Dover at J.P. Morgan Industrials Conference: Strategic Growth and Cautious Optimism

On Tuesday, 11 March 2025, Dover Corporation (NYSE: DOV) participated in the J.P. Morgan Industrials Conference 2025, providing a strategic overview of its current position and future direction. CEO Rich Tobin expressed confidence in the company’s growth, highlighting strong order rates and strategic positioning in growth markets. However, he also addressed potential challenges, including CapEx spending risks and tariff impacts.

Key Takeaways

• Dover’s order rates remain strong, aligning with projections from the end of the previous year.
• The company targets significant revenue from its CO2 systems, aiming for close to $300 million.
• ATS Corp reported a trailing twelve-month book-to-bill ratio of 1.18, with strong bookings.
• Both Dover and ATS Corp are focusing on disciplined capital allocation and strategic M&A.
• Macroeconomic uncertainties and tariffs remain concerns for both companies.

Financial Results

Dover Corporation:

• Order rates are consistent with last year’s trajectory.
• CO2 systems are expected to generate nearly $300 million in revenue.
• Incremental margins are targeted between $30 million and $35 million, with core activities projected to reach $40 million this year.

ATS Corp:

• Achieved a book-to-bill ratio of 1.18 over the past twelve months.
• Anticipates 10% organic sales growth next year.
• Aims to reduce its debt to EBITDA ratio from the high 3s to 2-3x.

Operational Updates

Dover Corporation:

• The refrigeration segment is expected to be fully booked for Q2 and Q3 by month-end.
• Belvac has reached a stable point, and the heat exchanger business shows a positive book-to-bill ratio.
• Growth in pumps and process solutions is contributing significantly to the bottom line.

ATS Corp:

• The company had its second-largest bookings quarter, maintaining a healthy funnel.
• The automotive business faces challenges due to market changes, but ATS is pursuing a commercial resolution with customers.

Future Outlook

Dover Corporation:

• Expects double-digit growth in the cryo business, driven by the gas complex market.
• All segments are projected to grow within the 3% to 5% range, with some potential outliers.
• The M&A pipeline is robust, with expectations for favorable multiples in 2025.

ATS Corp:

• Targets high single-digit to low double-digit growth, contingent on market conditions.
• Plans to leverage a U.S. listing for better currency in M&A deals.

Q&A Highlights

• Rich Tobin emphasized that Dover’s order rates are on track, with positive momentum continuing into the quarter.
• Andrew Hyder highlighted ATS Corp’s strong bookings and strategic focus on automation solutions in life sciences.
• Ryan MacLeod discussed ATS Corp’s automotive business challenges and the company’s efforts to reach a resolution with customers.

For further details, readers are encouraged to review the full transcript of the conference call.

Full transcript - J.P. Morgan Industrials Conference 2025:

Steve, Analyst: Great. Moving along here with Dover, CEO, Rich Tobin. Rich, thanks for coming.

Rich Tobin, CEO, Dover: Thanks for being here, Steve.

Steve, Analyst: I know how much you love March this time of year in New York. It’s beautiful and seeing everybody. Maybe just kick it off with a bit of a state of affairs in the near term. I think you had said at a recent conference that the order rates in the first quarter, I guess, what happened in the fourth quarter flowed into the first quarter from an order rate perspective, I believe was the comment. Maybe just update us on what you’re seeing out there given everybody is a little nervous about the macro.

Rich Tobin, CEO, Dover: Yes. I mean, that was three weeks ago now. We just closed February. Order rates are on the same trajectory. We’re pretty much exactly where we thought we were going to be, two thirds of the way through the quarter.

So, so far so good.

Steve, Analyst: All right. Great. Any questions? Just kidding. So on just on the businesses, maybe we can delve into just starting with maybe the Refrigeration, the Food and Refrigeration segment, kind of a bit of a tale of two cities over the last year.

Maybe talk about the growth business there and then the ones that are lagging and what you’re seeing in that segment as a start?

Rich Tobin, CEO, Dover: Sure. On the core Refrigeration business or the traditional business that we had, which is Retail Refrigeration Equipment, Q1 tends to be a little bit slow. We expect to be fully booked for Q2 and Q3 probably by the end of this month. On the CO2 systems trajectory, I think we targeted for that business to go from what was zero eighteen months ago to close to $300,000,000 in revenue and we’re on track to deliver that. So as the year progresses with the volume on the refrigeration mopping up the fixed cost and the margin mix on the CO2, it will be a good year for that business.

Steve, Analyst: And I guess on the Refrigeration side, is that an area where you’d think you’d see potential deferrals and things from customers given the uncertain environment? Which one of those businesses?

Rich Tobin, CEO, Dover: Yes. I mean, at the end of the day, in uncertain environments, the businesses that we have that are levered towards CapEx are the ones that we we would worry about, right? Because at the end of the day, kind of the ongoing replacement and consumption types of businesses that we have, those are for installed operating units. So it just gets consumed. A lot of that goes through distribution.

It’s the CapEx related business, whether that’s vehicle wash or refrigeration equipment, some of those. Those are the watch outs. So if the short

Steve, Analyst: term issues that we see with

Rich Tobin, CEO, Dover: the equity markets gets us gets our clients overly concerned. We’ll keep an eye on it. We don’t like I said, we don’t see it at all right now. So order rates are good and a reflection of how we closed last year and what we said at the beginning or at the January when we put our guidance out there. So they’re watch items at the end of the day, but right now they’re not reflected on our order books.

Steve, Analyst: And when it comes to the other businesses there, Belvac and which is the can making equipment as well as European heat exchangers with the swept business, those were two of the weak ones last year. Are you seeing any signs of life, stability, any risk of downside in those?

Rich Tobin, CEO, Dover: Well, I mean, they’re two different kind of stories at the end of the day. BELVAC was 100% levered towards can making equipment CapEx. And generally speaking, the can makers spend money at the same time and then they stop spending money at the same time. So what I can say about Belvac is for all the money that we made from 2019 to twenty twenty three ish, We’ve bottomed now, so the comp on Belvac this year is relatively easy, meaning it’s not a headwind that we’ve got to deal with. On the heat exchanger business, I’m sure that you all understand what’s been going on in the heat pump market.

So we rode that up with everybody else, and then rode it down from, I guess, August of ’twenty three through ’twenty four. Again, we called the bottom of that market in Q4 of last year. So our book to bill is over one in that business now and we’ll follow along with the heat pump manufacturers as we go from there. At its peak, heat pump revenue in that segment was about 38 percent, 40 percent at peak. So it’s not the entire business.

