All right, welcome. I'm Shengwei Zhu. I'm a managing director in the Industrials Investment Banking team at Citi. It's my pleasure to welcome Andrew Hider, CEO of ATS, to join us for a fireside chat this morning. As you all know, ATS is a global automation technology provider for various end markets, such as life science, food and beverage, nuclear energy, electric vehicle, consumer products, and other industrial end markets. Andrew has been the CEO for seven years. Under his leadership, he's grew the company from a CAD 1 billion revenue to almost CAD 3 billion revenue today. And the company is today listed both in Toronto Stock Exchange and New York Stock Exchange. Andrew, welcome. Thank you very much for having us. For those who may not have followed you closely, maybe, give us a little bit of overview of who ATS is, and also the key value driver that's behind this incredible growth and transformation. Well, appreciate it, and appreciate the warm welcome. Look, looking back on seven years, when we started off this journey, it really was aligned around understanding the strategic focus and where we wanted to really identify markets that we view are more resilient. And my background, I've been with a central company, and I've been with a decentralized corporation, and we've aligned ATS to be a decentralized corporation, all with a central operating system. So we have markets that we view are more resilient, and we have an operating system in how we operate the business. And, you know, no, no secret, life sciences is our largest market segment. To think about us effectively, if you have a pen, that can be considered an injectable device. We would be the ones you would come to to go from 1,000 prototypes to 1,000 a minute, and if you're looking at that, because it's direct into your bloodstream, you're gonna be looking at quality, you're gonna be looking at risk, you're gonna be looking at how do you get your product to market on time and meeting your targets for margin profile? 'Cause usually these are higher margin products. You come to ATS. And we not only do the full integration, but we've also acquired businesses with strong IP, strong support, to utilize to really bring that product to life and then support you over the life of the equipment. 'Cause one of the things that's changed in the last several years is customers don't just look at today, they also look at where are we gonna be a year, 2, 3 down the road, to make sure we've got that capability. And so our business has evolved to life sciences, and not just integration. We're integration, standard machines, standard products. We're also now in regulated food. We're in nuclear energy, green energy, supporting that trend. We're in the EV shift, and we're also in consumer products, focused on really higher-end niche areas for that space. And so, 7 years has gone quick, but while we talk about the business and how we've evolved, we're early in that journey. We're early in that, that migration to having high value for our customers and our shareholders. To give you a couple reference points, our business has grown, call it a little over 18%, and our profitability has grown a little over 24%. So strong performance, but yet still early in the journey. Great, and I think one of the things you talked about is moving away. Well, when you started, there was a lot of custom integration projects, right? You're adding a lot more custom products, recurring service businesses. What was that transformation look like, and how do you expect the mix to change going forward? Yeah, so, you know, looking back, one of the areas we identified quickly was we were in traditional ICE, and we were in a me-too space, medium to high risk, low profitability. We largely exited that. We also looked and said, "We wanna be on the integration piece," so high value for customers, really identifying that value creation. And then, how do we continue to expand our value through not only the integration piece, but then also through products, standard machines, and then ultimately services? This has been, obviously, a seven-year evolution, but if fast-forward to today, any given rough area of segment, our recurring revenue is between 25% and 35%, and that's been an intentional drive, an intentional shift. And how did we get there? We continue to invest on innovation. We continue to enable the team to launch solutions and capabilities for our customers. Why do we like that, number one? 'Cause if you look at return on invested capital, it's one of the greatest returns to our shareholders. Number two, we've acquired companies that have added strong capabilities, really businesses that are the leader in their niche space. An example, Comecer. It's out of Bologna, Italy. They do aseptic filling for the radiopharmaceutical space. Radiopharmaceuticals is identification and treatment of cancer. Very strong ability for our impact for customers, and their ability to support the end market and support the treatment of cancer. That business has grown since we've acquired them or roughly call it over the five-year mark, to almost double their revenue. We've been very focused on key end markets that we view are attractive, and then really enabling that through technology and value creation for customers. Right. So you talked about life science being a growth driver in ATS for the last couple years, and obviously you have a very strong, unique capability using radiopharma. You talked about auto-injector, stuff like that, related COVID testing. I