Q4 2021 ATS Automation Tooling Systems Inc Earnings Call
Good morning, ladies and gentlemen, and welcome to C. A T S automation and fourth quarter conference call and webcast. This call is being recorded on May 20th 2021 at 830, a M. Eastern time. Following the presentation. There will be we will conduct a question and answer session and try.
Instructions will be provided at that time for you to queue up for questions. If anyone has difficulty hearing the conference. Please press star followed by zero for operator assistance at any time I'd now like to turn the call over to Sharon So Howie director of Investor Relations at Ats. Please go ahead.
Thank you operator, and good morning, everyone. Your name and hosts today are Andrew and hired a chief Executive officer of Ats, and Ryan <unk>, Chief Financial Officer, or those who joined US by phone on our remarks are accompanied by a slide deck, which is available on Ats automation dot com.
While we began and I am required to provide the following statement and respecting forward looking information, which is made on behalf of Ats and all its representatives on this call you on.
Cautioned that the oral statements made on this call will contain forward looking information.
Those risks and uncertainties.
Clothing, those introduced by the COVID-19 and on it yes.
Actual results could differ materially from a conclusion forecast or projection and the forward looking information.
Certain material factors or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forward looking information.
Additional information about the material factors that could cause actual results to differ materially from the conclusion forecast or projection and the forward looking information and the material factors or assumptions that were on a flight and drawing a conclusion or making a forecast or projection as reflected in the forward looking information Archie.
Pain, and Ats's filings with the Canadian provincial Securities regulators.
Now, it's my pleasure to turn the call over to Andrew.
Okay.
Thank you Sri.
Good morning, ladies and gentlemen, and thank you for joining us.
We were pleased to report another strong quarter for Ats, including record order bookings and backlog.
After a challenging start to our fiscal year brought on by the COVID-19 pandemic, our business rebounded nicely over the balance of the year.
The fourth quarter marked a return to positive organic revenue growth and we.
Continue to drive margin expansion in line with our long term plan.
During the quarter, we also announced the successful completion of the tender offer to acquire CFT, a global supplier of automated processing and packaging equipment to the food and beverage industry.
The transaction closed in late March and our teams have started the integration work. We're excited to introduce our food technology platform at Ats and look forward to offering innovative solutions to meet our customers' needs.
Today.
I will update you on business conditions, and then Ryan will provide his report.
Starting with our financial value drivers.
Q4 revenues were $400 million.
Up 4.7 from Q4 last year and up 882% sequentially.
And by broad based activity levels organically.
Revenue grew 5.4% and the quarter for.
For the full year, our revenues of 1.43 billion were in line with last year's revenue.
Q4 order bookings were $463 million.
30% from last year.
And up 6% sequentially.
Bookings were strong across most segments with large customer rewards and life Sciences and transportation.
Bookings for the year were $1.6 billion up 11% year over year, driven by large awards and life Sciences and consumer products.
Our adjusted EBIT margin for the quarter was 12, 4%.
Representing over 200 basis point margin expansion versus Q4 of last year and over 50 basis point margin expansion sequentially.
For fiscal 2020.1 on.
Our adjusted EBIT margin of 11, 4% represented a 40 basis point margin expansion versus last year's margins.
Moving to our outlook.
Our healthy backlog of over 1 billion provides us with a solid base of business and good revenue visibility.
We are encouraged with the pace of vaccine Rollouts and many of our global markets. However for the time being we continue to operate and a COVID-19 environment, the inefficiency that and entails.
Our teams have made meaningful progress adapting to this new normal and.
We are pleased by recent order activity.
We continue to closely monitor customer demand signals and are seeing activities pick up and some areas.
By market.
Conditions and life Sciences are positive with broad based strength and medical devices.
Pharma and radio pharma.
During the quarter, we won a number of mandates related to COVID-19, and demonstrating the strength of our life Sciences franchise and.
And helping in the global fight against the pandemic.
This work represented around 34% of our life Sciences bookings and 19% of our total bookings in Q4 and covered awards and point of care diagnostics.
Vaccine syringes and diagnostic kits.
We're also seeing the return of more traditional non COVID-19 related opportunities and the funnel.
Our focus on innovation.
And differentiated solutions is bearing fruit with new customer wins and higher share of wallet with existing accounts.
