to remain cautious in deploying capital in the current economic environment. Funnel growth in markets where environmental, social and governance (“ESG”) 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. Customers seeking to de-risk or enhance the resiliency of their supply chains, address a shortage of skilled workers or combat high labour costs also provide future opportunities for ATS to pursue.
Order Backlog of $1,555 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, including several in the early stages of execution. In the second quarter of fiscal 2023, management expects the conversion of Order Backlog to revenues to be in higher end of the 35% to 40% range. This estimate is calculated each quarter based on management’s assessment of project schedules across all customer contracts, expectations for quick turn product and services revenues, expected delivery timing of third-party equipment and operational capacity.
The timing of customer decisions on larger opportunities is expected to cause variability in Order Bookings from quarter to quarter and lengthen the performance period and revenue recognition for certain customer programs. Revenue in a given period is dependent on a combination of the volume of outstanding projects the Company is contracted to, 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. The Company is working to grow its product portfolio and after-sales service revenues as a percentage of overall revenues over time, which is expected to provide some balance to the capital expenditure cycle of the Company’s customers.
Management is pursuing several initiatives to grow its revenues and improve its profitability with the goal of expanding its adjusted earnings from operations margin to 15% over the long term. These initiatives include growing the Company’s after-sales service business, improving global supply chain management, increasing the use of standardized platforms and technologies, growing revenues while leveraging the Company’s cost structure, and pursuing continuous improvement in all business activities through the ABM. The Company continues to make progress in line with its plans to integrate businesses acquired over the last year, and expects to realize cost and revenue synergies consistent with announced integration plans.
In the short term, the Company is continuing to address disruptions to global supply chains, which are leading to longer lead times and cost increases on certain raw materials and components used by the Company. To date the Company has largely mitigated many of these supply chain disruptions through the use of alternative supply sources and savings on materials not affected by cost increases. However, further cost increases or prolonged disruptions could impact the timing and progress of the Company’s margin expansion efforts and the timing of revenue recognition. Achieving the margin target assumes that the Company will successfully implement the initiatives noted above, and that such initiatives will result in improvements to its adjusted earnings from operations margin (see “Note to Readers: Forward-Looking Statements” for a description of the risks underlying the achievement of the margin target in future periods).
COVID-19 resulted in governments worldwide enacting emergency measures to combat the spread of the virus beginning in March 2020 (just prior to the Company’s fiscal 2021 year). These measures, which included the implementation of travel restrictions, quarantine periods and physical distancing requirements have affected economies and disrupted business operations for ATS and its customers. While vaccination programs are maturing and generally restrictions are easing across most countries, there is ongoing concern and uncertainty regarding new and potential variants. As a result, it remains difficult to predict the duration or severity of the pandemic or its affect on the business, financial results and conditions of the Company. Furthermore, depending on the duration and severity of the COVID-19 pandemic, it may also have the effect of heightening many of the other business risks such as risks relating to the Company’s supply chain (availability and cost of raw materials and components) and the successful on-time completion of customer contracts.
In the short term, the Company expects non-cash working capital to remain above 10%, as programs progress through milestones. Over the long term, the Company generally expects to continue investing in non-cash working capital to support the growth of its business, with fluctuations expected on a quarter-over-quarter basis. The Company’s goal is to maintain its investment in non-cash working capital as a percentage of annualized revenues below 15%. The Company expects that continued cash flows from operations, together with cash and cash equivalents on hand and credit available under operating and long-term credit facilities will be sufficient to fund its requirements for investments in non-cash working capital and capital assets, and 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.”
Quarterly Conference Call
ATS will host a conference call and webcast at 8:30 a.m. eastern on Wednesday, August 10, 2022 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 (647) 484-0475 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 August 17, 2022) by dialing (647) 436-0148 and entering passcode 8774548 followed by the number sign.
About ATS
ATS 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, food & beverage, transportation, consumer products and energy. Founded in 1978, ATS employs over 6,000 people at more than 50 manufacturing facilities and over 75 offices in North America, Europe, Southeast Asia and China.