think you've done a bunch of stuff. Where do you see the businesses going from this point now, right? Life science being 50% of the business, where are the specific areas within life science that you're deploying capital, you're deploying human resources to drive growth going forward? You know, and I'll take 'em by segment, but if you look at life sciences, and I'll tell you, it's an exciting area. The GLP-1 expansion, we are a key enabler for the manufacturing of that actual product. And by the way, just for reference point, we've been in this space for almost two decades. We were with the EpiPen back in the day. And we've not only been in the space, but we've constantly driven to have high technology, high capability. And through that, we've acquired a company. It was a business by the name of Transformix. We've rebranded it, 'cause we had to enable the technology, and it's now called Symphony. That has put us in a lead position. So what this effectively does in the market that we serve is we can be up to 2x the speed and output, and half the size. And some models actually get us to 3, but if you think about 2x the output, half the size, huge impact on the market. And the business, I mean, when we look at that space, and we look at the growth profile, we view this as the next 5+ years' growth. It is rough numbers, low single digits of our total revenue. We think this is gonna get up into high single digits of our total revenue, and it's going to be a key enabler. That said, our single largest order last quarter in life sciences was contact lenses, and the quarter before that was contact lenses. So we like the spaces that we've supported for years. We like the markets that we serve, the niche capabilities, like wearable devices and the treatment of diabetes, radiopharmaceuticals, identification and treatment of cancer, as well as where we are in diagnostics, where we are in support for lab automation, and with our new addition of Avidity, really getting into that, following the molecule. Understanding the lab space from the molecules that are effective, to really helping bring it to life, and the expansion. And so it really is around not only organic, but then inorganic, to support that growth profile. Great. And then you talk about Symphony, the Symphony platform, and the way that I looked at it, it's a very unique... Well, not unique, it's a very modular, standardized approach, digitized approach to automation, which is the holy grail in automation, in my mind. How can you talk about customer adoption of this technology, and how does that improve your margin, because it's more modular and standardized? Yeah, I mean, so easy answer, right? Modular solutions usually equate to better margin profile. And it's there, and it allows us to have a standard application that can be customized per customer. But the real power, and when a customer sees what they can do with this technology and capability, it's a game changer. And they look at it, and they understand, not only have we been in this space, and you're launching a solution that's an injectable device, high margin profile, and your demand's through the roof. You have confidence that ATS can help you bring that to life. And so not only Symphony, but then our experience, and we're using now AI in the, in the solution loop to identify defect recognition earlier on, so you kick it out earlier, and you don't add value, and so it allows you to improve your output. All these factors really go into the customer looking to ATS being a leader in that space. And you could take that exact example and go to wearable device in the treatment of diabetes. You could take that example and go to where we are in injectables, and the constant drive for value creation for customers, and utilizing not only our know-how, but our technology and IP, to bring that value to life. And then ultimately, reward to our shareholders, and that, that drive to expanding our margins, having higher recurring revenue into our business cycle, and that, that drive to being in the markets that we view are more resilient over long periods of time. Great. So you talk about AI, which is obviously a big focus for a lot of investors over the last, call it, 12, 18 months or so. Maybe we take that, expand on that part. Can you talk a little bit about ATS's digital strategy around AI, around software? I think you have a great machine vision offering, right? And then going to preventative maintenance, and you also talked about a couple IoT-type of project wins last quarter. I think these are very advanced technology. I don't... I think it's beyond a typical integrator capabilities. It'd be great to talk about that and expand on your capability, educate investors on what you have to offer. Yeah, and so it's a pretty meaty topic, and I'll just walk through. So we have a bit of a mantra, and it's "Own the floor." And how we think about it is, you know, the days of customers just getting a dashboard, those are limited. They wanna have actionable insights. They wanna drive impact on their solution. And so we've constantly... We're not now, we're a leader in integration for the markets we serve, so we understand what goes into building the equipment. We know when you're building that product, the thresholds that you have to meet. We know the quality applications, we know that the amount of PSI that this specific hose needs to go into making that solution set. So we have that capability. We've also, over time, acquired a company called PA Solutions, which their whole niche was collecting data off of existing manufacturing footprints, and so they could go into a brownfield site, and they could actually pull the data to understand it. And now, they've built out capability to not only pull the data, but then to bring it into the cloud and drive actionable insight back into the solution. And so we've got capability through our services, through our automation arm, as well as our ability with PA to collect the information and bring that back into improving process. 