ATS Corporation Common Shares

Welcome to the ATS Corporation third quarter conference call and webcast. This call is being recorded on February 7th, 2024 at 8.30 a.m. Eastern Time. Following the presentation, we will conduct a question and answer session. I'll now turn the call over to David Gallison, Head of Investor Relations at ATS.

Thank you, Operator, and good morning, everyone. On the call today are Andrew Heider, Chief Executive Officer of ATS, and Ryan McLeod, Chief Financial Officer. Please note that our remarks today are accompanied by a slide deck, which can be viewed via our webcast and available at atsautomation.com. We caution that the statements made on the webcast and conference 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, David. Good morning, everyone, and thank you for joining us.

Today, we reported strong third quarter organic revenue growth, good contributions from recent acquisitions, and adjusted earnings in line with our expectations as we built on the momentum achieved in the first half of the year. We completed the acquisition of Avidity, which further expands our life sciences products and services offerings. It's complementary to our existing businesses. At the beginning of Q4, our PA Solutions Group completed the acquisition of Ataka, an Italian-based automation integrator with a focus on primary processing and pharmaceuticals. Avedity and Ataka are the most recent examples of how we use acquisitions to drive our strategy and evolve our portfolio. We are pleased to welcome both teams to ATS. Now, I will update you on the business and our markets, and then Ryan will provide his financial report. Starting with our financial value drivers. Order bookings for the quarter were $668 million. supported by organic growth in life sciences and strong performance in food and beverage. The underlying trends driving demand for ATS solutions remain favorable. Q3 revenues were $752 million, up 16% from Q3 last year, including organic growth of 9%. Adjusted earnings from operations in Q3 were $101 million. up 17% versus Q3 last year. Moving to our outlook, our backlog held strong at over $1.9 billion. By market, our life sciences backlog is up 10% compared to Q3 last year at a record $875 million, supported by wins in key areas, including auto injectors and contact lenses. we remain focused on opportunities to provide expanded or integrated solutions to our customers. For example, we secured a new order as a result of an innovative offering that includes BioDots dispensing technology and SuperTrac smart conveyance technology as part of a diagnostic cartridge assembly system. Our life sciences opportunity funnel remains strong supported by market growth, including increased consumer demand for auto injectors driven by GLP-1 drugs. In transportation, backlog was $564 million, down 36% compared to Q3 last year, reflecting ongoing execution of large programs won in the last fiscal year, along with expected variability in program awards in this market. We are working with one of our OEM customers to support their revised timing on a portion of their existing program. While the near-term market for electric vehicles remains dynamic as OEMs look to lower platform costs and align capacity to end market demand, the long-term fundamentals remain intact and support demand for our solutions. Our transportation funnel is strong. and reflects diversified, long-term opportunities to support our customers. With ATS's proven ability to partner with customers by providing flexible solutions, we are well positioned as the EV market continues to evolve. In food and beverage, Q3 bookings were strong as expected, and our ending backlog was 207 million. we successfully secured our first IoT order for a tomato processing line. Our food and beverage businesses are focused on innovation and customer experience, including aftermarket service, as we expand our offerings to our customers. In energy, our funnel remains strong and is expected to provide opportunities for both refurbishment of existing nuclear reactors and investment in new reactors providing sustainable, clean energy. ATS has the experience, specialized skills, and proven track record to support customers with their energy initiatives. In consumer products, our funnel is stable. However, customers are continuing to evaluate their investments in the current economic climate, which may impact the timing of some opportunities. On after sales services, our consistent investment in the strategic area has included developing our digital solutions. As these solutions evolve, we are putting ourselves in a position to provide performance insights through our connected asset value chain and support our shift towards providing higher value services on both ATS and non-ATS equipment. During the quarter, we also secured a synergy win with Triad and our life sciences business to identify OEE improvement opportunities for a key customer. On our digital offerings across the automation value chain, our funnel is strong and we remain focused on developing our capabilities, utilizing an integrated architecture to help our customers collect and analyze data in an efficient manner to drive performance. During the quarter, a global pharma customer awarded ATS a contract to build their IoT platform for data exchange with one of their major clients. On supply chain, lead times and material cost pressures continue to challenge in some areas of the business, which our teams consistently work to offset. to the use of our supply chain levers and ABM tools, while increasingly leveraging digital tools to drive insights and opportunities. ABM activity and engagement remains strong, and we measure and monitor our success to identify areas for ongoing improvement and deployment of our tools across the organization. During the quarter, we hosted our ABM Global Conference with a focus on ATS business model principles, processes, and tools to achieve impact on our value drivers. On M&A, we continue to expand our portfolio and our integration efforts with Ability and Ataka are underway and progressing according to plan. Our M&A funnel remains active, healthy, and diversified across all target sizes. We remain disciplined in our approach and assessment of each target. On ESG, ATS Scientific Products earned a silver medal as part of the Ecovados Sustainability Program, an improvement from bronze last year. This award is a testament to the SP team's commitment to promoting sustainable practices and reducing our environmental impact. Additionally, Avidity recently launched the world's first water platform system with reusable cartridges that helps customers reduce their environmental footprint. We consistently work to identify ways to demonstrate our commitment to ESG principles and priorities across the organization, as well for our customers. On innovation, we remain focused on strategically investing capital to create solutions that drive returns for our customers. And a few highlights for the quarter. In life sciences, our co-mature team developed a new software product for use by customers in the therapeutic radiopharma market, specifically to allow nuclear medicine departments to link dose preparation information directly to central hospital data systems. On Symphony, our AETS Innovation Center continues to develop new solutions for auto-injector device assembly. allowing for threaded components to be connected together at very high speeds and accuracy. In food and beverage, COMAC announced the launch of a 3D scanning vision system that helps to automate and speed up the inspection and sorting of kegs prior to them being filled. And to drive our effort, ATS hosted its first ever Global Innovation Summit in November, which included over 50 of ATS's top innovators with the purpose of sharing technologies, innovation trends, and opportunities to accelerate technology development, including incorporating AI in their innovation approach and how we operate daily. In summary, our Q3 performance included strong revenue and earnings growth. Our opportunity funnel is well diversified. Our strategic acquisitions are performing to plan, and we remain confident in our ability to continue our trajectory in creating shareholder value. We are pleased to see ATS recognized once again as one of Waterloo Region's top employers. ATS was founded in the Waterloo, Ontario region over 45 years ago. And today, our team members continue to bring their best every day to serve our customers and grow our business. We remain guided by the ABM as our playbook as we deliver on our shared purpose to create solutions that positively impact lives around the world. Now, I will turn the call over to Ryan. Ryan, over to you. Thank you, Andrew.