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Edited Transcript of ATA.TO earnings conference call or presentation 6-Nov-19 3:30pm GMT

Q2 2020 ATS Automation Tooling Systems Inc Earnings Call

Cambridge Nov 22, 2019 (Thomson StreetEvents) -- Edited Transcript of ATS Automation Tooling Systems Inc earnings conference call or presentation Wednesday, November 6, 2019 at 3:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Andrew P. Hider

ATS Automation Tooling Systems Inc. - CEO & Director

* Maria Perrella

ATS Automation Tooling Systems Inc. - CFO

* Stewart McCuaig

ATS Automation Tooling Systems Inc. - Corporate VP, General Counsel & Secretary

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Conference Call Participants

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* Cherilyn Radbourne

TD Securities Equity Research - Analyst

* Justin Keywood

GMP Securities L.P., Research Division - Director of Equity Research

* Mark Neville

Scotiabank Global Banking and Markets, Research Division - Analyst

* Maxim Sytchev

National Bank Financial, Inc., Research Division - MD & AEC-Sector Analyst

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Presentation

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Operator [1]

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Good morning, ladies and gentlemen. Welcome to the ATS Automation Second Quarter Conference Call and Webcast. I would like to remind you that this call is being recorded on November 6, 2019, at 10:30 a.m. Eastern Time. (Operator Instructions)

I would now like to turn the call over to Stewart McCuaig, Vice President, General Counsel of ATS.

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Stewart McCuaig, ATS Automation Tooling Systems Inc. - Corporate VP, General Counsel & Secretary [2]

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Thanks, operator, and good morning. Your main hosts today are Andrew Hider, Chief Executive Officer of ATS; and Maria Perrella, Chief Financial Officer.

Before we begin, I'm required to provide the following statement respecting forward-looking information which is made on behalf of ATS and all of its representatives on this call. The oral statements made on this call will contain forward-looking information. The actual results could differ materially from a conclusion, forecast or projection in the forward-looking information. Certain material factors or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information. Additional information about the material factors that could cause actual results to differ materially from the conclusion, forecast or projection in the forward-looking information and the material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information are contained in ATS' filings with Canadian provincial securities regulators.

Now it's my pleasure to turn the call over to Andrew.

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Andrew P. Hider, ATS Automation Tooling Systems Inc. - CEO & Director [3]

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Thank you, Stewart. Good morning, ladies and gentlemen, and thank you for joining us. Our second quarter performance featured growth in revenues, year-over-year margin expansion, the advancement of our ABM and contributions from our recent acquisitions. This morning, I'm going to speak to you about our Q2 performance, our outlook and the reorganization plan we announced today. Maria will then provide her report.

Starting with our financial value drivers. Our revenues for the first half of the year were $680 million, up 17% over last year. Q2 revenues were $341 million, up 20% over Q2 last year. Our adjusted EBIT margin for the first half of the year was 12%, up from 10% last year. Year-to-date, order bookings were $744 million, up 4% year-over-year. Our Q2 bookings were $321 million, down 10% from last year when we booked the $72 million EV enterprise program.

This quarter, we booked a number of programs with repeat customers, resulting in higher bookings in both life sciences and nuclear. Our acquisition continued to perform well, contributing $26 million in orders in Q2.

Moving to our outlook. We ended the quarter with $945 million of order backlog, up 14% over last year. This provides us with a good base of business to drive growth for the remainder of the year.

Looking at our funnel, life sciences continues to be strong, we are seeing good opportunities in medical devices, pharma and radiopharma. As we've recently announced, early in Q3, ATS and Comecer combined to secure a $32 million order in the aseptic fill and finish market. This is a great win for our business and an early indication of the value ATS and Comecer can create together.

Today, life sciences represents over 50% of our backlog, we are well aligned to drive penetration in this market. Life Sciences has positive industry dynamics, high barriers to entry, including stringent regulation and high consequence of failure. These characteristics are complementary to our capabilities, which include high-speed, high-precision solutions across a number of applications.