'Cause what customers ultimately want is they wanna improve their output. They wanna know, "If I'm gonna invest in this, what can I do to drive actionable insight?" And we have now created the ability for an easy button. We can provide that actionable insight, or we can even go to the next phase, which is we can also help you implement this. And so I tell you all that because we've made nice progress, but we're early in this journey. And when I think about, you know, tools like AI, and AI is a tool, it is changing the way we view internal processes, it's changing the way we bring value to market with our customers. And I can cite different technologies, like the way we look at fruit with AI, and understand the defect characterization and kick out, so we know when you're producing something, you're gonna have the highest output. As well as, you know, even more recently, when I was walking the production floor, and a young engineer, she took me aside, she showed me how she's using our vision system with AI to identify defects earlier in the process for the auto injector space. That's huge value for our customers. And so when we look at digital, digital is the direction we are looking at that as an enabling direction. When we look at AI, that's a tool, and, and our business and, and our leaders understand the magnitude and impact of what AI can do. You know, it's, it's cheap predictive analytics, and really utilizing that to drive insight, and we're now using it in our legal process, in our HR process, to, to maximize the value creation that we can have across ATS. Are your customers paying for the AI and the software in a recurring revenue stream right now? So typically what they would do is they will pay for an upfront, and then the recurring. And ultimately, I mean, our mission is to get to that recurring and that value creation for our customers. But as I've said, we're still early in this journey. We've really... You know, we've acquired a few businesses like Yazzoom, like IPCOS, Triad, and other areas where we're bringing more value for those customers, but it's early in our journey. And because we know the impact, that constant drive to create value is something that we can really align around. Great. Before I continue, I wanna check on the floor if the audience has any questions. So I'm new to the story, so can you make, help us make a little bit more concrete? Thank you. Can you help us make a little more concrete how you are innovating? Because my understanding is that you are more an integrator of technology, so you're going to get the best, best technology and going to pull it together to help your client, but you talk a lot about innovation, so in doing things that are unique. Can you just give us some examples for us? Absolutely. So, to give you a little bit more data to support this, when, you know, call it, go back seven years, I think we were roughly around 80% integration, so big integration hub. Today, it's less than 50%. So we've not only shifted that... And, by the way, we didn't really go down, we've just grown the other pieces of the business to fill that in with standard machine, standard products. But now, as an innovation, we do this on a global scale, so every business is gonna have an innovation agenda. And what they're going to look at, so let's take Comecer, for example. That business understands, in the radiopharmaceutical space, that there's gonna be new drugs launched, like Lutetium or Actinium-225, and they're going to be working on the IP to really align their business, so when the customers launch these drugs, they're in a position to be able to produce that product set. And so they're already going through that IP, they're already lining up their technology, so that they can enable that drug to be launched, launched on time, and to be safely launched. They're also doing simple things, like if we're gonna take certain products and use vision with application of, of digital, they're gonna invest in that to show the output and show the improvement on the performance of the business. If you went to our facility in Cambridge, you'd see you have an innovation center, where Symphony was initially a product that had good IP, but didn't work in the application, that we knew it could have high value, and we worked on it for two years around investing to ensure that it could meet the application requirements. So then when auto injectors started going, it fit that application very well, and that's just one of many, many, many solutions that we launch. We just held our... You know, late last year, we held our innovation summit, where we brought in the leaders of innovation across ATS, and focused on key themes like digital transformation, AI enablement, enabling your tools to create capabilities for your customers, and using it in your everyday life. An engineer, there was a curing process that was taking longer than expected. They identified an area for a light capability to be able to reduce... That's how we