Managing Director in the Investment Banking Division at Deutsche Bank. Here with me today and this morning, we're excited to welcome Ryan McLeod, who is joining us for a fireside chat. Ryan is the Chief Financial Officer at ATS, a global leader in providing integrated automation solutions for customers in a number of highly attractive end markets, including life sciences, food and beverage, consumer products, and transportation. Welcome. Great to have you with us. Thank you, Stefan. Very glad to be here. Fantastic. Ryan, perhaps to kick things off, can you provide us a bit of an overview of ATS for anybody who might not be as familiar with the company? Yeah, happy to do so. So we're a $3 billion company, about 7,000 people. We're present in over 20 countries. So global business, decentralized. And what we do is we provide automated manufacturing solutions for our customers. So, a really topical, good example to kind of bring it to life, GLP-1 drugs, tremendous demand today. So a company who's launching a drug, a new product, they're going to come to us and we would be in this particular case, we're in the drug delivery system, so the auto-injector. And they're going to come to us, we're going to build out, design and build their entire manufacturing process for them. We build it in our factory, we then tear it down, ship it to their factory, set it up, train their operators how to use it, and then we'll service and support that equipment for, for the life of the equipment or the life of the product. About half our business today is in life sciences, so medical device, pharma, radiopharma, transportation, for us today is primarily EV. So we're involved in, battery pack and module assembly. We have a food business, which is, primarily on the regulated side, in, in providing equipment solutions for food processing, packaging. We have an energy business, which, for us is clean energy. So, so we're involved in the nuclear space, also grid battery storage, which is a very similar process to what we do in EV. Then, we have a consumer business, which is a variety of different things. There's some warehouse automation we do, there's some packaging, some durable goods. But at the end of the day, it all comes back to providing that solution for customers, which is really helping them bring their product to the market. That's very insightful. So Ryan, you've been with ATS for nearly two decades now. In 2020, you were appointed CFO. Can you tell us a little more about the strategic journey that, and the changes that the business went through, while you were there for the past 20 years? And how different is today's ATS compared to the company that you joined back in 2007? So 17 years. I don't want, I don't want to age myself too much. So, I mean, fundamentally, at the core, we still have this really great automation business. But in 2007, when I joined, it was the business was very much in a turnaround situation. So we went through a process. There was a new board, new CEO, new leadership team brought in. We divested some non-core assets. And that, you know, we call it a 10-year period of really regaining market trust, credibility, and really turning the business around. In 2017, a new CEO joined, Andrew Hider, who's our current CEO, so he's been with us just over 7 years now. His background is, he's an ex-Danaher employee, so he had a different operating model, believed in it. We've completely decentralized the corporation. We've brought in, let's say, some similar tools. We have our ATS Business Model, which is all based on continuous improvement. I think the other key change in when Andrew joined is we've really become a market-focused company. So as I said earlier, half our business today is in life science, and that's been a very intentional shift. It's a regulated market, high consequence of failure products. Back to my example on the injectable device, that's a market where quality is really critical to those customers. And price is always going to be a point of discussion with customers, but we like regulated markets like life sciences, lower cyclicality, good growth over a long period of time. Food is very much has very similar dynamics to the life sciences space, and then energy as well. Highly regulated. Quality is mission-critical in that space as well. And so those have been the big changes. And then, you know, we've been very focused on growth over the last five, seven years. We've done, I think, 24 deals, 24 acquisitions over the last five years. So, continuing to build on this really strong automation business by adding new technologies, new capabilities that we can bring to customers, in a more holistic way, provide complete solutions for them. So one of the major themes in our conversations with many of the leading industrial manufacturers here in the US is, aside from a tremendous trend towards industrial automation, has been the growth over the last few years from nearshoring efforts and a move of manufacturing operations back onshore, both in the US but also in Europe. Do you see sustained tailwinds there for ATS to benefit from that growth in years to come? The short answer is yes. You know, even... I mean, so I think there's been some acceleration in that regard. At the end of the day, what drives our business is companies who are launching a new product, so they're innovating, they're bringing something new to the market, or they're looking to scale up. A really good example, a company who spoke at our Investor