Life Sciences represented 60% of our annual bookings and we expect it will be a strong market for Hs for years to come.
And EV, we're seeing activity levels improve and the number of traditional Oems and newcomers recently announcing plans for electrical fleets.
We continue to be focused on the right opportunities and won a large award and the quarter.
Ats has a long track record and proven expertise and battery Assembly and test.
And we look forward to supporting our customers EV fleet goals.
And consumer and similar to last quarter, we saw strength and warehouse automation and food while cosmetics remained soft.
And energy, we continue to serve our customers and areas of refurbishment and decommissioning.
With strong execution and good line of sight to future opportunities in Canada and globally.
And after sales services on.
Bookings showed sequential improvement and revenues were up double digits versus last year and stable sequentially with strength across all market verticals.
Given the ongoing COVID-19 travel restriction and many geographies, we continue to rely on our regional service networks and the use of digital support tools.
We see additional opportunities to refine our after market services to drive a better customer experience and are nearing completion on a digital commerce initiatives to further enhance our digital value proposition.
To summarize our outlook bookings were strong this quarter and our funnel remains healthy.
While the pandemic environment continues to introduce some timing and approval uncertainty around capital deployment by our customers.
We are encouraged by the recent pickup and activity levels.
Moving to the ABM and our continuous improvement playbook, we're making progress by using virtual means to train and hold events.
During the quarter, we held our annual President's Qiagen.
Which is a week long event attended by our senior business leaders.
We also launched our first global virtual ABM boot camp.
A few ABM highlights from the quarter.
We held over 10 cadence across various Ats divisions.
These events drove improvements in multiple areas, including sales operations and customer service.
1 division and our life Sciences group was able to achieve greater standardization of parts and components with a 10 fold increase the number of standard parts identified and a 10% increase and supplier rebates.
The approach is being replicated at other life Sciences divisions.
Our Ats products group was able to develop a process to reduce lead times from approximately 12 weeks to 8 weeks.
The team identified efficiency opportunities and our procurement and production processes as well as scheduling and capacity planning.
Team is on track to achieve the new lead time by July of this year.
And our industrial automation team hosted its first Kaiser and where the customer designed to achieve a meaningful reduction and the project timeline.
You bet was a big success, resulting in a number of opportunities that ats and the customer are jointly developing.
We launched our first virtual ABM boot camp, which runs over a 6 week period, and goodbye and self paced learning with real time discussions with ABM leaders.
The first session wrapped up in April with over 50 participants and positive reception.
The new format enables us to continue scaling the training and demonstrates how businesses across Ats are using the ABM to deliver tangible results.
Turning to innovation.
We continue to prioritize investments and differentiated solutions that positively impacts our customers.
During the quarter, our industrial automation division applied the ABM principles to establish new processes to improve product innovation and drive agile product development.
This resulted in a team filing several new patents related to growing areas of our business.
In addition teams across Ats are pursuing next generation ideas and areas, including linear motion technology.
Digital services and modular flexible manufacturing just to name a few.
On M&A.
Acquisitions continue to be and important complement to Ats is organic growth.
Late in the fourth quarter, we welcome CFT to the Ags family.
Cft's serves as a platform for Ats and the food and beverage industry and joins Ats as other food business markup to comprise a food technology group.
This group is headed by Jeremy patents and accomplished H S veteran.
Subsequent to the quarter, we announced the acquisition of Biodot, which we expect to close and calendar Q2.
BARDA expands our life sciences capabilities and precise.
Low volume fluid dispensing and enhances our position and the point of care and clinical diagnostic lab and markets.
We will continue to cultivate and evaluate acquisition opportunities consistent with our proven strategy.
Of course timing of acquisitions will be variable and our approach to deploying our balance sheet be disciplined and strategic.
In summary.
Fourth quarter results highlighted the strength of our business.
And our ability to pivot and it.
GAAP the operations to the current climate.
Record booking activity reflected the alignment we have with our customers and providing best in class solutions.
Going forward.
Our focus remains on sharpening our execution to the application of the ABM playbook to drive better performance.
Our strong backlog provides good revenue visibility.
While our healthy balance sheet enables us to act opportunistically when strategic prospects arise.
We look forward to closing the Biodot acquisition, and finding more avenues to create value for our customers and our shareholders.
