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ATS Reports Second Quarter Fiscal 2022 Results

11/03/2021

CAMBRIDGE, ON, Nov. 3, 2021 /CNW/ - ATS Automation Tooling Systems Inc. (TSX: ATA) ("ATS" or the "Company") today reported its financial results for the three and six months ended September 26, 2021.

Second quarter highlights:

  • Revenues increased 55.6% year over year to $522.1 million.
  • Earnings from operations1 were $55.4 million (10.6% operating margin), compared to $23.4 million (7.0% operating margin) a year ago. Adjusted earnings from operations1 were $70.7 million (13.5% margin), compared to $40.1 million (12.0% margin) a year ago.
  • EBITDA1 was $81.2 million (15.6% EBITDA margin), compared to $41.5 million (12.4% EBITDA margin) a year ago. Adjusted EBITDA1 was $83.3 million (16.0% adjusted EBITDA margin), compared to $49.6 million (14.8% adjusted EBITDA margin) a year ago.
  • Earnings per share were 41 cents basic and diluted compared to 13 cents a year ago.
  • Adjusted basic earnings per share1 were 53 cents compared to 26 cents a year ago.
  • Order Bookings1 were $510 million, 26.6% higher compared to $403 million a year ago.
  • Order Backlog1 increased 35.5% to $1,295 million at September 26, 2021 compared to $956 million a year ago.

"The second quarter featured strong operational results including organic revenue growth, acquisition contributions from CFT and BioDot, margin expansion in line with our plan, solid Order Bookings and record Order Backlog," said Andrew Hider, Chief Executive Officer. "With our Order Backlog providing good revenue visibility, a healthy balance sheet in place to support growth, and our talented and committed workforce pursuing continuous improvement through our ABM, ATS is well positioned to continue creating value."

Year-to-date highlights:

  • Revenues increased 56.4% year over year to $1,032.7 million.
  • Earnings from operations1 were $107.3 million (10.4% operating margin), compared to $44.5 million (6.7% operating margin) in the prior year. Adjusted earnings from operations1 were $136.1 million (13.2% margin), compared to $69.8 million (10.6% margin) in the prior year.
  • EBITDA1 was $157.0 million (15.2% EBITDA margin), compared to $80.7 million (12.2% EBITDA margin) in the prior year. Adjusted EBITDA1 was $161.2 million (15.6% adjusted EBITDA margin), compared to $88.8 million (13.4% adjusted EBITDA margin) a year ago.
  • Earnings per share was 78 cents basic and diluted compared to 23 cents in the prior year.
  • Adjusted basic earnings per share1 were $1.01 compared to 43 cents a year ago.
  • Order Bookings1 were $1,146 million, compared to $728 million a year ago.

Mr. Hider added, "During the quarter, we made acquisitions that strengthen our consulting capabilities in process engineering, enhance our digital offerings, expand our portfolio of precision conveyor technologies and reinforce our position in the food and beverage end-market. We welcome BLSG and NCC to the ATS family. We also entered into an agreement to acquire DF S.r.l. and made good progress with the integration of CFT by rolling out the ATS Business Model and firming up supply chain and cost structure synergies opportunities. Organically, ongoing investments in innovation and product development are furthering our build, grow and expand value creation strategy."