Day back in 2018, so pre-COVID, I would say the geopolitical environment was a little bit better back then, maybe. But they—so the company was Insulet, and they have the Omnipod. It's a wearable insulin pump and a really great product. But they were doing all their manufacturing, they were sole sourced at a site in China, in what I would describe as a semi-automated facility. So roughly 2,000 people working in this facility. And so again, pre-COVID, pre this focus on supply chain de-risking, but they did identify that they needed to scale, and they had this risk of being sole sourced overseas. And like a lot of companies, the risk of getting somebody on your product but not being able to supply is a major risk. So they came to ATS, and you know, their chief operating officer at the time, who spoke at our Investor Day, he said we were not the cheapest option, but we were the low-risk option for them. So, we built out their entire manufacturing process in close to their headquarters in the Boston area, so not a low-cost region. It was a fully automated facility. They went from 2,000 operators to roughly 200 for the same output, and that was all done through automation. They used all our core technologies, our linear motion, our software platform, our vision systems. The punchline of the story is the gross margin on their product went from 45% out of their facility in China to 65% out of their automated factory in North America. So that's a meaningful- Mm-hmm. Companies who are thinking about reshoring or de-risking, there's a lot of benefit. And there's other factors. I mean, labor availability is a challenge for companies in North America or even Europe. So it's certainly a tailwind, but again, it comes back to companies have to... We don't see a lot of reshoring for reshoring's sake. It's typically tied to a new product, or building and scaling capacity. Are there any end markets that you would consider attractive, which you're currently not in or present in, in a meaningful way? Yes. Which ones are those? Well, I mean, so I mentioned this, we do a lot of market work, and so, you know, I'd say in terms of where we are today, life sciences, it's half our business. It's a focus for us. Again, a highly regulated market, low cyclicality, and quality is critical. Food, very much the same way. So markets that have that kind of a characteristic are markets that we're going to continue to look at and look for ways to get into, whether it's organically or inorganically. We've covered quite a bit on the life sciences side, maybe shifting gears to food and beverage. I'm curious what your outlook for that industry is and why it is such an attractive and important end market to you. I know, most recently you acquired the packaging machine provider, Paxiom, and clearly it's been a tremendous growth area for ATS over the last few years. Yeah, this is a market that we've primarily gotten into through acquisition. And again, a lot of similarities to our life science business, which is where the attraction comes from. Low cyclicality, a good margin opportunity. Quality is really important in this space. So our business today, we're the majority of our business is in primary processing and secondary processing. So primary processing is taking a tomato from the vine, turning it into a puree or tomato paste. Secondary processing would be taking that product and making a sauce, ketchup, baby food, whatever. And so again, quality is really important. These are processes where bacteria can be harbored, so you know, customers are very focused on those aspects. And, and in our existing business, we do have some packaging capability as well. Paxiom, though, is... That is their primary focus is packaging. So primary packaging, where the food is gonna touch the packaging. Secondary packaging is, it's gonna go into a carton or some sort of box or something, something else. And, and so highly complementary to our processing, our current processing capabilities. Excuse me. From a capability standpoint, also from a customer standpoint, both our existing business is global. It's majority of it's in Europe today. But Paxiom are also a global business, but primarily in North America. So highly complementary from a customer standpoint and a capability standpoint. Again, food's a business that we targeted a number of years ago because of those characteristics that are very life science-like and an area that we're going to continue to look for growth and continue to invest. You mentioned on the outset your exposure also into the electric vehicle space. Clearly, over the last few months, we've seen the market weakness there across your customer base in the transportation segment. When does ATS expect these uncertainties around EV technology to abate? And what is your longer-term outlook in this end market over the next 5-10 years? So I'll start with the long term. I think there's certainly a growth opportunity here, and the companies that are in this space, so the traditional OEMs or newer pure-play EV folks, they're all working towards a higher percentage of their fleet being EVs. So whether it's 30%, 50%, well, whatever that end goal is for them, that hasn't changed. And so there's going to continue to have to be investment in that space in order to build out that capacity. What's been a little bit unique. Well, a couple things. I mean, we saw a lot of growth in Europe initially, 5-6 years ago now. Whether it was driven by consumer demand or