Q1 2025 ATS Corp Earnings Call
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Hello everyone and welcome to the ATS Corporation First Quarter Conference call and webcast. This call is being recorded on August 8, 2024 at 8.30am Eastern Time. Following the presentation, we will conduct a question and answer session. I will now turn the call over to David Galison, Head of Investor Relations at ATS.
Operator: This call is being recorded on August 8, 2024 at 8.30 a.m. Eastern Time. Following the presentation, we will conduct a question and answer session. I will now turn the call over to David Galison, Head of Investor Relations at ATS. Please go ahead.
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Speaker Change: ATS, please go ahead.
Speaker Change: Thank you, operator, and good morning, everyone. On the call today are Andrew Hider, Chief Executive Officer of ATS, and Ryan McLeod, Chief Financial Officer.
David Galison: Please note that our remarks today are accompanied by a slide deck, which can be viewed via our webcast and is available at ATSAutomation.com.
Speaker Change: Please note that our remarks today are accompanied by a slide deck which can be viewed via our webcast and available at ATSAutomation.com.
Speaker Change: We caution that the statements made on our webcast and conference call may contain forward-looking information.
Speaker Change: And our cautionary statement regarding such information, including the material factors that could cause actual results to differ materially from the statements, and the material factors or assumptions applied in making the statements, are detailed on slide 2 of the slide deck.
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Speaker Change: Now, it's my pleasure to turn the call over to Andrew. Thank you, David. Good morning, everyone, and thank you for joining us. Today, ATS reported first quarter results for Fiscal 25, including our second highest bookings quarter in company history.
Speaker Change: led by both organic and acquisition growth within life sciences
Speaker Change: The quarter's results once again reflect the strength of our ABM and disciplined execution of our strategy for value creation.
Speaker Change: To further advance our capabilities, we welcomed Paxium to the ATS portfolio in July , creating further opportunities in multiple and market verticals.
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Speaker Change: This morning, I will update you on our business and markets, and Ryan will provide his financial report.
Unknown Attendee: I'll join you now, thank you. Thank you. Thanks for watching!
Operator: ..... [music]
Operator: Hello, everyone, and welcome to the ATS Corporation first quarter conference call and webcast. This call is being recorded on August 8, 2024, at 8.30am Eastern Time. Following the presentation, we will conduct a question and answer session. I will now turn the call over to David Galison, Head of Investor Relations at ATS. Please go ahead.
David Galison: Thank you, operator, and good morning, everyone. On the call today are Andrew Hider, Chief Executive Officer of ATS, and Ryan McLeod, Chief Financial Officer of ATS. Please note that our remarks today are accompanied by a slide deck, which can be viewed via our webcast and is available at ATSAutomation.com. We caution that the statements made on our webcast and conference call may contain forward-looking information. And our cautionary statement regarding such information, including the material factors that could cause actual results to differ materially from the statements and the material factors or assumptions applied in making the statements, are detailed on slide two of this slide. Now, it's my pleasure to turn the call over to Andrew.
Ryan: starting with our financial value drivers.
Andrew Hider: David, good morning, everyone, and thank you for joining us. Today, ATS reported first quarter results for fiscal 25, including our second highest bookings quarter in company history, led by both Organic and Acquisition within Life Sciences. The quarter's results once again reflect the strength of our ABM and the disciplined execution of our strategy for value creation. To further advance our capabilities, we welcomed Paxium to the ATS portfolio in July, creating further opportunities in multiple market verticals.
Ryan McLeod: Order bookings for the quarter were $817 million, up 18% year-over-year, supported by organic growth and life sciences, along with consumer products.
Andrew Hider: This morning, I will update you on our business and market, and Ryan will provide his financial report, starting with our financial value driver. Order bookings for the quarter were $817 million, up 18% year-over-year. Supported by Organic Growth and Life Sciences, along with Consumer Products. Q1 revenues were $694 million, down 8% from Q1 last year.
Unknown Executive: Q1 revenues were $694 million, down 8% from Q1 last year. As transportation revenues were lower, as expected, we were in the early phases of executing on recent program wins in life science and Food and Beverage. In energy, our funnel is strong. Our expertise with CANDU reactors positions us well as projects worldwide progress towards execution. We are focused on expanding our international customer base while supporting our long-standing customers. We also have specialized skills in energy storage and continue to work with customers on select opportunities. And after sales services. Our regional networks remain a key element of our approach to growth across all vertical markets.
Ryan McLeod: Q1 revenues were $694 million, down 8% from Q1 last year, as transportation revenues were lower as expected while we were in the early phases of executing on recent program wins in life sciences.
Andrew Hider: As transportation revenues were lower, as expected, we were in the early phases of executing on recent program wins in life science. By revenue stream, we drove solid growth in year-over-year service and product sales. Adjusted earnings from operations in Q1 were $86 million.
Speaker Change: By revenue stream, we drove solid growth in year-over-year service and product sales.
Ryan McLeod: Adjusted earnings from operations in Q1 were $86 million.
Andrew Hider: Moving to Outlook, our backlog ended at $1.9 billion, with trailing 12-month book-to-bill ratios at or above one in all market verticals for the third consecutive quarter, with the exception of transportation, by market. Life Sciences backlog of $990 million is the highest in ATS history, an increase of 26% compared to Q1 last year. This quarter included a number of large orders across our strategic submarkets, including wearable devices and GLP-1 auto-injectors, along with orders for radioisotope production lines.
Speaker Change: Moving to Outlook, our backlog ended at $1.9 billion, with trailing 12-month book-to-bill ratios at or above 1 in all market verticals for the third consecutive quarter, with the exception of transportation.
Speaker Change: by market life sciences backlog of nine hundred and ninety million is the highest in h s history an increase of twenty six percent compared to q one last year
Speaker Change: This quarter included a number of large orders across our strategic submarkets, including wearable devices and GLP-1 auto injectors, along with orders for radioisotope production lines.
Andrew Hider: Our Life Sciences Opportunity Funnel is strong in all key sub-markets, and our integrated life sciences solutions are creating new opportunities for our teams to harness our comprehensive suite of capabilities across customer value chains in Food and Beverage. Ending backlog for the first quarter was $216 million, an increase of 15% compared to the prior year, and our funnel remained strong.
Speaker Change: Our Life Sciences Opportunity Funnel is strong in all key sub-markets, and our integrated life sciences solutions are creating new opportunities for our teams to harness our comprehensive suite of capabilities across customer value chains.
Speaker Change: In food and beverage, ending backlog for the first quarter was $216 million, an increase of 15% compared to prior year, and our funnel remains strong.
Andrew Hider: With the Paxium acquisition, we look forward to leveraging customer synergies to expand our market position and support diversification of our offerings and customer base. Paxium's differentiated solutions in filling, wrapping, sealing, labeling, and pelletizing across a range of industries will be a strong complement to our existing ATS portfolio. Allowing us to offer complete packaging and end of line solutions. In energy, our funnel is strong, with refurbishment of existing nuclear reactors remaining a key driver.
Speaker Change: with the pxium acquisition we look forward to leverageing customer synergies to expand our market position and support diversification of our offerings and customer base
Speaker Change: Paxium's differentiated solutions in filling, wrapping, sealing, labeling, and pelletizing across a range of industries will be a strong complement to our existing ATS portfolio, allowing us to offer complete packaging and end-of-line solutions.
Speaker Change: In energy, our funnel is strong, with refurbishment of existing nuclear reactors remaining a key driver.
Andrew Hider: Our expertise with CANDU reactors positions us well as projects worldwide progress towards execution. We have opportunities to serve customers in the SMR market, where we are supporting ongoing concept development work, with the long-term goal of positioning ourselves for opportunities as the technology moves to construction-based, in both the SMR and large-scale new build market. Demand is benefiting from the need to achieve emissions targets globally.
Speaker Change: Our expertise with CANDU reactors positions us well as projects worldwide progress towards execution.
Speaker Change: We have opportunities to serve customers in the SMR market, where we are supporting ongoing concept development work, with the long-term goal of positioning ourselves for opportunities as the technology moves to construction phases.
Speaker Change: in go the smr and large scale new build markets demand is benefiting from the need to achieve emission targets globally
Andrew Hider: In addition, automation of fuel fabrication to support longer-term growth in the market is an emerging area of focus for ATS's previous experience. We are focused on expanding our international customer base while supporting our long-standing customers.
Speaker Change: in addition automation of fuel fabrication to support longer-term growth in the market is an emerging area of focus for at's previous experience
Speaker Change: We are focused on expanding our international customer base while supporting our long-standing customers.
Andrew Hider: We also have specialized skills in energy storage and continue to work with customers on select opportunities, and Transportation. Backlog was $417 million as we continued to progress on large programs won in fiscal 23. Our sales fund on transportation consists of smaller opportunities relative to the size of the order bookings we've seen over the past 24 months. As industry participants, we reduce investments to match end market demand and lower platform costs. As our existing EV projects have been moved towards completion, and customers have adjusted their end market demand expectations, we have been redeploying resources internally.
Speaker Change: In addition, we also have specialized skills in energy storage and continue to work with customers on select opportunities.
Speaker Change: In transportation, backlog was $417 million as we continued to progress on large programs won in fiscal 23.
Speaker Change: Our sales fund on transportation consists of smaller opportunities relative to the size of the order bookings we've seen over the past 24 months, as industry participants reduce investments to match end market demand and lower platform costs.
Speaker Change: As our existing EV projects have been moved towards completion, and customers have adjusted their end-market demand expectations,
Andrew Hider: Given the current market conditions, today, we announced plans to realign our EV businesses and adjust our cost structure to reflect our expectations for EVs to be a smaller portion of our overall business going forward. Ryan will provide further information in his prepared remarks, and Consumer Products, our funnel remains stable, including ongoing opportunities in areas such as warehouse automation and consumer packaging. This continues to be a niche market that makes use of our specialized capabilities and complements revenue and our larger vertical. And after sales services, our regional networks remain a key element of our approach to growth across all vertical markets, to create the proximity and response times that our customers need.
Speaker Change: We have been redeploying resources internally.
Speaker Change: Given the current market conditions, today we announce plans to realign our EV businesses and adjust our cost structure to reflect our expectations for EV to be a smaller portion of our overall business going forward.
Speaker Change: Ryan will provide further information in his prepared remarks.
Ryan McLeod: and consumer products our p remain stable including ongoing opportunities and areas such as warehouse automation consumer packaging this continues to be a ic market that makes use of our specialized capabilities and complements revenue and our larger verticals
Ryan McLeod: On after-sales services, our regional networks remain a key element of our approach to growth across all vertical markets and create the proximity and response times that our customers need.
