ATS Corporation (ATS) Earnings Call Transcript & Summary

Good morning, everybody, and welcome to the 2021 JPMorgan Industrials Conference. We've got a jampacked a couple of days here of Zooms, unfortunately, more virtual meetings. Hopefully, next year we'll be back in person. But we're very happy to kick it off today with ATS Automation. They are a critical enabler of automation trends in regulated industries. And we have CEO, Andrew Hider, here today, who's going to tell you a little bit about the company, and then we'll open it up for Q&A. Just to let you all know on Q&A, feel free to e-mail me -- IB, me, the usual standard kind of channels of communication, but there's also a question section on the website that you can all use to ping us as well on that, and we'll get those covered as we go. But with that, we'll kick it off with Andrew. Andrew, thanks for joining us. Appreciate it.

Great. Thank you, Steve. Appreciate the warm welcome. And thank you, ladies and gentlemen, for joining us this morning. I appreciate the time from the JPMorgan team for putting this conference together. I'm Andrew Hider, CEO of ATS Automation. And I want to start on Slide 3. ATS is a global diversified automation and technology company. We have over 4,200 highly skilled and dedicated employees around the world. We're proud of the work they do as innovators of advanced technology and solutions for our customers. Our global scale and presence is truly unique in our industry. With 20 manufacturing facilities and over 50 engineering and sales offices in over 20 countries, enabling us to truly serve a global customer base. You can see some of the financial highlights on this slide, and I will go into more details as we go through this presentation. But one important point that I want to highlight is the resilience of our business over the past year. This reflects not only the strong and proud work of our employee base, but also the high value we bring to our customers every day. Turning to Slide 4. What we do? ATS provides technology and automation capability to our customers around the world, helping them transform, streamline and optimize their manufacturing operation. To use an example, this pen is an injectable device. And in our life sciences space, a customer who has this device potentially just got FDA approval. And so they've built 1,000 prototypes and now they need to take that 1,000 and they need to go to 1,000 a minute. And oh, by the way, this device is 70% gross margin. So it's a high gross margin product. It's an injectable device. Therefore, it goes direct into the bloodstream. So it's high quality, high consequence of failure. And your demand is through the roof. You come to ATS. We have the integration capability. We have the automation capability. We have the machines that fill the product, that produce the product and bring it together as well as the products that support and enable it. And oh, by the way, over the life of the equipment, we're going to service and we have a digital solution that's going to constantly help you maximize your capability. That's where we play. And so we're in all of those swim streams. 60% of our business is in the automation product side. About 10% is specific products that are focused on technology. For instance, our SuperTrak and our Illuminate platform, which is part of our digital solution set. And approximately 30% of our business is in aftermarket and sales support. ATS can provide solutions across the full value chain of the customer's process. Well, it's not only designing, building, maintaining as well as supporting for the life of the equipment. Moving to Slide 5. We serve customers in 4 main verticals. Starting with life sciences. And we provide solutions for -- excuse me, for medical device manufacturers, pharma and radiopharma. In transportation, about 75% of this business is now EV. And this is a segment and focus area that we've been driving for about the last 4 years, and we've been in it for more than a decade. In consumer, we serve a number of subsegments. Starting with warehouse automation as well as food and cosmetics. And I'm going to talk a bit more about the food space as we recently announced an acquisition of CFT that's going to bring that segment to about 20% of our total business. In energy, the majority of our business is in nuclear today. We're focused on a specific area with refurbishment and decommissioning. These markets all have positive trends and positive dynamics. But in addition, there's also long-term trends around automation that's enabling through these areas, starting with continued demand for safety, reliability and quality. The increased complexity of products, one of our customers does a device in the treatment of diabetes, 72 unique products that come together -- unique pieces that come together to build 1 specific part that all needs to go together properly to deliver the right product to the market. And lastly, the reshoring and this whole discussion around supply chain management is a key area for automation and a key enabler for automation. Starting -- going to Slide 6. We highlight some of the products that we help bring to market. And one of the key points is that we have a strong relationship with our customers. Approximately 85% of our orders come from repeat customers. So when we go in and we really truly drive and help those customers bring products to market, we see a strong correlation to repeat business. And it's something as we look at new acquisition and new target areas that we can bring into that fold. And I'll highlight Comecer here a little bit later in the deck, whereas an aseptic filling process that we knew because of our relationship, we could help that product really see additional life in our customer base. Going to Slide 7. The ATS Business Model, or ABM. We're a decentralized corporation and all of our business aligned around the ABM, which is a set of business processes that truly help us evolve our strategy and really enable our continuous improvement in our operations. The ABM starts with 3 pillars on the left. It's people, having the best team and winning as a team. Then process. Formal, disciplined, around driving constant improvement in our process every day. And then