ATS Corporation Aktie

Hello. Welcome to the ATS Corporation Fourth Quarter Conference Call and Webcast. This call is being recorded on May 28, 2026, at 8:30 a.m. Eastern Time. [Operator Instructions] I'd now like to turn the call over to David Ocampo, Head of Investor Relations at ATS.

Thank you, operator, and good morning, everyone. On the call today are Doug Wright, Chief Executive Officer; and Anne Cybulski, Interim 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. 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 in Slide 3 of the slide deck. Now it's my pleasure to turn the call over to Doug.

Thank you, David, and good morning, everyone. Today, ATS reported fourth quarter and annual results for fiscal 2026. For the full year, revenue and adjusted earnings from operations grew by approximately 11%, reflecting solid execution across the platform as our teams delivered innovative solutions to our global customer base. Since I joined in January, I've spent time with our business leaders and teams, which has continued to sharpen my conviction about what makes ATS distinctive.

Regardless of the end market, what consistently stands out is how focused our people are on our customers and how genuinely committed they are to innovating so that our businesses excel. This starts with our ability to engineer and deliver in markets of consequence where the depth of our expertise and the precision of our execution are what customers depend on. A good example is how we are evolving our digital twin offering, moving beyond individual project execution to support customers on a continuous basis. My priority now is translating these capabilities into stronger financial performance. We see a clear path to margin improvement and free cash flow generation through disciplined execution, a greater mix of aftermarket revenue, sharper commercial acumen, innovation and improved utilization of our asset base. Consistent with these priorities, we are taking several actions to better position the portfolio. Our businesses previously involved in transportation are being consolidated, and we are refocusing their capacity to other areas.

In particular, we are moving away from large-scale automotive projects and repositioning the related capabilities into specialized applications where our differentiation creates greater value and the return profile is more attractive. As an example, we are partnering with a customer on novel technology to break down end-of-life tires and recover reusable byproducts, bringing our engineering expertise, digital tools and life cycle support to address a complex environmental challenge. We've also advanced the integration of our aftermarket businesses directly into our operating units.

This gives each business ownership of the full equipment life cycle and is a key lever in improving both margins and the predictability of our revenue. Across the business, we continue to evaluate our portfolio based on strategic focus areas and market dynamics. Any further actions will be aligned to our goals of continuing to grow the business with improved margin performance and cash flow efficiency.

Now shifting over to the results and outlook. Q4 adjusted revenues were up more than 3% versus last year, while order bookings were down 18%, reflecting the presence of several large enterprise orders in the prior period. Of note, excluding transportation, our 3-year CAGR on adjusted revenues and order bookings is approximately 12%. This performance again reinforces to me the strength of our chosen markets and the opportunity available to us over the longer term as we execute on our plans going forward. On profitability, Q4 adjusted earnings from operations were in line with our expectations, driven by execution against our backlog.

Now turning to outlook. We ended fiscal '26 with an order backlog of approximately $2 billion, providing good revenue visibility. In Life Sciences, demand remains strong with a healthy backlog and a diversified funnel against a range of applications. Our Radiopharma business continues to build momentum and remains a key growth driver, supported by growing customer investment across the value chain. Demand is driven by the expanding use of targeted therapies as adoption broadens across treatment settings and cancer types. As isotope supply and production capacity expand, customers increasingly require specialized infrastructure to support complex high-value programs at scale.

As an example of our ability to innovate to meet this demand, we recently introduced Flex-Line, our sterile pharmaceutical production platform, which integrates key manufacturing steps into a single solution to help customers accelerate market entry and reduce process complexity. Entering fiscal '27, our Life Sciences funnel is broader, extending beyond any single program type into areas such as mail-order pharmacy, automated visual inspection and lab automation. On GLP-1 auto-injector equipment, we remain engaged on active programs and to continue to support customers as production requirements and delivery formats evolve. In Food and Beverage, we have a strong funnel across our core processing markets, including tomato and fresh fruit applications. We are focused on expanding into adjacent packaging and produce categories, broadening the revenue base and building resilience against the timing of customer capital spending.

In Energy, backlog increased approximately 40% year-on-year, driven particularly by nuclear, including refurbishment, life extension and new build programs. The pipeline is strong and diversified across program stages and reactor technologies. Our work on nuclear refurbishment and life-extension programs continues to progress with service opportunities expected to build as these programs advance. Alongside this space, we remain actively engaged with several small modular reactor developers across fuel systems, fuel handling, modular fabrication and waste management.

Within Consumer Products, we continue to see orders across warehouse automation and packaging applications. Funnel activity remains stable, supported by customers' ongoing focus on automation, efficiency and fulfillment capabilities. On capital allocation, with leverage now within our target range, our near-term focus is on deploying capital within our framework. As our financial flexibility increases, we expect to have the capacity to pursue larger transactions. We have a funnel in our chosen end markets, and we are in a position to act with conviction when the right opportunity arises.

In evaluating potential acquisitions, we first focus on the industrial logic. In particular, we look for businesses that can enhance our margin profile, positively affect our aftermarket and service mix and where relevant, strengthen our technical capabilities in the markets we serve. This also includes considering how an opportunity may allow us to apply our engineering and automation expertise across adjacent applications and improve performance through disciplined execution.

Our objective is to deploy capital toward opportunities that enhance long-term cash generation and support disciplined, sustainable value creation for our shareholders. In summary, we entered fiscal '27 with strong positions in our core end markets and a clear strategic focus. I'm encouraged by the alignment and accountability across the organization and by the strength of our business leaders. We begin fiscal '27 with a solid backlog and good funnel visibility. With the actions taken and underway, ATS is a more focused company, and we are positioned to translate that into higher margins, stronger cash generation and long-term value creation.

Now I will turn the call over to Anne for her financial report. Anne, over to you.

Thank you, Doug, and good morning, everyone. Before reviewing our results, I'll address the reorganization activities that we disclosed today. After a thorough review of current and expected market conditions and given our sharp focus on capital efficiency and margin expansion, we decided to reposition our transportation operations, which includes consolidating divisions and rationalizing our operational footprint. These changes are aligned with our margin expansion focus in fiscal '27 while removing dilutive revenues of approximately $50 million. Our approach allows us to retain unique capabilities, technologies and domain expertise and redeploy them into more attractive niche industrial applications. As a result, I expect that in the coming quarters, we will no longer report transportation as a separate market vertical.

In the fourth quarter of fiscal '26, we recorded $28.3 million of costs related to these reorganization activities, primarily from closing out legacy projects. We expect restructuring charges of approximately $5 million in the first quarter as we complete the operational consolidation. During fiscal '27, we also expect to finalize the sale of 3 facilities currently held for sale and plan to use the proceeds to fund cash costs related to the reorganization activities. In the fourth quarter, we recorded $9.8 million of costs related to our previously announced initiative to embed our services operations directly into our business units, including project closure costs and other related non-cash adjustments.

In addition to the Q1 cost of completing the transportation repositioning, we also expect $5 million to $10 million of restructuring costs in other areas of the business. Throughout fiscal '27, as we continue to pragmatically assess our strategic positions and market potential across our portfolio, there will likely be further opportunities for rationalization. That said, the fundamentals of the business remains strong, and our teams are equipped with the tools they need to drive both operational excellence and disciplined strategic execution to support our performance expectations.

With that context, I'll turn to our operating results for the quarter. Order bookings were $704 million, down 18.4% compared to Q4 last year, which included large project awards in consumer products. Our trailing 12-month book-to-bill ratio at the end of Q4 was 0.99:1, reflecting execution against a strong backlog as previously secured orders converted to revenues. Our funnel remains healthy across our chosen end markets.

Adjusted revenues for the fourth quarter were $744 million, up 3.2% compared to last year, including organic growth of 1.5%, along with a 1.7% benefit from foreign exchange translation. Of note, on a full year basis, organic growth was 6% and excluding transportation, was nearly 14%, reflecting strong performance relative to the market.

Moving to earnings. Fourth quarter adjusted earnings from operations were $76.8 million, a 3.4% increase from Q4 last year, primarily on higher adjusted revenues, partially offset by increased SG&A costs. Gross margin for Q4 was 29.4% of adjusted revenues, a 36 basis point increase on Q4 last year, reflecting a higher contribution from higher-margin services and spare parts.

On SG&A, excluding adjusting items, expenses in the fourth quarter totaled $139.5 million, a $5.6 million increase over the prior year, mainly due to foreign exchange translation, along with higher professional fees. During the quarter, we incurred $15.2 million of restructuring costs in addition to the transportation and services reorganization costs that I discussed earlier. Excluding the mark-to-market impact related to changes in our share price, stock-based compensation expense was $2.4 million in Q4. Going forward, we expect the run rate to normalize to approximately $5 million per quarter. Adjusted earnings per share were $0.36 for the quarter.

Moving to our outlook. We ended the quarter with an order backlog of approximately $2 billion, with Life Sciences at $1.1 billion or 55% of backlog. Energy was the year's strongest growth market with order backlog up 40% versus Q4 last year. Our order backlog across Food and Beverage, Energy and Life Sciences, markets that tend to be more highly regulated, made up nearly 80% of the total order backlog heading into fiscal '27. Based on the expected conversion of this order backlog and new orders booked and billed within the period, Q1 revenues are expected to be in the range of $700 million to $740 million. As a reminder, this assessment is updated every quarter, taking into account revenue expectations from current order backlog and from new orders booked and billed within the quarter.

For fiscal '27, we expect modest revenue growth. Two things are worth calling out. As noted, transportation revenues are expected to step down, reflecting our decision to move away from large-scale automotive work. Within Life Sciences, we enter fiscal '27 with a more normalized backlog, having worked through our strong bookings from fiscal '25. This does not reflect a change in the underlying Life Sciences demand picture or our expectations to outperform our chosen markets over time.

On adjusted earnings from operations margins, we expect to exit fiscal '27 with 50 to 75 basis points of improvement over fiscal '26 on a full year basis, supported by our reorganization actions and continued operating discipline. This outlook includes the reinvestment of a portion of the related savings in targeted growth areas such as nuclear and radiopharma. As we execute on our plans, our path to margin expansion will not be linear. That said, with the actions we are taking, along with disciplined execution of the ABM across the portfolio and focus on aftermarket services, we are confident in our path forward.

Longer term, our adjusted earnings from operations margin target remains 15%. The actions we have taken this past year, along with the priorities we outlined today are deliberate steps on that path. Disciplined asset efficiency is central to that journey as we improve returns on invested capital and focus on delivering long-term shareholder value. While the macro environment remains fluid amid geopolitical and trade uncertainty, we can again confirm that previously announced tariffs have not had a material impact across our regions. Most exports from Canada to the U.S. continue to fall under USMCA coverage.

With respect to revised Section 232 tariffs, the impact depends on specific customer programs and the nature of our work and at this time, is not expected to be significant. Our global decentralized operating model positions ATS to adapt effectively and support customers wherever capital is being invested. Moving to the balance sheet. In Q4, cash flows from operating activities were $150 (sic) [ 149.5 ] million. Our non-cash working capital as a percentage of revenues was 12.1%, marking a third consecutive quarter of improvement. Sequential improvement from Q3 reflected the balance sheet impacts of the transportation reorganization along with focused discipline on working capital.

This ratio can be influenced by billing and collection activity around period ends, but the improvement is meaningful. We remain focused on driving efficient cash generation through disciplined working capital management processes and more broadly, overall asset efficiency. During the quarter, we invested $25.4 million in CapEx and intangible assets to support innovation and further strengthen our capabilities, bringing the full year total to $76.7 million. For fiscal '27, we expect our CapEx and intangible investment to be between $70 million and $90 million. On leverage, our net debt to adjusted EBITDA ratio ended Q4 at 2.8x, reflecting continued progress and marking a fourth consecutive quarter of improvement.

I'll remind you that in the event a capital deployment opportunity arises that aligns with our strict standards for shareholder value creation, we may temporarily operate above our range of 2 to 3x. In such cases, we will ensure there is a well-defined path to return to our targeted range. In summary, fourth quarter results were in line with our expectations, supported by a strong order backlog and diversified end market exposure. I am proud of and thankful to our global finance organization and our operations leaders and teams for their hard work and consistent execution across ATS during our leadership transition.

Together, their efforts provide a stronger foundation and increased financial flexibility as we head into fiscal '27. We made meaningful progress throughout the year. And in Doug's first quarter as CEO, we've achieved a lot. Both working capital and leverage are within our targeted levels. Our reorganization actions and operating priorities position us to deliver improving margins and stronger cash generation over time, supporting disciplined long-term shareholder value creation. Now we will open the call to questions from our analysts. Operator, could you please provide instructions? Thank you.

[Operator Instructions] Your first question comes from Michael Glen with Raymond James.

Maybe just to start with, could you give us some sense about how to think about bookings in fiscal '27 across the segments, specifically Life Sciences, how to think about bookings and backlog there?

Michael, I'll start and then Doug can chime in if you'd like. So from a bookings perspective, we've characterized our Life Sciences funnel and more broadly, the remaining market verticals. Life Sciences continues to remain strong. We have some areas of continued growth including in the radiopharma space, and we expect that to continue. There are some, what I would call, moderations in timing in certain submarkets within Life Sciences, but we're pleased with the level of diversification we're seeing within that space. And we'll continue to execute on our backlog as well as focus on those growth areas throughout the year.

And do you think that backlog in the situation where we are seeing the moderation in the GLP-1 portion of the backlog, should we still think about growth in Life Science backlog over the coming year?

That's our goal. And so of course, we came into fiscal '26 with a very strong backlog as a result of some of those GLP -- orders as you -- GLP-1 orders, as you noted. We've continued to work through that backlog. There's still some of that, that we have to deliver on. But in parallel, we've also seen an uptick in our radiopharma backlog. And there's other areas of focus within that portfolio that will continue to drive to our expectation to exit the year with growth.

Okay. And then just one surrounding M&A. I'm just trying to balance the commentary regarding you are doing some restructuring activity and then there's also M&A. I'm just trying to balance the 2 of those. Should we think about -- could we see M&A while some of this restructuring activity is ongoing? Or would that be completed before we see M&A? Just trying to get a sense of some of the timing.

So Michael, this is Doug. The answer is they're really independent swim lanes for us. I mean we look at restructuring as a capital deployment exercise, just like M&A. So from that context in terms of the ROI case that we look at, it's similar. But the restructuring is related to markets that we don't believe fit our long-term profile. And M&A is really about sort of future positioning either technology, aftermarket mix or customer growth or regional growth. So we really will do both of those simultaneously. They're not mutually exclusive.

Your next question comes from Max Sytchev with National Bank.

The first question I had, maybe for Doug. In terms of the capital efficiency language, can you maybe talk about the biggest levers that you can see contributing to those improving metrics?

Yes. Well, I think it's broadly about, one, our margin expansion journey. So obviously, that's a big part of the return on investment equation. But within the asset base, I think the company has a very good track record, and we've demonstrated good results in working capital management. And now we're balancing that with sort of reviewing the, let's say, the asset efficiency that's not working capital related. So that would be things like return on fixed assets, how we look at our ROI of internal investments. So we really will be driving both of those simultaneously for an improved capital efficiency result.

