ATS REPORTS FOURTH QUARTER AND FISCAL 2022 RESULTS

·21 min read

CAMBRIDGE, ON, May 19, 2022 /CNW/ - ATS Automation Tooling Systems Inc. (TSX: ATA) ("ATS" or the "Company") today reported its financial results for the three and twelve months ended March 31, 2022.

ATS logo (CNW Group/ATS Automation Tooling Systems Inc.)
ATS logo (CNW Group/ATS Automation Tooling Systems Inc.)

Fourth quarter highlights:

  • Revenues increased 50.8% year over year to $603.2 million.

  • Net income increased 67.6% year over year to $39.9 million.

  • Earnings per share were 43 cents basic and diluted compared to 26 cents a year ago.

  • Adjusted basic earnings per share1 were 64 cents compared to 34 cents a year ago.

  • Order Bookings1 were $638 million, 37.8% higher compared to $463 million a year ago.

  • Order Backlog1 increased 24.0% to $1,438 million at March 31, 2022 compared to $1,160 million a year ago.

"Fourth quarter performance featured record revenues, strong Order Bookings and continued adjusted EBIT margin expansion as core operations and new acquisitions combined to deliver value in a complex and volatile global environment," said Andrew Hider, Chief Executive Officer. "Our emphasis on serving regulated industries, the size and diversification of our Order Backlog, and the rigorous application of the ATS Business Model by our dedicated teams position us well for the start of our new fiscal year."

Year-to-date highlights:

  • Revenues increased 52.6% year over year to $2,182.7 million.

  • Net income increased 89.4% year over year to $121.4 million.

  • Earnings per share was $1.32 basic and $1.31 diluted compared to 70 cents and 69 cents respectively in the prior year.

  • Adjusted basic earnings per share1 were $2.17 compared to $1.07 a year ago.

  • Order Bookings1 were $2,456 million, compared to $1,626 million a year ago.

Mr. Hider added "The integration of our recent acquisitions is progressing to plan as we work to achieve cost synergies and establish the foundation for additional organic growth through cross selling, capability expansion and innovation. Our ability to serve customers as a global supplier of automation, advanced products and lifecycle support services has never been greater and the relevance of our differentiated solutions is clear in today's marketplace."

1 Non-IFRS Financial Measure: see "Non-IFRS Measures and Additional IFRS Measures".

Financial highlights
(In millions of dollars, except per share and margin data)


Q4 2022

Q4 2021

Variance

Fiscal 2022

Fiscal 2021

Variance

Revenues

$      603.2

$     399.9

50.8%

$     2,182.7

$      1,430.0

52.6%

Net income

$        39.9

$       23.8

67.6%

$        121.4

$           64.1

89.4%

Adjusted earnings from
operations1

$        85.8

$       49.5

73.3%

$        292.4

$         163.2

79.2%

Adjusted earnings from
operations margin1

 

14.2%

12.4%


183 bps

 