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

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


Three Months
Ended
September 26,
2021

Three Months
Ended
September 27,
2020

Six Mo nths
Ended
September 26,
2021

Six Months
Ended
September 27,
2020

Revenues

$

522.1

$

335.5

$

1,032.7

$

660.4

Earnings from operations

$

55.4

$

23.4

$

107.3

$

44.5

Adjusted earnings from operations1

$

70.7

$

40.1

$

136.1

$

69.8

EBITDA1

$

81.2

$

41.5

$

157.0

$

80.7

Adjusted EBITDA1

$

83.3

$

49.6

$

161.2

$

88.8

Net income

$

38.4

$

11.6

$

72.3

$

21.4

Basic and diluted earnings per share

$

0.41

$

0.13

$

0.78

$

0.23

Adjusted basic earnings per share1

$

0.53

$

0.26

$

1.01

$

0.43

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

Second quarter summary
Fiscal 2022 second quarter revenues were 55.6% or $186.6 million higher than in the corresponding period a year ago and included $120.4 million of revenues earned by acquired companies, most notably $92.5 million from CFT S.p.A ("CFT") which was acquired in the fourth quarter of fiscal 2021. Organic growth, excluding contributions from acquired companies and the impact of foreign exchange fluctuations was $79.9 million, or 23.8% higher than the second quarter of fiscal 2021. Organic revenue growth primarily related to increased activity in the life sciences market which generated higher revenues related to projects for COVID-19 applications and increased activity in other medical device and pharmaceutical projects. Foreign exchange negatively impacted revenues by $13.7 million or 4.1% primarily reflecting the strengthening of the Canadian dollar relative to the U.S. dollar and Euro. Revenues generated from construction contracts increased 58.1% due to a combination of revenues earned by acquired companies of $63.8 million (primarily $61.9 million from CFT), and organic revenue growth. Revenues from services increased 13.0% due to revenues earned by acquired companies of $13.2 million. Revenues from the sale of goods increased 186.1% due primarily to revenues earned by acquired companies of $43.6 million, reflecting increased product sales from acquired companies, primarily CFT and BioDot whose businesses generate a higher percentage of their revenues from product sales.

By market, revenues generated in life sciences increased $77.7 million or 42.7% year over year on higher Order Backlog entering the second quarter of fiscal 2022 compared to the corresponding period in the prior year, including $27.3 million of revenues earned by acquired companies, primarily BioDot and CIM. Revenues generated in food & beverage, which were previously reported under consumer products, increased $91.1 million or 1,124.7%, primarily due to the acquisition of CFT in the fourth quarter of fiscal 2021. CFT generated $91.5 million of food & beverage revenues in the second quarter of fiscal 2022. Revenues in transportation decreased $2.2 million or 3.1%, on lower Order Backlog entering the second quarter of fiscal 2022. Revenues generated in consumer products increased $13.7 million or 26.9%, on higher Order Backlog entering the second quarter of fiscal 2022. Revenues in energy increased $6.3 million or 26.9% due to project timing.

Net income for the second quarter of fiscal 2022 was $38.4 million (41 cents per share basic and diluted), a $26.8 million (or 231.0%) increase compared to $11.6 million (13 cents per share basic and diluted) for the second quarter of fiscal 2021. The increase was primarily a result of contributions from acquired companies of $6.5 million, coupled with organic revenue growth and improved operating margin as a result of the previously implemented reorganization.

Fiscal 2022 second quarter earnings from operations were $55.4 million (10.6% operating margin) compared to $23.4 million (7.0% operating margin) in the second quarter a year ago. Earnings from operations included: $13.2 million related to amortization of acquisition-related intangible assets and $2.1 million of incremental costs related to the Company's acquisition activity, compared to $8.6 million of amortization of acquisition-related intangible assets and $8.1 million of restructuring costs in the comparable period a year ago.

Excluding these items in both quarters, adjusted earnings from operations were $70.7 million (13.5% margin), compared to $40.1 million (12.0% margin) a year ago. Contributions from acquired companies were $12.9 million, with BioDot contributing $10.2 million, and CFT contributing $2.2 million. Higher second quarter fiscal 2022 adjusted earnings from operations reflected higher gross margin due to efficiency gains made in the Company's cost structure as a result of the previously implemented reorganization plans, improved program execution which has reduced the number and impact of Red projects (projects which are not on budget, on schedule or have quality issues), increased revenues from after-sales services as well as a reduction in travel and entry restrictions and temporary closures at customer sites related to COVID-19 compared to a year ago. In the second quarter of fiscal 2022, the Company did not receive recoveries under the Canadian Emergency Wage Subsidy ("CEWS") program compared to recoveries of $3.7 million a year ago.

Depreciation and amortization expense was $25.8 million in the second quarter of fiscal 2022, compared to $18.1 million a year ago, primarily due to the addition of identifiable intangible assets recorded on the acquisitions of CFT and BioDot.