regulation, there was a lot more activity from a capacity builder standpoint in Europe. When that was happening, there was, you know, investors asking us, "Well, when's North America going to happen?" It really happened for us over the last 2-3 years and including some customers playing catch up. So we've had a very large customer in particular that's been a big part of that. The other unique thing about what's happened in EV is the technology change in the batteries is so rapid that rather than in a traditional 5-7-year model window, where you would expect a changeover or retooling or something, some kind of investment catalyst, that's happening much more quickly. And that's driving a need for service work. It's driving also this incremental need for changing over. If you can get another 10%, 20%, 30% out of your battery power, the range, companies are looking at that very seriously. So, what's happened in the last little while is consumer demand has been weaker, and I think that's given companies the opportunity to pause some of that capacity expansion and focus on technology, making sure they have their products where they want them, getting that design stabilized. And so we expect over the midterm, there's going to be continued investment. Again, those long-term targets are there, whether it's company, consumer-driven or regulation-driven. There's still a lot of capacity that has to be built, but it is going to be what we've characterized as a more measured pace than what we've seen over the last 2-3 years. And so mid- to long-term, that's, there's still a lot of growth available and opportunity in that market. But in the short term, there are some headwinds. Maybe shifting gears a little bit to the overall strategy, and we alluded to this earlier, the strategic journey and transformation that the company has seen over the recent years, culminated in 2022 in a change of the name to ATS Corporation. Still it's a signal that your capabilities are now broader, more diverse, and more technologically advanced. Is this new corporate identity also a sign for a more increased technology transfer among your different businesses? Yeah. Again, short answer, yes. It was interesting when we went through that process, and we had to get shareholder approval for the name change. So we had a lot of questions from shareholders around why we were doing it, but none of them actually knew what our full corporate name was, which was ATS Automation Tooling Systems Incorporated. So it was a mouthful. But also, I mean, what we do today is so far beyond tooling. And so yeah, it was a very intentional shift, and we went through a fairly intensive process to end on a name that was very similar to what we had previously, ATS Corporation. But we wanted to do two things. One, we'd built up this really great brand with, with ATS over a number of years with our customers, and, and also we did want to reflect the, the broadening capabilities. So, you know, that's very much, and I didn't really touch on this, but, but strategically, when we're looking at acquisitions, we're not, we're not looking for other companies, that, that are, that are like our core business. We're not looking for other automation integrators or companies. We're looking for companies that have unique technology, unique capabilities, things that we don't have. And then with these very deep strategic relationships we have with customers, we're able to take this broader capability and, and bring them a, a more holistic solution. So again, the name change, was, kind of an exciting milestone for us. Yeah, we're really trying to capture this strategic journey that we've been on and the next evolution of the business. So AI has become a bit of a buzzword and is creeping more and more into the industrial world. Are you... and to what degree are you deploying AI these days, and how does this also link into, I guess, the ambition to increase the share of recurring revenues down the road? We're using AI, or we're looking at exploring, I guess, is probably a better way to describe it internally. So when we're, again, you know, part of our ATS business model is Continuous Improvement. We're always looking, it's not just in our operations, but it's in our finance organization, it's in our legal organization. What are we doing? Where do we have waste? Where can we be more efficient? So AI is a part of that, whether it's, you know, in our back office finance systems, our legal team is using it to do new NDAs, first reviews of NDAs and contract agreements, things like that. So, so there's an opportunity there, but I think more importantly, from a customer standpoint, we have software capability that one of our software products is called Illuminate. It's a manufacturing intelligence software, and it goes out on every piece of equipment. You know, new acquisitions aside, there's a process there, but the core business, it goes out on every piece of equipment, and it provides capability like predictive maintenance. And so if you're running equipment and you've got consumables or parts that are going to wear, it has the capability to tell you when that's going to happen, and it can tie into an ordering system. So you can kind of click a few buttons and then order spare parts, get them on site. We can deploy resources to go. So it's certainly something that we are continuing to build out. Again, I'd call it relatively early days, but has the potential to be very valuable for customers. And we've already