ATS Corporation (ATS) Earnings Call Transcript & Summary

Okay. Welcome, everyone, and I have the pleasure of having a little conversation here with Andrew, CEO of ATS. It's my distinct pleasure doing have him here at our Citi Industrial Tech and Mobility Conference on day 3.

So Andrew, I know you've had a good week here, a good couple of days with some investors. I thought what would be useful for everyone is to maybe just you reflect upon -- you've been in the role now for a number of years. As you look at the company, it's transitioned itself, it's transformed, share price appreciation has been really pretty impressive, growth has been good. What -- Maybe just step back as you came into the role till today, what have you seen? What has changed? Maybe give investors a little bit of a perspective.

Absolutely. And thanks again for being here [ Francis ] it's good to catch you up. So when I joined ATS about 6 years ago and boy, time flies, I came into a business that we were focused on good end markets. We had good liquidity in the organization and we really saw a lot of opportunity for growth. And so some of the first things we did early on was we decided we're going to be decentralized and we really push that across the organization. Number two, realigned around what we call our ABM, our ATS Business Model. It's, in its most simple form, it's aligned around continuous improvement about measuring what matters most and then going back and hammering it and hammering it again. So you can really align around always looking to make tomorrow better than today. And the team took that on. So we had a very engaged culture. We had a team that wanted to embrace this, and we started aligning the measurements and the metrics, and we call those our value drivers. And so -- you look at the organization, we had our playbook. We had the people aligned around it, and then we get our deep strategic review. And I will often talk about that where we looked at markets that we view are more resilient. And when I talk about that, and I talk about the growth trajectory, it was because we aligned around marks that we identified our markets that are long-term trends. So life sciences, regulated food, the shift to e-mobility and what that means. And we also exited markets that we viewed really our medium to high risk and it's low margin. And so you fast forward till to today, the ABM is now the way we operate. It's our DNA, our engagement scores have continued to grow. And the leadership team, it's about people then process and performance, and they align around that. Our business has grown a little over 16% within organically over 8%, and our margins have -- our EBITDA margins have grown 25-plus percent. And so while the team has certainly repositioned, we feel good about the progress, but we're early in our journey. And that's the exciting thing about ATS.

It sounds like it's tremendous progress. As you look through your business system, are there any kind of anecdotal stories you can share with people on breakthroughs. I know you just had a recent CEO Kaizen event, which is so critical to business systems. Are there 1 or 2 stories of sort of, hey, this is what we found, and this is kind of where we took it, that excited you personally or your employees.

Yes. So having done this, and I've run 7 companies now. I -- Year 1 is using the easiest year because everybody pushes a little harder. It's a year 2 that you really find out who's driving process and it took us that full 2 years to really allow our leadership team to embrace what we do. And I'll just say 1 of the -- my favorite stories is I was with a leader. He was with ATS for 30 years, Tom. And Tom and I are walking through and with tears in his eyes, he was talking about the Kaizen event he just participated in and how it's going to set up his area to really drive performance and how about the future leaders of tomorrow. And he was about to retire. So for him, it was about what he was able to drive and enable and he [indiscernible] took me aside and said, Andrew. I've been telling these guys over the last 10 years that we just did this different, it would have great impact. And so it has really become our DNA. And you mentioned the CEO, the President's Kaizen that's our fifth year of doing this. It's to set that tone that nobody is above continuous improvement. And I shut my phone down, Ryan McLeod is in the audience here. He's our CFO. He shuts his phone down. and we focus on continuous improvement. We focus on truly making tomorrow better than today. And it's just that constant evolution of that journey, and we will use phrases like don't let rate get in the way of better and that measurement tool around how do you ensure that you're making an impact for your employees, your shareholders and your customers.

That's really impressive. Andrew [indiscernible] staying on the whole business system philosophy, you've done a number of acquisitions. You've been very acquisitive somewhat almost say a compounder type of a company that I think a lot of investors certainly know about. How is the business system helpful as you integrate? And how quickly can you get these acquired companies on the system and humming together?