EBITDA was $81.2 million (15.6% EBITDA margin) in the second quarter of fiscal 2022 compared to $41.5 million (12.4% EBITDA margin) in the second quarter of fiscal 2021. EBITDA for the second quarter of fiscal 2022 included $2.1 million of incremental costs related to the Company's acquisition activity, compared to the corresponding period in the prior year which included $8.1 million of restructuring charges. Excluding these costs, adjusted EBITDA was $83.3 million (16.0% adjusted EBITDA margin), compared to $49.6 million (14.8% adjusted EBITDA margin) a year ago. Higher EBITDA margin reflected an improved cost structure and more pronounced pandemic inefficiencies in the same period a year ago.

Order Backlog 1  Continuity
(In millions of dollars)


Three Months
Ended
September 26,
2021

Three Months
Ended
September 27,
2020

Six Months
Ended
September 26,
2021

Six Months
Ended
September 27,
2020

Opening Order Backlog1

$

1,248

$

909

$

1,160

$

942

Revenues

(522)

(336)

(1,033)

(660)

Order Bookings1

510

403

1,146

728

Order Backlog adjustments2

59

(20)

22

(54)

Total

$

1,295

$

956

$

1,295

$

956

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

2 Order Backlog adjustments include incremental Order Backlog of acquired companies ($13 million acquired with NCC, and $24 million acquired with BioDot), foreign exchange adjustments, scope changes and cancellations.

Order Bookings
Second quarter fiscal 2022 Order Bookings were $510 million. The 26.6% year-over-year increase reflected organic growth of 4.5% and 25.0% growth from acquired companies, partially offset by a 2.9% decrease due to foreign exchange rate translation of Order Bookings from foreign-based ATS subsidiaries, primarily reflecting the strengthening of the Canadian dollar relative to the U.S. dollar and Euro. The growth in Order Bookings from acquired companies totalled $101 million, of which CFT contributed $79 million. By market, Order Bookings in life sciences were flat. Order Bookings in food & beverage increased due to the addition of CFT. Order Bookings in transportation increased due to an EV program win and timing of customer orders. Order Bookings in consumer products decreased due to timing of customer projects. Order Bookings in energy increased due to timing of customer projects, primarily in the nuclear market.

Second quarter fiscal 2022 book-to-bill ratio1 was 0.98:1, compared to 1.20:1 in the corresponding period a year ago. Book-to-bill ratio for the six months ended September 26, 2021 was 1.11:1, compared to 1.10:1 in the corresponding period a year ago.

Order Backlog
At September 26 2021, Order Backlog was $1,295 million, 35.5% higher than at September 27, 2020. Order Backlog growth was primarily driven by higher Order Bookings in fiscal 2022 in all end markets, and Order Backlog from acquired businesses. Foreign exchange rate changes positively impacted the translation of Order Backlog from foreign-based ATS subsidiaries by approximately 2.4% in the first six months of fiscal 2022, primarily reflecting the weakening of the Canadian dollar relative to the U.S. dollar and Euro.

Outlook
The Company's funnel (which includes customer requests for proposal and ATS identified customer opportunities) remains significant; however, the timing to convert opportunities into Order Bookings may be extended as some customers manage their responses to the pandemic by delaying planned project timing.

By market, the life sciences funnel remains robust as a result of strong activity in medical devices, pharmaceuticals and radiopharmaceuticals, and augmented by some opportunities related to the fight against COVID-19. Funnel activity in food & beverage is robust and with the addition of CFT, the Company has increased exposure to opportunities in this market. In transportation, the funnel largely includes strategic opportunities related to electric vehicles. Funnel activity in energy is stable and comprised of some longer-term opportunities. Funnel activity in consumer products has improved; however, management expects some customers to remain cautious in deploying capital in the current economic environment. Order Backlog of $1,295 million will help mitigate 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 third quarter of fiscal 2022, management expects the conversion of Order Backlog to revenues to be in the 35% to 40% range. This estimate was calculated based on the combination of management's estimate based on current projects which comprise Order Backlog and historical Order Backlog conversion data.