Okay. That's super helpful. And another question I had was on the commentary around the lab equipment space and go-to-market strategy, et cetera. I was wondering, do you mind maybe talking about the trends, the industry trends that are impacting that business kind of in general versus maybe some of the sort of ATS specifics. I'm just trying to see if there is a bit of a dislocation from that perspective or it's more market related.

It's primarily market forces. We operate in a lot of specialized sort of high consequence markets. And the nature of that is that when there's a regulatory shift or a budgeting priority change by, let's say, national labs or specific large customers, there's always a bit of risk there in those businesses in the short term. But over the long-term horizon, we feel very comfortable with our positioning in the lab equipment space. And it's a continued area of focus for our Life Sciences team, both as a vehicle for margin expansion as well as aftermarket development. And I think you'll continue to see us focusing on the lab equipment segment going forward.

Okay. And one quick question just in terms of M&A. I was wondering if -- in terms of the nuclear capability, if you think deepening sort of the supply chain expertise there could be potentially also a vertical of capital deployment or if you're looking elsewhere?

So we are very excited about the potential in the nuclear segment, both in the traditional CANDU reactors where we have a very strong existing legacy position as well as in the SMR categories where we're involved with a number of customers.

And should there be an opportunity for us to deploy capital in that space, it would certainly be an area that we would consider very strongly, particularly as it relates to extending our technology position or our service position and in some cases, looking at the geographic profiles because nuclear is quite often more of a national priority in different places. So if you're going to be in the U.S. market or the U.K. market, as an example, you have to have position there. So it would absolutely be an area that will get equal treatment in the M&A discussion across the portfolio.

Your next question comes from Cherilyn Radbourne with TD Cowen.

Could you give us a sense of where recurring revenues finished as a percentage of fiscal 2026 revenue and some of the initiatives underway to move that higher in fiscal 2027 and over time?

Sure, Cherilyn. I can start there and then Doug can add on. So what's sort of finished in range of our expectations, if I think about it in terms of around 1/3 of our business falls into what we would categorize as recurring. And that's where we can -- there's faster turn businesses like our products businesses as well as aftermarket and spares, those types of things. Over time, given that we know that, that part of the portfolio is -- tends to be margin accretive, our goal would be to bump that percentage up and to make it a more meaningful part of the portfolio to support the growth and margin expansion trajectory.

Cherilyn, in terms of the initiatives that drive it, I mean, I think there's really -- I classify it into 2 areas. One is around sort of focus and intention within our general management team. So everyone that runs a business at ATS has a service strategy. And some of them are strong. Some of them are aspiring to get stronger. And by having that focus and ownership, which through our organizational change that we announced last cycle, gives them all sort of what I would call a life-cycle ownership of their customer. So part of it is that. And there's also kind of to support that, there are a number of ABM tools that we have and continue to deploy to help our teams understand how to commercialize services.

Services business have a little bit of a different cadence than systems businesses. So they require different types of contracts and quotations and a lot of the underworkings of running a business. So there's a lot of tools that we're deploying that are enabling that service. In fact, one of our key President's Kaizen events that we did in the late winter was specifically related to service growth in one of our large units.

And that's something that a lot of our teams are aggressively working on. The second area is I believe strongly that our digital investments around things like digital twin, remote diagnostics, machine intelligence and the digital frontier that we're very focused on right now are really also a part of a broad service construct and I think you'll see ATS in the future talking more about physical AI and automation intelligence as key drivers to our recurring revenue stack.

Okay. That's helpful. Can you speak to how much of the 50 to 75 bps of expected margin improvement in fiscal '27 is related primarily to the transportation reorganization? And does that suggest that there might be upside if a lot of it is coming from transportation?

So yes, I can take that one, Cherilyn. So I mean, what I think you saw in our disclosures today is an example of how we're thinking of managing the business going forward and the overall portfolio. And the goal is to actively manage the businesses and improve our focus on growth and margin expansion over time. And in this case, we have a multi-pronged plan to support that initial growth. And there's multiple levers that we're using to drive margin improvement, offset by some of the investments in these key areas that we know that we need to make to support the longer-term growth, including in innovation.

So while some of the 50 to 75 bps is part of the transportation reorg more broadly, we expect to continue to pull those other levers, including services being integrated into the businesses and more focus on operational improvements, including through our ABM. The ABM is -- has a powerful set of tools. And what's important just to tag that on to Doug's commentary around focus and intention is really making sure that our business leaders are positioned to use the right tools in their businesses at the right time. So that's a bit of a long answer, but it's really a growth trajectory that we're trying to drive. And with the actions we took today with transportation, that's an example of how we're intending to manage the portfolio.

Your next question comes from Jonathan Goldman with Scotiabank.

Maybe just a housekeeping one to start. I know it's a small item, but the full year revenue guidepost for modest growth, is that gross or net of the transportation headwind?

That's gross.

Okay. Perfect. And then how should we think about or maybe frame up that growth rate, the modest growth relative to your end markets?

Sorry, Jonathan, let me just make sure that I clarify your previous question. So the modest growth is inclusive of the step down in transportation revenues, just so I'm clear. And sorry, can you ask your second question again?

Yes. So like the modest growth guide for this year, how does that frame up or correspond to the growth rates of your end markets?

Yes. So the way that I'm thinking about it is really, the -- call it, moderation relative to our previous performance is primarily timing related. So outside of that, that step down in transportation, our fiscal '27 guide is really about timing, program normalization, including in Life Sciences as opposed to any change in our long-term view of the markets we serve. And just to reiterate something that we included in the disclosures, our goal remains to outpace the broader automation markets that we participate in. And we feel that we're supported by good tailwinds in the markets that we serve.

And that timing kind of reset, do you have visibility on when those programs actually will flow through?

So Jonathan, I think the way I would -- the way we understand that is through our view of our pipeline, which is really a reflection of where our customers are budgeting and planning their work. So across a majority of ATS' segments, those are strong pipelines and really -- and more diverse, particularly in Life Sciences. We've talked about this before that we've really spent a lot of time over the last year diversifying our pipeline in things like radiopharma, mail-order pharma, other med devices to diversify that sort of pipeline where we sometimes have lumpiness in it based on different variables with things like GLP-1.

So I think we have a very strong view of our pipeline. I would not characterize that as modest. But clearly, when we're dealing with the scale of the systems that we're deploying, there's always a certain amount of lumpiness in the execution. So we'll have a little bit of sort of volatility in the quarters for revenue, but it's not an indication that our markets are softening at all. In fact, I would say that there's really no real drama in our -- in any of our end markets at this stage. But there is a bit of modestness in the revenue in the near term simply because of the timing of various large orders.

Okay. Got it. That's useful color. And I guess maybe one more on the working cap, really strong performance this quarter, working cap efficiency, 12%, I think, below your target of 15%. I did notice a large decline in accounts receivable. I just want to know if there's anything unusual in the quarter? And how should we think about the investment rate this year?

So we're pretty pleased with the progress we've made there. The -- as I said in my prepared remarks, sometimes we can get timing differences, especially in the custom integration part of the business based on when payments are received as we work through our billing cycle and in fact, our execution on these programs. The goal is 15% or less over time. And especially with some of the product businesses that we've brought on, we -- they tend to carry a higher working capital need. So that level of performance in the quarter and going forward to stay below 15% is our expectation, and it's one that takes ongoing discipline and attention by our teams. So no change to the goal, Jonathan.

Your next question comes from Joe Ritchie with Goldman Sachs.

This is Aanvi on for Joe. I just wanted to follow up on what Jonathan was also asking about the 2027 guide. So I wanted to spend a minute to understand the sequential decline in backlog in the context of still a positive book-to-bill. So specifically, how does this inform your 2027 revenue outlook? And if you could maybe particularly specify your comments around the consumer products market and energy because we realize those have been really strong for now 4 to 5 quarters.

Yes. So one of the -- obviously, we kind of -- we track our backlog. We track our funnels, as Doug said, the strength of our funnels, we feel good about. And so coming into this year, we had a healthy backlog that we were working off of and continue to drive the growth going forward. In Nuclear or Energy, which is primarily nuclear work, that was our strongest growth quarter -- strongest growth end market vertical in the year.

It's a relatively smaller portion of our business, but it's one that's strategically important to us. Some of that, we may see some timing factors in the order booking cycle, but we're working off of a strong backlog for that part of the business as we work through the refurbishment work that the team is executing on. And over time, we'll continue to deliver services and build out our SMR relationships and capabilities.

So that's a longer-term play for us, but one that we're excited about. Consumer Products, again, it's -- there's a number of different things in that backlog. And yes, we have seen good performance in that space. We characterize that as something that does tend to be a little bit more niche or subject to end consumer buying decisions. So -- but we've been happy with the performance of that part of the business during the year coming from a few different parts of our portfolio actually.

Got it. That's helpful. And maybe just my follow-up on the cash flow. So you -- it was good to see that pop in free cash flow this quarter, and now you've had 6 quarters of positive growth on that front. So I recognize that it has been an overhang on the stock previously. If you could touch upon the main drivers on that and how we should think of FCF conversion in a normal environment, that would help.

Yes. So Aanvi, our goal is to -- we have a longer-term goal that we stated around free cash flow, but we're happy with the performance in the year. It is an improvement. More predictability and normalization of that in the future is something that we're focused on through the commentary we provided around how do we drive overall capital efficiency and make sure that we're in all of the areas, all of the levers that we have available to us that we're operating efficiently in that regard. So it will continue to be an area of focus for us in terms of how we think about our investment decisions, both at the corporate level, but also within our businesses.

Yes. And I actually think I could only add that working capital is a high priority within our operating rhythm with our businesses. So we look at working capital at the same -- with the same level of intensity we look at gross margin or SG&A percentage in each business as we go through their operating reviews. We incentivize around working capital performance. So it's an intense part of our management system to have our leaders accountable for working capital. It's not a finance function. It's a general management function. It's a commercial leader function. It's a factory leader function.

So it's part of our operating rhythm. It's, I think, a hallmark of -- I know from -- as a lean practitioner that working capital processes are actually a really strong signal for process acumen because it's simply harder to move the needle on working capital than it is on other things because it takes longer, and there's lots of third parties involved, suppliers or customers. So I think it's a real hallmark of ATS' operating performance is working capital. And I think you'll see us continue to be highly focused on that.

[Operator Instructions] Your next question comes from Justin Keywood with Stifel.

As a follow-up to the auto-injector opportunity as it relates to GLP-1, but also other applications, this subsegment was described as being 20% of backlog or revenue of the Life Sciences segment last year. Are we able to get an update of where that is today and expectations in fiscal 2027?

I can speak to the numbers and then Doug can speak to the market, Justin. So we -- there's still auto-injector work in our backlog in the year. It came in where we expected it to be. Obviously, as we had executed on the work, it's come below what we had talked about before, which I think we said was in the -- you said, 20% of LS, Life Sciences backlog and 10% of overall. So it's ticked down below that, but that's sort of normal moderation as we work through the capacity build-out from last year's order bookings. But of course, we've seen some offset from the uptick in our diversified radiopharma bookings from another part of our business. So over time, we still see opportunity in that market. And I'll pass to Doug and he can comment on the market overall.

Yes. I think, Jonathan (sic) [ Justin ] in the long term, we believe that auto-injectors for GLP-1s and other therapies is still a growth market. Obviously, when we -- when customers are making very, very large investment decisions, it comes with a bit of lumpiness in our backlog but the real exciting part of the auto-injector market is actually the science. The number of trials that are underway for other types of products or therapies for cardiovascular, autoimmune and neurological indications.

I think as a provider to the Life Sciences industry, we're real proud of our position in helping bring these therapies to market. And there's obviously -- when we're dealing with science, there's a certain amount of volatility in the approvals of the -- through the clinical trials and the market ramps. But we're pretty confident that auto-injectors are going to be a delivery device for the long term, recognizing that there's a bit of lumpiness, but we think it's long term, going to be a great position for ATS.

That's very helpful. And then on capital allocation, what type of multiples are in the area for the private companies versus public peers that we see are continuing to trend much higher. Is there an ability for ATS to acquire at or below its current multiple?

Well, we certainly pay attention to the multiples that we pay. Obviously, from a value creation standpoint, the math is pretty straightforward. I would say, to answer your question, Justin, we see valuations across the spectrum. There are some opportunities that are -- we can acquire at below our current multiple, and there are others that we aspire to that have a higher multiple. But really, the lens that we use is really can we make the business better, whatever price we pay, we have to make sure we get a return on capital.

And I would say, as we look at our pipeline, I think there's a pretty broad rainbow of valuations that we see. It's very esoteric depending on the scale of the company, what region it's in, the specific mix that it has, how it's performing, et cetera. But we clearly have -- we have a very disciplined way that we look at value creation, and we would not exclude any -- we wouldn't exclude or prioritize any specific assets based exclusively on the multiple arbitrage. We look at it quite holistically. So we would -- we could do it either way.

That's helpful. Is there a target ROIC for potential acquisitions?

Yes, greater than our cost of capital in the 3-plus year horizon. And obviously, internally, as we're comparing alternatives, higher is better than -- even -- the higher is better, but we have a threshold that our investors, our Board holds us accountable for, but it's a pretty traditional and conservative approach to -- we have to exceed our cost of capital. And then if there are competing ideas for our capital, then we obviously pick the one that has the higher one.

This concludes the question-and-answer session. I'll turn the call to Doug Wright, Chief Executive Officer, for closing remarks.

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

This concludes today's conference call. Thank you for joining. You may now disconnect.

Welcome to the ATS Corporation Third Quarter Conference Call and Webcast. This call is being recorded on February 4, 2026, at 8:30 a.m. Eastern Time. [Operator Instructions] I'd now like to turn the call over to David Ocampo, Head of Investor Relations at ATS.

Thank you, operator, and good morning, everyone. On the call today are Doug Wright, Chief Executive Officer; Ryan McLeod, Chief Financial Officer; and Anne Cybulski, Vice President, Corporate Controller. Please note, our remarks today 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 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 in Slide 3 of the slide deck. As many of you know, this is Doug's first conference call as CEO of ATS. We're very pleased to welcome Doug as the new leader of our organization.

With that, it's my pleasure to turn the call over to Doug. Doug, over to you.

Thank you, David, and good morning, everyone. I'm pleased to be with you here today. As you know, I joined ATS in mid-January. While it's still early in my tenure, my focus has been on rapidly translating learning into action, particularly around execution discipline, margin performance and capital allocation. This focus has included spending time with our teams across the organization, building a deeper understanding of the business and our day-to-day operations.

I've also participated in our President's Kaizen Events, listening to and meeting with teams, including at our Cambridge, Ontario head office. What stood out from this year's group of Kaizens was the depth and breadth of our people's technical capabilities and the high-performance nature of our culture anchored by the ATS business model. During my career, I've had the opportunity to serve several organizations in different parts of the world, focusing on automation and diversified industrial technologies.

In bringing an analytical lens rooted in my engineering background and applied in multiple general management and CEO roles, one key takeaway for me is that companies built in a strong lean operating system are better positioned to execute and deliver sustained results. That lean culture is deeply embedded at ATS through the ABM and our focus will only get sharper going forward.