Andrew Hider: Our teams remain focused on expanding our capabilities to drive momentum and higher value services, including Digitally Enabled Insights. During the quarter, we launched our service experience center in Cambridge, which will enable real-time asset monitoring and support over any asset's full life cycle. Our Illuminate platform continues to be an important part of our ability to provide automation equipment monitoring and insights, both onsite and remotely. As for our digital offerings, our funnel is strong. Demand is positive for solutions that improve productivity or energy management and process automation applications.
Ryan McLeod: Our teams remain focused on expanding our capabilities to drive momentum on higher value services, including digitally enabled insights.
Ryan McLeod: During the quarter, we launched our Service Experience Center in Cambridge, which will enable real-time asset monitoring and support over any asset's full life cycle.
Ryan McLeod: our illuminate platform continues to be an important part forour ability to provide automation equipment monitoring and insights go onsite and remotely
Ryan McLeod: On our digital offerings our funnel is strong. Demand is positive for solutions which improve productivity or energy management and process automation applications.
Andrew Hider: Our proven track record is a competitive advantage for us. We continue to build our suite of offerings, including additional capabilities being layered on to our PFax platform, which is our cloud-based IoT platform that houses scalable technology and IoT offerings to support our customers' production control systems. As an example, during the quarter, we launched additions for AI-based heat exchanger and compressor monitoring systems to our Anomaly product. With these additions, we further expand Anomaly as a leading comprehensive software product for AI-based predictive maintenance.
Unknown Executive: We continue to build our suite of offerings, including additional capabilities being layered on to our PFax platform, which is our cloud-based IoT platform that houses scalable technology and IoT offerings to support our customers' production control systems. As an example, during the quarter, we launched additions for AI-based heat exchanger and compressor monitoring systems to our Anomaly product. With this addition, we further expand Anomaly as a leading comprehensive software product for AI-based predictive maintenance.
Ryan McLeod: Our proven track record is a competitive advantage for us.
Ryan McLeod: We continue to build our suite of offerings, including additional capabilities being layered on to our PFax platform.
Ryan McLeod: which is our cloud-based ioto platform that hous a scalable technology iot offerings to support our customers's production control systems
Ryan McLeod: As an example, during the quarter, we launched additions for AI-based heat exchanger and compressor monitoring systems to our Anomaly product. With this addition, we further expand Anomaly as a leading comprehensive software product for AI-based predictive maintenance.
Unknown Executive: We remain focused on developing our capabilities to allow us to support customers in the collection and analysis of data to meaningfully drive performance. As part of the ATS Business Model, we hosted our annual ATS Leadership Conference. Several teams were honored with ABM awards for overall value driver performance, innovation, recurring revenue, health and safety, and employee engagement. Our ABM culture continues to evolve, with evolving tools to improve day-to-day activities, in addition to enterprise-wide events, and a strong focus on sustaining impact.
Andrew Hider: We remain focused on developing our capabilities to allow us to support customers in the collection and analysis of data to meaningfully drive performance. As for the ATS Business Model, we hosted our annual ATS Leadership Conference, where ABM culture and success stories were on display. Several teams were honored with ABM awards for overall value driver performance, innovation, recurring revenue, health and safety, and employee engagement. Throughout the quarter, our global teams engaged in formal, continuous improvement efforts, including problem solving events.
Ryan McLeod: We remain focused on developing our capabilities to allow us to support customers in the collection and analysis of data to meaningfully drive performance.
Ryan McLeod: On the ATS Business Model, we hosted our annual ATS Leadership Conference, where ABM culture and success stories were on display. Several teams were honored with ABM awards for overall value driver performance, innovation, recurring revenue, health and safety, and employee engagement.
Ryan McLeod: Throughout the quarter, our global teams engaged in formal, continuous improvement efforts.
Andrew Hider: Kaizens, and workshops focused on all of our value drivers. Our ABM culture continues to evolve, with evolving tools to improve day-to-day activities, in addition to enterprise-wide events and a strong focus on sustaining impact. The value that our ABM drives for our employees, customers, and shareholders remains clear in M&A. Our funnel is active, and our portfolio remains diversified across a range of target sizes and markets. We maintain our disciplined approach as we assess targets for being actively engaged in cultivating opportunities that align with our strategic initiatives.
Ryan McLeod: including problem solving events kaisens and workshops focused on all of our value drivers
Ryan McLeod: Our ABM culture continues to advance, with evolving tools to improve day-to-day activities, in addition to enterprise-wide events, and a strong focus on sustaining impact.
Unknown Executive: The value that our ABM drives for our employees, customers, and shareholders remains clear. We maintain our disciplined approach as we assess targets. Integration activities are now underway at PACS, guided by our ABM Playbook. Meanwhile, integration of previous acquisitions, including Avidity, is progressing well. We are pleased to announce yesterday that we have signed an agreement to acquire the majority of the assets of HIDALF Institute, which is a leading manufacturer of lab equipment, subject to clearance and closing conditions.
Ryan McLeod: the value that our abm drives forour employees customers and shareholders remains clear
Ryan McLeod: on ma our funnel is active and our portfolio remains diversified acrossus a range of target sizes and markets
Ryan McLeod: We maintain our disciplined approach as we assess targets, while being actively engaged in cultivating opportunities that align with our strategic initiatives.
Andrew Hider: Integration activities are now underway at PACS, guided by our ABM Playbook. Meanwhile, integration of previous acquisitions, including Avidity, is progressing well. Both Paxium and Avidity, along with other recent acquisitions, are important contributors to expanding our recurring revenue. We are pleased to announce yesterday that we have signed an agreement to acquire the majority of the assets of Hidoff Institute, which is a leading manufacturer of lab equipment, subject to clearance and closing conditions.
Speaker Change: Integration activities are now underway at Paxium.
Speaker Change: guided by our abm playbook
Ryan McLeod: Meanwhile, integration of previous acquisitions, including Avidity, are progressing well.
Ryan McLeod: Both Paxium and Avidity, along with other recent acquisitions, are important contributors to expanding our recurring revenues.
Ryan McLeod: We are pleased to announce yesterday that we've signed an agreement to acquire the majority of the assets of HIDALF Instruments, which is a leading manufacturer of lab equipment, subject to clearing and closing condition.
Unknown Executive: On innovation, capital investment into solutions that drive returns remains a point of emphasis in our strategy. A few highlights from the quarter: our Symfony platform continues to be a differentiator for high-speed automation assembly. And during the quarter, we launched Symphony Cell Conductor, a software add-on that enables regulatory compliance for the life sciences market, and Cably Blue, a carton-to-carton blistering offering that allows customers to meet their sustainable packaging requirements.
Andrew Hider: On innovation, capital investment into solutions that drive returns remains a point of emphasis in our strategy. A few highlights from the quarter: our Symfony platform continues to be a differentiator for high-speed automation assembly. And during the quarter, we launched Symphony Cell Conductor, a software add-on that enables regulatory compliance for the life sciences market. Using our PA FACTS platform, and building on our previous launches of MyIWK and Marco Insights, we've also launched MyCFT, a customer portal for tomato processing applications within our food and beverage market, and Abby Kay, which our teams developed and successfully launched. Cably Blue, a carton-to-carton blistering offering that allows customers to meet their sustainable packaging requirements. This offering was originally developed during a President's Kaiser.
Ryan McLeod: On innovation, capital investment into solutions that drive returns remains a point of emphasis in our strategy. A few highlights from the quarter, our Symfony platform continues to be a differentiator for high-speed automation assembly.
Ryan McLeod: and during the quarter we launched symphony s conductor a software at-on that enables regulatory compliance with the life sciences market
Ryan McLeod: using our pa back platform and building on our previous launches of myadk and marco winsightits we've also launched my cft a customer portal for tomato processing applications within our food and beverage market
Speaker Change: And at IBK, our teams developed and successfully launched Cably Blue, a carton-to-carton blistering offering that allows customers to meet their sustainable packaging requirements.
Unknown Executive: This offering was recently developed during a President's Kaiser. With the actions we've announced today, we remain confident in our strategic direction and focus on regulated end markets. Our dedicated team is demonstrating exceptional commitment to innovation and customer satisfaction that is necessary for long-term value creation. As we progress through fiscal 2025, we will continue to focus on delivering on our shared purpose.
Andrew Hider: The team added direct voice of customer feedback and has had positive lead generation since launch. The successful market deployment of this product is a good example of our focus on customer sustainability requirements, which continue to evolve. In summary, our first quarter bookings were strong, and our backlog provides good revenue visibility. With the actions we've announced today, we remain confident in our strategic direction and focus on regulated end markets. Our dedicated team is demonstrating an exceptional commitment to innovation and customer satisfaction that is necessary for long-term value creation.
Speaker Change: this offering was a recently developed during a president's kain the team added direct voice of customer feedback and have add positive lead generation since launch
Speaker Change: The successful market deployment of this product is a good example of our focus on customer sustainability requirements, which continue to evolve.
Speaker Change: in summary our first quarter bookings were strong and our backlog provides good revenue visibility with the actions we've announced today remain confident in our strategic direction and focus on regulated end markets
Speaker Change: our dedicated team is demonstrating exceptional commitment to innovation and customer satisfaction it is necessary for long-term value integration
Andrew Hider: As we progress through fiscal 2025, we will continue to focus on delivering on our shared purpose, creating solutions that positively impact lives around the world. Now, I will turn the call over to Ryan. Ryan, it's over to you. Thank you, Andrew.
Speaker Change: As we progress through fiscal 2025, we will continue to focus on delivering on our shared purpose, creating solutions that positively impact lives around the world. Now, I will turn the call over to Ryan. Ryan, over to you. Thank you, Andrew, and good morning, everyone.
Ryan McLeod: Thank you, Andrew, and good morning, everyone. Starting with our operating results for the quarter. We drove strong order bookings of $817 million, up 18.4% compared to Q1 last year. Life Sciences led this increase with a combination of organic order booking growth, in addition to contributions from acquisitions, including avidity. Our trailing 12-month book-to-bill ratio at the end of Q1 was 1.02 to 1. Excluding transportation, or the trailing 12 month book to bill ratio was 1.18 to, Q1 revenues were $694 million, down 7.9% compared to the prior year.
Unknown Executive: We drove strong order bookings of $817 million, up 18.4% compared to Q1 last year. Our trailing 12-month book-to-bill ratio at the end of Q1 was 1.02 to 1.00. Excluding transportation and the trailing 12 month book to bill ratio of 1.18, Q1 revenues were $694 million, down 7.9% compared to the prior year. As expected, EV has moved past peak revenue contributions from our previous large order bookings in this phase. Food and beverage revenues declined, driven by a prior year benefit from stronger activity related to the higher energy cost environment, particularly in Europe.
Ryan McLeod: Starting with our operating results for the quarter.
Ryan McLeod: We drove strong order bookings of $817 million, up 18.4% compared to Q1 last year.