The Company's approach to the market and 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. The revenue of the Company in a given period is dependent on a combination of the volume of outstanding projects the Company is contracted to and the size and duration of those projects, and is driven by 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 continues to achieve revenue growth organically and by identifying strategic acquisition opportunities that can provide access to attractive end-markets. 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 cycle 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 13.2% in the first six months of fiscal 2022. 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 the ongoing pursuit of continuous improvement in all business activities through the ABM. 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, prolonged disruptions or further cost increases could impact the timing and progress of the Company's margin expansion efforts and the timing of revenue recognition. Achieving the 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 assumptions to the achievement of the margin target in future periods).

The Company continues to make progress in line with its plans to integrate acquired businesses, and expects to realize cost and revenue synergies consistent with announced integration plans. In the short-term, BioDot has benefitted from increased volumes related to specific COVID-19 applications, which the Company expects to diminish over time. With respect to the integration of CFT, and pursuant to its strategy of improving business performance, the Company is implementing a reorganization plan which will include the consolidation of certain subsidiaries in order to improve CFT's efficiency and cost structure. Management expects to incur restructuring costs of approximately $4 million, expensed during the third and fourth quarters of fiscal 2022.

COVID-19 resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures, which included the implementation of travel restrictions, quarantine periods and physical distancing requirements have affected economies and disrupted business operations for ATS and its customers. Vaccination programs are underway and generally restrictions are being easing across most geographies served by the Company. However, there is ongoing uncertainty regarding potential new COVID-19 variants, and as a result it is difficult to predict the duration or severity of the pandemic or its affect on the business, financial results and conditions of the Company.

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.

Quarterly Conference Call
ATS will host a conference call and webcast at 8:30 a.m. eastern on Wednesday, November 3, 2021 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 November 10, 2021) by dialing (416) 764-8677 and entering passcode 774356 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 5,000 people at 28 manufacturing facilities and over 50 offices in North America, Europe, Southeast Asia and China.

Consolidated Revenues
(In millions of dollars)

Revenues by type

Three Months
Ended
September 26,
2021

Three Months
Ended
September 27,
2020

Six Months
Ended
September 26,
2021

Six Months
Ended
September 27,
2020

Revenues from construction contracts

$

326.7

$

206.7

$

669.7

$

419.7

Services rendered

113.0

100.0

213.5

186.7

Sale of goods

82.4

28.8

149.5

54.0

Total revenues

$

522.1

$

335.5

$

1,032.7

$

660.4






Revenues by market

Three Months
Ended
September 26,
2021

Three Months
Ended
September 27,
2020

Six Months
Ended
September 26,
2021

Six Months
Ended
September 27,
2020

Life Sciences

$

259.6

$

181.9

$

490.2

$

363.4

Food & Beverage

99.2

8.1

213.2

15.2

Transportation

69.0

71.2

144.1

138.3

Consumer Products

64.6

50.9

126.1

92.0

Energy

29.7

23.4

59.1

51.5

Total revenues

$

522.1

$

335.5

$

1,032.7

$

660.4

Consolidated Operating Results
(In millions of dollars)


Three Months
Ended
September 26,
2021

Three Months
Ended
September 27,
2020

Six Months
Ended
September 26,
2021

Six Months
Ended
September 27,
2020

Earnings from operations

$

55.4

$

23.4

$

107.3

$

44.5

Amortization of acquisition-related intangible assets

13.2

8.6

24.6

17.2

Restructuring charges

––

8.1

––

8.1

Acquisition-related transaction costs

2.1

––

4.2

––

Adjusted earnings from operations1

$

70.7

$

40.1

$

136.1

$

69.8

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







Three Months
Ended
September 26,
2021

Three Months
Ended
September 27,
2020

Six Months
Ended
September 26,
2021

Six Months
Ended
September 27,
2020

Earnings from operations

$

55.4

$

23.4

$

107.3

$

44.5

Depreciation and amortization

25.8

18.1

49.7

36.2

EBITDA1

$

81.2

$

41.5

$

157.0

$

80.7

Restructuring charges

––

8.1

––

8.1

Acquisition-related transaction costs

2.1

––

4.2

––

Adjusted EBITDA1

$

83.3

$

49.6

$

161.2

$

88.8

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

Order Backlog by Market
(In millions of dollars)

