ATS NYSE: ATS withdrew its fiscal 2027 goals for modest revenue growth and margin expansion after order delays, particularly for packaging equipment, left the automation company with less time to convert bookings into sales.
The revised outlook came even as ATS reported a 12.7% increase in second-quarter order bookings and a record life sciences backlog. Interim Chief Financial Officer Anne Cybulski said lower revenue and an unfavorable business mix are temporarily offsetting benefits from the company’s cost-cutting program, especially over the next several months.
ATS expects third-quarter revenue of CAD 640 million to CAD 680 million. Cybulski said the forecast reflects expected conversion of existing backlog and orders anticipated to be booked and billed during the quarter.
Bookings rise as revenue and margins fall
For the fiscal second quarter, ATS reported revenue of CAD 666 million, down 8.6% from a year earlier. Cybulski attributed the decline to a more normalized level of GLP-1-related volume and lower activity in businesses outside life sciences. Excluding GLP-1 revenue, life sciences sales increased year over year, she said.
Adjusted earnings from operations fell 27.4% to CAD 57.4 million, while the adjusted operating margin declined to 8.6% from 10.9%. Management attributed the margin pressure primarily to lower volumes and a mix with fewer higher-margin programs. Adjusted earnings per share were CAD 0.27.
Order bookings totaled CAD 827 million, boosted by large enterprise orders in life sciences. Total backlog was approximately CAD 2 billion, including a record CAD 1.2 billion in life sciences. The trailing 12-month book-to-bill ratio was 1.05 to 1.
Chief Executive Officer Doug Wright said radiopharmaceuticals stood out during the quarter, alongside orders for medical device applications. ATS also received a large incremental radiopharma order, he said, without specifying its value.
Wright cautioned that some of the life sciences orders involve longer-dated factory projects. He said it could take another quarter or two before the bookings begin to materially re-energize revenue growth.
Tariffs delayed packaging orders
Wright said Section 338 tariffs introduced in late August delayed customer decisions on packaging systems manufactured in Canada and sold into the United States. He said the impact was concentrated in the packaging consumer business and did not affect life sciences products.
The U.S. announced modifications at the end of October that eliminated the impact on nearly all covered products, according to Wright. He said ATS expects the changes to benefit the company and customers over time, but declined to quantify the potential orders or predict when they would arrive.
Cybulski said the tariff-related delays accounted for a significant portion of the change in the annual outlook. Cyclicality in food and beverage, other customer decision delays and the repositioning of businesses previously focused on transportation also contributed, she said.
Cost program and capital allocation
ATS reiterated its commitment to CAD 65 million to CAD 75 million in annualized savings from its Fixed Cost Transformation Program once completed. Wright said that target is net of investments the company plans to make elsewhere. Cybulski said implementation would continue over the next 15 months, with benefits building as actions are completed.
The company has announced facility closures expected to reduce its square footage by approximately 10%. Actions announced so far will result in a global workforce reduction of 300 to 400 people, including subcontractors, with further adjustments expected as the program progresses.
ATS recorded CAD 21.3 million in restructuring costs during the quarter, about half tied to the transformation program. Wright said the reductions are targeted at underperforming areas, while ATS is adding radiopharma capacity and investing in other growth markets.
During the quarter, ATS repurchased approximately 2.2 million shares for CAD 61 million. Net debt was 3.1 times adjusted earnings before interest, taxes, depreciation and amortization, above the company’s target range of two to three times. Cybulski said ATS expects to remain moderately above that range for the rest of fiscal 2027, absent material acquisitions or portfolio actions.
About ATS (NYSE:ATS)
ATS Corporation is a Canadian automation solutions provider headquartered in Cambridge, Ontario. The company designs, builds and services automated manufacturing systems, production equipment and related technologies for manufacturers in a range of industries.
Its offerings include custom automation systems, assembly and test equipment, material-handling solutions, packaging systems, precision components and aftermarket services. ATS also provides automation software, controls, engineering, technical support and lifecycle services intended to improve production efficiency, quality and flexibility.
The company serves customers in sectors including life sciences, transportation, energy, consumer products and industrial manufacturing.
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