ATS Reports Third Quarter Fiscal 2023 Results

CAMBRIDGE, ON, Feb. 9, 2023 /CNW/ - ATS Corporation (TSX: ATS) ("ATS" or the "Company") today reported its financial results for the three and nine months ended January 1, 2023.

Third quarter highlights:

• Revenues increased 18.3% year over year to $647.0 million.
• Net Income was $29.2 million compared to $23.3 million a year ago.
• Basic earnings per share were 32 cents, up from 26 cents a year ago.
• Adjusted basic earnings per share¹ were 52 cents, no change year over year.
• Order Bookings¹ were $979 million, 45.9% higher compared to $671 million a year ago.
• Order Backlog¹ increased 45.3% to $2,143 million compared to $1,475 million a year ago.

"ATS is proud to report another record quarter of Order Bookings, Order Backlog and revenues earned while serving our global customer base. Adjusted earnings were in line with our expectations, and as anticipated, cash generation improved non-cash working capital¹ to 13% of revenue," said Andrew Hider, Chief Executive Officer. "This performance demonstrates the need for our enabling solutions, the strength of our strategy and an unwavering commitment to the ATS Business Model despite continued supply chain challenges."

Year-to-date highlights:

• Revenues increased 16.9% year over year to $1,846.6 million.
• Net Income increased 20.4% year over year to $98.1 million.
• Basic earnings per share increased 21.6% year over year to $1.07.
• Adjusted basic earnings per share¹ increased 8.5% year over year to $1.66.
• Order Bookings¹ were $2,518 million, compared to $1,817 million a year ago.

Mr. Hider added: "In the quarter, we achieved strong organic growth, announced two acquisitions and made further progress on both current integrations and our previously announced plan to enhance our global cost structure and efficiency. In recognition of our standing as a larger and more technologically advanced organization, we rebranded to ATS Corporation and made additional commitments to ESG in our new Sustainability report. Looking ahead, with record Order Backlog, we have a strong and extended platform of mission critical work on hand for customers and will employ the ABM to drive continuous improvement."

¹ Non-IFRS measure: see "Notice to Reader: Non-IFRS Measures and Additional IFRS Measures".

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

	Three Months Ended January 1, 2023		Three Months Ended December 26, 2021		Variance	Nine Months Ended January 1, 2023		Nine Months Ended December 26, 2021		Variance
Revenues	$	647.0	$	546.8	18.3 %	$	1,846.6	$	1,579.6	16.9 %
Net income	$	29.2	$	23.3	25.3 %	$	98.1	$	81.5	20.4 %
Adjusted earnings from operations^1	$	80.6	$	70.4	14.5 %	$	243.2	$	206.7	17.7 %
Adjusted earnings from operations margin^1		12.5 %		12.9 %	(42)bps		13.2 %		13.1 %	8bps
Adjusted EBITDA^1	$	95.1	$	83.5	13.9 %	$	284.7	$	244.9	16.3 %
Adjusted EBITDA margin^1		14.7 %		15.3 %	(57)bps		15.4 %		15.5 %	(9)bps
Basic earnings per share	$	0.32	$	0.26	23.1 %	$	1.07	$	0.88	21.6 %
Adjusted basic earnings per share^1	$	0.52	$	0.52	— %	$	1.66	$	1.53	8.5 %
Order Bookings^1	$	979.0	$	671.0	45.9 %	$	2,518.0	$	1,817.0	38.6 %

As At	January 1   2023		December 26   2021		Variance
Order Backlog^1	$	2,143	$	1,475	45.3 %

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

Third quarter summary
Fiscal 2023 third quarter revenues were 18.3% or $100.2 million higher than in the corresponding period a year ago. Growth reflected year-over-year organic revenue growth (growth excluding contributions from acquired companies and foreign exchange translation) of $52.4 million or 9.6%, and revenues earned by acquired companies of $41.0 million, most notably $39.2 million from SP Industries, Inc. ("SP"), which was acquired in the third quarter of fiscal 2022. Foreign exchange translation positively impacted revenues by $6.8 million or 1.2%, primarily reflecting the strengthening of the U.S. dollar relative to the Canadian dollar, partially offset by the strengthening of the Canadian dollar relative to the Euro. Revenues generated from construction contracts increased 26.3% or $87.8 million due to a combination of organic revenue growth and revenues earned by acquired companies of $7.4 million. Revenues from services decreased 8.6% or $11.7 million primarily due to project timing, partially offset by revenues earned by acquired companies of $6.7 million. Revenues from the sale of goods increased 31.5% or $24.1 million due to revenues earned by acquired companies, most notably $27.0 million from SP, which generates a higher percentage of its revenues from product sales.

By market, revenues generated in life sciences decreased $2.3 million or 0.8% year over year. This was the result of project timing, partially offset by revenues earned from acquisitions totalling $41.0 million, primarily SP contributions of $39.2 million. Revenues in transportation increased $90.5 million or 127.3% on higher Order Backlog entering the third quarter of fiscal 2023, driven primarily by previously announced EV Order Bookings of U.S. $237.0 million. Revenues generated in food & beverage increased $1.9 million or 2.2% due to timing of projects. Revenues generated in consumer products increased $13.8 million or 24.6% on higher Order Backlog entering the third quarter of fiscal 2023. Revenues in energy decreased $3.7 million or 13.9% due to lower Order Backlog entering the third quarter of fiscal 2023.