As at

September 26,
2021

September 27,
2020 

Life Sciences

$

778

$

580

Food & Beverage

143

11

Transportation

190

183

Consumer Products

96

83

Energy

88

99

Total

$

1,295

$

956

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

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


Three Months
Ended
September 26,
2021

Three Months
Ended
September 27,
2020

Six Months
Ended
September 26,
2021

Six Months
Ended
September 27,
2020

Adjusted EBITDA

$

83.3

$

49.6

$

161.2

$

88.8

Acquisition-related transaction costs

2.1

––

4.2

––

Restructuring charges

––

8.1

––

8.1

EBITDA

$

81.2

$

41.5

$

157.0

$

80.7

Less: depreciation and amortization expense

25.8

18.1

49.7

36.2

Earnings from operations

$

55.4

$

23.4

$

107.3

$

44.5

Less: net finance costs

7.2

8.0

14.6

16.2

Provision for income taxes

9.8

3.8

20.4

6.9

Net income

$

38.4

$

11.6

$

72.3

$

21.4

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 September 26, 2021

Three Months Ended September 27, 2020


IFRS

Adjustments

Adjusted
(non-IFRS)

IFRS

Adjustments

Adjusted
(non-IFRS)

Earnings from operations

$

55.4

$

––

$

55.4

$

23.4

$

––

$

23.4

Acquisition-related transaction costs

––

2.1

2.1

––

––

––

Amortization of acquisition-







related intangible assets

––

13.2

13.2

––

8.6

8.6

Restructuring charges

––

––

––

––

8.1

8.1


$

55.4

$

15.3

$

70.7

$

23.4

$

16.7

$

40.1

Less: net finance costs

$

7.2

$

––

$

7.2

$

8.0

$

––

$

8.0

Income before income taxes

$

48.2

$

15.3

$

63.5

$

15.4

$

16.7

$

32.1

Provision for income taxes

$

9.8

$

––

$

9.8

$

3.8

$

––

$

3.8

Adjustment to provision for







income taxes1

––

4.0

4.0

––

4.5

4.5


$

9.8

$

4.0

$

13.8

$

3.8

$

4.5

$

8.3

Net income 

$

38.4

$

11.3

$

49.7

$

11.6

$

12.2

$

23.8

Basic earnings per share

$

0.41

$

0.12

$

0.53

$

0.13

$

0.13

$

0.26

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


As at

September 26,
2021

March 31,
2021

Accounts receivable

$

414.1

$

285.9

Income tax receivable

5.2

8.2

Contract assets

317.0

272.8

Inventories

144.2

135.0

Deposits, prepaids and other assets

70.6

37.8

Accounts payable and accrued liabilities

(438.3)

(367.3)

Income tax payable

(40.3)

(32.9)

Contract liabilities

(328.8)

(218.3)

Provisions

(25.7)

(29.0)

Non-cash working capital

$

118.0

$

92.2

Trailing six-month revenues annualized

$

2,065.4

$

1,539.2

Working capital %

5.7%

6.0%

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

As at

 September 26,
2021

 March 31,
2021

Cash and cash equivalents

$

181.3

$

187.5

Bank indebtedness

(1.2)

(1.1)

Current portion of lease liabilities

(20.0)

(15.2)

Current portion of long-term debt

(0.0)

(0.1)

Long-term lease liabilities

(61.4)

(57.8)

Long-term debt

(521.6)

(430.6)

Net debt

$

(422.9)

$

(317.3)

Adjusted EBITDA (TTM)

$

273.1

$

200.7

Net Debt to Adjusted EBITDA

1.5x

1.6x

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

(in millions of dollars)

Three Months
Ended
September 26,
2021

Three Months
Ended
September 27,
2020

Six Months
Ended
September 26,
2021

Six Months
Ended
September 27,
2020

Cash flows provided by operating activities

$

55.7

$

20.3

$

104.1

$

67.3

Acquisition of property, plant and equipment

(8.8)