In EV, we have seen some delays in customer order activity, but the funnel remained strong. There are various reasons, including continued development of the technology and, in some cases, delays while customers assess end markets. This is not unusual, given the heavy investment customers are making in the EV shift.

Overall, our track record of proven success in EV, including battery module and pack assembly and e-motor assembly, positions us well as the industry shifts to electric vehicles.

In energy, we continue to win work in nuclear, where we are able to offer considerable value for our customers.

In consumer, we continue to pursue niche opportunities where our technologies align well with the value required by our customers. As I've stated in the past, I expect our customers will continue to exercise caution and be thorough in making their capital investment decisions, which leads to variability in order bookings from quarter-to-quarter. We also continue to monitor the impact of trade disputes on customer activity and our supply chain, which has added another variable to our customers' investment decisions.

On after-sales services, we continue to see favorable trends in attaching service sales to our CapEx business. Q2 after-sales service bookings and revenues both increased at double-digit rates over last year, and our funnel for services remains strong. We have made investments in after-sales service over the past several years, both in infrastructure to grow and in innovation to drive market leadership as with the recent launch of our IoT solution. We remain focused on growing this strategic area of our business as it drives recurring revenues and contributes to our margin expansion initiatives.

In support of our growth plans and to drive continued performance improvements, today, we announced a reorganization plan involving facilities that are not strategic to our future growth. This plan is designed to reallocate capital from underperforming facilities to high-performing facilities, improve the overall efficiency of our operations and reduce our cost base. The reorganization will be implemented primarily over the next 2 quarters at a cost of approximately $25 million. Coupled with the investment in innovation and capacity additions we're making in strategic areas of the business, this activity will prepare ATS operations globally to effectively serve customers and efficiently meet the demands of growth in our markets going forward.

Turning to our investment activities. Our expansion plans are progressing as expected. As a reminder, this includes additional capacity for our Life sciences business and dedicated space for innovation teams. Our innovation activities are ongoing. In the quarter, Comecer launched HELIOS, a new fully automated aseptic dispensing system for vials and syringes for the radiopharma market. As well, our life sciences group launched a new LED UV adhesive curing technology, providing surgical steel needles to glass syringe barrels. This solution replaces mercury vapor lamps, which are being regulated out to protect human health and the environment. This innovation, when combined with SuperTrak technology, forms the foundational elements of a high-speed glass syringe assembly system. We remain focused on internal investment in innovation as an important part of our capital allocation strategy to drive shareholder value.

Moving to the ATS Business Model. A few ABM highlights from the last quarter: One of our divisions improved the throughput of a key production process through a Kaizen Event, resulting in a 40% reduction in average completion time. This will drive cost efficiencies and improve lead time for the business, 5s programs were implemented at a number of divisions, including improvements at a division which drove a 30% reduction in waste in specified areas.

Another division implemented daily visual management and new standards in engineering that reduced complexity and improved project management. We have increased our training through additional ABM boot camps, over 120 of our leaders attended boot camps in the second quarter. Weekly lean training sessions are ongoing and driving advancement of the ABM throughout the business. Employee feedback is positive as our people are engaged in making improvements in their day-to-day activities. The pace of advancement is encouraging. We have many opportunities ahead for continued improvement that I expect will support our margin expansion plans.

Moving to Comecer. Integration of front end of the business activities is progressing very well. We've had some initial wins in both the pipeline of pursuits that capitalize on unique and sizable platform that has been created from the combination of ATS and Comecer. We are continuing to develop integrated service offerings and refine our joint go-to-market strategy for the aseptic fill and finish market. The combined sales groups have been aligned internally with improved capacity for Comecer in North America. Customer receptivity is positive. We are confident that revenue synergies will continue to be achieved. Integration of administrative activities is largely complete, joint initiatives between the supply chain groups are underway to drive cost-saving synergies.