Revenues for the nine months ended January 1, 2023 were 16.9% or $267.0 million higher than in the corresponding period a year ago and included $196.9 million of revenues earned by acquired companies, most notably $157.2 million from SP. Organic revenue growth, excluding contributions from acquired companies and the impact of foreign exchange fluctuations, was $99.8 million or 6.3% higher than the corresponding period in the prior year. Organic revenue growth was primarily related to activity in transportation, driven by EV work, as well as increases in consumer products. Foreign exchange translation negatively impacted revenues by $29.7 million or 1.9%, primarily reflecting the strengthening of the Canadian dollar relative to the Euro, partially offset by the strengthening of the U.S. dollar relative to the Canadian dollar. Revenues generated from construction contracts increased 15.5% or $155.6 million due to organic revenue growth combined with revenues earned by acquired companies totalling $43.8 million, primarily $26.0 million from SP. Revenues from services increased 1.5% or $5.4 million due to revenues earned by acquired companies of $31.6 million, most notably $19.6 million from SP, partially offset by reductions due to timing of several large service programs completed in the prior year and $15.4 million of foreign exchange translation impact. Revenues from the sale of goods increased 46.9% or $106.0 million due to $123.8 million of product and spare parts sales earned by acquired companies, primarily $112.5 million from SP, which generates a higher percentage of its revenues from product sales, offset by $6.8 million of foreign exchange translation impact.

By market, fiscal 2023 year-to-date revenues from life sciences increased $88.8 million or 11.1% due to contributions from acquired companies of $179.8 million, partially offset by lower revenues due to project timing and negative foreign exchange translation of $16.3 million. Revenues in transportation increased $163.9 million or 76.2% due to higher Order Backlog entering the year, revenues earned on previously announced large EV Order Bookings and the timing of project performance. Revenues generated in food & beverage decreased $27.6 million or 9.2% due primarily to negative foreign exchange translation impact of $20.0 million. Revenues generated in consumer products increased $40.7 million or 22.3% on contributions from acquired companies of $8.4 million and higher Order Backlog entering the fiscal year. Revenues in energy increased $1.2 million or 1.4% due to project timing.

Net income for the third quarter of fiscal 2023 was $29.2 million (32 cents per share basic), compared to $23.3 million (26 cents per share basic) for the third quarter of fiscal 2022. The increase reflected higher revenues and decreased stock-based compensation, partially offset by increased selling, general and administrative ("SG&A") and finance costs. Adjusted basic earnings per share were 52 cents compared to 52 cents in the third quarter of fiscal 2022 (see "Reconciliation of Non-IFRS Measures to IFRS Measures").

Net income for the nine months ended January 1, 2023 was $98.1 million ($1.07 per share basic), a $16.6 million (or 20.4%) increase compared to $81.5 million (88 cents per share basic) for the corresponding period a year ago. The increase was primarily the result of higher revenues and decreased stock-based compensation expense, partially offset by increases in SG&A and finance costs. Adjusted basic earnings per share were $1.66 in the nine months ended January 1, 2023 compared to $1.53 in the corresponding period a year ago (see "Reconciliation of Non-IFRS Measures to IFRS Measures").

Depreciation and amortization expense was $27.9 million in the third quarter of fiscal 2023, compared to $29.8 million a year ago.

EBITDA was $83.9 million (13.0% EBITDA margin) in the third quarter of fiscal 2023 compared to $68.0 million (12.4% EBITDA margin) in the third quarter of fiscal 2022. EBITDA for the third quarter of fiscal 2023 included $10.5 million of restructuring charges and $0.7 million of incremental costs related to the Company's acquisition activity. EBITDA for the corresponding period in the prior year included $6.3 million of incremental costs related to acquisition activity, $4.1 million of restructuring charges and $5.1 million of acquisition-related inventory fair value changes. Excluding these costs, adjusted EBITDA was $95.1 million (14.7% adjusted EBITDA margin), compared to $83.5 million (15.3% adjusted EBITDA margin) a year ago. Lower adjusted EBITDA margin reflected lower gross margins. EBITDA margin is a non-IFRS ratio - see "Non-IFRS and Other Financial Measures."

Depreciation and amortization expense was $91.6 million for the first nine months of fiscal 2023, compared to $82.9 million for the corresponding period a year ago, primarily due to the addition of identifiable intangible assets recorded on the acquisition of SP.

EBITDA was $262.2 million (14.2% EBITDA margin) in the first nine months of fiscal 2023 compared to $209.7 million (13.3% EBITDA margin) in the corresponding period a year ago. EBITDA for the first nine months of fiscal 2023 included $1.6 million of incremental costs related to the Company's acquisition activity, $11.7 million of restructuring charges and $9.2 million of acquisition-related inventory fair value charges. EBITDA in the corresponding period a year ago included $10.6 million of incremental costs related to the Company's acquisition activity, $4.1 million of restructuring charges and $20.5 million of acquisition-related inventory fair value charges. Excluding these costs in both periods, adjusted EBITDA was $284.7 million (15.4% adjusted EBITDA margin), compared to $244.9 million (15.5% adjusted EBITDA margin) a year ago. Lower adjusted EBITDA margin reflected lower gross margins.

Order Backlog Continuity
(In millions of dollars)

	Three Months Ended January 1, 2023		Three Months Ended December 26, 2021		Nine Months Ended January 1, 2023		Nine Months Ended December 26, 2021
Opening Order Backlog	$               1,793		$                1,295		$               1,438		$                1,160
Revenues	(647)		(547)		(1,847)		(1,580)
Order Bookings	979		671		2,518		1,817
Order Backlog adjustments^1	18		56		34		78
Total	$               2,143		$                1,475		$               2,143		$                1,475

¹Order Backlog adjustments include incremental Order Backlog of acquired companies ($11M acquired with IPCOS in the three and nine months ended January 1, 2023, $104 million acquired with SP included in the three and nine months ended December 26, 2021, $13 million acquired with NCC Automated Systems, Inc. ("NCC"), and $24 million acquired with BioDot, Inc. ("BioDot") in the nine months ended December 26, 2021), foreign exchange adjustments, scope changes and cancellations.

