Michael Glen

Michael Glen asked CEO Doug Wright to elaborate on his prior experience with margin initiatives and successes, and sought context for the higher run rate in services bucket revenue during the quarter.

Answer

CEO Doug Wright detailed three margin improvement areas: amplifying ABM tools for productivity, focusing R&D/commercial efforts on advanced technology applications for improved gross margins, and increasing aftermarket mix for stability. Interim CFO Anne Cybulski attributed the majority of the services revenue increase to ongoing refurbishment work, which is nearing completion, alongside other service offerings.

Michael Glen asked CEO Doug Wright to elaborate on his prior experience with margin initiatives and the successes realized in expanding margins in previous roles. He also sought context for the sequential increase in services bucket revenue during the quarter.

Answer

CEO Doug Wright categorized margin improvement opportunities into three areas: amplifying ABM tools for productivity, focusing R&D/commercial efforts on advanced technology applications for improved gross margins, and increasing aftermarket mix to smooth earnings volatility. He noted these themes also guide capital deployment. Interim CFO Anne Cybulski explained that a significant portion of the services revenue increase came from ongoing refurbishment work, which is nearing completion, in addition to other steady service deliverables like spares and onsite support.

Michael Glen of Raymond James Financial inquired about any plans or CapEx allocated for moving manufacturing to the U.S. and whether the company would now consider divesting its EV business following the recent settlement.

Answer

CFO Ryan McLeod confirmed there are no material plans or specific CapEx allocated to move production to the U.S. at this time. CEO Andrew Hider explained that the EV business has been right-sized and possesses valuable factory automation capabilities applicable to other opportunities, including reshoring, and therefore the company sees value in retaining it.

Michael Glen of Raymond James asked about any plans or capital expenditures for moving manufacturing to the U.S. and whether the company is considering divesting its EV business now that the major customer dispute is settled.

Answer

CFO Ryan McLeod responded that there are no material plans or specific CapEx allocated to move manufacturing to the U.S. at this time, as they are monitoring the long-term trade environment. CEO Andrew Hider explained that the EV business has been rightsized and its core factory automation capabilities can be leveraged for other opportunities, so the focus is on creating value with the business as it is.

Asked for details on the 3-4 year path to the 15% margin target, the feasibility of moving production from Canada to the US to mitigate tariffs, and the status of the disputed large EV customer account, including backlog and revenue.

Answer

The path to the 15% margin target relies on gross margin improvements from efficiency, standardization, and services growth. Shifting production from Canada would be complex in the short term but is feasible long-term given the company's significant US footprint. No revenue from the disputed EV project was recognized in the quarter, and only a small amount for paused work remains in backlog.

Michael Glen from Raymond James inquired about the 3-4 year timeline to achieve the 15% margin target, the feasibility of moving Canadian production to the U.S. to mitigate tariffs, and the backlog and revenue status of the large EV customer under dispute.

Answer

Ryan McLeod, Chief Financial Officer, confirmed the 3-4 year path to the 15% margin target is driven by supply chain efficiencies, standardization, and services growth, with most improvement targeted at the gross margin level. He described moving production from Canada to the U.S. as 'complex' in the short term but noted ATS has significant U.S. capacity for long-term flexibility. He also confirmed there was no revenue from the disputed EV customer in Q3 and only a small amount related to paused work remains in backlog.

Michael Glen from Raymond James asked if the business case for a Magna Steyr complete vehicle assembly plant in North America has evolved. He also inquired about the potential impact on Magna if Detroit 3 OEMs shift towards a 'made-to-order' model.

Answer

CEO Seetarama Swamy Kotagiri responded that the criteria for a North American assembly plant—requiring multiple customers and multiple life cycles—has not changed, and there is nothing active on the table. Regarding a 'made-to-order' model, he noted that OEMs are focused on simplifying complexity, which is positive, but he does not foresee such a shift having a significant impact on Magna's product portfolio.

Michael Glen of Raymond James asked about Magna's exposure to vehicles assembled in Mexico and Canada for U.S. export and the feasibility of reshoring efforts to improve USMCA compliance, considering the sub-tier supply base.

Answer

CFO Patrick McCann detailed Magna's sales into the U.S. from Canada (~70% of $4B) and Mexico (~25% of $5.5B). CEO Seetarama Kotagiri explained that reshoring is a complex, long-term process requiring a case-by-case business analysis with customers. The immediate focus is on increasing USMCA compliance through all available means, similar to the supply chain rebalancing seen post-COVID.

Michael Glen asked for guidance on the "increase in investments, other assets and intangible assets" line item on the cash flow statement for 2025 and a reminder of its main components.

Answer

CFO Patrick McCann explained that the largest component is customer-dedicated assembly lines, which are treated as a lower-risk investment recovered through piece price. He stated that after running at an elevated level, this spending is expected to normalize back to the traditional ~$300 million range in 2025, representing a significant year-over-year decrease.