ATS Corp (ATS) 2021 Q2 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to the ATS Automation Second Quarter Conference Call and Webcast. This call is being recorded on November 4, 2020, at 10 a.m. Eastern Time. (Operator Instructions)

I'd now like to turn the call over to Stewart McCuaig, Vice President and General Counsel of ATS. Please go ahead.

Thanks, operator, and good morning, everyone. Your main hosts today are Andrew Hider, Chief Executive Officer of ATS; and Ryan McLeod, 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. You are cautioned that the oral statements made on this call will contain forward-looking information that involves risks and uncertainties, including those introduced by the COVID-19 pandemic. 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.

Thank you, Stewart. Good morning, ladies and gentlemen, and thank you for joining us. For the second quarter, we continue to focus on our operations in this new environment, the health and safety of our employees and delivering on commitments for our customers. Our second quarter featured increased order bookings, and we finished with a strong order backlog. Operationally, we continued to improve our performance in the face of challenging business conditions.

In September, we announced a reorganization plan for our transportation business that included the divestment of noncore assets. Our teams have adjusted to the new environment and are delivering value for our customers, but COVID restrictions continued to (inaudible) revenues in the quarter. Today, I will focus on a few key topics, update you on business conditions, and then Ryan will provide his report.

Starting with our financial value drivers. Q2 revenues were $336 million, down 2% from Q2 last year on lower services revenue due to travel restrictions and entry limitations at some customer sites. Our Q2 adjusted EBIT margin was 12%, in line with last year. Q2 order bookings were $403 million, up 26% from last year. This includes the previously announced $20 million program for the design, build and delivery of automated safety syringe manufacturing systems. These systems will support increased demand for routine health care and to treat the surge of COVID-19 patients.

Moving to our outlook. We remain cautious as the pandemic appears to be far from over. Period end backlog of $956 million provides us with a solid base of business to offset uncertainty in the short term. We're encouraged with quarterly booking activity. By market, activity in life sciences remained relatively robust and included new mandates related to COVID-19 responses. Other activity in medical devices, pharma and radiopharma has remained strong. We won a number of orders that follow on current programs as well as orders from existing accounts that expanded our penetration with those customers. Life sciences represented over 65% of our year-to-date bookings, and we expect it will be a strong market for us over the long term.

In EV, we have seen regional differences in market development. In Europe, previous investments in EV capacity and a slowdown in end market demand have caused customers to focus their efforts on cash preservations and reexamine capital (inaudible) and timing. In North America, some EV opportunities are moving forward, but overall, transportation market activity remains challenging. In consumer, conditions remained soft with activity improvement opportunities in warehouse automation and food, which included contributions from MARCO. In energy, we continue to see activity in nuclear, including incremental demand for our digital solutions and services.

Overall, our funnel remains healthy, and we expect customers to exercise caution given limited visibility on the future severity and duration of the pandemic and its economic impact. On after-sales services, revenues were down year-over-year, and this business has not yet recovered due to travel and facility entry restrictions. That said, sequentially, after-sales service revenues were up double digits compared to Q1. Q2 service bookings were up from both Q1 and Q2 last year. Despite limitations created by COVID, funnel activities for services are robust. Our regional networks and the use of digital support tools, including enhanced remote support, have increased customer confidence as travel challenges continue.

Moving forward, we're focused on upgrades and maintenance opportunities and digital services to ensure customers can operate at high levels of productivity in this environment. In the second quarter, we announced a reorganization plan to help offset an expected downturn in our transportation market (inaudible) by the pandemic. This plan includes the closure of certain transportation facilities and workforce reductions, primarily in Europe and Asia, and resulted in the sale of noncore assets. This will align our European capacity and cost structure to current and expected conditions in the transportation market. Ryan will provide further details on costs and timing.