Ryan McLeod: Life Sciences led this increase with a combination of organic order bookings growth, in addition to contributions from acquisitions, including Avidity.
Ryan McLeod: Our trailing 12-month book-to-bill ratio at the end of Q1 was 1.02 to 1. Excluding transportation, our trailing 12-month book-to-bill ratio was 1.18 to 1.
Speaker Change: q one revenues were six hundred and ninety-four million dollars down seven point nine percent compared to the prior yearorganic growth in life sciences and consumer products along with a four percent benefit from recently acquired companies was offset by declines in transportation and food
Ryan McLeod: Organic growth in life sciences and consumer products along with a 4% benefit from recently acquired companies was offset by declines in transportation and food. As expected, EV has moved past peak revenue contributions from our previous large order bookings in this space. Food and beverage revenues declined, driven by a prior year benefit from stronger activity related to the higher energy cost environment, particularly in Europe.
Ryan McLeod: As expected, AV has moved past peak revenue contributions from our previous large order bookings in this space.
Ryan McLeod: Food and beverage revenues declined, driven by a prior year benefit from stronger activity related to the higher energy cost environment, particularly in Europe .
Ryan McLeod: Moving to earnings, Q1 adjusted earnings from operations were $86.2 million, down 16% from Q1 last year, primarily due to lower revenue. Q1 gross margin excluding acquisition-related inventory fair value charges was 29.9%, an increase of 168 basis points from the prior year. We continue to prioritize margin expansion utilizing ABM tools. In terms of supply chain dynamics, the improving trend on lead times for critical components has continued.
Ryan McLeod: Moving to earnings, Q1 adjusted earnings from operations were $86.2 million, down 16% from Q1 last year, primarily due to lower revenues.
Ryan McLeod: Q1 gross margin, excluding acquisition-related inventory fair value charges, was 29.9%, an increase of 168 basis points from the prior year. We continue to prioritize margin expansion utilizing ABM tools.
Unknown Executive: In terms of supply chain dynamics, the improving trend on lead times for critical components has continued. However, these improvements could take several quarters to be reflected in our results. We are still experiencing cost increases on some material costs, and our team continues to drive proven supply chain strategies and ABM activities to support the business. Moving to SG&A, excluding acquisition-related amortization and transaction costs, first quarter SG&A was $116.4 million, an $11.4 million increase when compared to the prior year, primarily due to incremental acquisition-related SG&A costs, mostly from Avidity. Excluding the mark to market impact related to changes in our share price, stock-based compensation expense was $5 million in Q1, consistent with the prior year.
Speaker Change: in terms of supply chain dynamics the improving trend on lead times for critical compliance has continued these improvements could take several quarters to be reflected in our results
Ryan McLeod: These improvements could take several quarters to be reflected in our results. We are still experiencing cost increases on some material costs, and our team continues to drive proven supply chain strategies and ABM activities to support the business. Moving to SG&A, excluding acquisition-related amortization and transaction costs, first quarter SG&A was $116.4 million, an $11.4 million increase when compared to the prior year, primarily due to incremental acquisition-related SG&A costs, mostly from avidity. Excluding the mark-to-market impact related to changes in our share price, stock-based compensation expense was $5 million in Q1, consistent with the prior year. Earnings per share was $0.36 in Q1 and $0.50 on an adjusted basis.
Ryan McLeod: we are still experiencing cost increases on some material costs and our team continues to drive proven supply chain strategies and abm activities to support the business
Ryan McLeod: moving test cha excluding acquisition-related amortization and transaction costs
Ryan McLeod: First quarter SG&A was $116.4 million, an $11.4 million increase when compared to the prior year, primarily due to incremental acquisition-related SG&A costs, mostly from avidity.
Ryan McLeod: Excluding the mark-to-market impact related to changes in our share price, stock-based compensation expense was $5 million in Q1, consistent with the prior year.
Unknown Executive: Earnings per share was $0.36 in Q1 and $0.50 on an adjusted basis. Moving to our outlook, we finished the quarter with just under $1.9 billion of order back. Looking ahead, revenue conversion for Q2 is estimated to be in the 33 to 36% range of order back. As a reminder, this assessment is updated every quarter based on revenue expectations from existing backlog and new orders booked and billed within the quarter. The lower conversion percentage reflects the relatively early phases of some larger life science programs, as well as approximately $150 million of delayed transportation order backlog, which remains excluded from our outlook for the year.
Ryan McLeod: earnings per share was thirty-six cents in q one and fifty cents on an adjusted basis
Ryan McLeod: Moving to our outlook, we finished the quarter with just under $1.9 billion of order backlog. Looking ahead, revenue conversion for Q2 is estimated to be in the 33 to 36% range of order backlog. As a reminder, this assessment is updated every quarter based on revenue expectations from existing backlog and new orders booked and billed within the quarter. The lower conversion percentage reflects the relatively early phases of some larger life science programs, as well as approximately $150 million of delayed transportation order backlog, which remains excluded from our outlook for the year.
Ryan McLeod: Moving to our Outlook, we finished the quarter with just under $1.9 billion of order backlog.
Ryan McLeod: Looking ahead, a revenue conversion for Q2 is estimated to be in the 33 to 36 percent range of order backlog.
Ryan McLeod: As a reminder, this assessment is updated every quarter based on revenue expectations from existing backlog and new orders booked and billed within the quarter.
Ryan McLeod: the lower conversion percentage reflects the relatively early phases of some larger life science programs as well as approximately one hundred and fifty million dollars of delayed transportation order backlog which remains excluded from our outlook for the year
Ryan McLeod: Due to lower expected revenues in Q2, particularly in our transportation business, we expect our margins to be negatively impacted. We're taking actions to mitigate the impact, including reallocating resources into other areas of the business. In addition to reducing our workforce, which we expect will cost between $15 million and $20 million over the next several quarters.
Unknown Executive: Due to lower expected revenues in Q2, particularly in our transportation business, we expect our margins to be negatively impacted. We're taking actions to mitigate the impact, including reallocating resources into other areas of the business. In addition to reducing our workforce, which we expect will cost between $15 million and $20 million over the next several quarters.
Ryan McLeod: Due to lower expected revenues in Q2, particularly in our transportation business, we expect our margins to be negatively impacted.
Ryan McLeod: We are taking actions to mitigate the impact, including reallocating resources into other areas of the business, in addition to reducing our workforce, which we expect will cost between $15 million and $20 million over the next several quarters.
Ryan McLeod: These actions are expected to right-size the cost structure of our transportation business for current market activity, allow us to continue to serve our customers effectively, and support ongoing growth in our other market verticals. Moving to the balance sheet, In Q1, cash flows used in operating activities were $35.4 million. Cash usage largely reflected the timing of progress billings and collection of those billings on our large approaches. Our non-cash working capital as a percentage of revenue was 23.4%, up from 19% at the end of fiscal 24.
Unknown Executive: These actions are expected to right-size the cost structure of our transportation business for current market activity, allow us to continue to serve our customers effectively, and support ongoing growth in our other market verticals. Moving to the balance sheet, in Q1, cash flows used in operating activities were $35.4 million.
Ryan McLeod: these actions are expected to rate size the cost structure of our transportation business for current market activity allowsus to continue to ser our customers effectively and support ongoing growth and our other market verticals
Unknown Executive: Cash usage largely reflected the timing of progress billings and collection of those billings on our large approach. Our non-cash working capital as a percentage of revenue was 23.4%, up from 19% at the end of fiscal 24. Looking ahead, we anticipate that working capital improvements will start to materialize in the back half of the year as milestones are achieved on larger programs in our backlog. During the quarter, we invested $15.9 million in CapEx and Intangible Assets.
Ryan McLeod: Moving to the balance sheet. In Q1, cash flows used in operating activities were $35.4 million. Cash usage largely reflected the timing of progress billings and collection of those billings on our larger projects.
Ryan McLeod: Our non-cash working capital as a percentage of revenue was 23.4%, up from 19% at the end of fiscal 24.
Ryan McLeod: Looking ahead, we anticipate that working capital improvements will start to materialize in the back half of the year as milestones are achieved on larger programs in our backlog. During the quarter, we invested $15.9 million in CapEx and Intangible Assets.
Ryan McLeod: looking ahead we anticipate that working capital improvements will start to materialize in the back half of the year as milestones are achieved on larger programs in our backlog
Ryan McLeod: during the quarter we invested fifteen point nine million dollars in capex and intangible assets
Ryan McLeod: On leverage, our net debt to adjusted EBITDA ratio was 2.7 to 1 as of the end of Q1. Our current leverage position is consistent with our objective of maintaining our net debt to adjusted EBITDA ratio within the two to three times range. As we noted when we reported our year-end results, we were active in our share buyback program during Q1. The NCIB program remains an opportunistic component of our overall capital deployment strategy.
Unknown Executive: On leverage, our net debt to adjusted EBITDA ratio was 2.7 to 1 as of the end of Q1. Our current leverage position is consistent with our objective of maintaining our net debt to adjusted EBITDA ratio within the two to three times range. As we noted when we reported our year-end results, we were active in our share buyback program during Q1. The NCIB program remains an opportunistic component of our overall capital deployment strategy.
Ryan McLeod: On leverage, our net debt to adjusted EBITDA ratio was 2.7 to 1 as of the end of Q1.
Ryan McLeod: Our current leverage position is consistent with our objective of maintaining our net debt to adjusted EBITDA ratio within the 2 to 3 times range.
Ryan McLeod: as we noted when we were reported our year-end results we're active on our shared buyback program during q one the ncib program remains an opportunistic component of our overall capital deployment strategy
Ryan McLeod: In summary, ATS delivered solid results for the course. We are particularly pleased with the continued strength of our order bookings, which highlight the value and importance of our offerings to our diverse customer base and our attractive long-term growth opportunities. Our order backlog remains strong and provides us with good revenue visibility for the fiscal year, with particular strength in life science. The recent addition of Paxium will further our opportunities in food technologies and packaging, and we look forward to closing the HIDALF acquisition in the coming weeks.
Unknown Executive: We are particularly pleased with the continued strength of our order bookings, which highlight the value and importance of our offerings to our diverse customer base and our attractive long-term growth opportunities. Our order backlog remains strong and provides us with good revenue visibility for the fiscal year, with particular strength in life science. A recent addition of Paxium will further our opportunities in food technologies and packaging, and we look forward to closing the HIDALF acquisition in the coming weeks.
Unknown Executive: In summary, ATS delivered solid results for the quarter.
Unknown Executive: we are particularly pleased with the continued strength of our order bookings which highlight the value and importance of our offerings to our diverse customer base and our attractive long-term growth opportunities
Ryan McLeod: Our order backlog remains strong and provides us with good revenue visibility for the fiscal year, with particular strength in life sciences.