wanna think about innovation. It's that drive to constantly make tomorrow better than today, and add high value for your customers. What are they willing to pay for, and how do we maximize that value creation? Any other questions? Yeah, hi. What does your business look like 3-5 years out? You know, I'm really careful on this one, 'cause everyone wants to say it's growth. But when we talk in our organization, if you join my leadership team, we talk about culture and people, by the way, very candidly, and you get two books. One is The Outsiders, 'cause I want you to know how we think about capital allocation. So our view is value and that constant drive for value. So our business, we're focused on areas where we call high differentiation, high consequence of failure. Life sciences is very aligned around that. You're gonna see us continuing to drive into key applications. We've just acquired Avidity. Now you can follow the molecule, so you understand the molecule to actual going to process. That's gonna be a key theme for us over long periods of time, and you're gonna see us continuing to evolve and, and grow that area of business. Resiliency. If you look at markets that are more resilient over long periods, it's life sciences and regulated food, and you're gonna see us continue to evolve in regulated food. We're in more primary processing, which is, think the tomato from the vine to puree. We wanna move into the secondary, which is puree to baby food. And, and we like those markets because they're regulated. It's ensuring you've got a safe product to market. And so you're gonna see us shifting our mix and continuing to drive down that path of very resilient, very high consequence of failure markets, and you're also gonna see a shift to more recurring revenue. Our business has been really driving in, so Avidity is 40% recurring. You're gonna see us continue to launch solutions that are gonna increase our recurring revenue and ultimately margin profile. So the key themes I hear is mission-critical, highly regulated market. If you get it wrong, severe consequences could happen, right? So that itself act as, you know, call it barrier of entry and competitive advantage against, other integrators. And with the technology you're adding, that gives you the technology advantage over other people, and that's why your customer keep come back to you, if that's. Yeah, and, you know, when you step back and we look, I mean, we're in life sciences, we're in regulated food, we're in energy with nuclear. We like our EV position. Now, that's, that market's a little bit more choppy right now. We do view it's gonna be a measured recovery around that space. We're in a high consequence of failure area, where customers look to our technology, look to our innovation, look to our solutions to really enable their capability. And so we've been specific and focused around organic growth in that area, and we've deployed capital externally, inorganically, in life sciences, in regulated food, and in digital and services. Great. And on the EV topic, I know last couple of years you have seen quite a bit of growth in that, in that sector. Obviously right now, you know, you have seen a couple project delays, and so on and so forth. Any perspective in terms of how do you see that market recovers? Yeah, you know, so we did, we announced a project that has basically been on hold, and our view is next quarter it'll be coming off. And to be clear, the fascinating thing about this space is the technology is changing so fast that customers look at their current capability, and they wanna know, are we at the greatest level for their battery technology, their solution set? And so while we announced it, it's not the first time this has happened in this area, and it's something that we've worked with customers on because they look at cost structure, they look at output, they look at their ability to drive further on a single charge. And so all that to be said, we do view that the short term is gonna be a bit choppy. Our mid- to long-term, our funnel is healthy. You know, right now, today, we're working with, call it 7-10 customers in this space, and we see opportunities for our continued expansion. That said, we do view it's gonna be a bit more measured over long periods of time. Where we saw a fairly significant uptick, we think investment's gonna be measured, and customers are going to continue to look to expand their capability. Great. So one question I'm always curious about is: How does the technology and know-how transfer between the different parts of the group, right? Between life science and electric vehicle, obviously, they're very different technology requirements, but clearly there is a benefit of having all that under one roof. Can you talk about kind of the, the technology transfer, know-how transfer between the various different groups, various end markets, and how does that benefit the group as a whole? You know, there are advantages and disadvantages to being decentralized, and I would say this is an area, being decentralized, you have to really enable. And, and what we don't do is we don't force companies to work together, 'cause what you find is then they're gonna shortchange, and they're gonna look and say, "It's not in my best interest to make this successful." And, and so we do a lot of work around really bringing the teams together to create or learn from their solutions. And, and I say that because you don't have to reinvent the wheel all the time.... We've launched a