Another M&A activity, during the quarter, we acquired iXLOG, a small German-based IT consulting and service provider, specializing in business intelligence and analytics. iXLOG will be integrated into our process automation business and allow us to expand our digital capabilities for customers.

In summary, on a year-to-date basis, performance included solid growth in both bookings and revenues. We have a strong order backlog, we are well positioned to drive growth in fiscal 2020. Our reorganization plan supports our margin expansion initiatives and reflects our disciplined approach to capital allocation. Our balance sheet remains strong, which we will continue to put to work through internal investment, innovation and strategic M&A as well as share repurchases when appropriate. Going forward, we are focused on our value-creation strategy, build, grow and expand to drive growth, both organic and inorganic and margin expansion with the goal of creating long-term shareholder value.

Now I will turn the call over to Maria.

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Maria Perrella, ATS Automation Tooling Systems Inc. - CFO [4]

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Thank you, Andrew. In the quarter and for the first half of the year, we achieved growth in our business and made progress on our strategy. Q2 featured year-over-year improvement in our revenues and EBIT margins, both including acquired companies and on an organic basis. As you know, year-to-date results include a full quarter of Comecer and KMW as compared to none last year. Both acquired businesses performed well and on plan.

As Andrew noted, we have also initiated a reorganization, some of which was reflected in Q2, but will more materially impact the next 2 quarters from a cost perspective and next year from a payback perspective. This morning, I will discuss Q2 results, the reorganization, including timing and expected impact and our balance sheet.

I'll start with operating results. Q2 bookings were $321 million, down from Q1's record bookings of $423 million. We believe this is part of normal variability as our funnel is healthy and remains similar in size and quality to prior quarters with a good mix of opportunities. Year-to-date bookings of $744 million averaged $372 million per quarter, with a book-to-bill ratio of 1.09:1. Q2 revenues of $341 million included $24 million from Comecer and KMW. Excluding acquired companies, revenues of $317 million were 12% higher than last year Q2.

Year-to-date, organic revenue growth was 8%. Compared to prior quarters, Q2 revenues were lower as a percentage of backlog due to the impact of vacation periods, primarily in Europe. Q2 ending backlog of $945 million was considerably higher than prior year's backlog of $830 million and decreased slightly from our record backlog in Q1 of $982 million. Although we have quarter-to-quarter variability, our current backlog provides us with a solid base to generate year-over-year revenue growth. Looking forward, Q3 revenues are estimated to be in the 35% to 40% range of backlog.

Moving to gross margins. We have seen a slight decrease as compared to the improved gross margins over the last 5 quarters, which progressed from 26% in Q1 last year to 26.6% by the end of Q4 and then 27% in Q1 fiscal '20.

In Q2 fiscal '20, gross margins decreased to 26.3%, primarily due to revenue mix and the summer vacation period, which resulted in under-absorption of fixed costs. The vacation impact is more predominant in our European businesses, which comprise a higher percentage of our total business compared to the last few years. Compared to Q1, the 70 basis point decline in gross margin was approximately 2/3 vacation related and 1/3 mix related. Mix reflected higher PA engineering services revenues, which generate lower gross margins. Excluding acquisition-related amortization expenses and restructuring costs, Q2's SG&A was $48.1 million or a $6 million increase compared to last year Q2's SG&A of $41.7 million. SG&A has increased over the prior year, due primarily to the addition of Comecer and KMW of approximately $4 million as well as increased employee costs and other costs to support organic growth.

Stock compensation expense has fluctuated over the last several quarters, with income of approximately $1 million in this quarter compared to an expense of $6.6 million last year. As this caused a greater than 200 basis point margin fluctuation and does not reflect operational performance, I will speak to adjusted earnings, excluding stock compensation expense. Q2 margins were 12.2% or 100 basis points higher than last year. We're pleased with the progress we've made on our margins despite some normal variability from quarter-to-quarter, and we are focused on continuing to improve on a year-over-year basis.