These fundamentals, along with our attractive market positions in growing end markets and our high-quality customer base have reinforced my decision to join this organization. Importantly, that foundation is supported by a deep and capable leadership bench, positioning us well to execute on our strategic priorities. In Q3, we welcomed Sarah Moore as our new Life Sciences Group Executive.

Sarah brings over 20 years of experience across Healthcare Diagnostics, Medical Devices and Life Sciences, along with a deep sector expertise and a strong operations background to lead our presence in one of our key end markets. We also recently appointed Simon Roberts, a long-tenured ATS leader to lead our Packaging & Food Technology business. This brings a leader with strong operational background to this key end market. This appointment coincided with our decision to embed our growing Services business within our operating units.

This change strengthens accountability, improves customer alignment and allows each business to manage services as a recurring margin-enhancing component of their solution offering. Our focus on people and leadership continues to be acknowledged externally. Our U.S. operations recently received a certificate of recognition from the Top Employers Institute, and we were once again named a top employer in the Waterloo area.

From an operating standpoint, I expect we can continue to build on the systems, rigor and accountability required to build long-term value with an emphasis on driving margin expansion across the portfolio. There are meaningful opportunities ahead through increased asset utilization and operating leverage, improved mix and continued advancement of the ATS business model.

That same discipline also guides our capital investment decisions across the portfolio. Our focus remains on allocating capital where it generates attractive risk-adjusted returns and enhances long-term shareholder value. We continue to evaluate opportunities that support growth and profitability, reinforce our core capabilities and remain consistent with our leverage framework.

This approach aligns with ATS' long-term capital allocation strategy and the priorities of our Board. Before I move on, I want to recognize Ryan McLeod for his contributions to ATS. Ryan has played an important role in strengthening ATS' financial foundation and building a strong finance team. We thank him for his leadership and wish him continued success in his new chapter.

Ryan's transition is orderly and planned. Anne Cybulski, a trusted member of our leadership team, will resume as interim CFO and provide the continuity. Our finance organization has been built by Ryan and Anne and is stable and capable. As I continue to deepen my understanding of the business, I'll provide additional perspectives as appropriate.

With that, I'll turn the call over to Ryan to walk through our third quarter performance and outlook.

Thank you, Doug, and good morning, everyone. Before moving to the quarter, I would like to welcome Doug to ATS. Doug brings a proven track record in lean operations and a disciplined approach to capital allocation. I'm confident that under his leadership, ATS will build on its strong foundation and continue to drive value creation for shareholders.

Turning to the quarter. I'll start with a brief overview of our Q3 performance before providing an update on our end markets. Anne will provide additional financial details in her remarks. Starting with our financial value drivers. Order bookings were $821 million, up almost 12% sequentially, supported by activity across multiple end markets. Q3 revenues were $761 million, up almost 17% from Q3 last year, driven primarily by organic growth, including continued momentum in services.

From a profitability standpoint, adjusted earnings from operations in Q3 were $80 million, in line with our expectations. Moving to our outlook. We ended the quarter with an order backlog of approximately $2.1 billion. Our backlog reflects a well-balanced mix across end markets and geographies. Looking ahead, our funnel remains healthy and diversified.

Within Life Sciences, order backlog was $1.1 billion, and revenues for the quarter were $391 million, the second highest in ATS' history. Demand remains constructive in our end markets with ATS' global scale supporting consistent execution in multiple regions and multisite customer programs. Radiopharma led by our Comecer business remains a key growth market supported by strong customer relationships and expanded services footprint and a proven track record.

Our unique capabilities in this market are driving engagement with both established and emerging customers across the development and commercial phases of radiopharmaceutical programs. Within GLP-1 auto-injectors, ATS is executing against a healthy backlog and partnering with customers as they scale production. As device requirements evolve and new therapeutic applications emerge, our teams continue to support customers throughout the product lifecycle.

In Food & Beverage, quarter end order backlog was $203 million. Funnel activity in Food & Beverage remains strong, driven by brand recognition in core processing markets, including tomato and other fresh fruit applications. In Energy, order backlog was a record $296 million, up 87% over Q3 last year, driven by refurbishment and life extension projects for nuclear reactors.

These refurbishment programs are longer cycle in nature and include service components that support both execution and ongoing operational requirements. Alongside refurbishment work, activity continues to progress in new build programs, including both large-scale reactors and SMRs. ATS is engaged early in the project lifecycle, supporting front-end design, engineering and prototyping activities. This work spans fuel production, fuel handling and modular fabrication across multiple reactor technologies.

Within Consumer Products, backlog reached a record $321 million, supported by a large enterprise warehouse packaging automation program that leverages ATS' global manufacturing and aftermarket capabilities. Consumer Products funnel remains steady with ongoing opportunities across warehouse automation and packaging.

In Transportation, the funnel continues to reflect smaller scale opportunities in both commercial and traditional vehicle platforms. In summary, quarter reflects steady execution across our priorities, supported by a strong order backlog and diversified end markets. Before we move to the financial review, I want to take a moment to express my confidence in the depth, capability and professionalism of the organization I've had the privilege to lead. I've worked closely with Anne for many years, and I've seen firsthand the strength of her leadership and that of the broader team.

I'll be moving on knowing the business is in very capable hands, supported by a strong leadership team and an organization deeply committed to operational excellence and disciplined execution. I also want to convey my sincere appreciation to the entire ATS team for their dedication and unwavering commitment to the company's success. With this continuity in place, ATS remains firmly focused on the business and well positioned to deliver long-term value for shareholders. Now I'll turn the call over to Anne. Anne, over to you.

Thank you, Ryan. The entire team and I wish you success in your next chapter. I share your confidence in ATS' experienced leadership and finance teams. I also echo both David's and Ryan's words of welcome to Doug. Doug, we're happy to have you on board. On to our operating results for the quarter. Order bookings were $821 million, down 7% compared to Q3 last year due to the expected lower run rate in Transportation and the inclusion of several larger enterprise bookings in Life Sciences and Food & Beverage last year.

Notably, our trailing 12-month book-to-bill ratio at the end of Q3 remained healthy at 1.06:1. Revenues for the third quarter were $761 million, up 16.7% compared to last year, including organic growth of 12.6%, along with a 4.1% benefit from foreign exchange translation. Of note, revenue increased in all market verticals, except for Transportation as expected. Moving to earnings. Third quarter adjusted earnings from operations were $79.9 million, a 21.6% increase from Q3 last year, primarily on higher revenue volumes.

Gross margin for Q3 was 29.6%, a 111 basis point decrease from last year, mainly due to program mix. Put another way, the decrease is a reflection of timing of programs being executed across our market verticals, which have different gross margin profiles. On SG&A, excluding acquisition-related amortization and transaction costs, expenses in the third quarter totaled $141.9 million, an $11.3 million increase over the prior year, mainly due to foreign exchange translation and, to a lesser extent, increased employee costs and professional fees.

Excluding the mark-to-market impact related to changes in our share price, stock-based compensation expense was $3.1 million in Q3. Earnings per share were $0.48 on an adjusted basis. Moving to our outlook. We ended the quarter with an order backlog of approximately $2.1 billion. Q4 revenues are expected to be in the range of $710 million to $750 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.

During the quarter, we incurred $5.5 million of restructuring costs under the program we disclosed last quarter. As we identified additional opportunities to further realign our cost structure, total costs under the program are now expected to be approximately $20 million. The associated payback period remains unchanged. We do expect some reinvestment in strategic growth areas while also supporting our operating leverage, mainly as we move into fiscal '27.

As we head into the last quarter of this fiscal year, we are pleased with our overall revenue growth of 13.6% on a year-to-date basis, including approximately 8% organic growth. Adjusted earnings from operations are up 14% on a year-to-date basis. ABM discipline and tools will continue to support focused execution across all of our value drivers, supported by the strong lean pedigree amongst our leadership team.

In addition, Doug's experience and focus on lean discipline is clear. While the macro environment remains dynamic amid geopolitical and trade uncertainty, once again, we can confirm that we have not been materially impacted by tariffs across our different geographies. Most of our exports from Canada to the U.S. continue to be covered under the USMCA. Our global decentralized operating model positions ATS well to adapt and serve customers where capital is being deployed.

As a result, we continue to execute, maintain leadership in our key submarkets and advance our growth priorities. Moving to the balance sheet. In Q3, cash flows from operating activities were $115 million. Our noncash working capital as a percentage of revenues was 16.4%, an improvement sequentially and also from Q3 last year. As a result, we moved closer to our targeted working capital value of less than 15% of revenues as we received some larger milestone payments before the end of the quarter.

As always, payment timing can affect this ratio around period ends, but our goal is to continue to sharpen our working capital efficiency and more broadly, overall asset efficiency. During the quarter, we invested $16.6 million in CapEx and intangible assets, supporting innovation and the continued strengthening of our capabilities. For fiscal '26, we expect our CapEx and intangible investment to be between $70 million and $90 million, slightly lower than the previously disclosed range. On leverage, our net debt to adjusted EBITDA ratio was 3x, reflecting continued progress towards the top end of our target range of 2 to 3x as expected and previously disclosed.

In summary, the third quarter results were in line with our expectations, supported by a strong order backlog and diversified end market exposure. Our leadership team and global employee base remain focused on leveraging our opportunities for margin expansion and capital efficiency across our business to drive shareholder value. Now we will open the call to questions from our analysts. Operator, could you please provide instructions. Thank you.

[Operator Instructions] Your first question today comes from the line of Maxim Sytchev from National Bank Financial.

Doug, congratulations on joining the company. And maybe the first question, if I may, for you. Do you mind maybe talking about your maybe 90-day and kind of 6 months priorities in terms of what's going to be on your slate?

Sure. Thanks, Maxim. So while it's early, I do have a few observations that I'll share with the group. First, I believe that we're aligned to strong and growing end markets in the portfolio. And growth has been strong. And while there's a few areas that need some improvement, our focus will be on -- continuing to focus on those core end markets that we're in today. So we're not -- I wouldn't say that my appointment brings any outlook change in terms of the end markets that we're focused on.

Secondly, we recognize that margin expansion potential has not been realized. And I think we have a lot of runway in front of us. And while I'm not ready to establish a new target for the organization yet, our team knows that we need to do better. There's opportunity in both ABM type improvement, which are a great set of tools that we just need to drive harder at executing as well as commercial actions to get more value for the important work that our teams do.

And third, as our leverage ratios are now back into our targeted range, we will deploy capital with a high level of discipline as usual, but with an emphasis on improving our margins, our aftermarket mix and bringing in new technologies that complement our portfolio within our existing end-market framework. So those are some of the key observations I would make today, and you can kind of convert that into what I'm focused on in the early days, both with the executive team, our operating units as well as with our Board. And I really remain very optimistic for the outlook for ATS.

That's excellent. And one quick question for Ryan. And Ryan, obviously, all the best, and it's been a pleasure. If I may, do you mind maybe connecting a little bit the improvement in margins that you were telegraphing at the beginning of the year and how that correlates to the gross margin change in the mix perspective and how I guess we should be thinking about modeling the rest of the year?

Yes. Thanks, Maxim. I appreciate it. I'm going to let Anne walk through the margin dynamics.

Thanks, Ryan. So Max, I would say from a gross margin perspective, we talked about mix, and it really is reflective of the -- what we're seeing the -- what we've got in our backlog and what we're executing on. I wouldn't call it anything unusual there. We've been pretty consistent in terms of performance there and in line with our expectations. We still -- as Doug said, we still got opportunities across the board, but specifically on gross margin through some of our levers that we'll continue to pull, including the usual standardization, supply chain, operational excellence initiatives.

So overall, I think some of the work we've got in our backlog right now is more -- you've seen nuclear bumping up, and we've talked about that being, generally speaking, lower gross margin, but accretive to the bottom line. So I don't think there's anything unusual, but there are some dynamics there and then the levers that we have available to us remain available, and we'll continue to focus on them.

Your next question comes from the line of Sabahat Khan from RBC Capital Markets.

Great. Just maybe starting at a high level on the revenue side. Obviously, you provided a bit of color on the outlook for each of the segments in your release. So maybe if you could just dig a little bit more into the nuclear, the Energy side and the Life Sciences side. One, were you just sort of expecting the nuclear side numbers to be that big?

Are there new orders that came through the year that drove sort of that size growth in nuclear? And then on the Life Sciences side, if you can maybe just talk about what you're seeing on the outlook there in terms of maybe things that could drive mid- to high single-digit type growth that segment seen times in the past?

Yes. So maybe, Saba, I'll start with the numbers and then Doug can chime in on the outlook. So from an Energy perspective, as we've talked about, the majority of the work that we have in our backlog right now is focused on life extension projects, and those tend to run out over 18 to 24 months, in some cases, from a top line standpoint. That said, we also have good backlog that we're continuing to generate in terms of our participation in new builds, both SMR and traditional reactors.

And an example in the quarter, we did have an order for new build reactor for fuel fabrication. So good participation there and not specific to any one technology. So I think a good demonstration of our team's capabilities beyond the [ CANDU ] technology that is the majority of the life extension work.

From a Life Sciences standpoint, we've continued to build out that part of the business. And of course, we have the custom integration piece of the business, but we've also got a good portfolio from a products and services standpoint that we'll continue to focus on driving the business forward from a top line standpoint. So Doug, go ahead.

Sure. So I would just add in terms of the outlook, Saba, that the -- we've obviously -- in the nuclear side, we've obviously had a very long-standing relationship with a number of customers on the CANDU platforms, and we're really pleased that we're continuing to support those life extension and refurb programs. But inside of our pipeline and kind of looking forward, we are also active on, I would call it, a handful -- a full handful of SMR customers in the early-stage activities in both modular fabrication and fuel handling.

And we do expect that over time, these customer relationships will expand as projects gain traction and evolve into operations. Obviously, this is a long-term investment for the company to get involved early. And we have to obviously be prudent in how we manage uncertainty that comes with new technology and new regulatory frameworks, but we feel like ATS is in a strong position to support those evolving technologies as they go forward.

I would say on the Life Sciences side of things, we really are pleased with the improvement in the diversity in the -- at the application layer within the pipeline and the backlog in Life Sciences. We're really excited about some of the new innovations that our customers are working on around radiopharma, visual inspection, other med tech applications, including things like mail order pharmacy. So we believe that we have a pretty good stable of new applications coming in that portion of our business that will allow us to help continue to support those great innovations that are happening with our customers.

Great. And then just for my follow-up, I guess, a bit more on the capital side, leverage moved in the right direction. And if you can just maybe comment a little bit on sort of the working capital target that you guys have, any initial plans there? And then understanding it's early days, but just your views on where M&A ranks in capital allocation as the leverage moves further in the right direction.

Sure. So it's a little premature for us to set new financial targets in terms of the working capital ratio, but you can be sure that in future calls with you, we will be reviewing those targets and coming forward with an updated framework. I think the team did make a lot of progress here in the last quarter on working capital. And that's -- honestly, improving working capital is actually quite hard operationally.