Moving to the ABM. We have adjusted training and event methods to this new environment. Progress continues, and we have many opportunities for improvement ahead to support our growth and margin expansion plans. A few ABM highlights from the quarter. A virtual ABM boot camp held in Europe resulted in 14 ABM-related events, including 2 Kaizens. The resulting improvements in process and daily visual management helped enable the delivery of critical projects to customers on time, while implementing split shifts for the workforce to maximize safety of our employees and customers. Another division conducted an event focused on streamlining the quoting process that yielded a 10% reduction in process time while improving quality. We launched our commercial ABM, which focuses on improving our marketing and front-end processes. This included the launch of our new ATS website and multiple marketing Kaizen Events. These efforts have resulted in (inaudible) date increases in our digital marketing funnel by 47%. During (inaudible) restricted travel and trade shows, this has proven to be instrumental (inaudible) ATS in front of potential clients, and it has resulted in our upcoming ATS Automation Virtual Expo we're holding early December. The virtual trade show will (inaudible) all ATS businesses, along with 38 of our growth suppliers. Presentations will include educational webinars that will introduce participants to automation and our core capabilities. We hope you will join us for this event.

To further tie Kaizen Events to progress, a year ago, we held an event that advanced the development of our critical sustainability initiatives. Our process defined what matters to our employees, customers and shareholders in ensuring the sustainable performance of our company. As a result of that work, we published our first annual sustainability report this week. The report highlights many of the policies and practices that shape and guide our efforts, provides data on our initiatives and performance and outlines our ongoing commitment to improve. This is an exciting milestone in our sustainability journey, and I encourage you to review the report, which is available on our website. Moving forward, we will continue to report on our sustainability commitments annually.

Turning to innovation. We completed the commercial launch of Symphoni, a digital manufacturing technology that improves productivity of automated assembly processes. It builds on the rapid speed matching technology that we acquired last year from Transformix. Symphoni increases our capabilities in life sciences and other vertical markets and is a key feature in the $20 million order we have secured for automated syringe manufacturing. The development and deployment of our digital service offerings are progressing as well. These products are ideally suited to the COVID environment and will serve customers well as they optimize their production processes and look to ATS to rapidly supply their needs for service and parts.

We continue to prioritize investment in innovation. We recently completed work on our new ATS Innovation Center, a state-of-the-art home for our innovation team. This is a significant accomplishment for ATS and the team has supported the build. The innovation team is working on next-generation ideas that will enable solution to positively impact our customers. We've also been recognized for our efforts. In the second quarter, our process automation group won the Fiat Chrysler Group CapEx Supplier of the Year. I'm proud of the team's efforts to ensure customer success and to achieve this recognition. Each of these initiatives demonstrates the innovative nature of our people and our ongoing strategic focus on creating value.

Moving to M&A. Acquisitions have been and will continue to be an important element of ATS' growth. We have a good pipeline of prospects that is (inaudible) throughout the year. As I've outlined in the past, we evaluate acquisitions based on 4 criteria: the market, the strategic value of the target, how we will integrate and operate the target and how quickly we can implement the ATS business model and finally, the financial return. We have been engaged and continue to cultivate key areas of interest. Of course, timing will be variable, and our approach to deploying our balance sheet will be disciplined and strategic.

In summary, our second quarter performance demonstrates the resiliency of our workforce in delivering our commitments. Our continued strength in bookings reflects the alignment we have with our customers in providing best-in-class solutions. We have made adjustments to operate in this new climate and continue to provide value for our customers. Going forward, we have a strong business with good backlog, a healthy balance sheet and our ABM playbook that will enable us to create long-term shareholder value. We are focused on putting our business in a position to succeed through this challenging period and emerging in a stronger position.

Now I will turn the call over to Ryan. Ryan?

Thank you, Andrew, and good morning, ladies and gentlemen. Our second quarter performance featured year-over-year and sequential improvement in our order bookings. Revenues and operating margins both improved over Q1, but were lower than last year. This morning, I will discuss our Q2 results, the reorganization, including timing and [expected] impact and provide an update on our balance sheet.