So there’s other portions of the business, whether it’s district heating, whether it’s data centers and a variety of the products that are actually growing and growing quite well. So I think what we said at the January that Swept has got a tough comp in Q1 that then at that point will roll it over and will comp pretty good for the balance of

Steve, Analyst: the year. So on this segment, it feels like this is emblematic of where you guys are with the growth businesses like the CO2 business continuing. I would assume you have some pretty good visibility on pretty strong growth there this year, double digit growth in CO2? Without question. Right.

So the growth business is growing and some of the other businesses more stable and less of a drag. Similarly, on the pump side, this business has gotten a lot of attention over the years given the high margins. What are you seeing on the colder just to start off on the growth side?

Rich Tobin, CEO, Dover: Looks great. I mean, right now on the biopharma side, we had been projecting in the low teens of growth. We’re actually clocking at a better pace than that. Now, well, remains to be seen how that goes from here, whether that is a kind of a restocking after multiple years of destocking at this point, but we’ll take it as it is at low double digits right now. And then on thermal connectors, I think that we’re up 80% or 90% right now.

So that business is the thermal connectors that go into data centers. It’s doing really well. Both those businesses, the biopharm is margin accretive to the segment. The thermal businesses will become margin accretive as we expand the capacity. But we have enough standing capacity to supply even the most buoyant projections about data center CapEx going through the next couple of

Unidentified speaker: years.

Steve, Analyst: And how are you seeing that business ebb and flow? You’ve talked about the lead times. You’ve got visibility on the construction of these things, but the lead times of the actual equipment that’s purchased can be pretty short. What are you seeing there?

Rich Tobin, CEO, Dover: Yes. I mean, it’s super interesting. At the end of the day, you would think that that amount of capital being deployed would be organized capital that you would run you would want to make sure that you had all the component parts you needed in the system to make the delivery dates. And that’s not really how it’s turned out because everybody’s trying to find their space between the builders or the deployers of that capital and then the EPCs that are actually building sub components of these big systems. So it’s actually turned out to be a very short cycle business.

That’s not particularly problematic for us because we had built a special purpose plant almost a year in advance of it. So right now, lead times is a critical factor and we have the shortest lead times in the industry.

Steve, Analyst: And then on the polymer processing side, the Mog business, that’s also been a headwind. So kind of similar to the other segment, you have a pretty nice growth business and then one that was down last year. Are you seeing any risk there or is that pretty stable?

Rich Tobin, CEO, Dover: It’s not going to shrink in 2025 and it’s basically been that’s been built into our forecast. We still love the segment. We would like to be an acquirer in the segment. The margin profile in our particular position is a leadership position there. We can take some limit about a cyclicality because it is CapEx driven at the end of the day.

But the business from a top line perspective is not a headwind that we have to overcome.

Steve, Analyst: And then moving on to clean energy, this is the retail fueling side as well as your cryo business. Again, another segment where there is, I guess, probably a bit more growth than the others. There’s not the drag businesses that you had last year at least. Maybe talk about those two segments and what you’re expecting and seeing there any signs of risk of CapEx on this side of the house outside of car Wash.

Rich Tobin, CEO, Dover: And nothing’s riskless at the end of the day because a portion of the business is CapEx driven. But having said that, we’ve got a lot of wind in our sales that are not revenue related. A lot of the restructuring that we did in ’24 is in this particular segment, so the roll forward, we’ll see in ’25. We’ve purchased a variety of different companies in the cryogenic space. We believe that we’re co leaders, I guess, is the way I would put it, globally in terms of components there.

We are going to enter into a phase now where we start extracting synergy value out of all those acquisitions. Generally speaking, we buy relatively small companies that are a lot of times single product companies. We leave them sit for a period of time. We upgrade their IT systems. We do things because we’re a public company.

But we want to hold on to the management team and we want to get an understanding the customer relationships. Once we’ve got that stabilized, then we can move into the synergy extraction phase. And in this particular case, there’s a lot of things that we’re working on footprint wise, right, because we’ve got a lot of small companies that we’re building a platform with. So my expectation is that we’re going to have good growth in that segment this year. We’re very interested to see what the outcome of the big meetings in Houston that are going on this week in terms of CapEx plans for our customers.

But then I would expect that you’re going to see us taking some restructuring charges in the back half of this year, which will be a benefit to ’twenty five and beyond.

Steve, Analyst: And the growth drivers there, any risk in this segment from or opportunities, frankly, from the change in administration and whether the IRA gets cut or these EV mandates? Any kind of influence on your business that you’re watching?

Rich Tobin, CEO, Dover: Well, like I said, I mean, the administration is in Houston today. I would expect the current pricing that needs there needs to be something the administration does to kind of drive the growth of investment they’re looking for. So things like bonus depreciation and things like that are very important to the energy sector. So whether it’s pipelines and approvals or bonus depreciation, I would expect that coming out of the meeting in Houston this week, we’ll have a lot of positive answers about that. Now we have not built that into our forecast.

That was built into our entry in a bigger way into the gas complex because you hear a lot about electrification, you hear a lot about a variety of different themes. At the end of the day, we’re making a bet that the low cost precursor of energy demand is gas. And that’s why we’ve spent the last three years deploying a lot of capital there.

Steve, Analyst: And so that business is still the cryo business still has a nice growth trajectory out in front of it? Absolutely. Double digit? Absolutely. You’re not seeing any major like air pockets or risk there or anything

Unidentified speaker: like that. Okay. I mean like

Rich Tobin, CEO, Dover: any business, it’s choppy at the end of the day, but we’re making a decade bet here in terms of the market positioning and what we think the growth is going to be for the gas complex in total. So, yes, I think that our expectation and part of what’s driving our guidance on the top line, a big portion of that is driven by that particular segment.

Steve, Analyst: And then just for Engineered Products, what’s left of Engineered Products? This would seem to be probably a bit more of a cyclical segment. What are you guys seeing there for this year?

Rich Tobin, CEO, Dover: Well, look, we divested a big piece of it last year at arguably a very good price. So we monetize that asset, which is the reason that we’ve got so much liquidity in our balance sheet right now. I think that the military business that’s in there is going to do really well, this over the next couple of years, all things being equal. The vehicle lift business is a little bit of a watch point because back to your earlier questions, that’s kind of CapEx related and probably one of the few businesses that we have that has exposure to the consumer at the end of the day. So we’re keeping an eye on that, but what we had built into the forecast for 25% there was not dramatic at the end of the day.

So I think that even if that was to be a little bit weak, we’d be able to handle it.

Steve, Analyst: And so are all of these somewhat within this 3% to 5% range in any of these segments outliers as you look out to 25% and as you evaluate the order rates that have come in so far in the first quarter?

Rich Tobin, CEO, Dover: On outliers? Look, I mean, at the end of the day, anything, any growth that we get out of pumps and process solutions because of the conversion rate, it’s worth $1.5 or $2 of revenue in any other particular segment. So to the extent that we can drive that portion of the portfolio, it’s meaningful to the bottom line.