Order Bookings
Third quarter fiscal 2023 Order Bookings were $979 million. The 45.9% year-over-year increase reflected organic growth of 38.2% and 5.8% growth from acquired companies, in addition to a 1.9% increase due to foreign exchange rate translation of Order Bookings from foreign-based ATS subsidiaries, primarily reflecting the strengthening of the U.S. dollar relative to the Canadian dollar, partially offset by the strengthening of the Canadian Dollar relative to the Euro. Order Bookings from acquired companies totalled $39.1 million, of which SP contributed $35.8 million. By market, Order Bookings in life sciences increased compared to the prior-year period, primarily due to a combination of organic growth in Order Bookings and $39.1 million of Order Bookings generated by acquired companies, of which SP contributed $35.8 million. Order Bookings in transportation increased due to the previously announced U.S. $221.3 million in Order Bookings from an existing global automotive customer to move towards fully automated battery assembly systems for their North American manufacturing operations. These Order Bookings are expected to be executed over the next 18-24 months and are in addition to U.S. $237.0 million of Order Bookings from the same customer announced in the first and second quarters. Subsequent to the end of the third fiscal quarter, the Company announced it has received Order Bookings of U.S. $119.9 million for the continued capacity expansion of automated battery module and pack assembly systems in North America as part of the same enterprise program. Order Bookings in food & beverage decreased due to the timing of projects. Order Bookings in consumer products decreased primarily due to a large project award that occurred in the third quarter of fiscal 2022. Order Bookings in energy decreased due to timing of customer projects.

Trailing twelve month book-to-bill ratio at January 1, 2023 was 1.29:1. Book-to-bill ratio is a supplementary financial measure - see "Non-IFRS and Other Financial Measures."

Backlog
At January 1, 2023, Order Backlog was $2,143 million, 45.3% higher than at December 26, 2021. Order Backlog growth was primarily driven by higher Order Bookings in fiscal 2023 within the transportation market, primarily from EV Order Bookings.

Outlook
The life sciences opportunity funnel remains strong as a result of solid activity across all submarkets, including medical devices, pharmaceuticals and radiopharmaceuticals. Management continues to see opportunities with both new and existing customers as a result of demand for key technologies and integrated solutions offerings. In transportation, the funnel largely includes strategic opportunities related to electric vehicles, as the global automotive industry continues to pivot production towards supporting growth in the electrical vehicle market. Management believes the Company's automated EV battery pack and assembly capabilities have positioned ATS well to be a critical partner within the industry. Funnel activity in food & beverage remains strong, particularly in the produce processing and keg-filling spaces, and the Company starts the fourth quarter with its highest Order Backlog since entering the food & beverage market. Funnel activity in consumer products is stable. Funnel activity in energy is stable and includes some longer-term opportunities in the nuclear industry. Across all markets, customers are exercising normal caution in their approach to investment and spending, and management has not observed a broad change in customer behaviour. Funnel growth in markets where environmental, social and governance ("ESG") requirements are an increasing focus for customers — including grid battery storage, 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, address a shortage of skilled workers or combat high labour costs also provide future opportunities for ATS to pursue. Management believes that the underlying trends driving customer demand for ATS solutions including rising labour costs, labour shortages, production onshoring or reshoring and the need for scalable, high-quality, energy-efficient production remain favourable.

Order Backlog of $2,143 million is expected to help 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, including several in the early stages of execution. This has extended the average period over which the Company expects to convert its Order Backlog to revenues, providing the Company with longer visibility. As a result of the extended average project conversion period, combined with higher Order Backlog, the Company's recent quarterly Order Backlog conversion percentage has decreased. In the fourth quarter of fiscal 2023, management expects the conversion of Order Backlog to revenues to be in the 29% to 32% range. This estimate is calculated each quarter based on management's assessment of project schedules across all customer contracts, expectations for faster-turn product and services revenues, expected delivery timing of third-party equipment and operational capacity.

The timing of customer decisions on larger opportunities is expected to cause variability in Order Bookings from quarter to quarter. 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 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 customers' capital expenditure cycles.

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. 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 acquired companies, and expects to realize cost and revenue synergies consistent with announced integration plans.

In the short term, ATS is working to address disruptions to global supply chains and cost pressures due to inflation, which are leading to longer lead times and cost increases on certain raw materials and components. To date, the Company has mitigated many of these supply chain disruptions through the use of alternative supply sources and savings on materials not affected by cost increases. However, continued cost increases and prolonged disruptions have impacted the timing and progress of the Company's margin expansion efforts as there have been short-term impacts on margins, as well as impacts on the timing of revenue recognition. Achieving and sustaining management's margin target assumes that the Company will successfully implement its initiatives, and that such initiatives will result in improvements to its adjusted earnings from operations margin that offset the pressures resulting from disruptions in the global supply chain (see "Forward-Looking Statements" for a description of the risks underlying the achievement of the margin target in future periods).  

With the ongoing macroeconomic and energy risks in Europe, in addition to other macroeconomic concerns, the Company has increased its focus on its exposure to European customers and continues to monitor customer credit overall. The Company's European divisions have a strong global presence, healthy funnels, and diversified revenue streams, with current Order Backlog in Europe representing 27.2% of total Order Backlog. The Company regularly monitors customers for changes in credit risk. The Company does not believe that any single industry or geographic region represents significant credit risk.

In the short term, the Company expects non-cash working capital to remain above 10% as programs progress through milestones. Over the long term, the Company generally expects to continue investing in non-cash working capital to support growth with fluctuations expected on a quarter-over-quarter basis. The Company's long-term goal is to maintain its investment in non-cash working capital as a percentage of annualized revenues below 15%. However, given the size and timing of milestone payments for certain large EV programs, the Company could see its working capital exceed 15% of annualized revenues in certain periods. 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 to 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."

Reorganization Activity
The Company regularly reviews its operations to ensure alignment with market opportunities and to achieve optimal structural and cost efficiencies. As a part of this review, the Company identified and previously announced an opportunity to improve the cost structure of the organization through targeted reductions which will primarily impact certain management positions. These actions started in the second quarter of fiscal 2023 and continued in the third quarter. Year-to-date restructuring expenses recorded in relation to the reorganization were $11.7 million, with $10.5 million recorded in the third quarter. The majority of the remaining actions are expected to be completed during the fourth quarter of fiscal 2023. The total estimated cost of these activities is between $20.0 million and $25.0 million with a payback period of approximately 18 months.