last, performance. Measure and course correcting when we're off. Now I can spend 20 minutes on this slide alone, but in the essence of time, I'll be a bit more brief. As we look across, it really is aligned around how we then deploy and how we implement these. And it starts with strengthen our core, our focus on maximizing our operations. Then delivering growth, our commitment to commercial and customer success. And lastly, pursuit of excellence. And these are the tools that drive innovation and long-term value creation for our shareholders. In the middle are just some of the tools we use to operate and drive innovation and continuous improvement within our operations. And importantly, this is a repeatable model that is applied across all of our companies. Whether they're in product, service or integration, we're constantly focused on making tomorrow better than today. And that focus on continuous improvement really drives that profitable growth mindset that alignment to customers, employees and shareholders, and all 3 have to align. On Slide 8, I want to highlight 1 important area of our ABM. That's the value drivers. Within value drivers, these are the core areas that we measure and they're standard across the business. So if we were to travel here and go to our business in Germany, Canada, U.S. or Thailand, they will start with these 8 value drivers. We have annual targets on each one of these that go to monthly and daily, where possible. So we know if we're winning or losing on a daily basis, focus on the critical few, you measure for success, and you're constantly driving to get better at each one of these every day. The top 4 are financial: bookings, revenue, margin expansion and working capital. And the bottom 4 are really aligned around ensuring that you can repeat and continue to improve on the top 4. Customer: on-time delivery and quality. When we speak to our customers and we analyze one of the key important areas for them, it's about did you deliver the product on time and at the highest of quality. And lastly, people. Internal fill rate and turnover. Internal fill rate's around, are you developing your people to build for today and tomorrow? And lastly, turnover. Ensuring that we've got alignment with engagement, but where we're driving where we're going in the business. Moving to Slide 9. This slide just provides an overview of our growth and value creation strategies. Starting with target markets. And we are growing in high-value end markets that align well with what we do. For example, life sciences is an attractive market with solid industry fundamentals, positive dynamics and opportunities to utilize all of the ATS technology innovation. Our ability to provide high-speed, high-precision solutions really serves this market well. We see life sciences as an area of growth for our company, particularly in medical devices and pharmaceutical. And we continue to broaden and deepen in this space. Other regulated markets such as nuclear and food are attractive and provide opportunities for us to differentiate, provide solutions and technologies in this space and drive innovation to really expand our support and penetration with our customers. And then the bottom half, you'll see the enablers for our focus. It starts with innovation, driving product and technology leadership, the highest levels to really truly align for value for our customers. Then digital growth. And our view of digital growth is around if you know and understand automation. So you understand what goes into making this product, then taking an IoT platform, bringing those together is the ability to have a true smart factory. You can understand and utilize the information and data that you pull from the process, and you know how to then correlate it to how to maximize the performance of the machines. That's our focus on digital, and we've continued to build on our solutions here. Strategic M&A. Targeted, disciplined focus around areas we can add incremental capability and really drive long-term value for our shareholders. And finally, continued margin improvement. This is the 5 key pillar areas. Around standardization, around strategic supply chain, expanding in higher-margin after sales and service market. Operational leverage. And lastly, the ABM that focus on continuous improvement and continuing to drive improvements in our business every day. Turning to Slide 10. This just demonstrates the progress we've made in that portfolio of focus and really focusing on our favorable markets in areas we want to differentiate ATS into the future. In 2012, 33% of our business came from life sciences. While last year, this represented over half of our business. And today, we're booking at about 60%. Transportation was 41% of our business, and it's primarily in ICE, which is Internal Combustion Engine. Today, transportation represents about 20% and it's primarily electrification of vehicles. So those shifts that you're hearing major OEMs announce, we're engaged in the battery pack assembly, battery process around that. And this is a strategic area for our customers and aligns truly well with what ATS can provide as a solution and a technology to the space. Moving to Slide 11. As I noted, the verticals we serve have favorable tailwinds. Life sciences, aging demographics, new product innovations and customer demands for quality. Additionally with customers focused on operational efficiency and getting product to market at the speed and pace that's needed, really align well with what ATS does. In transportation, the shift from EV -- from ICE to EV as well as standardization really aligns well and the shift, can you go from an ICE to an EV in a battery pack assembly, there's 10,000 welds. One of those going wrong can really drive an impact on the car's length and time it can perform at. Therefore, it's mission-critical for them to get that right and aligns with what ATS continues to support in the market. In energy, the demand for total energy and clean energy around solar and nuclear really align with what we do. With operations -- and operators really looking at the total life cycle management of the process, ensuring that automation is an enabler for both safety as well as efficiency within the space. And in consumer, demographics