Both KMW and Comecer's results were on plan and as expected. Comecer's revenues were lower in Q1 due to the summer plant shutdowns. We are excited about the joint Comecer-ATS pharma opportunity announced 2 weeks ago as this supports our revenue synergy objectives in a meaningful way. Of note, this $32 million opportunity is the largest order Comecer has booked in its 40-year history and Comecer and ATS are contributing equally to the work scope.

Moving to our reorganization. This plan is intended to drive improvement in our operations from cost-containment initiatives and the closure of underperforming divisions. This is part of our disciplined capital allocation strategy that is also enabling our continued investment in high-performing facilities to drive growth in our strategic markets. Restructuring costs incurred as part of the reorganization are expected to be approximately $25 million and primarily include severance and lease termination costs. Through the reorganization period over the next 2 quarters, we expect some downward pressure on margins as inefficiencies in the affected facilities will cause under-absorption of employee and fixed costs. These costs are estimated to be between $3 million to $5 million per quarter. Commencing fiscal 2021, we expect the consolidation and closure of underperforming facilities and offices will start to add an incremental $15 million to $18 million of annualized earnings. The reorganization plan will contribute to our margin expansion as we expect a positive adjusted earnings margin impact of between 110 and 130 basis points, once the reorganization is complete.

Moving to the balance sheet. Our noncash working capital as a percentage of revenue decreased in Q2 to 10.7% from 12.4% in Q1. Timing of deposits, programmed milestones and payments of accrued liabilities caused the difference. Cash provided by operations was $57.6 million in Q2 compared to $39.5 million last year. Year-to-date, we have invested $23 million of our planned $60 million fiscal '20 investment in CapEx and intangible assets. We continue to have strong liquidity with cash on hand of $191 million and our credit facility, of which approximately $623 million is available.

In Q2, we generated adjusted earnings per share of $0.29 compared to $0.17 last year or a $0.12 increase. Stock compensation expense accounted for half of the increase with revenue volume accounting substantially for the other half.

On a year-to-date basis, adjusted EPS of $0.55 grew from $0.39 last year. The $0.16 increase is due to volume, contributing approximately $0.09, lower stock compensation costs, contributing approximately $0.06 and margin improvement of approximately $0.01. Our effective tax rate was 23% in the quarter. Going forward, our effective tax rate is expected to continue to be in the range of 25% of pretax earnings.

In summary, we completed the first half of fiscal '20 with both organic and inorganic growth over the prior year. Our funnel remains well diversified with a mix of programs and enterprise solutions. We have a strong balance sheet with available credit, which will support our objective of profitable growth.

Now we'd like to open the call to your questions. Operator, could you please provide instructions to our listeners?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from the line of Cherilyn Radbourne from TD Securities.

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Cherilyn Radbourne, TD Securities Equity Research - Analyst [2]

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I actually wanted to start with a couple of questions on the reorganization plan. And Andrew, maybe you can start by just talking a little bit more about the underlying analytical process? And what you envision the network looking like post-completion?

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Andrew P. Hider, ATS Automation Tooling Systems Inc. - CEO & Director [3]

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Cherilyn, as we -- as I start, this is part of our ongoing strategic review process, and we continually review and assess our markets, the performance of our businesses and outlook to ensure we maximize the value we bring to our customers. And the facilities and locations that are being part of this process have underperformed for various periods. But more importantly, we have limited prospects to drive profitable growth going forward. And then we stepped back and looked strategically where we want to invest, and more importantly, where we're not going to invest moving forward. This is the consideration that are put into these decisions. And so as we've announced, we're investing in certain areas of our business that we drive growth, profitable growth and high-level value to our customers, and these areas are impacted from that decision.

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Cherilyn Radbourne, TD Securities Equity Research - Analyst [4]

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And so can you say how many facilities you expect will be impacted?

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Andrew P. Hider, ATS Automation Tooling Systems Inc. - CEO & Director [5]

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Yes. It's less than 10. And there is multiple areas that we're consolidating and/or exiting.