Starting with operating results. Our Q2 bookings were $403 million, up 26% compared to bookings of $321 million last year. The year-over-year increase primarily reflected new orders in life sciences and consumer. Acquired companies and foreign exchange positively impacted orders by 4% and 3%, respectively. Compared to Q1, order bookings were up 24%, reflecting continued strength in life sciences and improvements in transportation, consumer and energy. Year-to-date, bookings were $728 million with a book-to-bill ratio of 1.1:1. Q2 revenues declined 2% from last year to $335.5 million. Organically, revenues decreased 7% primarily reflecting lower after-sale services activity due to travel restrictions and limitations on access to certain customer facilities. Acquired companies and foreign exchange provided a partial offset, positively impacting revenues by 2% and 3%, respectively. Sequentially, revenues increased 3.3% from Q1, primarily reflecting improved after-sales service revenues. Recall April and May service activity was impacted by the pandemic.

Our Q2 ending backlog of $956 million provides us with a solid base to mitigate some of the economic fallout of the pandemic. Of note, life sciences represented 61% of our period end order backlog. While all of our market verticals have been impacted by the pandemic, life sciences has been more resilient. Approximately $10 million of our reported order backlog relates to a previously disclosed customer project on hold.

Looking forward, our revenue conversion for Q3 is estimated to be in the 35% to 40% range of backlog. While we are more comfortable in our outlook today than we were last quarter, the resurgence of COVID in many geographies and continued uncertainty in the economy may impact the timing of customer decisions. We continue to operate with almost half of our workforce at home and the presence of extra health and safety measures in our facilities, both of which caused inefficiencies.

Moving to margins. Q2 gross margin was 27.2%, up from 26.3% last year despite lower after-sales services activity. Higher gross margin reflected the benefit of the Canadian Emergency Wage Subsidy, which positively impacted gross margins by approximately $2.7 million and improvements made in our cost structure and good program execution. Going forward, we expect continued pressure from operating inefficiencies and challenges executing after-sales services work in this environment.

Moving to SG&A. On an adjusted basis, which excludes acquisition-related amortization and restructuring charges, Q2's SG&A of $50.1 million was $2 million higher than Q2 last year. Higher SG&A reflected incremental costs from acquired companies and the translation of foreign subsidiaries costs, partially offset by a $1 million benefit from the Canadian Wage Subsidy. (inaudible) the reorganization we announced in September, this plan is intended to help mitigate the impact of (inaudible) in the transportation market due to COVID. Total restructuring costs are expected to be approximately $14 million, which is down from our initial estimate of $24 million, reflecting the recently completed sale of assets and transfer of employees from our German-based subsidiary to the buyer. $8 million was incurred in Q2, with the balance expected to be incurred in our third fiscal quarter. Of the $14 million expected cost, approximately $5 million are noncash expenses.

Second quarter stock compensation expense was $1 million, up from a $1 million recovery in Q2 last year. Our effective tax rate was 25% in the quarter, consistent with our expectations. Finance costs were up by $1.3 million in Q2, primarily due to the $250 million cash draw on our credit facility, which was repaid during the second quarter. Q2 adjusted EPS was $0.26, down from $0.29 last year. (inaudible) revenues, increased SG&A and higher stock compensation expenses accounted for the decrease.

Moving to the balance sheet. In Q2, we generated cash from operations of $20.3 million compared to $57.6 million last year. Year-to-date, we've generated cash from operations of $67.3 million, up from $17.6 million last year, primarily reflecting the timing of investments in noncash working capital. Our cash collections remain strong, reflecting the strategic relationships we have with our customers. Our noncash working capital as a percentage of revenue was 13.1% in Q2, up from 12% in Q1. Timing of deposits and program milestones caused the increase. Based on the strength of our bookings in Q2 and the payment terms on those programs, I expect that we will (inaudible) working capital as a percentage of revenues below 15% in the short term. We invested $5.7 million in CapEx and intangible assets in Q2, down from $13.2 million last year. Higher (inaudible) last year related to the expansions of certain facilities. As a reminder and as planned, our CapEx budget this fiscal year is in the range of $30 million. Year-to-date, we have spent $11.5 million.

