ATS Corp T.ATS

TD

[retiredcf]

Lower their target by a buck to $71.00. GLTA

ATS Corporation

(ATS-T) C$59.66

Q1/F24 EBITDA Beat; Bookings Solid but Slightly Below Forecast Event

ATS reported Q1/F24 adjusted EBITDA of $119mm, a 3%-4% beat vs. the Street/ TDSI at $114mm/$115mm. The major variance vs. our forecast was a slightly faster- than-expected backlog drawdown.

Impact: NEUTRAL

• Q1/F24 Results: Revenue increased 23% y/y to a record $754mm, reflecting healthy organic growth of 15% plus acquired revenue and an FX tailwind. Adjusted EBITDA increased 29% y/y to $119mm (15.8% margin) vs. $93mm (15.1% margin) in Q1/F23. The margin expansion reflects lower adjusted SG&A as a percentage of revenue, partially offset by a lower gross profit margin, in part due to the execution of some higher-margin programs in Q1/F23.

• Solid Bookings/Backlog: Bookings of $690mm, while down 6% y/y and q/q, and slightly below the Street/TDSI at $703mm/$700mm, were still quite healthy, considering that Q1/F23 included a US$70mm EV order and Q4/F23 included a US$120mm EV order. The book-to-bill ratio was <1.0, as expected (0.92), but the TTM book-to-bill ratio remains strong at 1.18. The backlog of $2.0bln is up 30% y/y, and remains at near-record levels, with strong bookings in life sciences, partially offset by the expected ramp-up of EV projects, and the execution of primary processing projects ahead of the harvest season in food and beverage.

• Outlook Commentary: ATS' outlook commentary was virtually unchanged vs. last quarter. Funnel activity is strong in life sciences, including pharmaceuticals, radiopharmaceuticals, and medical devices, which includes auto-fillers and auto- injectors (specifically mentioned for the first time). Transportation and food and beverage also have robust funnels, and existing EV programs are progressing on time and on budget. Activity is stable in consumer products, and in nuclear, and the nuclear funnel includes some longer-term opportunities.

  TD Investment Conclusion

  We view ATS as uniquely positioned to benefit from supply-chain de-risking, and we see continued scope for margin improvement and M&A upside. We are somewhat concerned about the prospect of lapping more difficult prior-year bookings comparables in Q2/F24 and especially Q3/F24, but we don't want to lose sight of the bigger picture or read too much into one quarter of bookings, as new EV order bookings will be lumpy by nature.