So I think it shows a good level of execution by the team. And of course, my job is to keep pushing to make it even better than it has been. So you can count on that. I think in terms of capital allocation models, I would think about it like this. We're not going to change our level of discipline and focus and our committed leverage architecture that we've communicated to investors. We recognize that there's a view that as our leverage ratio gets back into our targeted zone that we can become more thoughtful about deploying M&A capital, and you can be confident that internally we are doing that.

We have a pretty rich pipeline that across a number of our end markets that we are continuing to evolve. And as I'm meeting with our business unit leaders and our corporate development team and getting an understanding of what's in their pipeline, I'm pretty confident that we've got the ideas to utilize to deploy capital. But obviously, as I said, we will remain quite disciplined in how we do that, but you should expect us to favor deploying capital toward M&A going forward.

Your next question comes from the line of Patrick Sullivan from TD Cowen.

Like everyone said, good luck, Ryan, and then Doug, welcome to the call. I guess first question I had was, it looks like there's a specific line -- kind of aligning opportunities outside of GLP-1 in the Life Sciences sector. So I guess, has there been any updates to customer plans within that market for you guys? Is there still significant capacity that needs to be constructed? Or have advancements in other oral therapies kind of influenced capital expenditure plans more recently?

Sure. I would say, obviously, Patrick, the GLP-1 ecosystem has a lot of dynamics involved in terms of both the ramp-up of capacity that we're participating in now as we're shifting into the delivery phase of the great upfront capacity partnerships that we entered a while back. But there's still a significant amount of new therapies around GLP-1s, new delivery form factors such as multi-use devices or more sustainable concepts in the devices themselves as well as new trials and customer activities around continuing to deploy new therapies around these therapeutics.

So I would say that the long term, the auto-injector market for us with respect to GLP-1s, it will -- it's obviously going to go through its lumpiness in the order cycle. But from a revenue perspective, we still see a pretty strong pipeline of incremental opportunities to continue to support those therapies. Now being prudent, we obviously have to improve the diversity of our pipeline for other types of therapies we mentioned in our prepared remarks.

There's a lot of excitement around radiopharma, oncology and other activities that we think will -- well, we're not -- we don't think it is diversifying our pipeline, and that will start to diversify our revenue footprint as time goes on. So we're committed to continuing to work with our GLP-1 and auto-injector customers.

We recognize that there's a lot of press now about different companies guiding different views on utilization of orals and other traditional and new therapies around GLP-1s. And I would say that from our perspective, our customers are still being pretty consistent that there's a lot of long-term opportunity in GLP-1s that we'll continue to support over time, recognizing that we have to diversify the portfolio to make sure that we can keep the machine running.

And just a small bit of extra color on the quarter. Within the quarter, we saw good examples of that diversification that Doug is referring to. Outside of GLP-1, we had orders in radiopharma and other areas of med device, which are a good demonstration of our team's capability and our capacity to execute across those submarkets. So just hopefully, that adds a little bit extra color for you there.

Yes, that's great. If I could ask one more. ATS often talks about cultivating assets as it relates to acquisition targets, sometimes over many years. Doug, is that approach consistent with your experience? Was that part of your mandate in previous roles? I guess any experience you can elaborate on with respect to that strategy would be great.

Yes. Thanks for the question, Patrick. I think the answer is very simple. I am very committed to the idea that I have a role and my executive team have a role in working with innovators, founders, sometimes families and other -- we work in a universe of strong levels of innovation that often start as small businesses and then evolve into opportunities to join a larger organization like ATS.

That does require a lot of kind of pick and shovel activity on the ground to cultivate those relationships. And it is something that I have a lot of experience in. And I think we'll continue to have a pretty -- a very tactical focus on getting out and meeting partners and working with them over the long term to put us in a better position to make those acquired companies feel at home inside ATS.

Your next question comes from the line of Justin Keywood from Stifel.

Just following up on the outlook for Life Sciences. We've seen some substantial CapEx investments over the last 6 to 8 months. By our math, about $480 billion has been announced, much of which are ATS' customers. And this is in part to potentially sidestep tariffs and reshore with U.S. manufacturing. I'm wondering if that narrative is leading to increased business for ATS? Or is it just a regular business as it goes as far as new CapEx and if you have any additional color there?

So Justin, I think specifically, we probably -- I think at a high level, we certainly are aware that there's a lot of discussion within the broader sort of Healthcare and Life Sciences space around reshoring and tariff mitigations. And we certainly are probably seeing some benefit from that in our own pipeline. But I can't -- I think at the end of the day, most of our customers are being very balanced in being close to their large markets as they build out their capacity.

So I wouldn't say that it's necessarily dependent on tariff dynamics. I think it's related to just the dramatic increase in demand for these therapeutics and just needing raw capacity. And if you're doing -- if you're adding new capacity in an environment where tariffs and geopolitical items are volatile, it's kind of rational to spread your capacity out among different geographies.

I think that's common across a lot of the industrial tech landscape as well among our peers. So I think that's kind of a natural outcome. And -- but you're correct that there is still a significant amount of capacity in the pipeline. And our job is to be able to serve that whatever geography the customer decides to land in.

Understood. That's very helpful. And then for the Transportation or EV segment, we saw continued pressure this quarter. Our expectation was it was near bottom levels last quarter. Are we at that range where we should see some stabilization going forward? And also, how strategic is the EV or Transportation segment to the overall business going forward?

Sure. So I think we look at Transportation holistically, the way we look at all of our end markets through a long-term value creation lens. And part of that specific to Transportation is we recognize that we have a lot of technology and value to bring to the EV ecosystem. But it's frankly going to be more targeted than it has been historically. I think we recognize that pursuing mega projects in the, call it, the broad Transportation sector has -- carries a lot of risk that we're not comfortable with.

But within sort of niches, within the Transportation segment, maybe it's assembly of batteries or hybrid engines or other sort of unique targeted areas where our technology can bring value and we can be rewarded appropriately for it. We still have a significant amount of pipeline in transportation, but we're going to be more cautious in how we go after the shiny objects. We're going to be more disciplined in how we pursue those projects. So it's still a market that we feel optimistic about. But on a relative scale, it will -- relative to our larger segments that we're participating in now, I think it will stay kind of in its current range.

And Justin, just to add, I mean, that's -- what Doug said is reflective of what we see in the backlog and also in bookings in the quarter as well as the funnel. So -- and I think that's a fair reflection of what we'd expect going forward.

[Operator Instructions] Your next question comes from the line of Patrick Baumann from JPMorgan.

I know it's been a couple of months already, but we haven't spoken yet. So I wanted to say congrats to Doug on the new role. And also, thanks to Ryan for all the help and guidance while we've been following the company and best of luck in your new role. I had a couple of questions. First on sales.

So generally, like when I look at the quarterly -- I know you guys don't like to talk about quarterly, but when I look at the quarters over time, you see a growth rate from third quarter to fourth quarter like in the mid-single-digit range sequentially. Can you help me understand why that might not happen this year? Is it -- was there some sales pulled ahead to the third quarter maybe? Any color on that would be helpful.

Yes. Patrick, I can take that one. So from a -- on a full year basis, we're still expecting what we talked about before in terms of high single-digit growth, and we're happy with where we are from an organic growth perspective on a year-to-date basis, especially given some of the market dynamics. The Q3 number, I mean, there was some benefit from scope adjustments and things that just timing of execution of the program. So what we have in our guide for Q4 leaves us consistent with what we would have expected on a full year basis. And I don't think there's anything unusual that I'd call out.

Okay. That's helpful. And then the second one is on backlog. And so I guess I just wanted to understand the sequential decline in context of the positive book-to-bill. It looked to me like maybe in Transport, there was a rescoping or something of that nature. Is that right? And if you could provide any color on that, that would be helpful. And then also on the orders front, like consumer looked like it had a big order in there. Could you provide any color on that?

Yes, I'd be happy to. So just with respect to the backlog, I mean, just -- about half of our business, roughly half is products and services. So as that portfolio continues to grow, I mean, we kind of look at a number of metrics across the board. So in our guide, we look at the shorter-term businesses. We kind of look at where we are from an execution standpoint on our larger projects. So there's some timing stuff in there. But I would say we're happy with the book-to-bill staying above 1.

And even if it does dip below 1 in any particular market or period on an individual quarter or trailing 12-month basis, if we're executing off of a healthy backlog that doesn't give us cause for concern. So I think -- and then your question on consumer, we did have -- we have had some strength in that area, again, reflective of the capabilities of the team. So that work will get executed over a normal time frame, consistent with the other work in our backlog, we typically say 12 to 18 months.

Your next question comes from the line of Jonathan Goldman from Scotiabank.

Maybe just the first one, circling back on the bookings. What are you guys thinking in terms of bookings growth this year? I'm just -- if you can give us any help parsing all the different puts and takes on funnel commentary, the strong revenue this quarter. You're lapping the enterprise orders last year, the timing as well. But how are you thinking about the full year cadence of bookings?

So from a -- you mean -- sorry, Jonathan, just to clarify for this year? Or what do you...

Yes for this year?

Yes. I mean we're -- we'll continue to -- there's -- obviously, in our Custom Integration business, there's some timing things that may impact the number. But on a full year basis, we're happy with where we've come in from a year-to-date perspective, and the funnel is healthy across the board, as we've talked about. And even if -- and as auto-injector orders modulate based on where customers are in their buying cycles, the funnels in the rest of the submarkets remain healthy. If there's anything, Doug, you'd like to add, go ahead.

No, I think it's -- I think we've got a great pipeline, and there's obviously some economic uncertainty that we live with every day. And I think the team has calibrated the orders outlook effectively. That's why we provide a range. And -- but I think it's -- the pipeline is robust, and we've got, I think, a pretty good opportunity to continue to deliver the type of growth that we've delivered in Q3. And obviously, our job is to beat those expectations.

Okay. That's helpful. Maybe switching to SG&A. You upsized the restructuring charges this quarter. I think you talked about maybe reinvesting some of that in strategic areas. What sort of areas are you planning to reinvest those savings in? And if we're thinking about kind of payback on restructuring, is this more of a top line payback or a cost payback at this point?

So yes, I mean, I would expect that it will be a mix. So we've -- the bump up in the range is basically just associated with some additional opportunities we've identified for efficiency across the program, including with -- associated with our services shift. I think some margin protection measures in a few parts of the business that have seen lower volumes, but nothing that I would call out that's material.

From a reinvestment standpoint, I mean, we've had a history of investing in innovation, and that's been critical to our success and will continue to be going forward. So that would be where some of the reinvestment would be as well as in areas of growth, we've talked about nuclear, which is a People business. So there, for example, in other areas -- other market focus areas, including Life Sciences. And as we work through the timing of some of this from a bottom line perspective, the piece that would flow through to operating -- to help with operating leverage would primarily be into fiscal '27 just based on the timing of the execution of the program.

Yes. And I think, Jonathan, one of the things that I'm -- as I've gotten around to meet our division leaders and talk to some of our innovators, these new therapies that are evolving in Life Sciences and these new kind of energy form factors that we're seeing evolve in our Energy business are very exciting, and I think create -- it's a great alignment between the technology that we have in-house and the needs that these customers have to support their evolution of their product as they kind of bring, in some cases, game-changing new technologies to the marketplace.

So I think it's a very prudent action for us to take our restructuring savings and redeploy investments in those growth areas. So when we talk about diversifying our pipeline and making early-stage investments in these new technologies, that's generally the destination for any incremental investment dollars that we get. And that's, I think, a pattern you'll see us repeat.

Okay. That's fulsome color. And maybe just one housekeeping one. The sequential increase in the SG&A, how much of that was due to FX?

It would be relatively in line from a proportionate standpoint to what we saw from the top line perspective. But we can follow up with you, Jonathan, on the specific values.

Your next question comes from the line of Michael Glen from Raymond James.

Doug, maybe to start, we've heard a focus on margin expansion mentioned a few times. Are you able to speak to some of your prior roles, any of the margin initiatives you implemented in those roles and maybe highlight some of the success you realized in expanding margins in prior roles.

Nice to meet you, Michael. Sure. I think I kind of categorize the margin improvement opportunities in 3 areas, all of which I've had extensive experience in my prior roles. So first is amplifying the deployment of our ABM tools to find productivity opportunities. This could be reducing cost, improving lead times, which helps us drive market share. The tool set that we have inside ATS is very strong. They're very familiar tools to my prior roles that I -- companies I've served.

And I think there's just a need within the team to drive more focus in executing them, perhaps being prioritizing a little differently. So I'm pretty comfortable that we actually have the tools in mind, but we'll be working harder to more effectively deploy them where we can move the needle on margins. And it could be looking at 80/20 pricing. It could be looking at low-cost country supply chain. It could be on finding labor productivity through value stream mapping exercises at the shop floor level. All up and down the architecture of the company, we have opportunities to deploy ABM to drive more efficiency.

And I'm confident that we'll be able to accelerate that. The second area is around focusing our R&D and commercial efforts on applications within our current end markets, but that require more advanced technology and application knowledge that we have inside ATS. And that then brings us the opportunity to enjoy improved gross margins. Some of the new applications that we talked about in our pipeline and emerging into our backlog around Life Sciences, nuclear, the examples that we talked about earlier, these are all areas where the physics challenges of creating something for our customers is quite a big challenge, and we bring technology to the table to help them solve those problems, and that gives us the opportunity to have a better yield and share in that value creation.

And then the third area, which has been a focus of the company, but I think has further opportunities is in increasing our mix of aftermarket. I think being -- having a significant portion of our business being in the CapEx cycle, we recognize that from an earnings volatility standpoint, having a higher share of aftermarket can both improve our margin profile as well as smooth out the natural ebbs and flows that come with the CapEx side of the company, as one of the reasons that I supported the decision that the team made to move the services teams into the business units to provide more of an end-to-end model with our end users from -- all the way from conceptual engineering through lifetime service and support.

I think that's very logical, and it will start to allow us to pursue organic strategies to expand our service potential. And even in our capital deployment discussions, one of the criteria that we talk about is the same things. We talk about, is there a potential to employ ABM to improve the target company's performance? Do we have the ability to use the technology to create something new for our customers?

And does it improve our aftermarket mix. So both in the internal work that we're doing as well as in our capital deployment work, those are kind of the themes that I've seen work in other enterprises similar to ATS, and that's what the team and I are going to be working through. And we'll -- once we have a more definitive framework about what that's going to mean to the economic, we'll come and share that with you.

Okay. That's a great amount of detail. And then just my second question, kind of plays off the first one, but you did see quite a move higher in the run rate on your services bucket revenue in the quarter. And are you able to give some context as to where that move higher did come from?

I can cover that one, Michael. So there's -- included in our service revenues, we have some refurbishment work that is ongoing. And so a good chunk of the increase in the quarter came from that work. And beyond that, though, the service -- the rest of the services deliverables are tight, streams of revenue continue to perform well, but the majority of the increase was from refurbishment work, which is being executed.

And would that -- we would expect that to continue in future quarters as well?

So that specific refurbishment program is ongoing, although nearing completion, but we -- refurbishment is an important part of our services portfolio in addition to other areas like spares, on-site support, asset management, those types of offerings.

