ATS Automation Tooling Systems Stock

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

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

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

[Presentation]

Good morning, ladies and gentlemen, and welcome to the ATS Annual and Special Meeting of Shareholders for 2026. I'm Mike Martino, Chair of the Board and proud shareholder of ATS. Doug Wright, Chief Executive Officer of ATS; and Anne Cybulski, ATS' Interim Chief Financial Officer, are both available to be answering questions later in the meeting and are participating online with me.

This is my first full year serving as Chair of ATS and it's been a privilege to work closely with the Board and management team during this important time for the company. As the largest owner of ATS stock and with 20 years with the company, I decided to take the Chair seat because I was both dissatisfied with the company's performance over the last 3 years and because I'm absolutely convinced that ATS is an undervalued platform that can grow in value by multiples of its current valuation over the next few years. It is my mission to make that happen.

The first step in that mission is to redouble the Board's work on value creation. Diligent oversight and risk mitigation are, of course, fundamental but the Board will hold itself to a higher standard. Every decision the Board of the Board will be judged by one question. Does it make ATS a more valuable company? We've already strengthened the management team.

We're fortunate to recruit Doug Wright as our CEO. Doug is moving quickly and decisively to drive shareholder value. First, by building a stronger team around him, which includes Sarah Moore as the head of our largest group Life Sciences. Both Doug and Sarah have a strong background in lean continuous improvement. That lean continuous improvement lens is the first of our 4 value creation levers that we are focused on under Doug's leadership.

We are driving this lean management system, what we call the ATS Business Model, or ABM, much deeper into our operations and holding each business accountable for results. Some shareholders believe that we've already achieved most of the possible gains from the AGM. That is wrong. We believe that significant margin improvement can be -- can begin to be achieved in the next 18 months.

We have given the divisional managers new tools to achieve these gains creating a structure that allows each manager to maximize his or her division's cash flow return on investment. These tools will ensure that capital is used to maximize the value creation across our portfolio of companies.

Next, driving aftermarket sales and service revenue to be a meaningly larger percentage of our revenues. Best-in-class competitors achieved greater than 40% aftermarket revenues, which results in higher earnings multiple. ATS will drive toward best-in-class aftermarket mix by placing greater emphasis on supporting customers throughout the entire life cycle of our equipment and by implementing dedicated sales strategies that ensure we capture more of the aftermarket business, our installed base naturally generates. We are already seeing encouraging progress with aftermarket revenue growing faster than our equipment sales.

Third, ensuring that we return to organic growth. This will come from enhanced technology investments adding commercial tools to our ABM toolkit, which means using ABM to drive sales and positioning the portfolio in markets where demand for mission-critical automation is experiencing secular growth. For example, small modular reactors, radiopharmaceuticals and certain medical devices where ATS has unique capabilities.

And finally, restarting value creation through capital allocation and M&A. We have rapidly deleveraged over the past 12 months. As we just reported, our net debt ratio is below 3x, which can enable ATS to engage with larger value accretive M&A targets. As a U.S. listed company, ATS is uniquely positioned as a partner in an industry that is expected to consolidate over the next 2 years.

As our first -- Q1 fiscal 2027 earnings call was held earlier today. We will keep the meeting focused on the formal business of the corporation. Shareholders are encouraged to refer to the Q1 materials and earnings call on our Investor Relations web page.

Now to the business of the meeting. I now ask that the Annual Meeting and Special Meeting of the shareholders of the corporation come to order. Once the formal business items of the meeting are complete, we will have some concluding remarks and then address any questions received throughout the course of the meeting using the instant messaging feature of the virtual interface.

I will preside as Chair of this meeting. Sarita Dankner, ATS Corporate Secretary, will act as Secretary of the meeting and [indiscernible], Investor Relations Associate at ATS will perform the role of moderator with respect to all questions submitted throughout the meeting.

As matters of business to be conducted today, we have the election of directors, the reappointment of the corporation's auditor for the coming year, and advisory resolution on the corporation's approach to executive compensation as well as a shareholder proposal seeking to amend bylaw #1 of the corporation.

If there are no objections, I will ask [ Anup Das ] and [ Luke Settle ] of Computershare Investor Services, Inc. to act as scrutineers for the meeting. The Secretary has advised me that the notice calling this meeting, together with a form of proxy and the Management Information Circular have been made available to each director of the corporation, the auditors of the corporation and each intermediary and registered holder of common shares of the corporation of record as of June 23, 2026, the record date for the meeting in accordance with applicable laws.

These materials are available on the corporation's website at atsautomation.com and on the corporation's profile on SEDAR+ and EDGAR. Our transfer agent Computershare Investor Services, Inc., has attested to the proper mailing of the notice following the meeting.

There has been filed with me proof of service of such mailing provided by the corporation's transfer agent. The scrutineers have provided me with their preliminary report regarding shareholder attendance at the meeting. I am pleased to say that the scrutineers' report indicates that there are common shares representing just over 88% of all outstanding common shares of the corporation present at this virtual meeting or represented by proxy.

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

As this meeting is being held virtually via live webcast, we think it is necessary to set out a few rules for orderly conduct. Questions can be submitted by using the instant messaging service of the Lumi virtual interface. When asking your question, please indicate your name, which entity you represent, if any, and if you are a shareholder, duly appointed proxyholder or a guest.

