Q1 2025 Earnings Overview
Despite reporting higher revenue, ATS Corp shares dropped 5.94% to $30.99.
A decline in order bookings and restructuring costs appear to have weighed on sentiment, sparking investor concerns.
However, our view remains bullish.
The underlying fundamentals and long-term growth potential of ATS still stand out, and short-term pressures could create an attractive entry point.
If the stock continues to pull back, we would strongly consider doubling our position. This earnings review outlines both the recent results and the reasons behind our continued conviction.
ATS stock remains undervalued relative to its intrinsic worth, with current pricing reflecting near-term volatility rather than long-term fundamentals.
The company’s focus on high-margin markets, operational efficiency, and consistent innovation underpins a solid growth foundation. While macroeconomic pressures and integration risks from acquisitions persist, ATS’s track record shows these challenges are manageable.
For investors with a 3–5 year view, ATS presents a compelling risk-reward setup. Its diversified presence across life sciences, energy, and food & beverage, paired with margin expansion efforts, positions the company to outpace peers in a fragmented industrial market.
Short-term uncertainty clouds the outlook, but the path to sustainable growth and profitability remains clear.
Management’s confidence is supported by trade advantages under the US-Mexico-Canada agreement and steady cross-border revenue flows from Canadian and European operations.
With automation, AI-driven manufacturing, and reshoring trends accelerating, ATS stands out as our top robotics sector pick. We maintain a $60 sell target, and would look to add if shares approach $25.
First quarter highlights:
Revenue: $736.7M, up 6.1% ($42.4M) from last year, supported by a 4.1% lift from acquisitions and a 3.2% positive impact from foreign exchange, partially offset by a 1.2% decline in organic sales.
Net Income: $24.3M (25¢ per share) vs. $35.3M (36¢) last year, with the drop mainly due to higher SG&A, stock-based compensation, and finance costs, partly offset by higher revenues.
Adjusted EPS: 41¢ vs. 50¢ a year ago.
Adjusted EBITDA: $101.5M vs. $106.0M last year.
EBITDA: $95.1M (12.9% margin) compared to $105.0M (15.1%) last year, reflecting $3.6M in stock-based comp revaluation, $2.5M in restructuring charges, and $0.3M in acquisition-related costs.
Order Bookings: $693M, down 15.2% from $817M last year.
Order Backlog: $2.07B, up 9.9% from $1.88B a year ago, providing solid revenue visibility moving forward.
ATS reported solid revenue growth, largely from strategic acquisitions and foreign exchange gains, though organic sales slipped modestly. Profitability was impacted by higher costs and one-time charges, resulting in lower net income and EBITDA margins. While new order bookings were softer, the company’s record-high backlog underpins confidence in its near-term outlook.
ATS’s Diversified Growth Engines
ATS’s business model is built on a portfolio spanning multiple high-growth industries, helping offset headwinds in weaker areas. While the Transportation segment continues to face pressure from slowing EV demand, momentum is building in Life Sciences, Energy, and Food & Beverage, which are now driving the company’s growth story.
Life Sciences
With a $1.2 billion backlog and 20% organic booking growth in Q2, Life Sciences remains a resilient performer. Demand is accelerating for auto-injectors, radiopharma solutions, and wearable glucose monitors products fueled by aging populations and rising chronic disease rates. Strategic acquisitions like BioDot and Heidolph have strengthened ATS’s capabilities in lab automation and sample preparation, positioning it to tap into the $1.2 trillion global biopharma market.
Energy
The nuclear sector is emerging as a powerful long-term growth driver. ATS’s patented Multiflex system for reactor decommissioning and its track record with Candu reactor refurbishments align with the global shift toward cleaner energy. With small modular reactors (SMRs) gaining momentum, ATS has a clear path to participate in the $1.5 trillion nuclear energy market by 2040.
Food & Beverage
Backlog in this segment is up 30%, reflecting rising demand for sustainable, automated processing solutions. ATS’s focus on both primary and secondary processing equipment, reinforced by the Paxium acquisition, leaves it well-positioned to capture share in the $1.8 trillion global food and beverage industry.
While transportation headwinds remain, ATS’s strategic diversification and targeted acquisitions are fueling growth in sectors with substantial long-term market potential.
Strength in Life Sciences, Energy, and Food & Beverage not only offsets current challenges but also sets the stage for sustainable expansion.
ATS reported Order Bookings of $693 million, a 15.2% decline compared to the same period last year. This drop was largely due to a 20.7% decrease in organic bookings, though acquisitions contributed a 3.1% boost and favorable foreign exchange movements added another 2.4%.