Speaker Change: recentan additionate of pximum will further our opportunities and food technologies inand packaging and we look forward to closing the hight all acquisition in the coming weeks
Ryan McLeod: Our focus remains on our core values of people, process, and performance, and utilizing the ABM to drive disciplined, purposeful, continuous improvement. We're confident in the ability of our teams to drive our strategy forward and create long-term value for our customers and shareholders. Now, we will open the call to questions from our analysts. Operator, could you please provide instructions? Thank you.
Unknown Executive: Our focus remains on our core values of people, process, and performance and utilizing the ABM to drive disciplined, purposeful, continuous improvement. We're confident in the ability of our teams to drive our strategy forward and create long-term value for our customers and shareholders.
Speaker Change: Our focus remains on our core values of people, process, and performance, and utilizing the ABM to drive disciplined, purposeful, continuous improvement.
Speaker Change: We're confident in the ability of our teams to drive our strategy forward and create long-term value for our customers and shareholders.
Speaker Change: Now we'll open the call to questions from our analysts. Operator, could you please provide instructions? Thank you.
Operator: The floor is open for a question and answer session. If you'd like to ask a question, please press star one. Again, that's star one on your telephone keypad. Our first question comes from Michael Glenn from Raymond James. Your line is now open.
Speaker Change: The floor for question-and-answer session. If you'd like to ask a question, please press star 1. Again, that's star 1 on your telephone keypad. Our first question comes from Michael Glen from Raymond James. Your line is now open.
Michael: Hey, thanks for getting me in there. I just really want to start with the working capital situation. I'm having a bit of a tough time understanding if the customer isn't
Michael Glenn: Hey, thanks for getting me in there. I just really want to start with the working capital situation. Like I'm having a bit of a tough time understanding if the customer doesn't appear to be willing to pay for the work being done. Like, why are you still progressing and building working capital on these projects? Like the numbers just seem to be getting really, really large at this point.
Speaker Change: Hey, thanks for getting me in there. I just really want to start with the working capital situation like I'm having a bit of a tough time understanding if the customer isn't
Speaker Change: doesn't appear to be willing to pay for for the work being done like why are you still progressing and building working capital on these projects like the numbers just seems to be getting really really large at this point
Ryan McLeod: Good morning, Michael. So, I have a couple things. The increase in working capital in the quarter was in a couple different areas of the business. It was both life sciences and EV, primarily. As I mentioned in my prepared remarks, programs are progressing. And as these programs get completed or advanced, depending on where we are in the build, we are invoicing them, and we expect to collect on them. There's, you know, I've talked about this being largely a timing issue, and that's what it is at this point.
Unknown Executive: Good morning, Michael. So, I have a couple things. The increase in working capital in the quarter was in a couple different areas of the business. It was both life sciences and EV, primarily. As I mentioned in my prepared remarks, programs are progressing. And as these programs get completed or advanced, depending on where we are in the build, we are invoicing them, and we expect to collect on them. There's, you know, I've talked about this being largely a timing issue, and that's what it is at this point.
Unknown Executive: good morning michael so so a couple of things the increase in working capital in the quarter
Unknown Executive: was in a couple different areas of the business. It was it was both life sciences and in EV primarily.
Unknown Executive: As I mentioned in my prepared remarks, programs are progressing.
Unknown Executive: And as these programs get completed or advanced, depending on where we are in the build, we are invoicing them and we expect to collect on them.
Unknown Executive: There's, you know, I've talked about this being largely a timing issue and that's what it is at this point.
Michael: Okay, is there risk, though, of any obsolescence with what you're building? I mean, the value of this equipment, I think, is changing in the marketplace as we speak, given the evolving EV outlook. Should we think about the potential for charges against any of this working capital that's being built up?
Michael Glenn: Okay, is there risk, though, of any obsolescence with what you're building? I mean, the value of this equipment, I think, is changing in the marketplace as we speak. Given the evolving EV outlook, should we think about the potential for charges against any of this working capital?
Michael: Okay, is there risk though of any obsolescence with what you're building? I mean the value of this equipment I think is changing in the marketplace as we speak given the evolving EV outlook.
Michael: Should we think about potential for charges against any of this working capital that's being built up?
Ryan McLeod: No, that's not our expectation. I mean, contractually, we're building to what's been expected or what we've contracted to. And as I said, our expectation is that the programs will get completed. And again, the build is not solely related to EV in the quarter. It's in life sciences as well.
Unknown Executive: No, that's not our expectation. I mean, contractually, we're building to what's been expected or what we've contracted for. And as I said, our expectation is that the programs will get completed.
Unknown Executive: No, that's not our expectation. I mean contractually we're building to what's been expected or what we've contracted to and as I said our expectation is
Unknown Executive: the programs will get completed and and again
Speaker Change: the build it's not solely related to eev in the quarter it's in my science it as well
Michael Glenn: Okay, I'll leave it there. Thank you.
Michael: Okay, I'll leave it there. Thank you.
Speaker Change: okay oh 'llleave it there thank you
Operator: Our next question comes from Cherilyn Radbourne of T.G. Cohen. Your line is now open.
Operator: Our next question comes from Cherilyn Radbourne of T.G. Cohen. Your line is now open.
Operator: Our next question comes from Sherilyn Radborn from T.G. Cohen. Your line is now open.
Pat Sullivan: Good morning. Thank you for taking my question. This is Pat Sullivan on behalf of Cherilyn. I know you touched on this a little bit in your prepared remarks, but could you elaborate on the opportunities that you see ahead in energy, including larger nuclear reactors, SMRs, and grid battery storage?
Patrick Sullivan: Good morning. Thank you for taking my question. This is Pat Sullivan on behalf of Cherilyn. I know you touched on this a little bit in your prepared remarks, but could you elaborate on the opportunities that you see ahead in energy, including larger nuclear reactors, SMRs, and grid battery storage?
Pat Sullivan: Good morning. Thank you for taking my question. This is Pat Sullivan on behalf of Cherilyn. I know you touched on a little bit in your prepared remarks, but could you elaborate on the opportunity that you see ahead in energy, including larger nuclear reactors, SMRs, and grid battery storage?
Andrew Hider: Yeah, absolutely, Pat. And good morning.
Unknown Executive: Call it three, and then you added a fourth from the standpoint of energy storage. But the biggest portion of our energy and nuclear area is can-do reactor refurbishment, being green energy and the need for continued energy support. We see this as an area of continued strength. It's a niche area for organizations.
Andrew Hider: There's Call it three, and then you added a fourth from a standpoint of energy storage. But the biggest portion of our energy and nuclear area is can-do reactor refurbishment. And... being green energy and the need for continued energy support. We see this as an area of continued strength. It's a niche area for our organization.
Unknown Executive: Yeah, absolutely, Pat, and good morning. Look, there's...
Speaker Change: pull up three and then then you added a fourth in there from a standpoint of energy storage but but large part the biggest portion of our of our energy and nuclear area is can do reactor refurbishment.
Unknown Executive: and
Unknown Executive: Being green energy and the need for continued energy support. We see this as an area of continued strength. It's a niche area for our organization.
Andrew Hider: We do the automation for the refurbishment process. That said, we continue to expand capability and our ability to serve and support not only the can-do refurbishment process but also support the tooling over the life of the tooling. We see continued strength in this area. The second portion, I would say, is the small modular reactors.
Unknown Executive: We do the automation for the refurbishment process. That said, we continue to expand capability and our ability to serve and support not only the can-do refurbishment process but also support the tooling over the life of the tooling. So we see continued strength in this area. The second portion, I would say, is small modular reactors. And then there's decommissioning, and we continue to support decommissioning where needed. Obviously, this is an area that our customers look to ATS for support in the efficiency of decommissioning, and when they can automate and drive cost and efficiency, it only supports their value creation in the space. Then there's battery storage and energy storage, and that continues to be an area of opportunity for the business and one that we view we have a strong value for our customers around.
Unknown Executive: we do the automation for the refurbishment process
Unknown Executive: That said, we continue to expand capability and our ability to serve and support
Speaker Change: 're not only they can do refurbishment process but also support the tooling over the leng of the to ing so we see continued strength in this area the second portion i would say is the small modduular reactors
Andrew Hider: And as I talk through this, we continue to see opportunity in this area; we're working with some of the major players in this space, and we do see this as an area of growth for the future. All that said, it needs to be proved out, and we need to make sure that we support our customers as they're really looking to bring these online and prove the capability of small modular reactors. As a reminder, we're a small portion of the overall spend, but we have a high impact, exactly kind of where we want to be from a value perspective of these customers.
Speaker Change: and as i talk tr we continue to see opportunity in this area we're working with some of the major players in this space
Unknown Executive: And we do see this as an area of growth for the future.
Unknown Executive: all that said it needs to be proved out and we need to make sure that we support our customers that they're really looking to bring these online and prove the capability on small mo actors is a reminder were a small portion of the overall spend but high impact
Andrew Hider: And then there's decommissioning, and we continue to support decommissioning where needed. Obviously, this is an area that our customers look to ATS for support in the efficiency of decommissioning, and when they can automate and drive cost and efficiency, it only supports their value creation in the space. Then there's then there's battery storage and energy storage, and that continues to be an area of opportunity for the business and one that we view we have a strong value for our customers around.
Unknown Executive: exactly kind of where we want to be from those value perspective of these customers
Unknown Executive: And then there's decommissioning, and we continue to support decommissioning where needed. Obviously, this is an area that...
Unknown Executive: Our customers look to ATS to support an efficiency of decommissioning and when they can automate and drive cost and efficiency, it only supports their value creation in the space.
Unknown Executive: then there's then there's battery storage and energy storage and that continues to be an area of opportunity for the business and one that we view we have a strong value for our customers around
Pat Sullivan: Okay, thanks. And if I could ask another question,
Patrick Sullivan: Okay, thanks. And if I could ask another question,
Speaker Change: okay thanks if i could ask another one i think you guys lots reported we've seen more and more announcements from companies investing billions of dollars into their gp one supply chains
Unknown Executive: I think since you guys last reported, we've seen more and more announcements from companies investing billions of dollars into their GLP-1 supply chains. I guess, are these investments and announcements in alignment with your internal expectations for the segment? Are they, you know, exceeding them or surpassing those levels you expected maybe three or six months ago? Yeah, so.
Andrew Hider: I think since you guys last reported, we've seen more and more announcements from companies investing billions of dollars into their GLP-1 supply chains. I guess, are these investment announcements in alignment with your internal expectations for the segment? Are they, you know, exceeding them or surpassing those levels you expected maybe three or six months ago? Yeah, so.
Speaker Change: I guess are these investments announcements in alignment with your internal expectations for the segment? Are they, you know, exceeding it or subseding those levels you expected maybe three or six months ago?
