Q1 2026 ATS Corp Earnings Call

Speaker #3: Welcome to the ATS Corp /ATS Q4 conference call and webcast. This call is being recorded on August 7, 2025, at 8:30 AM Eastern Time.

Speaker #3: Following the presentation, we will conduct a question and answer session. I'll now turn the call over to Arjun Kapoor, Investor Relations, Associate at ATS.

Speaker #4: 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.

Speaker #4: Please note there are remarks today that are accompanied by a slide deck, which can be viewed via our webcast and available at atsautomation.com. We caution that the statements made on the webcast and conference call may contain forward-looking information and are cautionary statements regarding such information.

Speaker #4: 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 in slide three of the slide deck.

Speaker #4: Now, it's my pleasure to turn the call over to Andrew.

Speaker #5: Thank you, Arjun. Good morning, everyone, and thank ou for joining us. Before we discuss our Q1 results, I want to take a moment to acknowledge the leadership transition as I move on from ATS.

Speaker #5: I've been honored to lead this great company, through a period of growth and transformation, as we expanded our capabilities, strengthened ur position in key markets, and created a solid foundation for the future.

Speaker #5: While the board conducts its CEO search, the company will be in the very capable hands of Ryan McLeod, as interim CEO, with the support of our experienced senior leadership team.

Speaker #5: During this transition, ATS will drive forward with its growth strategy, enabled by the ATS Business Model, our well-entrenched playbook for continuous improvement. Now to our we reported today.

Speaker #5: I will update you on our business and markets and then Ryan will provide his report. ATS delivered revenue growth with solid contributions from recent acquisitions.

Speaker #5: And adjusted earnings margins in line with our expectations. Starting with our financial value drivers, Q1 revenues were $737 million, up 6% from Q1 last year.

Speaker #5: Order bookings were $693 million, with good diversification across our portfolio. Adjusted earnings from operations in Q1 were $79 million, onto our outlook. Order backlog ended the quarter at approximately $2.1 billion, as we continued to win and deliver across our diversified portfolio of offerings.

Speaker #5: Including customer integration, standard equipment and products, and services. Our funnel remains healthy, reflecting the strategic nature of the customer programs we serve. As noted in past quarters, investment timing is variable, and are closely monitoring the business environment, given the dynamics of cross-border tariffs.

Speaker #5: In parallel, we continue to advance our strategy to grow, repeatable revenue through services, consumables, and digital offerings. Within life sciences, order backlog a quarter end was $1.2 billion, we secured wins across sub-markets, including auto injectors, radio pharma, and blood glucose monitoring wearables.

Speaker #5: Our diversified life sciences opportunity funnel remains strong, supported by our proven capabilities in regulated markets, and deep customer relationships. By way of example, ComaCare continues to be a partner of choice for radio pharma customers who value quality, and our proven track record for execution.

Speaker #5: As more customer programs advance towards commercial readiness, ComaCare is uniquely positioned to provide localized and specialized support from our new site in Indianapolis, which opened at the end of July.

Speaker #5: Separately, and previously, some customers in the lab research space are taking a more measured approach to capital spending, as a result of changes in US government funding.

Speaker #5: Although this does not change our outlook for life sciences overall. In food and beverage, our funnel remains strong, and we ended the quarter with a backlog of $229 million, an increase of 6% compared to Q1 last year.

Speaker #5: We continue to see investment in primary processing solutions, including a strong focus on aftermarket service. In addition, we are actively executing on our growth strategy, through secondary processing.

Speaker #5: Packaging and services, further supported by the addition of Paxium. In discussed energy, our funnel includes a mix of short and long-term opportunities. As a nuclear industry continues to benefit from renewed investment in favorable government policy, in the near term, there is momentum from ongoing can-do refurbishment activity.

Speaker #5: While both large-scale new builds and emerging small modular reactor programs provide further potential for growth. Drawing on our expertise, in early-stage design through to modular assembly and waste handling, we are well-positioned to support customers across their nuclear program life cycles.

Speaker #5: In consumer products, our funnel remains stable, with attractive niche opportunities. Our capabilities in warehouse automation and packaging continue to resonate with customers. In transportation, our funnel remains stable, in line with expectations.