Quarterly Conference Call
ATS will host a conference call and webcast at 8:30 a.m. eastern on Thursday, February 9, 2023 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 [phone] 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 February 16, 2023) by dialing [phone] and entering passcode 629793 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 solutions 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, transportation, food & beverage, 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. On November 21, 2022, the name of the Corporation was changed from "ATS Automation Tooling Systems Inc." to "ATS Corporation" and the ticker symbol for the Common Shares on the TSX was changed from "ATA" to "ATS". Visit us at www.atsautomation.com.

Consolidated Revenues
(In millions of dollars)

Revenues by type	Three Months Ended January 1, 2023		Three Months Ended December 26, 2021		Nine Months Ended January 1, 2023		Nine Months Ended December 26, 2021
Revenues from construction contracts	$               422.2		$               334.4		$            1,159.7		$             1,004.1
Services rendered	124.2		135.9		354.9		349.5
Sale of goods	100.6		76.5		332.0		226.0
Total revenues	$               647.0		$               546.8		$            1,846.6		$             1,579.6

Revenues by market	Three Months Ended January 1, 2023		Three Months Ended December 26, 2021^1		Nine Months Ended January 1, 2023		Nine Months Ended December 26, 2021^1
Life Sciences	$               304.1		$               306.4		$               885.4		$               796.6
Transportation	161.6		71.1		379.1		215.2
Food & Beverage	88.5		86.6		272.3		299.9
Consumer Products	69.9		56.1		222.9		182.2
Energy	22.9		26.6		86.9		85.7
Total revenues	$               647.0		$               546.8		$            1,846.6		$             1,579.6

¹ $3.9 million of revenues earned by SP in the three months ended December 26, 2021 have been reclassified from Consumer Products to Life Sciences and are reflected in the revenues for the three and nine months ended December 26, 2021 above.

Consolidated Operating Results
(In millions of dollars)

	Three Months Ended January 1, 2023		Three Months Ended December 26, 2021		Nine Months Ended January 1, 2023		Nine Months Ended December 26, 2021
Earnings from operations	$                 56.0		$                 38.2		$               170.6		$               126.8
Amortization of acquisition-related intangible assets	13.4		16.7		50.1		44.7
Acquisition-related transaction costs	0.7		6.3		1.6		10.6
Acquisition-related inventory fair value charges	—		5.1		9.2		20.5
Restructuring charges	10.5		4.1		11.7		4.1
Adjusted earnings from operations^1	$                 80.6		$                 70.4		$               243.2		$               206.7

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

	Three Months Ended January 1, 2023		Three Months Ended December 26, 2021		Nine Months Ended January 1, 2023		Nine Months Ended December 26, 2021
Earnings from operations	$                 56.0		$                 38.2		$               170.6		$               126.8
Depreciation and amortization	27.9		29.8		91.6		82.9
EBITDA^1	$                 83.9		$                 68.0		$               262.2		$               209.7
Restructuring charges	10.5		4.1		11.7		4.1
Acquisition-related transaction costs	0.7		6.3		1.6		10.6
Acquisition-related inventory fair value charges	—		5.1		9.2		20.5
Adjusted EBITDA^1	$                 95.1		$                 83.5		$               284.7		$               244.9

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

Order Backlog by Market
(In millions of dollars)

As at	January 1, 2023		December 26, 2021*
Life Sciences	$                  793		$                  805
Transportation	887		197
Food & Beverage	208		195
Consumer Products	162		165
Energy	93		113
Total	$               2,143		$                1,475

* $15.0 million of Order Backlog related to SP as at December 26, 2021 has been reclassified from Consumer Products to Life Sciences.

¹ The increase in transportation Order Backlog was primarily driven by EV Order Bookings. 

Reconciliation of Non-IFRS Measures to IFRS Measures
(In millions of dollars, except per share data)

The following table reconciles adjusted EBITDA and EBITDA to the most directly comparable IFRS measure (net income):  

	Three Months Ended January 1, 2023		Three Months Ended December 26, 2021		Nine Months Ended January 1, 2023		Nine Months Ended December 26, 2021
Adjusted EBITDA	$                 95.1		$                 83.5		$               284.7		$               244.9
Less: restructuring charges	10.5		4.1		11.7		4.1
Less: acquisition-related transaction costs	0.7		6.3		1.6		10.6
Less: acquisition-related inventory fair value charges	—		5.1		9.2		20.5
EBITDA	$                 83.9		$                 68.0		$               262.2		$               209.7
Less: depreciation and amortization expense	27.9		29.8		91.6		82.9
Earnings from operations	$                 56.0		$                 38.2		$               170.6		$               126.8
Less: net finance costs	19.7		7.9		43.9		22.6
Less: provision for income taxes	7.1		7.0		28.6		22.7
Net income	$                 29.2		$                 23.3		$                 98.1		$                 81.5

The following tables reconcile 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 January 1, 2023										Three Months Ended December 26, 2021
	Earnings from Operations		Finance Costs		Provision for Income Taxes		Net Income		Basic EPS		Earnings from Operations		Finance Costs		Provision for Income Taxes		Net Income		Basic EPS
Reported (IFRS)	$             56.0		$          (19.7)		$             (7.1)		$        29.2		$     0.32		$             38.2		$             (7.9)		$             (7.0)		$        23.3		$     0.26
Amortization of acquisition-      related intangibles	13.4		—		—		13.4		0.15		16.7		—		—		16.7		0.18
Restructuring charges	10.5		—		—		10.5		0.11		4.1		—		—		4.1		0.04
Acquisition-related            inventory      fair value charges	—		—		—		—		—		5.1		—		—		5.1		0.05
Acquisition-related      transaction costs	0.7		—		—		0.7		0.01		6.3		—		—		6.3		0.07
Tax effect adjustments^1	—		—		(6.4)		(6.4)		(0.07)		—		—		(8.0)		(8.0)		(0.08)
Adjusted (non-IFRS)	$             80.6						$        47.4		$     0.52		$             70.4						$        47.5		$     0.52

¹ 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.

