Q4 2025 ATS Corp Earnings Call

Welcome to the a T S Corporation fourth quarter conference call and webcast. This call is being recorded on May 28, 2025 at six P. M. Eastern time following the presentation. We will conduct a question and answer session I'll now turn the call over to David Galison head of Investor Relations at a T S.

Operator: Welcome to the ATS Corporation fourth quarter conference call and webcast. This call is being recorded on May 28, 2025 at 6 p.m. Eastern Time.

Operator: Following the presentation, we will conduct a question and answer session.

David Galison: I'll now turn the call over to David Galison, Head of Investor Relations at ATS. Thank you, operator and good evening.

Thank you operator, and good evening, everyone on the call today are Andrew Hider, Chief Executive Officer of Ats.

David Galison: On the call today are Andrew Hider, Chief Executive Officer of ATS, and Ryan McLeod, Chief Financial Officer. Please note that our remarks today are accompanied by a slide deck which can be viewed via our webcast and available at atsautomation.com.

Ryan McLeod: Ryan Mcleod Chief Financial Officer.

Please note that our remarks today are accompanied by a slide deck, which can be viewed via our webcast.

Speaker Change: Billable at Etfs automation Dot com.

David Galison: We caution that the statements made on the 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 three of the slide.

Ryan McLeod: We caution that the statements made on the webcast and conference call may contain forward looking information in our cautionary statement regarding such information included in 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 three.

Ryan McLeod: Three of the slide deck.

Andrew Hider: Now, it's my pleasure to turn the call over to Andrew. Thank you, David. Good evening, everyone. And thank you for joining us.

Andrew Hider: Now, it's my pleasure to turn the call over to Andrew.

Andrew: Thank you David Good evening, everyone and thank you for joining us today, <unk> reported fourth quarter and full year results for fiscal 2025.

Andrew Hider: Today, ATS reported fourth quarter and full year results for fiscal 2025. As you know, we announced a negotiated settlement with our EV customers. It was important that we put this matter behind us to enable us to continue to execute on our growth strategy. On that front, Q4 was the third highest bookings quarter in company history and included organic growth along with contributions from acquisitions. Our life sciences businesses demonstrated strength and market leadership. complimented by contributions from across ATS and other key market verticals. During the year, we welcomed Paxium and Hidoff, further expanding our product portfolio.

Andrew: As you know, we announced a negotiated settlement with our E&P customer.

Andrew: It was important that we put this matter behind us to enable us to continue to execute on our growth strategy.

Andrew: And on that front Q4 was the third highest bookings quarter in company history, and including the organic growth along with contributions from acquisitions.

Andrew: Our life Sciences businesses demonstrated strength and market leadership.

Andrew: Complimented by contributions from across Ags and other key market verticals.

Andrew: During the year, we welcomed axiom and hadar further expanding our products portfolio.

Andrew Hider: Fiscal 25 was not without its challenges, and the results reported today reflect the resilience of our teams, the breadth and depth of our capabilities across our vertical market. and the value of the ATS business model.

Andrew: Fiscal 'twenty five was not without its challenges and the results reported today reflect the resilience of our teams the breadth and depth of our capabilities across our vertical markets and the value of the Ats business model.

Andrew Hider: This evening, I'll update you on our business and markets, including macroeconomic influence.

Andrew: This evening I'll update you on our business and markets, including macroeconomic influences.

Andrew Hider: and Ryan will provide his financial report. Starting with our financial value drivers. Order bookings for the quarter were $863 million, up 9% from the fourth quarter last year. Our growth was supported by diversified bookings across all of our markets. Bookings for the full year were $3.3 billion, a record for ATS, setting us up well for fiscal 2017. Q4 adjusted revenues were $721 million, down 9% from Q4 last year. for the full year adjusted revenues were 12% lower year over year as a result of lower EV revenues as expected. Adjusted earnings from operations in Q4 were $74 million and for the full year were $283 million.

Ryan McLeod: And Ryan to provide his financial report.

Ryan: Starting with our financial value drivers order bookings for the quarter were $863 million up 9% from the fourth quarter last year.

Ryan: Our growth was supported by diversified bookings across all of our markets book.

Ryan: Bookings for the full year were $3 3 billion.

Ryan: A record for H, yes.

Ryan: Setting us up well for fiscal 'twenty six.

Ryan: Q4, adjusted revenues were $721 million down 9% from Q4 last year.

Ryan: For the full year adjusted revenues were 12% lower year over year as a result of lower <unk> revenues as expected.

Ryan: Adjusted earnings from operations in Q4 were $74 million and for the full year were $283 million.

Ryan: Moving to our outlook.

Andrew Hider: We'll bring her out one. Order backlog ended the quarter at approximately $2.1 billion, the highest in the last eight quarters. Our trailing 12-month book-to-bill ratio was 1.23 to 1, again, highlighting the importance of our entire portfolio of offers. across services, standard equipment and products, as well as custom integration.

Ryan: Order backlog ended the quarter at approximately $2 1 billion.

Ryan: The highest in the last eight quarters, our trailing 12 month book to Bill ratio was 1.23 to one again, highlighting the importance of our entire portfolio of offerings across services Sterling.

Ryan: Equipment and products as well as custom integration.

Andrew Hider: From a macro perspective, geopolitical and trade tensions are creating an uncertain environment. Although we are not immune to this uncertainty, we have not seen any material change in customer behavior today. It is possible that we could see impacts on demand in some areas of our business if uncertainty continues in the near to mid-term. That said, given our Q4 order bookings, we remain optimistic. ATS is well positioned in regulated markets with strategic customer relationships. Our global footprint gives us capacity to help our customers address their risks, as well as our own. Further, our embedded ABM tools help our teams respond to changing requirements.

Ryan: From a macro perspective, geopolitical and trade tensions are creating an uncertain environment.

Ryan: We are not immune to this uncertainty we have not seen any material change in customer behavior today.

Ryan: It is possible that we could see impacts on demand in some areas of our business of uncertainty continues in the near to midterm.

Ryan: Said, given our Q4 order bookings we remain optimistic.

Ryan: <unk> is well positioned in regulated markets with strategic customer relationships are.

Ryan: Our global footprint gives us capacity to help our customers address their risks as well as our own.

Ryan: Further our embedded ABM tools help our teams respond to changing requirements.

Ryan: Expanding our market reach through our capabilities, while growing recurring revenue is important for shareholder value creation.

Andrew Hider: Spanning our market reach through our capabilities while growing reoccurring revenue is important for shareholder value creation. To that end, our teams are dedicated to delivering for customers globally and actively planning for and addressing any short-term disruption. This includes further optimizing our global supply chain, strengthening regional capabilities, and taking targeted price action where necessary to support margins while ensuring reliable delivery across customer programs. Within Life Sciences. Order backlog ended the quarter at $1.2 billion, with key wins across all of our major life sciences businesses, including diversification in bookings, such as auto-injector assembly, radio pharma, wearables, and other medical devices.

Ryan: To that end our teams are dedicated to delivering for customers globally and actively planning for any depressing any short term disruptions. This.

Ryan: This includes further optimizing our global supply chain strengthening regional capabilities, and taking targeted price actions, where necessary to support margins, while ensuring reliable delivery across customer programs.

Ryan: Within life Sciences.

Ryan: Order backlog ended the quarter at $1 2 billion with key wins across all of our major life sciences businesses, including diversification of bookings such as auto Injector Assembly radio farmer.

Ryan: <unk> and other medical devices.

Ryan: Our life Sciences opportunity funnel is strong supported by market growth in key submarkets, including the demand for <unk>, one drugs wearable devices for diabetes care automated pharmacies and contact lenses and the ongoing need for solutions to support.

Andrew Hider: Our Legislative Sciences Opportunity Funnel is strong, supported by market growth and key sub-markets. including the demand for GLP-1 drugs, wearable devices for diabetes care, automated pharmacies and contact lenses, and the ongoing need for solutions to support detection and treatment in pharma and radiopharma. Our capabilities and deep understanding of the life sciences markets position us well to explore new areas to broaden our customer In the current environment, some customers are evaluating capital spending plans, particularly within the lab research space, but as I indicated, we have not seen a material shift or change at this time.

Ryan: Detection and treatment and pharma and radio pharma.

Ryan: Our capabilities and deep understanding of the life sciences markets position us well to explore new areas to broaden our customer base.

Ryan: In the current environment, some customers are evaluating capital spending plans, particularly within the lab research space, but as I indicated we have not seen a material shift or change at this time.

Ryan: And food and beverage our funnel remains strong and we ended the year with a backlog of $258 million.

Andrew Hider: and Food and Beverage, our fund will remain strong. We ended the year with a backlog of $258 million. The team is actively pursuing greater diversification to offset some seasonal variability in the CFT business with advancements into services and secondary processing, as well as packaging, which is supported by the addition of Pax For more information visit www.cftexas.com In energy, our funnel remains strong as the global nuclear industry experiences growth and transformation driven by increasing energy demands, advancements in nuclear technology, and sustained government support. Near-term demand is driven by ongoing can-do refurbishment projects, and we expect that longer-term demand will also come from new nuclear builds in both large-scale and small modular reactors.