for increased efficiency and quality of life are areas that we help and we support. Slide 12. And this is capital allocation -- I'm sorry, this is Slide 13. As I noted, M&A is an important element of our focus. It's an area that we drive, and we've got 4 key pillars that we focus on. It starts with market. And really understanding the market, both the ups and downs of the market. So when the market performs and is in a growth mode, what is it doing? As well as when you're in a recession, what happens within that space? And we want to understand both. We want to understand that niche capability and how it perform through that cycle through that period. And then the strategic value of the target. Is it a product solution? Is it differentiated technology? Is it a geographic expansion? Third is aligned around operational fit. How quickly we can launch the ABM. The management team, do we have leaders that are ready to go in and help support this integration? And lastly, the financial return, ROIC, reoccurring revenue and EPS accretion. And on the right are many of the assets and targets that we've added over the last 2.5 years. And what you'll notice is they're aligned around life sciences, regulated food, electric vehicles and then digital and enabling our digital solutions to continue to help and support our customers. On Slide 14. We highlight our most recent transaction, Comecer. And this is a business we've owned roughly around 2 years as of today. This asset has performed at or above expectations within ATS. And the rollout and the adoption of the ABM has really progressed very fast. And this team is a continuous improvement team. They've taken on the initiative of always making tomorrow better than today and growing that in their business. It's not only helped us with our integration capability, but knowing around the ABM playbook and what it can truly unlock in value for businesses. As you can see across -- on the bottom left, book-to-bill ratio's improved by 20%. Operating margin has improved by 300 basis points. And their service, while still early in their journey on expanding their services penetration, has gone up 200 basis points. This business has really been an area that they've highlighted and driven on their own as well as support from ATS from an implementation standpoint. Turning to Slide 15. We announced on Friday the completion of our most recent acquisition, CFT Group, a global supplier of automated processing and packaging equipment. This is a platform acquisition for ATS in the regulated food and beverages industry. It's well aligned with our strategy to target acquisitions in attractive and growing markets with differentiated technologies and strong competitive positions. Moving to Slide 16. Based in Parma, Italy, CFT is a technology leader in sorting, processing and packaging, serving the fresh produce, liquid food and beverage market. You'll find CFT's equipment and systems and plants around the world that produce sauces, fruit purees, baby foods and beverages, just to name a few examples. The company serves its market through a portfolio of well-regarded, market-leading brands and a global footprint. CFT has many blue chip customers that are diversified across Europe, North America and Asia. The company has demonstrated strong revenue growth profile over the last several years, and its revenue is diversified across sales of complete lines, signal machines and their aftermarket business. Turning to Slide 17. This is a highly strategic transaction for ATS. It allows us to really penetrate and build-out our new platform in the regulated food and beverage market. The addition of CFT will build on an earlier acquisition of MARCO and enables us to serve multiple areas of the food and beverage value chain in packaging, processing and sorting. Our special interest is CFT's technology leadership and their focus on this area to truly drive expansion with customers. The company possesses over 140 patents, demonstrating the depth of technology. There are multiple avenues to create meaningful synergies by leveraging technologies across the platform of ATS and CFT. We're confident the ABM playbook will create significant value by expanding operating margins through lean implementation and realizing supply chain and operational cost savings. Moving to Slide 18. The acquisition of CFT is another major step in the evolution of our portfolio towards high value and growth end markets. As I noted, these are highly regulated sectors where ATS can have substantial value to its customers through the application of automation technology. Since 2013, we've completed several acquisitions in these markets, and ATS has more than doubled its life sciences business. With the addition of CFT, we're establishing food and beverage as a key pillar of the business, representing over 20% of our pro forma revenue going into next year. Together with CFT, life sciences and nuclear, approximately 70% of our pro forma revenues will be from regulated markets. Going forward, we'll continue to explore opportunities to really acquire assets in key targeted markets, with our focus remaining on transactions that are strategic for ATS and provide solid returns on the investments for our shareholders. I'll wrap up with an overview of our financials, starting on Slide 19. We've grown our business both organically and through acquisition. Our revenues have grown at 12% CAGR over the past 3 years. And importantly, our organic CAGR has been 9% over the past 3 years. At the same time of this growth, our adjusted EBIT margin has expanded by 260 basis points, and we've maintained that through this challenging operating environment that's been brought on by COVID-19 over the past year. We continue to operate with low capital intensity. We fund growth investments that align with our return expectations. Moving to Slide 20. We have a strong balance sheet with continue -- that continues to support our growth. And lastly, from a leverage perspective, we have ample capacity to lever up for the right M&A opportunity as we see fit. I want to thank you for your time and joining me this morning and for the JPMorgan team for hosting us. I believe now we'll open the call up for questions. Moderator, over to you.