Now I will turn the call over to Ryan Ryan.
Thank you, Andrew and good morning, ladies and gentlemen.
Moving I'll provide an overview of our Q4 operating results and future and continued growth and revenues and operating margins and record order bookings and backlog and will.
And then provide color on our balance sheet.
Starting with operating results, our Q4 bookings were $463 million 30 per cent compared to last year.
Due primarily to organic growth.
The increase reflected the orders and life Sciences and transportation.
Fourth quarter bookings included large orders related to COVID-19, when and care rapid testing as well and the large television programming.
Compared to Q3 order bookings were up 6%, reflecting improvements and transportation Inc.
And he'd strength and life Sciences.
And the year bookings of $1.6 billion or 11% higher than last year due to increases and life Sciences and consumer.
Anecdote from 7% acquired company and foreign exchange provided uplifts of 2 percentage.
And our book to Bill ratio was 1.1 for awhile.
Q4 organic revenue growth was 5.4% over last year, primarily due to services and after sales.
Acquired companies on and 20 basis points to our growth both foreign exchange with a 90 basis point headwind compared to Q4 last year.
Sequentially revenues increased 8.2% from Q3, primarily reflecting the tightened and project activities.
For the year revenues of 1 Fortunately billion were consistent with last year. Despite the impact that depend on it which was more pronounced and first half of a year and more stringent and travel restrictions and reduced access and customer facility.
Organically revenues decreased 3%.
And this was offset by 2% growth from acquisitions, and a 1% benefit from foreign exchange translation.
Our record Q4, ending backlog of $1.1 billion from 23% higher than last year's 942 loans.
Organic growth and backlog was 12, 4% due to higher order bookings through the year, partially offset by foreign exchange translation with the balance of the increase related to $166 million of acquired backlog from CFT.
Life Sciences represented 50% of our period and order backlog with consumer represented 24% up from 10% a year ago, primarily reflecting the addition and CFT.
Looking forward our revenue conversion for Q1 is estimated to be and the higher end of the 35% to 40 per cent range of backlog.
While we're pleased with the strength and resiliency of our business and the near term Koby will continue to influence the timing of customer orders and services revenues.
Moving to margins Q4 gross margin was 27, 8% up over 450 basis points from last year.
Higher gross margin reflected improvements made and their cost structure to our reorganization and other efforts improved program execution and increased service revenues and.
Cost recoveries of $2.1 million were also realized from Canadian emergency wage subsidy.
Our teams have done an excellent job adapting to the current environment.
Our operations and continued to overcome the challenges of operating with almost half of our work force at home and the presence of extra health and safety measures and our facilities.
For the year fiscal 'twenty, 1 gross margin was 26, 9%.
154 basis points from last year.
Margins for fiscal 'twenty, 1 was due primarily to efficiency gains and our cost structure improved program execution, and $12.2 million and recoveries under the Canadian emergency wage subsidy program.
Cost structure and program execution improvements were partially offset by lower after sale service revenues and other operational efficiencies inefficiencies related to COVID-19.
Moving to SG&A expenses were $2.5 million higher than Q4 last year.
This year's costs included $8.1 million and acquisition related amortization and $4.2 million of M&A transaction costs, which were partially offset by a $5.6 million adjustment to the contingent consideration related to the acquisition of Mark.
Excluding comparable items from both periods Q4 that she and he was $54.8 million $4.4 million higher than last year, reflecting increased employee costs, partially offset by savings from the reorganization and other cost containment measures.
Fourth quarter stock compensation expense was $6.8 million compared to a recovery and $1 million last year.
Q4, adjusted earnings from operations were $49.5 million and 12, 4% compared to $39.3 million or 10, 3% and last year the.
The increase and margin, reflecting efficiency gains and our cost structure improved program execution and higher after sales service revenues.
Our effective tax rate was 9% and quarter and 19% for the year.
Largely reflected a $4.3 million and nonrecurring recovery reported from tax planning opportunities implemented and the fourth quarter.
Alluding, the nonrecurring recovery and adjusted effective tax rate from 25% and Q4.
And EPS was <unk> 34, and the quarter.
Up 31% over last year.
For the year adjusted EPS was $1.7.
Up 1 from $1.06 last year.
Improved operating margins accounted for the index.