Questions will be addressed during the question-and-answer period at the end of the meeting, provided that questions regarding procedural matters or directly related to the motions before the meeting which are submitted by shareholders or their duly appointed proxy holder may be addressed during the meeting. For purposes of the meeting today, voting on all matters will be conducted by electronic ballot.

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

Once discussion on all items of business has been concluded, I will give you a minute to enter your votes. If you haven't already voted by proxy, and I will then declare voting close on all resolutions. When you are asked to vote, you will receive a message on the virtual interface requesting you to register your votes. You will only have a certain amount of time to do so when the polls are open.

We will now proceed with the formal portion of today's meeting. I have been advised by Doug Wright that he would be prepared to second each of the motions in respect of the items of business outlined in the management information circular. Accordingly, unless there are any objections, I will take such motions as seconded with no further action.

The first item of business is the presentation of the corporation's consolidated financial statements for the year ended March 31, 2026, and the auditor's report thereon. Copies of such documents have been mailed to the shareholders who requested them and are also available on the corporation's website and on SEDAR+ and EDGAR. It is not proposed to read the financial statements to the meeting. Receipt and presentation of the financial statements for the year ended March 31, 2026, are hereby acknowledged. I direct that the financial statements and the auditor's report thereon be annexed to the minutes of this meeting.

We will now proceed with the election of directors. The number of directors to be elected at the meeting has been fixed at 8. I move to nominate those persons specified in the management information circular for election as directors of the corporation to hold office until the next Annual Meeting of Shareholders or until their successors are duly elected or appointed in accordance with the articles and bylaws of the corporation and take such motion as seconded by Doug Wright.

The proposed nominees are [ Avik Day, Joanne Ferstman, Kirsten Lang, Michael E. Martino, Sharon Cepel, Daniel A. Prior Philip B. Whitehead and William Douglas Doug Wright ].

The Board recommends that shareholders vote for each of the proposed nominees. If there are any further remarks with respect to the foregoing, please submit them now through the instant messaging service on the virtual interface.

There is no further discussion with respect to the foregoing.

Thank you. As there is no further discussion, I move that the nominations be closed and take such motion as seconded by Doug right.

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

There is no discussion at this time.

Thank you. As there is no further discussion, we will move on to the next item of business. The next item of business is to consider, and if deemed advisable, to pass a nonbinding resolution accepting the corporation's approach to executive compensation. The full text of which is set out in the Management Information Circular, which I will refer to as the advisory resolution on executive compensation.

To provide context for this resolution, we believe a shareholder advisory vote forms an important part of the ongoing process of engagement between shareholders and the Board on executive compensation. I, therefore, move to pass the advisory resolution on executive compensation and take such motion as seconded by Doug Wright. Is there any discussion on this motion?

There is no discussion at this time.

Thank you. The final item of business is to consider the shareholder proposal set out in the management information circular. The full text of the proposal, together with the Board's response and recommendation that the shareholders vote against the proposal is included on Schedule C to the Management Information Circular. Does any shareholder or duly appointed proxy holder have any questions or comments specifically with respect to this proposal? As with all questions today, please submit these through the instant messaging feature identifying your name if you are not a shareholder of record, the entity or shareholder you represent.

There is no discussion at this time.

Thank you. I now move that the shareholder proposal be voted on and take such motion as seconded by Doug right. As noted, the Board recommends that shareholders vote against the proposal. That concludes discussion on all items of business.

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

The polls are now open, and at this point, all registered shareholders and duly appointed proxy holders who have properly logged in with their control numbers or user name and who wish to vote will be able to see on the screen all motions being brought before being brought forth at this meeting. Please register your votes by accessing the voting page and selecting the for or withhold buttons next to the name of each proposed director and next to the resolution with respect to the appointment of Ernst & Young LLP as the corporation's auditor; the for or against buttons next to the advisory resolution and the for or against buttons next to the shareholder proposal. Once the electronic balloting closes, the voting page will disappear, and your votes will be automatically submitted. Please get your votes in.

[Voting]

I now declare the polls closed. I have been advised by the scrutineers of the voting results on the matters before us today. Accordingly, I'm pleased to announce that each of the 8 nominees has been elected as a Director of the corporation to serve until the next Annual Meeting of Shareholders or until his or her successor is elected or appointed. The appointment of Ernst & Young LLP as auditors of the corporation has been approved and the Board of Directors of the corporation has been authorized to fix their remuneration.

The advisory resolution on executive compensation as more particularly set forth in the management information circular, has been approved by a majority. The shareholder proposal, proposing that bylaw #1 of the corporation be amended as more particularly set out in the management's information circular has not been approved.

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

Ladies and gentlemen, that concludes the formal business brought before the meeting. As there is no further business, I declare the formal part of the meeting to be concluded.

Before we proceed to questions, I will invite Doug Wright, ATS' Chief Executive Officer to make brief closing remarks.

Thank you, Mike, and good morning, everyone, and thank you for participating in today's meeting. It's a privilege to be speaking with you at my first annual meeting as CEO of ATS.

