ATS - Earnings Call - Q1 2026

Transcript

Speaker 6

Welcome to the ATS Corporation First Quarter Conference Call and Webcast. This call is being recorded on August 7, 2025, at 8:30 A.M. Eastern Time. Following the presentation, we will conduct a question-and-answer session. I will now turn the call over to Arjun Kapur, Investor Relations Associate at ATS.

Speaker 7

Thank you, Operator, and good morning, everyone. On the call today are Andrew Hider, Chief Executive Officer of ATS Corporation, and Ryan McLeod, Chief Financial Officer. Please note that our remarks today are accompanied by a slide deck, which can be viewed via our webcast and is available at atsautomation.com. We caution that the statements made on the webcast and conference call may contain forward-looking information, and our cautionary statement regarding such information, including the material factors that could cause actual results to differ materially from the statements, and the material factors or assumptions applied in making the statements, are detailed in slide 3 of the slide deck. Now, it's my pleasure to turn the call over to Andrew.

Speaker 5

Thank you, Arjun. Good morning, everyone, and thank you for joining us. Before we discuss our Q1 results, I want to take a moment to acknowledge a leadership transition as I move on from ATS. I have been honored to lead this great company through a period of growth and transformation, as we expanded our capabilities, strengthened our position in key markets, and created a solid foundation for the future. While the Board conducts its CEO search, the company will be in the very capable hands of Ryan McLeod as Interim CEO, with the support of our experienced Senior Leadership Team. During this transition, ATS will drive forward with its growth strategy, enabled by the ATS Business Model, our well-entrenched playbook for continuous improvement. Now, to our Q1 results, which we reported today. I will update you on our business and markets, and then Ryan will provide his report.

ATS delivered revenue growth with solid contributions from recent acquisitions and adjusted earnings margins in line with our expectations. Starting with our financial value drivers, Q1 revenues were $737 million, up 6% from Q1 last year. Order bookings were $693 million, with good diversification across our portfolio. Adjusted earnings from operations in Q1 were $79 million. On to our outlook. Order backlog ended the quarter at approximately $2.1 billion, as we continue to win and deliver across our diversified portfolio of offerings, including custom integration, standard equipment and products, and services. Our funnel remains healthy, reflecting the strategic nature of the customer programs we serve. As noted in past quarters, investment timing is variable, and we are closely monitoring the business environment, given the dynamics of cross-border tariffs. In parallel, we continue to advance our strategy to grow repeatable revenue through services, consumables, and digital offerings.

Within life sciences, order backlog at quarter end was $1.2 billion. We secured wins across submarkets, including auto-injectors, radiopharma, and blood glucose monitoring wearables. Our diversified life sciences opportunity funnel remains strong, supported by our proven capabilities in regulated markets and deep customer relationships. By way of example, Comachare continues to be a partner of choice for radiopharma customers who value quality and a proven track record for execution. As more customer programs advance towards commercial readiness, Comachare is uniquely positioned to provide localized and specialized support from our new site in Indianapolis, which opened at the end of July. Separately, and discussed previously, some customers in the lab research space are taking a more measured approach to capital spending as a result of changes in U.S. government funding, although this does not change our outlook for life sciences overall.

In food and beverage, our funnel remains strong, and we ended the quarter with a backlog of $229 million, an increase of 6% compared to Q1 last year. We continue to see investment in primary processing solutions, including a strong focus on aftermarket service. In addition, we are actively executing on our growth strategy for secondary processing, packaging, and services, further supported by the addition of PACSim. In energy, our funnel includes a mix of short and long-term opportunities, as the nuclear industry continues to benefit from renewed investment in favorable government policy. In the near term, there is momentum from ongoing CANDU reactor refurbishment activity, while both large-scale new builds and emerging small modular reactor programs provide further potential for growth. Drawing on our expertise in early-stage design through to modular assembly and waste handling, we are well positioned to support customers across their nuclear program life cycles.