Moving to the balance sheet and Q4, we generated cash from operations of $39 million compared to cash generation of $9.7 million last year, primarily reflecting and reduction in working capital investment and higher profitability.
In fiscal 'twenty, 1 and we generated cash from operations of $185 million.
Up from $20 million last year, reflecting improved profitability and lower investment and non cash working job.
Non cash working capital as a percentage of revenue was very low and 6% from Q4 down from 8.7% and Q3, well within our target of maintaining working capital as a percentage of revenues below 15%.
On the deposit and program milestones cost.
We're pleased with this result, we do expect our non cash working capital investment to increase to a more normal range of approximately 10% during fiscal 'twenty 2.
Our cash collections remain strong, reflecting the strategic relationships, we have with our customers.
Adjusted $13.1 million, Capex, and intangible assets and Q4 compared to $18.3 million lives.
Hi, and investments last year related to the expansion of certain life Sciences facility.
In fiscal 'twenty, 1 capex was $31.6 million.
Moving forward, we expect to increase our capex investments in fiscal 'twenty, 2 as we add capacity to support growth and continue to invest and innovation.
Overall, our capex budget for fiscal 'twenty, 2 is expected to be and the range of $50 million to $60 million.
We ended the quarter with good liquidity.
And cash of $187 million and availability on our credit facilities of approximately $776 million.
From a leverage standpoint yearend net debt to adjusted EBITDA ratio was 141, including <unk> on a pro forma basis.
Adjusting on a pro forma basis for the additional volume, which we expect to close and calendar Q2 and leverage would be approximately $1.7 day 1.
Further and to deploy capital to pursue our strategies within our normal course of target leverage range of up to 2 to 2.5 times.
In Q4, we completed our offering and U S $350 million 8 year, 4 <unk>, 5% senior notes.
And we used a portion of the proceeds from the offering to fund the redemption of the 2023 U S $250 million 6.5% notes.
We recorded onetime finance costs of $9.1 million related to the redemption.
Upon repayment of the 6.5% notes.
On wound or existing interest rate swaps and entered into new U S zero interest rate swaps, resulting in an effective interest rates from the new senior notes of $3.63 per cent.
In summary.
And fourth quarter featured continued strong operating performance for.
And our teams have executed efficiently and show the customer needs are met and maintaining a safe working environment.
The investments and improvements made and their business are driving growth and resiliency and margin expansion.
The addition of <unk> provides us with an exciting platform and the food technology space and then.
How many additional biodot will provide us with new capabilities and life Sciences.
We had a record order backlog and strong balance sheet and available liquidity that combined provide etfs with a solid foundation to pursue our growth strategies.
Now we will open the call to questions from our analysts operator could you. Please provide instructions. Thank you.
Ladies and gentlemen, we will now conduct a question and answer session to allow as many voices to be heard as possible. Please limit yourself to 2 questions per tonne. If you have a question. Please press star followed by the 1 key on you touched on it.
So on your questions will be called and the order they are received.
Please ensure you lift the handset if you're using a speaker phone or pressing any keys..1 moment. Please for your first question.
Your first question comes from Cherilyn Radbourne from TD Securities. Your line is open.
Thanks, very much and good morning.
And I wanted to ask him back and nice growth in services and parts that we saw again this quarter.
You touched on the extent to which you think pent up demand and contributing as things open up and its pent up demand is contributing and how much more pent up demand might there be out there.
Yes, it could.
Good morning Cherilyn.
So you know as we look at our services business.
When we step back and look through the pandemic.
Couple of things that we did to enable this business and and the teams really aligned around first.
We really focused on our regional service network and when we looked at that network. It enabled us to continue to support and really drive solutions and and enable our customers to continue to build their product and secondly, we launched digital tools and and we did that to support our customers, but additionally.
<unk> truly enabled us. This this regional network to execute so as an example, you think about the U K and when the U K went on Lockdown, we get a regional network built within that region that allowed us to continue to support customers regardless of end market and we can do that because we had subject matter.
Experts and we have the digital tools that enable them to quickly understand how to fix and and then and really enable the process and production of products. So overall I would say we did a nice job pivoting early and the pandemic to enable us to be where we are today.
And why do I feel all of that because to answer. Your question. We certainly are in line with last quarter, and we view that debt, we're getting more and more back to normalized run for this business and so we're pleased with the progress we would view that we're in a normalized state there's still challenges around travel and around ability to support if needed.