The results varied widely across market segments. Life Sciences bookings fell, mainly due to the timing of customer programs. Food & Beverage bookings rose, supported by recent acquisitions, foreign exchange benefits, and organic growth. Consumer Products also saw an increase, driven by the timing of specific customer projects.
Transportation, as anticipated, continued to decline, reflecting weaker EV-related investments from North American customers. Energy, on the other hand, posted gains, thanks largely to the timing of nuclear refurbishment projects.
Looking ahead, ATS’s Life Sciences segment remains a strategic cornerstone. The opportunity pipeline is both strong and diversified, with demand in areas such as pharmaceuticals, radiopharmaceuticals, and medical devices.
The company continues to win opportunities from both new and existing customers, including producers of auto-injectors, wearable diabetes and obesity devices, contact lenses, pre-filled syringes, and automated pharmacy systems.
These wins are increasingly supported by ATS’s integrated capabilities across its business units. While certain laboratory research customers who rely on external funding are becoming more cautious with spending, ATS has not seen a significant slowdown in overall funnel activity.
In Food & Beverage, the opportunity pipeline remains robust. ATS is recognized as a leading solutions provider in global tomato processing, as well as other soft fruit and vegetable processing markets. Broader industry demand is also strong for automated solutions in packaging and secondary processing, areas where ATS continues to invest and expand.
The Consumer Products segment remains steady, though management notes that inflationary pressures and reduced discretionary spending could affect the timing of customer investments.
Even so, stable demand and a diversified set of opportunities position ATS to capture future growth once market conditions improve.
ATS is a leading System Integrator and Original Equipment Manufacturer (OEM) specializing in delivering comprehensive automation solutions to some of the world’s largest companies. The company’s end-to-end offerings span services, software, and hardware, enabling automation of manufacturing processes across diverse sectors, from Pharmaceuticals to Nuclear energy.
In the pre-automation stage, ATS works closely with clients to conduct discovery and analysis, develop concepts, run simulations, and perform total cost of ownership modeling to assess the feasibility and ROI of automation projects.
In the implementation phase, ATS supplies highly specialized equipment including proprietary OEM products and third-party components along with integration, engineering design, prototyping, manufacturing process controls, and equipment design/build services. Following automation, the company provides extensive support through training, process optimization, preventive maintenance, emergency response, spare parts, retooling, retrofits, and equipment relocation services.
The company’s market focus has shifted significantly over the years. In fiscal 2009, the Automotive sector was its largest end market, representing 32% of annual revenue. This changed in fiscal 2010 with the acquisition of Sortimat, which propelled ATS into the Life Sciences sector.
The company continued to grow this segment through additional acquisitions, including Comecer, PA, and SP Industries. By fiscal 2023, Life Sciences had become ATS’s largest end market, contributing roughly 44% of total revenue, with about two-thirds coming from Medical Devices and the remainder from Pharmaceuticals, Chemicals, and Radiopharmaceuticals.
ATS entered the Food & Beverage sector with the acquisition of MARCO in fiscal 2020 for approximately $57 million, later expanding its footprint through the $260 million acquisition of CFT in fiscal 2021.
The company’s offerings here include fresh produce processing, sorting and inspection, as well as beverage processing and filling systems. Growth in this segment is supported by strict government regulations on food safety, the need for consistent product quality, and shifting consumer preferences driven by demographic changes.
The Transportation sector, which accounted for 32% of ATS’s revenue in fiscal 2009, saw its share decline to just 14% by fiscal 2022 before rebounding to 29% today. This rebound reflects a strategic pivot away from the Internal Combustion Engine (ICE) market toward Electric Vehicles (EVs) and aerospace a move that has fueled growth but also contributed to the stock’s current overhang.
Since fiscal 2018, ATS has deployed approximately $1.8 billion in capital toward mergers and acquisitions, completing 23 deals that have enhanced its capabilities and expanded its market reach. Recent acquisitions include:
Paxiom (May 15, 2024, undisclosed)
Avidity Science (Sep 22, 2023, $195M)
Yazzoom (Jul 05, 2023, undisclosed)
Odyssey VC (Jul 01, 2023, undisclosed)
Triad Unlimited (Apr 10, 2023, undisclosed)
IPCOS (Nov 29, 2022, undisclosed)
ZI-ARGUS (Oct 03, 2022, undisclosed)
In the automation industry, M&A plays a critical role in driving growth. The high degree of customer loyalty in this sector makes it difficult for new providers to displace incumbents, meaning acquisitions often serve as the most effective route to enter new markets, gain differentiated capabilities, and deepen customer relationships.
RBC Capital Maintains Outperform on ATS, Lowers Price Target to C$48
JP Morgan Maintains Neutral on ATS, Lowers Price Target to $31
Goldman Sachs Maintains Sell on ATS, Lowers Price Target to $30