Unknown Executive: Yeah, so look, I would say it's in line. We continue to be a strong supporter of this space. Many customers around their launch and or future launch of drugs within this market in the auto injector area. As a reminder, we've been in this market for, gosh, two decades with the EpiPen and other variations of the product over time. With our launch of the Symfony platform, it's really enabled us to support customers on production needs, and to give you context on a base system, it simply allows us to go up to two times the output and half the footprint.
Andrew Hider: Yes, so look, I would say it's in line. We continue to be a strong supporter of this space. Many customers around their launch and or future launch of drugs within this market in the auto injector area. As a reminder, we've been in this market for gosh two decades with the EpiPen and other variations of the product over time. With our launch of the symphony platform, it's really enabled us to support customers with production needs and to give you context on a base system that simply allows us to go up to two times the output and half the footprint.
Unknown Executive: yes so so i would say it's in line we continue to be a strong supporter for this space
Unknown Executive: many customers around their launch and or future launch of drugs within this market around the auto injector area. As a reminder
Unknown Executive: We've been in this market for, gosh, two decades with the EpiPen and other variations of the product over time. With our launch of the Symfony platform,
Unknown Executive: It's really enabled us to support customers on production needs and to give you context on a base system.
Unknown Executive: A real key enabler and another check and improve point around utilizing innovation, IP, and technology to drive higher value for our customers. And so overall, we view this as a market that we will continue to support for the foreseeable future. It's in line with our customers' investment in their growth. And as they identify new drugs and new ability to fight other areas with this product, it's an area that ATS will continue to support.
Andrew Hider: A real key enabler and another check and proof point around utilizing innovation, IP, and technology to drive higher value for our customers. And so overall, we view this as a market that we will continue to support for the foreseeable future. It's in line with our customers' investment in their growth. And as they identify new drugs and new ability to fight other areas with this product, it's an area that ATS will continue to support.
Unknown Executive: simply allows us to go up to two times the output and half the footprint.
Unknown Executive: oral key enabl and in another check and improved point around utilizing innovation ip and technology to drive
Unknown Executive: higher value for our customers and so
Unknown Executive: Overall, we view this as a market that we will continue to support the foreseeable future.
Unknown Executive: It's in line with our customers' investment on their growth and as they identify new drugs and new ability to fight other areas with this product, it's an area that ATS will continue to support.
Joe Ritchie: Our next question comes from Joe Ritchie from Goldman Sachs. Your line is now open.
Operator: Our next question comes from Joe Ritchie from Goldman Sachs. Your line is now open.
Joe Ritchie: Okay, great. Thank you.
Speaker Change: Our next question comes from Joe Ritchie from Goldman Sachs. Your line is now open.
Joe Ritchie: Hi, good morning, guys. Maybe just kind of focus on the near term for a second and the guidance for next quarter. So, you've given a range, you know, call it roughly around 620 to, we'll say roughly 680 in revenues for the upcoming quarter. I'm just curious about two things.
Joe Ritchie: Hi. Good morning, guys.
Joe Ritchie: Good morning.
Joe Ritchie: so maybe just kind of focused on the near term for a second and the guidance for next quarter so you've given a range call it roughly around you six twenty to
Speaker Change: we's say r oughly sixhundredand eight in revenues for
Joe Ritchie: Number one, what's dependent on the low versus the high end of the range, like confidence and hitting either end. And then secondly, as you think about the margin profile of the business that's coming through, I know that some of your, I think some of your design work on the life sciences side tends to be a little bit lower margin. So, help us understand what the margin trajectory of that backlog is as well as that conversion.
Joe Ritchie: for the upcoming quarter. I'm just curious, two things. Number one,
Joe Ritchie: what's dependent like the low versus the high end in the range like incompetence and hitting highither either end and then secondly
Joe Ritchie: as you think about the margin profile of the business thatit's coming through i know that some of your i think some of your design work on the lifesciences sideides end to be a little bit lowermargin so help us understand what the margin trajecactually what trajectory of that backlog is as well that converts
Unknown Executive: Yeah, so Joe, I guess just first on the backlog conversion, then I'll touch on margins. So the range we provided is based on what's in the backlog and then as well as our expectation for shorter-term business in-quarter bookings and how that converts to revenue. So there's some impact from the shorter cycle equipment, but it's more dependent on progress on the projects. And so where we have materials coming in, that can get us towards a higher range. If materials, you know, push out a few weeks, that could put us towards a lower range. So that's the kind of sensitivity around it.
Ryan McLeod: Yeah, so Joe, I guess just first on the backlog conversion, then I'll touch on margins. So the range we provided is based on what's in the backlog and then as well as our expectation for shorter-term business in-quarter bookings and how that converts to revenue. So there's some impact from the shorter cycle equipment, but it's more dependent on progress on the projects. And so where we have materials coming in, that can get us towards a higher range. If materials, you know, push out a few weeks, that could put us towards a lower range. So that's the kind of sensitivity around it.
Unknown Executive: yes so so joe i guess just first on the backlog conversion then i'll 'll clouch on margins so the range we provideed it's based on what's in backlog and thenthat as well as our expectations for
Unknown Executive: shorter-term business in-quarter bookings and how that converts to revenue.
Unknown Executive: so there's there's some impact from the shorter term
Unknown Executive: shorter cycle equipment.
Unknown Executive: But it's more dependent on progress on the projects. And so where we have materials coming in, that can get us towards a higher range. If materials, you know, push out a few weeks, that could put us towards a lower range. So that's the kind of sensitivity around it.
Ryan McLeod: In terms of margin, I mean programs, and the rest of the business is largely operating as expected, and we're quite pleased with our margin performance in this current quarter. But given the sequential decline in revenues, we are going to see pressure on gross margin as well as our operating leverage, and it's primarily a utilization issue. So we do have cost containment measures in place, in addition to the restructuring actions that we've talked about, but those won't fully offset the revenue headwinds in the second quarter.
Ryan McLeod: In terms of margin, I mean programs, and the rest of the business is largely operating as expected, and we're quite pleased with our margin performance in this current quarter. But given the sequential decline in revenues, we are going to see pressure on gross margin as well as our operating leverage, and it's primarily a utilization issue. So we do have cost containment measures in place in addition to the restructuring actions that we've talked about, but those won't fully offset the revenue headwinds in the second quarter.
Ryan McLeod: In terms of margin, I mean, programs and the rest of the business is largely operating as expected and we're quite pleased with our margin performance in this current quarter.
Ryan McLeod: but given the sequential decline in revenues we are going to see pressure on gross margin as well as our operating leverage and it's primary primarily a utilization issue
Ryan McLeod: So we do have cost containment measures in place in addition to the restructuring actions that we've talked about, but those won't fully offset the revenue headwinds in the second quarter.
Ryan McLeod: Okay, that's helpful, Ryan. And then maybe just, you referenced the restructuring actions, the $15 to $20 million in cost actions. How should we think about the payback from those actions? And then also, you guys have referenced rightsizing your transportation backlog. You know, historically, if I go back into the past, I've seen that backlog in that kind of $200 to $250 million range. Is that what the expectation should be for what rightsizing actually means going forward?
Joe Ritchie: Okay, that's helpful, Ryan. And then maybe just, you referenced the restructuring actions, the $15 to $20 million in cost actions. How should we think about the payback from those actions? And also, you guys have referenced right-sizing your transportation backlog. You know, historically, if I go back into the past, I've seen that backlog in that kind of $200 to $250 million range. Is that what the expectation should be for what right-sizing actually means going forward?
Ryan McLeod: okay that's that's helpful right and and maybe just you reference the restructuring actions fifteen to twenty million dollars in cost actions
Ryan McLeod: How should we think about the payback from those actions?
Ryan McLeod: And then also, you guys have referenced rightsizing your transportation backlog.
Ryan McLeod: You know, historically, if I go back into the history, I've seen that backlog and that kind of $200 to $250 million range, is that what the expectation should be for what rightsizing actually means going forward?
Ryan McLeod: Well, so, um, let me, let me answer the first part of the question first. So, I mean, what we're doing is, as we talked about, aligning our cost structure to the level of market activity we expect. So, part of that is reallocating resources, and that's both people and footprint to other parts of the business, primarily in life sciences, but other parts as well. There is a headcount impact. And, again, that's gonna, that's going to remove costs from the business.
Ryan McLeod: Well, so, let me answer the first part of the question first. So, I mean, what we're doing is, as we talked about, aligning our cost structure to the level of market activity we expect. So part of that is reallocating resources, and that's both people and footprint to other parts of the business, primarily in life sciences, but other parts as well. There is a headcount impact. And, again, that's gonna, that's going to remove costs from the business.
Ryan McLeod: Well, so, um...
Ryan McLeod: And it's, it's in, I mean, from a run rate savings perspective, it's in excess of the dollars we're spending on from a backlog perspective. I mean, at this point, I'd say we expect this to be a lower percentage of our business. I don't think of it in terms of dollars, but just the way the market's going versus growth and or other verticals, it's going to be in that low double digit, maybe high single digit percentage of revenues going forward.
Ryan McLeod: So let me, let me...
Ryan McLeod: answer the first part of the question first. So, I mean, what we're doing is, as we talked about, aligning our cost structure to the level of market activity we expect. So, part of that is reallocating resources.
Ryan McLeod: And that's both people and footprint to other parts of the business, primarily in life sciences, but other parts as well. There is a headcount impact.
Ryan McLeod: And it's in, I mean, from a run rate savings perspective, it's in excess of the dollars we're spending on from a backlog perspective. I mean, at this point, I'd say we expect this to be a lower percentage of our business. I don't think of it in terms of dollars, but just the way the market's going versus growth and or other verticals, it's going to be in that low double-digit, maybe high single-digit percentage of revenues going forward.
Ryan McLeod: and again that's going that's going to remove cost from the business and it's it's in i mean from a run rate savings it's an excess of of the dollars were spending
Ryan McLeod: From a backlog perspective, I mean, at this point, I'd say we expect this to be a lower percentage of our business. I don't think of it in terms of dollars, but just the way the market's going versus growth in our other verticals. It's going to be...
Ryan McLeod: and that low double-digit, maybe high single-digit percentage of revenues going forward.
Joe Ritchie: Okay, that's helpful. Thanks, guys.
Joe Ritchie: Okay, that's helpful. Thanks, guys.
Speaker Change: Okay, that's helpful. Thanks, guys.
Operator: Our next question comes from Justin Keywood from Stifel. Your line is now open. Good morning.
Operator: Our next question comes from Justin Keywood from Steiffel. Your line is now open. Good morning.
Justin Keywood: Thank you.
Operator: Our next question comes from Justin Keywood from Stifle. Your line is now open.