That said with our regional support network, we have been able to really overcome a lot of the obstacles within this space.
Okay. That's helpful. So you would say that this is a more normalized state rather than a catch up on pent up demand is that fair.
Yes to answer your question directly yes. This is a more normalized debt.
Perfect and then maybe you could elaborate a little a little more on the activity and life Sciences, and the extent to which customer focus is starting to pivot away from Covid and factor projects that might've been temporarily put on hold due to the pandemic.
Yes, so I did mention this in my opening remarks, we are seeing our funnel increase on on non COVID-19 related more elective surgery type of applications and so I'm really pleased with that as far as how things are starting to progress on our funnel and to start with the headline very solid bookings for the quarter.
<unk> record bookings for the quarter.
And as I mentioned.
Healthy funnel as we go on to the year so.
Headline very pleased with the performance and how we're setting up for the year, but as you look at life Sciences.
And we're starting to see those those elective surgery opportunities take shape and our funnel, but additionally, we're pleased with the ability to execute on these COVID-19 opportunities. We're here for our customers, regardless of COVID-19 or non COVID-19 opportunities and we've won new customers through this and so we've taken a new technology and new.
Innovations like our Symphony product line, which was a development from transform ex truly enable us to execute and build out our capability on these new and existing customers to then allows us to continue our expansion within those businesses.
Great. That's my 2 thank you.
Thank you.
Your next question comes from Max Nimmo from Scotiabank. Your line is open.
Hey, good morning, guys and.
Great color.
Maybe just on the bookings.
I mean, there's clearly been a step change here.
I'm trying to I guess I understand it.
And then maybe just qualitatively.
And you can sort of just help with how much is just generally stronger markets versus you know what youre doing internally in terms of you know and treat processes on the front end or the service offering.
Okay, and any sort of commentary would be helpful.
Yeah. So to answer your question directly it's a bit of bolt March.
And to walk through that we've won new customers through this and and we're really pleased with those wins is that it allows us to then expand our footprint, but additionally, we have also expanded within businesses and you're on and I used. The example.
A little bit ago around the Symphony product line that has enabled us to do things differently and offer new solutions to customers that we've been supporting.
A decade, and so ultimately really pleased with the progress, but let me get more specific on the markets and and I've talked a bit about the life sciences, and and the continued activity and strong performance within the market, we're seeing not only from a standpoint on the COVID-19, but we're also seeing our funnel increase and.
Non COVID-19 related opportunities as well and EV and we're seeing the activity pick up in both North America, and Europe, and we booked a large EV award in the quarter and so pleased with that progress. We're also staying very close with this new administration and the U S around the stricter environmental.
And emissions rules and laws and so really caught thinking about them as in a day and adoption from EV as the shift continues and being very close to it we are a leader in battery pack Assembly and and it's 1 we want to continue to really help our customers as they navigate this this new new market and new.
New opportunity.
And consumer so this is a mixed bag for us and and we've seen strength and warehouse automation, where and niche application there, but we've seen strength. While also food has showed showed our ability to execute cosmetics is is soft and has remained soft.
When you think about cosmetics for US really you think about duty free shops and duty free shops had been impacted by this and so we do see that market coming back over time, but that has been a little bit on the softer and then and energy.
We see opportunities and Refurbishments, and decommissioning and and I've talked about decommissioning on the last call and the opportunity that that has for Ats, but we're seeing opportunities both in Canada and globally and murder and continue to build out our capability and we continue to build out our team.
Lastly, I will just talk about the ABM and how the team across Ats has shifted to what we call our commercial ABN and it is around.
Moving our aspect of demand generation.
Marketing tools, enabling our customers to understand all of our capabilities and then and then aligning that with our sales force effectiveness and.
And the team is doing an excellent job of pivoting during this environment truly maximize those opportunities and so and I answered your question upfront or on its a bit of both but it is and then when you get into the market you can really start to understand how our strategy is taking shape with new technologies, new innovations marrying with the needs of customers.
And our continued drive to really satisfy those needs.
Yeah, that's great and boots.
Super helpful and encouraging obviously.
Maybe for Brian just on the backlog conversion.
For the quarter <unk> make it.
The business is structurally higher membership and so about 40% is sort of.