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Cherilyn Radbourne, TD Securities Equity Research - Analyst [6]

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Okay. And then this one's probably for Maria. Just in terms of the incremental operating losses for the next couple of quarters as you implement the plan, will those run through cost of goods sold or SG&A or some combination of both?

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Maria Perrella, ATS Automation Tooling Systems Inc. - CFO [7]

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They will be both. But I would say the impact will primarily be seen in our cost of sales as we will continue to have our direct people and fixed overheads while we wind down and perform the consolidation activities.

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Cherilyn Radbourne, TD Securities Equity Research - Analyst [8]

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And will the $15 million to $18 million of expected savings show up in the same place on the income statement?

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Maria Perrella, ATS Automation Tooling Systems Inc. - CFO [9]

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That -- yes, primarily in the same place. Most of these costs would be in our cost of sales. There would be minimal SG&A impact.

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Operator [10]

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Your next question comes from the line of Mark Neville from Scotiabank.

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Mark Neville, Scotiabank Global Banking and Markets, Research Division - Analyst [11]

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Good quarter. Maybe just to continue on that discussion, just the -- again, just curious or some insight into the timing, I'm just curious if there's any particular events that sort of triggered this or maybe caused the underperformance? Or has it been sort of just an ongoing issue at these facilities?

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Andrew P. Hider, ATS Automation Tooling Systems Inc. - CEO & Director [12]

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No. As we step back, we -- and let me be very specific on it. This is a strategic decision on where we're going to allocate capital. And when we look at these divisions, and we do this again on an ongoing process for our strategic review of ATS globally, these are the areas where they didn't performed to plan, and we've looked at the alignment to the value they bring to customers and said when we're going to make an investment, we're going to align at higher-value divisions and locations. And therefore, it really is around that continued strategic review of our corporation, where we want to align the enterprise and where we're going to invest and also, as importantly, where we're not going to invest moving forward. And unfortunately, these are the areas that are impacted by that.

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Mark Neville, Scotiabank Global Banking and Markets, Research Division - Analyst [13]

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Okay. Is it more about the geography or about the markets they serve?

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Andrew P. Hider, ATS Automation Tooling Systems Inc. - CEO & Director [14]

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So it's -- when we look across, this is multiple geographies and multiple markets. And as -- one thing to know as we look at our total capacity globally, through the investments we're making and through this process, we're expanding and continuing our capacity expansion. So when we look at the ability to serve customers, we believe this puts us in a stronger position to offer that high level of service.

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Mark Neville, Scotiabank Global Banking and Markets, Research Division - Analyst [15]

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Okay. Maybe just on the macro, again, it feels -- again, just high level it feels maybe not your results, but again, high-level macros are sort of inconsistent or choppy. Again, your bookings have been quite strong, maybe a step down this quarter. I'm just curious sort of what you're seeing in -- and has there been any sort of material change in the last 3, 6, 9, 12 months? Are you seeing stabilization now? I'm just -- broadly sort of just curious.

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Andrew P. Hider, ATS Automation Tooling Systems Inc. - CEO & Director [16]

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Yes. So Mark, I'll start with the facts, and then I'll go into some specifics and then I'll talk a highlight, if I will.

So first, facts. Year-to-date, we're up greater than 4% in bookings. Our backlog remains healthy. And additionally, our funnel remains healthy across our verticals. And so when we look at the dynamic of ATS, we are -- we believe we're moving in the right direction. That said, we constantly challenge that. And part of that is I visit customers myself, our team visits customers on an ongoing basis to make sure we're aligned with the challenges they face. And what I can tell you is our leading indicators remain healthy. They remain that we're going to be looking at growth within the year as we stated in my announcement.