Justin Keywood: Good morning, thanks for taking my call. On the record, life sciences backlog, are you able to quantify what comprises the GLP-1 orders? and also the Outlook for Life Sciences. If we were to look at the segment, beyond GLP-1, are you still seeing strength and growth?
Justin Keywood: Good morning, thanks for taking my call. On the record, life sciences backlog, are you able to quantify what comprises the GLP-1 orders? And also the outlook for life sciences, if we were looking, to look at the segment. You know, beyond GLP-1, are you still seeing strength and growth?
Justin Keywood: Good morning, thanks for taking my call. On the record, life sciences backlog, are you able to quantify what comprises of GLP-1 orders?
Justin Keywood: And also the outlook for life sciences. If we were to look at the segment, you know, beyond GLP-1, are you still seeing strength and growth? Thank you.
Unknown Executive: So, why don't I take the second part first, and then Ryan can walk through the portion of the backlog. You know, Justin, when we step back and look at this space, there are, and I referenced this in my prepared remarks, there are several areas that we continue to see strength around. And of course, we referenced GLP-1; we're able to utilize our capability, our technology, our footprint to really drive impact here. But in addition to that, there are several areas, and, you know, I go through radiopharmaceuticals and the launch of new drugs in the fight against cancer.
Andrew Hider: So, why don't I take the second part first, and then Ryan can walk through the portion of the backlog. You know, Justin, when we step back and look at this space, there are, and I referenced this in my prepared remarks, there are several areas that we continue to see strength around. And of course, we referenced GLP-1; we're able to utilize our capability, our technology, our footprint to really drive impact here. But in addition to that, there are several areas, and you know, I go through radiopharmaceuticals and the launch of new drugs in the fight against cancer.
Unknown Executive: So why don't I take the second part first and then Ryan can walk through the portion of backlog.
Unknown Executive: You know, Justin, when we step back and look at this space, and I referenced this in my prepared remarks, there are several areas that we continue to see strength around.
Unknown Executive: And of course we reference GLP-1. We're able to utilize our capability, our technology, our footprint to really drive impact here.
Ryan McLeod: but in addition to that there are several areas and you know i go through radio pharmaceutical and the launch of new drugs in the fight against cancer we have a strong position in the ability to support that that market and it continues to be an area of strength for commature business
Andrew Hider: We have a strong position in the ability to support that market, and it continues to be an area of strength for mature business. We also see continued strength in wearable devices and specifically around not only wearables but in the treatment of diabetes and the areas around how we can support the products and launches within that space. We're also in pharmacy automation, which is also continuing to show strength and opportunity for the future.
Unknown Executive: We have a strong position in the ability to support that market, and it continues to be an area of strength for mature business. We also see continued strength in wearable devices and specifically around not only wearables but in the treatment of diabetes and the areas around how we can support the products and launches within that space. We're also in pharmacy automation, which is also continuing to show strength and opportunity for the future.
Unknown Executive: We also see continued strength in wearable devices and specifically around not only wearable but in the treatment of diabetes and the areas around how we can support the products and launches within that space.
Unknown Executive: We're also in pharmacy automation, which also is continuing to show strength and opportunity for the future, but I also remind you, you know, when we look at ATS and even our order volume
Unknown Executive: But I also remind you, you know, when we look at ATS and even our order volume, we have businesses that are continuing to support things like contact lenses and areas that customers want to invest in because it's their core product and core niches that they want to support over the long term. And we're able to support and drive not only new technology, but new innovation in those products. We have the ability to serve and support over the life of the equipment.
Andrew Hider: But I also remind you, you know, when we look at ATS and even our order volume, we have businesses that are continuing to support things like contact lenses and areas that customers look to invest in because it's their core product and core niches that they want to support over the long term. And we're able to support and drive not only new technology, but new innovation in those products. We have the ability to serve and support over the life of the equipment.
Unknown Executive: we have businesses that that are continuing to four things like contact lenses and areas that that customers want to invest because 's our core product and in cour issues that they want to support over the long term
Unknown Executive: And we're able to support and drive.
Unknown Executive: not only new technology new innovation in those products we have the ability to serve and support over the life of the equipment so our our view of the market very strong bookings quarter has very strong backlog today
Andrew Hider: So our view of the market, a very strong bookings quarter, and a very strong backlog today. Our funnel remains healthy. With the addition, or excuse me, future addition of the new acquisition we announced with Hidoff, we can't be more excited about that potential and what we can do with that business as we help them really penetrate and drive more into the lab space. But Ryan, do you want to touch on the backlog portion?
Unknown Executive: So our view of the market, a very strong bookings quarter, and a very strong backlog today. Our funnel remains healthy. With the addition, or excuse me, future addition of the new acquisition we announced with Hidoff, we can't be more excited about that potential and what we can do with that business as we help them really penetrate and drive more into the lab space. But Ryan, do you want to touch on the backlog portion?
Ryan McLeod: Our funnel remains healthy. With the addition, or excuse me, future addition of the new acquisition we announced with Hidoff, we can't be, you know, more excited about that potential and what we can do with that business.
Unknown Executive: Yeah, Justin, it's roughly 20% of our life sciences backlog or about 10% of our overall backlog. And that's consistent with where we'd expected it to be. We've talked in the past about those solutions being roughly a high single-digit, low double-digit percentage of our revenues, and that's how it aligns with our backlog.
Andrew Hider: Yeah, Justin, it's roughly 20% of our life sciences backlog or about 10% of our overall backlog. And that's consistent with where we'd expected it to be. We've talked in the past about those solutions being roughly a high single-digit, low double-digit percentage of our revenues, and that's how it aligns with our backlog.
Ryan McLeod: as we help them really penetrate and drive more into the lab space. But Ryan, do you want to touch on the backlog portion? Yeah, Justin, it's roughly 20% of our life sciences backlog or about 10% of our overall backlog. And that's consistent with
Justin Keywood: Thank you. I appreciate it.
Justin Keywood: where we'd expected it to be. We've talked in the past about
Justin Keywood: Those solutions being roughly high single-digit, low double-digit percentage of our revenues and that's how it aligns with our backlog.
Justin Keywood: Thank you. I appreciate it.
Unknown Executive: And then on M&A, you mentioned the Hidoff tuck-in acquisition. If there are any metrics that you could point to, the press release did mention that it's accretive on a multiple basis. And then also, within the pipeline, is it largely tuck-in opportunities, or are there some more sizable transactions potentially?
Speaker Change: Thank you.
Justin Keywood: And then on M&A, you mentioned the Hidoff token acquisition. If there are any metrics that you could point to, the press release did mention that it's accretive on a multiple basis. And then also, within the pipeline, is it largely token opportunities, or are there some more sizable transactions potentially?
Speaker Change: Appreciate it. And then on M&A, you mentioned the hide-off.
Unknown Executive: What is the Tuck-In acquisition? If there is any metrics that you could point to? The press release did mention that it's creative on a multiple basis. And then also within the pipeline, is it largely Tuck-In opportunities or are there some more sizable transactions potentially?
Unknown Executive: Yeah, so it's a creative on a gross margin basis. And to give maybe a little bit more context, this is an asset, an asset deal. And so the company had breached some covenants and been pushed into an insolvency process by its lenders. And so, from a value perspective, it made it very attractive. And this is a business that we've tracked for quite a period of time, which allowed us to move very quickly. And then I'll let Andrew address the second part.
Ryan McLeod: Yeah, so it's a creative on a gross margin basis. And to give maybe a little bit more context, this is an asset, an asset deal. And so the company had breached some covenants and been pushed into an insolvency process by its lenders. And so, from a value perspective, it made it very attractive. And this is a business that we've tracked for quite a period of time, which allowed us to move very quickly. And then I'll let Andrew address the second part.
Andrew: Yeah, so it's accretive on a gross margin basis, and
Andrew: to to give it maybe a little bit more context
Andrew: this this is an asset
Andrew: an asset deal and so the company had been
Speaker Change: had breached some covenants and been pushed into an insolvency process by its lenders. And so from a value perspective, made it very attractive. And this is a business that we've
Andrew: tracked for quite a period of time, which allowed us to move very quickly.
Andrew Hider: Yes, so just to add, we've known this space, this market, for over two years and continue to monitor it. So, very pleased.
Andrew Hider: Yes, so just to add, we've known this space, this market, for over two years and continue to monitor it, so we're very pleased. And, of course, we have to close and add a hideout to the business, but excited about the opportunity and where they're positioned within the organization. As far as our funnel is concerned, it continues to be strong, and when we look, there is a good mix of small, medium, and large within our funnel.
Andrew Hider: And then I'll let Andrew address.
Andrew Hider: Yeah, so just to add, we've known this space, this market for over two years and continue to monitor. So very pleased and of course we have to close and add Hideout to the business, but excited about the opportunity and where they're positioned within the organization.
Justin Keywood: And of course, we have to close and add Hidoff to the business, but we're excited about the opportunity and where they're positioned within the organization. As far as our funnel, it continues to be strong. And when we look, there is a good mix of small, medium, and large within our funnel. And as a reminder, we are constantly cultivating and constantly looking at areas that we know by building those relationships, building that ability to understand detailed assessments within the markets.
Andrew Hider: As far as our funnel, it continues to be strong, and when we look, there is a good mix of small, medium, and large within our funnel.
Andrew Hider: And as a reminder, we are constantly cultivating and constantly looking at areas that we know by building those relationships, building that ability to understand detailed assessments within the markets. When opportunities arise, we can move very quickly. And Hidoff is just one example of that; when this became available, we knew the space, we knew the area, we had done the diligence around understanding their capability, customer sentiment, and technology so we could move very quickly and have future potential with this business. Thank you for taking my call.
Andrew Hider: And as a reminder, we are constantly cultivating and constantly looking at areas that we know by building those relationships, building that ability to understand detailed assessment within the markets.
Justin Keywood: When opportunities arise, we can move very quickly. And Hidoff is just one example of that. When this became available, we knew the space, we knew the area, we had done the diligence around understanding their capability, customer sentiment, and technology so we could move very quickly and have future potential with this business. Thank you for taking my call.
Andrew Hider: When opportunities arise, we can move very quick, and HIDALF is just one example of that. When this became available, we knew the space, we knew the area, we had done the diligence around understanding their capability, customer sentiment, and technology, that we could move very quick and have a future potential with this business.
Justin Keywood: Thank you for taking my question.
Unknown Executive: Thank you for taking my question.
Unknown Executive: Thank you for taking my questions.
Operator: and comes from Maxim Sytchev from National Bank Financial. Your line is now open.
Maxim Sytchev: and comes from Maxim Sytchev from National Bank Financial. Your line is now open.
Maxim Sytchev: This question comes from Maxim Sytchev from National Bank Financial. Your line is now open.
Maxim Sytchev: Andrew, maybe just building a little bit on sort of the M&A discussion and maybe the interplay between M&A and CIB and how you guys are thinking about this internally.