In consumer products, our funnel remains stable with attractive niche opportunities. Our capabilities in warehouse automation and packaging continue to resonate with customers. In transportation, our funnel remains stable in line with expectations due to relatively lower EV and market demand. On services, we continue to advance our offerings, including our digital solutions across the range of markets we serve. Through our evolving capabilities, including our Connected Care Hub, ATS is well positioned to help customers proactively enhance system utilization and mitigate risk. From a strategic perspective, our services portfolio is designed to strengthen customer relationships over the full life cycle of equipment ownership, reinforce our role as a trusted partner, and drive recurring revenue. On the ATS Business Model, in Q1, our global teams actively engaged in key initiatives, including Kaizens, workshops, and problem-solving events, focused on all of our value drivers.

At our annual ABM Awards, teams were recognized for excellence in innovation, recurring revenue, customer engagement, health and safety, and overall performance, underscoring the sustained impact of our ABM culture. On M&A, our teams remain active in cultivating strategic opportunities that align with our long-term growth ambitions and contribute to value creation. In the near term, our focus is on returning leverage to our target range and on realizing further synergies from our recent acquisitions. On innovation, we continue to deploy capital and empower our teams to develop differentiated solutions that create value across our end markets. On digital innovation, we leveraged our acquisition of UReality to develop and launch a new, interactive, and scalable virtual reality training platform for customers. In energy, we advanced the deployment of our MultiFlex system.

MultiFlex is a patent-protected concept designed for the safe, precise cutting and removal of large nuclear reactor components in decommissioning and waste handling applications. MultiFlex is one example of our ability to innovate and deliver safe, efficient solutions within the highly regulated nuclear space. Finally, in June, we held our biannual ATS Automation Summit for customers and other partners at our Cambridge campus. This event showcased the most recent solutions from across our portfolio of companies, including ATS advancements in digital transformation, intelligent automation, and technology-enabled scalability. Through our workshops over several days, we focused on innovation trends in automation, including time-to-market, as well as digitalization and AI advancements, further positioning ATS as a thought leader for global customers. In summary, our opportunity funnel is well diversified, and our current order backlog provides solid revenue visibility and a strong foundation for profitable growth.

I'm also pleased to share that ATS was included in Time Magazine's inaugural list of Canada's Best Companies 2025, and we were number one in the Engineering, Manufacturing, and Medical Technology category. This recognition and our results today reflect the continued progress we are making across our value drivers, the resilience of our business model, and the dedication of our exceptional talent. I'm proud of what we've accomplished together, and I look forward to watching ATS continue to grow and succeed. Now, I will turn the call over to Ryan. Ryan, over to you.

Speaker 0

Thank you, Andrew. Good morning, everyone. Beginning with our operating results for the quarter, order bookings were $693 million, down 15% compared to Q1 last year, due primarily to the lower expected run rate in transportation order bookings. Q1 last year also had several larger enterprise order bookings in life sciences, which reflects normal variability. Importantly, our trailing 12-month book-to-bill ratio at the end of Q1 remained above 1, 1.17 to 1. Revenues for the first quarter were $737 million, up 6.1% compared to last year. Recently acquired companies contributed 4.1% to revenue growth, and foreign exchange translation added a 3.2% benefit. Q1 organic revenue growth was negative 1.2%, and the lower transportation revenues were only partially offset by growth in life sciences, consumer products, and food and beverage. Nevertheless, our outlook for revenue growth for the full year remains unchanged.

Moving to earnings, first quarter adjusted earnings from operations were $78.6 million, or 10.7% of revenues. This was in line with our expectations and represented an almost 40 basis point sequential improvement from Q4. Gross margin for Q1 was 29.8%, consistent with Q1 last year. On SG&A, excluding acquisition-related amortization and transaction costs, expenses in the first quarter totaled $136.4 million, a $20 million increase over the prior year. This increase included incremental SG&A from acquired companies and, to a lesser extent, both the impact of foreign exchange translation and employee costs. As always, we continue to focus on ongoing efficiency improvements in our operations. Excluding the mark-to-market impact related to changes in our share price, stock-based compensation expense was $4.8 million in Q1. Earnings per share were $0.41 on an adjusted basis. Turning to our outlook, we ended the quarter with an order backlog of approximately $2.1 billion.