Consolidated Revenues
(In millions of dollars)
| Revenues by type | Three Months Ended July 3, 2022 | Three Months Ended June 27, 2021 |
| Revenues from construction contracts | $ 375.1 | $ 343.0 |
| Services rendered | 114.1 | 100.5 |
| Sale of goods | 121.4 | 67.1 |
| Total revenues | $ 610.6 | $ 510.6 |
| Revenues by market | Three Months Ended July 3, 2022 | Three Months Ended June 27, 2021 |
| Life Sciences | $ 278.5 | $ 230.6 |
| Food & Beverage | 108.8 | 114.0 |
| Transportation | 97.0 | 75.1 |
| Consumer Products | 94.2 | 61.5 |
| Energy | 32.1 | 29.4 |
| Total revenues | $ 610.6 | $ 510.6 |
Consolidated Operating Results
(In millions of dollars)
| Three Months Ended July 3, 2022 | Three Months Ended June 27, 2021 | |
| Earnings from operations | $ 61.6 | $ 44.9 |
| Amortization of acquisition-related intangible assets | 20.3 | 12.8 |
| Acquisition-related transaction costs | 0.4 | 2.1 |
| Acquisition-related inventory fair value charges | 5.2 | 5.6 |
| Adjusted earnings from operations1 | $ 87.5 | $ 65.4 |
| 1Non-IFRS Financial Measure, See “Non-IFRS and Other Financial Measures” | ||
Three Months Ended July 3, 2022 | Three Months Ended June 27, 2021 | |
| Earnings from operations | $ 61.6 | $ 44.9 |
| Depreciation and amortization | 33.6 | 25.3 |
| EBITDA1 | $ 95.2 | $ 70.2 |
| Acquisition-related transaction costs | 0.4 | 2.1 |
| Acquisition-related inventory fair value charges | 5.2 | 5.6 |
| Adjusted EBITDA1 | $ 100.8 | $ 77.9 |
| 1Non-IFRS Financial Measure, See “Non-IFRS and Other Financial Measures” |
Order Backlog by Market
(In millions of dollars)
| As at | July 3, 2022 | June 27, 2021 |
| Life Sciences | $ 733 | $ 741 |
| Food & Beverage | 164 | 140 |
| Transportation | 372 | 192 |
| Consumer Products | 203 | 97 |
| Energy | 83 | 78 |
| Total | $ 1,555 | $ 1,248 |
Reconciliation of Non-IFRS Measures to IFRS Measures
(In millions of dollars, except per share data)
The following tables reconciles adjusted EBITDA and EBITDA to the most directly comparable IFRS measure (net income):
| Three MonthsEnded | Three MonthsEnded | |
| July 3, 2022 | June 27, 2021 | |
| Adjusted EBITDA | $ 100.8 | $ 77.9 |
| Less: acquisition-related transaction costs | 0.4 | 2.1 |
| Less: acquisition-related inventory fair value charges | 5.2 | 5.6 |
| EBITDA | $ 95.2 | $ 70.2 |
| Less: depreciation and amortization expense | 33.6 | 25.3 |
| Earnings from operations | $ 61.6 | $ 44.9 |
| Less: net finance costs | 10.7 | 7.5 |
| Less: provision for income taxes | 11.5 | 8.7 |
| Net income | $ 39.4 | $ 28.7 |
The following table reconciles adjusted earnings from operations and adjusted basic earnings per share to the most directly comparable IFRS measure (net income and basic earnings per share):
| Three Months Ended July 3, 2022 | Three Months Ended June 27, 2021 | |||||||||
| Earnings from Operations | Finance Costs | Provision for Income Taxes | Net Income | Basic EPS | Earnings from Operations | Finance Costs | Provision for Income Taxes | Net Income | Basic EPS | |
| Reported (IFRS) | $ 61.6 | $ (10.7) | $ (11.5) | $ 39.4 | $ 0.43 | $ 44.9 | $ (7.5) | $ (8.7) | $ 28.7 | $ 0.31 |
| Amortization of acquisition- | 20.3 | — | — | 20.3 | 0.22 | 12.8 | — | — | 12.8 | 0.14 |
| related intangibles | ||||||||||
| Acquisition-related inventory | 5.2 | — | — | 5.2 | 0.06 | 5.6 | — | — | 5.6 | 0.06 |
| fair value charges | ||||||||||