Steve, Analyst: And to the extent that you have these orders continuing here into the first quarter, are you confident enough if the orders hold up that you’d start to talk about the higher end of the range on growth? Because you have insinuated in the last call, you talked about how you probably could have raised the guide, but there was some Forex headwind and things like that. So,

Rich Tobin, CEO, Dover: Well, implicitly, we did raise the guide, right? We had 150 basis points of FX headwind and we did not reduce the guidance that we put out back in November of twenty twenty four. So I’d rather look at it that way rather than we could have raised it again. Look, it’s quarter by quarter. We’re booking into Q2 now.

We’re other than the really, really short term short cycle businesses were booked for the quarter right now. So all we got to do is deliver the quarter, hit our numbers and we’ll move on to the next one. So let’s not get excited about talking up the full year until we at least close one quarter.

Steve, Analyst: And are you seeing any elongated delivery requests or anything like that? I mean, three ms was just in here talking about that. You guys obviously have a very different type of business. But anything like that that you saw through the February here?

Rich Tobin, CEO, Dover: Well, I mean, the administration has made the weekends interesting with the tariffs on, tariffs off. And so whether that has been time well spent or not, we’ll see. No, we don’t really see a lot of pre buy. We haven’t done ourselves a lot of pre buy. The only thing that we did is at the end of Q3 of last year and the beginning of Q4 of last year, we went long in metals.

So copper, stainless steel and a variety Because we had built our forecast and gave our guidance, we said, well, you know what, let’s and at the time, historically, metal prices were pretty advantageous. So we went long and we’re covered now largely through the end of Q3 of this year. So no matter what happens with tariffs, at least right now, we’ve got financial instruments that allow us to deal with that if that becomes a headwind.

Steve, Analyst: And can we just talk a bit about tariffs? What’s your exposure? And are you how are you reacting?

Rich Tobin, CEO, Dover: Generally speaking, we’re a proximity manufacturer, so we don’t have long supply chains. We tend to look at tariffs vis a vis our competitive set at the end of the day. So each individual business has a group of competitors and then we look at are we advantaged or disadvantaged vis a vis those competitors and can we take advantage of situations when we can or if we’re disadvantaged, what are we going to do about it at the end of the day? So we’ve tried to monetize all the traps of what we bring out of China and Mexico so far and begun to run the numbers on Europe. I can tell you that we don’t import anything from Canada of any quantum.

The Mexico One, we could either eat it or pass along in price. It’s not that large at the end of the day and we would expect from China. We’re pretty much in the same boat as all of our competitors because where else you’re going to get basic electronic goods. I mean, that it comes from China. It doesn’t come from anywhere at all.

And from an advantageous point of view, there are certain businesses that we have that we saw from the first time of the Trump tariffs that we were we were in an advantaged position by being a proximity manufacturer and to the extent that we can take advantage of it, that’s terrific. So we’ll see.

Steve, Analyst: And where where were that, the you know, as far as having an advantage,

Rich Tobin, CEO, Dover: where We’ve got competitor we’ve got yeah, we’ve got competitors in certain business lines that 70% of the production is in Mexico, and it’s virtually all exported into North America. So if you believe those tariffs are real, and we’re a domestic manufacturer, then we’ve got an opportunity there. But it’s super granular, but we don’t have to go business by business. So but we look at that at the end

Steve, Analyst: of the day. And any impact that you guys have from a federal funding perspective? Anything you’d look at and say, we’re exposed to a market that could get pared back?

Rich Tobin, CEO, Dover: No, no Doge issues that I’m aware of. We don’t sell other than military equipment, we don’t sell anything to the government of any quantum.

Steve, Analyst: So you guys had talked also a couple of weeks ago about your incremental margins. Historically, $25,000,000 to $35,000,000 was I think the algorithm you guys have guided to, but you kind of clipped off the low end of that range and are now talking probably more like $30,000,000 to $35,000,000 you’re doing $40,000,000 on a core basis this year. What was the driver of that change? And maybe just talk about the building blocks for that algorithm?

Rich Tobin, CEO, Dover: Sure. If we do everything right, which unfortunately never do everything right, but the way that we run the portfolio, every year we should be working on self help actions to drive productivity that have an impact on margins in the next year. So we should always be building a bank of, you can call it restructuring or whatever you want or efficiency or anything else that we get the role forward benefits. So last year, we did a lot of restructuring in our European footprint in clean energy, and we’ve got a roll forward of $25,000,000 which is pure profit to the extent that it all the roll forward would happen. So that’s part of the reason that’s that’s driving margin this year.

And then either through M and A or organic investment or growth platforms, those are all margin accretive businesses. So this notion of mixing up. So where are we’re where we’re deploying capital, if we’re doing this correctly, should be margin accretive to the consolidated margins of Dover. And if you go look at what we’ve done in m and a and what we’ve done in CapEx, you know, we we pretty much have done that over the last five years. So over time, we would have the mix up benefit.

We’d have the restructuring benefit on the roll forward. And then I guess the other portion would be if we were to do a disposal and it was a margin dilutive business, then again, you would get that roll forward. And that’s a playbook that subject to timing and availability that that’s the way we run this portfolio of businesses.

Steve, Analyst: And as far as the pricing aspect of that, what do you assume in there every year?

Rich Tobin, CEO, Dover: Yes. I mean, we haven’t if you go back and look over the post COVID pricing, we have not been leaders in that regard. We manufacture a lot of sub components, so we don’t have a lot of consumer facing businesses at the end of the day. The consumer is the one that’s really been eating all this inflation in terms of pricing. So I think we’ve been price cost positive post COVID.

But when we comp ourselves to some of the other industrial companies out there that have consumer facing businesses, we’re no buy nearly a leader there. Our expectation this year is to be price cost positive. All the pricing is out and has been out in the market. So it’s not like it’s on the come at the end of the day. And like anybody else, we use pricing as a way to kind of manage backlog at the end of the day, right?

Meaning kind of price increases that become effective in June. Can you drive the backlog to get the industrial absorption and whether you realize the price or not becomes irrelevant because you’re actually getting the benefit of managing the industrial base more efficiently.

Steve, Analyst: When it comes to portfolio, you guys have been active on both sides. You have a pretty significant opportunity to deploy a few billion of capital over time. I think it’s four plus if you add some appropriate leverage. What’s the current state of affairs in the M and A pipeline just to start?

Rich Tobin, CEO, Dover: Sure. The pipeline is full, but it’s I described it as like a lot of salmon waiting at the bottom of the river and waiting for somebody to to basically set expectations for multiples going into ’25. So we’ve had really one meaningful transaction in industrial world this year. I think it went off at 15 between fifteen and sixteen times EBITDA, so a pretty healthy price at the

Unidentified speaker: end of that. You’re talking

Steve, Analyst: about the Sun

Rich Tobin, CEO, Dover: Nine deal? A deal that’s out there. So that’s pretty healthy pricing. Now that was kind of pre equity markets moving lower. So does that put a break on it?