	Nine Months Ended January 1, 2023										Nine Months Ended December 26, 2021
	Earnings from Operations		Finance Costs		Provision for Income Taxes		Net Income		Basic EPS		Earnings from Operations		Finance Costs		Provision for Income Taxes		Net Income		Basic EPS
Reported (IFRS)	$          170.6		$          (43.9)		$          (28.6)		$        98.1		$     1.07		$          126.8		$           (22.6)		$           (22.7)		$        81.5		$     0.88
Amortization of acquisition-      related intangibles	50.1		—		—		50.1		0.54		44.7		—		—		44.7		0.48
Restructuring charges	11.7		—		—		11.7		0.13		4.1		—		—		4.1		0.05
Acquisition-related fair      value      inventory charges	9.2		—		—		9.2		0.10		20.5		—		—		20.5		0.22
Acquisition-related      transaction costs	1.6		—		—		1.6		0.02		10.6		—		—		10.6		0.12
Tax effect of the above      adjustments^1	—		—		(18.3)		(18.3)		(0.20)		—		—		(20.2)		(20.2)		(0.22)
Adjusted (non-IFRS)	$          243.2						$     152.4		$     1.66		$          206.7						$      141.2		$     1.53

¹ 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.

The following table reconciles organic revenue to the most directly comparable IFRS measure (revenue):

	Three Months Ended January 1, 2023		Three Months Ended December 26, 2021		Nine Months Ended January 1, 2023		Nine Months Ended December 26, 2021
Organic revenue	$               599.2		$               449.2		$            1,679.4		$             1,280.2
Revenues of acquired companies	41.0		114.6		196.9		349.7
Impact of foreign exchange rate changes	6.8		(17.0)		(29.7)		(50.3)
Total revenue	$               647.0		$               546.8		$            1,846.6		$             1,579.6
Organic revenue growth	9.6 %				6.3 %

The following table reconciles non-cash working capital as a percentage of revenues to the most directly comparable IFRS measures:

As at	January 1 2023		March 31 2022
Accounts receivable	$               384.7		$               348.6
Income tax receivable	7.2		9.0
Contract assets	502.5		360.8
Inventories	251.9		207.9
Deposits, prepaids and other assets	89.0		84.8
Accounts payable and accrued liabilities	(541.0)		(501.5)
Income tax payable	(35.5)		(48.6)
Contract liabilities	(311.3)		(248.3)
Provisions	(25.7)		(24.8)
Non-cash working capital	$               321.8		$               187.9
Trailing six-month revenues annualized	$            2,471.8		$             2,300.0
Working capital %	13.0 %		8.2 %

The following table reconciles net debt to adjusted EBITDA to the most directly comparable IFRS measures: 

As at	January 1 2023		March 31 2022
Cash and cash equivalents	$              302.1		$         135.3
Bank indebtedness	(12.0)		(1.8)
Current portion of lease liabilities	(20.1)		(20.0)
Current portion of long-term debt	(0.0)		(0.0)
Long-term lease liabilities	(57.9)		(62.9)
Long-term debt	(1,305.9)		(1,016.7)
Net Debt	$          (1,093.8)		$             (966.1)
Adjusted EBITDA (TTM)	$              383.8		$              343.9
Net Debt to Adjusted EBITDA	2.8x		2.8x

The following table reconciles free cash flow to the most directly comparable IFRS measures:

(in millions of dollars)	Three Months Ended January 1, 2023		Three Months Ended December 26, 2021		Nine Months Ended January 1, 2023		Nine Months Ended December 26, 2021
Cash flows provided by operating activities	$               116.1		$                 82.1		$                 46.4		$               186.2
Acquisition of property, plant and equipment	(18.6)		(8.1)		(32.7)		(27.9)
Acquisition of intangible assets	(6.9)		(3.2)		(14.1)		(9.1)
Free cash flow	$                 90.6		$                 70.8		$                 (0.4)		$               149.2

INVESTMENTS, LIQUIDITY, CASH FLOW AND FINANCIAL RESOURCES
(In millions of dollars, except ratios)

As at	January 1, 2023		March 31, 2022
Cash and cash equivalents	$               302.1		$               135.3
Debt-to-equity ratio^1	1.35:1		1.14:1

¹Debt is calculated as bank indebtedness, long-term debt and lease liabilities. Equity is calculated as total equity less accumulated other comprehensive income.

	Three Months Ended January 1, 2023		Three Months Ended December 26, 2021		Nine Months Ended January 1, 2023		Nine Months Ended December 26, 2021
Cash, beginning of period	$                 95.2		$               181.3		$               135.3		$               187.5
Total cash provided by (used in):
Operating activities	116.1		82.1		46.4		186.2
Investing activities	(43.1)		(589.5)		(42.1)		(781.1)
Financing activities	130.9		527.3		160.8		606.5
Net foreign exchange difference	3.0		(1.1)		1.7		1.0
Cash, end of period	$               302.1		$               200.1		$               302.1		$               200.1

 

ATS CORPORATION
Interim Condensed Consolidated Statements of Financial Position
(in thousands of Canadian dollars - unaudited)