From a (inaudible) standpoint, we finished the quarter with a net debt to adjusted EBITDA ratio of 1.3:1. We have further room to deploy capital to pursue our strategies within our normal course target leverage range of up to 2 to 2.5x. We ended the quarter with good liquidity consisting of cash of $163 million and availability on our credit facility of approximately $750 million. In the second quarter, we amended our primary credit facility and extended its maturity to August of 2022. Combined with our 2023 U.S. dollar bonds, we have adequate credit availability for the next several years.

In summary, our second quarter featured strong performance by our business despite the difficult environment. Our teams have done an excellent job in meeting customer needs while maintaining a safe working environment. The investments we have made in our operations, including innovation, capacity for our life sciences business, our services organization and training our people in ABM and continuous improvement, will serve us well as conditions normalize. The reorganization activity will improve our cost structure to manage through this environment and enable us to focus our investments towards higher return generating businesses. We have a healthy order backlog, a strong balance sheet and available liquidity that combine to provide us with a solid foundation to pursue our growth strategies.

Now we will open the call to questions from our analysts. Operator, could you please provide instructions? Thank you.

(Operator Instructions) Our first question is from Mark Neville with Scotiabank.

So first off, great quarter. Well done. If I could just start on the margin. Your gross margin is up 280 basis points quarter-over-quarter. I'm just sort of -- I guess, I'm just trying to understand how much of that is mix, whether it be life sciences or greater aftermarket work? How much is from past restructuring? I guess what I'm ultimately trying to get at here is sort of is this a good starting point for going forward? Or is there something that may cause it to step down a bit in coming quarters?

Yes. So again, Mark, I'll walk through some of the factors that have kind of impacted our Q2 margins versus Q1. So first, on the negative, the Wage Subsidy was down in the quarter, probably just under $3 million. On the positive side, we did have more services work in the quarter. So I talked a little bit last quarter and this quarter about how April and May were particularly difficult from an after-sales services standpoint. So that was a positive contributor to our Q2 margins. And then the rest was really good program management, volume and the improvements we've made to our cost structure. And if I were to quantify them, the services was about 1/3 of the increase versus Q1 and the balance would be [program] management volume and improvements to our cost structure.

Okay. So yes, I guess that -- when I think about going forward, I guess, the life sciences, 61% of your business, aftermarket keeps growing, you get more scale or you leverage -- with the higher volumes even for the coming quarter, there's no reason to think why there would be any significant step down.

Well, I mean, I'm not going to provide guidance on our margins going forward. But the factors I walked through -- so the Wage Subsidy, we will see a decrease this quarter. Services, it's still a challenging environment to execute in after-sales services. Program management, yes, I expect that's going to continue to be strong going forward.

Okay. That's fair. Andrew, can I as you a question, maybe on the restructuring? I can appreciate there's some weakness in transportation, but I guess our view is that it's cost structural and exposure to EVs is the good thing and maybe having capacity there would be a good thing. So maybe just your thoughts around -- or maybe just comments around that. I guess, a year from now, if the markets -- the automotive markets will be back and, again, EVs keep growing, is there sort of any risk that maybe you don't have enough capacity? Yes.

Yes. So Mark, (inaudible) we're saying, this is not an exit from EV, more specifically, actually, it's an alignment to what we do best at EV, which is sell the module and module to pack assembly and aligning around that. The specific division or divisions that were impacted and primarily the one in Europe was a traditional ICE business. And they had done, call it, with a couple of customers, some EV work. And when we looked at the ICE impact and looked at what was going on in Europe, we really rightsized the region for what we view as the potential for that space. And so to summarize, we don't view this as a limitation going forward. And for the relationships that we want to keep, we're going to continue to keep.

Okay. If I can just ask one last question just before getting back, just on capital allocation. Again, I'm just curious about sort of what your thoughts on the buyback with the stock being where it is. I'm not sure where it's at this morning, but stock where it is. And maybe just on -- again, on M&A, you provided some commentary, but maybe just -- maybe asking your appetite for actually doing something sort of in this environment not just cultivating.