seen a lot of use cases where it is demonstrating value. Mm-hmm. That's very interesting. Shifting gears again and a bit of a focus on M&A. It's been such a tremendously important element of your growth story in recent years, and the acquisitions that you've been making over the last recent, well, five years. I was actually counting $25, not 24. Can you tell us a little bit more about long-term capital allocation plans for ATS? And so specifically, finding the right mix between pursuit of M&A and deploying capital into inorganic growth vis-a-vis potentially implementing a dividend policy down the road as a growing and more mature company. Sure. So Paxiom hasn't closed yet. That'll be $25. But yes, so, I mean, we do, we've got a capital allocation framework that we follow, and we talk about it often internally and externally, but it starts with internal—our number one priority is internal investment. And whether it's investing in innovation, supporting growth in certain aspects of the business, that from an ROI perspective is always the best returns, or almost always, I should say, the best returns from meeting our hurdle rates and the pace at which we can do that. But number two from a capital allocation standpoint is M&A. We're in relatively fragmented spaces. We've got a lot of really good capability, but there's a lot of niche capability out there that we would find attractive. So that's, and you know we've got a you know pretty disciplined framework with which we pursue M&A. It starts with the market. We have to like the market. It has to be an area that ticks those boxes around lower cyclicality. It's a good growth market. Those are areas that we're going to invest in. It's got to have something unique, a technology capability, something that's additive to what we have. We also look at how we're going to operate the business. One of the things that's very important to us is developing our people, and we spend a lot of time talking about leadership development and talent development, because as we buy these businesses, if we need to deploy leaders into them, we need to have a bench to be able to do that. And then the financial return, which again, for us, our primary criteria is return on invested capital. When we look at the margins, the accretion, those sorts of things too. The third priority for capital allocation is we have a share buyback in place, which we really use opportunistically. We don't have a set amount of capital that we're going to deploy every year. It's really where we see value. Dividends not on our radar at the moment. That might be something down the road, but those, those other levers, again, there's a lot of opportunity. When you speak to investors, and clearly your investor base has shifted over recent years to perhaps a more growth-oriented investor base, what are some of the large pushback points that you're getting? What are they skittish around? Well, so I think, you know, folks who are newer to the business, they don't. You know, our business is one, it helps to come and see it. So people have a hard time understanding what we do. And so there's a perception of automation integrators, which you're taking components, and so it can be more limited from a value add perspective. But our focus has been, we've got this great talent of engineers and capability and years and years of, you know, some of it's experience. But how do we continue to build out our technology portfolio, our value add, whether it's hardware, you know, our linear motion platform is a great example. We have a vision system, or whether it's our software and some of the digital capabilities that we're building out, Illuminate being one of them. There's others as well. You know, not just integrating third-party components. So that is certainly something that we do, but bringing a more full and complete solution that embeds our technology and our hardware. And from a margin standpoint, that allows us to capture more of the pie. So I think that's an area. You know, EV is an interesting one. I think we've got a mix of investors. Some are very bullish on the sector, some aren't. Again, from a long-term perspective, we do see a lot of value there. But yeah, I think those are some of the key areas. I think we get a lot of support from investors on the M&A that we've done and continuing on that track record. People really like the exposure to life sciences, to the food markets. Nuclear is actually another one that... It's our smallest market vertical right now, but a lot of investors really like that exposure as well. That's great. So when you look at ATS's continued focus on inorganic growth and also a decentralized business model, you can certainly draw parallels to some of the best-in-class compounders. So as you think about the likes of a Nordson, IDEX, AMETEK, also all very, very much focused on life science end markets, is this perhaps the sort of these industrial best-in-class compounders, the right way to think about your peer set, at least in the future? So that's an interesting question. I mean, yeah, so short answer, yeah. I think we look at some what I would call aspirational peers, and you mentioned a few that have done a really good job from bringing together in a decentralized business and focusing on some really interesting areas that have the ability to create value. So but for us, it's... And to go back to what I talked about, strategically, we're aligning the business to markets that we see have long-term good