13.4%

11.4%


198 bps

Adjusted EBITDA1

$        99.1

$      58.8

68.54%

$       343.9

$         200.7

71.4%

Adjusted EBITDA margin1

16.4%

14.7%

173 bps

15.8%

14.0%

172bps

Basic earnings per share

$        0.43

$      0.26

65.4%

$         1.32

$           0.70

88.6%

Adjusted basic earnings per
share1

$        0.64

$      0.34

88.2%

$         2.17

$           1.07

102.8%

Order Bookings1

$      638.0

$    463.0

37.8%

$    2,456.0

$      1,626.0

51.0%








As at




March 31,
2022

March 31,
2021

Variance

   Order Backlog1




$        1,438

$           1,160

24.0%

1 Non-IFRS Financial Measure: see "Non-IFRS Measures and Additional IFRS Measures".

Fourth quarter summary
Fiscal 2022 fourth quarter revenues were 50.8%, or $203.3 million higher than in the corresponding period a year ago and included $172.1 million of revenues earned by acquired companies, most notably $80.2 million from CFT and $59.4 million from SP. Organic revenue growth, excluding contributions from acquired companies and the impact of foreign exchange rate changes, was $41.8 million, or 10.5% higher than the fourth quarter of fiscal 2021. Foreign exchange translation negatively impacted revenues by $10.6 million or 2.7%, primarily reflecting the strengthening of the Canadian dollar relative to the Euro. Life sciences was the primary source of organic revenue growth and reflected increased activity on medical device and pharmaceutical projects. Revenues generated from construction contracts increased 37.8% or $97.5 million due to a combination of revenues earned by acquired companies of $72.0 million (primarily $53.0 million from CFT), and organic revenue growth. Revenues from services increased 24.2% or $26.6 million primarily due to revenues earned by acquired companies of $20.7 million. Organic growth in services accounted for $11.1 million of the year-over-year increase and reflected the Company's after-sales service initiatives. Foreign exchange translation negatively impacted service revenues by $5.2 million. Revenues from the sale of goods increased 246.7% or $79.2 million due to revenues earned by acquired companies, primarily CFT and SP, which generate a higher percentage of their revenues from product sales. Organic revenue and organic revenue growth are Non-IFRS measures. Please see "Non-IFRS and Other Financial Measures."

By market, fourth quarter revenues generated in life sciences increased $91.6 million or 40.1% year over year. This growth reflected higher Order Backlog entering the fourth quarter of fiscal 2022 compared to the corresponding period in the prior year, and included $62.1 million of revenues earned by newly acquired companies, primarily SP, with a $40.7 million revenue contribution. Revenues generated in food & beverage increased $85.4 million or 871.4%, primarily due to the acquisition of CFT, which generated $79.9 million of revenues in the fourth quarter of fiscal 2022. Revenues in transportation increased $11.3 million or 16.8% on higher Order Backlog entering the fourth quarter of fiscal 2022. Revenues generated in consumer products increased $22.8 million or 37.9% on higher Order Backlog entering the fourth quarter of fiscal 2022. Revenues in energy decreased $7.8 million or 22.9% due to project timing.

Net income for the fourth quarter of fiscal 2022 was $39.9 million (43 cents per share basic and diluted), a $16.1 million (or 67.6%) increase compared to $23.8 million (26 cents per share basic and diluted) for the fourth quarter of fiscal 2021. This primarily reflected an increase in earnings from operations combined with a decrease in net finance costs. Adjusted basic earnings per share were 64 cents compared to 34 cents in the fourth quarter of fiscal 2021 (see "Reconciliation of Non-IFRS Measures to IFRS Measures").

Fiscal 2022 fourth quarter earnings from operations were $59.8 million (9.9% operating margin) compared to $42.8 million (10.7% operating margin) in the fourth quarter a year ago. Fiscal 2022 earnings from operations included $19.2 million related to amortization of acquisition-related intangible assets, $1.4 million of incremental costs related to the Company's acquisition activity, and $1.7 million in adjustments to contingent consideration related to the acquisition of MARCO recorded to SG&A expenses, $5.2 million of acquisition-related inventory fair value charges recorded to cost of revenues and $1.9 million of restructuring costs. Fiscal 2021 fourth quarter earnings from operations included $8.1 million of amortization of acquisition-related intangible assets, $4.2 million of incremental costs related to the Company's acquisition activity, and $5.6 million in adjustments to contingent consideration related to the acquisition of MARCO.

Excluding these items in both quarters, adjusted earnings from operations were $85.8 million (14.2% margin), compared to $49.5 million (12.4% margin) a year ago. Contributions from acquired companies were $13.3 million, with SP contributing $8.5 million and BioDot contributing $4.3 million. Fourth quarter fiscal 2022 adjusted earnings from operations reflected higher gross margin due to efficiency gains made in the Company's cost structure resulting from previously implemented reorganizations, improved program execution, increased revenues from after-sales services, as well as a reduction in COVID-19 travel, entry restrictions and temporary closures at customer sites compared to a year ago.