Speaker #5: Due to relatively lower EV and market demand, on services, we continue to advance our offerings, including our digital solutions. Across the range of markets we serve, through our evolving capabilities, including our connected care hub, ATS is well-positioned to help customers proactively enhance system utilization and mitigate risk.

Speaker #5: From a strategic perspective, our services portfolio is designed to strengthen customer relationships, over the full life cycle of equipment ownership. Reinforce our role as a trusted partner and drive reoccurring revenue.

Speaker #5: On the ATS Business Model, in Q1, our global teams actively engaged in key initiatives, including Kaizens, workshops, and problem-solving events. Focused on all of our value drivers.

Speaker #5: At our annual ABM awards, teams were recognized for excellence in innovation, reoccurring revenue, customer engagement, health and safety, and overall performance. Underscoring the sustained impact of our ABM culture.

Speaker #5: On M&A, our teams remain active in cultivating strategic opportunities. That align with our long-term growth ambitions, and contribute to value creation. In the near term, our focus is on returning leverage to our target range.

Speaker #5: And on realizing further synergies from our recent acquisitions. On innovation, we continue to deploy capital and empower our teams to develop differentiated solutions that create value across our end markets.

Speaker #5: On digital innovation, we leveraged our acquisition of U-Reality to develop and launch a new interactive and scalable virtual reality training platform for customers. In energy, we advanced the deployment of our multi-flex system.

Speaker #5: Multi-flex is a patent-protected concept, designed for the safe, precise cutting and removal of large nuclear reactor components, in decommissioning and waste handling applications. Multi-flex is one example, of our ability to innovate and deliver safe, efficient solutions within the highly regulated nuclear space.

Speaker #5: Finally, in June, we held our biannual ATS Automation Summit for customers, and other partners at our Cambridge campus. This event showcased the most recent solutions from across our portfolio of companies.

Speaker #5: Including ATS advancements in digital transformation, intelligent automation, and technology-enabled scalability. Through our workshops, over several days, we focused on innovation trends in automation. Including time-to-market, as well as digitalization in AI advancements.

Speaker #5: Further positioning ATS as a thought leader for global customers. In summary, our opportunity funnel is well-diversified. And our current order backlog provides solid revenue visibility and a strong foundation for profitable growth.

Speaker #5: I'm also pleased to share that ATS was included in Time Magazine's inaugural list of Canada's best companies 2025. And we were number one in the engineering, manufacturing, and medical technology category.

Speaker #5: This recognition and our results today reflect the continued progress we are making across our value drivers. The resilience of our business model and the dedication of our exceptional talent.

Speaker #5: I'm proud of what 've accomplished together. And I look forward to watching ATS continue to grow and succeed, now I will turn the call over to Ryan.

Speaker #5: Ryan, over to you.

Speaker #6: Thank you, Andrew. Good morning, everyone. Beginning with our operating results for the quarter, order bookings were $693 million, down 15% compared to Q1 last year.

Speaker #6: Due primarily to the lower expected run rate in transportation order bookings. Q1 last year also had several larger enterprise order bookings in life sciences, which reflects normal variability.

Speaker #6: Importantly, our trailing 12-month book-to-build ratio at the end of Q1 remained above 1, at 1.17 to 1. Revenues for the first quarter were $737 million, up 6.1% compared to last year.

Speaker #6: Recently acquired companies contributed 4.1% to revenue growth, and foreign exchange translation added a 3.2% benefit. Q1 organic revenue growth was negative 1.2%, as lower transportation revenues were only partially offset by growth in life sciences, consumer products, and food and beverage.

Speaker #6: Nevertheless, our outlook for revenue growth for full year remains unchanged. Moving to earnings, first quarter adjusted earnings from operations were $78.6 million, or 10.7% of revenues.

Speaker #6: This was in line with our expectations, in represented in almost 40 basis points sequential improvement from Q4. Gross margin for Q1 was $29.8%, consistent with Q1 last year.

Speaker #6: On SG&A, excluding acquisition-related amortization and transaction costs, expenses in the first quarter totaled $136.4 million, at $20 million increase over the prior year. This increase included incremental SG&A from acquired companies, and to a lesser extent, both the impact of foreign exchange translation and employee costs.

Speaker #6: As always, we continue to focus on ongoing efficiency improvements in our operations. Excluding mark-to-market impact, related to changes in ur share price, stock-based compensation expense was $4.8 million in Q1.

