ATS Corporation Common Shares

Good morning, ladies and gentlemen. Welcome to the ATS Automation first quarter conference call and webcast. I would like to remind you that this call is being recorded on August 14, 2019 at 10 a.m. Eastern. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for questions. If anyone has difficulty hearing the conference, please press star followed by zero for operator assistance at any time. I would now like to turn the call over to Stuart McQuaig, Vice President, General Counsel of ATS.

Thanks, operator, and good morning, everyone. Your main hosts today are Andrew Heider, Chief Executive Officer of ATS, and Maria Perrella, Chief Financial Officer. Before we begin, I'm required to make the following statement respecting forward-looking information, which is made on behalf of ATS and all of its representatives on this call. The oral statements made on this call will contain forward-looking information. The actual results could differ materially from a conclusion, forecast or projection in the forward-looking information. Certain material factors or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information. Additional information about the material factors that could cause actual results to differ materially from the conclusion, forecast or projection in the forward-looking information And the material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection as reflected in the forelooking information are contained in ATS's filings with Canadian Provincial Securities Regulators. Now it's my pleasure to turn the call over to Andrew.

Thank you, Stuart. Good morning, ladies and gentlemen, and thank you for joining us. Our first quarter performance featured growth in bookings and revenues, continued margin expansion, the advancement of our ABM, and contributions from our recent acquisitions. We finished the quarter with record order backlog. This morning, I'm going to speak to you about our Q1 performance and outlook. Maria will then provide her report. Starting with our Q1 financial value drivers, bookings were a record $423 million, up 18% over last year. Organic growth accounted for half the increase. with the other half coming from Comisar and KMW. Both of our recent acquisitions perform well. We booked a number of large programs during the quarter, including a life sciences program for a medical device application with an existing customer, and several large programs in transportation in North America and Europe, all with repeat customers. Our sales and operations teams continue to execute well. Q1 revenues were $339 million, up 13% over last year. Excluding acquisitions, our organic revenue growth was 4%. Our Q1 adjusted EBIT margin was 11%. Moving to our outlook, we ended the quarter with a record order backlog of $982 million, up 24% over last year. This provides us with a good base of business to drive growth for the remainder of the year. Looking at our funnel, Life Sciences continues to be strong, and we are seeing good opportunities in medical devices, pharma, and radiopharma. Life Sciences represents over 50% of our backlog, and we are well aligned to drive penetration in this market. Life Sciences has positive industry dynamics, high barriers to entry, including stringent regulation and high consequence of failure. These characteristics are complementary to our capabilities, which includes high-speed, high-precision solutions across a number of applications. EV activity remains healthy and represents the majority of our transportation funnel. Our proven success in EV, including battery module and pack assembly and e-motor assembly, positions us well to capitalize on the transportation market shift. In consumer and energy, we continue to pursue niche opportunities where our technologies align well with the value required by our customers. As I've stated in the past, I expect our customers will continue to exercise caution and be thorough in making their capital investment decisions, which could lead to variability in order bookings from quarter to quarter. We also continue to monitor the impact of trade disputes on customer activities and our supply chain, which has added another variable to our customers' investment decisions. On after sales services, customer receptivity is positive, and we continue to see favorable trends in attaching service sales to our CapEx business. Q1 after sales service bookings and revenues both increased at double-digit rates over last year, and our funnel for services remains strong. We have made investments in after-sales services over the past several years, both in infrastructure to grow and develop the business and in innovation to drive market leadership as with the recent launch of our IOT solution. We remain focused on growing the strategic area of our business as it drives reoccurring revenues and contributes to our margin expansion initiatives. Moving to the ATS business model, we are continuing to embed the ABM in how we do business every day. At Comasur, we introduced training on ABM fundamentals and held our first problem-solving events. Globally, we conducted 15 Kaizen events, which addressed areas such as operations, project management, human resources, and finance. Just a couple highlights from this last quarter. One division reduced lead time on a specific assembly process by over 50% through standardizing its workflow, streamlining processes, and improving daily visual management. Another division reduced a key operational process by 20% through value stream mapping, implementing standards in their process, and eliminating waste. Our ADM boot camps and weekly lean training sessions are ongoing and driving advancement of the EABM throughout the business. Employee feedback is positive as our people are engaged in making improvements in their day-to-day activities. The pace of advancement is encouraging and we have many opportunities ahead for continued improvement that I expect will support our margin expansion plans. Turning to our investment activities, During the quarter, we broke ground on the expansion of one of our facilities in Cambridge. This expansion led capacity for our life sciences business and dedicated space for our innovation teams. Our innovation activities are ongoing. Early in the first quarter, we launched Illuminate Manufacturing Intelligence, our connected factory management IoT platform that customers use to maximize their overall equipment effectiveness productivity, and quality. We continue to review our capital allocation strategy, including internal investment opportunities, acquisitions, and share buybacks to drive long-term shareholder value. Moving to Comisar. ATS Life Sciences business coupled with Comisar creates a sizable platform that we expect to grow. Integration of front-end of the business activities is progressing very well. We have built a pipeline of pursuits where the combined businesses are working together on specific opportunities to capitalize on the strong and positive momentum created in the market since the acquisition. Sales groups have been aligned internally with improved capacity for Comasur in North America. We are continuing our work to develop integrated service offerings and develop a joint go-to-market strategy for the aseptic fill and finish market. Customer receptivity is positive, and we are confident that revenue synergies will be achieved. Integration of administrative activities is expected to be largely complete over the next few months. Joint initiatives between the supply chain groups are underway to drive cost-saving synergies, which we are working to achieve over the next 12 to 24 months. In summary, We are focused on our value creation strategy, build, grow, and expand. We're off to a good start to the year with solid growth in both bookings and revenues. We have a record order backlog, and we are well positioned to drive growth in fiscal 2020. We are focused on driving continuous improvement in all aspects of our business through our ABM. Our balance sheet remains strong, which we will continue to put to work through internal investment, innovation, and strategic M&A, as well as share repurchases when appropriate, all with the goal of continuing to create long-term shareholder value. Now I'll turn the call over to Maria.