And we have reached the end of our question-and-answer session. I will now turn the call back over to Mr. Wright for closing remarks.

Thank you, operator, and thank you, everyone, for joining us today. I'm excited to be part of the team here at ATS, and we look forward to speaking with you further on our Q4 call in May.

This concludes today's conference call. We thank you for your participation. You may now disconnect.

Welcome to the ATS Corporation Second Quarter Conference Call and Webcast. This call is being recorded on November 5, 2025, at 8:30 a.m. Eastern Time. Following the presentation, we will conduct a question-and-answer session. I'd now like to turn the call over to David Ocampo, Head of Investor Relations at ATS.

Thank you, operator, and good morning, everyone. On the call today are Ryan McLeod, Interim Chief Executive Officer of ATS; and Anne Cybulsk, Interim 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. 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 the making the statements are detailed in Slide 3 of the slide deck. Now it's my pleasure to turn the call over to Ryan.

Thank you, David, and welcome to ATS. It's great to have you on the team. Good morning, everyone, and thank you for joining us today. Today, ATS reported second quarter results for fiscal '26, highlighted by strong organic revenue growth and an improvement in adjusted earnings margins in line with our expectations. These results reflect the strength of our decentralized organization and the collective efforts of our teams. During this leadership transition period, it is business as usual as we build on our culture of continuous improvement through the ATS business model with a clear focus on creating value across our diversified global portfolio. As we've previously discussed, the Board began its search for a permanent CEO over the summer and is now well into the process, while our entire senior leadership team remains intensely focused on advancing our strategic growth priorities. This morning, I will update you on the business and our markets, and Anne will provide her financial report.

Starting with our financial value drivers. Order bookings were $734 million, up 6% sequentially, reflecting solid performance and strength across our diversified end markets. Q2 revenues were $729 million, up 19% from Q2 last year, driven primarily by organic growth and supported by solid performance in services. Adjusted earnings from operations in Q2 were $79 million. Moving to our outlook. Order backlog of approximately $2.1 billion continues to provide good revenue visibility. Our opportunity funnel remains healthy and well diversified. Within Life Sciences, order backlog at quarter end remained strong at $1.1 billion, supported by demand across submarkets. Importantly, the wider life sciences funnel includes a mix of opportunities in radiopharma, auto-injectors, diagnostic wearables and automated pharmacies. ATS works with a broad set of leading GLP-1 customers, providing diversification across platforms and drug delivery formats.

In addition, as other applications for GLP-1 therapies emerge, including for treatment of cardiovascular and neurological disorders, ATS is well positioned to support providers of drug delivery solutions. Momentum remains especially strong in the radiopharma space, supported by investments in production capacity and the advancement of new therapeutics. To support growth and meet evolving customer needs, our recently opened Comecer Competence Center in Indianapolis delivers enhanced service capabilities and faster response times for customers in North America. During the quarter, Comecer secured new wins in diagnostic and therapeutic projects, advancing next-generation capabilities for radiopharmaceutical production. Within the lab research space, government-funded customers continue to take a more measured approach to capital investment given the changing U.S. funding environment.

While orders from these customers represent a small portion of our overall business, our lab equipment businesses have been leveraging the common ABM framework to improve joint commercial initiatives and to expand shared access to their individual customer bases. In Food and Beverage, quarter end backlog was $218 million with customer wins in multiple regions during Q2 in primary processing and in sorting and inspection supported by internally developed products and technology. Our food and beverage funnel remains strong with customer investment focused on automation that enhances yield, quality and energy efficiency across our comprehensive solutions, spanning primary processing, inspection, primary and secondary packaging and aftermarket support. In Energy, order backlog was a record $277 million, up 154% over Q2 last year. This increase was driven primarily by nuclear refurbishment projects as operators continue to invest in life extension programs. The nuclear funnel continues to broaden beyond refurbishment, covering service and new nuclear reactor builds, including small modular reactors.

On new builds, initial activity centers on early phase design and engineering programs that support modular fabrication of reactor structures and fuel handling systems. These programs position ATS to participate as projects move into commercial deployment. While order timing may vary, supportive policies and growing demand for clean and reliable energy, including from data centers, support a strong outlook for nuclear. In Consumer Products, our funnel remains stable with ongoing programs in personal care and household goods packaging, along with warehouse automation. In transportation, the funnel consists of relatively smaller opportunities, consistent with our expectations. Our capabilities in battery assembly allow us to win and deliver on these opportunities as they arise. Overall, our balanced exposure to regulated and growth-oriented end markets, along with a strong order backlog positions us well to navigate the current environment. Turning to the ATS business model. It remains central to how we operate and is well embedded into our culture.

I recently attended our global ABM Conference where our continuous improvement leaders from across the business demonstrated their commitment to driving the ABM, along with a renewed focus on creating impact for customers and shareholders through disciplined execution and operational efficiency. I continue to be impressed by our team's use of the ABM to drive value within their operations. This includes daily visual management tools to create immediate focus and drive problem solving as well as sustained process improvements through Kaizen and strategy deployment. On M&A, our funnel is healthy and active as we cultivate and review opportunities that align with our long-term strategic priorities. We continue to integrate our more recent acquisitions and drive further synergies, particularly through shared customer access and integrated offerings from across our portfolio. We're also working diligently to return leverage to within our target range with good progress made during the quarter.

On innovation, we have further developed our Illuminate Manufacturing intelligence platform to support new deployments of select businesses, including some of our more recent acquisitions. These efforts allow us to efficiently integrate equipment, standardize data capture and analytics and improve visibility across our installed base. The 2025 ATS Innovation Summit is being held this week, bringing together key innovation leaders from across the ATS organization. Through panels and workshops, the summit seeks to foster a unified innovation ecosystem, accelerate product development and strengthen collaboration on translating emerging technologies into customer value.

Our investment in innovation has been core to our strategy and remains a key differentiator for ATS. In summary, our results this quarter reflect good progress across our value drivers, supported by a strong backlog. Our advantages today, including our global footprint, our talented workforce aligned around our ABM culture and our strong customer relationships will serve us well in advancing our growth and long-term value creation strategy for the future. Now I will turn the call over to Anne. Anne, over to you.

Thank you, Ryan, and good morning, everyone. Starting with our operating results for the quarter. Order bookings were $734 million, down 1.1% compared to Q2 last year, which included several larger enterprise bookings in Life Sciences. This was largely offset by growth in all other markets over last year. Our trailing 12-month book-to-bill ratio at the end of Q2 remained healthy at 1.12:1 and was at or above 1 across all market verticals. Revenues for the second quarter were $729 million, up 18.9% compared to last year, including organic growth of 12.6%, along with a 3.9% benefit from foreign exchange translation and a 2.4% contribution from acquisitions. Moving to earnings. Second quarter adjusted earnings from operations were $79.1 million, a 40% increase from prior year, primarily on higher revenue volumes. Gross margin for Q2 was 29.9%, a 36 basis point increase on Q2 last year.

On SG&A, excluding acquisition-related amortization and transaction costs, expenses in the first quarter totaled $134.5 million, a $14.5 million increase over the prior year, primarily a result of incremental SG&A from acquired companies and FX translation impact. Excluding a recovery related to forfeitures from our former CEO's departure and mark-to-market impact related to changes in our share price, stock-based compensation expense was $4.3 million in Q2. Earnings per share were $0.45 on an adjusted basis. Moving to our outlook. We ended the quarter with an order backlog of approximately $2.1 billion. Q3 revenues are expected to be in the range of $700 million to $740 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. This quarter, we have identified an opportunity to realign our cost structure to strategic focus areas and to drive global operational efficiencies.

We estimate restructuring costs of approximately $15 million will be incurred in the final half of this fiscal year with an expected payback of less than 1 year. For clarity, there is no change to our expectations for full year high single-digit revenue growth as previously disclosed. We continue to expect adjusted operating margin improvement on a full year basis in fiscal '26. ABM discipline and tools help to create focus across all of our value drivers, including margin expansion. The macro environment remains dynamic, including geopolitical tensions and trade and tariff considerations. As a reminder, the majority of our exports from Canada into the U.S. remain covered under the USMCA. Our global and decentralized operating model positions us well to navigate market dynamics to serve customers where they are deploying capital.

In this environment, ATS continues to execute well, maintaining leadership in our key submarkets and driving progress on our growth priorities. Moving to the balance sheet. In Q2, cash flows from operating activities were $28 million. Our noncash working capital as a percentage of revenues was 18.3%. And while timing of milestone billings and collections do impact this percentage, our focus on driving working capital efficiency across the business and our target of 15% remains unchanged. We expect to see improvement by the end of the fiscal year. During the quarter, we invested $18.3 million in CapEx and intangible assets, reflecting our disciplined focus on innovation and strengthening our capabilities. For fiscal '26, we expect our CapEx and intangible investment to be within our previously disclosed range of $80 million to $100. On leverage, our net debt to adjusted EBITDA ratio was 3.4x.

This progress since the beginning of the year supports our expectation of reducing leverage to within our target range of 2 to 3x. In summary, we are pleased with second quarter results and with the alignment of our leadership team and global employee base as we continue to execute on our plans and drive the business forward. Our strong order backlog supports our outlook for sustained growth and our expectations for revenue and margin expansion in fiscal '26 are unchanged. ATS is leveraging our culture of continuous improvement and our embedded structural advantages to drive tangible value through a consistent disciplined approach. We are confident that our team's continued efforts will deliver value to both our customers and shareholders. Now we will open the call to questions from our analysts. Operator, could you please provide instructions? Thank you.

[Operator Instructions] Your first question today comes from the line of Cherilyn Radbourne from TD Cowen.

When we look at your results, the one thing that is of some concern to us is that it appears bookings momentum has slowed over the last 6 months relative to the second half of last year. So just curious what gives you confidence that, that's just normal lumpiness in the business and not something more?

So I mean a couple of things. First of all, I mean, when we look at the state of the business, there is normal course variability and there are some larger programs, which can really drive that. But our book-to-bill is healthy at 1.12. From a backlog perspective, we're up about 14%, 13.5%, 14% year-over-year. So we're in a really good position from a backlog standpoint. But I think importantly, to your question, funnel activity, and I talked about it a little bit in my prepared remarks, but in general, it is healthy across our vertical markets. So life sciences, really good activity. Auto-injectors remains very active. We're seeing a lot of activity in radiopharma as well as medical -- general medical device wearables, contact lenses, automated pharmacy. So a lot of activity across life sciences, which supports that outlook. Food continues to be strong. We're seeing some really good uptake and interest based on what we're doing in primary processing, packaging as well as some of the inspection and sorting capability that we have.

Consumer is stable. It's been very resilient. And transportation is as we expected, it's lower relative to where it was a couple of years ago, but there's still opportunities that are arising. I think the other area that we're seeing a lot of growth opportunity in is energy, and there's a lot happening. Refurbishment has continued to be active. we're seeing good activity in decommissioning and maybe a bit more mid- to long term, but certainly accelerating is the new nuclear space. So new builds, whether it's conventional technology or SMRs, we're seeing a lot of activity in that space and participating in a lot of early-stage projects to support the ongoing build-out that's going to be coming in that -- in the nuclear space. So overall, I mean, as I said, our funnels were very positive in terms of where they sit and support the continued growth that we expect.

Okay. That's helpful color. And then just specifically, how did the services business perform in the second quarter? And along with that, are you intending to recruit someone to replace Simon Roberts to head that segment?

Cherilyn, I'll start with the numbers question. And so overall, we're happy with the performance of the service business in the quarter, also on a year-to-date basis. I would call the performance strong. There were some EV numbers in the comparatives, but really good performance across other areas of the business. And services, as you know, are kind of reoccurring in nature. So we have some in the numbers that are like upgrades that are less regular, but services remains strategic to our overall growth plans. So good performance, happy with what we're seeing across the business, and I'll let Ryan comment on the other piece.

Yes. So Cherilyn, the short answer is yes. I mean, first of all, we're very pleased that Simon has taken on the leadership role within our Packaging and FoodTech business. Simon is a long-time ATS executive, very experienced, knows the business very well. And aftersales is an attractive opportunity within packaging and FoodTech. So very well aligned with some of Simon's background. And we will be replacing that role, yes.

Your next question comes from the line of Sabahat Khan from RBC.

I guess just looking ahead to sort of the back half of this year and into fiscal '27, as you think about the margin trajectory, it at this point in the cycle, do you think it's more driven by some incremental initiatives you need to take on the cost reduction side? I know you announced the restructuring a little bit this morning. Or is it more from sales picking up on a more consistent basis over the next 4 to 6 quarters that sort of gets you moving towards the medium to longer-term targets you have on the margin side?

So let me start with just reiterating what we're expecting on a full year basis from a margin expansion perspective. It remains an area of focus for us. There's nothing really in the backlog that I'd call out that would drive a different view. We do continue to have a number of levers available to us to drive improvement across the board on margin. We've talked about those before. And I think the growth of the business will continue to support that margin expansion expectation. On the restructuring, one of the areas that we expect to see is while we will have some cost savings from that, we would also expect to be able to reinvest some of those savings in higher growth areas of the business as well as in innovation. So overall, a number of levers available to us to continue to drive towards that longer-term objective that you referenced.

Great. And then just for a follow-up, I guess, as you think about sort of the inorganic side, it sounds like you are still sort of keeping your options open, but should we expect that to pick up in a more meaningful way when leverage sort of has in that with a 2 handle on it? Or is that something you're sort of open to right now? And if so, what are some of the end markets in focus as it relates to your pipeline?

So yes, I mean, we're certainly very active in cultivating, reviewing opportunities. At the same time, we are, as Anne said in her prepared remarks, focused on bringing our leverage down. And really, that provides us more flexibility. Cultivation does take time. We have seen good activity over the last several months in terms of what's happening in our funnel. But I mean, we're going to be prudent in how we go forward here, certainly conscious of where we're trading right now. I mean equity remains an option for us. And as I said, we're conscious of where we're trading right now. But for the right deal and in the right circumstance, that certainly remains an option for us. So just to go back, I mean, the U.S. listing, one of the rationale there was that does make our shares more attractive as currency and M&A. So all of those options remain on the table. But as I said, we do want to delever as that ultimately provides us more flexibility. At the same time, there's an active market right now. So we're going to find the right balance on both.

Your next question comes from the line of Maxim Sytchev from National Bank of Canada Markets.

Ryan, I was wondering if it's possible to get a bit of your general sense on the health care space. I mean we seem to seeing more health care M&A as the pharma companies need to replace the pipelines. I guess how quickly can we see potentially sort of inflection point in terms of opportunities on that side, even though like obviously, you're quoting a pretty healthy funnel. But just curious around your general thoughts in relation to that.

Yes. I mean, Max, I'll probably reiterate a little bit of what I said, but we are seeing good activity in our funnel. And so if I start with auto-injector, and that's really the drug delivery format that's really being used in -- with GLP-1 drugs. We're in the middle of executing some larger programs there. But as I said, funnel activity is still encouraging. And some of that is tied to continued expansion of those drugs and consumer adoption and as well as some new therapies. And I mentioned conditions such as cardiovascular health and neurological conditions, which are -- there's research and trials ongoing to support GLP-1s as therapies for those conditions. So all of that, we do expect to drive continued growth in the auto-injector space. And we're also working with customers on new technologies there. So a lot of the drug delivery today is single-use auto-injectors, and there's a move towards fixed dosage multi-dose auto-injectors.