We’ll see. But the good news is a lot of that stuff has to come. A lot of it’s coming out of PE. It’s probably two years too late coming to the marketplace. We shall see.

We’ve got our fingers in a variety of different pies of the ones that kind of everybody knows about, for lack of better word. But we, for the most part, do a lot of proprietary deals that don’t come to auction, and we’ve got a good handful of those. So we’re going to be as disciplined as we always have been in terms of M and A, in terms of the pricing. But we are highly liquid right now, so it’s not like that we’re constrained from the balance sheet point of view.

Steve, Analyst: And as far as that decision to either do a deal or buyback stock, I mean, your stock has pulled back a decent amount. Are you does that get more attractive here? And historically, you’ve been pretty aggressive and done ASRs. What’s the mindset around buybacks?

Rich Tobin, CEO, Dover: I think that what we said when we sold ESG at the end of Q3 last year and gave our guidance that our priority would have been our hierarchy of priority is always internal investment. And if you go look at our growth platforms, I think four out of the five are organic investment that we didn’t buy. One is inorganic at the end of the day. Second priority would be M and A. And third priority would be capital return.

But I think what I described it at the time was going into ’25 that we had a very good insurance policy. If there was to be a dislocation in the capital markets, and that we’d be opportunistic as we have been in the past. And I think that that is absolutely on the table.

Steve, Analyst: Okay. And as far as divestitures are concerned?

Rich Tobin, CEO, Dover: We’re not a forced seller at the end of the day. But to the extent, we have a very clear eyed view of what every business in our portfolio is worth. So if you’re willing to engage on that basis as opposed to, boy, if you sell this, your margin will go up and then you’ll trade higher kind of stuff that we generally get that we reject at the end of the day. Yes, look, at the end of the day, we were we sold more in revenue than we bought last year. But I think that if you take a look at the multiples that we got for those businesses, they were above what we would seem to be the sum of parts analysis in the particular portfolio.

Steve, Analyst: And I guess in your view, is that portfolio churn necessary to get yourself to a bit higher multiple over time?

Rich Tobin, CEO, Dover: Necessary, no, because you can just outgrow issues at the end of the day, right? I mean, there are businesses that are perceived to be low margin businesses, but don’t require any working capital. So their ROIC is actually terrific and right, that is kind of why we fought off the sell refrigeration mantra for five years around here because the the ROIC on that business is especially at the margins there it is today is really good. So that’s the way that we view everything in the portfolio. So if it’s margin dilutive, we can grow away from it over time.

Does that accelerate if you get if you monetize? Sure, it does. But we’re not going to accelerate it just to dress up the optics of the margin of the total portfolio and leave value on the table, I guess, is the way I would put it. The only time that we would do that would be if we were to lever up because of M and A, then you would have optionality of delevering by monetizing assets in the portfolio. But clearly, we are very far away from that scenario.

Steve, Analyst: How much of the portfolio do you think is stuff that you would, if I gave you a good price for it today, you’d be willing to, you know Well,

Rich Tobin, CEO, Dover: I guess it depends. All of it. Really, I mean, you know, it depends.

Steve, Analyst: You know what I mean? Like

Rich Tobin, CEO, Dover: I know I know what you mean, but I’m giving I’m giving you the honest answer, right? I mean, we have got very portions of portfolio that are worth a lot of money. And if you wanna pay a 45% premium on that, I can’t not say no.

Steve, Analyst: Got it. Okay. Any questions out there? Yes. Right here first.

And then there next.

Unidentified speaker: Just on the heat pump side, do you have a sense of how much the IRA tax credits pulled forward demand and kind of what the other side of that could be if those tax credits were taken away?

Rich Tobin, CEO, Dover: You’re talking about U. S? Our volume of US and heat pumps is marginal at best. The vast amount of the volume is in Europe, and that is legislated country by country, and it’s all over the map right now. So what happens going into the future?

We shall see. I think that the current administration will see what their posture is. I mean, the bottom line is there needs to be some efficient there needs to be some scale built in North America for heat pumps to get to a price point. You’d have to have energy costs come up and you’d have to have volume leverage bring down. And then you get into breakeven in terms of transitioning without IRA or anything else.

And we’re a little bit away from that right now. I mean, energy costs are just not going the right way for heat pump adoption other than, like, the Canada and the upper belt of The US where it’s really cold. Yeah. Look, we’ve got for us, we’re capacitized for the North American market right now. It’s not heat pump driven.

It’s a lot of bigger units that go into district heating and into data centers right now, but that we’ve got capacity in Tulsa to the extent that it grows. We can support the who’s who would talk about bringing heat pump technology to North America and a meaningful scale.

Unidentified speaker: Thanks for taking the question. I came in a little late. Sorry, I apologize if this question was addressed. But about a month ago at a competitor conference, you made some fairly positive comments about short cycle orders and sort of said, hey, things are continuing and it wasn’t just a blip in January. Are you still feeling that way given all the volatility we’ve seen or has the needle moved a little bit?

Rich Tobin, CEO, Dover: Well, Well, you can imagine that was Steve’s first question, but I’ll repeat. Apologize, I’m sorry.

Unidentified speaker: My morning meeting.

Rich Tobin, CEO, Dover: Yes, I mean, we just closed February and orders are at the same trajectory that we exited last year and what we saw in January. So far so good.

Steve, Analyst: It was question one through six. Are you got what’s your take as an esteemed business leader in this country? What’s your take on what’s going on out there? And how do you and your board discuss a playbook? Or just how are you approaching all this?

Rich Tobin, CEO, Dover: Fundamentally, I think that what is being tried is correct. It’s always the messaging is always messy. But I think the second time around, I think everybody’s a little bit more comfortable with the messiness of the messaging, at the end of the day. You know, you and I have talked about this before. If you go back and look at core growth in industrials, the general comment, right, there’s outliers up and down in there.

And you look at unitary volume growth over the last couple of years, it’s been marginal. Right? There’s been a lot of price that’s gone through, and not much in units. And at the end of the day, what we need is demand. Right?

And And I think that what is being done in terms of trying to deal with the deficit and dealing with government spending being the driver of GDP is not a sustainable economic platform. So, yeah, at the end of the day, I don’t want to spend my weekends talking about what’s our exposure between Mexico and The U. S. And then Monday morning being told never mind. But, I think fundamentally what is being tried is I would agree with it in total.

And at the end, we would like to see real kind of business activity, GDP growth rather than kind of here’s a bunch of cash floating into from the ether or from the treasury into the economy because that’s not sustainable.