That said, we're constantly challenging ourselves to ensure that we align the business for the highest level of value for these customers. I also mentioned the EV shift, and I want to talk a little bit about this, because one of the dynamics we're seeing is the funnel is still very healthy in this space. We are seeing some cases where the process has taken longer than both of us have expected from an order process. That said -- and it's primarily in North America. That said, we believe this allows ATS to offer the highest level of value to these customers. Because their plans and their launch dates don't move. So they want to launch a product on this certain date or a model on this certain date, we have the ability to help them execute that plan. Now we need to win the work, but the funnel remains healthy in the space. And I've even as recently in the last month, visited several of these customers to know that they have plans to move forward, but they want to align around their technologies. So we are seeing some movement there. But as a whole, the investment thesis and the investment plan on EV is still holding true.

And one last one, and I want to highlight this because we're very pleased with the win, very excited about the joint Comecer and ATS win that we announced recently, 32 million, largest order in Comecer's history. And also shows the aseptic fill and finish market, the area that we have targeted is an area that we really can align around. So we're very excited about that. We need to execute, of course, and deliver that value, but very pleased with the progress we've made.

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Mark Neville, Scotiabank Global Banking and Markets, Research Division - Analyst [17]

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That's very helpful. Sorry, I missed a question or sorry to sort of circle back on the restructuring. The $3 million to $5 million incremental costs, is that limited or isolated to the second half? Or is that sort of continuing to Q1, Q2 and next fiscal year?

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Maria Perrella, ATS Automation Tooling Systems Inc. - CFO [18]

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No, that's isolated to the second half, and we're providing the range just based on timing, how quickly can we execute these activities. So transferred programs and then finalization of social plans, et cetera.

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Mark Neville, Scotiabank Global Banking and Markets, Research Division - Analyst [19]

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Yes. Okay. Sorry, maybe just one last one before I turn it over, just the after-sales service. It feels like it's been a while now we're talking about double-digit growth, I'm just -- I guess I'm just curious as to the drivers sort of behind this. Is this just better attach rates on new equipment? Or is it sort of going back to your installed base? Or is it better product sales, maybe that they're using with other vendors' automation equipment, your clients? I'm just -- again, just high level curious on to that.

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Andrew P. Hider, ATS Automation Tooling Systems Inc. - CEO & Director [20]

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Sure, Mark. We're pleased with the progress we have made here. And what I can state is we've seen an increase across the board. The team is executing the plan, and we're moving in the right direction. What I can also state is we've got a lot of work to do, and we're pleased with the team's performance. They've had multiple quarters of consecutive growth. And we've also launched, and we had the recent launch for our IoT solution. And as you're aware, this is a strategic area of focus for our business, and we're pleased with the progress. We've got a lot of work ahead of us.

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Operator [21]

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(Operator Instructions) Your next question comes from the line of Justin Keywood from GMP Securities.

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Justin Keywood, GMP Securities L.P., Research Division - Director of Equity Research [22]

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Just on the EV opportunities, if the customers' planned launch dates remained unchanged, is there a near-term inflection point where these projects need to get started in order to meet that timing?

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Andrew P. Hider, ATS Automation Tooling Systems Inc. - CEO & Director [23]

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Justin, so as we walk through this, absolutely, we are getting to that timing and the challenges customers face is when they are really looking at the product set and ensuring they've got a finalized product. They want to make sure before they automate that they have something that is really going to be closely aligned to the final solution. And so it does put a bit of timing crunch on the order process. That said, this is where we believe we can offer the highest level value for these customers. We have history in this space. We have experience in this space. And when we were to target an area, where timing constraints are important and risk is important, that's really an opportunity for ATS to highlight where our true capability is and how we can help these customers.

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Justin Keywood, GMP Securities L.P., Research Division - Director of Equity Research [24]

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Okay. So in other words, if this continues to be pushed out a bit more, does that strengthen ATS' position over competitors?

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Andrew P. Hider, ATS Automation Tooling Systems Inc. - CEO & Director [25]

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We would like to think so. But at the end of the day, we also know that there are other competitors that want to win this work. And so we believe it puts us in a better position. That said, we have to earn the work, and we work every day to ensure that our solution, our technology, our commitment to excellence and execution aligns with the needs of the customer.