As I noted in this morning's Q1 fiscal 2027 earnings call, since joining ATS, I've completed a comprehensive portfolio review and site assessments across the organization. This process gave me a clearer view of both the strengths of the portfolio and the opportunities ahead and reinforce my confidence in the quality and commitment of our people, the depth of our technical expertise and the strength of our customer relationships.

I was particularly impressed by the importance of the work our teams do every day. They solve complex scientific and manufacturing problems, help improve patient outcomes supports safe and high-quality food production and contribute to energy security. My conviction in ATS is stronger today than when I joined the company. We participate in attractive markets with compelling long-term growth drivers.

As I said in the earnings call, we have a clear plan. Now it's about execution, and I'm confident in our ability to translate that into improved performance and meaningful value creation. On behalf of our entire management team, I want to thank our employees for their continued commitment, our customers for their trust and our shareholders for their ongoing engagement and support. I will now turn it back to Mike.

Thank you, Doug. With that, we can now proceed to questions. As explained at the beginning of the meeting, any shareholders, proxy holders or guests who would like to ask a question can use the instant messaging feature of the virtual interface to do so. We will answer as many questions as time permits.

As a reminder, when asking your question, please state your name, the entity you represent, if any, and confirm whether you are a shareholder duly appointed proxyholder or a guest. Please limit your questions to topics relating to today's subject matter. For each question we answer, we will summarize the question and read out loud the name of the person who asked such question and if applicable, the entity such person represents. We would like to remind you that questions which were already answered or that are redundant or repetitive will not be answered. Secretary, do we have any questions thus far?

We do not have any questions.

We will give the attendees a few moments to type in questions. There being no further questions, we are now concluding the question-and-answer part of the meeting. That concludes the Annual and Special Meeting of the shareholders of ATS. I will sign off by saying that thank you for participating and reminding you that we welcome shareholder questions during the year and are available by contacting our team as noted in the Investor Relations page on our website. Have a great day. Goodbye for now.

Welcome to the ATS Corporation First Quarter Conference Call and Webcast. This call is being recorded on August 6, 2026, at 8:30 a.m. Eastern Time. [Operator Instructions] I'd now like to turn the call over to David Ocampo, Head of Investor Relations at ATS.

Thank you, operator, and good morning, everyone. On the call today are Doug Wright, Chief Executive Officer; and Anne Cybulski, Interim Chief Financial Officer. Please note that our remarks today are accompanied by a slide deck, which can be viewed via our webcast and available at atsautomation.com.

We caution that the statements made on the webcast and conference call may contain forward-looking information and our cautionary statement regarding such information, including the material factors that could cause actual results to differ materially from the statements and the material factors or assumptions applied in making the statements, are detailed in Slide 3 of the slide deck.

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

Thank you, David, and good morning, everyone. Today, we reported first quarter results for fiscal 2027. Before discussing the quarter, I want to provide an update on conclusions from my portfolio review, the long-term demand profile in our chosen end markets and our path to margin expansion.

Since joining ATS, I've completed a comprehensive portfolio review and site assessments across the organization. This process gave me a clearer view of both the strengths of the portfolio and the opportunities ahead and reinforced my confidence in the quality and commitment of our people, the depth of our technical expertise and the strength of our customer relationships.

I was particularly impressed by the importance of our work our teams do every day. They solve complex scientific and manufacturing problems, help improve patient outcomes, support safe and high-quality food production and contribute to energy security. I am confident in the growth profile in the underlying markets in which we solve such problems and have such impact.

Across all of our solutions and end markets, artificial intelligence is creating opportunities for ATS, both as a demand driver and as a capability that we are uniquely able to harness in our solutions because of our deep domain expertise. My overall optimism is reflected in positive outcomes across several areas of the business.

In life sciences, the trailing 12-month book-to-bill, excluding GLP-1-related activity, was approximately 1.1x, driven by strength in radiopharmaceuticals. We also delivered 11% year-over-year growth in service-related revenues across the company.

I have even more conviction today than I did in coming to ATS on the opportunities this company has in the markets in which we compete. It is this conviction that tells me that over time, we can operate above our stated operating margin target of 15% while continuing strong secular top line growth. What will turn this conviction into performance are the frameworks that we are now applying across the business.

First, through the application of a disciplined cash return on investment framework, we expect to achieve approximately half of the margin improvement required to achieve our 15% target, primarily through a fixed cost transformation program.

Second, through growth in higher-margin aftermarket services, stronger commercial discipline and innovation and improved application of our ABM tools, we expect to deliver the remainder of the improvement needed to achieve and exceed our 15% target.

On fixed cost transformation, we've initiated an 18-month program to simplify our operations, improve efficiency and strengthen the foundation for long-term profitable growth and shareholder returns. The program will include reductions in facility overhead, indirect expenses and SG&A.

The first phase focuses on Europe, where our review identified excess capacity and operating infrastructure that are not generating returns consistent with our requirements. We are consolidating certain facilities and transferring select technical capabilities to other ATS locations where existing capacity and capabilities can support customer requirements more efficiently.

Given the nature of these actions, the implementation and realization of benefits are expected to occur over several quarters. We estimate the initial phase of the European fixed cost transformation program to generate annualized savings in the range of $20 million, which is approximately 30% of the savings opportunities we anticipate from the overall fixed cost transformation program.