Ryan: The team is actively pursuing greater diversification to offset some seasonal variability and the CFT business with advancements into services and secondary processing as well as packaging, which is supported by the addition of <unk>.

Ryan: In energy, our funnel remains strong as a global nuclear industry experienced as growth and transformation driven by increasing energy demands advancements in nuclear technology and sustained government support.

Ryan: Near term demand is driven by ongoing can do refurbishment of projects and we expect that longer term demand will also come from new nuclear builds in both large scale and small modular reactors.

Andrew Hider: Our end-to-end strategic capabilities enable us to support customers across all phases, from concept and design through to factory automation of modular assemblies and waste handling. ATS is well positioned for sustained growth in these key energy markets. and Consumer Products, our partner remains stable with attractive niche opportunities. Our capabilities in such areas as warehouse automation and packaging solutions delivered strength and bookings in the quarter. Within transportation, our front will remain stable with smaller opportunities as expected due to lower end market demand than previous years, particularly in the EV battery. During the quarter, we received an additional order from an EV customer in Europe.

Ryan: Our end to end strategic capabilities enable us to support customers across all phases from concept and design through to factory automation of module assemblies and waste handling.

Ryan: Etfs is well positioned for sustained growth in these key energy markets.

Ryan: In consumer products of one remains stable with attractive niche opportunities.

Ryan: Our capabilities in such areas as warehouse automation and packaging solutions delivered strength in bookings in the quarter.

Ryan: Within transportation.

Ryan: Our funnel remains staple with smaller opportunities as expected due to lower end market demand than previous years, particularly in the EV battery space.

Ryan: During the quarter, we received an additional order from an EBT customer in Europe.

Andrew Hider: And after sales, we continue to make progress on our strategy. are evolving service plan offerings, including higher value service. and the expansion of digital tools are helping to drive greater customer adoption and retention. Our goal is to serve as a global partner for continuous productivity optimization across our customer base. Globally, our ATS teams are aligned and have a deep understanding of where value can be driven for our customers with our digital solution. Our strategy and ability to drive improved lifecycle performance, asset utilization, and overall operational efficiency through areas like our Connected Care Hub will allow us to help our customers reduce their enterprise risk over time.

Ryan: Our after sales we continued to make progress on our strategy, our evolving service plan offerings, including higher value services.

Ryan: And the expansion of digital tools are helping to drive greater customer adoption and retention.

Ryan: Our goal is to serve as a global partner for continuous productivity optimization across our customer base.

Ryan: Globally, our <unk> teams are aligned and have a deep understanding of our value can be driven for our customers with our digital solutions.

Ryan: Our strategy and ability to drive improved lifecycle performance asset utilization and overall operational efficiency through areas like our connected care hub will allow us to help our customers reduce their enterprise risk over time.

Andrew Hider: On the ATS Business Model, we hosted our seventh annual President's Kaizen which included teams from across all ATS groups and major geographies. The teams brought focus to strategic areas, including resource planning and optimization, business simplification. Product Development, Port Station Process. and reimagining processes to drive greater efficiency in operation. These events are a great demonstration of our team's collective drive for breakthrough change. The level of work completed in a single week is the testament to the evolution of our ABM culture over time.

Ryan: On the Ats business model, we hosted our seventh annual President's Kaizen events.

Ryan: Which included teams from across all age groups and major geographies.

Ryan: The teams brought focus to strategic areas, including resource planning and optimization business simplification.

Ryan: Product development puts station processes, and reimagining processes to drive greater efficiency in operations.

Ryan: These events are great demonstration of our team's collective drive for breakthrough change.

Ryan: The level of work completed in a single week is a testament to the evolution of our ABM culture overtime.

Andrew Hider: On MV&A, we are making steady progress on cultivating strategic opportunities that align with our long-term growth priorities and enhance the value of our portfolio over time. In the short term, we remain focused on returning leverage to targeted levels and on the continued integration of our recent acquisitions to maximize their long-term contributions to our business. On innovation, we're deploying capital and empowering our talent to create differentiated solutions that drive value for our customers. Going into fiscal 26, we've identified opportunities to innovate in such areas as expanding the utilization of our symphony platform, incorporating more digital applications in our portfolio to drive further efficiency.

Ryan: On M&A, we are making steady progress on cultivating strategic opportunities that align with our long term growth priorities and enhance the value of our portfolio over time and.

Ryan: In the short term, we remain focused on returning leverage to targeted levels and on the continued integration of our recent acquisitions to maximize their long term contributions to our business.

Ryan: On innovation, we're deploying capital and empowering our talent, it's great differentiated solutions that drive value for our customers.

Ryan: Going into fiscal 'twenty, six we've identified opportunities to innovate in such areas as expanding the utilization of our symphony platform incorporating more digital applications in our portfolio to drive further efficiency for example, and our digital tomato solution for food and beverage markets.

Andrew Hider: For example, in our digital tomato solution for food and beverage market. and adding additional functionality. and to our proprietary SuperTRACK system. In summary, our global businesses continue to demonstrate ongoing commitment to serving our customers. Supported by deep industry knowledge and experience. To that end, I want to congratulate two businesses on hitting significant milestones this past year. Coma Chair celebrated their 50th anniversary. CFT celebrated their I'm also pleased to note that ATS was once again recognized by Canada's Top 100 for being a leading employer in both the Waterloo region and southwestern Ontario. Strong fourth quarter bookings combined with a record order backlog provides us with good revenue visibility and a strong foundation for profitable growth heading into fiscal 26.

Ryan: And adding additional functionality.

Ryan: Into our proprietary <unk> system.

Ryan: In summary, our global businesses continue to demonstrate ongoing commitment.

Ryan: To serving our customers supported by deep industry knowledge and experience.

Ryan: To that end I want to congratulate two businesses on hitting significant milestones this past year.

Ryan: Common share celebrated their 50th anniversary.

Ryan: CFT celebrated their <unk>.

Ryan: I'm also pleased to note that Ats was once again recognized by Canada's top 100.

Ryan: For being a leading employer in bolt to Waterloo region and southwestern Ontario.

Ryan: Strong fourth quarter bookings combined with a record order backlog provides us with good revenue visibility and a strong foundation for profitable growth heading into fiscal 'twenty six.

Andrew Hider: Our teams remain focused on driving improvements across all of our values. As we enter fiscal 26, our opportunity funnel is well diverse. And we are confident in our ability to drive our ABM culture, as our engaged and dedicated teams remain intensely focused. on creating strong customer and long term shareholder value.

Ryan: Our teams remain focused on driving improvements across all of our value drivers.

Ryan: As we enter fiscal 'twenty six our opportunity funnel is well diversified and we are confident in our ability to drive our AVM culture are engaged and dedicated teams remain intensely focused on creating strong customer and long term shareholder value.

Andrew Hider: We're responding to the challenges in the macro environment, with clear alignment across the leadership team and our individual business Now I will turn the call over to Ryan.

Ryan: We're responding to the challenges in the macro environment with clear alignment across the leadership team and our individual businesses now.

Ryan: Now I will turn the call over to Ryan Ryan over to you.

Ryan McLeod: Ryan, over to you.

Ryan McLeod: Thank you, Andrew, and good evening, everyone. Before I review results, I'll provide a few comments on two specific non-recurring items. First, our EV settlement, and second, income tax. On the EUV settlement, as we disclosed, we expect to receive $134.75 million U.S. dollars or about $194 million Canadian based on our Q4 pending exchange rate before the end of fiscal Q1. The settlement resulted in an after-tax impact of approximately $129 million Canadian, which was reflected in our Q4 results. The preliminary fourth quarter fiscal 25 results that we disclosed on May 23, including net income, earnings per share, EBIT and EBITDA are unchanged.

Ryan McLeod: Thank you Andrew and good evening everyone.

Ryan: Before I review results I'll provide a few comments on two specific nonrecurring items first our EV settlement and second income taxes.

Ryan: On the <unk> settlement as we disclosed we expect to receive $134 $75 million U S. Dollars would have been 194 million Canadian based on our Q4 pending exchange rate before the end of the fiscal Q1.

Ryan: The settlement resulted in an after tax impact of approximately $129 million Canadian which was reflected in our Q4 results.

Ryan: The preliminary fourth quarter fiscal 25 results that we disclosed on May 23, including net income earnings per share EBIT and EBITDA are unchanged, however, and finalizing our results and in accordance with <unk> standards, rather than having the expense flow through SG&A you will see in our financial statements that we have recorded a reduction of revenues.