As at		January 1 2023		March 31 2022
ASSETS
Current assets
Cash and cash equivalents		$       302,145		$       135,282
Accounts receivable		384,668		348,631
Income tax receivable		7,161		9,038
Contract assets		502,509		360,820
Inventories		251,858		207,873
Deposits, prepaids and other assets		89,023		84,818
		1,537,364		1,146,462
Non-current assets
Property, plant and equipment		245,710		222,123
Right-of-use assets		76,623		81,289
Other assets		16,108		18,631
Goodwill		1,097,812		1,024,790
Intangible assets		575,499		568,180
Deferred income tax assets		4,811		7,922
		2,016,563		1,922,935
Total assets		$    3,553,927		$    3,069,397
LIABILITIES AND EQUITY
Current liabilities
Bank indebtedness		$         12,018		$           1,766
Accounts payable and accrued liabilities		540,995		501,465
Income tax payable		35,476		48,617
Contract liabilities		311,327		248,329
Provisions		25,741		24,825
Current portion of lease liabilities		20,059		19,964
Current portion of long-term debt		43		43
		945,659		845,009
Non-current liabilities
Employee benefits		30,577		29,132
Long-term lease liabilities		57,924		62,856
Long-term debt		1,305,927		1,016,668
Deferred income tax liabilities		122,343		126,114
Other long-term liabilities		9,731		3,935
		1,526,502		1,238,705
Total liabilities		$    2,472,161		$    2,083,714
EQUITY
Share capital		$       516,775		$       530,241
Contributed surplus		14,853		11,734
Accumulated other comprehensive income		48,933		22,848
Retained earnings		497,606		416,773
Equity attributable to shareholders		1,078,167		981,596
Non-controlling interests		3,599		4,087
Total equity		1,081,766		985,683
Total liabilities and equity		$    3,553,927		$    3,069,397

Please refer to complete Interim Condensed Consolidated Financial Statements for supplemental notes which can be found on the Company's profile on SEDAR at www.sedar.com and on the Company's website at www.atsautomation.com.

ATS CORPORATION
Interim Condensed Consolidated Statements of Income
(in thousands of Canadian dollars, except per share amounts - unaudited)

		Three months ended					Nine months ended
		January 1 2023			December 26 2021		January 1 2023			December 26 2021
Revenues
Revenues from construction contracts		$         422,171			$         334,369		$      1,159,668			$       1,004,091
Services rendered		124,255			135,921		354,884			349,457
Sale of goods		100,622			76,514		332,041			226,005
Total revenues		647,048			546,804		1,846,593			1,579,553
Operating costs and expenses
Cost of revenues		463,362			388,862		1,331,691			1,140,247
Selling, general and administrative		107,283			102,927		321,304			276,451
Restructuring costs		10,465			4,056		11,736			4,056
Stock-based compensation		9,933			12,727		11,253			32,007
Earnings from operations		56,005			38,232		170,609			126,792
Net finance costs		19,733			7,869		43,900			22,551
Income before income taxes		36,272			30,363		126,709			104,241
Income tax expense		7,060			7,049		28,574			22,700
Net income		$           29,212			$           23,314		$           98,135			$           81,541
Attributable to
Shareholders		$           29,266			$           23,857		$           97,976			$           81,280
Non-controlling interests		(54)			(543)		159			261
		$           29,212			$           23,314		$           98,135			$           81,541
Earnings per share attributable to shareholders
Basic		$               0.32			$               0.26		$               1.07			$               0.88
Diluted		$               0.32			$               0.26		$               1.06			$               0.88

Please refer to complete Interim Condensed Consolidated Financial Statements for supplemental notes which can be found on the Company's profile on SEDAR at www.sedar.com and on the Company's website at www.atsautomation.com.

ATS CORPORATION
Interim Condensed Consolidated Statements of Cash Flows
(in thousands of Canadian dollars - unaudited)

		Three months ended					Nine months ended
	Note	January 1 2023			December 26 2021		January 1 2023			December 26 2021
Operating activities
Net income		$           29,212			$           23,314		$           98,135			$           81,541
Items not involving cash
Depreciation of property, plant and equipment		6,469			5,362		18,568			15,408
Amortization of right-of-use assets	7	6,006			5,454		17,407			16,304
Amortization of intangible assets		15,428			18,949		55,620			51,164
Deferred income taxes	13	1,033			(25,800)		(13,192)			(39,611)
Other items not involving cash		(518)			26,682		8,029			31,142
Stock-based compensation	14	1,508			338		3,637			993
Change in non-cash operating working capital		57,011			27,777		(141,809)			29,214
Cash flows provided by operating activities		$         116,149			$           82,076		$           46,395			$         186,155
Investing activities
Acquisition of property, plant and equipment		$         (18,588)			$            (8,102)		$         (32,723)			$          (27,926)
Acquisition of intangible assets		(6,902)			(3,245)		(14,143)			(9,054)
Business acquisition, net of cash acquired	4	(18,163)			(578,166)		(18,163)			(744,351)
Settlement of cross-currency interest rate swap instrument		—			—		21,493			—
Proceeds from disposal of property, plant and equipment		525			34		1,431			229
Cash flows used in investing activities		$         (43,128)			$        (589,479)		$         (42,105)			$        (781,102)
Financing activities
Bank indebtedness		$           (6,345)			$              (176)		$             9,549			$              (120)
Repayment of long-term debt		(181,897)			(44,291)		(196,199)			(127,360)
Proceeds from long-term debt		325,270			590,503		395,559			761,529
Proceeds from exercise of stock options		338			407		1,942			2,876
Purchase of non-controlling interest	4	—			(14,437)		(452)			(15,112)
Repurchase of common shares	12	—			—		(21,071)			—
Acquisition of shares held in trust	14	(1,184)			—		(12,365)			—
Principal lease payments		(5,306)			(4,768)		(16,113)			(15,311)
Cash flows provided by financing activities		$         130,876			$         527,238		$         160,850			$         606,502
Effect of exchange rate changes on cash and cash equivalents		3,085			(1,093)		1,723			1,050
Increase in cash and cash equivalents		206,982			18,742		166,863			12,605
Cash and cash equivalents, beginning of period		95,163			181,330		135,282			187,467
Cash and cash equivalents, end of period		$         302,145			$         200,072		$         302,145			$         200,072
Supplemental information
Cash income taxes paid		$             8,931			$           14,112		$           36,680			$           22,241
Cash interest paid		$           23,066			$           11,754		$           46,019			$           25,540

Please refer to complete Interim Condensed Consolidated Financial Statements for supplemental notes which can be found on the Company's profile on SEDAR at www.sedar.com and on the Company's website at www.atsautomation.com.