On the broader transformation program, we will provide updates on the expected cost-out opportunity as these are finalized along with the cost of the entire program. This program, together with our ABM, expansion of our aftermarket services business and our focus on regulated markets is intended to make ATS into an even more attractive company capable of driving sustained earnings power over time.

Now over to Q1. On near-term performance, Anne will discuss the quarter results in more detail in her prepared remarks. But in brief, Q1 adjusted revenues were down 5% versus last year, reflecting a lower opening order backlog, the timing of project execution and the planned reduction in large-scale automotive work. Despite this, we continue to see healthy levels of customer engagement across our markets, particularly in radiopharma.

Against this backdrop, profitability in the quarter also reflected the lower revenue base. On profitability, adjusted earnings from operations were $68 million, down 13% compared with Q1 last year.

Turning to our end markets, we ended the first quarter with approximately $1.9 billion in order backlog. Within life sciences, our opportunity funnel is active and well diversified across radiopharma, pharmaceuticals and medical device applications.

Radiopharma remains an attractive growth opportunity supported by increasing adoption of therapeutic applications, ongoing investment in isotope production and a shift toward more decentralized manufacturing to support timely patient access to treatment. As programs advance toward commercialization, we continue to observe broader market activity aimed at securing capacity, enhancing supply chain resilience and supporting reliable operations in highly regulated environments.

Our work with TerraPower isotopes reflects this investment as customers expand isotope production capacity to support future therapeutic demand. Our differentiated capabilities in containment systems, automation and life cycle support position us to participate in multiple phases of this capacity build-out.

Beyond radiopharma, the life sciences funnel includes opportunities in automated visual inspection, lab automation, contact lenses and wearable devices. In food & beverage, our funnel remains strong despite lower order activity in certain markets following elevated investment levels in recent years. We continue to see opportunities across core and adjacent end markets, including fresh fruit processing, secondary processing and packaging applications. Equipment replacement requirements may also support investment activity over time.

In energy, our funnel remains strong, driven by industry investment in energy security, infrastructure modernization and new power generation capacity to support data center needs. Within nuclear, ATS has a strong track record supporting CANDU reactor refurbishment and life extension programs.

Looking ahead, our opportunity set is broadening. In Canada and the United States, we are engaged with reactor technology companies in early engineering, systems design and prototype equipment development for small modular reactors and next-generation large reactor programs.

For reference, on a single nuclear reactor build, our portion of the project may represent a low single-digit percentage of the customer's total CapEx. For us, this could represent revenue of $50 million to $150 million based on the application. Within industrial & consumer, funnel activity remains stable with opportunities across warehouse and packaging systems and specialized industrial applications.

On capital allocation, leverage remains within our target range and our acquisition funnel remains active. Over the past 12 months, we have significantly strengthened our balance sheet, providing greater flexibility as we evaluate opportunities.

We remain patient and disciplined, focused on opportunities that are strategically aligned and capable of creating meaningful shareholder value. We will remain selective, but when opportunities align with our strategic priorities and meet our return requirements, we have the flexibility to pursue them while remaining disciplined stewards of capital.

Before I summarize the opportunity I have in front of us, I will turn the call over to Anne for her financial report. Anne, over to you.

Thank you, Doug, and good morning, everyone. Before turning to our operating results, I'll provide some additional context.

We are driving improvements to our costs through our previously announced restructuring plan, and those actions are underway. In addition, we plan to take structural costs out of the business as part of our transformation program. In the near term, revenue mix and volume influence our reported operating margin. However, we made some progress during the quarter.

For example, in Q1, adjusted gross margin improved both sequentially and year-over-year, which we see as early evidence that some of our focused actions are working, particularly on aftermarket services.

In Q1, we incurred restructuring costs of $5.7 million against the first quarter expected spend of $10 million to $15 million. We expect to complete this initial set of actions in the second and third quarters as we continue to work through workforce and regional requirements.

As we drive improvements across the organization, we also completed other reorganization-related actions in the quarter. These actions resulted in $21.5 million of noncash charges in the quarter, primarily write-downs of assets that are no longer strategic going forward. We have adjusted for these items as nonrecurring.

We expect further restructuring and reorganization-related charges through the balance of the year to complete our previously disclosed Q1 actions, any margin protection actions warranted by market conditions and as we start to execute the broader fixed cost transformation program that Doug described. We will size those costs as the plans are finalized.

As Doug noted, about half of our path to 15% operating margins will be closed through our fixed cost transformation program and the remainder through our focus on margin-accretive aftermarket services, stronger commercial discipline, innovation and improved application of our ABM tools. The benefits are expected to build progressively as we implement the program actions over approximately 18 months, and we will report our progress.

Taken together, these actions will change our cost structure, not just our cost this year. The opportunity to fundamentally shift the way we manage our cost base underpins our confidence in scalable earnings growth.

With that, I'll turn to our operating results for the quarter. Order bookings were $656 million, down 5.3% from Q1 last year, reflecting large nuclear project awards in the prior year period. Timing also played a role with some anticipated Q1 orders moving into future periods. Bookings vary quarter-to-quarter. To reiterate, our view of mid- to longer-term underlying demand has not changed, and our funnel remains healthy across our chosen markets.