Speaker #6: Earnings per share were $0.41 on an adjusted basis. Turning to our outlook, we ended the quarter with order backlog of approximately $2.1 billion. Q2 revenues are expected to be in the range of $700 million to $740 million.

Speaker #6: 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.

Speaker #6: In the quarter, we incurred an additional $2.5 million of restructuring costs, as a continuation of the program announced last year. We continue expect operating margin improvement throughout fiscal '26, although this may not be linear.

Speaker #6: ABM tools remain a critically important element of our ongoing margin expansion focus. On tariffs, while the environment is still evolving, we have not seen a material impact to date.

Speaker #6: On order bookings intake, we continue to stay close with our customers to address their regional execution and capacity needs. On supply chain, our strategic sourcing approach is designed to protect margins and minimize disruption where possible.

Speaker #6: Of note, the majority of our exports from Canada into the US are covered under the USMCA. Moving to the balance sheet, in Q1 cash flows from operating activities were $156 billion.

Speaker #6: Our non-cash working capital is a percentage of revenues was 17.3%, supported by the EV settlement payment that we received in the quarter. While there may be variability between periods, we remain focused on working capital efficiency across the business, and our target of 15% of revenues or less is unchanged.

Speaker #6: During the quarter, we invested $16.3 million in CapEx and intangible assets, and we continue to strategically invest to drive innovation and capability. On leverage, our net debt to adjusted EBITDA ratio was 3.6 times on a pro forma basis at Q1.

Speaker #6: Which includes full year contributions from our most recent acquisitions. The improvement from Q4 was driven by the receipt the EV settlement payment, used primarily to reduce amount sowing on our credit facility.

Speaker #6: We remain committed bring our leverage to our get range of two to three times. As we noted when we reported earlier in results, we were active on our share buyback program during Q1.

Speaker #6: The NCIB program remains an opportunistic component of our overall capital deployment strategy. In summary, first quarter results were in line with our expectations. With solid revenue generation, and improved operating margins on a sequential basis.

Speaker #6: In addition, our strong order backlog supports our outlook for growth. Before we invite questions, I want to extend my thanks to Andrew. Since he joined ATS in 2017, his leadership has been instrumental to ATS's growth.

Speaker #6: As well as to our future, with the legacy of disciplined execution, strategic focus, and continuous improvement that he has built. Andrew, thank you. During this leadership transition, it's business as usual.

Speaker #6: Our priorities and our plan remain unchanged. We will continue to focus on performance improvement across all of our value drivers, and we will seek to complement organic growth by cultivating strategic acquisitions.

Speaker #6: Our decentralized management structure, strong leadership team, and our global teams' mitment to the ATS Business Model will continue to serve us well. Importantly, we remain committed to creating long-term value for our shareholders, and customers through strong execution and continued growth in our targeted markets.

Speaker #6: Now we will open the call to questions from our analysts. Operator, could you please provide instructions? Thank you.

Speaker #7: We will now begin the estion and answer session. If ou would like to ask a estion, simply press star followed by the number one on your telephone keypad.

Speaker #7: And your first question comes from the line of Joe Ricci with Goldman Sachs. Joe, please go ahead.

Speaker #8: Hey, good morning, guys. And Andrew, congratulations. You know, going to miss talking to ou on these conference calls, and I wish you nothing but the best of luck.

Speaker #9: Thank you, Joe. Appreciate it.

Speaker #8: Yeah, you bet. Hey, guys, can we just, can we just talk about the, just the demand environment? A little further. It doesn't seem like you guys are seeing, you ow, much slippage in your business.

Speaker #8: At the same time, fully recognize that that orders can be lumpy, right? And so, yeah, a little bit maybe slower start to the year.

Speaker #8: But maybe just kind of talk, talk through the demand environment, what you're seeing, what our customers are saying. Across your key end markets, and kind of how you're thinking about the outlook for rest of the year.

Speaker #10: Yeah, hey, Joe. Maybe I'll start, and then Ryan can add on. You know, if we step back, a couple of data points. First, as you're well aware, we don't look at any single quarter in olation.

Speaker #10: We, we, we look over a period of time. And our trailing 12-month book-to-build ratio is 1.17. So, so really aligned around that growth target.

Speaker #10: And, and really what we outlined last quarter around, this will be a growth year for, ATS. And we expect that to hold true. If you then go in prepared remarks, you ow, what you'll find is in large part, our funnelers remain healthy.