So rather than onetime use and throw it away, it can be used for multiple injections. So there is, as I said, a good funnel there and good activity. I think -- sorry, just Yes. The other area that I mentioned, but I'll spend a little bit more time on is radiopharma. And that's very active. There's a lot of drug discovery, drug development happening, customers moving from R&D into clinical trials and then into commercial manufacturing. And so we've been winning projects in new diagnostics and therapeutic applications, and there's a lot of activity happening in that space. And it's very exciting. And we talked -- I talked in my prepared remarks about our Comecer competence center, which recently opened in Indianapolis, and that really positions us well to provide regional support in North America, collaborate more closely with our customers and have an improved service response time for customers in that region.

Yes, that's great color. And then maybe just a question in relation to nuclear. And I'm not sure if Anne wants to take this one. But in terms of -- I mean, obviously, backlog is up significantly in that space. But how should we think about the tail of that backlog to revenue conversion? Can you -- like is there anything different in relation to these projects? Can you provide any more color there?

Max, so yes, we've seen good growth in terms of the nuclear backlog, as you said. Most of the -- a good chunk of the backlog is related to the reactor refurbishment or life extension programs that are primarily CANDU technology driven. That said, there are a number of customers that we have also in the backlog that would represent our earlier participation from a design perspective in some of the new build work that is ongoing. So it's a good cross-section of customers in terms of overall weighting of the backlog. We'd expect to see that refurbishment work continue over the next, say, call it, 1.5 years to 2 years at a minimum and then be supplemented over the mid- to longer term with some of the work that we're doing on the new builds. So from an early participation standpoint on new builds, we're very active there. So -- and that's important to the longer-term play.

Your next question comes from the line of Justin Keywood from Stifel.

I'll start off with leverage. Does the target remain to exit this fiscal year at 3x?

Just the short answer is we do expect to come back within our targeted range by the end of the fiscal year. That's our goal.

Okay. So suggest some healthy free cash flow generation over the next few quarters. And then just on the -- circling back on the nuclear, just to drill down here because in the backlog, it does show as the second largest segment, which is a bit surprising. And I understand that some of these projects are longer term in nature. But how should we see that Nuclear Energy segment as a percentage of revenue trending over the next year or over the next few years?

Justin, so I mean, the short answer is it's going to grow. I don't want to get too specific in terms of percentage of business. But as you noted, it's become a significant part of our backlog. The activity in that space and the funnel activity is very healthy. We are working with a number of customers in the new build space in addition to the work that we continue to execute on in refurbishment. Decommissioning also is a growing space. So there's a lot of opportunity, and it's an attractive growth opportunity for us. So it will continue to grow, but I'm not going to put a percentage on it in terms of how big of a business it will be.

[Operator Instructions] Your next question comes from the line of Jonathan Goldman from Scotiabank.

Maybe just on the backlog, when do you expect to lap the large enterprise orders?

Just to make sure I heard your question, Jonathan, when do we expect to, can you repeat it? I didn't hear you.

Cycle over the large enterprise orders from last year. I think that seems like a pretty clear reason why backlog is kind of stabilized or not growing as fast. I just want to know when you would plan to lap those large tough comps from last year.

So we are -- as I said in my prepared remarks, we're executing on some of those larger orders that we did book in Q2 last year. They are -- there's a number of those that are still in progress, and we continue -- we're getting into the later stages of them. That said, we continue to book new work. As Ryan talked about, the funnel is healthy. And so as we continue to execute on those larger programs, we'd expect the backlog to fill in with new work.

And remind me, I think the larger enterprise orders have a longer delivery period beyond 12 months. Is that correct?

Yes, that's right. They tend to run more in the 12- to 18-month range and sometimes up to 24.

Okay. Perfect. And I guess the second one for me on the working cap, what's the visibility? Or maybe what gives you confidence as we sit here today that you can hit the 15% target this year? And I don't know if that's an exit rate for the year totally, but what do you think needs to happen to get there?

So there's obviously things that could affect that from a timing perspective. And the main piece of that would be related to timing of milestone billings and then collection on some of those larger opportunities. But as we continue to work through that backlog, we would expect improvement by the end of the year. Throughout Q3, I would say we'll still see that higher working capital need on some of those larger programs. But overall, our objective remains 15%. There are opportunities across the business to drive working capital efficiency, including some of our more recently acquired businesses that came on board with a heavier working capital intensity. So overall, business is focused on this, and those are the factors that will drive the improvement by the end of the year.

Your next question comes from the line of Patrick Baumann from JPMorgan.

I had a couple of questions here. One is on Life Sciences. Any reason why the revenue seems to be coming in a little bit slow there? Just wondering if there's hesitation at all related to some of the order backlog that's been built there related to government policy and things of that nature?

Patrick, I mean, the short answer is no. It's largely timing on execution of projects in our backlog that drives the bulk of our revenue conversion. As I said, in my prepared remarks, so we do have some exposure to publicly funded institutions, organizations within the lab space, but it's a small part of our business. And I mean, if we step back on that, a couple of years ago or even last year, China was weak, and we've actually seen that improve in that part of the business. And now this year, with some of those funding changes that's created headwinds in North America. So -- but as I said, it's a small piece of our overall business. And we're actually -- I think I mentioned this in my prepared remarks as well, in the process -- we are in the process of doing some joint go-to-market approaches across our lab businesses to share customer lists and how we're approaching customers in certain geographies. So early days of that initiative, but we do expect that will provide some offset to some of the funding challenges that do exist within the U.S.

Got it. And have you -- I guess I missed maybe the first part of the Q&A. Did you comment on how you think margins will trend sequentially in the third quarter? And then also the $15 million of restructuring, what's that targeted at?

Patrick, yes, I did briefly mention it. But just to recap, when we think about the margin trajectory for the back half of the year, we do expect to see full year margin expansion. And that's consistent with what we've said previously. On the restructuring, the benefit of that as we execute on those initiatives will flow into -- there'll be some cost savings that we'll see as part of our overall margin expansion efforts. There's also an opportunity for us to reinvest some of those savings in higher growth areas of the business. And Ryan had flagged energy and nuclear as a growth area, and we also continue to focus on innovation. And that has really been a core of our strategy and the key to our success over the years.

And then so if you don't want to comment on quarterly trajectory, what -- remind me what the annual margin expansion target was?

We didn't peg a specific number, but we did say we were expecting to see year-over-year margin expansion compared to last year. And last year, we were at from an adjusted EBITDA perspective, 13.8%. So better than that by the end of the year through continuing to execute on the projects we've got in our backlog and driving some of the efficiencies that we've talked about through the levers that we have available to us.

And the high single-digit revenue growth guidance that was reaffirmed for the year, can you remind me if that is organic revenue or if it's total revenue?

It is total revenue. We do have in our year-to-date numbers, some M&A benefit, barring any further M&A in the back half of the year, which we don't build into our guidance. There will be no M&A benefit in the back half of the year and the FX rates will do what the FX rates are going to do. But we do still expect that high single-digit growth top line that would include continued organic growth.

And that includes FX as well and M&A?

From the first half, yes, the M&A from the first half.

Your next question comes from the line of Michael Glen from Raymond James.

Ryan, are you able to comment on what the customer feedback is with the oral application for GLP-1s? Are you seeing this impact your funnel? Or is it raising any concerns as to what the -- how this may impact future orders for auto-injector?

Michael, so customers in this space, they are working to develop an oral alternative. And I think that really stems from the belief that, that will drive wider consumer adoption versus an injectable. But to date, a lot of the studies and the development work, there's been some challenges with that. Some of it tied to the patient experience causing nausea. So there's a tolerability trade-off. There's also been some challenges around the active ingredients and how they get absorbed into the system. So -- but nevertheless, I do expect that's going to continue to be a focus area for customers. But to date and as we see it, that auto-injectors really remain in direct injection really remain the most reliable, effective and widely adopted delivery format for these GLP-1 drugs. Oral formulations could certainly become a complement to that if you get into maintenance phases as an example. But we continue to see that auto-injectors will have a very prominent place in drug delivery for GLP-1 therapies.

Okay. And then can you remind us -- I believe in the past, you've indicated that GLP-1 is roughly 20% of the Life Science backlog. Are you able to give an update on where that figure sits today?

Yes, it's still in that range.

Okay. And then last one for me. Just looking at the SG&A for the overall business, Anne, I believe you gave the $134.6 million figure as the run rate ex share-based comp. Is this the right level for -- at this point in time, should we start to see leverage on SG&A, should SG&A on that adjusted basis grow slower than overall revenue growth?

So that's the goal as part of our margin expansion focus internally. We do have a focus on SG&A. But as the top line grows, I would expect to see that improved leverage drop through.

And that concludes our question-and-answer session. I will now turn the call back over to Ryan McLeod for some final closing remarks.

Great. Thank you, operator, and thank you, everyone, for joining us today. We look forward to speaking to you on our third quarter call in February.

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

ATS Corporation's Annual Meeting of Shareholders is about to begin. Please note that today's meeting is being recorded. If you participate and disclose personal information, you will be deemed to consent to the recording, transfer and use of same. The company's comments today, including any made during the question-and-answer period may contain forward-looking information and may refer to non-IFRS measures.

The company refers you to its cautionary statements regarding such information, which are currently displayed and which are found in its disclosure documents. Such cautionary statement with respect to forward-looking information includes the material factors that could cause actual results to differ materially from such information as well as the key assumptions applied and such statement with respect to non-IFRS measures notes that non-IFRS measures are intended to provide information to ATS' shareholders and should not be considered in isolation or as a substitute for IFRS measures.

To welcome you to the AGM, ATS has prepared a short video, which we will play before the meeting begins.

[Presentation]

As you know, this will be my last shareholder meeting as Chairman of the Board. I will come back to that later.

Today, I'm joined by Mike Martino, a long-term shareholder and Board member of ATS as well as being the incoming ATS Chair. Also with me are Andrew Hider, our outgoing Chief Executive Officer and Director of ATS; and Ryan McLeod, our Chief Financial Officer. We will be available to answer questions later on in the meeting.

Let me begin with an overview of recent business developments and our progress against ATS long-term strategy. We will also address the leadership changes that we've announced in recent weeks. While fiscal 2025 was challenging, our financial results were underpinned by our diversified presence in dynamic end markets, our differentiated capabilities and the disciplined application of the ATS business model by our skilled workforce.

ATS teams demonstrated exceptional drive and dedication, while consistently demonstrating our culture of continuous improvement.

In Life Sciences, we continue to support a broad set of customers with automation solutions that drive scalability, high precision delivery and faster time to market.

Strategic investments to drive innovation, along with targeted acquisitions have further strengthened our capabilities in the dynamic growing regulated end markets that we receive -- that we serve across this vertical.

In Food & Beverage, we introduced advanced inspection and sorting solutions that help improve quality control and operational efficiency, enabling customers to deliver on critical requirements for safety and productivity.

Overall, ATS specialized capabilities have delivered steady progress across our market verticals. This includes areas where we bring strong expertise such as energy where we help nuclear customers adjust or scale their operations to meet growing energy demands.

Our specialized capabilities also extend to the consumer products market including opportunities in packaging and warehouse automation and transportation. This past year, our teams strengthened our digital portfolio, enhanced our service offerings and explored opportunities to advance the integration of AI-based tools.

Our commitment to innovation forms the basis for how we operate the markets we serve and the value we deliver to customers. Our Board was actively engaged with management throughout the year as part of our commitment to risk management and value creation. We continue to mature and evolve our ATS business model, or ABM, and introduced new tools and capabilities to help our global business innovate and respond to change.

An example of this is how the business responded to global tariff challenges, where ATS was quickly able to use the ABM to put processes and protocols in place to mitigate the impact. The ABM will remain a valuable resource to best position the company for long-term success.

In May, we finalized a settlement with one of our EV customers providing us with greater flexibility with our balance sheet, reducing our leverage. In addition, we have better aligned our transportation business with the current end market demand.

Last July, we acquired Paxiom followed by Heidolph last August to expand our capabilities in packaging and complement our global suite of products and equipment in both Food & Beverage and Life Sciences.

A final comment on shareholder value creation. ATS has outperformed the S&P 500 Index on a total shareholder return basis over the past 5 years. This despite challenges in the global economic and business environment.

Our latest quarterly results issued just this morning show that our healthy backlog positions us favorably to execute our long-term strategy and drive sustained value creation through fiscal 2026 and beyond.

Our achievements in fiscal 2025 would not have been possible without the unwavering commitment and consistency of execution from our global teams. I want to extend my sincere appreciation to ATS' 7,500 employees. We're embracing our continuous improvement culture and driving innovation.

To our customers, thank you for the trust you place in our solutions and capabilities especially in a market environment with heightened uncertainty and shifting trade dynamics.

I also want to convey my thanks to our shareholders for your engagement. Your partnership supports our long-term value creation strategy as we enter a new chapter in the ATS' growth story.

And finally, thank you to my fellow directors for your insights, commitment and the instrumental role you play in collaboration with management to set ATS on the best course for long-term value creation and your ability and commitment to representing the interest of all our shareholders.

Before moving forward with our agenda, I would like to touch upon the leadership update we announced on July 7. We wish to thank sincerely, our outgoing CEO, Andrew Hider, for his leadership and commitment through over 8 years. Andrew, thank you very much.

Ryan McLeod will be assuming the role of interim CEO effective August 8 until the board completes its search for Andrew's permanent replacement. A thorough search process is underway to ensure that we identify the right leader to take ATS forward. The Board has full confidence in the team that Andrew has built and in particular, Ryan's and our senior leadership team's ability to drive uninterrupted progress and a smooth transition.

Now on to the business of the meeting. I ask at the Annual Meeting of Shareholders of the corporation come to order.

Once the formal business items of the meeting are complete, we will have some concluding remarks and then address any questions received through the course of the meeting using the instant messaging feature on the virtual interface.

I will preside as Chair of the meeting. Sarita Dankner, ATS Corporate Secretary, will act as Secretary of the meeting; and Arjun Kapur, Investor Relations Associate at ATS will perform the role of moderator with respect to all questions submitted through the meeting.

As matters of business to be conducted today, we have the election of directors, the reappointment of the corporation's auditors for the coming year and finally, an advisory resolution on the corporation's approach to executive compensation. If there are no objections, I will ask Anup Das and Luke Zettel of Computershare Investor Services to act as scrutineers of the meeting.

The Secretary has advised me that the notice calling this meeting, together with a form of proxy and Management Information Circular and the addendum to the management information circular collectively referred to as the Management Information Circular, have been made available to each Director of the corporation, the auditors of the corporation and each intermediary and registered holder of common shares of the corporation of record as of June 16, 2025, the record date for the meeting, all as required by in accordance with applicable laws.

These materials are available on the corporation's website at atsautomation.com and on the corporation's profile on SEDAR+ and EDGAR.