We will talk in our business, we'll talk people and culture. And we're constantly focused on getting that right. So when we acquire a company, there's 4 things we look at. There's the market that they serve. So is it an area like, SP being one of them. They're a leader in lyophilization, which is really turning a liquid to a solid and it's really helpful in extending a drug life if -- so if you're going to ship a product around the world, that's very helpful in that process. We then look at the strategic rationale. We look at people and we look at the leadership team, how we're going to operate it. And lastly, we look at the financial return. And we take this into a playbook. So when we identify a business that is an attractive addition, we'll walk through what that means to us. And so -- we don't get everything right. You walk in day 1, I would say, rough numbers, 75% yet kind of nailed. We knew the business. We knew the supply chain. We knew the services opportunity. The other piece we do very early on is the ABM. And it's our culture, it's our DNA. What I've found though, it's fascinating to me that the businesses that are new to the ATS journey, they take to it so quickly because they want to align around a continuous improvement, they want to understand the parameters of how we operate. And so SP being a prime example, most recently, we have a boot camp that our leaders go through. They were -- the majority of that boot camp. And we actually had to limit them because they wanted to be a part of it. And so our playbook has continued to evolve on small, medium and large, but one of the fundamentals that we drive early on is that adoption in the ABM and really making that clear around how we utilize it, to constantly make tomorrow better than today.

That's very thoughtful. On -- as -- and stepping back, I mean you are at the center of automation. That's what you do. There's been so much talk over the past 3 or 4 years about automation. Where is it going? How is it changing? There are a lot of large companies that participate in on Honeywell, Rockwell Automation, Siemens. Maybe for the investor, give us a sense of where you are in that ecosystem because you're sort of a little bit between a solutions provider, you're a little bit -- are you a product provider? Are you a software provider? I mean, how do we think about ATS in the ecosystem. And it doesn't have to be across all verticals, but just help us think through that because I think that's an important.

Yes. And it's 1 that we, [ Francis ], you know our story. But to walk through, the business I took over, we were all close to 80% integration. So I'm going to use this example. And I'm going to say this is Francis, Inc. This is an injectable device. And this treats diabetes, it treats something. And you've just got FDA approval. And so in this, it's 70% gross margin. It's an injectable device. So the business actually owns a liability if they get it wrong. So they have to ensure that the quality at the level it's high margin, and your demand is through the roof because you just got FDA approval. You've come to ATS. And we build the entire production line around making this product go from 1,000 prototypes to 1,000 a minute. And then along the way, we've acquired companies, they're part of that value chain. So the billing aspect of this, the movement, so we have SuperTrak, the inspection of this solution all the way through, we serve and support. So we have service and support for the life of the equipment to get this product to market. And when you look at the markets we've identified life sciences, a key area of focus for us over a long period of time, usually more resilient in the space that it serves. Also, the dynamics of the global market with high turnover high labor inflation, areas like when we talk about supply chain derisking or building demand or building capacity where we have demand, we enable that. And so our integration is now 40% of our business. We have standard machines and products as 40%, and we have services is about 20%, and services includes both brake-fix spare parts, as well as digital. We do predictive maintenance, we do digital twin, and all those areas offer a high value for our customers. And so when they come to ATS, they look at us from a footprint standpoint, from a technology standpoint, also a whole capability. And it really goes to it. It's kind of interesting, Francis, you mentioned M&A and has been certainly a part of our growth story. But when we acquire a company, immediately customers will reach out to us because we have services, we've got capability already offered at many of the sites to bring in and talk about the solution. So it's been a very good synergy story as well.

I think from -- at least from my perspective, a really interesting part of what you just said is there are so few companies that do both metrology and the systems. And I don't think a lot -- I think as we see automation become more prevalent, especially as people have moved away from Asia, supply chains have moved more local, you've had to have more complexity in terms of the product output it's cycle times and you talked about pharma, life sciences, they're getting much shorter. The FDA approval process is all this stuff needs you need to be quicker. And I see -- listening to what you say, it's a lot of what you do, where I think the nimble I guess probably that's one of the question is, do you see the nimbleness of your organization, this pure focused maniacal focus as a real competitive advantage versus others, speed to market.

