News & Events zu ATS Corporation (ATS)ATSATS Corporation

Company Initiates Fixed Cost Transformation Program, Expected Annual Cost Reduction of $20 Million

Following the completion of a comprehensive review of its entire portfolio against its long-term value creation criteria, management has initiated a program to transform the Company's fixed cost structure over time. The review included consideration of operating footprint, cost structure and capital allocation priorities, resulting from management's application of a disciplined cash return on investment framework across the organization. The review reinforced management's confidence in the Company's core strengths and position in critical growth markets, and identified opportunities to simplify the Company's operating structure, optimize its global footprint, reduce fixed costs and improve returns on invested capital, while better aligning it with its current business profile and long-term growth objectives. Management believes these meaningful structural changes can contribute approximately half of the margin expansion required to achieve the Company's current long-term adjusted earnings from operations margin target of 15%. This multi-phase program, which is expected to be completed in approximately 18 months, is not intended to alter the Company's strategic focus on services or the end markets it serves. Rather, the objective is to reshape the cost structure of the business so that resources can be allocated more efficiently in support of the Company's long-term growth strategy. As the initial phase of the Fixed Cost Transformation Program, management identified excess capacity across certain European facilities based on current and expected demand for customer programs required to be executed within Europe. The European Footprint Consolidation will involve the transfer of select technical capabilities to other ATS facilities where existing capacity and capabilities can support customer requirements more efficiently. Where appropriate, customer programs may also be supported through ATS' broader global footprint. Given the nature of the facility and reorganization activities involved, implementation and the realization of the related benefits are expected to build as the program actions are implemented over approximately 18 months. Related restructuring costs will be disclosed as the plans progress. The annual costs that can be reduced in connection with this initial phase are expected to be in the range of $20 million, followed by additional cost reduction opportunities on the remainder of the Fixed Cost Transformation Program, including opportunities to simplify the Company's operating footprint and reduce fixed costs in other parts of the business. Those initiatives remain under evaluation and will be communicated as plans are finalized and approved. The initial phase of cost reductions is expected to represent approximately 30% of the savings opportunity from the broader Fixed Cost Transformation Program. Management continues to believe that executing on the long-term growth opportunities across the Company's end markets and the operational-improvement initiatives currently underway, together with portfolio optimization and cost-reduction activities, including the Fixed Cost Transformation Program, support the Company's achievement of its long-term adjusted earnings from operations margin target of 15%. Management intends to provide updates as the initiatives progress.

Management Expects Restructuring Costs of Approximately $5 Million

Management believes that the underlying trends driving customer demand for ATS solutions, including growing labour constraints, production onshoring or reshoring and the need for scalable, high-quality, energy-efficient production, remain favorable. Management has not seen a material impact on its overall life sciences funnel activity. In 1Q27, expects restructuring costs of approximately $5M related to transportation-related divisions and $5M-$10M related to other parts of the business, as warranted. As part of transportation-related restructuring, three smaller facilities in the U.S. will be closed. Two facilities in the U.S. and one facility in Germany are being held for sale, with one of the facilities in the U.S. to be structured as a sale and leaseback transaction. The proceeds from the sale of these facilities, expected in FY27, are expected to fund the restructuring activities and other related costs associated with exiting these businesses and concluding the company's obligations with respect to legacy customer contracts. Management continues to actively monitor the situation as it evolves and is taking steps to mitigate risks where possible while continuing to offer support to customers based on their needs, which may include onshoring or reshoring production.