ATS Corporation Common Shares

Good morning ladies and gentlemen and welcome to the ATS Automation first quarter conference call and webcast. This call is being recorded on August 11th 2021 at 8 30 a.m eastern time. Following the presentation we'll conduct a question and answer session. Instructions will be provided at that time for you to queue up for questions. If anyone has difficulties hearing the conference please press star followed by zero for operator assistance I'll now turn the conference over to Shireen Zalhawi, Director of Investor Relations at ATS. Please go ahead.

Thank you, Operator, and good morning, everyone. Your main hosts today are Andrew Hyder, Chief Executive Officer of ATS, and Ryan McLeod, Chief Financial Officer. For those who joined us by phone, our remarks are accompanied by a slide deck, which is available at ATSautomation.com. Before we begin, I am required to provide the following statement respecting forward-looking information, which is made on behalf of ATS and all its representatives on this call. You are cautioned that the oral statements made on this call will contain forward-looking information that involves risks and uncertainties, including those introduced by the COVID-19 pandemic. The actual results could differ materially from a conclusion forecast or projection in the forward-looking information. Certain material factors or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information. Additional information about the material factors that could cause actual results to differ materially from the conclusion forecast or projection in the forward-looking information and the material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information are contained in ATS's filings with the Canadian Provincial Securities Regulators. Now it's my pleasure to turn the call over to Andrew.

Thank you, Shereen. Good morning, ladies and gentlemen, and thank you for joining us. We're pleased to report a strong quarter for ATS, including record order bookings and backlog. With robust organic revenue and good progress on margin expansion, we're building on recent momentum. We continue to execute our M&A agenda and close two acquisitions in the quarter, VowDot and CIM. VowDot is now part of our life sciences group. It expands our capabilities and offerings for this important end market. CIM joins our process automation solutions business and helps expand our customer and geographical reach. We're excited to welcome both businesses to the ATS family. Additionally, CFT, which we acquired late in the fourth quarter, is performing in line with our expectations and the integration is progressing well. Today I will update you on business conditions and then Ryan will provide his report. Starting with our financial value drivers, Q1 revenues were $510 million, up 57% from Q1 last year and up 28% sequentially, driven by the addition of CFT, which closed in late March 2021, as well as broad-based business strength. Organically, revenues grew 28% year-over-year, an improvement that was augmented by the impact COVID-19 had on Q1 revenues last year. Q1 order bookings were $637 million, almost double last year's level and up 38% sequentially. CFT and Biodat contributed approximately a third of order bookings growth versus Q1 last year. And we saw strong bookings across most markets, with large customer awards in life sciences and transportation. Our adjusted EBIT margin for the quarter was 12.8%, representing over 360 basis point of margin expansion versus Q1 of last year, and over 40 basis point of expansion sequentially. Moving to our outlook. Our backlog grew to 1.2 billion at the end of Q1, providing us with good revenue visibility and a solid business foundation for fiscal 2022. As vaccine rollouts picked up pace in a number of our global markets, we're seeing improvement in customer site access and reduced travel restrictions compared to the same period last year. While the situation remains fluid, I'm proud of how our people adapted and our ability to find creative ways to serve our customers. By market, we saw positive conditions in life sciences with strength in key sectors of medical devices, pharma, and radiopharma. We continue to win mandates related to COVID-19 as we help our customers in the fight against the pandemic. This work represented around 10% of our life sciences bookings and 6% of our total bookings in Q1. We're also seeing more traditional non-COVID related opportunities in the funnel as customers revive pre-pandemic investment priorities. Life Sciences represented 64% of our bookings this quarter, and we expect it to remain a key market for APS. In EV, we're seeing robust activity levels from both traditional OEMs and newcomers looking to expand their electrical offerings. We continue to be selective in the opportunities we pursue and won a number of mandates, including a large award in the quarter. Our long track record and proven expertise in battery assembly and test make us a trusted partner as our customers navigate the complexities of evolving battery technologies. We saw strength in food and beverage, and with the addition of CFT, we're now a separate reporting activity in this market. In other areas of consumer, we saw good activity in warehouse automation, while cosmetics still hasn't recovered yet to pre-pandemic levels. In energy, we continue to execute and see opportunities in nuclear for both refurbishment and decommissioning in Canada and globally. On after-sales services, order bookings remained healthy and revenues were up double digits versus Q1 last year and in line with our expectations. We continue to utilize our regional service networks and digital tools to facilitate access to customer sites as we navigate pandemic travel restrictions in some geographies. We see opportunities to expand the aftermarket services footprint to support additional areas of our business and create a better customer experience. To summarize our outlook, this is another quarter of strong order bookings that has led to record order backlog. Our funnel remains healthy, and we're seeing a pickup in customer activity. The pandemic environment continues to introduce some timing and approval uncertainty when it comes to our customers' buying decisions. However, we're encouraged by recent customer demand signals. Moving to the ABM, our continuous improvement playbook. This was another busy quarter for our teams with multiple virtual Kaizens and problem-solving workshops held across the company with a focus on both operational and commercial improvement. A few ABM highlights. We held 15 Kaizens and problem-solving workshops across various ATF divisions. These events drove improvements in multiple areas, including bookings, sales, and operations. One division in our life sciences group used a Kaizen to eliminate approximately 600 hours it spends annually on non-value-added time by improving workflow and shop floor layout. At CFT, we held a workshop aimed at improving the on-time delivery of spare parts. By implementing a daily visual management system, we expect on-time delivery to improve to 90% or better in the next three months from approximately 80% today. Our industrial automation team hosted another joint customer event in Q1 focused on simplifying the process for handling change orders and significantly shortening the length of the process. This is the second collaboration with customers and another positive outcome. We also launched our second global virtual AVM Bootcamp on the back of a similar event in Q4 that received positive company-wide feedback. The camp runs over a six-week period and combines self-paced learning and real-time discussions with ABM leaders. This modified virtual format enables us to continue scaling our training and demonstrates how businesses across ATS are using the ABM to deliver tangible results. On M&A, acquisitions continue to be an important complement to ATS's organic growth. The integration of the CFT acquisition which closed late in the fourth quarter, is progressing well with performance tracking to plan. As you know, CFT scaled up our food and beverage exposure and compliments our other food business, Marco. During the quarter and during this first quarter, we acquired two businesses, BioDot and CIM. BioDot expands our life sciences capabilities in low volume dispensing and enhances our position in the point of care and lab automation on markets. CAM, a system integrated with a focus on industrial automation, adds to our capabilities and expands our customer base and reach in the pharma market. CAM now operates as part of our process automation solutions business. We will continue to cultivate and evaluate acquisition opportunities consistent with our proven strategy. Of course, timing of acquisitions will be variable, and our approach to deploying our balance sheet will be disciplined and strategic. In summary, first quarter results present another proof point of the strength and resiliency of our business. Going forward, our priorities remain unchanged, ensuring the health and safety of our employees, serving our customers well, and creating value for our shareholders. Our strong backlog provides good revenue visibility, while our healthy balance sheet enables us to pursue our M&A playbook when strategic targets arise. Now I will turn the call over to Ryan. Ryan, over to you.