Ryan McLeod: However, in finalizing our results, and in accordance with IFRS standards, rather than having the expense flow through SG&A, you will see in our financial statements that we have recorded a reduction in revenues in the quarter of $146.9 million, with the remainder of the settlement impact of $24.2 million reflected in SG&A expenses. This income statement classification differs from what we disclosed in our preliminary earnings release. However, as I noted, there is no change to net income. We are presenting an adjusted revenue measure to reflect this one-time event and have adjusted for the total P&L impact in our adjusted earnings consistent with what we previously disclosed.

Ryan: In the quarter of $146 $9 million.

Ryan: With the remainder of the settlement impact for $2004 2 million reflected in SG&A expenses.

Speaker Change: This income statement classification differs from what we disclosed in our preliminary earnings release. However, as I noted there is no change to net income.

Speaker Change: We are presenting an adjusted revenue measure to reflect this one time event and have adjusted total P&L impact our adjusted earnings consistent with what we previously disclosed.

Ryan McLeod: Importantly, the settlement will reduce our net debt to adjusted EBITDA leverage by 0.5 times or approximately half a turn, providing us with greater flexibility to continue to execute on our growth strategy relative to a prolonged process where timing is harder to predict. Given the deteriorating market conditions in transportation and the added uncertainty in the market caused by tariffs, settling the matter at this time was a good outcome for ATS. Separately, on taxes, in our Q4 results, we recognize the tax assets related to a plan that will benefit our cash taxes and result in an expected effective tax rate in the mid-20% range going forward.

Ryan: Importantly, the settlement will reduce our net debt to adjusted EBITDA leverage by 0.5 times or approximately half a turn providing us with greater flexibility to continue to execute on our growth strategy relative to a prolonged process for timing is hard to predict.

Ryan: Given the deteriorating market conditions in transportation and the added uncertainty in the market caused by tariffs settling the matter at this time was a good outcome for Etfs.

Ryan: Separately on taxes, and our Q4 results we recognized the tax assets related to a plan that will benefit our cash taxes and result in an expected effective tax rate in that mid 20% range going forward.

Ryan McLeod: We've adjusted for the non-recurring impacts related to this plan and our adjusted EPS, which was a 38 cent per share benefit to reflect normalized operations for the year.

Ryan: We've adjusted for the nonrecurring impacts related to this plan and our adjusted EPS, which was at 38 per share benefit to reflect normalize its operations for the year.

Ryan McLeod: Now moving on to Q4 operating results. Order bookings were $863 million, an increase of 9% over Q4 last year, and included 2.6% organic growth, a 4% contribution from acquisitions, and a 2.5% positive impact from foreign exchange translation. The end of Q4, the trailing 12-month book-to-bill ratio was 1.23 to 1, and was above 1 in all market verticals. For the year, order bookings grew 14.3% and included organic growth of 6.2%, a foreign exchange benefit of 1.9%, and contributions from acquisitions of 6.2%. After adjusting for the revenue portion of the EV settlement, which adds back the $146.9 million impact, revenues for the fourth quarter fiscal 25 were $721 million, down 8.9% compared to last year.

Ryan: Now moving onto Q4 operating results order bookings were $863 million, an increase of 9% over Q4 last year and included two 6% organic growth of 4% contribution from acquisitions and a two 5% positive impact from foreign exchange translation.

Ryan: At the end of Q4, and the trailing 12 month book to Bill ratio was one three to one and was above one in all market verticals for.

Ryan: For the year order bookings grew 14, 3% and included organic growth of six 2%.

Ryan: Foreign exchange benefit of one 9% and contributions from acquisitions of six 2%.

Ryan: After adjusting for the revenue portion of the <unk> settlement, which adds back the $146 $9 million impact revenues for the fourth quarter fiscal 25 were $721 million down eight 9% compared to last year.

Ryan McLeod: year over year organic growth and life sciences and consumer products, along with a 3.6% contribution from recent acquisitions, provided some offset to lower transportation revenue. Notably, revenues increased sequentially by 10.6% as we continued to benefit from strong order bookings over the past several quarters. Moving earnings, fourth quarter adjusted earnings from operations were $74.3 million, a 23% decline from the prior year, primarily from lower revenue volumes, particularly in transportation. Excluding acquisition related inventory to fair value charges, gross margin for Q4 was 29% and 90 basis point improvement from last year, driven by a more favorable mix, which included higher margin program.

Ryan: Year over year organic growth in life Sciences, and consumer products, along with a three 6% contribution from recent acquisitions provided some offset to lower transportation revenues, notably revenues increased sequentially by 10, 6% as we continued to benefit from strong order bookings over the past several quarters.

Ryan: Moving to earnings fourth quarter adjusted earnings from operations were $74 3 million or 23% declined from the prior year, primarily from lower revenue volumes, particularly in transportation.

Ryan: Excluding acquisition related inventory to fair value charges gross margin for Q4 was 29% and 90 basis point improvement from last year, driven by a more favorable mix, which included higher margin programs.

Ryan McLeod: On SG&A, excluding acquisition related amortization and transaction costs and the SG&A portion of the EV settlement. Expenses in the fourth quarter totaled $133.9 million, an $11.2 million increase over the prior year, primarily due to SG&A from acquired companies, in addition to increased employee costs and the impact of foreign exchange translation. As always, we continue to work to enhance efficiency in both our existing operations and newly acquired entities through our disciplined integration process. Excluding the mark to market impact related to changes in our share Stock-based compensation expense was $1.1 million in Q4. Earnings per share were 41 cents on an adjusted basis down from last year primarily due to the lower revenue volume.

Ryan: On SG&A, excluding acquisition related amortization and transaction costs and the SG&A portion of the settlement expenses in the fourth quarter totaled $133 9 million and $11 $2 million increase over the prior year, primarily due to SG&A from acquired companies. In addition to.

Ryan: Increased employee costs and the impact of foreign exchange translation.

Ryan: As always we continue to work to enhance efficiency in both our existing operations and newly acquired entities through a disciplined integration process.

Ryan: Excluding the mark to market impact related to changes in our share price stock based compensation expense was $1 1 million in Q4.

Ryan: Earnings per share were <unk> 41 on an adjusted basis down from last year, primarily due to the lower revenue volumes.

Ryan McLeod: Turning to our outlook, we ended the fiscal year with an order backlog of approximately $2.1 billion, and we expect Q1 revenues to be in the range of $680 million to $730 million. As a reminder, this assessment is updated every quarter, taking into account revenue expectations from current order backlog and new orders booked and billed within the quarter.

Ryan: Turning to our outlook, we ended the fiscal year with an order backlog of approximately $2 1 billion and we expect Q1 revenues to be in the range of $680 million to $730 million.

Ryan: As a reminder, this assessment is updated every quarter taking into account revenue expectations from current order backlog and new orders booked and billed in the quarter.

Ryan McLeod: In the quarter, we incurred an additional $3.5 million of restructuring costs related to the previously disclosed reorganization activity. Expanding our operating margins remains an ongoing priority. In particular, as life sciences order bookings from the latter half of Fiscal 25 move to higher revenue-generating phases, and as we benefit from the cost structure and volume alignment in our EV businesses, we expect to see improvement throughout Fiscal 26. Across our business, we continue to systematically use AVM tools to enhance our processes, streamline our supply chain, and achieve further standardization. And we continue to invest in innovation and service.

Ryan: In the quarter, we incurred an additional $3 $5 million of restructuring costs related to the previously disclosed reorganization activities.

Ryan: Expanding our operating margins remains an ongoing priority.

Ryan: In particular as life Sciences order bookings from the latter half of fiscal 'twenty five moved a higher revenue generating phases.

Ryan: And as we benefit from the cost structure and volume alignment in our <unk> businesses, we expect to see improvement through fiscal 'twenty six.

Ryan: Across our business, we continue to systematically as ABM tools to enhance our processes streamlining our supply chain and achieve further standardization.

Ryan: We continue to invest in innovation and services.

Ryan McLeod: On tariffs, we're working to mitigate risks as they arise and where possible. Our global footprint and decentralized operating model, along with our proven AVM tools, provide us the flexibility required to address disruptions over the longer term. short term costs have been manageable to date and we're staying close to our customers as the current environment continues to evolve. We're also actively working with our global supply base to mitigate challenges in flow of goods and manage potential cost increases.

Ryan: On tariffs, we're working to mitigate risks as David rising were impossible.

Ryan: Our global footprint and decentralized operating model along with our proven ABM tools provide us the flexibility required to address disruptions over the longer term.

Ryan: Short term cost have been manageable to date, and we're staying close to our customers as the current environment and continues to evolve.

Ryan: Also actively working with our global supply base to mitigate challenges and flow of goods and manage potential cost increases.

Ryan McLeod: Moving to the balance sheet in Q4, cash flows from operating activities were $39.3 million. Our non-cash working capital is a percentage of revenue of $22.4 Excluding the settlement receivable from the EB dispute, our non-cash working capital was just over 15% as we continue to progress across the rest of our businesses on working capital efficiency and moving back towards our target range. During the quarter, we've invested $29 million in CapEx and intangible assets with an investment for the year of $78.1 million. Our innovation efforts in critical growth areas remain a priority. fiscal 26, we expect our CapEx and Intangible Investment to be in the range of $80 million to $100 million.