| Acquisition-related | 0.4 | — | — | 0.4 | — | 2.1 | — | — | 2.1 | 0.03 |
| transaction costs | ||||||||||
| Tax effect adjustments1 | — | — | (6.3) | (6.3) | (0.07) | — | — | (5.4) | (5.4) | (0.06) |
| Adjusted (non-IFRS) | $ 87.5 | $ 59.0 | $ 0.64 | $ 65.4 | $ 43.8 | $ 0.48 |
| 1 Adjustments to provision for income taxes relate to the income tax effects of adjustment items that are excluded for the purposes of calculating non-IFRS based adjusted net income. |
The following table reconciles organic revenue to the most directly comparable IFRS measure (revenue):
| Three MonthsEnded | Three MonthsEnded | |
| July 3, 2022 | June 27, 2021 | |
| Organic revenue | $ 538.6 | $ 415.8 |
| Revenues of acquired companies | 87.2 | 114.4 |
| Impact of foreign exchange rate changes | (15.2) | (19.6) |
| Total revenue | $ 610.6 | $ 510.6 |
| Organic revenue growth | 5.5 % |
The following table reconciles non-cash working capital as a percentage of revenues to the most directly comparable IFRS measures:
| As at | July 32022 | March 312022 |
| Accounts receivable | $ 342.3 | $ 348.6 |
| Income tax receivable | 7.1 | 9.0 |
| Contract assets | 469.0 | 360.8 |
| Inventories | 225.8 | 207.9 |
| Deposits, prepaids and other assets | 89.0 | 84.8 |
| Accounts payable and accrued liabilities | (520.8) | (501.5) |
| Income tax payable | (53.9) | (48.6) |
| Contract liabilities | (259.6) | (248.3) |
| Provisions | (21.6) | (24.8) |
| Non-cash working capital | $ 277.3 | $ 187.9 |
| Trailing six-month revenues annualized | $ 2,427.6 | $ 2,300.0 |
| Working capital % | 11.4 % | 8.2 % |
The following table reconciles net debt to adjusted EBITDA to the most directly comparable IFRS measures:
| As at | July 32022 | March 312022 |
| Cash and cash equivalents | $ 139.9 | $ 135.3 |
| Bank indebtedness | (2.7) | (1.8) |
| Current portion of lease liabilities | (19.2) | (20.0) |
| Current portion of long-term debt | (0.1) | — |
| Long-term lease liabilities | (58.7) | (62.9) |
| Long-term debt | (1,087.1) | (1,016.7) |
| Net Debt | $ (1,027.9) | $ (966.1) |
| Adjusted EBITDA (TTM) | $ 366.7 | $ 343.9 |
| Net Debt to Adjusted EBITDA | 2.8x | 2.8x |
The following table reconciles free cash flow to the most directly comparable IFRS measures:
| (in millions of dollars) | Q1 2023 | Q1 2022 |
| Cash flows provided by (used in) operating activities | $ (31.7) | $ 48.4 |
| Acquisition of property, plant and equipment | (7.5) | (11.0) |
| Acquisition of intangible assets | (4.9) | (3.3) |
| Free cash flow | $ (44.1) | $ 34.1 |
INVESTMENTS, LIQUIDITY, CASH FLOW AND FINANCIAL RESOURCES
(In millions of dollars, except ratios)
| As at | July 3, 2022 | March 31, 2022 |
| Cash and cash equivalents | $ 139.9 | $ 135.3 |
| Debt-to-equity ratio1 | 1.19:1 | 1.14:1 |
| 1Debt is calculated as bank indebtedness, long-term debt and lease liabilities. Equity is calculated as total equity less accumulated other comprehensive income. |
| Three Months Ended July 3, 2022 | Three Months Ended June 27, 2021 | |
| Cash, beginning of period | $ 135.3 | $ 187.5 |
| Total cash provided by (used in): | ||
| Operating activities | (31.7) | 48.4 |
| Investing activities | 9.8 | (129.0) |
| Financing activities | 27.9 | 109.6 |
| Net foreign exchange difference | (1.4) | (0.1) |
| Cash, end of period | $ 139.9 | $ 216.4 |
ATS AUTOMATION TOOLING SYSTEMS INC.
