ATS Corporation's Strategic Shift and EV Settlement: A Pivotal Turn Toward Profitability

The EV market's volatility has left its mark on ATS Corporation, but the company's recent settlement with a major EV customer and its pivot toward regulated markets signal a critical turning point. Let's dissect how ATS is recalibrating its strategy to prioritize profitability and stability, and why investors should take notice.

The EV Settlement: A Necessary Reset

ATS's Q4 2024 earnings reveal the stark reality of its EV program: a $171.1 million pre-tax charge tied to a settlement with a key EV customer. While this write-off slashed net income by $129 million, the move delivers two critical benefits. First, the $194 million CAD cash influx (due in Q1 2026) provides immediate liquidity. Second, it frees ATS from further obligations on projects hit by EV demand declines and global macroeconomic uncertainty.

The financial hit is a one-time adjustment, but its strategic value is profound. By exiting underperforming EV contracts, ATS can reallocate resources to higher-potential sectors. The company explicitly states this shift allows it to focus on regulated markets—think infrastructure, utilities, and government-backed projects—where demand is more predictable.

The Numbers: Adjusted for Clarity, Positioned for Growth

While GAAP net income turned negative ($68.9M loss), ATS's adjusted metrics tell a different story:
- Adjusted Net Income: $40.0M (down 37.6% YoY but still positive).
- Adjusted EBITDA: $97.1M (13.5% margin), down from $115.8M in Q4 2024 but reflective of the EV write-down.
- Order Backlog: $2.139B, up slightly from prior quarters, signaling robust demand in non-EV sectors.

The key here is that ATS's adjusted results exclude the EV settlement's full impact. Investors should focus on the adjusted figures, which highlight operational resilience. Even with the EV drag, the company's core business—excluding the settlement—delivered $721M in revenue and a 10.3% operating margin.

Why This Matters for Investors

1. Cash Flow and Liquidity: The $194M settlement payment arriving in early 2026 strengthens ATS's balance sheet, reducing reliance on debt or equity markets in a period of elevated borrowing costs.
2. Strategic Focus: Regulated markets are less cyclical. For example, infrastructure projects often have long-term contracts and government-backed financing. ATS's backlog includes $2.1B in orders, suggesting it's already securing such deals.
3. Margin Stability: Despite the EV write-down, adjusted EBITDA margins held at 13.5%. This suggests cost discipline and the potential for margin expansion as regulated projects scale.

Risks and Considerations

• Execution Risk: Shifting focus to regulated markets requires strong project management and regulatory expertise. ATS's track record in these areas will be critical.
• Macroeconomic Headwinds: Even regulated sectors can face delays during economic downturns. However, these sectors typically offer better visibility than EV markets.
• Currency Exposure: The settlement's USD-denominated payment could be diluted if the CAD strengthens, though ATS may hedge this risk.

A Call to Action: Buy the Dip, Position for Stability

ATS's stock is likely undervalued given the one-time EV hit. Investors should:
- Wait for May 28's Full Results: The preliminary data is a starting point, but audited figures will confirm the adjusted metrics' reliability.
- Focus on Long-Term Value: Regulated markets offer steady returns. ATS's backlog and adjusted margins suggest it's well-positioned to deliver 10-15% annual EBITDA growth over the next three years.

Historical backtesting reveals that a short-term strategy of buying ATS on earnings announcement days and holding for 20 trading days resulted in an average loss of 17.7%, with a maximum drawdown of 27.8%. This underscores the importance of a long-term perspective, as the company's strategic shift to regulated markets and focus on sustained profitability are best captured over quarters, not days.

• Compare to Peers: Companies in regulated infrastructure sectors (e.g., ) often trade at premiums due to predictable cash flows.

Final Takeaway: A New Chapter Begins

The EV settlement isn't just a write-off—it's a strategic reset. ATS is jettisoning volatile exposure for stable, predictable growth. With cash coming in, a solid backlog, and a focus on regulated markets, this is a buy signal for investors willing to look beyond the Q4 headline loss.

The path forward is clear: ATS's pivot to regulated markets, coupled with its liquidity boost, positions it to outperform in 2026 and beyond. Investors should act now to capitalize on this undervalued opportunity.