Q2 revenues are expected to be in the range of $700 million to $740 million. As a reminder, this assessment is updated every quarter, taking into account revenue expectations from current order backlog and new orders booked and billed within the quarter. In the quarter, we incurred an additional $2.5 million of restructuring costs, as a continuation of the program announced last year. We continue to expect operating margin improvement throughout fiscal 2026, although this may not be linear. ABM tools remain a critically important element of our ongoing margin expansion focus. On tariffs, while the environment is still evolving, we have not seen a material impact to date. On order bookings intake, we continue to stay close with our customers to address their regional execution and capacity needs. On supply chain, our strategic sourcing approach is designed to protect margins and minimize disruption where possible.

Of note, the majority of our exports from Canada into the U.S. are covered under the USMCA. Moving to the balance sheet, in Q1, cash flows from operating activities were $156 million. Our non-cash working capital as a percentage of revenues was 17.3%, supported by the EV settlement payment that we received in the quarter. While there may be variability between periods, we remain focused on working capital efficiency across the business, and our target of 15% of revenues or less is unchanged. During the quarter, we invested $16.3 million in CapEx and intangible assets, and we continue to strategically invest to drive innovation and capability. On leverage, our net debt-to-adjusted EBITDA ratio was 3.6 times on a pro forma basis at Q1, which includes full-year contributions from our most recent acquisitions.

The improvement from Q4 was driven by the receipt of the EV settlement payment, used primarily to reduce amounts owing on our credit facility. We remain committed to bringing our leverage to our target range of 2 to 3 times. As we noted when we reported our year-end results, we were active on our share buyback program during Q1. The NCIB program remains an opportunistic component of our overall capital deployment strategy. In summary, first quarter results were in line with our expectations, with solid revenue generation and improved operating margins on a sequential basis. In addition, our strong order backlog supports our outlook for growth. Before we invite questions, I want to extend my thanks to Andrew.

Since he joined ATS in 2017, his leadership has been instrumental to ATS's growth, as well as to our future, with the legacy of disciplined execution, strategic focus, and continuous improvement that he has built. Andrew, thank you. During this leadership transition, it's business as usual. Our priorities and our plan remain unchanged. We will continue to focus on performance improvement across all of our value drivers, and we will seek to complement organic growth by cultivating strategic acquisitions. Our decentralized management structure, strong leadership team, and our global team's commitment to the ATS Business Model will continue to serve us well. Importantly, we remain committed to creating long-term value for our shareholders and customers through strong execution and continued growth in our targeted markets. Now, we will open the call to questions from our analysts. Operator, could you please provide instructions? Thank you.

Speaker 6

We will now begin the question-and-answer session. If you would like to ask a question, simply press star followed by the number one on your telephone keypad. Your first question comes from the line of Joe Ricci with Goldman Sachs. Joe, please go ahead.

Hey, good morning, guys. Andrew, congratulations. I'm going to miss talking to you on these conference calls, but wish you nothing but the best of luck.

Speaker 5

Thank you, Joe. Appreciate it.

Yeah, you bet. Hey, guys, can we just talk about the demand environment a little further? It doesn't seem like you guys are seeing much slippage in your business. At the same time, fully recognize that orders can be lumpy, right? A little bit maybe slower start to the year, but maybe just kind of talk through the demand environment, what you're seeing, what your customers are saying across your CAN markets, and how you're thinking about the outlook for the rest of the year.

Yeah, hey, Joe, maybe I'll start, and then Ryan can add on. If we step back a couple of data points. First, as you're well aware, we don't look at any single quarter in isolation. We look over a period of time, and our trailing 12-month book-to-bill ratio is 1.17. Really aligned around that growth target, and really what we outlined last quarter around this will be a growth year for ATS, and we expect that to hold true. If you then go in the prepared remarks, what you'll find is, in large part, our funnels remain helpful, and the conversations are very engaging with our customers around their target and their approach to strategic investments. We're in many attractive areas.