Our transfer agent, Computershare Investor Services has attested to the proper mailing of the notice calling this meeting and there has been filed with me the proof of service of such mailing provided by the transfer agent.

The scrutineers have provided me with their preliminary report regarding shareholders' attendance at the meeting. I'm pleased to say that the scrutineers report that there are common shares representing just over 90% of all outstanding common shares of the corporation present at this virtual meeting or represented by proxy.

Accordingly, I declare that the requisite quorum of shareholders is present and I declare the meeting is being duly and properly constituted for the transaction of business. I direct that proof of mailing and the scrutineer's final report on attendance be annexed to the minutes of the meeting.

As this meeting is being held virtually via live webcast, we think it is necessary to set out a few rules for orderly conduct.

One, questions can be submitted by using the instant messaging services of the Lumi virtual interface.

Two, when asking a question, please indicate your name, which entity you represent, if any, and if you're a shareholder, duly appointed proxyholder or a guest.

Three, questions will be addressed during the question period at the end of the meeting, provided that questions regarding procedural matters or directly related to the motions before the meeting may be addressed during the meeting.

Four, for the purposes of the meeting today, voting on all matters will be conducted by electronic ballot. Registered shareholders and duly appointed proxy holders will be asked to vote on each item of business at the same time after the presentation of all business items. If you have already voted, you do not need to do so again, unless you wish to change your vote. If you vote again using the electronic ballot, your online vote during the meeting will revoke your previously submitted proxy.

Five, once discussion on all items of business has concluded, I will give you approximately 1 minute to enter your votes. If you haven't voted already by proxy, then I will declare the voting closed on all resolutions.

Six, when you're asked to vote, you will receive a message on the virtual interface requesting you to register your votes. You will only have a certain amount of time to do so when the polls are open.

We will now proceed with the formal portion of today's meeting.

I've been advised by Ryan McLeod that he would be prepared to second each of the motions in respect to the items of business outlined in the management information circular. Accordingly, unless there are any objections, I will take such motions as seconded with no further action needed.

The first item of business is the presentation of the corporation's consolidated financial statements for the year ended March 31, 2025, and the auditor's report thereon. Copies of these statements have been mailed to the shareholders who requested them and are also available on the corporation's website and on SEDAR+ and EDGAR. It should come as no surprise that it is not proposed to read the financial statements to the meeting.

So receipt and presentation of the financial statements for the year ended March 31, 2025, are hereby acknowledged and I direct that the financial statement and the audits -- statements and the auditor's report thereon be next to the minutes of the meeting.

We'll now proceed with the election of directors. The number of directors to be elected at the meeting has been fixed at seven. I move to nominate those persons specified in the management information circular for election as directors of the corporation to hold office until the next Annual Meeting of Shareholders or until their successors are duly elected or appointed in accordance with the articles and bylaws of the corporation. And I take such motion as duly seconded by Ryan McLeod.

The proposed nominees are: Avik Dey, Joanne Ferstman, Kirsten Lange, Michael Martino, Sharon Pel, Daniel Pryor, and Philip Whitehead. If there are any further remarks with respect to the foregoing, please submit them now through the instant messaging service on the virtual interface.

There is no further discussion with respect to the foregoing.

Thank you, Sarita. As there's no further discussion, I move that the nominations be closed and take such motion as seconded by Ryan McLeod.

We will now proceed with the reappointment of the auditors of the corporation. I move that Ernst & Young LLP be reappointed as auditors of the corporation until the next Annual Meeting of Shareholders or until a successor is appointed and that the Board of Directors is authorized to fix the auditor's remuneration and I take such motion as seconded by Ryan McLeod. Is there any discussion on this motion?

There is no discussion at this time.

Thank you, Sarita. As there's no further discussion, we will move to the next item of business.

The next item of business is to consider and if deemed advisable, to pass a non-binding resolution accepting the corporation's approach to executive compensation. The full text of which is on Page 14 of the Management Information Circular. And I will refer to this as the advisory resolution on executive compensation.

To provide context for this resolution, we believe that a shareholder advisory vote forms an important part of the ongoing process of engagement between shareholders and the corporation on executive compensation. I, therefore, move to pass the advisory resolution on executive compensation and take such motion as seconded by Ryan McLeod.

Is there any discussion on this motion?

There is no discussion at this time.

Thank you, Sarita. As there's no further discussion, we will proceed with voting. As mentioned, voting today will be conducted by electronic ballot. As a reminder, if you have already voted in advance, do not vote again unless you want to change your vote. If you vote again using the online ballot, your online vote will revoke your previously submitted proxy. I will now take a moment to ask the balloting be opened to registered shareholders and duly appointed proxy holders.

The polls are now open, and at this point, all registered shareholders and duly appointed shareholders who have properly logged in with their control numbers or username and who wish to vote will be able to see on the screen all motions being brought forth at this meeting.

Please register your votes by accessing the voting page and selecting the for or withhold buttons next to the name of each proposed director and next to the resolution with respect to the appointment of Ernst & Young LLP as the corporation's auditors. And the for or against buttons next to the advisory resolution. Once the electronic balloting closes, the voting page will disappear, and your votes will be automatically submitted.

So I'm going to pause here to allow time for voting and then I'll come back in a minute.

[Voting]

Okay. So I think everybody's had time -- plenty of time to vote now. So I will declare the polls as being closed. Thank you very much.

I've been advised by the scrutineers that a sufficient number of votes have been received to pass all of the resolutions before us today.

Accordingly, I am pleased to announce that first, each of the seven nominees has been elected as Director of the corporation to serve until the next Annual Meeting of Shareholders or until his or her successor is elected or appointed.

Second, the appointment of Ernst & Young LLP as auditors of the corporation has been approved, and the Board of Directors of the corporation has been authorized to fix their remuneration.

Third, and finally, the advisory resolution on executive compensation as more particularly set forth on Page 14 of the management information circular has been approved by a majority.

I direct that the results of the poll be included with the minutes of the meeting. The final results of voting will be announced in a press release in accordance with the policies of the Toronto Stock Exchange and New York Stock Exchange and filed on SEDAR+ and EDGAR.

So ladies and gentlemen, that concludes the formal business brought before the meeting. As there is no further business, I will declare the formal part of the meeting to now be complete. Thank you.

As you know, this is my last meeting as Chairman of ATS, bringing to a close 15 years as a member of the Board of Directors and Chair. This organization has been on a fantastic journey and I've been privileged to have had the opportunity to support the company and play an active role in its guidance over this period.

When I look at the company, from where -- from when I first joined the Board to where things are today, it is a remarkable story of growth and innovation supported by an incredibly strong leadership team.

And of course, I've got a lot of people to thank for their support during this period, including, as I already mentioned, Andrew.

Andrew, thanks for everything you've done and all your accomplishments. Congratulations and best wishes on everything that's to come for you. The executive team has been a fantastic source of support commitment, excellence dedication and, of course, patients when it comes to the Board and the Chair. So thank you for that.

I want to thank the many employees of ATS that had a privilege to meet all around the world. It's just completely inspirational. I already thank the colleagues on the Board, but I thank them again. A terrific group of people, tremendously supportive and very, very dedicated.

I want to single out Dave Cummings, who's leaving us today and has made a tremendous contribution and was a very loyal member of the Board. Thank you, Dave, for everything you did.

And I want to thank once again, our shareholders, many of whom I got to know and talk to over the years, engaged with in discussions that we're constructive, appropriately challenging and helpful was absolutely tremendous. It's a Chairman cannot ask for more. So thank you all very much.

Being part of this journey has really been deeply rewarding. I may no longer be part of the Board, but I will remain an engaged supporter of the organization. The Board that we've just elected will bring valuable insight into ATS and fresh perspectives from new members. I wish them the very best and I'm very pleased to see Mike Martino stepping in as the new Chair.

I look forward to watching ATS grow, continue to grow and evolve in the coming years and decades under the strong leadership team and Board. I am highly confident that the best chapters of the ATS story are yet to be written.

I will now invite our current CEO, Andrew Hider, to offer his remarks. Andrew?

Thank you, David. Since joining ATS I've been fortunate to work alongside a skilled Board of Directors who led by Dave McAusland. I'm thankful to work with and learn from him and our other Board members.

A hallmark of our time working together is the ATS growth story, which was highlighted again in our recently released Q1 results. We have a talented, dedicated global team who have been and will continue to be instrumental in truly owning and building our culture of continuous improvement and bringing the ABM to every aspect of our operations and our focus on ATS' value, people, process and performance.

I look forward to watching the company continue to grow and progress as a world leader with incredible customers, dedicated employees, and engaged shareholders.

Thank you for the opportunity to serve ATS.

I will now pass it over to Mike Martino. Mike, over to you.

Thank you, Andrew. You've done a tremendous job of leading ATS during your 8-plus years, and we sincerely wish you the best in your next endeavors. Your time at ATS has been marked by consistent execution and meaningful progress. We're grateful for the strong foundation you leave behind.

I would also like to offer a genuine thank you to David McAusland, for his exceptional stewardship and unwavering dedication to ATS over the past 15 years, as well as the strong words of support he shared for ATS.

As a representative of the largest shareholder of ATS, I've been proud to watch this company grow during my 18 years on the Board, and they look forward to my expanded role moving forward as Board Chair. From a Board perspective, we have full confidence in the ATS leadership team and our interim structure and we will support the company as it continues to execute on its existing strategy as it leverages the ATS business model as a competitive differentiator.

With that, we can now proceed to questions. As explained at the beginning of the meeting, any shareholders, proxy holders or guests who would like to ask a question and use the instant messaging feature of the virtual interface to do so. We will answer as many questions as time permits. As a reminder, when asking your question, please state your name, the entity you represent, if any, and confirm you are a shareholder, newly appointed proxy holder or a guest.

Please limit your questions to topics relating to today's subject matter. For each question we answer, we will summarize the question, read out loud the name of the person who asked such question and if applicable, the entity such person represents. We would like to remind you that the questions which were already answered or that are redundant or repetitive will not be answered.

Secretary, do we have any questions thus far?

We have no questions thus far.

We will give the attendees another few moments to type in questions.

There being no further questions, we are now concluding the question-and-answer portion of the meeting.

That concludes the Annual Meeting of Shareholders of ATS. I will sign off by saying thank you for participating and reminding you that our door is always open for shareholder engagement during the year.

Have a great day. Goodbye for now.

Welcome to the ATS Corporation First Quarter Conference Call and Webcast. This call is being recorded on August 7, 2025 at 8:30 a.m. Eastern Time. Following the presentation, we will conduct a question-and-answer session. I will now turn the call over to Arjun Kapur, Investor Relations Associate at ATS.

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.

Please note that our remarks today 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 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 in Slide 3 of the slide deck.

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

Thank you, Arjun. Good morning, everyone, and thank you for joining us. Before we discuss our Q1 results, I want to take a moment to acknowledge the leadership transition as they move on from ATS. I've been honored to lead this great company through a period of growth and transformation as we expanded our capabilities, strengthen our position in key markets, and created a solid foundation for the future.

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. 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 Q1 results, which we reported today. 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. 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. Order bookings were $693 million, with good diversification across our portfolio. Adjusted earnings from operations in Q1 were $79 million.

On to our outlook. Order backlog ended the quarter at approximately $2.1 billion as we continue to win and deliver across our diversified portfolio of offerings. 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. We are closely monitoring the business environment given the dynamics of cross-border tariffs.

In parallel, we continue to advance our strategy to grow repeatable revenue through services, consumables and digital offerings. Within Life Sciences, order backlog at quarter end was $1.2 billion. We secured wins across submarkets, including auto-injectors, radiopharma and blood glucose monitoring wearables. Our diversified Life Sciences opportunity funnel remains strong. Supported by our proven capabilities in regulated markets and deep customer relationships.

By way of example, Comecer continues to be a partner of choice for radio pharma customers who value quality and a proven track record for execution. As more customer programs advance towards commercial readiness, Comecer is uniquely positioned to provide localized and specialized support from our new site in Indianapolis, which opened at the end of July.

Separately and discussed previously, some customers in the lab research space are taking a more measured approach to capital spending as a result of changes in U.S. government funding, although this does not change our outlook for Life Sciences overall.

In Food and Beverage, our total remains strong, and we ended the quarter with a backlog of $229 million, an increase of 6% compared to Q1 last year. 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 for secondary processing, packaging and services further supported by the addition of Paxiom.

In energy, our funnel includes a mix of short and long-term opportunities as the nuclear industry continues to benefit from renewed investment and favorable government policy. In the near term, there is momentum from ongoing CANDU refurbishment activity, while both large-scale new builds and emerging small module 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.

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 due to relatively lower EV end 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.

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. On the ATS business model, in Q1, our global team is actively engaged in key initiatives, including Kaizens, workshops and problem-solving events focused on all of our value drivers.

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. On M&A, our teams are in 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 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. On digital innovation, we leveraged our acquisition of reality to develop and launch a new interactive and scalable virtual reality training platform for customers. In energy, we advanced the deployment of our multiplex system. Multiplex is a patent-protected concept designed for the safe, precise cutting and removal of large nuclear reactor components in decommissioning and waste handling applications. Multiplex is one example of our ability to innovate and deliver safe, efficient solutions within the highly regulated nuclear space.

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, including ATS advancements in digital transformation, intelligent automation and technology-enabled scalability. Through our workshops over several days, we focus on innovation trends in automation, including time to market as well as digitalization and AI advancements. 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. 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 #1 in the engineering, manufacturing and medical technology category. 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.

I'm proud of what we've accomplished together, and I look forward to watching ATS continue to grow and succeed. Now I will turn the call over to Ryan. Ryan, over to you.

Thank you, Andrew, and good morning, everyone. Beginning with our operating results for the quarter. Order bookings were $693 million, down 15% compared to Q1 last year, 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. Importantly, our trailing 12-month book-to-bill ratio at the end of Q1 remained above 1, 1.7:1. Revenues for the first quarter were $737 million, up 6.1% compared to last year. 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.

Nevertheless, our outlook for revenue growth for the full year remains unchanged.

Moving to earnings. First quarter adjusted earnings from operations were $78.6 million or 10.7% of revenues. This was in line with our expectations and represented an almost 40 basis point sequential improvement from Q4. Gross margin for Q1 was 29.8%, consistent with Q1 last year. On SG&A, excluding acquisition-related amortization and transaction costs, expenses in the first quarter totaled $136.4 million, a $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. As always, we continue to focus on ongoing efficiency improvements in our operations.

Excluding the mark-to-market impact related to changes in our share price, stock-based compensation expense was $4.8 million in Q1. 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. 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. In the quarter, we incurred an additional $2.5 million of restructuring costs as a continuation of the program announced last year. We continue to expect operating margin improvement throughout fiscal '26, although this may not be linear. 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. 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. Of note, the majority of our exports from Canada into the U.S. are covered under the USMCA.

Moving to the balance sheet. In Q1, cash flows from operating activities were $156 million. Our noncash working capital as 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.

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 3.6x on a pro forma basis in Q1, which includes full year contributions from our most recent acquisitions. The improvement from Q4 was driven by the receipt of the EV settlement payment used primarily to reduce amount owing on our credit facility. We remain committed to bring our leverage to our target range of 2 to 3x.