Adjusted revenues for the first quarter were $698 million, down 5.2% compared to last year, reflecting the lower opening order backlog and the planned reduction in transportation-related activity, partially offset by revenue growth in energy and services.

Moving to earnings. First quarter adjusted earnings from operations were $68.1 million, down 13.4% from Q1 last year, primarily on lower revenues with the benefit of our cost actions still ahead of us. Gross margin for Q1 was 30% of adjusted revenues, an 18 basis point increase on Q1 last year, primarily on higher-margin after-sales service revenues.

On SG&A, excluding adjusting items, expenses in the first quarter totaled $136.6 million, slightly higher than last year, largely on foreign exchange translation. Excluding the mark-to-market impact related to changes in our share price, stock-based compensation expense was $4.9 million in Q1, and we continue to expect normalized stock-based comp expense of approximately $5 million per quarter. Adjusted earnings per share for the quarter was $0.35.

Moving to our outlook. We closed the quarter with an order backlog of approximately $1.9 billion. On a combined basis, life sciences, food and beverage and energy represented more than 80% of our total backlog, supporting visibility across several of our more highly regulated markets.

Based on the expected conversion of existing order backlog, together with revenues from orders anticipated to be booked and billed within the period, we expect second quarter revenues to be in the range of $660 million to $700 million. As a reminder, this assessment is updated every quarter.

Looking across the balance of fiscal '27, we expect margins to strengthen through the second half as backlog converts and our cost actions take effect. The macroeconomic environment remains fluid, and we continue to monitor trade, tariffs and geopolitical developments. To date, these have not had a material impact on our business. Our global footprint and sourcing network give us the flexibility to manage these dynamics.

Moving to the balance sheet. In Q1, cash flows used in operating activities were $10 million. This was mainly related to timing of billing and collections on larger programs, and we expect improvement going forward. Our noncash working capital as a percentage of revenues was 14.3%. This measure can fluctuate between quarters, but we do expect to remain within our long-term target of 15% of revenues or less.

Working capital discipline, efficient asset utilization and cash generation remain a clear focus, supported by the internal frameworks we are deploying across the business. During the quarter, we invested $15.6 million in CapEx and intangible assets, including technology infrastructure and internal development initiatives. For fiscal '27, we continue to expect our CapEx and intangible investment to be between $70 million and $90 million.

On leverage, our net debt to adjusted EBITDA ratio ended Q1 at 2.9x. We do expect to operate within our targeted range of 2 to 3x through fiscal '27. As previously noted, we may temporarily exceed this range for capital deployment opportunities that meet our disciplined return criteria and support a clear path back to our target leverage range within an acceptable time frame.

In summary, we are advancing the previously disclosed restructuring actions initiated in Q1 and the broader transformation program announced today. Together, these initiatives are intended to reduce fixed costs and SG&A, consolidate our footprint, improve capacity utilization and increase capital efficiency across the organization with a clear focus on cash return on investment.

As a result, we expect a structurally lower cost base and stronger cash generation over time, positioning ATS for scalable earnings growth as volumes improve. That gives us confidence in our ability to create long-term shareholder value and returns.

Before we go to Q&A, I'll pass the call back to Doug to conclude. Doug?

Thanks, Anne. My conviction in ATS is stronger today than when I joined the company. We participate in attractive markets with compelling long-term growth drivers. That, together with what I observed across the organization, reinforces my belief that we can, over time, operate above our stated operating margin target of 15%.

Through a focus on cash return on investment, we have the tools to address our fixed cost structure and improve returns. Through the ATS business model, we have the tools to improve operational performance and strengthen execution across the organization.

We have a clear plan, and now it's about execution, and I'm confident in our ability to translate that into improved performance and meaningful value creation.

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

[Operator Instructions] Your first question comes from the line of Sabahat Khan of RBC Capital Markets.

This is Patty on the line for Saba this morning. So just maybe starting off looking at kind of your outlook for the rest of F '27, you also mentioned some kind of deal or revenue slippage kind of into future quarters and then calling out it might be dependent on a pickup in order activity through the rest of the year to kind of deliver on some -- your kind of expectations for modest growth this year.

So just maybe if you could give a bit more color on that. I think bookings in F '26 were down, call it, 10%. So what would you think you would need to comp maybe through the rest of the year to deliver on that? And if you could also give some incremental color on kind of the nature of that slippage you called out as well, that would be, I think, really helpful.

Okay. Well, thank you. So we believe the modest organic revenue growth remains achievable, but it will depend on the timing of larger customer awards and the pace at which those orders convert during the second half.

The markets that we serve are very attractive, but they do have some level of lumpiness in them by the virtue of the fact that, in some cases, we're dealing with new science or major regulatory criteria that are driving things like nuclear and radiopharma. So they're inherently lumpy over the short cycle. But over the long term, they're very healthy.

So as an example, in the most recent quarter, we were very strong in radiopharma, and we were -- we had relatively weak bookings in nuclear. But that doesn't mean that those -- both of those markets are still very attractive long-term growers. So in the back half of the year, we would expect some of our lumpy markets to do a bit better than they did in the most recent quarter.