If you just look at life sciences, whether it's the continued support around GLP-1 drugs and a little bit of data around that, the novel drug approvals are in line with last year, which effectively means more drugs continue to be approved, and we continue to engage with customers about their launches. To radiopharma and the continued identification of new drugs or existing drugs to support cancer treatment around identification and/or treatment after you receive surgery, to wearable devices and the treatment of diabetes or even glucose monitors. We talked about this in the past, even the ongoing support for pharmacy automation or even contact lenses. Many, many key opportunities around that space. We then go to energy.

Our nuclear business remains strong, continues to be strong, four key themes in that, and I've walked through those in the past, but it's CANDU reactors, it's decommissioning, it's SMRs, and it's fuel requirement needed for the resurgence of nuclear energy. To our food business, that remains continued successful in its pursuit of not only ongoing business, but new areas of technology and innovation and bringing value to our customers. Transportation has really steadied out, and when we look at that business, we're winning work, and pleased with where we sit, we've right-sized the business for our view of the market. Lastly, consumer products. We look at that market, and we're monitoring that space, but we've seen it hold up, and whether it's warehouse automation or even in our ability to support high-end cosmetics. It's remained called rather steady.

Overall, our view on the year and the market is we're in a strong position, strong backlog, and our book-to-bill ratio remains in line with our expectations on growth.

Speaker 0

Joe, I'll just jump in with one more data point as well. If we look over the first half of this calendar year, really since tariffs have become part of the environment or have been in place, and if we exclude transportation, our orders are up over 10% year over year in the first six months of the calendar year. As Andrew said, we've got a strong backlog, and we're very well positioned to continue to drive revenue growth for the year.

That's super, super helpful. Appreciated that. Can I just maybe quickly just kind of double-click on the energy business specifically? Because your backlog's not only up a lot year over year, it saw a pretty material uptick sequentially. What I find interesting about that is that a lot of other companies that we look at have been talking about project delays in the energy sector. What was it about your business this quarter that saw like a material uptick? Is it on the nuclear side? Just any color around that would be helpful.

Within energy, most of the growth is coming in nuclear, as we've talked about. A lot of what we're doing in that space, and the bulk of the growth is coming in refurbishment activity, primarily around CANDU reactors. We've seen a very strong demand environment in that space and continue to see a good outlook there. In terms of other areas, as Andrew talked about in the SMR space and in fuel handling, that's a smaller part of our business today. We've talked about it. Our view on the SMR market is a lot of this is in the development phase today and represents an exciting opportunity, but more of a future opportunity for the business.

Great, thank you.

Speaker 6

Your next question comes from the line of Maxim Sytchev with National Bank Financial. Maxim, please go ahead.

Hi, ladies and gentlemen.

Speaker 5

Morning!

Andrew, obviously, you know, all the best in future endeavors. It's been a pleasure. Congrats.

Joining is mutual.

Wonderful. Maybe the first question, I was wondering if it's possible to get a bit of an update on the integration process and some of the cross-selling opportunity, ABM kind of acceptance on the part of ADT, Heidolph. That would be super helpful. Thank you so much.

Yeah, absolutely. I'll start with a bit of a headline on this. Look, our funnel continues to grow here, and we see strong opportunity. There is traditional with ATS Life Sciences Systems working with Biodot, as well as ADT and Heidolph bringing solution sets to their markets. We did have some awards within the quarter, but more future view is the funnel continues to be healthy, and the addition of Heidolph has certainly been a welcome addition for the ability to bring more to the lab space and really align with ADT, as well as one of the business units in SP, our Genevac business. Exciting future, and see this as an area that we, as ATS, can bring higher value to our customers.

Okay, super helpful. Then.

Sorry, just.

Go ahead, Ryan, of course.

On the overall integration progress across all three, going very well, very much in line with our expectations. ABM deployments and uptake has been very strong in all three businesses. Some of the cost synergies, as it relates to cost structure improvements, supply chain integration, we're very pleased with the process across all three assets.

Okay, that's good to hear. Andrew, I guess your comment around some of the research funding being under pressure in the U.S. right now, correct me if I'm wrong, this represents less than kind of like single-digit exposure for the life sciences space. Can you just please clarify that?