digital capability. When we held a digital symposium, our teams learned that they have the ability to launch this in short order, and all they have to do is just line up their data flow to really walk that process, and then they've got full capability to offer it in their markets. And so we do things like a digital solution set, where we'll bring the teams together. We will do things like innovation, or we'll do innovation workshops to enable, to support and help companies on bringing that solution set or that capability to market. But it really does take a coordinated effort, and what you'll find is the best technology usually wins, and the best capability usually wins. Because if people can utilize that and bring that to market, they can bring high value for their customers. Great. And are you continue to seeing the tailwind in your business driven from sort of onshoring and nearshoring efforts? I remember you talked about previously, there was a pharmaceutical manufacturing plant moved from China to Boston area, and you built a fully automated facility for them. Can you talk about any continued tailwind you're seeing in that area? And there's a few here. And I'll start with labor. And this is really one that's kind of a general theme across. And whether you're onshoring, reshoring, you're doing supply chain de-risking, or your labor costs are increasing, this is a real challenge and a real opportunity for ATS. And when you look at automation enabling that area, that gap, it is often customers are leaning into really enabling that. And you use an example, is actually a company that spoke at our investor day, call it 4 or 5 years ago, where they moved a product from China to Boston, low-cost region to high-cost region. And they were able to reduce the operator requirement from over 2,000 to less than 200, and they improved their gross margin by 20%. So they not only moved it, but they were able to improve their output, they were able to improve their, their margin profile, and they were able to bring it to an area where their leadership, their engineers, could really learn and continue to drive technology advancements on their product at their core location. And we see that with many companies around their ability to bring solution sets, whether it's the auto-injector space or, or, or even contact lenses, where they wanna have capability in the markets where they have demand. And because we built out our services arm, because we built out our ability to support in region, they looked to ATS for that, that solution set. And so labor is a big one. And one of our customers that I was, I was visiting with a few years ago leaned into me and said, "You know, Andrew, we're 66,000 people. A third of our workforce is gonna retire in the next three to five years. A third. You have to help us. And the new generation, they don't understand dials, they understand swipes." "And they don't get how to run this equipment, so you have to help us." And so that's enabled services, that's enabled our ability to support from a digital capability. That's also led into how do we restructure our view of true solution sets, true products that are gonna enable their success? And we're seeing that in many areas of the business. Great. And then part of your overall strategy, I would say, is M&A, right? So ATS is a compounder consolidator in this space, and then you have deployed something like $1.7 billion of capital since 2018. Can you talk about your M&A or capital deployment strategy going forward? Where, which area are you gonna deploy more capital or less capital? How do you think about that? You know, to answer that, I'll just walk you. So we have four major criteria for any deal we look at. First one is the markets they serve. We really deeply understand the niche that the solution set. So not just, okay, life sciences. We'll get very specific on, so with Avidity, we want to understand in biopharmaceutical, which is their core space, what is their position and what is their value of brand and their value of technology? And we get to know that really well, and so we look at markets, number one. Number two, we look at the strategic rationale. Really, where does this- is this a services play? Is this a technology advancement? How are we gonna extract the strategic rationale and value from that? Number three, how we're gonna operate it. How quickly can we launch the ATS business model? What's the management team look like? Do we need to bring in a new leader? Do we need to look at their structure and understand? And the more that we've built out our leadership journey, the more we don't wanna pay up for management teams. So do we have leaders ready to help out in that journey? And then last is the financial return. And the number one here is we look at return on invested capital, and our target that we say externally is double-digit within five years. We've often done it much earlier than that, and it all depends on the deal for the business. But then we're now looking at things like recurring revenue, margin accretion, really understanding what we can do to drive value for this business. So we look at every deal under those four. Then if you look at the targets that we've gone after, and we've built out cultivation capability, the best deals we do, we've cultivated. Not by auction, they're not 50 people in a bidding process. It's we've gotten to know the leadership team, we've gotten to know the owner, we've gotten to know the management structure. We understand the