ATS NYSE: ATS reported higher fiscal 2026 revenue and adjusted earnings from operations, while outlining a series of restructuring actions aimed at improving margins, cash generation and capital efficiency heading into fiscal 2027.
Chief Executive Officer Doug Wright said full-year revenue and adjusted earnings from operations each grew by approximately 11%, reflecting “solid execution across the platform.” In the fourth quarter, adjusted revenue rose more than 3% from the prior year, while order bookings declined 18%, which management attributed to several large enterprise orders in the prior-year period.
Wright, who joined ATS in January, said his focus is on converting the company’s engineering and automation capabilities into stronger financial performance. He cited margin improvement, free cash flow generation, a higher mix of aftermarket revenue, stronger commercial execution, innovation and better asset utilization as priorities.
Transportation Operations to Be Repositioned
Management said ATS is consolidating businesses previously involved in transportation and shifting capacity toward other areas. Wright said ATS is moving away from large-scale automotive projects and repositioning related capabilities into specialized applications where the company sees stronger differentiation and more attractive returns.
In the financial review portion of the call, management said the transportation changes are expected to remove approximately CAD 50 million of dilutive revenue. ATS recorded CAD 28.3 million of costs in the fourth quarter related to the reorganization, primarily tied to closing out legacy projects. The company expects approximately CAD 5 million of restructuring charges in the first quarter as it completes the operational consolidation.
ATS also expects to finalize the sale of three facilities held for sale during fiscal 2027 and plans to use the proceeds to fund cash costs tied to the reorganization. Management said the company likely will no longer report transportation as a separate market vertical in coming quarters.
The company also recorded CAD 9.8 million of costs related to its previously announced initiative to embed services operations directly into business units. Management said the change is intended to give each business ownership of the full equipment lifecycle and support higher-margin, more predictable revenue.
Fourth-Quarter Results and Backlog
Fourth-quarter order bookings were CAD 704 million, down 18.4% from a year earlier. Management said the prior-year quarter included large project awards in consumer products. ATS ended the quarter with a trailing 12-month book-to-bill ratio of 0.99 to 1.
Adjusted revenue for the fourth quarter was CAD 744 million, up 3.2% from last year. That included organic growth of 1.5% and a 1.7% benefit from foreign exchange translation. On a full-year basis, organic growth was 6%; excluding transportation, organic growth was nearly 14%, management said.
Adjusted earnings from operations were CAD 76.8 million, up 3.4% from the prior-year quarter. Gross margin was 29.4% of adjusted revenue, up 36 basis points, reflecting a higher contribution from services and spare parts. Adjusted earnings per share were CAD 0.36.
ATS ended fiscal 2026 with an order backlog of approximately CAD 2 billion. Life sciences represented CAD 1.1 billion, or 55%, of the backlog. Food and beverage, energy and life sciences — markets management described as more highly regulated — accounted for nearly 80% of total backlog entering fiscal 2027.
Fiscal 2027 Outlook
Management guided for first-quarter revenue of CAD 700 million to CAD 740 million, based on expected backlog conversion and orders booked and billed within the period. For fiscal 2027, ATS expects modest revenue growth, inclusive of the expected step-down in transportation revenue.
Management said life sciences is entering fiscal 2027 with a more normalized backlog after ATS worked through strong fiscal 2025 bookings. The company said this does not reflect a change in underlying life sciences demand or its expectations to outperform chosen markets over time.
ATS expects adjusted earnings from operations margin improvement of 50 to 75 basis points over fiscal 2026 on a full-year basis, supported by reorganization actions and operating discipline. Management said the outlook includes reinvestment of part of the savings into targeted growth areas such as nuclear and radiopharma. Longer term, ATS maintained its adjusted earnings from operations margin target of 15%.
Management also said previously announced tariffs have not had a material impact across the company’s regions. Most exports from Canada to the U.S. continue to fall under USMCA coverage, and revised Section 232 tariffs are not expected to have a significant impact at this time.
End-Market Commentary
Wright said demand in life sciences remains strong, supported by a healthy backlog and diversified funnel. He highlighted radiopharma as a key growth driver, citing growing customer investment across the value chain and expanding use of targeted therapies. ATS recently introduced FLEXLINE, a sterile pharmaceutical production platform designed to integrate key manufacturing steps into a single solution.
On GLP-1 auto-injector equipment, Wright said ATS remains engaged on active programs and continues to support customers as production requirements and delivery formats evolve. During the question-and-answer session, management said auto-injector work remains in the backlog but has declined from prior levels as ATS executes on earlier capacity build-out orders. Wright said he views auto-injectors for GLP-1s and other therapies as a long-term growth market, while acknowledging lumpiness in customer investment decisions.
In energy, ATS said backlog increased approximately 40% year over year, driven particularly by nuclear programs, including refurbishment, life extension and new builds. Wright said ATS remains active with several small modular reactor developers across fuel systems, fuel handling, modular fabrication and waste management.
Food and beverage demand was described as supported by a strong funnel in core processing markets, including tomato and fresh fruit applications. In consumer products, ATS said it continues to see orders across warehouse automation and packaging applications, with stable funnel activity supported by customer interest in automation, efficiency and fulfillment.
Cash Flow, Leverage and Capital Allocation
ATS reported fourth-quarter cash flow from operating activities of CAD 150 million. Non-cash working capital as a percentage of revenue improved to 12.1%, marking the third consecutive quarter of improvement. Management said the company remains focused on disciplined working capital management and overall asset efficiency.
Capital expenditures and intangible investments totaled CAD 25.4 million in the fourth quarter and CAD 76.7 million for the full year. For fiscal 2027, ATS expects CapEx and intangible investment of CAD 70 million to CAD 90 million.
Net debt to adjusted EBITDA ended the fourth quarter at 2.8 times, marking a fourth consecutive quarter of improvement and placing leverage within the company’s target range. Wright said ATS has increased financial flexibility and expects capacity to pursue larger transactions if opportunities meet its standards.
Asked about the relationship between restructuring and acquisitions, Wright said they are “independent swim lanes.” He said restructuring addresses markets that do not fit ATS’s long-term profile, while M&A is focused on future positioning through technology, aftermarket mix, customer growth or regional growth.
Management said recurring revenue finished fiscal 2026 at around one-third of the business, including faster-turn products, aftermarket, spares and related categories. Wright said ATS is working to expand service strategies across business units and sees digital investments, including digital twins, remote diagnostics and machine intelligence, as part of a broader recurring revenue opportunity.
About ATS NYSE: ATS
ATS Corporation NYSE: ATS is a Canada-based global provider of automation and energy solutions. Headquartered in Cambridge, Ontario, the company specializes in the design, engineering and manufacturing of custom automation and test systems, as well as fluid handling and control products. Since its founding in 1978, ATS has focused on delivering integrated hardware and software solutions that help original equipment manufacturers (OEMs) improve efficiency, quality and throughput across a range of industries.
Through its Automation segment, ATS develops bespoke assembly and testing platforms for sectors such as life sciences, consumer electronics, automotive and industrial equipment.
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