That's correct, Max. It's a low single-digit % of our business that is in that space. We have seen impact, but as I think Andrew said in his prepared remarks, not a material impact to our overall business or overall life sciences business.

Okay, good to hear. In terms of the margin profile, I think in the past, you've mentioned that life sciences typically has a higher gross margin. I guess as that product mix is shifting right now, we have less transportation, more life sciences, food, et cetera. How should we think about the progression on margin, on a growth rate basis? I don't know if you can talk about short-term versus medium-term, but any color would be helpful. Thank you.

Speaker 0

Yeah, I mean, I'll speak more to the medium-term, Max, because we will continue to see variability quarter to quarter, and that's largely driven by the project portfolio and what's getting executed and kind of driving revenues within the quarter. Generally speaking, where we're targeting and expect to drive margin expansion is through gross margin. There's some operating leverage we expect as well from where we're operating today. Some of that is mixed tied to life sciences. Some of that is mixed tied to the product and services portfolio. The improvement initiatives that we're driving around supply chain, labor productivity, and other areas, most of that does, again, show in our gross margin over the medium term.

Is there anything in the project pipeline which is kind of restraining the progress when it comes to margins in the short term?

No, there's nothing unusual, nothing to call out.

Okay. Maybe just last question. Obviously, with the leadership transition, I'm just curious around the M&A pipeline and what are you guys seeing in the market specifically, and I guess your ability to act if something were to come through tomorrow.

Yeah, like I think we said in the prepared remarks, it's really business as usual. We've got a plan for the year. The team is fully engaged on executing to that plan, as well as our strategy, and that strategy is centered on both organic and acquisition-related growth. M&A activity is continuing, cultivation activity is continuing. In terms of doing a deal or getting something over the finish line in the short term, that's going to be more governed by our leverage than support from the board or the ability to act in this interim period. We've talked about our focus is on deleveraging, bringing our leverage to that 2 to 3 times range. That doesn't mean we can't do smaller tuck-in acquisitions in the short term. Again, that's from a capital deployment standpoint. Our focus is on deleveraging.

Okay, super helpful. Thank you so much, gentlemen.

Thank you.

Speaker 6

Your next question comes from the line of Justin Keywood with Stifel. Justin, please go ahead.

Thank you, and good morning. Echo the congrats, Andrew, and all the success in value creation at ATS.

Speaker 5

Thank you.

Thank you. On the tariffs, we've seen several major U.S. CapEx announcements from ATS's life sciences customers. Is that translating to any increased activity with ATS, assuming that there's going to be increased automation over the next several years, or is it just announcements at this stage?

Just to understand your question, you're saying ATS announcements or tariff announcements?

ATS's life sciences customers, we've seen several increased CapEx announcements in the U.S., presumably to combat potential tariffs. Is that leading to increased conversations or order activity with ATS, assuming that there's going to be related increased automation?

Yeah, if you, I'm going to answer your question, but I'm going to walk through it in a bit of phases here. If you step back, whenever there's investment, whether it's tariff, onshoring, supply chain de-risking, we can go down labor and the lack of labor to support output, all that equates to generally a favorable automation position. This would be no different. That said, it has been, I would say, more the anomaly today in the orders that customers have cited tariff being the reason for an order. I would just say that is not the norm. What we've aligned to more is that customers are building capability and capacity where they have demand. We're seeing customers really align around that. There are a lot of discussions for the future and where they want to build a product.

We are seeing that, and we have seen a few customers pull their decision into the U.S. versus outside of the U.S. Overall, I would say we haven't seen a large part in our investment in ATS orders today. That said, whenever it's favorable like this, it would generally lean to a higher automation play and a higher position for ATS.

Understood. That's helpful. I want to come back on the balance sheet. Very healthy free cash flow quarter, $140 million. I assume that includes all of the EV settlement, just trying to understand if there was any part of that EV settlement that was maybe pushed into the next quarter, or was it fully received?

That was fully received, and that issue is closed and behind us.

Was there any tax portion of that payment? It was announced at $194 million. I'm just trying to square that with the free cash flow in the quarter.