Yes. So Mark, I'll start. We do, I mean, as you're aware, have the NCIB in place, and we've been active in employing that tool.

And that will continue.

And sorry, you said M&A? Sorry.

Yes. No, so that's the NCIB. It will continue, and it's coming up for renewal. And assuming we've got alignment with the Board, we will plan to continue that.

As far as M&A, Mark, I mentioned it in my opening comments, it is an area that we are focused on and continue to be an important element at ATS. And we have a good pipeline that has increased. Some of the interesting dynamics of the COVID pandemic is that the shift to video calls and the ability to cultivate through that has actually increased. Aligning schedules is always a challenge. And I would say that we've increased and we are -- we have a healthy funnel and an executable funnel. And so we are going to be true to our 4, which is the market, the strategic value, how we will integrate and operate and financial return. But we are absolutely aligned. And as a (inaudible) point, we view ATS' footprint as being a key enabler here. When we see an opportunity and whether it's Europe or North America or Asia, we have the ability to be on-site because we've got a footprint in the region. And it really does set us aside and allows us to really cultivate and/or assess the business. One last one, and I forgot to mention this. Additionally, Phil Whitehead, who is on our Board, has been named Chair of the Strategic Committee focused on M&A. And that's also really been helpful and aligned with where we want to drive this. And so I'm really pleased with that change, and it's a continuation of our focus and efforts.

Our next question comes from Justin Keywood with Stifel GMP.

Nice to see the resilience in the business in the quarter. I had a question on the order bookings. There was a mention of some related to -- for the fight of COVID-19. I'm just wondering how repeatable are these orders. Just in the COVID-19 area, does the funnel activity remain robust?

Yes. So I'll take this in a couple of ways, Justin First, the funnel activity is robust. We don't characterize how -- what percentage of our funnel, but it is a meaningful percentage of the life sciences funnel.

Second, it's a dynamic area because as we look at the syringe manufacturing process, this is -- this could be considered normal course and the fight against COVID. And so we view that as an area that we say, we can help regard this with these customers on whether they're increasing their output, reducing their supply chain risk, onshoring or in the fight against COVID. So this really plays the area that ATS does best. And as a reminder, our key areas are: first, our technology and innovation; second, our experience; third, our ability to execute. The project we announced early in the year that went from 40 weeks down to 14 and up and running. Just a testament to the team's engagement (inaudible). And a footprint is also a key element because customers look for support over the life of the equipment. And so we view this as an attractive area, but we also view that this area is playing to what ATS does best, and we view this as a continuation.

Absolutely understood. And then on the services revenue, it seems to be there's a few moving parts probably. There's some pressure in the revenue, but there was mention that the funnel and backlog remains robust. And I assume that the equipment has to be serviced at some point. So like just looking kind of into next year, is there going to be an inflection point where maybe that revenue starts to trend back up to the double-digit growth area? Or with the restrictions in place, does it still remain a bit unclear when that will happen?

So I'll start with just saying, restrictions do create a [challenge]. And our view is -- and I know I mentioned this on our call earlier, one of the things we realized early on in the pandemic was the inability to travel, and we launched our remote support tool, and we've got many customers that are aligned around that. And it helps them continue their process, but then also ATS to support. We view that this is a business that's going to get back on track. Timing is going to be variable. And I'm not here to call the pandemic timing. What I can tell you is (inaudible) really solid bookings quarter for this section of the business. The funnel remains healthy. And we're going to continue to overcome obstacles to support our customer base.

And maybe, Justin, just to add on to that as well, some of the service work we booked this quarter is refurb work. And that can either be done on (inaudible) it can be shipped back to our facility and done in one of our facilities, which is the case. So that's another area of the business that's not as direct -- of the services business, specifically, that's not as (inaudible) directly impacted by travel restrictions today.

(Operator Instructions) And we do have another question from Mark Neville with Scotiabank.

If I can just follow up on the aftermarket discussion -- or the after-sale service. Do you have a rough sort of estimate for us how much of that business would be parts versus remote or digital or software-based?