(1.9)

(19.8)

(5.9)

Acquisition of intangible assets

(2.5)

(3.8)

(5.8)

(5.6)

Free cash flow

$

44.4

$

14.6

$

78.5

$

55.8

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

As at

September 26, 2021

March 31, 2021

Cash and cash equivalents

$

181.3

$

187.5

Debt-to-equity ratio1

0.65:1

0.59:1

1 Debt 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
September 26,
2021

Three Months
Ended
September 27,
2020

Six Months
Ended
September 26,
2021

Six Months
Ended
September 27,
2020

Cash flows provided by operating activities

$

55.7

$

20.3

$

104.1

$

67.3

ATS AUTOMATION TOOLING SYSTEMS INC.
Interim Consolidated Statements of Financial Position
(in thousands of Canadian dollars - unaudited)

As at

Note

September 26
2021

March 31
2021





ASSETS




Current assets

11



Cash and cash equivalents


$

181,330

$

187,467

Accounts receivable


414,070

285,947

Income tax receivable


5,223

8,158

Contract assets

17

316,956

272,847

Inventories

5

144,214

134,978

Deposits, prepaids and other assets

6

70,629

37,807



1,132,422

927,204

Non-current assets




Property, plant and equipment


208,799

191,169

Right-of-use assets

7

80,903

72,570

Other assets

8

6,948

5,882

Goodwill


786,227

671,057

Intangible assets


317,934

264,691

Deferred income tax assets


9,024

11,087

Investment tax credit receivable


23,836

52,440



1,433,671

1,268,896

Total assets


$

2,566,093

$

2,196,100





LIABILITIES AND EQUITY




Current liabilities




Bank indebtedness

11

$

1,184

$

1,106

Accounts payable and accrued liabilities


438,307

367,303

Income tax payable


40,324

32,938

Contract liabilities

17

328,846

218,290

Provisions

10

25,666

29,034

Current portion of lease liabilities

7

19,986

15,197

Current portion of long-term debt

11

20

79



854,333

663,947

Non-current liabilities




Employee benefits


33,702

34,110

Long-term lease liabilities

7

61,420

57,764

Long-term debt

11

521,620

430,634

Deferred income tax liabilities


79,443

74,437

Other long-term liabilities

8

24,989

22,548



721,174

619,493

Total liabilities


$

1,575,507

$

1,283,440





Commitments and contingencies

11, 15







EQUITY




Share capital

12

$

529,572

$

526,446

Contributed surplus


11,168

11,170

Accumulated other comprehensive income


63,311

59,830

Retained earnings


368,884

297,818

Equity attributable to shareholders


972,935

895,264

Non-controlling interests


17,651

17,396

Total equity


990,586

912,660

Total liabilities and equity


$

2,566,093

$

2,196,100

See accompanying notes to the interim condensed consolidated financial statements.

ATS AUTOMATION TOOLING SYSTEMS INC.
Interim Consolidated Statements of Income
(in thousands of Canadian dollars, except per share amounts - unaudited)



Three months ended

Six months ended


Note

September 26
2021

September 27
2020

September 26
2021

September 27
2020







Revenues






Revenues from construction contracts


$

326,715

$

206,725

$

669,722

$

419,736

Services rendered


113,050

100,031

213,536

186,660

Sale of goods


82,369

28,776

149,491

54,003







Total revenues

17

522,134

335,532

1,032,749

660,399







Operating costs and expenses






Cost of revenues


369,385

244,308

736,083

489,932

Selling, general and administrative


86,867

58,669

170,062

115,167

Restructuring costs


––

8,147

––

8,147

Stock-based compensation

14

10,507

983

19,280

2,619







Earnings from operations


55,375

23,425

107,324

44,534







Net finance costs

18

7,177

8,037

14,682

16,231







Income before income taxes


48,198

15,388

92,642

28,303







Income tax expense

13

9,819

3,763

20,383

6,924







Net income


$

38,379

$

11,625

$

72,259

$

21,379







Attributable to






Shareholders


$

38,119

$

11,770

$

71,455

$

21,469

Non-controlling interests


260

(145)

804

(90)



$

38,379

$

11,625

$

72,259

$

21,379

Earnings per share






attributable to shareholders






Basic and diluted

19

$

0.41

$

0.13

$

0.78

$

0.23

See accompanying notes to the interim condensed consolidated financial statements.