Absolutely. And to think about it in this world, 70% gross margin, your patents will run out. So time to market is so critical for you. And so you nailed it. It's -- they come to ATS because we have strong experience. We've got strong technology. We've got a strong brand. And COVID has caused this whole other dynamic, which is services has gone from a nice to have to mission-critical. And you're going to not only build this in the U.S., you're going to build it in Europe, you're going to build it Asia, you're going to build it around the world. You want a company like ATS that can enable you globally. We have built that infrastructure. So when we acquire new technology, day 2, we can offer services in Europe. We can offer services in Asia. We can offer services in North America that really allows them to elevate their capability and bring that solution set and really enable our customers. So we do view strategically as integration being an enabler and while we add in new technologies, new products, it's going to build that reoccurring revenue and strong tie to technology development.

We talked a little bit about Life Sciences and maybe just shift gears a little bit, talk a little bit more. You mentioned food beverage. How do you see that market today? Because for a while, obviously, there was a little bit of CapEx slowdown associated with COVID, what are these large companies looking to do? How do you think that you can take advantage of that trend of where it's going? And how do you see the growth rate of that whole market developing?

So when we -- and just a kind of headline, life sciences and regulated food generally over a long period of time has the best dynamics and an increase and a decrease. So usually, they're the most resilient markets. And we talked about regulated food. So headline for us, our backlog in our Food division is the best it's ever been. And 1 of the things that's driving that is we are -- to think about a simplistic form, when you go grab tomato paste or anything around tomatoes, we are a leader in that space. And 1 of the things we do really well is the energy management. So we are more effective on energy management and the cost of energy being higher allows the ROI to work out better for our customers as well as when you have labor shortages, they look to automation for that. And so these dynamics have really helped us through. While we've got a heavy footprint in Europe, it's a global business, and we're constantly lining around making sure that the technology is really enabling the customer. So one of our business is Raytec. It does high-speed scanning. It does high-speed looking for any type of defect or any type of product variation to kick it out. So when you grab something, you know it's safe and the regulation around that is continuing to increase.

Very interesting. And maybe just to cover the other end market you talked about with EV. How do you see that developing? I mean, obviously, we went through a period of time where the amount of capital associated with these companies was almost unlimited, that's changed. What do you see as the changing dynamics in that market as a source shakes out, Andrew? And how does ATS playing in that part?

So [ Francis ] when we went through this, we largely exited ICE, and we did that pretty early on. So headline our current backlog is 90% for automotive, it's 90% EV, 10% really strategic ICE, which is more around body-in-white. So it actually covers both areas. And we looked at this market -- we got a lot of stuff right. We've got a lot of stuff wrong, too. And the growth profile, we certainly laid out and we thought it was going to be a growth profile that was going to be a strong growth [ probably ] double digits, it has certainly continued to outpace that, the shift, the evolution. And the other one that we really missed on was the battery technology. And what do I mean by that? What we do is if you're going to be an OEM and you're going to launch an EV vehicle, you're going to shift your thinking around how to move that vehicle. And one of the things you have to get right is what they call battery pack assembly, and so in the frame of the vehicle, they're going to have what they call the battery pack assembly. And it often looks like a bunch of D batteries lined up. And to give you a perspective, there's 10,000 wells in there, 10,000. You get 1 wrong, it's potentially a 2% inefficiency hit. So instead of the vehicle going 100 miles, it goes 98. You get 2 wells wrong, 96. So it's critical to that customer. And we've -- that's been our driver, our experience and our technology. So we shifted our focus to that, won a lot of work in Europe, started winning a lot more work in North America. And one of the areas we're seeing is technology of batteries is shifting so fast that instead of a 7-year window, it's more like 3 to 4. So these customers that we originally engaged on for the full production line are now starting to come back and saying, now we need to retool the system. So the growth profile has certainly been a significant growth profile. We've been announcing a lot of wins in this space. But if you step back and look, it's still early in its penetration. And you can read the amount that is needed for the demand just to meet demand there's a significant amount of investment for the next foreseeable future, 3, 5, up to 10 years. And as battery technologies change, you'll often go back to your initial OEM or your initial provider to modify your line so you can use that new technology.