Speaker #10: And the conversations are very engaging with our customers around their target and their approach to strategic investments. And we're in many, attractive areas. You know, if you just look at life sciences, whether it's, you know, the continued support around GLP-1 drugs and, and, and, you know, a little bit of data around that, the novel drug approvals are in line with last year.

Speaker #10: Which effectively mean more, you know, drugs continue to be approved. And we continue to engage with customers about their launches. To radio pharma and, and, and, ou know, the continued identification of, of new drugs or existing drugs to support cancer treatment around identification and, and, or treatment, after you've surgery.

Speaker #10: To, wearable devices and, and as, you know, in the treatment of diabetes or, or even glucose monitors too. And, and we've talked about this in the .

Speaker #10: even the ongoing support for, for pharmacy automation or, or even contact lenses. So, many, many key opportunities around that space. We then go to energy.

Speaker #10: Our nuclear business remains strong, continues to be strong for key themes in that. And I've walked through those in past, but it's candy reactors, it's, it's, it's decommissioning, it's, it's SMRs, and it's, and it's fuel requirement needed for the, the resurgence of, of nuclear energy.

Speaker #10: to our food business that, that remains continued, you ow, successful in its pursuit of not only ongoing business, but, but, but new areas of technology and, and innovation and, and bringing value to our ustomers.

Speaker #10: transportation is, is really steadied out and, and, and when we look at that business, we're winning work and, and pleased, you know, with where we sit.

Speaker #10: We've right-sized the business for, for the, our view the market. And then lastly, consumer products. And, and, you know, we, we, we, we look at that, market and, you know, and, and we're monitoring that space, we've seemed to hold up and, and, you know, whether it's warehouse automation or, or even in, , our ability to support high-end cosmetics and, and it's remained called rather steady.

Speaker #10: So overall, our view on the, on, the, on the year and the market is, is we're in a strong position, strong backlog, and our book-to-build ratio remains in line with, with our expectations on growth.

Speaker #10: And, and.

Speaker #9: Joe, just I'll ump in with one more data point as well. So if we look over the first half of this calendar year, so really since tariffs have become, part of the, part of the environment, or have been in place, and, and if we exclude transportation, our orders are up over 10%, year over year in the first six months of the calendar year.

Speaker #9: So, as Andrew said, we've got a ong backlog and, and we're very well positioned to continue to drive revenue growth for the year.

Speaker #8: No, it's super, super helpful. Appreciated that. Can I just maybe quickly just kind of double-click on the, on the energy business specifically? Because your backlogs not only up a lot, over year over year, it was saw pretty material uptick sequentially.

Speaker #8: What I find interesting about that is that a lot other companies that we look at have been talking about project delays in the energy sector.

Speaker #8: So what was it about, you know, this, your business this quarter that saw like a material uptick? Is it on the nuclear side? Just any, any color around that would be helpful.

Speaker #9: Within energy, most of the growth is, is coming in nuclear, is, is we've talked . a lot of what we're ing in that space, and it, you know, the bulk of the growth is coming in refurbishment activities, so primarily around candy reactors.

Speaker #9: and, and we've, we've seen, a very strong demand environment in that space and, and, continue to see a, a good outlook there. in terms of other areas, as, as Andrew talked in the SMR space and in fuel handling, that's a smaller part of our business today.

Speaker #9: And we've ked about, I mean, our, our view on the SMR market is, a lot of this is in the development phase today. And, and represents an exciting opportunity, but more of a future opportunity the business.

Speaker #8: Great, thank ou.

Speaker #7: And your next question comes from the line of Maxim Stisha with National Bank Financial. Maxim, please go head.

Speaker #11: Hi, good morning, entlemen.

Speaker #9: Morning.

Speaker #11: And, and Andrew, obviously, you know, all, all, all the best in the future, endeavors. It's, it's been a asure. Congrats.

Speaker #10: Joe, it was ual.

Speaker #11: Oh, wonderful. so maybe the first question I was wondering if it's possible to get a bit of an update on, the integration process and, some of the cross-selling opportunity ABM kind , acceptance on the part of the VDT High Dolph.

Speaker #11: that would be super helpful. Thank you so much.