A more normal number going forward or is it just a matter of sort of timing and mix for the quarter.
Well at this point, it's timing and mix for the quarter and this is.
It's something that.
And we look at every quarter and determined.
And what do we expect to be based on.
And our portfolio and what we have on backlog and what we expect to book and revenue within the quarter.
At this point I would say it remains to be seen whether.
And as CFT will drive a change and this metric.
But we'll continue to look at this necessity per quarter.
Alright, Thanks, guys I'll get back in queue.
Your next question comes from Justin <unk> from Stifel. Your line is open.
Good morning, Thanks for taking my call and nice to see the results on.
On the notable EV Battery award are you able to provide some more context on the value of the contract. If this is on existing or new customer and then the opportunity for follow on work.
So so I can't provide.
I can't provide a lot of a lot more quarter I mean, it was a large program.
It's a customer that we have worked on.
Previously and.
And if it's somebody that would you expect on an ongoing relationship with <unk>.
It's a long standing relationship and a very good customer.
And just and just to add on to <unk> comment and we do see additional potential with this customer, but as you're well aware and we often say we need to execute and prove out the value that we bring to this customer.
Okay understood and.
And then for merchant expansion initiatives and I'm, just wondering if you ever and update on the broader goals.
The 500 bps over 5 years was a you know on tract and now there's a few moving parts with the CFT contributing and.
Perhaps more aftermarket services work coming back.
Just thoughts on and update if you have any broad on margin expansion goals over the next few years and beyond.
Well I mean.
Our goal is unchanged for the core business.
So we are still targeting that 500 basis points and.
And with the addition of CFT theyre going to be a part of that too to your point it won't change the timing.
And so it doesn't change the and golf.
I just go back on non core business.
We're largely and call. It halfway there. So we finished the quarter and about a $12.4 per cent.
Over the last 3 quarters of the fiscal year.
We operated on 12, 1%.
So we have had.
Good level of margin expansion and the year.
And what are you, excluding Q1, which was heavily impacted by Covid and the munis.
Actual lockdowns.
And our plans haven't changed we're focused on on the different initiatives that were pursuing throughout the business.
And we're driving continuous improvement through for ABM.
Supply chain management, we made really good progress on this initiative and you can see.
Continues to contribute.
And it'll be a big part of margin expansion with CFT.
Standardization is an area that we've.
And then a little bit further behind on.
But it is really starting to take shape and Andrew talked with some of the Kaiser and activity and.
The initiatives that we're pursuing on standardization and then you.
You mentioned.
After sales services, and we did see a continuation of strength and not and that business. This quarter and then of course operating leverage and we expect and continue to grow the business and drive operating leverage so.
And like I said time and will be a little bit more variable with CFT from a total portfolio basis, but the objective for the core business does not change.
And that's adjusted operating margins, you're referring to.
Yes, correct.
And up.
And so go ahead Jeff.
No go ahead and that's fine.
And it's just going to remind you. So when we started this we were just under 10% so.
In fiscal 17, and we finished at $9.6 and like I said, we're we finished Q4 at 12, 4% so.
Call and we're halfway towards towards the objectives.
Okay, that's helpful and Ryan and I didn't get in your opening remarks on the expected capex for the remainder of those this year or next year.
It's $50 million to $60 million.
That's 5 zero to 60.
Yes, correct.
Okay, and any particular initiatives, that's driving that because that's historically, a little higher than that and what's been in the past.
Well, so that that doesn't incorporate.
And.
But it doesn't incorporate the new businesses. So we have a higher base in terms of ongoing maintenance spend.
And what we've had in the past and.
And and we are investing and a couple of areas that will.
On that.
It will be enabling continued growth. So we do have some capacity expansion and in certain areas.
We're going to continue to invest in innovation and then and then like I said the regular ongoing maintenance.
Type activity.
Overall long term, we're going to continue to operate and that 2% to 3%, 2% to 3% range of revenues.
And total.
More on the higher end and this upcoming year.
Okay understood. Thank you for taking my questions.
Welcome.
Your next question comes from David Ocampo from Cormack Securities. Your line is open.
Good morning, everyone.
I just wanted to circle and on Justin's last questions on the margins and focus more on the near term opportunity there.