ATS AUTOMATION TOOLING SYSTEMS INC.
Interim Consolidated Statements of Cash Flows
(in thousands of Canadian dollars - unaudited)



Three months ended

Six months ended


Note

September 26
2021

September 27
2020

September 26
2021

September 27
2020







Operating activities






Net income


$

38,379

$

11,625

$

72,259

$

21,379

Items not involving cash






Depreciation of property, plant and equipment


4,987

3,706

10,046

7,358

Amortization of right-of-use assets

7

5,574

4,130

10,850

8,250

Amortization of intangible assets


15,280

10,294

28,753

20,580

Deferred income taxes

13

(5,948)

(3,750)

(9,079)

(5,343)

Other items not involving cash


4,426

1,527

9,888

859

Stock-based compensation

14

372

175

655

311



63,070

27,707

123,372

53,394

Change in non-cash operating working capital


(7,404)

(7,405)

(19,293)

13,897

Cash flows provided by operating activities


$

55,666

$

20,302

$

104,079

$

67,291







Investing activities






Acquisition of property, plant and equipment


$

(8,826)

$

(1,921)

$

(19,824)

$

(5,918)

Acquisition of intangible assets


(2,537)

(3,814)

(5,809)

(5,555)

Business acquisition, net of cash acquired


(51,392)

––

(166,185)

––

Purchase of non-controlling interest


(590)

––

(675)

––

Proceeds from disposal of property, plant and equipment


101

417

195

3,064

Cash flows used in investing activities


$

(63,244)

$

(5,318)

$

(192,298)

$

(8,409)







Financing activities






Restricted cash


$

––

$

51

$

––

$

––

Bank indebtedness


203

752

56

929

Repayment of long-term debt


(81,860)

(247,444)

(83,069)

(302,479)

Proceeds from long-term debt


56,621

––

171,026

55,080

Proceeds from exercise of stock options


418

1,537

2,469

3,806

Principal lease payments


(5,145)

(3,918)

(10,543)

(7,689)

Cash flows provided by (used in)






financing activities


$

(29,763)

$

(249,022)

$

79,939

$

(250,353)







Effect of exchange rate changes on cash






and cash equivalents


2,231

(1,876)

2,143

(4,531)







Decrease in cash and cash equivalents


(35,110)

(235,914)

(6,137)

(196,002)







Cash and cash equivalents, beginning of period


216,440

398,557

187,467

358,645







Cash and cash equivalents, end of period


$

181,330

$

162,643

$

181,330

$

162,643







Supplemental information






Cash income taxes paid (received)


$

3,408

$

(3,265)

$

8,129

$

(379)

Cash interest paid


$

3,356

$

3,195

$

13,786

$

16,884

See accompanying notes to the interim condensed consolidated financial statements.

Notice to reader: Non-IFRS measures and additional IFRS measures
Throughout this document, management uses certain non-IFRS measures to evaluate the performance of the Company. The terms "operating margin", "EBITDA", "EBITDA margin", "adjusted net income", "adjusted earnings from operations", "adjusted EBITDA", "adjusted EBITDA margin", "adjusted basic earnings per share", "non-cash working capital as a percentage of revenues", "free cash flow", "net debt to adjusted EBITDA", "Order Bookings", "Order Backlog", and "book-to-bill ratio" 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. 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 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 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 EBITDA and adjusted basic earnings per share (including adjusted net income) 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 asses 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 earnings from operations, (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 and (v) free cash flow to its IFRS measure components, in each case for the three- and six-month periods ended September 26, 2021 and September 27, 2020 is contained in this MD&A (see "Reconciliation of Non-IFRS Measures to IFRS Measures"). This MD&A also contains a reconciliation of (i) working capital as a percentage of revenues and (ii) net debt to their IFRS measure components, in each case at both September 26, 2021 and March 31, 2021 (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 six-month periods ended September 26, 2021 and September 27, 2020 is also contained in this MD&A (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"). Such forward-looking statements involve 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. Forward-looking statements include all disclosure regarding possible events, conditions or results of operations that is based on assumptions about future economic conditions and courses of action. Forward-looking statements may also include, without limitation, any statement relating to future events, conditions or circumstances. ATS cautions you not to place undue reliance upon any such forward-looking statements, which speak only as of the date they are made.

