ATS Corporation (ATS) Earnings Call Transcript & Summary

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 Zettel 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 Dey, Joanne Ferstman, Kirsten Lange, Michael E. Martino, Sharon C. Pel, Daniel A. Pryor, 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.