So I believe parts is going to be less than 25% of that number and digital is going to be something less than that as well.

And the remainder would be what?

The remainder would be on-site support, refurbishment work.

Modifications?

Yes.

Your next question is from Mac Whale with Cormack.

Just quickly on the conversion. When you look at the backlog, and I know you don't usually go into the different -- the conversion of that backlog on a segmented basis, but when you go back and look at it, there's been some change. And I'm wondering if that's sustainable in the future, like in terms of the amount of revenue that you're getting out of the backlog -- that you're getting out of consumer, for instance, and the lower level that you see in life science. I guess it's understandable given how the different sizes and how much those have changed. But I'm wondering if you could speak a little bit about the nature of the business and whether that -- there's something permanently changed here because of the nature of the orders you got?

So there's nothing permanent. I mean our backlog conversion is really driven by the specific backlog -- projects we have in backlog and the timing of those projects. So when we have larger enterprise orders, some of those can be 12, 18, even 24 months. In consumer, specifically, we do have some shorter duration projects in that backlog that we've had over the last couple of quarters. But I wouldn't say any of this is permanent. It's really just a [function] of the orders that we're executing at any given time.

Okay. Okay. So -- and I thought perhaps that the nature of some of the life sciences orders, there may have been sort of a need to expedite that, whereas maybe in some of the other work would have been -- you talked about sometimes the customer timing being pushed out in some senses. But I guess we should look at it more on a yearly basis. I know we shouldn't kind of get into each quarter. But I just was curious because it's relatively consistent up until the last -- in the last couple of quarters.

Yes. So certainly, the last couple of quarters with some of the COVID-related programs, and Andrew talked about the test kit order that was executed in 14 weeks, I mean, that's a very unusual schedule. So there has been some of that recently. But you're right. Yes, there's -- in terms of looking at a specific quarter, there's nothing from a change in business or a permanent trend that I would draw from this. It's best to look at this over the long term.

Yes. And then just a follow-up on that. Is there an implication on margin when that happens? Like do you recoup any additional cost to sort of deliver more quickly than you would normally be able to or normally scheduled to do? Does that -- do you bear more cost to that? Or do you have that through in the contract pricing?

Well, so there's no additional -- I'm not sure if I'm going to exactly answer your question here. But there's no additional costs based on the size of a project or a margin difference necessarily. If we're accelerating a project, there might be additional costs related to working 2 shifts or we're deploying additional people on it, but those would be factored [into] the bid. From an overall efficiency standpoint, the quicker we can get projects in and get them through our factory and (inaudible) customers, there's a benefit to that, of course. But from a specific project-by-project basis, it all gets factored in when we're bidding on the work.

And at times, Mac, there is areas where they'll have an early delivery (inaudible) to the programs. But it's certainly something that we would drive to and ensure we've got a (inaudible) before we would move forward in the contract.

Okay. And then just following up on the whole business model and the changes that have been made there. In this new way of operating that you've had to deal with over the last couple of quarters, do you expect a pace of like the Kaizen Events or any continuous improvement, do you expect that there may be an effect down the road of less of those -- less impact from those or less benefit from those? Or do you expect that the changes that have been made will allow you to continue at the same pace?

Yes. So obviously, I'm not going to provide future guidance here. But what I can tell you is this team has just adapted and continues to adapt to overcome obstacles. I talked a little bit about it in my opening remarks around the commercial ABM. And boy, it's just exciting times to watch how the team aligns around that, (inaudible) it drives to the key metrics. And I just -- I utilized one (inaudible) 47% of digital marketing funnel increase. And yes, it's certainly a starting point was low, but the team is very focused on execution. And so I would say it took us a little bit to understand how do virtual Kaizens and adapt. But when I say a little bit, we overcame those obstacles very quickly and aligned around the 2 areas of the (inaudible). And we're now holding boot camps. We're now holding Kaizen Events. We're now holding global events where we can really maximize our performance.