No, no tax impact. I mean, there's a future tax benefit tied to the write-off, but no, there was no tax impact to the cash inflow.

Okay. Just on the deleveraging outlook, targeting to get to the 2 to 3 times, any indication on timing when that could be achieved?

Yeah, our expectation is we get there this year. Our biggest opportunity, in addition to continuing to operate profitably, is really in working capital. I talked about this in my prepared remarks, but our goal is to maintain working capital below 15%. We're above that target right now. Some of that is structural, as we've added some acquisitions, which are more product-related businesses. Those have put pressure on our ability to achieve that target. There is normal course variability in our larger projects and custom automation business. We do see opportunity to improve and get that below our target this year.

That's fiscal year, just to clarify?

Yes, correct.

Great. Thank you for taking my questions.

Thank you.

Speaker 6

Your next question comes from the line of Patrick Michael Baumann with JPMorgan. Patrick, please go ahead.

Oh, thanks. Andrew, congrats on the great run at ATS and the opportunity ahead of you at Baxter. Best of luck.

Speaker 5

Thank you.

Yeah, no problem. On the margin dynamics, I know you were talking a little bit longer term, Ryan. If sales are down a little bit sequentially, in the second quarter, do you think you can still drive sequential margin expansion, or do you think margins come down a little bit in the second quarter and then resume that expansion in the second half? Because I think previously we expected kind of progression sequentially through the year. I just want to make sure everything's kind of lined up the way you guys are thinking about it.

Yeah, Patrick. Our outlook for the year has not changed, and that's both in terms of growth for the year and margin expansion for the year. I do want to reiterate that, I mean, first, I don't expect we're going to see big jumps in our margins sequentially, and there is going to continue to be variability. It's not necessarily a linear ramp. We do expect, you know, margin expansion for the year. I talked through earlier a little bit on the initiatives that we have in place tied to material productivity, labor, pricing, other areas of efficiency. I think what we saw this quarter is probably a reasonable run rate in terms of ongoing improvement, but not necessarily linear.

Okay, that makes sense. Can you talk a little bit about the food and beverage CapEx outlook in North America? I think you have a decent view there with PACSim. Just curious what you're seeing from customers in terms of their investment plans in that specific end market.

Absolutely. We've continued to see this market not only be stable, but additional opportunities and areas where we've invested in technology and innovation. Whether it's PACSim or our business with CFT or even Raytech in optical inspection, we've continued to see this be supportive around how we enable customers to bring food to market and meet the requirements as needed for the end consumer. I'm pleased with the performance here to date and really look forward to seeing this business continue to expand.

Thank you. Lastly, just on the portfolio, is there anything in the portfolio that at this stage you'd consider to be non-core and you could maybe look for opportunities to kind of wind down over time or divest as you replace it with other acquired assets?

The short answer is no. We've talked about in the past our approach on capital deployment and value creation, and that includes looking at ongoing investments in the portfolio as well. That view of the portfolio and ongoing strategy work is something we refresh every year. That's going to continue to be how we approach it and view with a critical eye where we're generating value and what makes sense in terms of being part of ATS.

Okay, makes a ton of sense. Thanks a lot for the time.

Speaker 6

Again, if you would like to ask a question, simply press star followed by the number one on your telephone keypad. Your next question comes from the line of Cherilyn Radbourne with TD Cowen. Cherilyn, please go ahead.

Hi, good morning. This is actually Patrick Sullivan on the line for Cherilyn. Thank you for taking the questions, and congrats, Andrew, on the next opportunity for you. I appreciated the color on what you're watching in the lab space. I just wanted to clarify, would that be more tied to, you know, the consumable side of things in the portfolio? I just ask it because, you know, there's a recent White House action plan that outlined an interest in heavily investing in automated labs across the private, regulatory, and academic sector. I want to know kind of what capabilities ATS might have in lab automation and then kind of our side away from the consumable lab equipment stuff.