Notice to Reader: Non-IFRS Measures and Additional IFRS Measures
Throughout this document, management uses certain non-IFRS financial measures, non-IFRS ratios and supplementary financial measures to evaluate the performance of the Company.

The terms "EBITDA", "organic revenue", "adjusted net income", "adjusted earnings from operations", "adjusted EBITDA", "adjusted basic earnings per share", and "free cash flow", are non-IFRS financial measures, "EBITDA margin", "adjusted earnings from operations margin", "adjusted EBITDA margin", "organic revenue growth", "non-cash working capital as a percentage of revenues", and "net debt to adjusted EBITDA" are non-IFRS ratios, and "operating margin", "Order Bookings", "Order Backlog", and "book-to-bill ratio" are supplementary financial measures, all of which do not have any standardized meaning prescribed within IFRS and therefore may not be comparable to similar measures presented by other companies. Such measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. In addition, management uses "earnings from operations", which is an additional IFRS measure, to evaluate the performance of the Company. Earnings from operations is presented on the Company's consolidated statements of income as net income excluding income tax expense and net finance costs. Operating margin is an expression of the Company's earnings from operations as a percentage of revenues. EBITDA is defined as earnings from operations excluding depreciation and amortization. EBITDA margin is an expression of the Company's EBITDA as a percentage of revenues. Organic revenue is defined as revenues in the stated period excluding revenues from acquired companies for which the acquired company was not a part of the consolidated group in the comparable period. Organic revenue growth compares the stated period organic revenue with the reported revenue of the comparable prior period. Adjusted earnings from operations is defined as earnings from operations before items excluded from management's internal analysis of operating results, such as amortization expense of acquisition-related intangible assets, acquisition-related transaction and integration costs, restructuring charges, and certain other adjustments which would be non-recurring in nature ("adjustment items"). Adjusted earnings from operations margin is an expression of the Company's adjusted earnings from operations as a percentage of revenues. Adjusted EBITDA is defined as adjusted earnings from operations excluding depreciation and amortization. Adjusted EBITDA margin is an expression of the entity's adjusted EBITDA as a percentage of revenues. Adjusted basic earnings per share is defined as adjusted net income on a basic per share basis, where adjusted net income is defined as adjusted earnings from operations less net finance costs and income tax expense, plus tax effects of adjustment items and adjusted for other significant items of a non-recurring nature. Non-cash working capital as a percentage of revenues is defined as the sum of accounts receivable, contract assets, inventories, deposits, prepaids and other assets, less accounts payable, accrued liabilities, provisions and contract liabilities divided by the trailing two fiscal quarter revenues annualized. Free cash flow is defined as cash provided by operating activities less property, plant and equipment and intangible asset expenditures. Net debt to adjusted EBITDA is the ratio of the net debt of the Company (cash and cash equivalents less bank indebtedness, long-term debt, and lease liabilities) to adjusted EBITDA. Order Bookings represent new orders for the supply of automation systems, services and products that management believes are firm. Order Backlog is the estimated unearned portion of revenues on customer contracts that are in process and have not been completed at the specified date. Book to bill ratio is a measure of Order Bookings compared to revenue.

Operating margin, adjusted earnings from operations, EBITDA, EBITDA margin, adjusted EBITDA, and adjusted EBITDA margin are used by the Company to evaluate the performance of its operations. Management believes that earnings from operations is an important indicator in measuring the performance of the Company's operations on a pre-tax basis and without consideration as to how the Company finances its operations. Management believes that organic revenue and organic revenue growth, when considered with IFRS measures, allow the Company to better measure the Corporation's performance and evaluate long-term performance trends. Organic revenue growth also facilitates easier comparisons of the Corporation's performance with prior and future periods and relative comparisons to its peers. Management believes that EBITDA and adjusted EBITDA are important indicators of the Company's ability to generate operating cash flows to fund continued investment in its operations. Management believes that adjusted earnings from operations, adjusted earnings from operations margin, adjusted EBITDA, adjusted net income and adjusted basic earnings per share are important measures to increase comparability of performance between periods. The adjustment items used by management to arrive at these metrics are not considered to be indicative of the business' ongoing operating performance. Management uses the measure "non-cash working capital as a percentage of revenues" to assess overall liquidity. Free cash flow is used by the Company to measure cash flow from operations after investment in property, plant and equipment and intangible assets. Management uses net debt to adjusted EBITDA as a measurement of leverage of the Company. Order Bookings provide an indication of the Company's ability to secure new orders for work during a specified period, while Order Backlog provides a measure of the value of Order Bookings that have not been completed at a specified point in time. Both Order Bookings and Order Backlog are indicators of future revenues that the Company expects to generate based on contracts that management believes to be firm. Book to bill ratio is used to measure the Company's ability and timeliness to convert Order Bookings into revenues. Management believes that ATS shareholders and potential investors in ATS use these additional IFRS measures and non-IFRS financial measures in making investment decisions and measuring operational results. 

A reconciliation of (i) adjusted EBITDA and EBITDA to net income, (ii) adjusted earnings from operations to earnings from operations, (iii) adjusted net income to net income, (iv) adjusted basic earnings per share to basic earnings per share (v) free cash flow to its IFRS measure components and (vi) organic revenue to revenue, in each case for the three- and nine-month periods ended January 1, 2023 and December 26, 2021 is contained in this news release (see "Reconciliation of Non-IFRS Measures to IFRS Measures"). This news release also contains a reconciliation of (i) non-cash working capital as a percentage of revenues and (ii) net debt to their IFRS measure components, in each case at both January 1, 2023 and March 31, 2022 (see "Reconciliation of Non-IFRS Measures to IFRS Measures"). A reconciliation of Order Bookings and Order Backlog to total Company revenues for the three- and nine-month periods ended January 1, 2023 and December 26, 2021 is also contained in this news release (see "Order Backlog Continuity").