Really, no. I mean, it's interesting. So I think it's interesting because we come through a period of time now, probably I think my guess is 3 to 4 years into this whole ESG investment thesis, which as we all know, we've made -- some of us might have different views on it. But as I reflect upon where you are in that cycle, you've got a couple of markets that are long -- really long-term growth. We just talked about battery technology probably being at the forefront of a multiyear trend. Let's talk about 1 other. How do you see nuclear? How do you see this whole movement towards SMR, how do you see that playing into what you're doing? Because I think from the non-knowledgeable investor, there's a really interesting idea here where you've got multiple vectors of which you're playing against ESG-oriented growth thesis with real dollars being spent, not theory.

Yes. So green technology is real. So we're in the EV shift, we're in nuclear -- and we're not here to debate, it's green or you're actually utilizing that. And as energy needs continue, nuclear is an option that people are really looking to. And then we also actually offer other solutions that allow our customers to understand their carbon footprint and know when they make an investment that they're seeing that reduce. So we're starting to really build out that green technology piece. And for nuclear, we've been more a niche player in CANDU reactors. I mean it's refurbishment and long story short a CANDU reactors has multiple tubes over time, the nuclear core will degrade and go down. And so to extend the life, you have to remove pull the tube out, [ pulverize them ], put a new tube in, and that extends the life by about 30 to 40 years. and we have worked with Bruce Power on this and others to help them along. Through that, we also got in the decommissioning space and we've been engaged in this small module reactor. We now have 2 customers in that space. And so the interesting piece is CANDU reactors are continuing, attractive area we're offering not only the solution set of the tools, but we're serving and supporting them through this. We're providing solutions like digital twin, solutions like predictive maintenance, all these things to help these customers. Decommissioning has started, the small module reactor has been ongoing for close to a decade, but yet it's starting to really move fast because it's becoming a very relevant option and I was pressed on the last earnings call around the size of the market. I'm very careful in characterizing this because it can be very big. And the technology is shifting such that when this is proven out, there is a lot of opportunity for growth. And so we've been helping a couple of key customers through that and helping them in their fuel process to enable them to really utilize this.

So maybe shifting a little bit here. How are you managing the growth? I mean there's a lot of growth at this. We've got a relatively small nimble organization, how do you manage it? And how do you generate the cash, put the cash flow up that you guys have been put up. As I said, well, you've been acquisitive, your balance sheet has been used, how do you do it?

We don't like secret [indiscernible] quarter ends.

I was wondering if there's one [indiscernible].

So we have 8 value drivers. And why do we -- so it's bookings, revenue, margin and working cap. And so we'll walk through every business, and we know what your annual target is. We know where you are by month and oftentimes by day and so we can go very deep very quickly, and then we know if there's an issue. So you're red or green, not pink, not purple, red or green. And then the other -- we have 2 run customer, which is quality on-time delivery, and we have 2 around people, turnover and internal fill rate. And so what that allows us to effectively do is take the standard view and know where you have to go deep. And if we show up to a site and [ Francis ], you're welcome to come and tour, we go to a site in Germany or we go to a site in Canada or here in the U.S. They're all going to start with their 8 value drivers. And we're going to know immediately what's going on in the business. And then we go to the KPIs. And then we understand what are you doing to drive improvement. What are you doing to do a short-term and long-term fix because if your arm is chopped off, fix the bleeding and then figure out how to not let that happen again. Probably a pretty bad example, but you get ...

I get it. I like the simplicity in a complex organization.

Yes.

That's what I'm hearing.

That's exactly it.