Steve, Analyst: So I guess from that perspective, it feels to me like less confidence near term because of just all the uncertainty. But like as a capital allocator and decision maker, you do have some, for lack of a better term, faith, which you think it’s the right move, you think things will work out. And so you’re probably less apt to like really turn the screws and cut things today and see how it plays out, which, you know, is kind of the feedback loop that people are worried about.

Rich Tobin, CEO, Dover: Look, I think that we were early in calling basically, rising interest rates. We’re going to become a problem when we cut production relatively early in the cycle and took our lumps for it. So we were decisive there. I don’t see a need to do that presently. I think that if it just gets noisy for a couple of quarters here, we’re willing to kind of deal with that.

I look at it from a maybe a bit of a longer term perspective. We’ve done a lot of work on this portfolio in terms of which is reflected in the margins of the business over time. It’s as good as I’ve ever seen it in terms of what our markets exposures are, our competitive position, what we’ve done in terms of productivity. We’re still spending CapEx this year and over the next ninety days barring a debacle, we’re not going to take our foot off the gas because I think that we really built some leadership positions that we can monetize over the next five to ten years. So we kind of despite all the angst, we’ll kind of put our pedal to the metal here.

Having said that, if you look at the individual pieces of our portfolio, these are medium sized companies, right? These do not have long supply chains that you’ve got to make. And these are not automotive factories where you have to make decisions nine months in advance. We can toggle up and toggle down relatively quickly, and we’ve demonstrated that before either going into COVID or coming out to COVID. If you look at our margin performance versus our peers, we outperformed.

And it’s not because we’re geniuses, it’s just because of the fact that it’s easier to flex smaller enterprises than it is to flex big global enterprises. So, you know, if we have a couple of quarters where there’s a lot of noise and people start pushing around orders a little bit, I mean, we’re not going to panic here. I think that we’re in a, you know, a very healthy position. And if we’ve got to defend the equity because the equity markets overreact, then like I said, we have an insurance policy going into this year and we’ll take advantage of it.

Steve, Analyst: Great. I think that’s it. Rich, thanks a lot. Great. Thanks,

Unidentified speaker: Steve. Okay. Okay. Okay. Okay.

Okay. Okay. Okay. Okay. Okay.

Okay. Okay. Okay. Okay. Okay.

Okay. Okay. Okay. Okay.

Patrick Baumann, Analyst, JPMorgan: Good morning, everyone. My name is Patrick Baumann. I’m on the Multi Industry Electrical Equipment team at JPMorgan. Cover a bunch of industrial stocks, including ATS Corp. I’m pleased to have with us today, Andrew Hyder, CEO and Ryan MacLeod, CFO of the company.

And I’m going to let Andrew for a few minutes here just give kind of a quick overview for those that are new to the story. And then we’re going to jump into Q and A and take some Q and A from the audience if there is any. So with that.

Andrew Hyder, CEO, ATS Corp.: Well, appreciate it. Good morning, everyone. The simplest way to think about ATS is we help our customers bring their product to life. And our largest market is life sciences. So my example is going to be a life sciences example.

So this is an injectable device. You gotta use your imagination for a second. And it treats something. It treats cancer. And you just got FDA approval.

So your demand is through the roof and you’re 70% gross margin. So time matters to you. And also what matters is because this is an injectable device, quality has to be perfect. So you’re gonna be looking at defects to ensure that you don’t have any, and you don’t have any contamination. You come to ATS.

And we build the entire production process around getting this product to market. Because you’ve built a thousand prototypes, but now you need to go to a thousand a minute. And we have now have the ability to bring the whole suite of production. We build it on our facility. You prove it out that we can build it, and then we tear it down and rebuild it at your facility.

And then we’ve acquired companies that do the filling, that do the movement, that do the vision, and we’ve also wrapped the services and support for the life of the equipment. So we continue to offer digital capability. As what you’ve seen, you want to ensure you can meet the demand over the long haul of the equipment. That’s our sweet spot. So our business now is largest segment is life sciences.

And we’re in areas like GLP-one drugs. We’re doing the auto injector, wearable device in the treatment of diabetes. We’re in radio pharmaceuticals, so that’s cancer identification, cancer treatment. We’re also in contact lens manufacturer, right, enabling our customers to constantly meet their demand. Our second largest is we’re also involved in food safety.

We’ll think about the next time you have food, ensuring that it meets the quality requirements of that market space. Again, regulated area, regulated space. Bring nuclear energy, helping our customers bring clean energy to the market. And we do a lot of the automation around that space. We’re also involved in the automotive space with EVs.

Now that’s less than 10% of our total corporation moving forward. It’s been a bigger piece in the past. And lastly, we’re in consumer products. We do niche applications in warehouse automation. We’re also involved in high areas like creams and solutions where we’re filling the product to help our customers bring their product to light.

Our trailing twelve month book to bill ratio is 1.18 and we last quarter announced that we had our second largest bookings quarter in company history. So, certainly these times are choppy and we’ll walk through that. Our customers continue to look to ATS to bring value and bring solutions to their market.

Patrick Baumann, Analyst, JPMorgan: Great. Thanks for the intro. So obviously, we’ll get to the topic of the conference around tariffs at some point. But maybe we’ll start with kind of the order environment. And last quarter for ATS, I think was one of the best orders quarters in the company’s history, if not the best.

You could clarify that. But maybe talk to to what you’re seeing across the different end markets that’s driving that sustainability of the recent orders activity, particularly in life sciences, and whether there was any kind of large bookings that influenced recent results?

Andrew Hyder, CEO, ATS Corp.: Yes. So as I mentioned, it was the second largest bookings quarter in company history, and the prior largest was when we had a significant EV order. So we’re very proud of that performance. If I step back, as a CEO, one of the things I focus on is standard work and one of my process is voice a customer. So I meet with customers on a constant basis.

One of the things they’re telling us is they’re not taking their eyesight off of launching their critical products to meet their demand. Now they might be looking at their global footprint differently, but that’s an area where ATS has strength. We can help you in North America, in The US, in Canada. We can help you in Europe, in any place you want to play or in Asia. So where you want to build capability, we have the flexibility and capability to build that product set in that region.

Where we have demand, building our process. But all of our markets actually saw book to bill ratio over one last quarter. So while we understand that the short term choppiness will be taking some shape when we look at tariffs and we’re going to talk a little bit about that, Automation is a continued focus for our customer base. And when we go through, I get often asked around if there’s a benefit, if there’s a tax advantage, do customers change their buying behaviors? And what I can tell you is, and I’ve been CEO now for eight years, it really doesn’t change their behavior on a strategic product.