Speaker #10: Yeah, absolutely. And I'll start with a bit of headline on this. Look, our funnel continues to grow here. And, and we, we see strong opportunity and, and, you know, there, there is traditional with, with, you know, ATS, life sciences systems working with, with, with biodot.

Speaker #10: As well as a VDT and High Dolph bringing solution sets to their markets. And so, you know, we, we did have some, some awards within the quarter, but, but more future view is, is the funnel continues to be healthy and, and the addition of High Dolph has certainly been a, a, a welcome addition for, for the ability to bring more to the lab space and, and, and really aligned with a VDT and as well as, one of the business units in SP.

Speaker #10: our Genevac business. And so exciting future and, and see this as an area that, that we as, as, as ATS can bring higher value to our ustomers.

Speaker #11: Okay, that's super helpful feedback. And then. Sorry, go ahead.

Speaker #9: Sorry, just on the overall integration progress, across all three, going very well. very much in line with our expectations. ABM deployments, and, and uptake has been very strong in all three businesses.

Speaker #9: some of cost synergies, as it relates to, you know, cost structure improvements, supply chain integration, we're very pleased with the process across, across all three assets.

Speaker #11: Okay, that's good hear. And, and, Andrew or Ryan, I, I guess, your, comment around some of the research, funding being under pressure in the US right now, correct me if I'm wrong, this represents less than, kind of like single digit, exposure for the, life sciences space, but can you just please clarify that?

Speaker #9: That's correct, Max, it, it's, it's a low single digit percentage of our business that is in that space. And, and so we have seen impact, but as, as I ink Andrew said in his prepared remarks, not a material impact to our overall business or overall life sciences business.

Speaker #11: Okay, okay, good to hear. And then just in terms the, the margin profile, I, I think in the past you've mentioned that life sciences typically has a higher, gross margin.

Speaker #11: I, I guess as the, product makes a shifting right now, I mean, we have less transportation, more life sciences, food, et cetera. How should we think the progression, on, on margin, on going for a basis?

Speaker #11: And I, I don't ow if you can, you know, talk about kind of like short term versus medium term, but, any color would be, would be helpful.

Speaker #11: Thank you.

Speaker #10: Yeah, I, I an, I'll, I'll speak more to the medium term, Max, because we, we will continue to see variability quarter to quarter, and that's largely driven by the project portfolio and what's getting executed and kind driving revenues within a quarter.

Speaker #10: But, but generally speaking, where we're targeting and expect to drive margin expansion is through gross margin. And, and there's some operating leverage we expect as well from where we're ating today, but, and, and some of that is mixed tied to, tied to life sciences.

Speaker #10: Some of is mixed tied to the product and services portfolio. And then, you know, the, the, the improvement initiatives that we're driving around supply chain, labor, productivity, and, and other areas.

Speaker #10: So, most of that does, does, again, show in our gross margin over, over the medium term.

Speaker #11: Okay, and that is, is there anything in the ect pipeline which is kind of, restraining the progress when it es to margins in, in the short term?

Speaker #10: no. No. No, there's, there's nothing unusual missing, nothing to call it.

Speaker #11: Okay, and then maybe just last question. I mean, obviously, with the, the leadership transition, I'm just, curious, around, you know, the, M&A pipeline and what you guys, seeing, in, in the market specifically.

Speaker #11: And I guess you'll, our ability to act if something were to come through, you know, tomorrow. Thanks.

Speaker #10: Yeah, so I, I an, like, like, I think we said in the prepared remarks, it's really business as usual. So, you know, we've got a, a plan for the year.

Speaker #10: The team is, is fully engaged on, on executing to that plan and, and, and as well as our strategy. And that, that strategy is centered on both organic and acquisition-related growth.

Speaker #10: So, M&A activities continue cultivation activities continuing. In terms of, you know, doing a deal or, or getting something, you ow, to over the finish line in, in the short term, that's going to be more governed by our leverage than, than, you ow, than, than support from, from the board or, or, or the ability to act and, and in this interim period.

Speaker #10: and so we've talked about our, our focus is on deleveraging, bringing the, bringing ur leverage to that two to three times range. Now, that doesn't an, we, we can't do, we can't do smaller tuck-in acquisitions in the short term.

Speaker #10: but again, that's from a capital deployment strat standpoint. Our focus is on, on deleveraging.

Speaker #11: Okay, super helpful. Thank you so much, gentlemen.