Depreciation and amortization expense was $32.5 million in the fourth quarter of fiscal 2022, compared to $17.4 million a year ago. The increase was primarily due to the addition of identifiable intangible assets recorded on the acquisitions of CFT, BioDot and SP.

EBITDA was $92.3 million (15.3% EBITDA margin) in the fourth quarter of fiscal 2022 compared to $60.2 million (15.1% EBITDA margin) in the fourth quarter of fiscal 2021. EBITDA for the fourth quarter of fiscal 2022 included $1.9 million of restructuring charges, $1.4 million of incremental costs related to the Company's acquisition activity, $5.2 million of acquisition-related inventory fair value charges and $1.7 million in adjustments to contingent consideration on the acquisition of MARCO. EBITDA for the corresponding period in the prior year included $4.2 million of incremental costs related to the Company's acquisition activity and $5.6 million in adjustments to contingent consideration on the acquisition of MARCO. Excluding these costs, adjusted EBITDA was $99.1 million (16.4% adjusted EBITDA margin), compared to $58.8 million (14.7% adjusted EBITDA margin) a year ago. Higher adjusted EBITDA margin reflected operating improvements including to the Company's cost structure and less pronounced pandemic inefficiencies than in the same period a year ago. EBITDA margin is a Non-IFRS ratio; see "Non-IFRS and Other Financial Measures."

Order Backlog Continuity
(In millions of dollars)


Q4 2022

Q4 2021

Fiscal 2022

Fiscal 2021 

Opening Order Backlog

$       1,475

$          985

$       1,160

$         942

Revenues

(603)

(400)

(2,183)

(1,430)

Order Bookings

638

463

2,456

1,626

Order Backlog adjustments1

(72)

112

5

22

Total

$       1,438

$       1,160

$       1,438

$      1,160

1 Order Backlog adjustments include incremental Order Backlog of acquired companies ($104 million SP, $13 million NCC and $24 million BioDot included in fiscal 2022), foreign exchange adjustments, scope changes and cancellations.

Order Bookings
Fourth quarter fiscal 2022 Order Bookings were $638 million, a 37.8% year-over-year increase. This reflected organic growth of 1.0% and 39.5% growth from acquired companies, partially offset by a 2.7% decrease due to foreign exchange rate translation of Order Bookings by ATS' global subsidiaries, primarily reflecting the strengthening of the Canadian dollar relative to the Euro. Growth in Order Bookings from acquired companies totalled $182 million, of which CFT contributed $81 million and SP contributed $66 million. By market, Order Bookings in life sciences increased due to the addition of SP. Order Bookings in food & beverage increased due to the addition of CFT. Order Bookings in consumer products increased due to the combination of acquired companies and the timing of customer projects. Organic growth was offset by lower Order Bookings in transportation compared to a year ago, when the Company secured a large EV program, and lower Order Bookings in energy due to timing of customer projects.

Backlog
At March 31, 2022, Order Backlog was $1,438 million, 24.0% higher than at March 31, 2021. Order Backlog growth was primarily driven by higher Order Bookings in fiscal 2022 in all end markets, 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, as pandemic restrictions have eased in some geographies, persistent supply constraint pressures and inflation contribute to a fluid and uncertain operating environment. 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 is robust and with the addition of CFT, the Company has enhanced its exposure to opportunities in this market. In transportation, the funnel largely includes strategic opportunities related to electric vehicles, a growing market. Funnel activity in energy is stable and comprised of some opportunities being developed over the longer term. Funnel activity in consumer products has improved; however, 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, electric vehicle ("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 also provide future opportunities for ATS to pursue.

Order Backlog of $1,438 million is expected to 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. In the first quarter of fiscal 2023, management expects the conversion of Order Backlog to revenues to be in the lower end of the 40% to 45% range. This estimate was calculated based on the combination of management's estimate of current projects in Order Backlog and expectations for revenues that will be booked and recognized within the period.