Ryan: Moving to the balance sheet in Q4, our cash flows from operating activities were $39 3 million are noncash working capital as a percentage of revenue was 22, 4%.

Ryan: Including the settlement received both from the EV dispute our noncash working capital was just over 15% as we continued to progress across the rest of our businesses on working capital efficiency and moving back towards our target range.

Ryan: During the quarter, we invested $29 million in Capex in intangible assets with an investment for the year of $78 $1 million, our innovation efforts in critical growth areas remain a priority for.

Ryan: For fiscal 'twenty, six we expect our capex and intangible investments to be in the range of 80 million to $100 million.

Ryan: On leverage at the end of the quarter, our net debt to adjusted EBITDA ratio was three nine times on a pro forma basis.

Ryan McLeod: On leverage at the end of the quarter, our net debt to adjusted EBITDA ratio was 3.9 times on a pro forma basis, which includes full year contributions from our most recent As I noted, this will be helped by receipt of the EV settlement payment in Q1 of Fiscal 26. We remain committed to bringing our leverage to our target range of two to three times.

Ryan: <unk> full year contributions from our most recent acquisitions.

Ryan: As I noted this will be helped by receipt of the EBT settlement payment in Q1 of fiscal 'twenty six we remain committed to bringing our leverage towards our target range of two to three times.

Ryan McLeod: for reference. Early in Q1, we were active in our NCIB, acquiring 309,000 shares for approximately $10 million. share buyback remains an important and opportunistic element of our overall capital deployment strategy. That said, our primary capital allocation priorities remain a focus as we continue to invest internally on innovation and growth while cultivating acquisition opportunities.

Ryan: For reference.

Ryan: Early in Q1, we were active in our and CIB acquiring 309000 shares for approximately $10 million.

Ryan: Share buyback remains an important an opportunistic element of our overall capital deployment strategy that said our primary capital allocation priorities remain a focus as we continue to invest internally on innovation and growth while cultivating acquisition opportunities.

Ryan: In summary, fourth quarter results were encouraging as we move into fiscal 'twenty six with a goal of driving growth and margin expansion.

Ryan McLeod: In summary, fourth quarter results were encouraging as we move into fiscal 26 with a goal of driving growth and margin expansion. For the year, despite challenges in fiscal 25 as a result of changes in demand in the North American EV markets, we had record order bookings that were diversified across strategic global markets and regulated industries. Orbit Aqualog is strong and gives us good revenue visibility in fiscal 2016. We expect short term margin pressures from lower transportation revenues to continue to abate through a reorganization. as we drive improved volumes in transportation and growth in the rest of the business.

Ryan: For the year despite challenges in fiscal 'twenty five as a result of changes in demand in the North American EV markets. We had record order bookings that were diversified across our strategic global markets and regulated industries.

Ryan: Order backlog is strong and gives us good revenue visibility in fiscal 'twenty six weeks.

Ryan: We expect short term margin pressures from large transportation revenues to continue to abate throughout our reorganization efforts as we drive improved volumes in transportation and growth in the rest of the business.

Ryan McLeod: Looking ahead, we're committed to building on our positive momentum in fiscal remain focused on driving growth in our core markets, leveraging our acquisitions and executing on our value creation strategy.

Ryan: Looking ahead, we're committed to building on our positive momentum in fiscal 'twenty six we remain focused on driving growth in our core markets, leveraging our acquisitions and executing on our value creation strategy.

Operator: Now we will open the call to questions from our analysts. Operator, could you please provide instructions? Thank you.

Ryan: Now we will open the call to questions from our analysts operator could you. Please provide instructions. Thank you.

Speaker Change: Thank you we will now begin the question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad. If you would like to withdraw your question simply press Star. One again. Your first question comes from the line of Cherilyn Radbourne from TD Cowen Your line is open.

Operator: We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. If you would like to withdraw your question, simply press star 1 again.

Cherilyn Radbourne: Your first question comes from a line of Cherilyn Radbourne from TD Cowan. Your line is open. Thanks very much and good evening.

Cherilyn Radbourne: Thanks, very much and good evening.

Andrew Hider: The first question I guess is, as you look at the backlog and the underlying duration of it, as well as what you're seeing and hearing from customers, how confident do you feel about returning to positive organic growth in fiscal 2020? Yeah, Cherilyn, good evening. Short answer is very positive. And if you look at our thrilling 12-month book-to-bill ratio, 1.23 really supports that alignment. If you look at all markets, all of our markets are above a one, and, you know, led by some key areas and key technologies. So, you know, when we look at the year, we are confident we'll be returning to growth, we're confident in the areas that we're supporting.

Cherilyn Radbourne: First question I guess is as you look at the backlog and the underlying duration a bit.

Ryan: What youre seeing and hearing from customers how confident do you feel about returning to positive organic growth in fiscal 'twenty six.

Ryan: Yes, Sharon good evening short answer is.

Ryan: Very positive and if you look at our trailing 12 month book to Bill ratio of one two or three really supports that alignment.

Ryan: If you look at all markets all of our markets are above a one and led by some key areas or key technologies. So when we look at the year. We are confident we will be returning to growth. We're confident in the areas that we're supporting and to even go further on substantial really substantiate that with the discussions.

Andrew Hider: And to even go further on substance, you know, really substantiating that with the discussions, you know, I've been out visiting customers as long as our global team, and where we see products that have alignment to strategic priorities for our customers, they're continuing to invest.

Ryan: I've been out visiting customers as long as our global team and where we see products that have alignment to strategic priorities for our customers. They will continue they are continuing to invest so.

Ryan McLeod: So overall, I would say our view of the year is cautiously optimistic. In Cherilyn, maybe I'll just jump in with a couple of data points, some of which we covered in the prepared remarks, but sort of order backlog being a 19.3% does does support growth, obviously, about 23% of that backlog does go beyond one year, which, which is fairly consistent with where we typically operate in terms of some of those longer term programs. But, you know, just just echo what Andrew said, the strength of our backlog does give us a lot of confidence in terms of organic growth in in fiscal 26.

Ryan: Overall, I would say our view of the year is cautiously optimistic.

Andrew Hider: And Cherilyn, maybe I'll just jump in with a couple of data points, some of which we covered in the prepared remarks, but the order backlog being up.

Cherilyn Radbourne: 19, 3%.

Cherilyn Radbourne: Does does support growth obviously.

Cherilyn Radbourne: 23% of that backlog does go beyond one year, which which is fairly consistent with where we typically.

Cherilyn Radbourne: Operating in terms of some of those longer term programs, but.

Andrew Hider: Just to Echo what Andrew said.

Speaker Change: <unk> of our backlog does give us a lot of confidence in terms of organic growth in.

Speaker Change: In fiscal 'twenty six.

Cherilyn Radbourne: Okay, that's really helpful. And the midpoint and range that you provided for fiscal Q1 would suggest that at the midpoint, you'd be up modestly. So that's nice to see.

Speaker Change: Okay. That's really helpful. And then midpoint in that range that you provided for fiscal Q1, which suggests that at the midpoint you'd be up modestly.

Cherilyn Radbourne: And in terms of the.

Ryan McLeod: In terms of the internal control deficiency that was noted, can you talk about how that was identified and what's underway to address the issue? Was that related to the EV, the accounting treatment of the EV settlement? So a couple of things, so it's identified through our normal course process. And as you know, I think, you know, this is our first year having adopted the SOCS requirements, which are a little bit different, a little bit more rigorous than what we were previously operating under. So we go through a testing process and an assessment process. And there was there was certain.

Cherilyn Radbourne: Internal controlled efficiency.

Cherilyn Radbourne: Can you talk about how that was identified and what's underway to address the issue was that related to the CEB.

Cherilyn Radbourne: The accounting treatment of the settlement.

Cherilyn Radbourne: So a couple of things.

Cherilyn Radbourne: So it's identified through our normal course process nodes.

Cherilyn Radbourne: I think you know this is our first year, having adopted the sox requirements, which are.

Cherilyn Radbourne: A little bit different a little bit more rigorous than.

Cherilyn Radbourne: What we were previously operating under so.

Cherilyn Radbourne: We go through a testing process and an assessment process.

Cherilyn Radbourne: There was there is certain.

Cherilyn Radbourne: Process business processes.

Ryan McLeod: process, business processes, some of it related to what's what's called IP information prepared by entity, which is effectively spreadsheets and some of the documentation around spreadsheets. So I think importantly, none of this had a, as we stated in the disclosure, an impact on our financial or reported financial statements, current period, prior periods, and largely relates to documentation improvements that that we need to make. And that's, that's where our focus is on that as we go into fiscal 26. Perfect. That's really helpful.