And so if we think about that, Andrew, I mean, you've done it really impressive -- we talked early on about the growth. And the growth has been 8, plus 8, it is pretty impressive. How about the margins? How did you move the margins? And where could they go? I mean as we look at ATS, you're obviously not an integrator. We talked about that. you're at the same time, you're not -- you're not going to be a 30% OP margin aftermarket-oriented company. But where should an investor think if you look at a 5-year stack, I'm not asking you to put a model out there. But there's got to still be significant ramp? And how do you get at it?

So when I first joined earlier about 9.6. And we laid out and started to really look at what the business could be. And part of that was the shift. Part of that was our supply chain opportunity. Part of that was leveraging our cost structure utilizing standard operating, standard machines, standard products, part of it was services and ABM. And we looked at all this and we built it on some luck. Here's what we can get to on the base business, and we set a 500 basis point improvement. So 9.6 to 15. Math wasn't that good. It was over driven. But we got there. And through that, we also acquired a couple of dilutive companies. And 1 of them we knew it was CFT because we knew we had to invest time, but we wanted to be in that space. And so when we step back and look at the business and where we are today, we've made nice progress. The team is executing. They're looking at the areas we need to drive. Supply chain has been a key focus for us. And if you don't -- the business, we have a global buy, we've actually built out systems, so we know exactly where we spend our money. So we buy 1 million of these a year, we know the discount rates. We bring that across. We've seen a little bit of a challenge recently because of the whole supply chain issues, and we've been minimizing that. But we've continued to make progress. And what we stated is we want to get the full business to 15% EBIT. We haven't put the timeline on it. We want the supply chain to get more normalized and then we're going to set a target for getting to that level and then continuing and the other interesting pieces is, as we move up into the right, and we continue to build out our capability and do more acquisitions around building that out, we also look at businesses that maybe we're not investing as much time, money or effort into and said, are they a fit? And so right before COVID hit, we actually sold the company to another division that was going to be core to its focus. And so we will shift our mix and because we're decentralized, it allows us to look at that and say, "How do we have really the greatest impact for the business as well as where do we want to focus our impact."

Right. Very interesting. I like the concept of continuously evaluating the business and not just on the what do you grow, but what do you get rid of in order to keep the focus. What about the aftermarket? I mean, you alluded to a little bit on spare parts, service, I assume software, there's got to be a some kind of maintenance software, maybe some prevent -- preventive monitoring. How are you -- how is that -- how are you focusing the organization on driving that in order to improve stickiness?

This has been -- this has been a strategic focus for us for a while. And it was part of -- when I joined, it was part of our focus and I'll tell you, oftentimes, we like to say that it's very -- there were some simple things that we just needed to get done. One of them we had engineers that were working on both the services opportunities as well as new CapEx. And we basically said, if you've got a $10 million opportunity or $100,000 opportunity, where are you going to spend your time on? So we separated that. And then we had a sales team that would sell both, and we separated that. And so -- there are some real tactical things we need to put in place. And then they were strategic around having a system that our customers could have easy process and ordering having our digital capability or predictive maintenance, align with the ability to order spare parts and manage our service teams. And so all that to be said, the target was 20%. We're running right around that level, but we have more opportunity to go. And I would say we've got businesses in the 40% range, and we have businesses that are under 20%. This is going to be a shift. And as we see customers look at this strategically, digital is going to continue to be right in our focus area, the services aspect enables that 70% gross margin to continue and we have really aligned around enabling that and bringing that value to our customers.

That's really good. Maybe just pause here. I don't know if anyone in the audience has any questions or I could keep going. Any questions? Okay. Well, you get me to ask my question. Let's talk a little bit about -- I alluded to this earlier, very simplistically, what do you think are the 3 or 4 real competitive strengths? I have my own ideas, but maybe in your mind, what are those 3 things or 4 things that you bring?

