ATS Corp T.ATS

TD

[retiredcf]

Some potential here for them to raise their current target of $59.00. GLTA

ATS Corporation

(ATS-T) C$53.93

Modest Q3/F23 EBITDA Beat; Record Bookings/Backlog Event

• ATS reported Q3/F23 adjusted EBITDA of $95mm, a slight beat vs. the Street at $92mm, and in line with our $95mm estimate. Relative to our forecast, slightly higher-than-expected revenue, due to a somewhat faster-than-expected backlog drawdown, was offset by higher-than-expected SG&A.

• Record bookings of $979mm were comfortably above our $915mm forecast, more than offsetting the slightly faster-than-expected backlog drawdown, such that the ending backlog of $2,143mm was 3% better-than-expected.

• The conference call is at 8:30 a.m. ET. Dial-in: [phone].

  Impact: SLIGHTLY POSITIVE

• Q3/F23 Results: Revenue increased 18% y/y to $647mm, reflecting 10% organic growth, plus acquired revenue of $41mm, and a 1% FX tailwind. Adjusted EBITDA increased 14% y/y to $95mm (14.7% margin) vs. $84mm (15.3% margin) in Q3/ F22, primarily reflecting: 1) a 140bps decrease in the gross profit margin, which ATS attributed to the execution of higher-margin programs in Q3/F22 and the impact of supply-chain headwinds in Q3/F23; 2) a 20bps improvement in adjusted SG&A as a percentage of revenue; and 3) lower stock-based compensation, which was very elevated in both years, but declined 80bps y/y as a percentage of revenue.

• Record Bookings/Backlog: Record bookings of $979mm were up 46% y/y, reflecting organic growth of 38%, primarily due to large order bookings from an existing automotive customer in the EV space and in life sciences. The book-to- bill ratio was 1.51, and the ending backlog was a record $2,143mm, up 45% y/y and 20% q/q. The company's outlook commentary is largely unchanged vs. Q2/ F23. Funnel activity is strong in life sciences, EVs, and in food and beverage, and ATS has its highest-ever order backlog in food and beverage since entering the space. Activity is stable in consumer products and in nuclear, and the nuclear funnel includes some longer-term opportunities.

• Cash Flow: Working capital as a percentage of revenue improved to 13% vs. 16% in Q2/F23, due to the receipt of some milestone payments for large EV programs, and ATS' leverage of 2.8x net debt to TTM adjusted EBITDA is back within the target range, even as the company continues to invest in working capital on some newer enterprise programs.