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 can 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 cycles 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 from 13.5% in fiscal 2022 (2021 – 11.4%). 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 global COVID-19 pandemic has disrupted global supply chains, 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 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 management's 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 affected economies and disrupted business operations for ATS and its customers. While vaccination programs are underway and generally restrictions are easing across most countries, there is ongoing concern and uncertainty regarding potential new 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.

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 Thursday, May 19, 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 (416) 764-8659 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 May 26, 2022) by dialing (416) 764-8677 and entering passcode 552564 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 services 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

Q4 2022

Q4 2021

Fiscal 2022

Fiscal 2021

Revenues from construction contracts

$       355.6

$      258.1

$    1,359.7

$       895.1

Services rendered

136.3

109.7

485.7

413.3

Sale of goods

111.3

32.1

337.3

121.6

Total revenues

$       603.2

$      399.9

$    2,182.7

$    1,430.0






Revenues by market

Q4 2022

Q4 2021

Fiscal 2022

Fiscal 2021

Life Sciences

$       320.3

$      228.7

$    1,113.0

$       805.4

Food & Beverage

95.2

9.8

395.0

35.0

Transportation

78.6

67.3

293.8

272.3

Consumer Products

82.9

60.1

269.0

203.2

Energy

26.2

34.0

111.9

114.1

Total revenues

$       603.2

$      399.9

$    2,182.7

$    1,430.0






Revenues by customer location

Q4 2022

Q4 2021

Fiscal 2022

Fiscal 2021

North America

$       333.3

$      198.5

$    1,114.3

$       687.6

Europe

207.3

140.3

822.9

567.8

Asia/Other

62.6

61.1

245.5

174.6

Total revenues

$       603.2

$      399.9

$    2,182.7

$    1,430.0

Consolidated Operating Results
(In millions of dollars)


Q4 2022

Q4 2021

Fiscal 2022

Fiscal 2021

Earnings from operations

$         59.8

$         42.8

$       186.6

$       119.6

Amortization of acquisition-related intangible assets

19.2

8.1

63.9

33.5

Acquisition-related transaction costs

1.4

4.2

12.0

6.7

Acquisition-related inventory fair value charges

5.2

––

25.7

––

Gain on sale of facility

––

––

––

(5.3)

Contingent consideration adjustment

(1.7)

(5.6)

(1.7)

(5.6)

Restructuring charges

1.9

––

5.9

14.3

Adjusted earnings from operations1

$         85.8

$         49.5

$       292.4

$       163.2

1Non-IFRS Financial Measure, See "Non-IFRS and Other Financial Measures"

 


Q4 2022

Q4 2021

Fiscal 2022

Fiscal 2021

Earnings from operations

$         59.8

$         42.8

$       186.6

$      119.6

Depreciation and amortization

32.5

17.4

115.4

71.0

EBITDA1

$         92.3

$         60.2

$       302.0

$      190.6

Restructuring charges

1.9

––

5.9

14.3

Acquisition-related transaction costs

1.4

4.2

12.0

6.7

Acquisition-related inventory fair value charges

5.2

––

25.7

––

Gain on sale of facility

––

––

––

(5.3)

Contingent consideration adjustment

(1.7)

(5.6)

(1.7)

(5.6)

Adjusted EBITDA1

$         99.1

$         58.8

$       343.9

$      200.7

1Non-IFRS Financial Measure, See "Non-IFRS and Other Financial Measures"

Order Backlog by Market
(In millions of dollars)

As at

March 31,
2022

March 31,
2021

Life Sciences

$          734

$          585

Food & Beverage

183

169

Transportation

208

197

Consumer Products

211

113

Energy

102

96

Total

$       1,438

$       1,160

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):


Fiscal 2022

Fiscal 2021

Fiscal 2020

Adjusted EBITDA

$       343.9

$         200.7

$        195.1

Less: restructuring charges

5.9

14.3

26.6

Less: acquisition related-transaction costs

12.0

6.7

1.5

Less: acquisition-related inventory fair value charges

25.7

––

––

Add: gain on sale of facility

––

(5.3)