Yes. So from a customer perspective, brand experience, brand and experience. And what do I mean by that? Customers are going to look because they've got a high view of quality and getting to market on time and being able to meet their demand is absolutely critical to them. And so we're not often -- we don't play on price. We're often a price leader, brand capability and experience is going to be number one. Number two, location and location of services, location and capability they're going to oftentimes do a production facility in North America, then they want to move to Europe, they do want to move to Asia. They want to ensure that wherever they go, we can enable their ability to execute. [indiscernible] technology. And how do we enable them to maximize that process and really bring that product to market. And so the last piece, and we will often talk about this, but customers have shifted their thinking on what they view as system initial versus the services aspect. And what do I mean by that? When a customer first launches, they need the process to be very simple in its ability to build the product. but they need our services team to be able to enable on an ongoing basis. And so I use the U.K. as an example, when COVID hit the U.K. shut down the borders and they didn't allow people in and out. And I was on with customers that said, look, we need you to continue to support us. We needed to continue to enable our solution. And we could do it because we built the capability within our services teams. And so because of our footprint there, it really truly drives an enabling solution. It drives a strategic advantage, but it's shifted in the customers' priority list where now it's a key area versus it used to be a nice to have.

Yes, that's really interesting. It's interesting because one of the things I didn't hear you say that I would have -- I have observed is just that maniacal focus on helping solve a problem. I think at least again, you walked a lot more shop floors than I have. I don't think a lot of times the customer knows exactly what the -- they just need. As you said, they need the 70% gross margin being done. And these -- or these solutions have become more complex but yet they become lower price at the same time. So they become more enabling. And I guess what I was going to go with that is -- as you look out, and I talked to a lot of people sit there and say, the capital spending has not yet been deployed in the size in which it's going to be in North America, predominantly because people are still trying to figure out automation, how to play it. I mean is that a fair statement? Or am I a little bit overly optimistic on that.

So if you step back, we just had our best bookings quarter in corporation history. Our backlog is the best it's ever been. So I use that as a headline because we do view that there's a lot of opportunity in -- and you're kind of touching on it, which it's interesting the operators today are different than what the operators were 10, 20, even 5 years ago, we're swiping and knowing the machine inside out is way different at the level. And so they'll look to us to help them in that journey to simplify the solution, but yet still make a complex product. And so this turnover, this shift of movement, what -- the aging demographics of the population, we have 1 customer, there's 66,000 people they're planning for 1/3 of their workforce to retire over the next 5 years. 1/3.

It's unbelievable.

Unbelievable.

And to what you just said, you're taking people who knew how to operate machines and like I always call it this black science. And now all of a sudden, you've got 20-year-olds who want their iPhone. And like, how do I do this? I mean so you have to -- that's a lot to grapple with.

It's a lot -- and so what I -- and you touched upon around identifying solutions and really and we do that. And I would kind of lump that in with innovation. It's who we are. And it's that focus on constantly trying to make the solution set of viable, simple solution, but for a complex challenge for our customers.

I mean it's really -- because as I think through it, again, maybe I'm being a little bit too simple. But the amount of technology risk inherent to your business model is a lot lower than other people playing in automation. What I say that is that you're driving a solution from best products, best possibilities out there, where someone who is sitting there doing -- making universal robot is going to compete against 500 people. And I think that's -- they may see the growth but you're able to sit there, as you said earlier, pull stuff together, some of which is your own some, which is probably a third party and tie it all together and make them talk. I've got 1 -- another interesting question.

[indiscernible] we'll let you keep going forever. I like it.

Well, -- so what I was going to say is I'm going to ask a question. I have no idea what the answer is, so I could be really bad. But is there a move towards trying to tie the software on the manufacturing side not just into the QA, but back into the MRP, I mean how do you see that? Is that going to ever happen, Andrew?