So I think it's just these long-cycle markets require us to have a bit of patience with the velocity of the actual backlog because just the nature of the markets that we're in. But clearly, because we started off the fiscal year slow, it will depend on us having strong recovery in order rates in the back half to be able to deliver on our full year guide. And as we evolve in subsequent quarters, we'll continue to update you.

All right. Great. That's helpful. And then maybe just on the fixed cost transformation program, there's still about -- you've identified the European consolidation, the footprint consolidation there, $20 million, so kind of implies a full cost savings of about $60 million to $70 million.

So do you think -- have you evaluated Doug, basically the full business? Or do you see maybe there's room for more opportunity there as you kind of go through it? And yes, basic -- how would you see that evolving? And when maybe could we get more details on the next phases of the program?

Sure. Well, first of all, the cost transformation program is a fully comprehensive view of our -- or will include a view of all of our manufacturing facilities where we have indirect cost in SG&A. So it's -- while we're highlighting the European item, it's -- I've been to all of our facilities in my process. So we have a comprehensive view there.

This is -- these will be meaningful changes to our cost structure. And I think you've highlighted sort of what the full quantum of the opportunity is. I would say that the run rate that we establish through these programs will be highly accretive to our margin growth rate.

The balancing act is that while we are being -- going to be very aggressive in driving what I would consider to be a good set of productivity actions, we are also part of some very, very fast-growing markets that require us to invest. So we certainly have a lot of -- if you just look at the math, there's certainly a lot of opportunity at a gross level, but we also have to be cognizant of how nuclear is evolving and how radiopharma is evolving, and we need to make sure that we continue to invest in those.

So we have what we believe is a fairly aggressive but balanced approach to our fixed cost action, respecting the fact that we still expect ATS to be a long-term growth company with some very important growth markets.

So it's a balanced approach, but it is very tactical and very detailed in terms of how we are going after underutilization and overcapacity and frankly, some SG&A that has built up that needs to be rightsized. But we also have to continue to invest in the long-term drivers of the company's future.

The one thing that I would add to what Doug said is the way we've assessed the portfolio through his first 6-plus months on the job is really through a set of very pragmatic data-driven frameworks that allow us to identify where these opportunities exist. And we will continue to deploy those frameworks even as we're executing on this transformation plan.

We are fully aware of where we've tracked from a fixed cost perspective relative to our top line over the last number of years. And that's something that we are paying attention to. And as Doug said, will be included in the plan as we execute on it.

Your next question comes from the line of Cherilyn Radbourne with TD Cowen.

Doug, I guess I'm a little surprised that you see a major cost transformation plan as necessary. And I'm curious whether cost reduction was a large part of your initial thesis when you joined ATS or something that you uncovered on further analysis once you got inside?

Cherilyn, good to hear from you. So I would say that the Board -- as I joined the company, the Board was aware that we had some areas of the business that we needed to manage through some restructuring, obviously, the transportation portion that we talked about last quarter. So there was some, I would say, pretty well-known and discussed cost actions that needed to be taken.

As I've gone through my site visits, I mean, I've been on site with all of our significant companies around the world, doing a full day strategy review and diagnostic. And I've applied a framework that we've developed in terms of how we look at cash return on investment, how we look at how the portfolio is performing at a macro level as well as at a sort of at a division level. And we simply have identified that there's more opportunity to be more productive.

It's a fairly simple framework, but what it did do was it identified that there are portions of the business that have invested in capacity that we don't need today to support our growth profile. And so I'd say it's a little bit of both, Cherilyn.

I think I knew when I coming in that there was opportunity that the Board had talked to me as I was coming on to the Board. And then as I did my diligence and visiting all the sites, I don't -- this is not a paperwork exercise. This was done walking through factories and walking through our operations with my team. And Anne and I built this framework out that allowed us to have visibility to where there was opportunity. And we see significant savings opportunities simply by, I call it, running the trains on time better.

Okay. That's helpful context for sure. And then separately, acquisitions have obviously been part of the growth agenda at ATS for some time. How do you sort of protect the capacity to do them while you execute this transformation program?

Well, Cherilyn, clearly, from a human capital or team standpoint, that's a very important question that I have to manage through. I would say that in the growing parts of our organization, they will remain very focused on both organic and inorganic activity. We have a pretty dynamic flywheel and process that we run. We have a dedicated committee of our Board that we're always looking at opportunities for efficient deployment of capital and M&A.

Clearly, when there's a specific division that has a particular emphasis on substantial cost reduction activities, they have diminished capacity to take on more effort. So we have to be balanced in how we approach certain aspects of the portfolio. But the growing parts of the portfolio are -- there's been no change in appetite for M&A.

I would say, our cash return on investment framework has established -- we use it for internal investments as well as for our M&A investments, and it does set thresholds for how we look at the return on investment, and it's a little bit more granular and detailed now than with sort of the framework that I put in place, but it hasn't changed our appetite at all. But we clearly have some areas that we have to balance the need to run the trains on time with buying new trains.

[Operator Instructions] The next question comes from the line of Michael Glen with Raymond James.