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Justin Keywood, GMP Securities L.P., Research Division - Director of Equity Research [26]

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Got it. And going back to the new pharma customer win, are you able to give some additional color on the size of this customer, the key criteria in selecting ATS? And I'm curious if ATS previously targeted this customer prior to Comecer.

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Andrew P. Hider, ATS Automation Tooling Systems Inc. - CEO & Director [27]

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So I have to be somewhat selective, but I'll provide some context. First, ATS, Comecer have not worked with this customer in the past. Number two, ATS on its own would not have won this work. And number three, this is a fairly large customer, and they want to perform the service, and we believe there's follow-on work from what we're providing today. So we're very pleased with the ability for us to execute. That said, we need to provide the value to this customer before we can move to the next step. But from a standpoint of a win, aseptic fill and finish has been a targeted area. We're pleased with the progress, the team did a great job and now it's on us to provide that value.

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Operator [28]

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Your next question comes from the line of Maxim Sytchev from National Bank Financial.

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Maxim Sytchev, National Bank Financial, Inc., Research Division - MD & AEC-Sector Analyst [29]

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Andrew, I had a question for you, just a bit more on the macro side. Given obviously all the trade tensions right now with China, we're starting to see some of the capacity being moved to Europe or North America, especially in the life sciences space. Can you maybe share some observations there, if any?

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Andrew P. Hider, ATS Automation Tooling Systems Inc. - CEO & Director [30]

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Yes, sure. Sure, Max. Let me step back. When we look at this, we constantly monitor this. And what we've seen to date is it's not driven any difference in customer decision. What we have seen though is they're constantly monitoring to ensure that they have the right capacity in the right regions to meet the demand in the market. And so our view is we stay close with our customers. We have capabilities, as you're well aware, in all the regions that they might move their product to. But we have not yet seen it really drive the decision process, we've seen more of the demand in the region be the impetus for them to move forward. So at this time, it hasn't been a negative or a positive, but we view if it continues, it plays into the positive side for ATS.

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Maxim Sytchev, National Bank Financial, Inc., Research Division - MD & AEC-Sector Analyst [31]

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Yes, yes, for sure. Agreed. And then a quick question for Maria, if I may. When I look at the changes in noncash working capital, I think it kind of compares to $65 million draw on a year-to-date basis. How should we think for kind of the totality of the year, if you don't mind updating us on that front?

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Maria Perrella, ATS Automation Tooling Systems Inc. - CFO [32]

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Well, this -- I'm going to say it depends. And it's variable based on what happens with the types of programs that we have or that we receive deposits that we get milestone payments. We look at working capital as a percentage of revenue, and we know that we started the year off a little higher over 12% and we've come down to 10.7%. Looking at our working capital as a percentage of revenue, we're targeting to be in and around the 10% range and you can see being there based on what we have today. But it's possible to get up to 15%, again, based on the type of work that we receive and the milestone schedule, et cetera.

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Maxim Sytchev, National Bank Financial, Inc., Research Division - MD & AEC-Sector Analyst [33]

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Right. No, because, I mean, unfortunately, I think we're talking about sort of 2 different numbers. And I appreciate obviously that you guide on kind of ARs to revenue. But is it conceivable that you're still going to have a draw noncash working capital this year? Is that how you guys are modeling?

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Maria Perrella, ATS Automation Tooling Systems Inc. - CFO [34]

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It's possible. But again, it's hard to estimate that right now.

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Operator [35]

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There are no further questions at this time. Andrew, I turn the call back over to you for closing comments.

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Andrew P. Hider, ATS Automation Tooling Systems Inc. - CEO & Director [36]

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Thank you, operator. And thank you, everyone, for joining us today. And I look forward to reporting our third quarter results in February. Have a great day.

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Operator [37]

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Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.