Interim Condensed Consolidated Statements of Financial Position
(in thousands of Canadian dollars – unaudited)
| As at | July 32022 | March 312022 |
| ASSETS | ||
| Current assets | ||
| Cash and cash equivalents | $ 139,902 | $ 135,282 |
| Accounts receivable | 342,330 | 348,631 |
| Income tax receivable | 7,096 | 9,038 |
| Contract assets | 469,042 | 360,820 |
| Inventories | 225,834 | 207,873 |
| Deposits, prepaids and other assets | 88,972 | 84,818 |
| 1,273,176 | 1,146,462 | |
| Non-current assets | ||
| Property, plant and equipment | 222,609 | 222,123 |
| Right-of-use assets | 77,054 | 81,289 |
| Other assets | 11,433 | 18,631 |
| Goodwill | 1,023,421 | 1,024,790 |
| Intangible assets | 552,861 | 568,180 |
| Deferred income tax assets | 5,672 | 7,922 |
| 1,893,050 | 1,922,935 | |
| Total assets | $ 3,166,226 | $ 3,069,397 |
| LIABILITIES AND EQUITY | ||
| Current liabilities | ||
| Bank indebtedness | $ 2,674 | $ 1,766 |
| Accounts payable and accrued liabilities | 520,794 | 501,465 |
| Income tax payable | 53,879 | 48,617 |
| Contract liabilities | 259,628 | 248,329 |
| Provisions | 21,556 | 24,825 |
| Current portion of lease liabilities | 19,187 | 19,964 |
| Current portion of long-term debt | 64 | 43 |
| 877,782 | 845,009 | |
| Non-current liabilities | ||
| Employee benefits | 28,593 | 29,132 |
| Long-term lease liabilities | 58,741 | 62,856 |
| Long-term debt | 1,087,106 | 1,016,668 |
| Deferred income tax liabilities | 124,939 | 126,114 |
| Other long-term liabilities | 609 | 3,935 |
| 1,299,988 | 1,238,705 | |
| Total liabilities | $ 2,177,770 | $ 2,083,714 |
| Commitments and contingencies | ||
| EQUITY | ||
| Share capital | $ 527,973 | $ 530,241 |
| Contributed surplus | 12,173 | 11,734 |
| Accumulated other comprehensive income | 5,693 | 22,848 |
| Retained earnings | 439,125 | 416,773 |
| Equity attributable to shareholders | 984,964 | 981,596 |
| Non-controlling interests | 3,492 | 4,087 |
| Total equity | 988,456 | 985,683 |
| Total liabilities and equity | $ 3,166,226 | $ 3,069,397 |
| Please refer to complete Interim Condensed Consolidated Financial Statements for supplemental notes which can be found on the Company’s profile on SEDAR at www.sedar.com and on the Company’s website at www.atsautomation.com. |
ATS AUTOMATION TOOLING SYSTEMS INC.
Interim Condensed Consolidated Statements of Income
(in thousands of Canadian dollars, except per share amounts – unaudited)
| For the three months ended | July 3 2022 | June 27 2021* |
| Revenues | ||
| Revenues from construction contracts | $ 375,076 | $ 343,007 |
| Services rendered | 114,097 | 100,486 |
| Sale of goods | 121,418 | 67,122 |
| Total revenues | 610,591 | 510,615 |
| Operating costs and expenses | ||
| Cost of revenues | 440,853 | 372,300 |
| Selling, general and administrative | 112,172 | 84,636 |
| Stock-based compensation | (3,987) | 8,773 |
| Earnings from operations | 61,553 | 44,906 |
| Net finance costs | 10,725 | 7,505 |
| Income before income taxes | 50,828 | 37,401 |
| Income tax expense | 11,435 | 8,718 |
| Net income | $ 39,393 | $ 28,683 |
| Attributable to | ||
| Shareholders | $ 39,204 | $ 28,139 |
| Non-controlling interests | 189 | 544 |
| $ 39,393 | $ 28,683 | |
| Earnings per share attributable to shareholders | ||
| Basic | $ 0.43 | $ 0.31 |
| Diluted | $ 0.42 | $ 0.30 |
| * Certain amounts for the previously reported three months ended June 27, 2021 were re-presented in fiscal 2022 as a result of measurement period adjustments for the acquisitions of CFT and BioDot as required by IFRS 3, Business Combinations. |
| Please refer to complete Interim Condensed Consolidated Financial Statements for supplemental notes which can be found on the Company’s profile on SEDAR at www.sedar.com and on the Company’s website at www.atsautomation.com. |
ATS AUTOMATION TOOLING SYSTEMS INC.