Speaker #10: Thank ou.

Speaker #7: And your next question comes from the line of Justin Caywood with Staple. Justin, please go ahead.

Speaker #11: Thank you and good ning. Echo, the congrats Andrew and all the success and value creation at ATS.

Speaker #12: So I just, thank you. I,

Speaker #11: on, the, the tariffs, we've seen, several, major US CapEx announcements from, ATS's life sciences, customers. is that translating to any increase, activity with, with ATS, assuming that there's going to be increase, automation over the next, several years, or is it just announcements at this stage?

Speaker #10: So just to understand your question, you're saying ATS announcements or tariff announcements?

Speaker #11: so, so ATS's, life sciences customers, we've seen several, increase, CapEx announcements, in US. presumably to combat potential tariffs. Is that leading to, increased conversations or order activity with, ATS, assuming that there's ing to be, h, related increased automation?

Speaker #8: Yeah, I mean, it, it, if you, so, so, so I'm going to wer your question, but I'm going to walk through it a bit of phases here.

Speaker #8: So, so if you step back, whenever, whenever there's investment, whether it's tariff, onshoring, supply chain de-risking, I mean, we can go down labor and, and, the lack of labor to support, output.

Speaker #8: All that equates to generally a favorable automation, position. And so this would be no different. That said, it has been, I would say, more the anomaly today in the orders that, that customers have cited tariffing, the, the, the reason for an order.

Speaker #8: And, and I would just say, that, that is not the norm. We've aligned to more is that customers are building capability and capacity where they have demand.

Speaker #8: And, and we're seeing customers really align around that. Now, there is a of discussions for future and where they want to build the product.

Speaker #8: And so we are seeing that and we have seen, a few customers pull, their decision into, into the US versus outside of US. But overall, I would say we haven't en a, in, in large part in our investment in, in, in ATS orders today, that said, whenever it's favorable like this, it would generally lead to a higher automation play and a higher position for ATS.

Speaker #11: Understood. That's helpful. And, and then I want to come back, on the balance sheet, very healthy, free cash flow quarter, 140 million. I assume that includes, all of the EV settlement.

Speaker #11: but just, trying to stand, if there was any part of that, that EV, settlement, that was maybe pushed into the next quarter, or, was it fully received?

Speaker #10: that was fully received and that issue is, is closed and behind us.

Speaker #11: It was there any, attacks, portion of, of that payment, because it was announced that at 194 million. so just trying to square that, with the free cash flow on the quarter.

Speaker #10: n-no, no, no tax impact. I mean, there's, there's a future tax benefit, tied to, tied to the, the, well, the write-off, but, but no, there was no, no tax impact to the, to the cash inflow.

Speaker #11: Okay. and then just on the, deleveraging outlook, targeting to get to the two to three times, any indication on, on timing when that could be achieved?

Speaker #10: yeah, our expectation is, is we get there this year. you know, our, our, our gest, opportunity in, in, in addition to continuing to operate profitably in, in, in is really in working capital and, you ow, I talked about this in my prepared remarks, but our goal is maintain working capital below 15%.

Speaker #10: We're above that target right now. And some of that is, is structural, as we've added some acquisitions, which are more product-related businesses, those have put pressure on, on our ability to achieve that target.

Speaker #10: And then there's normal course variability in our, in our larger projects and custom automation business. but we do see opportunity to improve and, and get that below, our target, this year.

Speaker #11: A-and that's, fiscal year, just, just to arify?

Speaker #10: Yes, yes, correct.

Speaker #11: Great. Thank you for taking my questions.

Speaker #10: Thank you.

Speaker #7: And your next question comes from the line of Patrick Bowman with JP Morgan. Patrick, please go ahead.

Speaker #11: Oh, thanks. Andrew, congrats on the, on the at run at ATS. and the opportunity ahead of you at Baxter. best of luck.

Speaker #12: Appreciate it.

Speaker #11: Yeah, yeah, no problem. On, on the, on the margin, dynamics, I know you, were talking, a little bit longer term, Ryan. if, if, if sales are down a little bit sequentially, you know, in, in the second quarter, do you think you can still drive you know, sequential margin, expansion or do you think, you know, margins come down a little bit in the second quarter and then resume that expansion in the second half?

