Q4/F24 Results: We have tweaked our gross profit margin assumption to better reflect the impact of a short-term hold placed on ~$200mm of EV work in the backlog. Our revenue forecast of $715mm is just 1% below consensus ($723mm), as is our revised EBITDA estimate of $108mm (consensus is $109mm).
Bookings/Backlog: ATS' Q3/F24 bookings missed by 9%, resulting in a corresponding reduction to the FTM EBITDA estimate (consensus). The Street is looking for EBITDA to be roughly flat y/y in F2025; therefore, we think it is important that ATS' Q4/F24 book- to-bill ratio exceed 1.0x. The consensus bookings estimate is $718mm (book-to-bill ratio of 0.99x), within a wider-than-normal range of $666mm to $760mm. Some analysts are apparently forecasting that Q4/F24 bookings will be comparable to Q3/F24 ($668mm), while others, like ourselves, are more optimistic that Q4/F24 bookings will meet/slightly exceed Q2/F24 bookings of $742mm (our Q4/F24 bookings estimate is $741mm). The reason for our relative optimism is that we believe the focus on a declining EV backlog has arguably obscured considerable strength elsewhere in the business. Ex-EVs, ATS posted a Q3/F24 book-to-bill ratio of 1.15x, primarily driven by life sciences and energy, although food and beverage/consumer products both had book-to-bill ratios >1.0x. The Q3/F24 life sciences backlog was a record $875mm or ~45% of the total backlog vs. EV- related work at 30%.
EV Program Deferral: ATS' Q3/F24 backlog of $1.9bln included a ~$200mm EV order that had been delayed. ATS was expecting the program to restart in Q1/F25, once the customer had realigned its production schedule. The potential for a further delay is a risk to the share-price, but would be less impactful than a bookings miss, in our view.
M&A Still a Potential Catalyst: Q3/F24 leverage was 2.3x TTM EBITDA, and we think the Street would tolerate another 0.5x turn for the right opportunity, which implies ~ $230mm-$235mm of firepower: enough to acquire ~$23mm-$29mm of EBITDA at an 8x-10x multiple (pre-synergies) or ~5%-6% of F2025E EBITDA (consensus).