Great. Thanks, Andrew. I'll go through some of the questions that I have. And anybody who has questions, please, again, feel free to e-mail IB or on the conference website, you can also log in and send some questions. So just to kind of clarify, you guys -- do you supply the componentry and the interworkings to make these machines do what they need to do? Or you guys are actually the machine tool provider? Where in the value chain do you lie and where do you want to focus going forward?

Yes. So our business is made up of -- and I mentioned this early in the deck, but just to walk through it again. We do the integration. So if an end user or a producer of, say, this injectable device would come to us, we would do the integration of the full production line. So from start to finish, we make the entire process of the production line. We also have machine builds and products within that that support and enable that process as well as products. And so our focus starts with markets and then solutions within the markets and technologies that are going to enable us to continue to develop that value chain.

So you're historically kind of a system integrator type of business that then grew into the products or it seems the products are a bit more of a focus now. Has there been an evolution over a long period of time on this front?

Yes. So there's been, I would say, 2 evolutions. First is what you're saying around -- really around starting with just innovation -- or excuse me, with integration and going to machine build and products as well as really our focus on the markets. And if you look at life sciences, more than doubling and really aligning and you think about Comecer and the addition of Comecer, they do aseptic filling. And you machined an aseptic filling as well as radiopharma that enables -- and if you don't know those spaces, aseptic filling, the area that they would focus on is, call it, if you were to do trial runs of drugs in the pharmaceutical space, you're going to use a machine that's going to produce products at a certain level, they're in that space. And so they would do areas in the pharmaceutical area. And then in radiopharma, that's identification and treatment of cancer. And they're the ones that fill the process that would then be injected into your bloodstream. And so we've evolved not only in the markets, but then also in the solutions within markets and continuing our evolution on technology and products and strong brands in the space.