So look, there's debates on this whole piece. And our view, and we have a business called PA solutions. And by the way, PA was we really didn't understand the strategic direction of this business. And we brought a new leader in, and he really worked with the team around identifying their sweet spot. And the interesting thing about that business and the journey of our customers is those conversations are really easy or easier on a green site on a new site. All the machines talk, you've got capability across -- the real challenge is brownfield sites. And so -- and if you talk to customers, they're going to tell you the majority of my sites are brownfield sites. So while it's great to have this identified digital solution, digital capability, software algorithm that works across the majority of my facilities don't have that. And so when you talk to me about it, the biggest opportunity is in those brownfield sites, and we are able to pull and extract the information off so you can utilize it in the process. So all that to be said, of -- we think there's opportunity there. A lot of people are trying to go in that direction. For us, we do view that there's a win either way because we can truly help getting the information off the system and into whatever you're going to use from a software and we own the software on our equipment. So we have the capability to really navigate that either way it goes.

It's really interesting. As you think what are the 3 or 4 things that keep you up at night as you look at your business? I mean, what do you worry about? We talked about the advantages. Let's talk about [indiscernible]. Hey, this is sort of like if I'm concerned and not you, big picture stuff.

Yes. And I know it's a very simplistic answer, but I'm going to give it. The number one is people. And with the model we have, being decentralized, it really is aligned around leaders making the right decision in the right context to enable the team. And look, again, I've run 7 companies. When I get the leadership right and they're empowered, they have autonomy, they have accountability. The team does well they outpace their competition. They really feel aligned with what the business can perform to. And so we'll spend the -- I'll spend the majority of my time around that people aspect. And when we talk about the ABM, it's people then process then performance. The other piece is with M&A, one of the things we look at is how we're going to operate. And so when we think about leaders, if we're not building up our own internal leadership capability, then we have to pay up for management teams, and we don't want to have to pay up for management teams. And so we do things like we just launched an EDP program, Executive Development Program where we're training our leaders to take on the challenge of today and tomorrow to understand the playbook and know that it can work in multiple areas. There's [ waste ] in every process. There's ways to engage leaders and build out capability. It's getting the best, we call it, retain, attract and develop, retain the best, attract the best and develop the best and constantly focus on people. And so if you ask me what keeps you up at night, it's that.

Right. Well, you've been fortunate that you've had a very good team that I would argue is capable of running a bigger and bigger enterprise. So that's -- you've done a good job. Well, thank you. Maybe last question. I think I'm going to try and remember what Andy says, he's asking everyone, so I'm going to try to do it, which is -- I think I'm going to get this right, which is what are the 3 or 4 trends that you see out there that equity investors should be cognizant that you in your corporation and can take advantage of and what are 1 or 2, there's sort of a little bit off the rails that you -- what you -- what worry you? I think we've talked a lot about this. So yes, I'm sure you could answer it pretty simplistically.

Yes. So let's start with markets, right? So -- and I look at this in kind of a simple form, but first market, so we've identified and targeted markets that we view are more resilient. Long term more attractive. And we look over a 30-year period to really understand them. And life sciences, regulated food, the EV shift, nuclear, make up the bulk. We then have a consumer products piece that we watch and we ensure that we understand the lay out there. But we've really aligned around good long-term markets. Number two, the tails that are happening right now, higher labor inflation, turnover, the lack of labor, if you're going to move to North America to build. I just talked to other CEOs how fast they can get people to join the team. It's a real challenge. Automation helps that. It helps our customers. And I often use an example of, if you're going to do this injectable device, do you want the person that's doing it with a file that's made 5? Or do you want a machine that's built 1 trillion of these? I know what I want.

I know I want it too. [indiscernible] file.

He wants the craftsmanship. And so those are real -- and an example we use is a business that spoke at our Investor Day that they moved from China to Boston. Before COVID, before all this happened, and they improved their gross margin from 45% to 65% because they reduced the number of hands and people on that production line. And it enabled them to bring it to North America to bring their capability where they had engineering. And so you've got the markets, you've got the tailwinds. And lastly, it's that people and drive. And we will talk about our people and our culture is absolutely critical. And when you look at businesses that perform over long periods of time, our view, it's really the people that constantly challenge that constantly set the target to be better tomorrow, always focused on how to improve.

I think that's a great way to end it, Andrew.

Thank you so much.

Thank you very much for your time.

Appreciate it.