Doug, I'm just hoping that maybe you can dig into the existing backlog and maybe give some insights into, are you happy with the margin profile of the work in the embedded backlog? Should we think about a smaller backlog on this margin-optimized company in the future? And what does the top line look like in -- when you hit that 15% operating margin?

So thank you, Michael. I would say there's no correlation between our growth rate potential for the company and this higher margin profile. We -- I don't believe at all that the actions that we're taking have any effect on our ability to create demand. In fact, I think it actually will help us because it will allow us to allocate capital more fulsomely to the businesses that have substantial growth in front of them.

So in terms of the margin profile and backlog, I wouldn't comment on that. But I would say it's not -- there's no material difference in what we have in our current backlog versus existing run rates.

There's clearly -- this is, I think, something that I've spent a lot of time thinking through, Michael. I think the nature of ATS being exposed to really first-generation therapeutics in life sciences. And the really, really dynamic changes that are happening in energy demand around the world simply will make us a little more volatile in our program awarding for these large projects.

I mean some of these radiopharma projects are $100 million projects and some of these nuclear sites are, well, we've said today between $50 million and $150 million scale. So there will be a certain amount of dynamics in our order rates, the way we report them.

But I think the long-term growth potential of the business is getting stronger because we're more focused on our life sciences and energy segment. And even our food business is identifying opportunities to grow faster through virtue of more food quality and regulatory actions within food are also picking up.

So I think there's still a lot -- there's no correlation between margin -- our margin potential and scale. In fact, I could probably build a pretty reasonable argument for you that by investing more heavily in these more -- nuclear is obviously an area where we have very specific differentiation.

And in radiopharma as well, where we're in a situation where we have some of the best technology in the world, I think our margin profile can actually get better, and we can continue to see significant growth.

Yes. And Michael, the only thing I would add to that is when we talk about the fixed cost transformation program and the scale and growth that we expect to continue to drive, as Doug described, we're really talking about creating flexibility in our cost structure in order to be able to operate efficiently within the context of those markets and the nature and dynamic of them the way that they operate.

Okay. And then can you give some insights into -- like the 18-month period that you're referencing, are you able to provide some insights into what should we think about margins exiting that period? Are we getting close to 15% at that point in time? Or is 15% would come another 18 months after you're done the program?

I would say, Michael, it would be somewhere in between those boundaries you've defined. I mean, clearly, the cost actions and the decisions to exit facilities to rightsize the business, those will all be materially complete within this 18-month horizon. But how they actually map into a particular reporting period, will there be some variation there.

But clearly, a majority of the -- well, all of the actions that we've identified in this 18-month program will be activated by that time. But then, of course, they have -- they take time to accrue in there. So it would probably be somewhere in that horizon that you identified, somewhere 18 months plus would be fully absorbed.

But to be clear, there will be significant improvement in the 18-month horizon, but the full $70-plus million of savings, that clearly will be a run rate basis and then would accrue into that sort of second, third year.

Yes. And just to clarify, Michael, on -- as Doug just described, we're talking about the 18-month horizon relative to this transformation program. And then we also described where we expect the remainder of the gap to our 15% target to come from. So we've tried to dimension it very clearly through the plan that we've laid out as well as some of the things that we've already been talking about, including services and the ABM.

Yes. I think, Michael, the other perspective to have on this is that as an operator, I certainly have the capacity to drive more dramatic cost reduction in an 18-month horizon. Just looking at our numbers, you could see that for yourself.

But we are also investing in these new markets. So there's a balancing act that we have to strike in terms of making ourselves more efficient where we need to, but also we have to protect we will protect our investment zones because we're dealing with some markets that have the potential to transform ATS, and we want to make sure that we're in a position to benefit from that growth.

So we have to -- there'll be a balancing act. So could we hit the target in 18 months? Probably. But we're also investing at the same time. So that's kind of the, call it, the balancing feature of the next couple of years for us.

And I'll just ask one more. Are you expecting to make any dispositions or exiting any additional business lines apart from, say, transportation over the time frame?

So we have nothing on the agenda for you today. What I would tell you, Michael, is that our cash return on investment framework process constantly evaluates where elements of the portfolio sit on -- if you think about the mean cash return on investment for ATS and you think about a broad portfolio of businesses, we're always looking at where those businesses sit. And in fact, we review this with our Board every quarter. I look at it every month. So we're always looking at where our businesses are performing.

So in the event that we were to identify a business that we didn't think we had the appetite to invest further to drive improvement in creating that better return, then we would consider dispositioning. But nothing -- so I'd say the process is there constantly. I do it at my level. Each of our groups and our division leaders have their own portfolio of product lines and smaller businesses. And we're building this framework as a way to align ownership behavior with all of our portfolio investments.

And therefore, if we were to identify an asset that was not performing and we didn't think it was we didn't have the ability or didn't have the appetite to improve it, then we would consider it for disposition. So I want you to be comfortable that we have a process for how we adjudicate your question, but there's nothing on the agenda at this moment that we're ready to act on.

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

On the radiopharmaceutical strength mentioned, are we able to have some context as far as the subsegment percentage of sales, the book-to-bill and how you see that segment going forward?