Right. And so I guess when you think about the different end markets that you serve, life sciences, transportation, what are the kind of commonalities that allow you to have this portfolio and kind of leverage the business model across? What are the key things that kind of bring it all together from an end market perspective? Because it would seem that these would be, at least from an industry expertise perspective, pretty different buckets.

Yes. And there is a bit of that. So if you step back and look at our business, and Steve, this is a great area of questions. We are a decentralized corporation. So we operate independently within the business units. And why do we do that? So a couple of things. First, the needs of customers in these spaces are going to be different. So the needs of a customer in, call it, the EV shift is going to be different than the need of a customer in life sciences. And so we operate truly independent across those with a focus on those. And know that now our transportation is roughly 20% of our business. And obviously, we talked a bit about the evolution of life sciences now being about 60%. But as we look at the commonality, one, ABM is a key process there. And the ABM and our continuous improvement can help out whether you're an integrator, you're a product builder, you're a digital solution provider. It's about having a focus on what matters most and driving execution to continually improve. And that's the ABM. It's common sense vigorously applied, as we like to call it. Secondly, when we look at the solutions that we can maximize our impact. Digital solutions really don't -- it doesn't matter across the board. You're going to take data and you're going to understand how that data can improve the process. And so for us, we focus on critical elements and elements you can really drive value for customers. And then with automation, you know what goes in to make the product. So we understand all the dynamics, all the variables that goes into making this or battery pack assembly, and then we can utilize that data to really improve and continue to support and drive that. And so that's where our service and support comes in around the life of the equipment for us to maximize that value through that life. And so there is an element of true independence and focus on markets, and Comecer is a prime example. We didn't change the name. The brand is a strong brand in the space. But we've enabled them and helped them to really drive the growth that we see. But additionally, they've taken Illuminate, and they're now launching Illuminate on their product. And that allows them to bring a whole another level of value to their space, whole another level of really service and support for their customers.

What kind of -- when you go and look at these acquisitions, what kind of prevailing multiples are you seeing out there? And what are your kind of -- maybe delve in a little bit more to what your kind of return thresholds are?

Yes. So multiples are thought in a pretty big range right now. And I would say, for good assets, you continue to see high multiples. And certainly, we continue to be engaged in many processes. And we're very disciplined in our approach. Even though we've done several acquisitions and even with the announcement of CFT, we've also been many -- involved with many processes where we align with the top 4 and we have a financial return, and that's one of our key 4 that if we don't achieve it, we also don't move forward. And so CFT was, call it -- and we announced that sub 10. But at the end, there's also acquisitions like Comecer that was above that in the low double digits. When we look at our financial return and our expectation, we target to get to ROIC of double digits within a 5-year period. And certainly, that's an area that we target and look at for every independent asset, but that's just one of the areas that we look at and assessment of our business. And ultimately, we want to be above WACC. But at the end, we look at each independent business and we look at the value we can bring to ATS over the short and long term.

And are there bigger deals that are floating around out there? Or is it mostly bolt-ons? What's your -- what's kind of the pipeline look like these days in terms of size and opportunity? And are there -- is there anything outside of your core end markets that you're kind of looking to expand into?

So there are many, many opportunities out. And I would say, what we've seen in the past 6 months is -- even in the past 3 has been a fairly significant increase of opportunities, and our funnel is very healthy. About 2 years ago, we added a Board member Phil Whitehead, and Phil really has been engaged with our process around the cultivation aspect. And I have kind of an old thing that ABC as a CEO always be cultivating. Well, we're constantly focused on cultivating deals and really aligning with businesses that we want as part of the story short term and long term. And so through our focus on this with not only the cultivation aspect with aligning with folks like Phil and really our engagement around other -- whether it's investment banks or building out our team, it's really allowed us to look at many different areas. And my rule is the measurement isn't if we went forward or not. Certainly, we want to win in processes, but we're disciplined. It's about did we have the chance, did we have the shot? Did we know the full value potential of the asset? And I can say with confidence that of the assets that have traded in our core areas, we've either been a part of it or known that they've gone through. And so there's a big mix of big and small that we can add on adds a lot of value for our shareholders.