growth potential: life sciences, food tick those boxes. There's again consequence of failure in those markets, so there's regulation, and customers really care about quality. It's not a you know, just a price discussion with customers. And then taking that business, continuing to build it organically, but also adding on, where we can through inorganic means, bring new capability and again, more fulsome solutions to customers. ATS has now grown to a $4 billion market cap business, an enormous track record under the current CEO and also under your tenure. Where do you see the business in five years? Are you just continuing on the successive growth, or do you think a more transformational move is also possible? So it's tough for me to put a number on it. I would say, you know, we do have continued growth ambitions. At the end of the day, the automation, the global automation market grows at mid-single digits. We're trying to outpace that growth, and our five-year CAGR with M&A is in the 19% range. Our average organic growth rate's been 8.5, 8.6% over the last five years. And I would say that's our continued focus. The challenge with M&A is we are disciplined, so we do a lot on cultivation. So Paxiom is a deal that we cultivated. Most of the deals that we're successful on are cultivated, so they're companies that are in our spaces. We've identified our business leaders. So, Paxiom is a great example where the president of our food business identified this business as an attractive business, met with the owners several years ago and worked over a number of years to build that relationship. So when you get into a situation of looking at, are you going to sell the business? What are you going to do with the business? We want to be that first phone call that an owner is going to make. So, you know, when businesses are in auctions, we tend to not be successful because it has to meet our return thresholds, and if it doesn't, if prices get bid up, then it's not something that's gonna make sense for us necessarily. So it's tough to put a number out there because M&A, if it fits, then great. If it doesn't fit, then we're not gonna participate. Maybe one last question before that, I open it up to the room to see if there, if anyone has a question. Multi-industry players aren't investing in anything. If you look at some of their CapEx investments, they're not going up, they're down. Meanwhile, tech companies couldn't be spending more money capitalizing on AI. So you have this divergent view, and investors are looking at both saying- ... The view is eventually the industrial side will change. Eventually, the large cap industrial will have to spend more. You stated currently, single-digit growth. You're planning and thinking about that. Is that also a point of, whether it's frustration or just observation, do you see that, see that changing? Meaning, could we be sitting here in 12 months, that mid-singles get to mid-double digits outside of anything you're doing, just from a recognition of the greater automation and spend around that? So that's a really interesting question, and it's tough for me to answer other than what we see in our markets. And I would go back to some of the fundamentals. I mean, for companies that... And again, life sciences is a great example where automation is widely accepted. I mean, it's the norm more than anything. And there's degrees of automation. I mean, there's fully, there's semi, and all kinds of in between. But I mean, for us, it's if you're going to build capacity in North America or in Europe or outside of low-cost regions, automation makes it almost always makes sense from a business perspective. It's... And again, whether that's just cost, or whether that's quality, I mean, you know, there, there's... I didn't talk about it, but the quality requirements in a life sciences application, you can't take risk on it. I mean, you can't have product failures. Those are market cap hit type discussions for our customers. So they're not willing to move on that. And so automation is absolutely critical to those customers in those industries, and that's why we've aligned ourselves. We have a business in consumer that does primary and secondary packaging of consumer and life science products. So when we do viscous filling of things like, cosmetics, but also, you know, it could be a sunscreen, it could be a moisturizer, it could be a steroid cream, a more life science application. That's a business where we do see a bigger tie to economic growth and cycles and in a downturn, you know, COVID was a great example where there's no investment. A lot of cosmetics weren't... Demand was down. And I think there's again, you know, I'm answering very specific to our industry, but if you look at some of the fundamentals around just labor availability, turnover of labor is a major issue for our customers. We have a life science customer in North America, where they've got a 25% turnover in their facility. So you can't bring people in quick enough and train them on how to operate the equipment. And so automation, and then what that's driven is a much bigger demand for service and our folks going in and training their teams to operate equipment and ensuring uptime and OEE, all the standard metrics are being met. So, yeah, I think just the fundamentals are going to continue to support automation. Great. I think it just brings us to the end. Thank you for joining us. Thank you very much for hosting. I appreciate it. Thank you.