As we noted when we reported our year-end results, we were active on our share buyback program during Q1. 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. 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' growth 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. 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. Our decentralized management structure, strong leadership team and our global team's commitment 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.

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

[Operator Instructions] And your first question comes from the line of Joe Ritchie with Goldman Sachs.

Andrew, congratulations. I'm going to miss talking to you on these conference calls and but wish you nothing but the best luck.

Thank you, Joe. Appreciate it.

Yes, you bet. Can we just -- can we just talk about adjusted the demand environment a little further? It doesn't seem like you guys are seeing much slippage in your business. at the same time, fully recognize that orders can be lumpy, right? And so a little bit maybe a slower start to the year. But maybe just kind of talk through the demand environment, what you're seeing, what your customers are saying, across your key end markets and kind of how you're thinking about the outlook for the rest of the year?

Yes. Joe, maybe I'll start and then Ryan can add on. If we step back a couple of data points, First, as you're well aware, we don't look at any single quarter in isolation. We look over a period of time. And our trailing 12-month book-to-bill ratio is 1.17. So really aligned around that growth target. 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 the prepared remarks, what you'll find is, in large part, our funnels remain healthy 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. If you just look at life sciences, whether it's the continued support around GLP-1 drugs and a little bit of data around that, the novel drug approvals are in line with last year, which effectively means more drugs continue to be approved. And we continue to engage with customers about their launches to radiopharma and the continued identification of new drugs or existing drugs to support cancer treatment around identification and/or treatment after you receive surgery to wearable devices and in the treatment of diabetes or even glucose monitors to -- and we've talked about this in the past, even the ongoing support for pharmacy automation or even contact lenses.

So many, many key opportunities around that space. We then go to energy. Our nuclear business remains strong, continues to be strong. Four key themes in that, and I've walked through those in the past, but it's CANDU reactors. It's decommissioning it's SMRs and its fuel requirement needed for the resurgence of nuclear energy.

To our food business that remains continued successful in its pursuit of not only ongoing business, but new areas of technology and innovation and bringing value to our customers. Transportation has really steadied out. And when we look at that business, we're winning work and pleased with where we sit. We've rightsized the business for our view of the market.

And then lastly, consumer products. We look at that market and we're monitoring that space, but we've seen it hold up and whether it's warehouse automation or even in our ability to support high-end cosmetics and so it's remained call it rather steady. So overall, our view on the year and the market is we're in a strong position, strong backlog and our book-to-bill ratio remains in line with our expectations on growth.

And Joe, just -- I'll jump 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 environment or have been in place. And if we exclude transportation, our orders are up over 10% year-over-year in the first 6 months of the calendar year. So as Andrew said, we've got a strong backlog, and we're very well positioned to continue to drive revenue growth for the year.

That's super helpful. I appreciate that. Can I just maybe quickly just kind of double click on the energy business, specifically because your backlog suddenly have a lot over year-over-year, it was -- saw a pretty material uptick sequentially. What I find interesting about that is that a lot of other companies that we look at have been talking about project delays in the energy sector. So what was it about your business this quarter that saw like a material uptick. Is it on the nuclear side? Just any color around that would be helpful.

Within energy, most of the growth is coming in nuclear, as we've talked about. A lot of what we're doing in that space and the bulk of the growth is coming in refurbishment activity, so primarily around CANDU reactors. And we've seen a very strong demand environments in that space and continue to see a good outlook there. In terms of other areas, as Andrew talked about, in the SMR space and in fuel handling, that's a smaller part of our business today. And we've talked about it.

I mean, our view on the SMR market is a lot of this is in the development phase today. And represents an exciting opportunity, but more of a future opportunity for the business.

And your next question comes from the line of Maxim Sytchev with National Bank Financial.

And Andrew, obviously, all the best in future and definitely, it's been a pleasure. Congrats.

Thanks is mutual.

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 of acceptance on the part of Avidity, Heidolph, that could be helpful.

Yes, absolutely. And I'll start with a bit of a headline on this. Look, our funnel continues to grow here. And we see strong opportunity and there is traditional with ATS life sciences systems working with BioDot, as well as Avidity and Heidolph bringing solution sets to their markets. And so we did have some awards within the quarter, but more future view is the funnel continues to be healthy, and the addition of Heidolph has certainly been a welcome addition for the ability to bring more to the lab space and really align with a as well as one of the business units in SP our Gen vac business. And so exciting future and see this as an area that we -- as ATS can bring higher value to our customers.

Helpful. And then -- go ahead.

Sorry, just on the overall integration progress across all 3 going very well. very much in line with our expectations, ABM deployments and uptake has been very strong in all 3 businesses, some of the cost synergies as it relates to cost structure improvements, supply chain integration. We're very pleased with the process across all 3 assets.

Okay. That's good to hear. And Andrew and, I guess, your comment around some of the research funding being under pressure in the U.S. 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?

That's correct, Max. It's a low single-digit percentage of our business that is in that space. And so we have seen impact, but as I think Andrew said in his prepared remarks, not a material impact to our overall business or overall Life Sciences business.

Okay. Okay. Good to hear. And then just in terms of the margin profile, I think in the past, you've mentioned that Life Sciences typically has a higher gross margin. I guess as the product mix is shifting right now, I mean, restaurants, transportation, more life sciences, food, et cetera, how should we think about the progression on margin on for basis? And I don't know if you can talk about kind of like short term versus medium term, but any color would be helpful.

Yes. I mean I'll speak more to the medium term Max because 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 of driving revenues within a quarter. But generally speaking, where we're targeting and expect to drive margin expansion is through gross margin. And there's some operating leverage we expect as well from where we're operating today.

But and some of that is mix tied to life sciences. Some of that is mix tied to the product and services portfolio. And then the improvement initiatives that we're driving around supply chain labor productivity in other areas. So most of that does, again, show in our gross margin over the medium term.

Okay. And is there anything in the project pipeline, which is kind of restraining the progress when it comes to margins in the short term?

No, no. No. There's nothing unusual, nothing to call out.

Okay. And then maybe just last question. I mean, obviously, with the leadership transition, I'm just curious over around the M&A pipeline? And were you guys seeing in the market specifically? And I guess your ability to act if something were to come through tomorrow.

Yes. So I mean, like I think we said in the prepared remarks, it's really business as usual. So we've got a plan for the year. The team is fully engaged on executing to that plan and as well as our strategy. And that strategy is centered on both organic and acquisition-related growth.

So M&A activity is continuing, cultivation activity is continuing. In terms of doing a deal or getting something over the finish line in the short term. That's going to be more governed by our leverage than support from the board or the ability to act in this interim period. And so we've talked about our focus is on deleveraging bring our leverage to that 2x to 3x range. Now that doesn't mean we can't do smaller tuck-in acquisitions in the short term. But again, that's from a capital deployment standpoint, our focus is on deleveraging.

And your next question comes from the line of Justin Keywood with Stifel.

Echo the congrats to Andrew and all the success and value creation at ATS.

Thank you.

Just on the tariffs. We've seen several major U.S. CapEx announcements from ATS' Life Sciences customers. Is that translating to any increased activity with ATS assuming that there's going to be increased automation over the next several years? Or is it just announcements at this stage?

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

So ATS is life sciences customers. We've seen several increase CapEx announcements in the U.S., presumably to combat potential tariffs. Is that leading to increased conversations or order activity with ATS, assuming that there's going to be related increased automation.

Yes. I mean if you -- so I'm going to answer your question, but I'm going to walk through it in a bit of phases here. So if you step back, whenever there's an investment, whether it's tariff onshoring, supply chain derisking, I mean we can go to labor and the lack of labor to support output, 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 of the anomaly today in the orders that customers have cited tariff being the reason for an order. And I would just say, that is not the norm. We've aligned to more is that customers are building capability and capacity where they have demand. And we're seeing customers really align around that.

Now there is a lot of discussions for future and where they want to build the product. And so we are seeing that, and we have seen a few customers pull their decision into the U.S. versus outside of U.S. But overall, I would say we haven't seen in large part in our investment 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.

Understood. That's helpful. 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. But just trying to understand if there was any part of that settlement that was maybe pushed into the next quarter? Or was it fully received?

That was fully received and that issue is closed and behind us.

Was there any tax portion of that payment because it was announced at $194 million. So just trying to square that with the free cash flow in the quarter.

No, no tax impact. I mean there's a future tax benefit tied to the write-off. But no, there is no tax impact to the cash inflow.

Okay. And then just on the deleveraging outlook targeting to get to the 2x to 3x, any indication on timing when that could be achieved?

Yes. Our expectation is we get there this year. Our biggest opportunity in addition to continuing to operate profitably and is really in working capital. And I talked about this in my prepared remarks, but our goal is to maintain working capital below 15%. We're above that target right now. And some of that is structural as we've added some acquisitions which are more product-related businesses, those have put pressure on our ability to achieve that target.

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

And that's fiscal year, just to clarify.

Yes. Yes, correct.

And your next question comes from the line of Patrick Baumann with JPMorgan.

Andrew, congrats on the great run at ATS and the opportunity, how you go back to. Best of luck.

Thank you.

Yes, no problem. On the margin dynamics, I know you were talking a little bit longer term, Ryan. If sales are down a little bit sequentially in the second quarter, do you think you can still drive sequential margin expansion? Or do you think margins come down a little bit in the second quarter and then resume that expansion in the second half? Because I think previously, we expect to kind of progression sequentially through the year. I just want to make sure everything is kind of lined up the way you guys are thinking about it?

Yes, Patrick. So our outlook for the year has not changed, and that's both in terms of growth for the year and margin expansion for the year. I do want to reiterate that -- I mean, first, I don't expect we're going to see big jumps in our margin sequentially. And there is going to continue to be variability. It's not necessarily a linear ramp.

But we do expect margin expansion for the year. And I talked through earlier a little bit on the initiatives that we have in place tied to material productivity, labor pricing, other areas of efficiency. And so I think what we saw this quarter is probably a reasonable run rate in terms of ongoing improvement but not necessarily linear.

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 Paxiom. Just curious what you're seeing from customers in terms of their investment plans? In that specific end market.

Absolutely. So we've continued to see this market, not only be stable, but additional opportunities in areas where we've invested in technology and innovation. And whether it's Paxiom or our business with CFT or even Raytec in optical inspection. We've continued to see this be supportive around how we enable customers to bring food to market and meet the requirements as needed for the end consumer. And so pleased with the performance year-to-date and really look forward to seeing this business continue to expand.

Okay. And then lastly, just on the portfolio. Is there anything in the portfolio that at this stage, you'd consider to be noncore? And you can maybe look for opportunities to kind of wind down over time or divest as you replace it with other acquired assets?

So I mean the short answer is no. But we've talked about in the past, our approach on capital deployment and value creation, and that includes looking at ongoing investments in the portfolio as well. And so that view of the portfolio and ongoing strategy work, that's something we refresh every year. And so that's going to continue to be how we approach it and view with a critical eye where we're generating value and what makes sense in terms of being part of ATS.

[Operator Instructions] And your next question comes from the line of Cherilyn Radbourne with TD Cowen.

This is actually Patrick Sullivan on the line for Cherilyn. And congrats, Andrew, on the next opportunity for you.

I appreciated the color on what you're watching in the lab space. I just want to clarify, would that be more tied to consumable side of things in the portfolio? And I just asked this because there's a recent White House action plan that outlined an interest in heavily investing in automated labs across private regulatory and academic sector. So I wanted to know kind of what capabilities ATS might have in lab automation and then kind of parse that away from the consumable lab equipment stuff.

Yes. So maybe I'll start here. So we are in, I would say, a bit of bolt around this. And if you look -- and not to get too specific, but I'm going to walk through the businesses a little bit. When you look at cloud, that's a bit more in the lab automation side and they support that area of business. And we do view that it is in line with the ability to help labs as they look at automation for the future.

When you then go to Avidity, they're going to 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, and we all know where they are in that position. That is also a consumable area.

And then when we look at SP with their business, it is lab Lio Again, that is one around. It certainly can support the initiative around automation, but it is more around if you're going to run multiple drugs as a trial they would then do the vial process for that with the Genevac business. And then lastly, Heidolph is more the -- is supporting overall lab laboratory space and what they want to do, whether it's during mixing or for their process within the lab area.

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

Okay. Great. And then I guess just one more. So can you just elaborate on the multiplex system that you've recently highlighted in the opening remarks, what kind of applications are they used for? Is that used in the CANDU related work that you guys do? Is that something that's in -- more in the innovation phase side of things right now?

Yes. So multiplex, very excited about this patent protected business. It is around the decommissioning area of the business and decommissioning is used in the traditional nuclear reactors. It is a normal course process and they go through decommissioning and then often they'll recommission a new nuclear reactor. This allows them to be more efficient, more space conscious, and it is an area that truly helps in the process around decommissioning. And we have won awards, and we do have a funnel that's built around this business in this market.

And your next question comes from the line of Michael Glen with Raymond James.

This is actually Fred Gatali on for Michael Glen and congrats, Andrew. Let me start with Life Sciences regarding the ordering sector business, how diversified is the business outside of GLP-1 applications? Is the book revenue concentrated in GLP-1? Or are there other emerging or growing categories for auto injectors.

Yes. So the majority is -- the majority of our auto-injector business is tied to GLP-1. In terms of diversification, we have 10 active customers in that space today. So it is fairly well diversified. 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 addition to diabetes treatment. There's a lot of research and work being done by these drug manufacturers around new applications. So things like cardiovascular health, neurological disorders. So it's a fast-growing area and an area we continue to see a lot of opportunity in.

Great. And then on Life Sciences, further, so this is a slowdown from a much lower pace in fiscal '25. Can you just indicate what categories of products or that slower piece of bookings?

So you're asking about the quarter itself?

Correct.

Yes. I mean, like I said, it's there are some larger programs in the prior year first quarter. Some were tied to wearables in the space. I think the auto-injector, it was still a big piece of Q1 bookings or a significant piece, but was lower year-over-year. I mean it really is, as we talked about kind of normal course variability with -- it's just timing of some larger programs.

All right. And then last one for me. Just PAUSE on the timeline associated with bringing the working capital back into the 15% range -- can you talk about that? And then in addition, maybe highlight where working capital remains elevated right now? What segments or product lines?

Yes. I talked a little bit about this. I think our expectation is to get there for the end of the year. And it's really in 2 areas. Part of it is kind of the structural change I talked about with adding more product-based businesses. And there, the opportunity is primarily in inventory terms a little bit on payment terms in the order to cash cycle.

In the custom automation business, that's more of a timing. And we're going to see that variability quarter-to-quarter. That's normal course for us. But overall, the opportunity there is primarily in payment terms and that order to cash cycle.

There is no further questions at this time. I will now turn the call over to Andrew Hider for closing remarks. Andrew?

Yes. Thank you, operator, and I invite you all to participate in our Annual Shareholders Meeting, which will be all virtually today at 10:30 a.m. Eastern Time. Details are certainly in the management info circular.

Lastly, thank you for joining us. Stay safe, and goodbye for now.

That concludes today's call. Thank you all for joining. You may now disconnect.