Phil is a great guy to have in the room. I've -- we met each other years ago and did a little traveling together in Europe one time back a long time ago at Danaher. He's a fantastic guy. On the life sciences side, what are you seeing -- where are we kind of in that cycle, if there is a cycle? What did you see pre-COVID? What are you seeing today? And how do you kind of think about the rates of growth in that market going forward? It's obviously very dynamic and positive. But there's a lot moving around. So maybe what are you seeing on that front?

Yes. So I'll kind of walk through -- I'll give you where we are, and then I'll walk through how we're viewing the market and then what we see in the future. So I would say that there's, call it, 3 areas that we've kind of highlighted and 3 major buckets. And these are big buckets. But the whole focus on the pandemic has been an area of growth for us. And it's been, call it, a little over 10% of our bookings within the year. And it's been an area that we can really drive and help our customers impact. And what do I mean by that? Because of our focus on technology and innovation -- one of our launches was the test -- the COVID test kit, the rapid test kit and the customer needed it in 14 weeks. And by the way, this is normally a 40-plus week application. And because of all this investment and drive, we were able to get it down to 14 weeks and helped them get the product to market. And so we've seen a bit of the COVID era. And where it gets a little blurry is customers that are buying vials or vial manufacturing, we're engaged in. And so whether it's for this or other areas, it's, call it -- that's the area where it's a little bit part of our base business, but also expansion into the COVID aspect. And 1 nice outcome for us is we've added new customers here. And as I mentioned in the slide, when we add new customers, oftentimes we can continue to bring in more and more technology solutions for these customers because we have really deep relationships. At times, we'll be at the Board level, where we understand that we can bring in new solutions like Comecer that gives us the ability to expand. But our base business in life sciences has done well. The area that we've seen a little bit of softening, and I would say it's more of a push to the right, is around elective surgeries. And we do -- if you're going to get a hip replaced, you might have delayed it based on this decision. We do the things like the IV bag, the manufacturing of those, the catheter, anything in the peripheral, we build the machines that make the product. As you look forward, there's some really interesting trends that are going on. And one of the things we view is really favorable towards automation and favorable towards us. First, this whole onshoring and focus on supply chain management. Part of my standard work as a CEO is I talk to customers on a frequent basis, and they're focused on it. So of the last 10, roughly 50% will talk about the supply chain aspect, where they've got a manufacturing footprint, where they need to improve and how automation can help them. But additionally, of that, call it, half of those are ordered. So we've already started in the early stages of that process. Additionally, one of the things we don't talk about enough is turnover an employee base. So over the next 3 to 5 years, there's going to be the shift of retirement. And when it goes through that, automation is an enabler. One of our customer is a business and they spoke at an Investor Day 2 years ago, business by the name of Insulet. They do the OmniPod, treatment -- wearable device in the treatment of diabetes. And to give you the headline, it's a wearable device in the treatment of diabetes. It does -- it's the insulin pump. So you have to be 100% accurate all the time with high quality. And they moved their production from China to Boston, and they utilized all of ATS technology solutions. They -- and this was a couple of years ago. They grew their margin from 45% out of China to 65% out of Boston, and they did that through automation. So as we look at that area and the aging population of the workforce, automation is a key enabler. And as you think about the dynamics of the markets then, with increased quality, increased traceability, increased expectation on how the product performs in the market. And that's a continued evolution of the space. It really lends itself to what ATS does best. And lastly, the other area that I would just say is just part of our brand, part of the the area, why customers choose us, is we can help them over the life of the equipment. So if you are producing this product and it's 70% gross margin, you want to get this product on time every time into the market at the [ highest ] of quality. If you go down, it's an issue. If you have a problem in your supply chain, it's an issue. And that's where ATS really comes in. And not only do we provide the equipment and the solutions, we also provide the service and support over the life of the equipment, and we're in many of the regions that can really help our customers. And that's why through COVID, really engage and enable the services has been a challenge for this, but because of the innovation and technology we've launched, we've been able to really help our customers continue to perform.