Speaker #11: Because think previously I, we expected kind of, progression sequentially through the year. I just want to make sure everything's kind of lined up the way you guys are thinking about it.

Speaker #12: Yeah, Patrick. So our, our outlook for the year has not changed and that's, both in terms of, of growth for the year and margin expansion for the year.

Speaker #12: I, I, I do want to reiterate that, I mean, first, don't expect we're going to see big jumps in our margins sequentially. And there is going to continue to be variability.

Speaker #12: It, you ow, it's, it's not necessarily a linear ramp. but we do expect, you know, margin expansion for the year. And I, I talked through earlier a ittle bit, on, on the initiatives that, that we have in place tied to material productivity, labor, pricing, other areas of efficiency.

Speaker #12: And so, I think what we saw this quarter is, is probably a reasonable, run rate in terms of ongoing improvement. but not necessarily linear.

Speaker #11: Okay, that makes sense. can you talk a little bit about the food and beverage CapEx outlook in North America? I think you have a decent view there with Paxium.

Speaker #11: just curious what you're seeing from customers in terms of their investment plans. In that specific end market.

Speaker #12: you know, absolutely. So we've continued to see this market, not only be stable, but, but, but additional opportunities in areas where we've invested in technology and innovation.

Speaker #12: And whether it's Paxium, or, or, our business with CFT, or, or even, Raytech in, in optical inspection. We've continued to, to see this be, you know, supportive around how we enable customers to, to bring food to market and, and, and meet the requirements that's eded for the end consumer.

Speaker #12: And so, pleased with, with the performance year to date and really look forward to seeing this business continue to expand.

Speaker #11: Okay. thank you. And then lastly, just on the portfolio, is there anything in the portfolio that at this stage you'd consider to be non-core?

Speaker #11: and you can maybe look for opportunities to kind of, you know, wind down over time or divest as you, as ou replace it with other, you know, acquired assets?

Speaker #12: S-so I, I, I mean, the short answer is no. but, you know, we've talked about, in the past, our, our approach on, on capital deployment and, and value creation and that includes, looking at ongoing investments in, in the portfolio as well.

Speaker #12: And so, that, that view of the portfolio and, and, you know, ongoing strategy work, that's something we refresh every year. And, and so that's going to continue to be how we approach it.

Speaker #12: And, you ow, view with a critical eye, where we're generating value and, and, and what makes sense, in terms of, in terms of, you know, being part of ATS.

Speaker #11: Okay, makes a ton of sense. Tha-thanks a lot for the time.

Speaker #7: Again, if you would like to ask a estion, simply press star followed by the number one on your telephone keypad. And your next question comes from the line of Sherilyn Radborn with TD Cowan.

Speaker #7: Sherilyn, please go head.

Speaker #13: Hi, good ning. This is actually Patrick Sullivan on the line for Sherilyn. thank you for taking the questions. And congrats to Andrew on, the next opportunity for you.

Speaker #13: I appreciated the color, on what you're watching in the lab space. I just wanted to arify, would that be more tied to, you know, consumable side of, things in the portfolio?

Speaker #13: And I just asked it because, you know, there's a recent White House action plan that outlined an, an interest in heavily investing in automated, labs across private regulatory and academic sector.

Speaker #13: So I wanted to know kind what capabilities, ATS might have in lab automation, and then kind of our side away from the, the consumable lab equipment stuff.

Speaker #10: Yeah, so, so maybe I'll start here. so we, we are in, I would say, a bit of, bit of both around this. And, and if you look, you know, and, , and not to get too specific, but I'm going to walk through the businesses a little bit.

Speaker #10: When you ok at biodot, that's a bit more in the lab automation side. And they support that area of business. And, and we do view that, that, that it is in line with, with the ability to, to, to help labs as they look at automation, for the future.

Speaker #10: when you then go to a VDT, they're going have some impact on, the research side but they do have, as well, support for enabling their portion of the process for if you do want to automate or bring a higher level of technology and insight into monitoring the lab space.

Speaker #10: And, and we all know where they are in that, in that position. that is also a consumable area. and then, and then, when we look at, SP with, with their business, it is lab LIO.

Speaker #10: again, that is one around, it, it certainly can support the initiative around automation but, but it is more around if you're going to run multiple drugs as a trial, they would then do the LIO process for that with the Genevac business.