Cherilyn Radbourne: Some of it related to.

Cherilyn Radbourne: Whats with cold IP information prepared by entity, which is effectively spreadsheets.

Cherilyn Radbourne: Some of the documentation around spreadsheet so.

Cherilyn Radbourne: I think importantly, none of this had a as we stated in the disclosure and the impact on.

Cherilyn Radbourne: Our financial our reported financial statements to current period prior periods and largely relates to documentation improvements that we need to make and that's that's where our focus is on that as we go into fiscal 'twenty six.

Speaker Change: Okay perfect. That's really helpful. That's my two.

Cherilyn Radbourne: That's my two.

Speaker Change: Your next question comes from the line of Maximus as Jeff from National Bank Financial Your line is open.

Maxim Sytchev: Your next question comes from a line of Maxim Sytchev from National Bank Financial. Your line is open.

Maxim Sytchev: Hi, good evening, gentlemen.

Jeff: Hi, good evening gentlemen.

Speaker Change: Hi, Max.

Andrew Hider: Andrew, maybe the first question for you, do you mind me providing a bit of color on the composition of programs that exist within the healthcare backlog right now? I mean, one of the questions we often get from investors is how sustainable the GLP-1 sort of growth rate and just curious to see around sort of the expectations. Yeah, so Max, to give you a little bit more color, I mean, so we're certainly excited about our continued support on the GLP-1 space, and we have a diversified customer base within this area. I think right now we're working with eight plus customers and really aligning around their ability to meet the market demand and continue to market demand.

Cherilyn Radbourne: Maybe the first question for you do you mind, maybe providing a bit of color on the composition of programs that exist within the healthcare backlog right now I mean.

Cherilyn Radbourne: One of the questions, we often get from investors is how sustainable that <unk> sort of growth rate and just curious to see around sort of the exposure there. Thanks.

Speaker Change: Yes, so max to give you a little bit more color.

Cherilyn Radbourne: So we're certainly excited about our continued support on the <unk> space and we have a diversified customer base within this area I think right now we're working with eight plus customers and really aligning around their ability to meet the market demand and continued market demand than we do view this as well.

Andrew Hider: And we do view this as, you know, a short to midterm area of focus and sustained ability to grow.

Cherilyn Radbourne: A short to mid term area of focus and sustained ability to grow but additionally, if you step back. We're also in Radiopharmaceuticals, which the identification and treatment of cancer, we're in wearable devices and medical devices. So specifically wearable devices in the treatment of diabetes.

Andrew Hider: But additionally, if you step back, we're also in radio pharmaceuticals, which is identification and treatment of cancer. We're in wearable devices and medical devices. So specifically, you know, wearable devices and the treatment of diabetes. You know, we're in automated pharmacy, we're in contact lenses. And so our view is, you know, as we look at the growth of the year and the potential for the year, you know, there's, as I said earlier, a lot to be cautiously optimistic about. And when I speak to customers, they're looking to. further build out their product portfolios. And we're in many niche markets beyond those that I specify.

Cherilyn Radbourne: We're an automated pharmacy, we're in contact lenses and so our view is as we look at the growth of the year and the potential for the year.

Cherilyn Radbourne: There is as I said earlier, a lot to be cautiously optimistic about and when I speak to customers, they're looking to.

Cherilyn Radbourne: Further build out their product portfolios and we're in many niche markets beyond those that I specify.

Andrew Hider: And so I would say that my engagement with customers have been have been aligned around that and have been aligned around our ability to support their growth needs.

Cherilyn Radbourne: And so I would say that my engagement with customers have been have been aligned around that and had been aligned around our ability to support their growth needs.

Speaker Change: Okay. That's great color. Thanks, so much and then.

Ryan McLeod: And then, Ryan, around working capital, I mean, perhaps I'm wrong, but historical transportation was more capital-intensive than other buckets in the business. So now that that part of the business has shrunk fairly significantly versus the rest, how should we think about that working capital intensity, velocity of improvement? Because I mean, theoretically, that should get better faster, or how should it? Yeah, so Max, excluding the remaining working capital that's on our balance sheet at Q4 tied to the EV, the EV settlement and dispute, we're just over the 15% target. So you're right, in terms of market verticals, commercial terms in transportation typically are more working capital intensive.

Speaker Change: Ryan around working capital and then Christian if I'm wrong, but.

Speaker Change: Oracle transportation was more capital intensive statin either buckets in the business. So now that that part of the business has shrunk fairly significantly versus the rest.

Speaker Change: Should we think about that working capital intensity.

Speaker Change: Velocity of improvements because only theoretically that should get better faster or how should we think about this thanks.

Cherilyn Radbourne: Yes, so max.

Speaker Change: Excluding the remaining working capital that's on our balance sheet at Q4 tied to the EV.

Cherilyn Radbourne: The EV settlement in dispute.

Cherilyn Radbourne: We're just over the 15% target. So you are right in terms of market verticals commercial.

Cherilyn Radbourne: Commercial terms in transportation typically are more working capital intensive so as that has become and will be a smaller part of our business. We do see a benefit to our working capital from that there is an offset though.

Ryan McLeod: So as that has become and will be a smaller part of our business, we do see a benefit to our working capital from that. There is an offset, though, and that's as we've as we've expanded into more product based businesses. So shorter cycle where we're carrying inventory, those businesses are more working capital intensive. And so I think I've spoken through, you know, some of the acquisitions in particular, Hyde Hall, Paxium, Avidity, these are all 20% plus working capital businesses. Now, there's efficiency available in those and it's primarily around inventories and being more efficient there. But all that to say, that does provide some offset to the lower transportation now.

Cherilyn Radbourne: As we've as we've expanded into more product based businesses, so shorter cycle, where we're carrying inventory.

Cherilyn Radbourne: Those businesses are more working capital intensive and so.

Cherilyn Radbourne: I think I've spoken through.

Cherilyn Radbourne: Some of the acquisitions in particular hydraulic axiom avidity. These are all 20% plus working capital business is now theres efficiency available in those and it's primarily around inventory and.

Cherilyn Radbourne: Being more efficient there but.

Cherilyn Radbourne: All that to say that does provide some offset to the lower transportation known.

Ryan McLeod: Our target is to be below 15%. I expect we'll get there this year. We'll see normal course variability in quarters. But that is our target. And as I said, we have a number of initiatives across the organization in place to help support that program.

Cherilyn Radbourne: Our target is to be below 15% I expect we will get there. This year, we will see normal course variability in quarters.

Cherilyn Radbourne: But that is our target.

Speaker Change: As I said, we have a number of initiatives across the organization in.

Speaker Change: In place to help support that progress.

Ryan McLeod: Okay, just one quick one around the tax rate expectations for 2026, how should we, I guess, model it on a perspective basis? Yeah, so a couple of unusual items going through our taxes in this year, particular in Q4, but on a normalized basis, we're in the mid 20% range, which is a little bit lower than what we'd anticipated. There's some normal course impacts from changes in jurisdictions where we operate, our profitability in certain jurisdictions, but we're always looking at how our business is to really make sure we're maximizing that. We did implement a legal entity consolidation that's going to result in a cash tax benefit that we're going to see over the next several years.

Speaker Change: Okay, and just my follow up.

Cherilyn Radbourne: Sorry, just one quick one around the tax rate expectations for 2026 passionately.

Cherilyn Radbourne: This model it on a prospective basis.

Cherilyn Radbourne: Yes, so a couple of unusual items going through our taxes in this year, particularly in Q4, but on a normalized basis. We're in the mid 20% range, which is a little bit lower than what we'd anticipated. There's some normal course.

Cherilyn Radbourne: Impacts from changes in jurisdictions, where we operate.

Cherilyn Radbourne: Our profitability in certain jurisdictions, but.

Cherilyn Radbourne: We're always looking at how our business is structured globally to truly make sure we're maximizing that.

Cherilyn Radbourne: We did implement.

Cherilyn Radbourne: <unk> entity consolidation Thats going to result in a cash tax benefit that we're going to see over the next several years.

Ryan McLeod: But that doesn't really have an impact on our on our effective tax rate. So the way to think about it is really in the mid 20% range in that 24 to 26. but also realizing there's cash tax benefits from some of the planning and as well from the EV settlement that'll help our cash tax.

Cherilyn Radbourne: But that doesn't really have an impact on our on our effective tax rate. So the way to think about it it's really in the mid 20% range in that 24% to 26%.

Cherilyn Radbourne: But we're also realizing there's capex benefits from some of the planning and as well from the <unk> settlement that will that will help our cash taxes.

Cherilyn Radbourne: Okay. That's great. Thank you so much.

Maxim Sytchev: That's great. Thank you so much.

Speaker Change: Your next question comes from the line of <unk> Khan from RBC capital markets. Your line is open.