On the last quarter, you talked about pressure from Covid related costs are you starting to see that received now or and you have you largely worked on through your system there.
Well.
And what are the a lot of the factors that impacted this or still in place so where we operate around the world.
We're still operating with with what I would call non normal or additional health and safety protocols and in facilities. We still have a large percentage of our work force at homes. So we have people coming into our facilities every day, but we also have.
And our engineering and office staff largely working from home so.
And those those conditions still exist.
Also talked about the impact on services and <unk>.
Travel restrictions and.
And the complications and people out and to quarantine and for going into a market or are coming back home to a market. So all of those conditions still exist, but what I would say is we've done a good job overcoming these offices so.
From the services perspective, we talked about our global footprint, our regional network, the digital tools and implemented and then within our facilities.
Our teams have done an excellent job and <unk>.
Keeping our facilities safe and keeping them open and some hearings and the health and safety protocols. So.
And the conditions still exist, but from an impact.
We're mitigating from from a margin perspective.
Okay, and then on the M&A pipeline that you guys have in terms of and funnel.
It picked up quite a bit here are you starting to see more competition that through the space and is that having any impact on on the multiples that you have to bid and order to acquired businesses.
So why don't I kind of walked us a little bit so we announced the acquisition of Biodot and CFT the closure of CFT.
Really pleased with those new adds are very much in line with our strategic direction and.
And really in line with where we are taking the corporation.
When we step back and look at our funnel, our funnel remains healthy and I would actually state that it's it's opened up more.
From the food technology space, and we like regulated food, we like the food technology area and so we've really built that out and so I would say, it's increased and we remain active in the market around cultivation around staying close with many targets.
We've entered into.
And many discussions where we don't get to the finish lines because we choose to.
To go on a different direction and and we have 4 criteria that you've seen multiple times and if those 4 really don't lineup. We then go on a different direction, but I'll just state that our funnel remains healthy we continue to cultivate and share multiples are and area of focus and target and we see multiple.
<unk> remaining at a certain pico and at a certain level that said I think we've continued and and we will continue to manage to overcome those and really build out a strong value creation for ats and for our shareholders.
And I'm sorry, Andrew are you starting to see more competition for and stuff that you're bidding on or largely unchanged.
It's largely unchanged what I can say is our cultivation efforts.
<unk> up and continue to pick up and that really does enable us to move in and being a pace, but it's largely unchanged.
Okay. That's my question. Thank you so much.
Thanks.
Your next question comes from Matt Maxime.
Jeff from National Bank.
Your line is open.
Hi, good morning.
Good morning, Matt Good morning.
And I was wondering if you don't mind, maybe talking about the.
CFT integration.
Blueprint, maybe any kind of early learnings from.
I think on board of the SaaS side.
And how you think about like any updates on the cost synergy revenue synergy just any update on acquisitions as possible.
Absolutely and and.
You know I'll start with the headline here Max and I'll go into specifics we are on track with the integration we are confirming and have confirmed our belief around the synergies and around around the cost potential and where we believe we can deliver on and so none of that has changed and.
And so.
And you can walk through it and we closed in March and our teams started the integration immediately around that and they've done a lot of work around firming up the supply chain synergies and and.
And really exploring and continuing to explore the synergy and cross selling synergies with this group.
I'm pleased to say, we've even started quoting out and 1 of the products.
And this business and technology. This business has and something called CFT robotics and reported that out and other areas of our business and so we're realizing and we're very pleased with the projects and and prospects around the synergies and where we are on track to realize those.
And so we're.
And I would just say headline is is pleased with the progress and certainly viewed as this business is.
As a real strategic fit for Ats.
And so far no.
No negative surprises in terms of.
And having to look under the hood or maybe any positive surprises, maybe if it's possible to share.
Yes, so whatever your acquisition and Theyre going to fire and things as you go along and what I can say is that they're not meaningful at this time and we're really pleased with is the business and the team at CFT had been fantastic and the approach and so we're.
We're really pleased with how this is unfolding, we're really pleased with the integration and we're not changing the targets as of yet, but I'll just say that debt.
What we set out to achieve we're very confident we can achieve.
Okay. That's super helpful. Thanks, So much and maybe just 1.
Cleanup question for Ryan.
In terms of the backlog to revenue conversion for the upcoming quarter I presume, but by and Dod is not included and that's correct.