But over a long period of time, when you look at building capability in a region like The US, generally, there’s labor shortages. There’s areas that you have to get right. And when you have a turnover in your workforce, it creates a potential challenge. Automation helps that. So our view is from a long term perspective, it’s generally a tailwind.

The markets we’re in are more attractive, they’re more resilient, and we constantly stay focused on innovation and technology to bring higher level of value for our customers over a period of time. And so last quarter, second largest bookings quarter in company history, And I mentioned on the call, our funnel remains healthy. Our dialogue remains constructive with our customers. Their focus on product launches continues.

Patrick Baumann, Analyst, JPMorgan: So obviously, with 1.35 book to bill last quarter, the backlog is looking really good, exiting your fiscal year, which ends this month. So as you think about how that sets you up for the next fiscal year, the visibility it gives you, what’s your confidence in the organic growth rate inflecting to I mean consensus is assuming 10% organic sales growth next year after a tough fiscal twenty twenty five, I suppose. What’s your confidence in delivering that backlog? And then on top of that, are there any watch items like for things obviously, EV has had a tough couple of years here. Are there any watch items for things in life sciences, whether it’s drug approvals or reimbursements or things like that, that are kind of on the dashboard for you, either that could drive upside to orders or could present some risk for orders that are already in backlog, anything that you’re watching in life sciences?

I know there’s a lot there, sorry.

Ryan MacLeod, CFO, ATS Corp.: Maybe I’ll start on the backlog piece. So, yes, our trailing twelve month book to bill ratio was 1.18, which is a bit better indicator of growth versus the single quarter being at 1.35%. So a number of years ago, I would have said, Patrick, that’s a pretty good indicator of forward growth. But the reality is some of those programs that we have in our backlog today, they do go out beyond one year. So there’s some longer term programs and a lot of that is driven by customer delivery schedules.

So they’ve ordered multiple lines and two are going to go into North America that have a certain timing, two are going to go into Europe that have a certain timing. So we’ve seen some of that extend out. Prior to this year, our average organic growth rate over the prior five years was 8.6%. I think that’s a reasonable ballpark that we expect to operate in. I think if demand continues to be strong like we’ve seen it over the last couple of quarters, then certainly we could get into double digits.

But that’s going to depend on a lot of the shorter term book to bill business that we have, whether it’s in services, which historically for us has been a growth area regardless of what happens in the economy. If people are investing in CapEx, they are typically looking to get more out of their existing asset base. So services is typically pretty resilient. But overall, like I said, I think we’re thinking about it in that high single digit. And if the markets keep up, certainly low double digits would be reasonable as well.

Patrick Baumann, Analyst, JPMorgan: That’s helpful. And then in terms of dashboard and life sciences, things you might be looking at for upsides or downsides or what have you?

Andrew Hyder, CEO, ATS Corp.: Yes. So we operate very decentralized. And if you know my background, I started my career at GE, then

Unidentified speaker: I went to Danaher Corporation. I was at Danaher for ten years. And I

Andrew Hyder, CEO, ATS Corp.: decentralized fashion. And so there’s no one specific answer. It depends on the business. But usually, you’re going to look at drug approvals. You’re going to look at product launches, you’re going to look at where they are in their cycle on their product.

So for instance, a company and by the way, we’ve been in inhalers for decades. We are also in the auto injector space for twenty plus years. Auto injector is the enablement for the GLP-one drugs. And so we look at not only at the current, but then also how they’re modifying that product over time. Because if they’re going to take this and they’re always modifying, they’re always improving and looking at how to make it a more effective platform, they’re going to change the clip.

They got to come back to us. We’re going to walk through whether it’s a modification to the actual process or you need full pieces of equipment. And so while we look at, you know, and you think about radioisotope manufacturing, they’re now looking at drugs like Octinium two twenty five or Lutanium and there’s many more that they’re looking to launch in the fight against cancer. That’s all good for us. But I use that, of course, we track that.

But we also look at the cycle and the buying process for multiple industries. And I referenced contact lenses because a couple of quarters ago, it was two quarters in a row. They were the single largest booking in our quarter. And so while we might have things that trail off, we’re constantly looking with our customers on how they’re going to expand their penetration, how they’re going to drive their key products to get them to market. And ATS is a trusted partner there.

One last one, which is fascinating for us is we’ve been investing in our services and digital for years before my time. And it just continued on and we’ve seen nice progress there. But what COVID did to that segment has been truly instrument kind of pivoting our business for the future. And the reason is it has taken services from a nice to have to mission critical because our customers now look at continuity, the ability to continue to build their product without issue as one of the enablers and our footprint, our layout for services and digital has been a key driver there. And so that becomes an equal weight as well as getting their product to market.

And it is and it’s an area that ATS has a strong position in And we continue to grow and build our capability in that area.

Patrick Baumann, Analyst, JPMorgan: Maybe taking a step back, just very quickly, I often get asked questions about what’s the right comp for ATS? Who does ATS compete with? So maybe if you could give a little bit of context around who globally the competitors are, maybe if you want to do it by end market or what have you, how you think about your business in the peer set?

Andrew Hyder, CEO, ATS Corp.: Yeah. This is probably the hardest question because everyone wants to throw Rockwell out there and we don’t compete against Rockwell. They’re actually a supplier to us. And so when you look, our competition is usually regional and by market. So for instance, we acquired a business by the name of Coma chair.

Coma chair does radioisotope filling. So that’s that whole process around cancer identification and treatment. Their largest competitor is right down the street in Italy. Now we have the lead position, lead market share in that area, but it’s a local business. So niche market, high value, high position.

So we look at having a big share position in the markets we support. The interesting thing is as we look at this whole tariff process, it puts us in a unique spot because not only well, short term, it’s gonna be choppy and we’re gonna figure that out. But as our customers look to have their manufacturing process close to where they’re going to build capability, we can do that. We have the process and the capability to move production in the region, whereas our competition oftentimes is in a region and in a market. So it makes it slightly more challenging.

But it’s a more fragmented space and we’re okay with that. Our aspirational peers are going to be the likes of businesses that operate decentralized that drive strategic profitable growth. And that’s what we’re continuing to move towards.

Patrick Baumann, Analyst, JPMorgan: Okay. So you brought up tariffs just now.

Ryan MacLeod, CFO, ATS Corp.: I did.

Patrick Baumann, Analyst, JPMorgan: Yeah. So I was waiting for the question. So maybe we’ll touch on that because obviously as a company that’s headquartered in Canada have substantial operations up there. You also probably do some sourcing between Mexico and U. S.

And what have you. So maybe touch on kind of your exposures to sourcing from Canada and Mexico and then also the playbook that you guys are executing to manage through this?

Ryan MacLeod, CFO, ATS Corp.: Yes. So maybe I’ll start on the revenue side. So about 15% of our revenues go from Canada into The U. S, so equipment that we’re producing in Canada that moves into The U. S.