Sabahat Khan: Your next question comes from a line of Sabahat Khan from RBC Capital Markets. Your line is open. Great, thanks and good afternoon. I guess just following up on the line of questioning that Cherilyn sort of started on the revenue growth for this year. It looks like the revenue, I guess, you provided the range. In terms of the outlook for conversion, how much could that vary over the course of the year based on the type of work you had taken? Is this like a range that we should probably lean on as we think about the rest of fiscal 26?

Speaker Change: Great. Thanks, and good afternoon, I guess, just following up on the line of questioning the shoreline sort of started on the organic revenue growth for this year and it looks like the revenue I guess, you've provided the range and then in terms of the the outlook for conversion like how much could that vary over the course of the year based on the type of work you and take care.

Speaker Change: Is this like a range that we should probably lean on.

Speaker Change: As we think about the rest of the fiscal 'twenty six or does it even evolve based on the things you can see behind the scenes.

Sabahat Khan: Or does it even evolve based on the things you can see behind the scenes, just based on the type of work that you might intake the with the bigger backlog? How would you think about the conversion over the future quarters?

Cherilyn Radbourne: Based on the type of work that you might even take the rest of it just trying to get understanding of the big a bigger backlog, how we should think about the conversion over the future quarters offerings.

Cherilyn Radbourne: Yes, so a couple of things solve it.

Sabahat Khan: Yeah, so a couple things, Sabahat, and I'll step back a little bit. The conversion rate is going to change. That's driven just by material flows and different factors that largely impact our project revenues. But, you know, as I said, our backlog is up 19%. Several of those programs do go out beyond a year, roughly, as I said, 23%. But what our expectation is, is we're going to drive growth this year. And, you know, prior to the EV headwinds, we were at a high single-digit organic growth rate. Keep in mind the global automation market, it's a mid-single-digit growth rate market, and our objective is to outpace that growth.

Cherilyn Radbourne: Step back a little bit.

Cherilyn Radbourne: <unk> rate's going to change that's driven just by material flows and different factors that largely impact our project revenues, but.

Cherilyn Radbourne: As I said.

Sabahat Khan: Backlog is up 19%.

Cherilyn Radbourne: Several of those programs do go out beyond a year roughly.

Cherilyn Radbourne: 23%.

Cherilyn Radbourne: <unk>.

Cherilyn Radbourne: But our expectation is is we're going to drive growth this year.

Cherilyn Radbourne: Prior to the Evs headwinds we were at.

Cherilyn Radbourne: High single digit.

Cherilyn Radbourne: The organic growth rate.

Cherilyn Radbourne: Keep in mind, the global automation market, it's a mid single digit growth rate market and our objective is to outpace that growth.

Sabahat Khan: And that's how we're thinking about fiscal 26.

Cherilyn Radbourne: And that's how we're thinking about fiscal 'twenty six.

Cherilyn Radbourne: Okay, Great and then maybe just kind of on the on the margin side with the EV business I guess much smaller as we look ahead over the course of fiscal 2000, and say just directionally as we look ahead into our backlog and our expectations for <unk>.

Sabahat Khan: Okay, great.

Sabahat Khan: And then I'm just kind of on the on the margin side with the EV business, I guess, much smaller as we look ahead over the course of fiscal 26. Just directionally, as you look ahead into your backlog and your expectations for revenue for the rest of the year, how are you thinking about margin progression? Should we assume that EV was a good portion of the drag over the last year? Just maybe just some high level commentary on how what you're expecting for the rest of this Yeah, so the transportation business was a drag in fiscal 25.

Cherilyn Radbourne: Revenue for the rest of the year, how are you thinking about margin progression should we assume that <unk> was.

Cherilyn Radbourne: Good portion of the drag over the last year or just maybe just some high level commentary on how what are you expecting for the rest of this year. Thanks.

Cherilyn Radbourne: Yes, so the transportation business.

Cherilyn Radbourne: It was a drag in fiscal 'twenty five.

Sabahat Khan: It saw some improvement from the low point in Q2. It's still not operating in Q4 at the level that we expect, but it is improving, and we expect it to be profitable in fiscal 26. Similar to how we operate, we're targeting margin expansion. We have a number of initiatives in place relating to material productivity, labour productivity, pricing, other areas of efficiency in our operations. That said, what we saw this quarter in terms of expansion, sequential expansion, is probably a reasonable run rate. I've used the term modest previously, and that's what I would expect. There's going to be variability.

Cherilyn Radbourne: Saw some improvement from the low point in Q2.

Cherilyn Radbourne: It's still not operating in Q4 at the level that we expect but it is improving and we expect it to be profitable in <unk>.

Cherilyn Radbourne: Fiscal 'twenty six.

Cherilyn Radbourne: Similar to how we operate.

Cherilyn Radbourne: We're targeting margin expansion.

Cherilyn Radbourne: We have a number of initiatives in place relating to material productivity labor productivity pricing.

Cherilyn Radbourne: Other areas of efficiency in our operations.

Cherilyn Radbourne: That said, what we saw this quarter in terms of <unk>.

Cherilyn Radbourne: Expansion sequential expansion is probably a reasonable run rate I've used the term modest.

Cherilyn Radbourne: Previously and that's what I would continue to expect theres going to be variability.

Sabahat Khan: It's not going to be linear, but again, that's how we're thinking about the business this year in terms of margin expansion is progression throughout the year that we'll see in our EBIT and EBITDA margins.

Cherilyn Radbourne: Not going to be linear, but thats again, thats how were thinking about.

Cherilyn Radbourne: The business this year in terms of margin expansion is as progression throughout the year.

Cherilyn Radbourne: In our.

Cherilyn Radbourne: EBIT and EBITDA margins.

Speaker Change: Okay, Great and then maybe just one last one maybe high level one.

Sabahat Khan: Great.

Sabahat Khan: And then maybe just one last one, maybe a high level one. As we think about tariffs, obviously, there is negatives from the perspective of actual tariffs. And then given where you are in sort of the industrial landscape, you can see some positive benefits from the reshoring efforts. You can maybe just help frame for us that puts in the takes and what you're hearing from customers, given all the all the headlines out there. Yes, Sabahat, look, it's certainly challenging to navigate and this is an evolving landscape. That said, look, our teams have been laser focused on identifying risks and actively monitoring and mitigating where possible.

Cherilyn Radbourne: As we think about tariffs obviously, there is negative from the perspective of actual tariffs and then given where you are in sort of the industrial landscape you could see some positive benefits on the re shoring efforts.

Cherilyn Radbourne: Maybe just help frame for us the puts and the takes and what Youre hearing from customers given all the all the headlines out there. Thanks.

Cherilyn Radbourne: Yes.

Cherilyn Radbourne: Look it's certainly challenging to navigate and this is an evolving landscape.

Speaker Change: Ed look our teams have been laser focused on identifying risks and actively monitoring and mitigating where possible and we've largely been able to do that the impact on Ats has been call. It minimal and we are continuing to ensure that we can.

Andrew Hider: And we've largely been able to do that. The impact on ATS has been, call it minimal, and we are continuing to ensure that we can you know, identify supply options, identify areas of control and areas to build. And so we continue to look across now. We do look at this market and tariffs being a potential benefit midterm. And the reason is ATS being a global player allows us to really utilize that global strength. And so certain businesses are able to move their product and build in region where needed. And we have the ability to support our customers on a global scale.

Speaker Change: Identify supply options identify areas of control areas to build and so we continue to look across now we.

Cherilyn Radbourne: We do look at this market.

Cherilyn Radbourne: And tariffs being a potential benefit in mid term and the reason is ats being a global player allows us to really utilize that global strength and so certain businesses are able to move their product and build in region where needed.

Cherilyn Radbourne: And we have the ability to support our customers on a global scale. So if this continues on Ats, we do view us in a position of a potential strength to support our customers through that.

Andrew Hider: So if this continues on, ATS we do view as in a position of potential strength to support our customers through that.

Speaker Change: Okay. Thanks very much.

Operator: Thanks very much. Again, if you'd like to ask a question, press star 1 in your telephone keypad.

Speaker Change: Again, if you'd like to ask a question press star one on your telephone keypad. Your next question comes from the line of David Ocampo from <unk> Securities. Your line is open.

David Ocampo: Your next question comes from the line of David Ocampo from Cormark Securities. Your line is open. Thanks. Good evening, everyone.

Speaker Change: Thanks, Good evening everyone.

Ryan McLeod: Maybe the first one for Ryan. I guess when we think about the the inventory and the contract assets that were tied to your EV customer, it sounds like they were almost written off to zero. Is there any room for that to be redeployed to other areas, whether they were standard products, and we can view that as potential upside, or should we just view that as a zero?

Speaker Change: Maybe first of all David Orion.

Speaker Change: I guess, when we think about the inventory and the contract asset that were tied to EV customer it sounds like they're.

Speaker Change: Almost written off to zero is there any room for that to be redeployed to other areas, whether they were standard products and we can view that as potential upside or or should we just view that as a zero going forward.

