ATS Corporation Common Shares

Good morning, ladies and gentlemen. Welcome to the ATS Automation Third Quarter Conference call and webcast. This call is being recorded on February 2nd, 2022 at 8.30 a.m. Eastern Time. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for questions. If anyone has difficulties during the conference, please press star, followed by zero for operator assistance at any time. I will now turn the call over to Stuart McQuaig, Vice President, General Counsel, ATS.

Thanks, operator, and good morning, everyone. Your main hosts today are Andrew Hyder, Chief Executive Officer of ATS, and Ryan McLeod, Chief Financial Officer. We note that our remarks today are accompanied by a slide deck displayed on the screen in the webcast, and which is also available, including for those joining by phone, at atsautomation.com. We caution that the statements made on the webcast and call may contain forward-looking information, and our cautionary statement regarding such information, including the material factors that could cause actual results to differ materially from the statements, and the material factors or assumptions applied in making the statements are detailed on slide two of the slide deck. Now it's my pleasure to turn the call over to Andrew.

Thank you, Stuart. Good morning, ladies and gentlemen, and thank you for joining us. We're pleased to report another strong quarter for ATS, featuring order bookings, order backlog, and revenue records, and adjusted EBIT margin expansion. Although the pandemic and supply chain disruptions created a challenging and fluid business environment, organic revenue growth was robust. Newly acquired businesses performed a plan and we completed two acquisitions. SP Industries expands our capabilities and offerings throughout the life cycle of pharmaceutical development. DF enhances our offerings and aseptic fill finish. Today, I will update you on our business, and then Ryan will provide his financial report. Starting with our value drivers, Q3 revenues were $547 million, up 48% from Q3 last year, driven by a combination of acquired businesses and strength across our core operations. Organically, revenues grew 22% year-over-year, a positive result that was augmented by the pandemic impact on Q3 revenues in the prior year. Q3 order bookings were a record $671 million, up 54% year-over-year. CFT, BioDot, and SB contributed approximately two-thirds of order bookings growth versus last year. Bookings were strong across most market verticals. with large customer awards in consumer products and transportation. Our adjusted EBIT margin for the quarter was 12.9%, representing margin expansion of over 100 basis points from Q3 of last year. Moving to our outlook. Our backlog grew to a record $1.5 billion at the end of the quarter, providing us with a solid base of business and good revenue visibility. The pandemic situation remains fluid, and we continue to work with our customers and employees to manage the challenges, including newly imposed travel restrictions in certain jurisdictions and supply chain interruptions. Despite the challenges, our teams have done an excellent job to ensure customer needs are met. By market, conditions remain positive in life sciences. good activity in our key sectors of medical devices, pharma, and radiopharma. Today, our funnel is comprised of more traditional, non-COVID-related opportunities. In EV, we continue to see robust activity levels with rapid growth in the battery assembly market. We won several mandates during the quarter, including a large award from a repeat customer. As our customers experience new complexities from evolving battery technologies, our long track record and proven expertise in the battery assembly and test space position ATS as a trusted partner. In food and beverage, our order funnel remains strong, with opportunities in food processing leading the way. In consumer, we're seeing continued activity in warehouse automation. In energy, The market for automated tools and related services for nuclear refurbishment is expanding. The decommissioning market also continues to evolve, and we see prospects in both North America and globally. There are also emerging opportunities in isotope production and small modular reactor markets, as well as grid batteries. On services, order bookings grew. both year-over-year and sequentially. Utilization and expansion of our regional service network coupled with the use of digital support tools have improved our ability to support our customers. In turn, our customers continue to embrace our digital services platform. We see opportunities to expand our aftermarket services footprint and add to our digital capabilities. Operationally, we faced a challenging business environment resulting from global supply chain issues and the pandemic. We've experienced some supplier lead time extensions, and our team has completed several related problem solving events. These challenges are likely to persist in the near term. To summarize our outlook, this quarter included record order bookings, record order backlog, and a robust funnel. were encouraged by recent activity levels. However, global supply chain and labor market dynamics represent a challenge and uncertainty. The situation is actively monitored and countermeasures implemented wherever possible. Moving to the ABM, our continuous improvement playbook. This was another busy quarter with continued emphasis on improving our value drivers. both operationally and commercially. Our linear motion business held the Kaizen to remove waste from a critical assembly process. The Kaizen resulted in a 50% reduction in floor space, lower inventory requirements, and a 20% improvement in cycle time. A life sciences division held the Kaizen on their spur parts order processing. Through collaborative efforts, they were able to improve efficiency by 50%. Our services business held a joint Kaizen with a customer to define requirements for a turnkey training, execution, and spare parts management program. These joint efforts are a great way to provide value to our customers while also strengthening our relationships. We continued to employ our global virtual ABM boot camps on the back of similar successful events in preceding quarters. 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 use the ABM to drive tangible results. On M&A, acquisitions and strategic core markets continue to be an important complement to to ATS's organic growth. During the quarter, we closed two acquisitions, SP being the largest in ATS history. SP is a designer and manufacturer of high-grade biopharma processing equipment, life sciences equipment, and lab apparatus products. SP expands our life sciences capabilities and offerings through the addition of its aseptic and non-aseptic Lyle portfolio. Notably, the combination of ATS and SP will allow us to better support the needs of our customers throughout the life cycle of pharmaceutical development and production. After deploying capital to these latest acquisitions, our balance sheet remains strong. 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, as will the integrations that follow. Of note, we continue to make progress in the integration of previous acquisitions, including CFT, which was acquired last March, Biodot, acquired in June, and NCC, which joined in September. At Biodot, administrative tasks associated with the integration are largely complete, and our efforts are focused on continuing to deploy the ABM playbook. At CFT, we continue to roll out the ATS business model, focus on opportunities to further synergies in our supply chains and cost structures, and completed several ABM activities. These included standard work events, a raw material problem-solving event, and a communication Kaizen, which drove increased awareness and engagement across the business. At ATS, our innovation activities are ongoing as they form part of our expand strategy. In the past quarter, we have completed a number of projects and initiatives that have resulted in the launch of a new high-speed debug camera, GMP testing and certification of our SuperTrac Pharma product, and the development of a new energy management software program that will enable customers to track and reduce their carbon footprint. We're pleased that our acquired company are also innovators. At the recent Chicago Process Expo, our NCC business won the innovation award for the sanitary design of the NCC side drive conveyance system. We have filed a patent for this system, which has multiple applications, including raw and packaged food products. Congratulations to the whole NCC team. Well done. In summary, the results of the quarter and year to date demonstrate the strength and resiliency of our business and portfolio offerings. Record order booking activity reflects the alignment we have with our customers in providing best-in-class solutions. Going forward, We are unwavering in our commitment to protecting and engaging our employees, serving our customers well, and creating value for our shareholders. We will execute on these priorities through the application of the ABM Playbook with the goal of driving continuous improvement in our performance. Our record order backlog provides good revenue visibility, while the healthy balance sheet enables pursuit of organic growth and strategic M&A opportunities. Our objective is to build a great ATS business, and we're making progress every day towards our collective goal. Now, I will turn the call over to Ryan.