And for that revenue stream, I mean, first of all, we haven’t seen sort of any changes from a customer perspective in terms of buying behavior or anything like that. But certainly, that scenario, we’re staying very close with customers. And typically, the responsibility for tariffs falls to the customers. Contractually, that’s where it goes. And so we’ve got equipment that’s very far along in the build cycle that some of which we’ve shipped early for customers to get ahead of.

Now dates have clearly moved around, but to get ahead of some of the dates that had previously been announced. And customers are looking at it from potentially relocating equipment not into The U. S. So we have a customer where we shipped a line early for them, a second line that’s in production for them. They’re looking at putting that into a European location.

And so each of the projects or customer engagements we have in place, these are the types of discussions we’re having with them. Another example, a customer that’s earlier on, so just ordered within the last couple of months, for them, we’re producing equipment that’s going to go all over the world. So some of it in The U. S, some in Canada, some in Europe and some in Asia. And we have shifted the build of some of that equipment into The U.

S. And it’s there’s some cost impact of that, which again the customers in this case is happy to bear because it’s a better it’s a more efficient cost than a 25% tariff. So that’s very much what how we’re approaching it from the customer side. It’s a lot of discussions, a lot of engagement with customers around what do you guys want to do to mitigate this and we’re helping as best we can there. From a supply chain side, a lot of what there’s a couple of things.

We’re looking and working with our suppliers the same way our customers are working with us to understand their mitigation plans, how they could be impacted, what specific materials. In some cases, there are things that are sourced from Mexico. It’s not a big percentage of our spend, but it’s very much supplier by supplier understanding their supply chain and where things are moving and we’re looking at alternative sources of supply where there are components that will be caught. We don’t expect it’s going to be a material impact and it’s something that our supply chain team is very actively engaged on.

Patrick Baumann, Analyst, JPMorgan: So 25% goes through in April, the impact to you is what next year? Like how do I think about that?

Ryan MacLeod, CFO, ATS Corp.: I expect from a sales perspective, not much of an impact. Like I said, because we have flexibility from a supply chain standpoint, we expect we’ll be able to pass the majority along or find alternate supply.

Patrick Baumann, Analyst, JPMorgan: Helpful. Maybe let’s talk about margins then, because obviously you guys have some aspirational targets over the midterm that provide very good runway for the company to drive profitable growth for a number of years here. I think margins are kind of in the low double digits right now and your goal is to get them up to the mid teens, right?

Ryan MacLeod, CFO, ATS Corp.: Yes. We have a 15% EBIT target,

Patrick Baumann, Analyst, JPMorgan: correct. EBIT target, yes. Maybe talk through like the levers. I think it would be helpful, the levers to get there, how much is under your control, how much is market based improvements, gross margin, SG and A leverage, all the kind of moving parts?

Ryan MacLeod, CFO, ATS Corp.: Yes. So it’s a bit of a mix at this point. And we’ve lost some operating leverage this year with headwinds that have impacted our transportation business. So if you’d asked me that question a

Unidentified speaker: year

Ryan MacLeod, CFO, ATS Corp.: ago, most of the improvement that we’re targeting is would affect our gross margin. So it’s areas like our supply chain, where we’ve seen a lot of benefit over the years and continue to see opportunity around consolidating our supply base. Andrew talked a bit about the decentralized model. We have a global supply chain group that sits at the corporate level effectively and they work with all the local supply chains in putting together global agreements, rebate programs and then working with our divisions to expand that addressable spend. So that’s a big lever that we’ve seen a lot of impact from and continue to see a lot of opportunity.

Number two, standardization. And standardization, excuse me, we a lot of people think about our business and rightly so as custom automation. So we’re designing and building equipment products, manufacturing lines for our customers. We’re very focused on standardizing a lot of that. The GLP-one example or for us that’s auto injectors, we’ve got nine or 10 different customers in that space today.

And while all of their products are a little bit different, we apply a very standardized approach in building that equipment for them. So the same core technology is based on our Symphony platform. It uses our SuperTrak linear motion conveyance system. And so that standardization drives efficiency in the engineering process, it drives efficiency in the assembly process and is a margin lever that again we’re very focused on. The third one I would highlight is the mix.

And we’ve talked about after sales services, it’s a higher margin business. It’s an area that we’re very focused on growing. We’ve invested in that to grow, to build out our regional capability. And so those are all areas and again, you’ll see them mostly in gross margin. And again, from where we sit today, operating leverage is part of getting to that 15% target as well from where we sit today.

Patrick Baumann, Analyst, JPMorgan: So if you grow 8% organically for a few years, is that kind of the timeline to get to that margin? Or is it a little longer than that?

Ryan MacLeod, CFO, ATS Corp.: Yes. We’ve talked about this as you used the term mid range target. I think that’s fair. It’s we’ve thought about it in three to five years. And I think given where we sit today, it’s likely a four to five year timeframe.

Patrick Baumann, Analyst, JPMorgan: Helpful. I want to see if there’s any questions from the audience. Otherwise, I’ll keep asking. Hold on one sec.

Unidentified speaker: That’s left you now with a little more leverage than you’ve had historically, and this is the first time you’re sort of referencing that. And how do you think about capital allocation now given where you are with your leverage?

Unidentified speaker: Yes.

Ryan MacLeod, CFO, ATS Corp.: So our focus is on delevering. We’re high 3s today and likely be in that range again next quarter, just given we have some higher historical earning periods dropping off. But our focus is on delevering back to the two to three times range, which puts us in a much better position from a strategic standpoint.

Andrew Hyder, CEO, ATS Corp.: And capital allocation. Sorry, it’s an area I’d love to get into. If you join my team, you get two books. One book is the outsiders. And the reason why I want you to have that book is I want you to understand how Ryan and I think about capital allocation.

And it’s not just new M and A, it’s ongoing. The greatest return to our shareholders, internal investment. We’ve continued to increase that investment. We’ve launched new products, new solutions like the Symphony platform that Ryan mentioned that really enabled us to bring a more capable solution to the auto injector space to support the GLP-one launches. M and A is a key piece of that.

Now when you look at M and A, we did two quarters ago three deals, Pacxiom, Heidolph and a smaller asset for our digital solution. And those are all cultivated deals. And I would say, if we look at our funnel for the future, it’s about cultivation. The best deals we do are cultivated deals, and they take time. And so while we’re going to focus on delevering, we’re still cultivating.

Our funnel is healthier on M and A. And when we get back to it, we have the ability and certainly built out relationships that we can continue to add in areas where we see have the greatest advantage for the business. And so we’re going to be focused on driving this down and then getting back to basics on adding and then helping achieve greater success and achieve aspirations on those targets.