Ryan McLeod: Well, contract assets is zero. Inventory we've written to what we expect to be able to utilize, but I wouldn't expect a benefit out of that going forward. There are materials that could be redeployed, but not a material benefit, no.

Speaker Change: Well go to contract assets is zero inventory, we've written too.

Speaker Change: And what we expect to be able to utilize but I wouldn't expect.

Cherilyn Radbourne: A benefit out of that going forward there are materials that we.

Cherilyn Radbourne: Sure.

Cherilyn Radbourne: That could be redeployed, but not a not a material benefit known.

David Ocampo: Okay.

Cherilyn Radbourne: Okay.

Ryan McLeod: And then just following up on Max's question or line of questioning as it relates to life sciences, I do respect that GLP-1 is just one end market that you guys serve, but I'm curious how you guys are thinking about both the positives and the negatives just as it relates to Lily's positive trial results as it relates to ingestible GLP-1. Yeah, so a couple items. And to give you some context, and to add to my comment for Max, the noble drug approval, which is really an indication of future demands. The last couple of years, 23-24, being really above average on approval process, sets the stage for future potential growth.

Cherilyn Radbourne: And then just.

Speaker Change: Following up on Max's question or line of questioning as it relates to life Sciences at Deere spec.

Cherilyn Radbourne: <unk> is just one end market that you guys serve but I'm curious how you guys are thinking about both the positives and negatives just as it relates to Lilly as positive trial results as it relates to Ingestible GL people on drugs.

Cherilyn Radbourne: Yes, so a couple of items and to give you some context.

Cherilyn Radbourne: To add to my comment for match the noble drug approval, which is really an indication of future demand.

Ryan McLeod: The last couple of years 'twenty, three 'twenty four being really above average on approval process sets the stage for future potential growth in this year is really in line with last year as far as its run rate. So overall, we do view this market as having continued ability to support our position as it sits today.

Andrew Hider: And this year is really in line with last year as far as its run rate. So overall, we do view this market as having continued ability to support our position as it sits today. As far as the drug, as far as going to pill form, look, and you can read the articles as we do, and we have engagements with customers. There's certainly been a lot of discussion on this. We have seen also customers pull back on this based on trials. And so our view is that certainly that could be an option for the future. We're monitoring, assessing.

Cherilyn Radbourne: As far as the drug as far as going to <unk> look at it.

Cherilyn Radbourne: And you can read the articles as we do and we have engagements with customers. There has certainly been a lot of discussion around this we have seen also customers pull back on this based on trials and so our view is that certainly that could be an option for the future we're monitoring assessing.

Andrew Hider: The customers we're engaged with are still investing in the area around the high-potency ability around GLP-1 with an auto-injector, and that supports our ability to support our customers. We're as a reminder, we are in pharmacy automation, and we're in other areas.

Cherilyn Radbourne: The customers, we're engaged with are still investing in the area around the high potency ability around <unk>, one with an auto injector and that supports our ability to support our customers.

Cherilyn Radbourne: As a reminder, we are in pharmacy automation and we are in other areas and so.

David Ocampo: And so, you know, when we see new new drug launches, new areas, we are have the capability to support our customers on those new new launches and new drug programs. That's very helpful and useful color.

Cherilyn Radbourne: When we see new drug launches new areas, we are have the capability to support our customers on those new launches.

Cherilyn Radbourne: New drug programs.

Speaker Change: Okay, that's very helpful and useful color and then maybe just last one.

Andrew Hider: And then maybe just the last one. You guys talked about, I mean, you guys always talk about cultivating M&A transactions. But when we think about your leverage, even with all the moving parts and the collection of the cash, it does suggest that you guys are still going to be above three times levered. So are larger acquisitions on pause until you can get below the three times? And maybe, Ryan, you can refresh us on the maximum leverage ratio you guys are willing to go to for the right outcome. So yeah, so why don't I start, David?

Speaker Change: You guys talked about and you guys always talk about cultivating M&A transactions.

Speaker Change: When we think about your leverage even with all the moving parts in the collection of the cash. It does suggest that you guys are still going to be above three times levered.

Speaker Change: So our larger acquisitions on pause until you can get below the three times and maybe Ryan you can refresh us on the maximum leverage ratio you guys are willing to go to for the right acquisition.

Speaker Change: So yes, so why don't I start David with the settlement, it's about half a turn reduction.

Ryan McLeod: So look, with the settlement, it's about half a turn reduction. And it certainly gets us, you know, closer to our mark. All that to be said, if you look at the landscape for M&A today, so our expectation isn't changing. We're seeing overall volumes go down slightly as far as M&A goes. But our cultivation and our opportunity funnel continues to be strong. And we do continue to cultivate those assets where when they become available, we're in a position to pounce and they take time. If you look at the two we did this past year with Paxium and Hidoff, those were years in the making.

Speaker Change: And it certainly gives us gets us closer to our mark although to be said if you look at the landscape for M&A today.

Speaker Change: So our expectation isn't changing we are seeing overall volumes go down slightly as far as M&A goes, but our our cultivation in our opportunity funnel continues to be strong and we do continue to cultivate those those assets where when they become available we are in a position to power and they take time, if you will.

Cherilyn Radbourne: At the two we did this past year with with.

Cherilyn Radbourne: With Patheon and hide up those were years in the making and so as we look at our future. We're cultivating assets that when we're in a position to move quickly we can.

Ryan McLeod: And so as we look at our future, we're cultivating assets that you know, when we're in a position to move quickly, we can. And we are going to continue to look at areas that are high attractive for ATS and our shareholders. Yeah, and I'll just add on. So, as I said, we're targeting to get to that two to three times range, because that really gives us more flexibility relative to where we sit today, particularly as it is you think about larger opportunities. That said, and I'll repeat a little bit what Andrew said, we're always cultivating for the right opportunity.

Cherilyn Radbourne: <unk>.

Cherilyn Radbourne: We are going to continue to look at areas that are high attractive for Ats and our shareholders.

Cherilyn Radbourne: Yes, and I'll just add on so.

Cherilyn Radbourne: As I said, we're targeting to get to that two to three times range because that really gives us.

Cherilyn Radbourne: More flexibility relative to where we sit today, particularly as it as you think about larger opportunities.

Cherilyn Radbourne: That said as.

Andrew Hider: I'll repeat a little bit what Andrew said.

Cherilyn Radbourne: We're always cultivating for the right opportunity and we're going to look at various financing alternatives, where there is a deal that makes sense from a value creation perspective. So.

Ryan McLeod: And we're going to look at various financing alternatives where there's a deal that makes sense from a value creation perspective. So you know, we'll be disciplined in our approach, but we're going to look at it from a value perspective.

Cherilyn Radbourne: We'll be disciplined.

Cherilyn Radbourne: And our approach but.

Cherilyn Radbourne: We're going to look at it from a value perspective.

Cherilyn Radbourne: Okay. That's perfect that's all I had.

Ryan McLeod: Okay, that's perfect.

Michael Glen: That's all I had.

Speaker Change: Your next question comes from the line of Michael Glen from Raymond James Your line is open.

Michael Glen: Your next question comes from the line of Michael Glen from Raymond James. Your line is open. Okay, just a couple questions.

Speaker Change: Hey.

Speaker Change: Just a couple of questions. So.

Ryan McLeod: So number one, what are you guys thinking about in terms of moving some of your product manufacturing to the US? Do you have any capex plans? Is any of the capex this year associated with that? Or like, just give some thoughts on your line of thinking for that.

Speaker Change: Number one what are you guys thinking about in terms of moving some of your.

Speaker Change: Product manufacturing to the U S. Do you have any capex plans does any of that Capex. This year.

Speaker Change: Associated with that or like just give some thoughts on your line of thinking for that.

Speaker Change: Yes, Michael So nothing I would call out.

Ryan McLeod: Yeah, Michael, so nothing I would call out specifically that's a material move. As Andrew noted, we have capacity in the US that for some of our products, some of what we do, it's fairly straightforward. Anything that's more significant from a CAPEX standpoint, we're not at that point yet where we've made a commitment to move production. That's going to be dependent on does it make sense in this environment, in a potentially changing environment, and ultimately, what the global trade environment looks like in terms of tariffs and how that looks from a long-term perspective. So something we're monitoring, but not something that's part of our CAPEX plans that I aligned.

Speaker Change: Specifically, that's a material move as Andrew noted.

Speaker Change: We have we have capacity in the U S.

Speaker Change: <unk>.

Speaker Change: For some of our products some of what we do it's fairly straightforward anything thats more significant from a capex standpoint, we're not at that.

Speaker Change: The point, yet, where we've where we've made a commitment to to move.

Speaker Change: <unk> moved production, that's that's going to be dependent on does it make sense in this environment in a potentially changing environment and ultimately.

Speaker Change: What what the global trade environment looks like.

Speaker Change: In terms of tariffs and how that looks from a long term perspective, so something we're monitoring but not something that is part of our capex plans.