Note to Readers: Forward-Looking Statements 
This news release, and results of operations of ATS contains certain statements that may constitute forward-looking information within the meaning of applicable securities laws ("forward-looking statements"). Forward-looking statements include all statements that are not historical facts regarding possible events, conditions or results of operations that ATS believes, expects or anticipates will or may occur in the future, including, but not limited to: the value creation strategy; the Company's strategy to expand organically and through acquisition, and the expected benefits to be derived; the ATS Business Model ("ABM"); completion of the ZIA acquisition; the announcement of new Order Bookings and the anticipated timeline for delivery; potential impacts on the time to convert opportunities into Order Bookings; various market opportunities for ATS; the Company's Order Backlog partially mitigating the impact of variable Order Bookings; rate of Order Backlog conversion to revenue; the potential impact of timing of customer decisions on Order Bookings, performance period, and timing of revenue recognition; expected benefits with respect to the Company's efforts to grow its product portfolio and after-sale service revenues; Company's goal of expanding its adjusted earnings from operations margin over the long term and potential impact of supply chain disruptions; expectation of synergies from integration of acquired companies; non-cash working capital levels as a percentage of revenues in the short-term and the long-term; expectation in relation to meeting liquidity and funding requirements for investments; potential to use debt or equity financing to support growth strategy; expected results of reorganization activity and their anticipated timeline; expected capital expenditures for fiscal 2023; the Company's belief with respect to the outcome of certain lawsuits, claims and contingencies; and the uncertainty and potential impact on the Company's business and operations due to the current macro-economic environment including the impacts of COVID-19, inflation, supply chain disruptions, interest rate changes, and the war in Ukraine.

Such forward-looking statements are inherently subject to significant known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of ATS, or developments in ATS' business or in its industry, to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements. Important risks, uncertainties and factors that could cause actual results to differ materially from expectations expressed in the forward-looking statements include, but are not limited to, the duration of the COVID-19 pandemic and its impact on the Company, its employees, customers, suppliers and the global economy; impact of regional or global conflicts; general market performance including capital market conditions and availability and cost of credit; performance of the markets that ATS serves; industry challenges in securing the supply of labour, materials, and, in certain jurisdictions, energy sources such as natural gas; impact of inflation; interest rate changes; foreign currency and exchange risk; the relative strength of the Canadian dollar; risks related to customer concentration; risks related to a recession, slowdown, and/or sustained downturn in the economy; impact of factors such as increased pricing pressure, increased cost of energy and supplies, and delays in relation thereto, and possible margin compression; the regulatory and tax environment; inability to successfully expand organically or through acquisition, due to an inability to grow expertise, personnel, and/or facilities at required rates or to identify, negotiate and conclude one or more acquisitions, including the ZIA acquisition, or to raise, through debt or equity, or otherwise have available, required capital; that the ABM is not effective in accomplishing its goals; that the timing of completion of new Order Bookings is other than as expected due to various reasons, including schedule changes or COVID-19 pandemic-related factors, the customer exercising any right to withdraw the Order Booking or to terminate the program in whole or in part prior to its completion, thereby preventing ATS from realizing on the full benefit of the program; that some or all of the sales funnel is not converted to Order Bookings due to competitive factors or failure to meet customer needs; that the market opportunities ATS anticipates do not materialize or that ATS is unable to exploit such opportunities; variations in the amount of Order Backlog completed in any given quarter; timing of customer decisions related to large enterprise programs and potential for negative impact associated with any cancellations or non-performance in relation thereto; that the Company is not successful in growing its product portfolio and/or service offering or that expected benefits are not realized; that efforts to expand adjusted earnings from operations margin over long-term are unsuccessful, due to any number of reasons, including less than anticipated increase in after-sales service revenues or reduced margins attached to those revenues, inability to achieve lower costs through supply chain management, failure to develop, adopt internally, or have customers adopt, standardized platforms and technologies, inability to maintain current cost structure if revenues were to grow, and failure of ABM to impact margins; that acquisitions made are not integrated as quickly or effectively as planned or expected and, as a result, anticipated benefits and synergies are not realized; non-cash working capital as a percentage of revenues operating at a level other than as expected due to reasons, including, the timing and nature of Order Bookings, the timing of payment milestones and payment terms in customer contracts, and delays in customer programs; the failure to realize the savings expected from reorganization activity or within the expected timelines; that capital expenditure targets are increased in the future or the Company experiences cost increases in relation thereto; risk that the ultimate outcome of lawsuits, claims, and contingencies give rise to material liabilities for which no provisions have been recorded; and other risks and uncertainties detailed from time to time in ATS' filings with securities regulators, including, without limitation, the risk factors described in ATS' annual information form for the fiscal year ended March 31, 2022, which are available on the System for Electronic Document Analysis and Retrieval ("SEDAR") and can be accessed at www.sedar.com. ATS has attempted to identify important factors that could cause actual results to materially differ from current expectations, however, there may be other factors that cause actual results to differ materially from such expectations.

Forward-looking statements are necessarily based on a number of estimates, factors and assumptions regarding, among others, management's current plans, estimates, projections, beliefs and opinions; the future performance and results of the Company's business and operations; the assumption of successful implementation of margin improvement initiatives; and general economic conditions and global events, including the COVID-19 pandemic.

Forward-looking statements included herein are only provided to understand management's current expectations relating to future periods and, as such, are not appropriate for any other purpose. Although ATS believes that the expectations reflected in such forward-looking statements are reasonable, such statements involve risks and uncertainties, and ATS cautions you not to place undue reliance upon any such forward-looking statements, which speak only as of the date they are made. ATS does not undertake any obligation to update forward-looking statements contained herein other than as required by law.

SOURCE ATS Corporation

David Galison, Head of Investor Relations, ATS Corporation, 730 Fountain Street North, Cambridge, ON, N3H 4R7, 519-653-4483 x87185, [email protected]