Interim Condensed Consolidated Statements of Cash Flows
(in thousands of Canadian dollars – unaudited)
| For the three months ended | July 3 2022* | June 27 2021 * |
| Operating activitiesNet income | $ 39,393 | $ 28,683 |
| Items not involving cashDepreciation of property, plant and equipment | 6,067 | 5,059 |
| Amortization of right-of-use assets | 5,732 | 5,276 |
| Amortization of intangible assets | 21,831 | 14,914 |
| Deferred income taxes | (7,000) | (4,977) |
| Other items not involving cash | 5,954 | 5,462 |
| Stock-based compensation | 695 | 283 |
| Change in non-cash operating working capital | (104,408) | (6,287) |
| Cash flows provided by (used in) operating activities | $ (31,736) | $ 48,413 |
| Investing activitiesAcquisition of property, plant and equipment | $ (7,495) | $ (10,998) |
| Acquisition of intangible assets | (4,854) | (3,272) |
| Business acquisition, net of cash acquired | — | (114,793) |
| Settlement of cross-currency interest rate swap instrument | 21,493 | — |
| Proceeds from disposal of property, plant and equipment | 677 | 94 |
| Cash flows provided by (used in) investing activities | $ 9,821 | $ (128,969) |
| Financing activitiesBank indebtedness | 949 | (147) |
| Repayment of long-term debt | (4,301) | (1,209) |
| Proceeds from long-term debt | 57,406 | 114,405 |
| Proceeds from exercise of stock options | 978 | 2,051 |
| Purchase of non-controlling interest | (452) | (85) |
| Repurchase of common shares | (20,721) | — |
| Principal lease payments | (5,899) | (5,398) |
| Cash flows provided by financing activities | $ 27,960 | $ 109,617 |
| Effect of exchange rate changes on cash and cash equivalents | (1,425) | (88) |
| Increase in cash and cash equivalents | 4,620 | 28,973 |
| Cash and cash equivalents, beginning of period | 135,282 | 187,467 |
| Cash and cash equivalents, end of period | $ 139,902 | $ 216,440 |
| Supplemental informationCash income taxes paid | $ 3,346 | $ 4,721 |
| Cash interest paid | $ 13,735 | $ 10,430 |
| * Certain amounts for the previously reported three months ended June 27, 2021 were re-presented in fiscal 2022 as a result of measurement period adjustments for the acquisitions of CFT and BioDot as required by IFRS 3, Business Combinations. |
| Please refer to complete Interim Condensed Consolidated Financial Statements for supplemental notes which can be found on the Company’s profile on SEDAR at www.sedar.com and on the Company’s website at www.atsautomation.com. |
Notice to Reader: Non-IFRS Measures and Additional IFRS Measures
Throughout this document, management uses certain non-IFRS financial measures, non-IFRS ratios and supplementary financial measures to evaluate the performance of the Company.
The terms “EBITDA”, “organic revenue”, “adjusted net income”, “adjusted earnings from operations”, “adjusted EBITDA”, “adjusted basic earnings per share”, and “free cash flow”, are non-IFRS financial measures, “EBITDA margin”, “adjusted operating margin”, “adjusted EBITDA margin”, “organic revenue growth”, “non-cash working capital as a percentage of revenues”, and “net debt to adjusted EBITDA” are non-IFRS ratios, and “operating margin”, “Order Bookings”, “Order Backlog”, and “book-to-bill ratio” are supplementary financial measures, all of which do not have any standardized meaning prescribed within IFRS and therefore may not be comparable to similar measures presented by other companies. Such measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. In addition, management uses “earnings from operations”, which is an additional IFRS measure, to evaluate the performance of the Company. Earnings from operations is presented on the Company’s consolidated statements of income as net income excluding income tax expense and net finance costs. Operating margin is an expression of the Company’s earnings from operations as a percentage of revenues. EBITDA is defined as earnings from operations excluding depreciation and amortization. EBITDA margin is an expression of the Company’s EBITDA as a percentage of revenues. Organic revenue is defined as revenues in the stated period excluding revenues from acquired companies for which the acquired company was not a part of the consolidated group in the comparable period. Organic revenue growth compares the stated period organic revenue with the reported revenue of the comparable prior period. Adjusted earnings from operations is defined as earnings from operations before items excluded from management’s internal analysis of operating results, such as amortization expense of acquisition-related intangible assets, acquisition-related transaction and integration costs, restructuring charges, and certain other adjustments which would be non-recurring in nature (“adjustment items”). Adjusted operating margin is an expression of the Company’s adjusted earnings from operations as a percentage of revenues. Adjusted EBITDA is defined as adjusted earnings from operations excluding depreciation and amortization. Adjusted EBITDA margin is an expression of the entity’s adjusted EBITDA as a percentage of revenues. Adjusted basic earnings per share is defined as adjusted net income on a basic per share basis, where adjusted net income is defined as adjusted earnings from operations less net finance costs and income tax expense, plus tax effects of adjustment items and adjusted for other significant items of a non-recurring nature. Non-cash working capital as a percentage of revenues is defined as the sum of accounts receivable, contract assets, inventories, deposits, prepaids and other assets, less accounts payable, accrued liabilities, provisions and contract liabilities divided by the trailing two fiscal quarter revenues annualized. Free cash flow is defined as cash provided by operating activities less property, plant and equipment and intangible asset expenditures. Net debt to adjusted EBITDA is the ratio of the net debt of the Company (cash and cash equivalents less bank indebtedness, long-term debt, and lease liabilities) to adjusted EBITDA. Order Bookings represent new orders for the supply of automation systems, services and products that management believes are firm. Order Backlog is the estimated unearned portion of revenues on customer contracts that are in process and have not been completed at the specified date. Book to bill ratio is a measure of Order Bookings compared to revenue.