business. Not to say we don't do that, but we get to know the teams really deeply to know is there a fit? To know the value we have, and also oftentimes, when you build that relationship, you can know really where it is in the process. And so cultivation, the criteria, and then if you look at the areas we've targeted, life sciences has been an area we've targeted, we're going to continue to target. There's high value creation, usually because of our integration arm. When we acquire a technology, we can bring that in and create that value very quickly for the customers. Regulated food is one we continue to like and like over long periods of time, and then I would say digital and services as being an enabling technology across the platform. And, you know, we've announced a few deals, but, you know, you look at what we've done with YaZoom, with IPCOS. We acquired a company called BLSG, which does—they actually im- drive the improvement to the business. So once things have been identified, they help them drive impact. It's almost that closed-loop approach to customers around, not only can we identify it, but we can also drive the impact to support you in making sure you see that value. Great. So you talk about double-digit ROIC being, the financial hurdle, at least. Does that hurdle change depend on, sort of rate environment or depend on which area deploying capital? Is there, is there flexibility or is that kind of fixed? Yeah, I mean, you know, we always wanna. We wanna outpace our weighted cost of capital, and so we're of course gonna look at that in its totality. That said, you know, the things we look at, I mean, we're gonna look at making sure it fits the business long term, the value creation is there. And, you know, you think about, we talked about CFT. Here's a business that we really like the end market space, but we looked at their margin profile as a challenge, and we said: Okay, all right, what's the brand like? What's the loyalty from customers? What's the technology? What's their IP? And to give you a case in point, they were low single digits EBIT, low single digit EBIT. And we knew what the market served, so we knew what the competitive landscape looked like, we knew what people were performing to, we knew what the services looked like. And fast-forward today, that business has done a 500 basis point improvement on their EBIT. They're just getting started on their journey. The team is really maximizing impact. Their turnover, by the way, has gone from double digits to now less than 5%. Their leadership is engaged on the journey. They're expanding their organization, and so we know what we can do. That said, we wanna understand the market first, 'cause at the end, we can build great leaders and great culture, but we also wanna be in really good markets for long periods of time, and that's why we very much focus on that. Great. Any. Yeah. When I hear your story, you remind me a lot of Danaher. Is that how we should think about your company? Is that, is that your model? If you don't know me, I am an ex-Danaher person. Oh! That was not rehearsed. But- I do know, I do know. But I will say, we don't, we don't, I don't like to use that in our narrative. I would say our aspirational peers are gonna be, you know, decentralized businesses, and, you know, I can rattle a few off, like IDEX or AMETEK. I mean, they've done a really nice job. We're building the ATS model, and I would say that the fortunate thing in these conversations is, yeah, we've made nice progress, but we're early in this journey. The shift to the products and standard machines and that capability on integration and now what we can do with digital, it's the business... Of course, there's gonna be bumps in the road. We can't predict markets, but we are very laser-focused on areas over long periods of time that we know we can out-execute, and we've built the team, we have the culture aligned, and we're constantly driving for execution. What percentage of your business is recurring? You talk a lot about services. If you look at any given moment, you know, across different segments, we're between 25% and 35% recurring revenue. Okay. We say reoccurring, and there's a lot of dynamics around recurring versus reoccurring, but, but services is a piece of that, digital's a piece of that, replacement componentry is a piece of that, and so we do look at those across. You're gonna see us continuing to look- Increase. to expand that. Okay, thanks. Great, and my final question, and I should know that in the last seven years, the market cap has increased four times to almost CAD 4 billion today. What's your vision for the next five years, and what do you need to get there from a technology, human capital perspective, from a financial capital perspective? Yeah, I mean, look, if you ask me what I. What keeps me up at night, it's people. It's leadership. We're going to build and continue to build the corporation. Our team is hungry, and if you came to our leadership conference, we do it every year in June, it's the strongest leadership team we've had, and we're only getting better. And so it really is around maximizing that value that our teams can drive impact on. And so we're laser-focused on making this our run, and the team is strong, and we have the operating plan. We've got the playbook, but it's that constant drive to have the best team and win as a team, and aligning around the markets and technologies that are gonna create value for our customers. Great. Thank you, Andrew. Appreciate it.