Speaker Change: That I outlined.

Speaker Change: Okay.

Andrew Hider: Okay, and then with the EV situation seemingly cleaned up, Andrew, are you able to provide some commentary? Do you think that it is potentially the right time for you to divest the EV business? So, look, this business has been really right-sized to reflect the current demand environment, and as we see going forward, setting it up for success. And look, you have to remember that the work we do in this business is really wrapped around factory automation. And with this business being right-sized, and also the potential for more reshoring of manufacturing, there's opportunities we can pursue in factory automation that are outside of the segment.

Speaker Change: And then with the EV situation seemingly cleaned up.

Speaker Change: Andrew are you able to provide some commentary do you think that it is potentially the right time for you to divest the EP business.

Speaker Change: So this business has been really right sized.

Speaker Change: To reflect the current demand environment and as we see going forward setting it up for success and look you have to remember that the work. We do in this business is really wrapped around factory automation and witness business being right size and also the potential for more re shoring of manufacturing.

Speaker Change: These opportunities we can pursue and factory automation that are outside of the segment.

Andrew Hider: So, we have good capabilities in the space. It's an area of business that we can create value for our customers, and ultimately, our shareholders. And so, that's how we see it today.

Speaker Change: So we have good capabilities in this space, it's an area of business that we create value for our customers and ultimately our shareholders and so thats, how we see it today.

Speaker Change: Okay. Thank you.

Michael Glen: Okay, thank you.

Speaker Change: Your next question comes from the line of Cherilyn Radbourne from TD Cowen Your line is open.

Cherilyn Radbourne: Your next question comes from a line of Cherilyn Radbourne from TD Cowan. Your line is open. just a couple of other questions for me.

Cherilyn Radbourne: Thank you just a couple of other questions for me.

Andrew Hider: Just with regard to the backlog by market, and you alluded to this a little bit in your prepared remarks, but you set new backlog records in consumer products and nuclear. So I was hoping for a bit more color in those two areas.

Cherilyn Radbourne: With regard to the backlog by end market and you alluded to this a little bit in your prepared remarks, but is that new backlog record in consumer products and nuclear so I was hoping for a bit more color on those two areas.

Cherilyn Radbourne: Yes.

Speaker Change: Yeah, So Sharon I'll take I'll take those separately so in consumer products.

Andrew Hider: Yeah, so Cherilyn, I'll take those separate. So in consumer products, you know, we've continued to see support on our niche solution for the warehouse automation space. And as a reminder, this solution for that area is really targeted around supporting this customer to meet their sustainability goals while improving their efficiency. And so while they're looking at their global footprint, we've actually moved, we've had the ability to move this product to be built in region for their usage. So we like the ability to support, it is a niche provider in that area. And one that we like as far as not only upfront CapEx, but then and then supporting from a services and capability standpoint.

Cherilyn Radbourne: We've continued to see support on our niche solution for the warehouse automation space and as a reminder, this solution for that area is really targeted around supporting this customer to meet their sustainability goals, while improving our efficiency and so while they are looking at our global footprint, we've actually move.

Cherilyn Radbourne: The ability to move this product to be built in region or their usage. So we like the ability to support it as a niche provider provider in that area and one that we like as far as not only upfront capex, but then and then supporting from our services and.

Cherilyn Radbourne: And capability standpoint.

Andrew Hider: As far as nuclear, look, nuclear, if you think about it, I'm going to break it down into four areas. And our largest area is candy reactors. And think of the refurbishment, we've talked about that in the past, the Bruce Power, you know, work that we've done and continue to do. We've seen candy reactors continue to have a long life and one that ATS has a lead niche position in. There's also traditional reactors, which are going to go through a decommissioning process. And we continue to see opportunity there.

Cherilyn Radbourne: As far as nuclear nuclear if you think about I'm going to break it down into four areas in our largest areas candy reactors and think of the refurbishment we've talked about that in the past the Bruce power.

Cherilyn Radbourne: Work that we've done and continue to do we've seen Kinder reactors continued to have a long life and one that Ats has a belief niche position in.

Cherilyn Radbourne: Theres also traditional reactors, which are going to go through a decommissioning process and we continue to see opportunity there.

Andrew Hider: There's a small modular reactor portion. And, you know, I've walked through this a little bit in the past. But as a reminder, we think this is about a five plus year potential. That said, we're working with some of the key players around enabling and getting to that mark because the opportunity exists. And they're really aligning around enabling this as a solution set as clean energy to support the increased energy demands. And then lastly, and we're seeing more increase in this is is nuclear fuel and the support around the ability to bring more nuclear fuel into the market.

Cherilyn Radbourne: Theres, a small module reactor portion and.

Cherilyn Radbourne: Walk through this a little bit in the past, but as a reminder, we think this is about a five plus year potential that said, we're working with some of the key players around enabling in getting to that mark because the opportunity exists and theyre really aligning around enabling this as a solution set.

Cherilyn Radbourne: As clean energy to support the increased energy demand and then lastly, and we're seeing more increase and this is.

Cherilyn Radbourne: Is nuclear fuel and the support around the ability to bring more nuclear fuel into the market.

Andrew Hider: And so we've actually started to win work in this space to support that and support the ability to get more fuel into the into the market. So look, we're a niche player. We like our position. We like the growth potential in this area. And if we look at the trailing 12 month book to bill ratio and energy, it certainly supported a continued continued area growth.

Cherilyn Radbourne: So we've actually started to win work in this space to to support that and support the ability to get more fuel into the end of the market. So look we're a niche player we like our position we like the growth potential in this area and if we look at the trailing 12 month book to Bill ratio in energy. It's certainly supported a continued.

Cherilyn Radbourne: Continued area of growth.

Speaker Change: Great and then last one for me.

Cherilyn Radbourne: Great.

Andrew Hider: And then last one for me, just as you think about how to protect yourselves in light of a changing tariff backdrop and the potential for related inflation, are there any changes that you've made or contemplated to the terms of your contracts in that regard? So our contracts actually protect us fairly well from this situation. So certainly as we're getting into new contracts it's a point of discussion but not an area that we're seeing a significant challenge from. And I mentioned, you know, from a pricing standpoint that we are addressing and some of that is on the product side, how we price, but also when there are changes or tariffs impacts, those do get passed on to customers typically.

Speaker Change: Should we be thinking about how to protect yourselves in light of the changing tariff backdrop and the potential for related inflation are there any changes that you've made or contemplated at the terms of your contracts in that regard.

Speaker Change: So our contracts.

Speaker Change: Actually protect us fairly well.

Speaker Change: And from the situations. So certainly as we're getting into new contracts at the point of discussion, but not not an area that we're seeing.

Speaker Change: Significant challenge from.

Speaker Change: And I mentioned from a pricing standpoint that we are addressing and some of that is is on the product side, how we price but also.

Speaker Change: When there are changes.

Speaker Change: Those those do get or or tariffs impacts those to get passed on to customers typically.

Andrew Hider: I think more of the work is, or a lot of the work rather, is happening on the supply chain side and we touched on this a little bit but it's So localizing and as much as we can our supply chain, working with our suppliers to do that, we're working very closely with our brokers, logistics advisors, we do in our Canadian operations, a lot of what we do benefits from the USMCA, where we sit and where our equipment qualifies under those agreements. So all that to say we've been able to manage most of the impact and what we haven't, I think as Andrew said, it's really not a material headwind for us.

Speaker Change: I think more of the work is.

Speaker Change: There are a lot of the work rather is happening on the supply chain side.

Speaker Change: We touched on this a little bit but.

Speaker Change: <unk>.

Speaker Change: So localizing in as much as we can our supply chain working with our suppliers to do that.

Speaker Change: We're working very closely with our brokers logistics advisors.

Speaker Change: We do in our Canadian operations.

Speaker Change: A lot of what we do benefits from from the U S. MCA.

Speaker Change: So where we sit and where our equipment qualifies under those.

Speaker Change: Agreements so.

Andrew Hider: All that to say, we've been able to manage most of the impact and what we what we haven't I think as Andrew said, it's really not a material.

Speaker Change: The headwind for us.

Speaker Change: That's all for me thank you.

Cherilyn Radbourne: That's all for me.

Operator: Thank you.

Speaker Change: Thank you.

Andrew Hider: And that concludes our question and answer session.

Speaker Change: And that concludes our question and answer session I will now turn the call back over to Mr. Hider for closing remarks.

Andrew Hider: I will now turn the call back over to Mr. Hider for closing remarks. Thank you, operator. And thank you, everyone, for joining us today.

Speaker Change: Thank you operator, and thank you everyone for joining us today I look forward to speaking to you on our Q1 call in August.

Operator: I look forward to speaking to you on our Q1 call in August. Stay safe and goodbye for now.

Speaker Change: Stay safe and goodbye for now.

Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.

Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Sure.

Speaker Change: Yes.

Speaker Change: Sure.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Sure.

Speaker Change: Thanks.