Operating margin, adjusted earnings from operations, EBITDA, EBITDA margin, adjusted EBITDA, and adjusted EBITDA margin are used by the Company to evaluate the performance of its operations. Management believes that earnings from operations is an important indicator in measuring the performance of the Company’s operations on a pre-tax basis and without consideration as to how the Company finances its operations. Management believes that organic revenue and organic revenue growth, when considered with IFRS measures, allow the Company to better measure the Corporation’s performance and evaluate long-term performance trends. Organic revenue growth also facilitates easier comparisons of the Corporation’s performance with prior and future periods and relative comparisons to its peers. Management believes that EBITDA and adjusted EBITDA are important indicators of the Company’s ability to generate operating cash flows to fund continued investment in its operations. Management believes that adjusted earnings from operations, adjusted operating margin, adjusted EBITDA, adjusted net income and adjusted basic earnings per share are important measures to increase comparability of performance between periods. The adjustment items used by management to arrive at these metrics are not considered to be indicative of the business’ ongoing operating performance. Management uses the measure “non-cash working capital as a percentage of revenues” to assess overall liquidity. Free cash flow is used by the Company to measure cash flow from operations after investment in property, plant and equipment and intangible assets. Management uses net debt to adjusted EBITDA as a measurement of leverage of the Company. Order Bookings provide an indication of the Company’s ability to secure new orders for work during a specified period, while Order Backlog provides a measure of the value of Order Bookings that have not been completed at a specified point in time. Both Order Bookings and Order Backlog are indicators of future revenues that the Company expects to generate based on contracts that management believes to be firm. Book to bill ratio is used to measure the Company’s ability and timeliness to convert Order Bookings into revenues. Management believes that ATS shareholders and potential investors in ATS use these additional IFRS measures and non-IFRS financial measures in making investment decisions and measuring operational results.
A reconciliation of (i) adjusted EBITDA and EBITDA to net income, (ii) adjusted earnings from operations to earnings from operations, (iii) adjusted net income to net income, (iv) adjusted basic earnings per share to basic earnings per share (v) free cash flow to its IFRS measure components and (vi) organic revenue to revenue in each case for the three month periods ended July 3, 2022 and June 27, 2021 is contained in this news release (see “Reconciliation of Non-IFRS Measures to IFRS Measures”). This news release also contains a reconciliation of (i) non- cash working capital as a percentage of revenues and (ii) net debt to their IFRS measure components, in each case at both July 3, 2022 and March 31, 2022 (see “Reconciliation of Non-IFRS Measures to IFRS Measures”). A reconciliation of Order Bookings and Order Backlog to total Company revenues for the three month periods ended July 3, 2022 and June 27, 2021 is also contained in this news release (see “Order Backlog Continuity”).