Speaker #10: And then lastly, Hyde Office is, is more the, the supporting overall lab, laboratory space in, in, what they want to do, whether it's during mixing or, part of their process within, within the lab area.

Speaker #10: So overall, I would say within research, we're going to see some impact, but it's relatively small within ATS. If you then go to the initiative around automation, it is something that, that is in line with ATS.

Speaker #10: but, but it is still relatively small but overall business.

Speaker #13: Okay, great. Thank you. and then I guess with one more, so can you just elaborate on the multiplex system that you briefly highlighted in the opening remarks?

Speaker #13: You know, what kind of applications is that used for? Is, is that used in the candy-related work that you guys, do? Is that something that's in, more in the, the, the, you know, innovation space side of things right ?

Speaker #10: Yeah, so, so, the multiplex, you know, very excited this, this, this patent-protected, business. it is around the decommissioning area of the business. And, and decommissioning is, is used in the traditional nuclear reactors.

Speaker #10: It is a no more course process. And they go through decommissioning and then often a, a, they'll, 'll, they'll recommission a new, a new nuclear reactor.

Speaker #10: This allows them to be more efficient. a, a more space-conscious and, and, and it is an area that, that truly helps in the process around decommissioning.

Speaker #10: And we have won awards and we do have a funnel that's built around this business and this market.

Speaker #13: Excellent. Thank you.

Speaker #7: And your next question comes from the line of Michael Glenn with Raymond James. Michael, please go head.

Speaker #14: Hey, good ning. This is actually Fred Gattelli on for Michael Glenn. And, congrats Andrew. So let me start with life sciences. regarding the order injector business, how diversified is the business outside of GLP-1 applications?

Speaker #14: Is the book heavily concentrated in GLP-1 or are there other, emerging or growing categories for auto injectors?

Speaker #10: Yeah, so, so good ning, Fred. The majority is, the majority of our auto injector business, is, is tied to GLP-1 in terms diversification. we have 10 active customers in that space today.

Speaker #10: so it is fairly well diversified. you know, and, and the other, the other area I would point out is while a lot of these, a lot of the demand for these drugs is being driven by, weight loss and obesity treatments, in, in addition to, diabetes treatment, there's, there's a lot of research and work being done by these drug manufacturers around new applications.

Speaker #10: So, things like cardiovascular health, neurological disorders. So it, it's, it's, it's a fast-growing area and, and it's an area we continue to see a lot of opportunity in.

Speaker #13: Great. And then on life science, further, so this year slowed from the much higher pace in fiscal '25. Can you just indicate what categories of products saw that, slower pace of bookings?

Speaker #10: sorry, you're asking about the quarter self?

Speaker #13: Correct.

Speaker #10: Yeah, I mean, like I said, it, it's, it's, you know, th-there's, there's some larger programs, in the, in the prior year first quarter. some were tied to, wearables in the space.

Speaker #10: I ink, the auto injector, it was still a piece of, of Q1 bookings or, significant piece, but, but was lower year over year. I mean, it, it really is, as we talked about, kind of normal course variability with, just timing of some larger programs.

Speaker #13: All right. And then, h, last one for me, just on the, the timeline associated with bringing the working capital back into the 15% range.

Speaker #13: can you talk about that and then in addition, maybe highlight where working capital remains elevated right ? What segments and product lines?

Speaker #10: Yeah, I, I, I talked a little about this. I, I think our, our, our expectation is to get there for, the end of the year.

Speaker #10: And, you know, it, it's really in two areas. Part of it is, is kind of the structural change I talked about with adding more product to this businesses.

Speaker #10: and, and there's the opportunity is primarily in inventory terms, a little bit on, on payment terms in, the order to cash cycle. in the custom automation business, that's more of a timing.

Speaker #10: And, and, you ow, we're going to see that variability quarter to quarter. That's normal course for us. But overall, the opportunity there is, is primarily in payment terms and that, that order to cash cycle.

Speaker #13: Thank ou.

Speaker #10: You're come.

Speaker #7: There's no further question at this time. I will now turn the call over to Andrew Heider for closing remarks. Andrew?

Speaker #15: Yeah, th-thank you, operator. And I invite you all to participate in our annual shareholders meeting, which we held virtually today at 10:30 AM Eastern Time.

Speaker #15: Details are certainly in the management info circular. Lastly, thank you for joining us. Stay safe and goodbye for now.