Unidentified speaker: But you sound like you’re pretty committed to stepping it down and then going back out.

Andrew Hyder, CEO, ATS Corp.: We have a and we’ve talked candidly in the automotive space. We have an outstanding item that we’re looking to clear up and in discussions on clearing up. That would get us good way there. And then just continuing to drive execution in the business, improve profitability by unlever and then ultimately continue to deploy capital internally and externally. Thank you.

Ryan MacLeod, CFO, ATS Corp.: The only thing I would add to that too is and you kind of I think, hinted at this, but we listed in New York. It’s coming up on two years now. Part of the reason we did that was our shares as a currency in an M and A deal are a lot more attractive with The U. S. Listing than just the Canadian listing.

So that’s something that could be a possibility and again from where we sit with higher leverage today. But it still has to make sense and tick all the right boxes from a ROIC standpoint and of course, strategically as well.

Unidentified speaker: And you haven’t done that. You have not used equities?

Ryan MacLeod, CFO, ATS Corp.: Correct. We have not. Correct.

Unidentified speaker: But some of the there’s the outside equity preferred,

Unidentified speaker: PE

Unidentified speaker: preferred, that kind of thing as an option too?

Ryan MacLeod, CFO, ATS Corp.: Yes.

Unidentified speaker: Maybe continue on the auto discussion. My understanding and correct me if I’m wrong, the equipment’s delivered, it’s operational. Good companies have contracts. What are the scenario I don’t know that I’ve ever seen anything like this. What maybe just spend a second what has to happen and what are the different scenarios that could happen because that payment solves the leverage issue and reaccelerates the organic M and A.

So it’s fairly significant.

Ryan MacLeod, CFO, ATS Corp.: Yes. It definitely helps with the leverage, obviously. So you’re correct, the equipment’s delivered. It’s in production. It’s been in production for a while.

Where it’s been fully commissioned, it exceeds contractual requirements. The market changed for our customer. The equipment that we’ve built and delivered was designed for called 1,000,000 vehicles a year. Their forecast for this year is about 300,000, so they don’t need the capacity. Well, that’s not normally our problem.

In this case, it’s become our problem. So in terms of where does it go from here, I mean, we’re trying to reach a commercial resolution with the customer. Our leverage in this case primarily is contracts. The unfortunate situation is the only way to enforce a contract if you have a disagreement is through litigation. So our goal is not to have to do that.

Our goal is to get it settled, which to put a timeframe on it is several months, the next several months. Failing that, then we go down an alternate path, which again, the unfortunate thing around that is it’s years to resolve.

Patrick Baumann, Analyst, JPMorgan: Just a follow-up on that. Is there a way to think about like, I think it’s a few hundred million dollars. Is there a way to think about like in the past precedents around like haircuts that suppliers have had to take to come to resolution on something like this?

Andrew Hyder, CEO, ATS Corp.: Of course. And we assess all that and this is a known challenge in this space.

Rich Tobin, CEO, Dover0: Andrew, you mentioned a few times choppiness at the start and then Patrick asked you about orders and you cited good environment for that. So is the choppiness more on the sort of on the products and equipment like the short cycle side like where are you seeing choppiness on the demand side?

Andrew Hyder, CEO, ATS Corp.: Yes. So how I walk through it is if we continue to build in regions where it’s a 25% tariff, that becomes at times a challenge in the end market. So we would then work with our customers on moving that product to region. And so I’m going to take Comecer for instance, out of Italy, Primary Build is out of Italy. They’ve already started their process of having capability to build in The U.

S. And so what I mean by choppiness is, it takes time to move a product up. Any standard product, if you think it’s going to happen overnight, I’m here to tell you I’ve done it many times. It doesn’t happen overnight and there’s usually a length of time. But our view is it can be done.

We have the capability to do so. We have the footprint to do so. And we have the relationship with our customers around being able to have the process in region. And so that’s what I mean when I say choppiness. And what does that mean in a result?

Typically, it doesn’t impact bookings that you look at your margin to make sure you

Unidentified speaker: can cover that during that period of time.

Patrick Baumann, Analyst, JPMorgan: I’ve got another question if there’s no more from the audience. So you guys listed in The U. S. And I guess I’m just wondering, is there a next step in terms of the evolution of the company, whether that be reporting in U. S.

Currency at some point or the headquarters or anything like that. And then the other question I always get from investors is, can ATS provide some annual guidance, like some official annual guidance? Because no one, I guess, is ever really sure like what the bogey is at a given year. I’m not asking for quarterly, but some kind of a framework on an annual basis. What holds you back from doing something like that?

Because a lot of U. S. Listed companies do provide that guidance, which is why we get the question from U. S. Investors.

Ryan MacLeod, CFO, ATS Corp.: Maybe I guess I got to take this one. So we don’t have at this point intention to issue formal guidance. We have we talked about the midterm targets out there and we typically provide kind of a next quarter view on revenues and some more qualitative discussion around margins. But I acknowledge the question and the request. In terms of redomiciling, no intention at this point.

I mean, we’re always looking at what makes sense from a shareholder perspective. Is there some sort of value that could be realized by doing something like that. But at this point, no intention. I mean, our executive team is very global. So across North America, across Europe, we have leaders all over the world.

In terms of reporting currency, I’d say that’s something that in terms of likeliness is probably the most likely of the three things you asked me. No short term decisions there, but I think a lot of our business is U. S. Based. And so that’s something that we are looking at and could be within the realm.

Patrick Baumann, Analyst, JPMorgan: Helpful. And then we got a minute left. Just wanted to follow-up on the use of equity capital for M and A. Like what can you walk through kind of how you think about the trade offs, how we should think about it? Like what are

Ryan MacLeod, CFO, ATS Corp.: the parameters around when you would use equity capital? Yes. So our number one financial criteria when we’re looking at M and A is return on invested capital. And so we have a double digit target that aligns with our cost of capital and exceeding that within five years. Smaller deals, we get a little bit more aggressive and want to make sure we’re ticking that box typically within three years.

But so that’s the number one criteria. I mean, we look at accretion, we’ll look at, of course, the margin profile, the level of recurring revenue. There’s lots of other financial considerations, but number one is ROIC. So in the context of using equity, something could work as

Unidentified speaker: long

Ryan MacLeod, CFO, ATS Corp.: as it ticks that ROIC box. But it is more complicated from an investor standpoint if it’s if the multiples don’t line up. I mean, there’s complications to using equity, but those are things we’re certainly conscious of. But as I said, our number one criteria is ROIC.

Patrick Baumann, Analyst, JPMorgan: Great. Thanks so much for the time and for joining us. Really appreciate it. Thanks everyone for participating.

Ryan MacLeod, CFO, ATS Corp.: Appreciate it. Thank you. Thank you, Patrick.

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