How do you choose what part of the production line you're going to pursue from an equipment perspective? So I can understand if you're an integrator, you're kind of buying a bunch of different stuff and connecting it all together for the end user customer. But once you start bringing some of the other stuff in-house, it's obviously a little bit a different game. How do you kind of choose which parts of the equipment are most attractive to you? And how much do you do then kind of rely on others for?

Yes. So this is a great question. And the reason is because we're so embedded and understand the full process, this is where we can really get deep and understand. So for instance, Comecer, we really like the aseptic filling process. We like that space because the demand -- and clearly, right now, the demand is very high. We really like that space. So then because of our relationship with the customers, and these are many of the names you know and major global players, they talk to us about the need in this area and how they would love to have another aseptic filling process and they would love to have ATS engaged, but the technology development is a 10-year process. You got to prove it out. They're not going to bet the farm on it. So when we went out and acquired that business, we can immediately bring the solution in. We can immediately penetrate. And we saw that in the synergies. Because the customers, we've built this trust. And oh, by the way, we've got the service and support network that can help out when it comes in as well as a digital solution. And so there are areas where we say, you know what, we're not going to be engaged in that. There's areas we're going to develop internally. We have a vision platform, a vision solution that we provide. When our customers see that that's the best benefit for them, we can utilize that solution and technology. And so it really does depend, and we're focused on niche capabilities that truly offer the highest value for our customers and then ultimately our shares. And areas that we don't see meet that model, we can continue to buy externally, and that's perfectly fine.

One last one for you. Transportation is still a pretty decent-sized market. What kind of growth rates are you seeing in the revenue base there? And obviously, you mentioned EVs. But I guess just in total, the -- if ICE is maybe losing share over time as a percentage of wallets and EVs are increasing, what do you see over this year and then next year for kind of your total growth in your transportation business organically?

Yes. So this has been an interesting shift for us, and I've been here for about 4 years now -- a little over 4 years. And one of the areas we looked at deeply when I came onboard was the markets we serve and the areas that we view we have differentiated technology and solution. And I'll tell you, transportation was one we really drove into. And it was really largely around ICE because what we saw was a lot of the areas were medium to high risk with lower returns. And that just doesn't make sense. It doesn't add up over time. And why is that? There was a lot of me-too products. And so we've shifted our portfolio within this very significantly, and it was intentional. And so while we've seen that shift, we've also grown the EV aspect through our business. And now it's 75% of our total transportation shift. And we've also continued to announce and we even made an announcement earlier around a customer that's partnered with us. We talked a little bit about that online, and they announced with it. But it's an area that we view is differentiated in the technology. The growth is real. North America is going through this. But when we went through this, we did do a big portfolio shift within that segment to focus on the niche capability in the niche areas that are going to be a bit more strategic around the solution for customers and the innovation. And so it is an area that we do view as differentiation and an area we can offer through the higher value to our customer base.

And that total -- does that total grow this year and next? And this is the last question. We got to wrap-up here.

We expect it will continue to be a growth story, but realize that we've also shifted out of ICE as well. So there's going to be a little bit of mix into the EV as we go through this.

Okay. Great. Andrew, thank you so much for taking the time with us today. Best of luck this year. Next year, hopefully, a little more -- a little less volatility and a little more growth. But sounds -- seems like an excellent and interesting company. And best to luck going forward.

Appreciate it. Thank you very much. And thanks, again, for moderating today.

Yes.