Maxim Sytchev: Andrew, maybe just building a little bit on sort of the M&A discussion and maybe the interplay between M&A and CIB and how you guys are thinking about this internally.
Speaker Change: Good morning, gentlemen.
Andrew Hider: Good morning.
Maxim Sytchev: Andrew, maybe just building a little bit on sort of the M&A discussion and maybe the interplay between M&A and CIB and how you guys are thinking about this internally. Thanks.
Ryan McLeod: So, Max, maybe I'll start on that. I mean, first on the NCAV, it really is, it's, we've always viewed this as opportunistic. There's not a set allocation in our budget. We regularly review it with the board, and we balance that with other opportunities that we want to be well positioned for. Um, you know, our capital deployment framework really favors internal investment first, and it's all based on return on invested capital and then M&A second.
Unknown Executive: So, Max, maybe I'll start on that. I mean, first on the NCIB, it really is, it's, we've always viewed this as opportunistic. There's not a set allocation in our budget. We regularly review it with the board, and we balance that with other opportunities that we want to be well positioned for. Um, yeah, our capital deployment framework really favors internal investment first, and it's all based on return on invested capital and then M&A second.
Unknown Executive: So, so, Max, maybe I'll start on that. I mean, first on the NCIB, it really is, it's, we've always viewed this as opportunistic.
Unknown Executive: Our capital deployment framework really favors internal investment first and it's all based on return on invested capital and then M&A second.
Maxim Sytchev: Thank you. And then the second question I had, just in terms of right sizing the business, do you mind maybe contextualizing this? Once we sort of, through that, how the exit margin compares to what you guys telegraphed at Invest Today in terms of, you know, progressing to, those levels?
Maxim Sytchev: Thank you. And then the second question I had, just in terms of right sizing the business, do you mind maybe contextualizing this? Once we sort of, through that, how the exit margin compares to what you guys telegraphed at Invest Today in terms of, you know, progressing to, those levels?
Maxim Sytchev: Thank you. And then the second question I had just in terms of right sizing of the business
Maxim Sytchev: Do you mind maybe contextualizing this?
Maxim Sytchev: Once we sort of through that, how the exit margin compares to what you guys telegraphed and then yesterday, in terms of, you know, progressing to, to those levels, thanks.
Unknown Executive: Yeah, I mean, I think this puts us back into a place. We won't, I don't think coming out of this will be at 15%. There's still there's still work we have to do. And that was not, as a reminder, that was not a short-term margin target. That was one that we see evolving over a number of years. But I think, you know, this is really, we're in a position that we need to protect the margins and, given the decline that we're seeing in the transportation market, align our cost structure to that reality. So, from a margin perspective, you know, I'd say it puts us back into a place that we were prior to prior to the decline in transportation.
Ryan McLeod: Yeah, I mean, I think this puts us back into a place. I mean, we won't, I don't think coming out of this will be at 15%. There's still work we have to do. And that was not, as a reminder, that was not a short-term margin target. That was one that we see evolving over a number of years.
Unknown Executive: Yeah, I mean, I think...
Unknown Executive: This puts us back into a place. I mean, we won't, I don't think coming out of this will be at the 15%. There's still there's still work we have to do. And that was not, as a reminder, that was not a short term margin target. That was one that we see evolving to over over a number of years.
Maxim Sytchev: But I think, you know, this is really, we're in a position that we need to protect the margins. And given the decline that we're seeing in the transportation market, aligning our cost structure to that reality. So from a margin perspective, you know, I'd say it puts us back into a place that we were prior to prior to the decline in transportation.
Unknown Executive: But I think...
Unknown Executive: You know, this is really...
Unknown Executive: We're in a position that we need to protect the margins and given the decline that we're seeing in the transportation market, aligning our cost structure to that reality. So from a margin perspective, I'd say it puts us back into a place that we were
Ryan McLeod: And I guess, is there any difference, sort of, structurally, that needs to be done internally vis-a-vis the restructuring you did in the transport space in Europe a number of years ago? Like, is this more complex, or is it not really necessarily the case?
Unknown Executive: Yeah, and I guess, is there any difference, sort of, structurally, that needs to be done internally vis-a-vis the restructuring you did in the transport space in Europe a number of years ago? Like, is this more complex, or is it not really necessarily the case?
Unknown Executive: Prior to the decline in transportation.
Unknown Executive: And I guess, is there any difference, sort of, structurally that needs to be done internally vis-a-vis the restructuring you've done in the transport space in Europe a number of years ago? Like, is this more complex, or is it not really necessarily the case?
Andrew Hider: I would say it's not more complex, and, you know, as a reminder, we were able to move several of the associates to support our growth areas like life sciences. And then this was the additional action that's taken to align the business to what we view as the future or foreseeable future in the short and midterm.
Unknown Executive: I would say it's not it's not more complex. And and you know, as a reminder, we were able to move several of the associates to support our growth areas like life sciences. And then this was the additional action that's taken to align the business to what we view as the future or foreseeable future in the short and mid term.
Unknown Executive: I would say it's it's not not more complex and and you know as a reminder we were able to move several of the associates to support our growth areas like life sciences.
Unknown Executive: And then this was the additional action that's taken to align the business to what we view as the future or foreseeable future in the short and midterm.
Andrew Hider: And I guess, Andrew, your comment around sort of preserving the capability if when the market recovers is that you still have, you know, sort of embedded expertise that doesn't go away. Correct. Correct. And, and, you know,
Andrew Hider: And I guess, Andrew, your comment around sort of preserving the capability if when the market recovers is that you still have, you know, sort of embedded expertise that doesn't go away. Correct. Correct. And, you know,
Andrew Hider: Okay, and I guess, Andrew, your comment around sort of preserving the capability if when sort of the market recovers, you still have, you know, sort of embedded expertise that doesn't go away, right?
Andrew Hider: And, you know, as a reminder, our workforce is, to an extent, able to flex into areas for growth, and we're able to support the growth in life sciences right now, and we're able to utilize that workforce to really support and drive it.
Andrew Hider: And, you know, as a reminder, our workforce is, to an extent, able to flex into areas for growth, and we're able to support the growth in life sciences right now, and we're able to utilize that workforce to really support and drive it.
Speaker Change: Correct, correct and you know as a reminder our workforce is you know to an extent ability to flex into areas for growth and and we're able to support the growth in life sciences right now and we're able to utilize that workforce to really support and drive.
Speaker Change: Okay, good to hear. Thank you so much.
Operator: Before we move on to our next question, if you'd like to ask a question, please press star one on your telephone keypad. That's star one on your telephone keypad. Our next question comes from David Ocampo from Cormark Securities. Your line is now open.
Operator: Before we move on to our next question, if you'd like to ask a question, please press star one on your telephone keypad. That's star one on your telephone keypad. Our next question comes from David Ocampo from Cormark Securities. Your line is now open.
David Ocampo: Thank you.
Operator: Before we move on to our next question, if you'd like to ask a question, please press star 1 on your telephone keypad. That's star 1 on your telephone keypad. Our next question comes from David Ocampo from Cormark Securities. Your line is now open.
David Ocampo: Thanks. Good morning, everyone. Just two questions here. Ryan, you talked about repurposing some of the square footage in EV for life sciences, but I'm just curious, with all the square footage that you guys have in Ohio, I seem to remember it being a pretty large number. Are there any facilities or leases that you're contemplating getting out of?
David Ocampo: Thanks. Good morning, everyone. Just two questions here. Ryan, you talked about repurposing some of the square footage in EV for life sciences, but I'm just curious, with all the square footage that you guys have in Ohio, I seem to remember it being a pretty large number. Are there any facilities or leases that you're contemplating getting out of?
David Ocampo: Thanks. Good morning, everyone. Just two questions here. Ryan, you can talk.
David Ocampo: about repurposing some of the square footage in EV to life sciences. But I'm just curious, with all the square footage that you guys have in Ohio, I seem to remember it being a pretty large number, are there any facilities or leases that you're contemplating getting out of?
Unknown Executive: A short answer is no, we're not exiting any facilities. And even in Ohio, I mean, a lot of that has been focused on EV over the last two years. But there is some life science work that gets done out of that facility. There's some, I guess I'd call it consumer, work that gets done out of that facility. So it's not solely focused on transportation.
Ryan McLeod: A short answer is no, we're not exiting any facilities. And even in Ohio, I mean, a lot of that has been focused on EV over the last two years. But there is some life science work that gets done out of that facility. There's some, I guess I'd call it consumer, work that gets done out of that facility. So it's not solely focused on transportation.
Unknown Executive: Short answer is no, we're not exiting any facilities.
Unknown Executive: And even in Ohio, I mean, it...
Unknown Executive: A lot of that has been focused on EV over the last...
Unknown Executive: two years.
Unknown Executive: But there is some life science work that gets done out of that facility, there's some.
Unknown Executive: I guess I'd call it consumer that gets done out of that facility. So it's not solely focused on transportation.
David Ocampo: Okay, and then just the last quick one here, just on the tax rate, which looks pretty elevated in the quarter. Was that largely driven by where the profits were generated? Or was there something that's materially changed within kind of how you're being treated?
David Ocampo: Okay, and then just the last quick one here, just on the tax rate, which looks pretty elevated in the quarter. Was that largely driven by where the profits were generated? Or was there something that's materially changed within kind of how you're being treated?
David Ocampo: and then just a lost quick one here just on the tax rate i it's pretty elevated in the quarter was that largely driven by where the profits 're generated or was there something that's materially changed within kind of how your game tax
Ryan McLeod: So there are a couple of dynamics. Part of it was the geographical split of profitability in the quarter, but we did have an expectation that our effective tax rate would increase, and that's based largely on changes in the jurisdictions in which we operate. So we do expect it to be higher in fiscal 25 vis-a-vis where we were in the last couple years.
Unknown Executive: So there are a couple of dynamics. Part of it was the geographical split of profitability in the quarter, but we did have an expectation that our effective tax rate would increase. And that's based largely on changes in the jurisdictions in which we operate. So we do expect it to be higher in fiscal 25 vis-a-vis where we were in the last couple of years.
Unknown Executive: So there's a couple dynamics. Part of it was
Unknown Executive: The Geographic split of profitability in the quarter, but we did have an expectation that our effective tax rate would increase.
Unknown Executive: And that's based largely on changes in the jurisdictions in which we operate. So we do expect it to be higher in fiscal 25 vis-a-vis where we were the last couple of years.
David Ocampo: So do you think the rate that we saw this quarter should be applied for the balance of the year at 26, 27% range?
Unknown Executive: So do you think the rate that we saw this quarter should be applied for the balance of the year, called a 26-27% range?
Speaker Change: So do you think the rate that we saw this quarter should be applying for the balance of the year, call it that 26-27% range?