Yes, that's correct.
And expect to close this quarter, but.
And given where we are now it'll be it'll be in the later quarters and won't have a material impact.
Okay. That's great. That's it from me. Thank you so much.
And again, if he would like to ask a question. Please press star 1 on your telephone Keypad. Your next question comes from Mark Neville from Scotiabank. Your line is open.
Hey, guys. Thanks for taking the follow ups.
Yeah, I guess I'm, just curious have you seen and getting back on your business or and your customers' behavior just from the recent commodity price inflation.
So we from a standpoint of our customers know, we have not and I gave the headlines, but our funnel is healthy as we go into the year. So pleased with that as we look at our business and then step back the short answers we have not seen.
Really anything material to date, but our supply chain and our supply chain team has been very focused and very vigilant about this and and and as you recall them and we've talked about this is 1 of our 5 points. The team has been.
Very proactive and and identification with suppliers and identification of the roadmap and and strategic lay out and how we want to drive the business here, so they've been able to really minimize and.
Be able to allow me to state. This is no material, where we haven't seen a shift Dell Inc.
As you know.
Some suppliers are extending their lead times, so where we've had stuff in days now goes out to potentially weeks and and we've seen some shift from call. It 1 to 3 days.
To 3 weeks and and Fortunately, we were able to identify this early on and because of our planning we've been able to plan and ensure that there's no impact on our and our ability to execute.
And so to date no real material impact another 1 just just headed off.
Is around.
And the shortage and.
Chips, and the EV side, or the automotive and transportation and we have not seen a disruption and our portion of that and and just call. It reminds the team here on this we are in.
Strategic area of focus for our customers and we have not seen any impact on our business and when.
And when we look strategically with our customers, it's aligned with how they have to shift their business to meeting the needs and the market.
Okay, Yeah, and just sorry, just to clarify that on the chips, Andrew again, you haven't seen any impact and certain enough and showing up and this quarter either.
Later.
Yeah.
Correct.
Debt.
And I guess just around.
And I will be around infrastructure stimulus and whether U S or other markets I'm just curious do you think that.
And that's potentially a tailwind from the business.
So.
We do to answer your question, we do have it and let me walk through a little bit.
So we call it.
It's a little and as I said, we call it on shoring or supply chain, Derisking and and all of these areas and.
And typically that is going to be and enabler for automation and if you step back and look at the ability to meet the demand usually it is going to equate to an automation area and so we do view that as a tailwind as.
As you're well aware part of my standard work as a CEO is to continue to talk to customers and cost of the last and I mentioned this on our call you know call it a quarter or 2 ago and the last 10 customers, especially and life sciences half of them are talking and and we've seen the awards or orders and a small amount.
But but but but still orders in preparing for this shift.
Mark 1 of the other areas that debt is a tailwind for automation.
And it's not getting as much highlight right now, but it is a meaningful change.
The retirement and the next 3 to 5 years and when we look at retirement and the younger workforce coming in automation as an enabler to really continue the continuity of production process because of the and what our customers care about is building a quality product on time on budget on target <unk>.
Distantly and so theyre really reaching out to us to say, we've got a changing shift here. So not only do we need to meet the demand and our region, but we also have a potential retirement aspect coming up and therefore, we need to talk through the aspects of how do we automate and meet these heavily.
Regulated markets that allow us to produce the products. So we do view this as a tailwind timing is call. It 18% to 36 months out so I would say, it's early and the assessment and dialogue, but it is it is a ship that we view does favour greater automation.
Great.
Maybe just 1 last question just on and maybe just to clarify.
Again with CFC.
And you started the integration and Youre doing integration bar, that's expected to close this quarter that neither of those would preclude you can doing anything else in terms of M&A and correct.
Correct.
Okay, Okay, alright, guys, thanks, again and keep it up.
Mr Hydro either from no further questions at this time please continue.
Thanks, operator to conclude.
We are pleased with the performance this quarter and recognize the hard work and dedication of our teams across Ats that made this possible.
This past year has turned out to be very different from what many of us have imagined yet.
Yet despite the challenges our people were able to adapt and deliver innovative high quality solutions for our customers.
Solutions that positively impacted lives around the world.
Thank you for joining us today I look forward to speaking to you on our Q1 call on August stay safe and Goodbye for now.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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