So I would say, first of all, it is the fastest-growing part of our life science business. The backlog is twice as material today as our GLP-1 backlog. So it is quickly becoming a material part of our life sciences business.

And the science behind this is really exciting for our team. I mean we're basically part of a new generation of oncology therapies. And it's a aside from the sort of -- the human element of these exciting new therapies from a business perspective, these are very, very complex manufacturing environments with a lot of safety and you're doing with radiological materials.

And these sites that our customers are building and that we're partnering with them are very substantial opportunities for ATS. We mentioned one partnership in our text today. There are several -- there's a whole ecosystem of investment going into this market that we are uniquely positioned to support. And these are material. I mean they're -- the size of these facilities would be a triple-digit opportunity addressable market for a company like ATS.

So just on triple-digit addressable market, sorry, are you able to just clarify that a bit?

Well, what I'm saying is these isotope facilities that you've probably read about in the news, they are fairly large sites, and they require a lot of ATS equipment -- ATS category of equipment. And for a company like ATS, the addressable market per site would be in that ZIP code.

Okay. And just circling back on the operating margin target of 15%. I'm not sure if I missed this, but is it fair to assume that the base level today is 10%, suggestive of 500 bps margin expansion goal?

Well, I mean, last year, we were around 10.6%. So our long-term stated margin target is -- EBIT target is 15%. And as Doug said today, we believe that as we continue to transform and grow the operations and the business participating in these high-growth markets that we have the opportunity to operate above that. But right now, we're targeting getting to that 15%.

Yes. So Justin, just in terms of the cost transformation program, just to help you with your modeling, consider it to be around a 250 basis point potential over time. So 500 is a pretty good estimate, as you've already stated and confirmed. And about -- when we say half, that's kind of the way we would model it from -- the balance would be other items, including the substantial growth we're having in our services business, which is accretive, as well as other ABM-level improvements.

So -- but half from fixed cost, half from other within that other would be mix toward aftermarket, which would be reasonably material as well as the other pieces. And as you -- a number of you have asked us before sort of help bridge the margin expansion deliverable. We're trying to be a little more fulsome here and giving you a little bit of the chunks of the math to help you understand the quantum that we're targeting.

There are no further questions on the line. I will now turn the call back over to Doug Wright for the closing remarks.

Thank you, operator, and thank you, everyone, for joining us today. We look forward to welcoming shareholders at our annual meeting later today and speaking with all of you again in our Q2 call in November. Have a good day.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

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

Thank you, operator, and good morning, everyone. On the call today are Doug Wright, Chief Executive Officer; and Anne Cybulski, Interim Chief Financial Officer. Please note that our remarks today are accompanied by a slide deck, which can be viewed via our webcast and available at atsautomation.com. We caution that the statements made on the webcast and conference call may contain forward-looking information and our cautionary statement regarding such information, including the material factors that could cause actual results to differ materially from the statements and the material factors or assumptions applied in making the statements are detailed in Slide 3 of the slide deck. Now it's my pleasure to turn the call over to Doug.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Your next question comes from Max Sytchev with National Bank.

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

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

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

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

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

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

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

Your next question comes from Cherilyn Radbourne with TD Cowen.

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

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

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

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

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

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

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

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

Your next question comes from Jonathan Goldman with Scotiabank.

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

That's gross.

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

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

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

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

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

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

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

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

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

Your next question comes from Joe Ritchie with Goldman Sachs.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Thank you, operator, and good morning, everyone. On the call today are Doug Wright, Chief Executive Officer; Ryan McLeod, Chief Financial Officer; and Anne Cybulski, Vice President, Corporate Controller. Please note, our remarks today are accompanied by a slide deck, which can be viewed via our webcast and available at atsautomation.com.

We caution that the statements made on the webcast and conference call may contain forward-looking information and our cautionary statement regarding such information, including the material factors that could cause actual results to differ materially from the statements and the material factors or assumptions applied in making the statements are detailed in Slide 3 of the slide deck. As many of you know, this is Doug's first conference call as CEO of ATS. We're very pleased to welcome Doug as the new leader of our organization.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Excluding the mark-to-market impact related to changes in our share price, stock-based compensation expense was $3.1 million in Q3. Earnings per share were $0.48 on an adjusted basis. Moving to our outlook. We ended the quarter with an order backlog of approximately $2.1 billion. Q4 revenues are expected to be in the range of $710 million to $750 million. As a reminder, this assessment is updated every quarter, taking into account revenue expectations from current order backlog and new orders booked and billed within the quarter.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Yes for this year?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Thank you, operator, and good morning, everyone. On the call today are Ryan McLeod, Interim Chief Executive Officer of ATS; and Anne Cybulsk, Interim Chief Financial Officer. Please note that our remarks today are accompanied by a slide deck, which can be viewed via our webcast and available at atsautomation.com. We caution that the statements made on the webcast and conference call may contain forward-looking information and our cautionary statement regarding such information, including the material factors that could cause actual results to differ materially from the statements and the material factors or assumptions applied the making the statements are detailed in Slide 3 of the slide deck. Now it's my pleasure to turn the call over to Ryan.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

And that includes FX as well and M&A?

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

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

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

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

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

Yes, it's still in that range.

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

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

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

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

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