Speaker 5

Yeah, maybe I'll start here. We are in, I would say, a bit of both around this. If you look, and not to get too specific, I'm going to walk through the businesses a little bit. When you look at Biodot, that's a bit more in the lab automation side, and they support that area of business. We do view that it is in line with the ability to help labs as they look at automation for the future. When you then go to ADT, they're going to have some impact on the research side, but they do have as well support for enabling their portion of the process if you do want to automate or bring a higher level of technology and insight into monitoring the lab space. We all know where they are in that position. That is also a consumable area.

When we look at SP with their business, it is lab lyo. Again, that is one around, it certainly can support the initiative around automation, but it is more around if you're going to run multiple drugs as a trial, they would then do the lyo process for that with the Genevac business. Lastly, Heidolph is more the supporting overall laboratory space and what they want to do, whether it's stirring, mixing, or part of their process within the lab area. Overall, I would say within research, we're going to see some impact, but it's relatively smaller than ATS. If you then go to the initiative around automation, it is something that is in line with ATS, but it is still relatively small of our overall business.

Okay, great, thank you. I guess with one more, can you just elaborate on the MultiFlex system that you briefly highlighted in the opening remarks? You know, what kind of applications is that used for? Is that used in the CANDU-related work that you guys do? Is that something that's more in the innovation space side of things right now?

Yeah, so the MultiFlex system, you know, very excited about this patent-protected business. It is around the decommissioning area of the business, and decommissioning is used in the traditional nuclear reactors. It is a normal course process, and they go through decommissioning, and then often they'll recommission a new nuclear reactor. This allows them to be more efficient and more space conscious, and it is an area that truly helps in the process around decommissioning. We have won awards, and we do have a funnel that's built around this business and this market.

Excellent, thank you.

Speaker 6

Your next question comes from the line of Michael Glen with Raymond James. Michael, please go ahead.

Hey, good morning. This is actually Fred Gatali on for Michael Glen, and congrats, Andrew. Let me start with life sciences. Regarding the auto-injector business, how diversified is the business outside of GLP-1 applications? Is the book heavily concentrated in GLP-1, or are there other emerging or growing categories for auto-injectors?

Speaker 5

Good morning, Fred. The majority of our auto-injector business is tied to GLP-1. In terms of diversification, we have 10 active customers in that space today, so it is fairly well diversified. The other area I would point out is, a lot of the demand for these drugs is being driven by weight loss and obesity treatments. In addition to diabetes treatment, there's a lot of research and work being done by these drug manufacturers around new applications, things like cardiovascular health and neurological disorders. It's a fast-growing area and an area we continue to see a lot of opportunity in.

Great. On life science further, this year's slowdown from the much higher pace in fiscal 2025, can you just indicate what categories of products saw that slower pace of booking?

You're asking about the quarter itself?

Correct.

Yeah, I mean, like I said, there were some larger programs in the prior year, first quarter. Some were tied to wearables in the space. I think the auto-injector, it was still a big piece of Q1 bookings, or a significant piece, but was lower year over year. It really is, as we talked about, kind of normal course variability with just timing of some larger programs.

All right. Last one from me, just on the timeline associated with bringing the working capital back into the 15% range. Can you talk about that, and in addition, maybe highlight where working capital remains elevated right now, what segments and product lines?

Yeah, I talked a little bit about this. I think our expectation is to get there for the end of the year. It's really in two areas. Part of it is kind of the structural change I talked about with adding more product-based businesses. There, the opportunity is primarily in inventory terms, a little bit on payment terms and the order-to-cash cycle. In the custom automation business, that's more of a timing. We're going to see that variability quarter to quarter. That's normal course for us. Overall, the opportunity there is primarily in payment terms and that order-to-cash cycle.

Thank you.

Welcome.

Speaker 6

There is no further question at this time. I will now turn the call over to Andrew Hider for closing remarks. Andrew?

Speaker 5

Thank you, Operator. I invite you all to participate in our annual shareholders' meeting, which will be held virtually today at 10:30 A.M. Eastern Time. Details are certainly in the management info circular. Lastly, thank you for joining us. Stay safe and goodbye for now.

Speaker 6

That concludes today's call. Thank you all for joining. You may now disconnect.