Unknown Executive: Yeah, I think in the 25 to 27% range, we'll see some movement, movement quarter to quarter. And, and I should also remind you that we, I mean we, this is a focus of how we've structured the business globally, and we're always looking to maximize our efficiency efficiency in terms of taxes. Um, and our focus first and foremost is on cash taxes and and minimizing cash taxes, and secondarily on our effective tax rate.
Ryan McLeod: Yeah, I think in the 25 to 27% range, we'll see some movement, movement quarter to quarter. And, and I should also remind you that we, I mean we, this is a focus of how we've structured the business globally, and we're always looking to maximize our efficiency efficiency in terms of taxes, um, and and our focus first and foremost is on cash taxes and and minimizing cash taxes, and secondarily on our effective tax rate.
Unknown Executive: Yeah, I think in the 25 to 27% range, we'll see, we'll see some movement, movement quarter to quarter. And, and I should also...
Unknown Executive: remind you that we I mean we this is a focus how we how we've structured the business globally and we're always looking to
Unknown Executive: Maximize our efficiency in terms of taxes and our focus first and foremost is on cash taxes and minimizing cash taxes and secondarily is on our effective tax rate.
David Ocampo: Okay, that's perfect. Thanks a lot, guys.
David Ocampo: Okay, that's perfect. Thanks a lot, guys.
Operator: Our next question comes from Patrick Baumann from JP Morgan. Your line is now open.
Operator: Our next question comes from Patrick Baumann from JP Morgan. Your line is now open.
Patrick Baumann: Okay, that's perfect. Thanks a lot, guys.
Speaker Change: Our next question comes from Patrick Baumann from JP Morgan. Your line is now open.
Patrick Baumann: Well, hi. Good morning. Can you hear me?
Patrick Baumann: Well, hi. Good morning. Can you hear me?
Andrew Hider: Yes. Good morning. Good morning. Great. Thanks. Thanks for taking my question. You may have mentioned this at the beginning of the call, but I wasn't able to join a few minutes late. Last quarter, you mentioned that you thought that the acquisitions you had done in growth and life sciences as well as would offset the decline you expected in transport in terms of the 2025 revenue outlook. I was wondering if you provided an update on that, or, if not, if you could provide an update on how you're thinking about that.
Patrick Baumann: be hi goodmorning hear me
Patrick Baumann: Good morning. Great. Thanks. Thanks for taking my question. You may have mentioned this at the beginning of the call, but I wasn't able to join a few minutes late. Last quarter, you mentioned that you thought that the acquisitions you had done in growth and life sciences as well as would offset the decline you expected in transport in terms of the 2025 revenue outlook. I was wondering if you provided an update on that, or, if not, if you could provide an update on how you're thinking about that.
Speaker Change: Yes, good morning, good morning.
Patrick Baumann: Great. Thanks for taking my question.
Patrick Baumann: You may have mentioned this at the beginning of the call, but I wasn't able to join until a few minutes late. Last quarter you had mentioned that you thought that...
Patrick Baumann: acquisitions you had done and growth in life sciences as well would offset the decline you expected in transport in terms of the 2025 revenue outlook. I was wondering if you provided an update on that or if not, if you could provide an update on how you're thinking about that.
Ryan McLeod: Yeah, sure. I didn't provide an update on that. But I mean, the overall outlook hasn't changed. I think underneath there's certainly moving parts.
Unknown Executive: Yeah, sure. I didn't provide an update on that. But I mean, the overall outlook hasn't changed. I think underneath, there's certainly moving parts.
Unknown Executive: Yeah, sure. I didn't provide an update on that. But I mean, the overall outlook hasn't changed. I think underneath, there's certainly moving parts, transportation.
Unknown Executive: sequentially from where we were three months ago, I would say has become weaker. Life sciences sequentially has become stronger and you can see in our results, very strong bookings.
Ryan McLeod: Transportation, sequentially from where we were three months ago, I would say it has become weaker, and Life Sciences sequentially has become stronger. And you can see in our results, very strong bookings in that quarter. We closed Paxium.
Unknown Executive: Transportation, sequentially from where we were three months ago, I would say it has become weaker, and Life Sciences sequentially has become stronger. And you can see in our results, very strong bookings in that quarter. We closed Paxium.
Unknown Executive: We've closed Paxium. We expect to close Heidolf in the short term, which is additive.
Ryan McLeod: We expect to close Heidolf in the short term, which is additive. So, I mean, well, Q2 is going to be a challenging quarter. We do see the second half being strong. And overall, we don't see a material change to our revenue outlook for the year.
Unknown Executive: We expect to close Heidolf in the short term, which is additive. So, I mean, well, Q2 is going to be a challenging quarter. We do see the second half being strong. And overall, we don't see a material change to our revenue outlook for the year.
Unknown Executive: I mean, well, Q2 is going to be a challenging quarter. We do see the second half being strong and overall, we don't see a material change to our revenue outlook for the year.
Patrick Baumann: Okay, and then separately on margin, did you comment on what drove the significant improvement in gross margin in the quarter and the sustainability of Gross Margin at that level?
Patrick Baumann: Okay, and then separately on margin, did you comment on what drove the significant improvement in gross margin in the quarter and the sustainability of Gross Margin at that level?
Speaker Change: Okay, and then separately on margin, did you comment on what drove the significant improvement in gross margin in the quarter?
Unknown Executive: Um, no, I didn't, but I'm happy to. So, um, so a couple things.
Ryan McLeod: Um, no, I didn't, but I'd be happy to. So, so a couple things.
Speaker Change: Sustainability of Gross Margin at that level.
Speaker Change: Unknown Speaker No, I didn't, but happy to. So, a couple things. I mean, you know, 170 basis points or 168 basis points, to be a bit more precise here over here. We did see some benefit from acquisitions, and then as well some benefit from mix, including both higher service revenues.
Speaker Change: And then a higher proportion of our revenues coming from life sciences, which does have a benefit at the gross margin level.
Unknown Executive: I mean, you know, 170 basis points or 168 base points, a bit more precise year over year, we did see some benefit from acquisitions. And then, as well, some benefit from mix, including both higher service revenues and then a higher proportion of our revenues coming from life sciences, which does have a benefit at the gross margin level. Our operations performed very well in the quarter. I did reference in my prepared remarks that supply chain headwinds are easing. But that's going to take still a few quarters to work its way through business. But, but yeah, we're pleased with the margin performance in the quarter.
Ryan McLeod: I mean, you know, 170 basis points or 168 base points, a bit more precise in your rear, we did see some benefit from acquisitions. And then, as well, some benefit from mix, including both higher service revenues and then a higher proportion of our revenues coming from life sciences, which does have a benefit at the gross margin level. Our operations performed very well in the quarter. I did reference in my prepared remarks that supply chain headwinds are easing. But that's going to take still a few quarters to work its way through business. But, but yeah, we're pleased with the margin performance in the quarter.
Unknown Executive: Our operations performed very well in the quarter. I did reference in my prepared remarks that supply chain headwinds are easing, but that's going to take still a few quarters to work its way through business. But yeah, we're pleased with the margin performance in the quarter.
Patrick Baumann: Is that high 29s something we should be modeling going forward, or do you think it's going to step back down in the near term?
Unknown Executive: Is that high 29s something we should be modeling going forward, or do you think it's going to step back down in the near term?
Unknown Executive: Is that high 29s something we should be modeling going forward or do you think it's going to step back down in the near term?
Unknown Executive: Well, there's, I mean, there's going to be, there's going to continue to be variability in the short term, as I talked about, given the sequential revenue decline we expect. There are going to be headwinds, mainly from utilization, which, again, we're taking measures to address through the restructuring actions, as well as some temporary cost containment measures that we have in place. And, and, but coming out of that, we do expect to see continued strong margin performance.
Ryan McLeod: Well, there's, I mean, there's going to be, there's going to continue to be variability in the short term, as I talked about, given the sequential revenue decline we expect. There are going to be headwinds, mainly from utilization, which, again, we're taking measures to address through the restructuring actions, as well as some temporary cost containment measures that we have in place. And, and, but coming out of that, we do expect to see continued strong margin performance.
Unknown Executive: Well, so...
Unknown Executive: So, I mean, there's going to be, there's going to continue to be variability in the short term, as I talked about, given the sequential revenue decline we expect. There are going to be headwinds, mainly from, from utilization, which again, we're taking, we're taking measures to, to address through the restructuring actions.
Unknown Executive: As well as some temporary cost containment measures that we have in place, but coming out of that, we do expect to see continued strong margin performance.
Speaker Change: Understood. Okay, thanks so much. Best of luck.
Speaker Change: Thank you. Thank you.
Patrick Baumann: Understood. Okay.
Patrick Baumann: Understood. Okay.
Patrick Baumann: Thanks so much. Best of luck. Thank you. Thank you.
Patrick Baumann: Thanks so much. Best of luck. Thank you. Thank you.
Patrick Baumann: We have reached the end of our Q&A session. I'd now like to hand back over to Mr. Andrew Hider for final remarks.
Andrew Hider: We have reached the end of our Q&A session. I'd now like to hand the microphone back to Mr. Andrew Hider for final remarks.
Andrew Hider: We have reached the end of our Q&A session. I'd now like to hand the microphone back to Mr. Andrew Hider for final remarks.
Andrew Hider: We're pleased with our progress, and the ABM will continue to support our focus on value creation for shareholders. I invite you all to participate in our annual shareholders meeting, which will be held virtually tomorrow at 10 a.m. Eastern Time. Thanks for joining us today. I look forward to speaking to you on our Q2 call in November. Stay safe, and goodbye for now.
Andrew Hider: We're pleased with our progress, and the ABM will continue to support our focus on value creation for shareholders. I invite you all to participate in our annual shareholders meeting, which will be held virtually tomorrow at 10 a.m. Eastern Time. Thanks for joining us today. I look forward to speaking to you on our Q2 call in November. Stay safe, and goodbye for now. Thank you, everyone, for attending today's call. You may now disconnect. Have a wonderful day!
Speaker Change: Thank you, operator.
Andrew Hider: We're pleased with our progress and the ABM will continue to support our focus on value creation for shareholders.
Andrew Hider: I invite you all to participate in our annual shareholders meeting, which will be held virtually tomorrow at 10 a.m. Eastern Time. Thanks for joining us today. I look forward to speaking to you on our Q2 call in November . Stay safe and goodbye for now.
Operator: Thank you everyone for attending today's call. You may now disconnect. Have a wonderful day.
Operator: Thank you everyone for attending today's call. You may now disconnect. Have a wonderful day.
Operator: Thank you everyone for attending today's call. You may now disconnect. Have a wonderful day.
unknown: David Ocampo, David Ocampo, David Ocampo,