Forward-looking statements relate to, among other things: the strategic framework; the Company's strategy to expand organically and through acquisition; the ATS Business Model ("ABM"); conversion of opportunities into Order Bookings; the Company's Order Backlog partially mitigating the impact of variable Order Bookings; rate of Order Backlog conversion; the potential impact of the Company's approach to market and timing of customer decisions on Order Bookings, performance period, and timing of revenue recognition; expected benefits with respect to the Company's efforts to expand its services revenues; Company's goal of expanding its adjusted earnings from operations margin to 15% (the "margin target") over the long term and potential impact of COVID-19; expectation of synergies from integration of acquired businesses; expectation in relation to future business volume at BioDot; timing and amount of restructuring costs; non-cash working capital levels as a percentage of revenues; expectation in relation to meeting liquidity and funding requirements for investments; potential to use leverage to support growth strategy; the potential impact of COVID-19 and government emergency measures; expected timing of closing of DF acquisition; expected capital expenditures for fiscal 2022; and the Company's belief with respect to the outcome of certain lawsuits, claims and contingencies. 

The risks and uncertainties that may affect forward-looking statements include, among others: the progression of COVID-19 and its impacts on the Company's ability to operate its assets, including the possible shut-down of facilities due to COVID-19 outbreaks; the severity and duration of the COVID-19 pandemic in all jurisdictions where the Company conducts its business; the nature and extent of government imposed restrictions on travel and business activities and the nature, extent, and applicability of government assistance programs, in both cases related to the COVID-19 pandemic, as applicable in all jurisdictions where the Company conducts its business; the impact of the COVID-19 pandemic on the Company's employees, customers, and suppliers; impact of COVID-19 on the global economy; general market performance including capital market conditions and availability and cost of credit; performance of the markets that ATS serves; foreign currency and exchange risk; the relative strength of the Canadian dollar; impact of factors such as increased pricing pressure, increased cost of 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, or to raise, through debt or equity, or otherwise have available, required capital; that some or all of the sales funnel is not converted to Order Bookings due to competitive factors or failure to meet customer needs; timing of customer decisions related to large enterprise programs and potential for negative impact associated with any cancellations or non-performance in relation thereto; variations in the amount of Order Backlog completed in any given quarter; that the Company is not successful in growing its service offering or that expected benefits are not realized; the margin target is not a projection or forecast, but a management objective and there is no certainty that the Company will achieve a 15% margin target in the near or longer term; 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; that future business volumes at BioDot are other than as expected; that the restructuring plan is not implemented as anticipated, takes longer than anticipated, and/or does not achieve the anticipated benefits, resulting in delays, increased costs, and/or lower than expected improvements to operating performance; 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; that closing of the DF acquisition is delayed or prohibited as a result of the completion of regulatory filing process; 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; that one or more customers, or other entities with which the Company has contracted, experience insolvency or bankruptcy with resulting delays, costs or losses to the Company; political, labour or supplier disruptions; the development of superior or alternative technologies to those developed by ATS; the success of competitors with greater capital and resources in exploiting their technology; market risk for developing technologies; risks relating to legal proceedings to which ATS is or may become a party; exposure to product and/or professional liability claims; risks associated with greater than anticipated tax liabilities or expenses; and other risks detailed from time to time in ATS' filings with Canadian provincial securities regulators. Forward-looking statements are based on management's current plans, estimates, projections, beliefs and opinions, and other than as required by applicable securities laws, ATS does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change.

SOURCE ATS Automation Tooling Systems Inc.

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