Note to Readers: Forward-Looking Statements
This news release and results of operations of ATS contains certain statements that may constitute forward- looking information within the meaning of applicable securities laws (“forward-looking statements”). Forward- looking statements include all statements that are not historical facts regarding possible events, conditions or results of operations that ATS believes, expects or anticipates will or may occur in the future, including, but not limited to: the value creation strategy; the Company’s strategy to expand organically and through acquisition; the ATS Business Model (“ABM”); potential impacts on the time to covert opportunities into Order Bookings; various market opportunities for ATS; the Company’s Order Backlog partially mitigating the impact of variable Order Bookings; rate of Order Backlog conversion to revenue; the potential impact of timing of customer decisions on Order Bookings, performance period, and timing of revenue recognition; expected benefits with respect to the Company’s efforts to grow its product portfolio and after-sale service revenues; Company’s goal of expanding its adjusted earnings from operations margin over the long term and potential impact of supply chain disruptions; expectation of synergies from integration of acquired businesses; the uncertainty and potential impact of COVID-19 and government emergency measures; non-cash working capital levels as a percentage of revenues in the short-term and the long-term; expectation in relation to meeting liquidity and funding requirements for investments; potential to use debt or equity financing to support growth strategy; expected capital expenditures for fiscal 2023; and the Company’s belief with respect to the outcome of certain lawsuits, claims and contingencies.
Such forward-looking statements are inherently subject to significant known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of ATS, or developments in ATS’ business or in its industry, to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements. Important risks, uncertainties and factors that could cause actual results to differ materially from expectations expressed in the forward-looking statements include, but are not limited to, the duration of the COVID-19 pandemic and its impact on the Company, its employees, customers, suppliers and the global economy; impact of regional or global conflicts; general market performance including capital market conditions and availability and cost of credit; performance of the markets that ATS serves; industry challenges in securing the supply of labour, materials, and, in certain jurisdictions, energy sources such as natural gas; impact of inflation; foreign currency and exchange risk; the relative strength of the Canadian dollar; impact of factors such as increased pricing pressure, increased cost of energy and supplies, and delays in relation thereto, and possible margin compression; the regulatory and tax environment; inability to successfully expand organically or through acquisition, due to an inability to grow expertise, personnel, and/or facilities at required rates or to identify, negotiate and conclude one or more acquisitions, or to raise, through debt or equity, or otherwise have available, required capital; that the ABM is not effective in accomplishing its goals; that some or all of the sales funnel is not converted to Order Bookings due to competitive factors or failure to meet customer needs; that the market opportunities ATS anticipates do not materialize or that ATS is unable to exploit such opportunities; variations in the amount of Order Backlog completed in any given quarter; timing of customer decisions related to large enterprise programs and potential for negative impact associated with any cancellations or non-performance in relation thereto; that the Company is not successful in growing its product portfolio and/or service offering or that expected benefits are not realized; that efforts to expand adjusted earnings from operations margin over long-term are unsuccessful, due to any number of reasons, including less than anticipated increase in after-sales service revenues or reduced margins attached to those revenues, inability to achieve lower costs through supply chain management, failure to develop, adopt internally, or have customers adopt, standardized platforms and technologies, inability to maintain current cost structure if revenues were to grow, and failure of ABM to impact margins; that acquisitions made are not integrated as quickly or effectively as planned or expected and, as a result, anticipated benefits and synergies are not realized; non-cash working capital as a percentage of revenues operating at a level other than as expected due to reasons, including, the timing and nature of Order Bookings, the timing of payment milestones and payment terms in customer contracts, and delays in customer programs; that capital expenditure targets are increased in the future or the Company experiences cost increases in relation thereto; risk that the ultimate outcome of lawsuits, claims, and contingencies give rise to material liabilities for which no provisions have been recorded; and other risks and uncertainties detailed from time to time in ATS’ filings with securities regulators, including, without limitation, the risk factors described in ATS’ annual information form for the fiscal year ended March 31, 2022, which are available on the System for Electronic Document Analysis and Retrieval (“SEDAR”) and can be accessed at www.sedar.com. ATS has attempted to identify important factors that could cause actual results to materially differ from current expectations, however, there may be other factors that cause actual results to differ materially from such expectations.
Forward-looking statements are necessarily based on a number of estimates, factors and assumptions regarding, among others, management’s current plans, estimates, projections, beliefs and opinions; the future performance and results of the Company’s business and operations; the assumption of successful implementation of margin improvement initiatives; and general economic conditions and global events, including the COVID-19 pandemic.
Forward-looking statements included herein are only provided to understand management’s current expectations relating to future periods and, as such, are not appropriate for any other purpose. Although ATS believes that the expectations reflected in such forward-looking statements are reasonable, such statements involve risks and uncertainties, and ATS cautions you not to place undue reliance upon any such forward-looking statements, which speak only as of the date they are made. ATS does not undertake any obligation to update forward-looking statements contained herein other than as required by law.
SOURCE ATS Automation Tooling Systems Inc.
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