Timing will be variable. Customers will be looking at their launches when they get approval. So it will certainly be variable. We are in a position and we’re working with customers to ensure that they’re successful in the launch. And one last minor one here, we’ve been in this space for over two decades, it’s new and exciting and an area that we can support the drive. We’ve also been in this market and we have a strong reputation in the space to really help our customers execute.
Michael Glen: Okay. Thanks for taking the questions.
Operator: Your next question comes from Justin Keywood with Stifel. Please go ahead.
Justin Keywood: Good morning. We saw some de-leveraging in the quarter. Balance sheet is at 2.3x, that could suggest a reasonable capacity for further M&A. Are you able to update us on the pipeline, target verticals, and potential size of deals that you’re looking at?
Andrew Hider: Good morning, Justin. Look, we are in a position and I’ll just say, if I just step back and I did mention this, our funnel remains healthy. And when we look at our funnel, it is a mixture of sizes, small, medium and large, aligned around very strategic products and technologies for end markets that we view are strong end markets and strategic end markets. And so we’re pleased with where we sit. We’ve added now Avidity, we’ve added ITACA, two very good additions to the family. Our position in the ability to continue to cultivate is strong. And we continue to have very strong or very good dialogues with potential targets. That said, we’re patient. And when we find high value for our customers and shareholders, we’re in a position to move quickly.
Justin Keywood: Understood. And then a follow-up, to GLP-1, we saw Novo announced an acquisition of Catalent to shore up manufacturing capacity for fill-finish. One question is, if ATS offers fill-finish, and does that take away the opportunity? And then also just on the GLP-1 backlog, if we’re able to characterize the percentage. I know it was at a record level in the current quarter?
Andrew Hider: To walk through the acquisition, we generally view that as positive for ATS. And it’s just one more proof point of the constraint to get product to market and exciting times for our ability to support. But also – and I reference this on the call as a highlight for innovation. We launched an iOT solution set for a customer, and it was around a pharma customer to work with a contract manufacturer, to really do data processing. And it’s just how we can continue to evolve and really support customers as they move in these directions to really bring their products to market and understand all the data variables to support those launches. Ryan will touch upon the second part of the question.
Ryan McLeod: Yes. So it’s low-double digits as a percentage of our backlog.
Justin Keywood: So just to clarify, low-single digits for bookings, but double digits for backlog?
Ryan McLeod: Correct.
Justin Keywood: Thank you.
Ryan McLeod: And Justin, just to clarify. So to keep in mind, these programs are in the range of 12 months from timing of order to execution and delivery. So the orders that we booked last quarter – sorry, back in our fiscal Q2, are still in relatively early stages. And so most of that is still in our backlog?
Justin Keywood: Understood. Thank you for taking my call.
Andrew Hider: Thank you, Justin.
Operator: Your next question comes from Maxim Sytchev with National Bank. Please go ahead.
Maxim Sytchev: Hi. Good morning, gentlemen.
Ryan McLeod: Good morning, Max.
Maxim Sytchev: Andrew, maybe just one kind of methodology/philosophical question for you. When we think about kind of return on invested capital by vertical, when you look at transports obviously more lumpiness, more working capital intensity, like when you look across the portfolio, how does it stack versus other verticals within ATS? And over the long-term, should we assume that kind of the preferred route would be to get to, I don’t know, like 80% healthcare in 10 years? Or how should we think about that level of composition? Maybe any comments from you would be super helpful. Thanks.
Andrew Hider: Yes. So Max, as you’re well aware, we have a very focused strategy around capital allocation and it is very aligned to return on invested capital. And if you just take a step back and look at our M&A pipeline and what we’ve announced, it really aligns around just take the last few digital, life sciences, regulated food and areas that we offer high impact on an external perspective. When we look internally, we look at investment to return and ensure that the return on where we’re focused is, is at the level and threshold we would expect. And so while every market is going to have an opportunity, certain markets are going to have higher returns. And that’s how we line for innovation, that’s how we line for technology development.
And there’s no shortage of opportunity for life sciences and our continued expansion. And I referenced a few of these on the call. We invested and launched a new life sciences system around auto-injectors, around capability building within the space to even continue to improve our output. We talked about a capability development and radiopharmaceutical around dose calibration and utilizing iOT as a support structure. And we talked about really the launch of iOT solution within the pharma space. So as we look at our investments, we expect a strong return. We also expect a strong penetration to support our growth in strategic end markets.
Ryan McLeod: Max, just to add on a little bit here too. So the transport and EV business is primarily an organic play for us. So from a return perspective, and we’ve talked about this. We look at return on investment, typically internal investments generate a higher return and reach our thresholds more quickly. So even though this is a higher investment in working capital in this business from a return on invested capital, the fact that it’s organic really puts at a similar playing field with the rest of the verticals.
Maxim Sytchev: Okay. That’s super helpful. And actually, do you mind if I squeeze in one more. I think last quarter you mentioned that you have some pilot programs with other auto OEMs. Just curious to see if there is any potential directional update you can provide on those. That’d be helpful. Thanks.
Andrew Hider: I mean, so they’re progressing to plan and we have no other delays in our program. So they’re progressing to plan and we’re staying close with our customers around their investment and their long-term view on the market. And so I would just say, it’s ongoing progress and when we’re aligned around.
Maxim Sytchev: Okay. Excellent. That’s it for me. Thank you so much.
Andrew Hider: Thank you, Max.
Operator: [Operator Instructions] Your next question comes from Sabahat Khan with RBC Capital Markets. Please go ahead.
Sabahat Khan: Great. Thanks and good morning. Just a clarification question. I think just want to tie off the comment in the press release about the $200 million of delayed backlog. I guess should we assume that if the delay hadn’t happened because the revenue would’ve been higher by $2 million for this next quarter, or is that $200 million revenue impact maybe going to be split somewhat in this upcoming quarter and maybe a bit after that? Thanks.
Ryan McLeod: Yes. Good morning, Saba. It’s Ryan. So the $200 million backlog, so like the rest of our projects would be executed over a period of time and call it roughly 12 months, what would’ve been remaining on that program? So I mentioned this earlier, but from our backlog, we typically – revenue in the range of 25% to 30%. And in this case with EV being longer duration programs, it would’ve been more towards the lower end of that.
Sabahat Khan: Okay, great. And then there’s a little bit of discussion earlier on your participation in kind of the nuclear space. I’m just wondering, I guess given the role that you’re playing in some of the elements of whether it’s refurbishment or things like that kind of, are you working on becoming more involved in other parts of it? Like, if new build were to start tomorrow morning, do you have kind of the capacity and the capabilities to get involved? Or is there some R&D and other capabilities that you’re looking to add to maybe partake in this or what seems to be more of like a five, 10, 15-year type runway here for that side of the business. Curious, what capabilities or where you can play today versus maybe three, five years from now?
Andrew Hider: So couple things. First, we like our niche position and we like the value it creates. We are continuing to expand that value creation. And you look at the SMR space that we’re supporting, you look at what we can do on refurbishment, you look at what we can do on decommissioning. And even in areas around new and identifying. So it is an area that says, when we step back, we like the strategic position we are today. We like the opportunities that we can build into. And we can do that both from an innovation perspective as well as really supporting our customers through different technologies. So it’s an area that I would say we’re going to continue to highlight and continue to drive.