––

Add: contingent consideration adjustment

(1.7)

(5.6)

––

EBITDA

$       302.0

$         190.6

$        167.0

Less: depreciation and amortization expense

115.4

71.0

71.4

Earnings from operations

$       186.6

$         119.6

$          95.6

Less: net finance costs

32.2

40.1

28.1

Less: provision for income taxes

33.0

15.4

14.6

Net income

$       121.4

$           64.1

$          52.9

 


Q4 2022

Q4 2021

Adjusted EBITDA

$           99.1

$          58.8

Less: restructuring charges

1.9

––

Less: acquisition related-transaction costs

1.4

4.2

Less: acquisition-related inventory fair value charges

5.2

––

Add: contingent consideration adjustment

(1.7)

(5.6)

EBITDA

$           92.3

$          60.2

Less: depreciation and amortization expense

32.5

17.4

Earnings from operations

$           59.8

$          42.8

Less: net finance costs

9.6

16.7

Less: provision for income taxes

10.3

2.3

Net income

$           39.9

$          23.8

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 March 31, 2022

Three Months Ended March 31, 2021




Provision





Provision




Earnings


for



Earnings


for




from

Finance

income

Net

Basic

from

Finance

income

Net

Basic


operations

costs

taxes

income

EPS

operations

costs

taxes

income

EPS

Reported (IFRS)

$    59.8

$    (9.6)

$  (10.3)

$    39.9

$ 0.43

$    42.8

$  (16.7)

$    (2.3)

$    23.8

$   0.26












Amortization of acquisition-
      related intangibles

19.2

––

––

19.2

0.21

8.1

––

––

8.1

0.09












Restructuring charges

1.9

––

––

1.9

0.02

––

––

––

––

––












Acquisition-related fair
      value inventory charges

5.2

––

––

5.2

0.06

––

––

––

––

––












Acquisition-related
      transaction costs

1.4

––

––

1.4

0.02

4.2

––

––

4.2

0.05












Contingent consideration
      adjustment

(1.7)

––

––

(1.7)

(0.02)

(5.6)

––

––

(5.6)

(0.06)












Adjustment to net finance
      costs1

––

––

––

––

––

––

9.1

––

9.1

0.10












Tax effect adjustments2

––

––

(7.1)

(7.1)

(0.08)

––

––

(8.7)

(8.7)

(0.10)












Adjusted (non-IFRS)

$    85.8



$    58.8

$ 0.64

$    49.5



$    30.9

$   0.34

1 Adjustments to net finance costs relate to non-recurring finance costs associated with the redemption of the U.S. $250.0 million 6.5% senior notes that were due in 2023.

2 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. For the three months ended March 31, 2021, adjustments to provision for income taxes include $4.4 million of income tax effects on adjustment items that are excluded for the purposes of calculating non-IFRS based adjusted net income, and a non-recurring provision for income taxes amount of $4.3 million primarily related to the impact of tax planning opportunities which were implemented in the fourth quarter of fiscal 2021.

 


Twelve Months Ended March 31, 2022

Twelve Months Ended March 31, 2021




Provision





Provision




Earnings


  for



Earnings


for




from

Finance

income

Net

Basic

from

Finance

income

Net

Basic


operations

costs

taxes

income

EPS

operations

costs

taxes

income

EPS

Reported (IFRS)

$  186.6

$  (32.2)

$  (33.0)

$  121.4

$ 1.32

$  119.6

$  (40.1)

$  (15.4)

$    64.1

$   0.70












Amortization of acquisition-
      related intangibles

63.9

––

––

63.9

0.69

33.5

––

––

33.5

0.37












Restructuring charges

5.9

––

––

5.9

0.07

14.3

––

––

14.3

0.16












Acquisition-related fair
      value inventory charges

25.7

––

––

25.7

0.28

––

––

––

––

––

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