And I guess following on to that, the potential then is that even with -- even if things were to go back to normal, there's probably a lot of things that you'll probably retain and might actually be -- allow you to be even more efficient in the future. Is that -- do you feel the same way?

I do. I do. And I know I'm pointing to this again, but the commercial ABM piece is a key area. And our sales team is -- they do a (inaudible) selling ATS and ensuring that the value we bring to customers is aligned to their needs, and this is only going to help them. And so we've got a great team and they continue to focus on the (inaudible).

Your next question is from Maxim Sytchev with National Bank.

Andrew, now that we're getting close to 2 years on Comecer, I was wondering if you don't mind maybe sort of sharing some of the takeaways from that transaction. I don't know if you're willing to discuss some financial metrics and maybe provide a bit of an update regarding the radiopharma market in general, if it's possible.

Yes, I'll start, and then I'll certainly turn it over to Ryan to add here. So a couple of things. And Max, one of the [things] we've grown very comfortable on is our ability to integrate. And it was one of the bigger acquisitions since I've been on (inaudible) an alignment to integration, ensuring that we can maximize the value with Comecer. And as a reminder, the thesis going in, the reason why we really love this business is not only the radiopharmaceutical space, but then also (inaudible) to work with ATS on joint projects. And what I can tell you is they're at or above expectations. And when you look at the radiopharma market, it continues to have attractive aspects.

One of the lessons learned, I would say, is we didn't really explain the market as well as we should around cancer treatment, cancer identification and the growth of isotopes that impact that space and really align -- so people could understand the way that Comecer really provides value into the space around isotopes, around identification and then ultimately, treatment. And they continue to be the leader, and they're growing at a very fast pace within that area. But then additionally, and this would be my last point before I turn it over to Ryan, is a [line] around this aseptic filling. And (inaudible) announced the joint win with ATS. We absolutely don't have the ability to announce the customer. It was a very big win, and we view that there's follow-on work. And I've been in meetings with customers on these follow-on opportunities that really aligns to how we wanted to move with the business. So all in all, we're very pleased with the progress, very pleased with the performance. And it really has built our confidence. And a lot of lessons learned through the integration, but really taking those into future acquisitions. Ryan, anything you would add to my update?

I'm not going to get into too many specifics, but their bookings have grown double digits, particularly on strength in North America, which was a large part of our thesis when we bought the business. And their margins have expanded as well, and it's been a combination of operational efficiencies, good progress on supply chain. And this team has really, really adopted in (inaudible) the ATS business model and done a really good job improving the financial performance over the last 18 months.

Okay. That's very helpful. And great. I mean, obviously, the next one to ask it. And maybe, Andrew, just closing the loop around M&A, any color? Because I think the last time we spoke, there was a bit of a gap between what the sellers are willing to accept in terms of multiples or what forward EBITDA they feel comfortable with. Where is that discussion point now? Are we getting closer to sort of meeting somewhere in the middle? Or how would you characterize these conversations?

I mean, look, our funnel is healthy here, and we've got a lot of conversations going on. And what I can tell you is multiples for good assets continue to be at a decent level. And what I can state is that we've got the 4 variables that we align around and ensuring that the financial return is one of them. And our team is -- Max, when I first came on, we were building out our team at corporate to really enable and drive M&A and engage and go through the process, and we've got KPIs around this. Further that, we've really started to align the business units to cultivate. And those are some of the best cultivators because they get and engage with businesses in areas that we want to target and markets we want to target. And so I would view that as a strength for us moving forward, and it's got to be something that we continue to leverage as we build out this plan.

(Operator Instructions) Your next question is from Justin Keywood with Stifel GMP.

I just had a question of clarification. The reduced restructuring charge from $25 million to $14 million, does that include any cash in the door from the divestiture? Or is that accounted separately?

That includes the cash proceeds from the assets we sold, yes.

Okay. And that number, is that -- do you anticipate any other changes? Or that's pretty sound as it is?

At this time, I don't anticipate any changes to that number.

Mr. Hider, there are no further questions at this time. Please continue.

Thanks, operator. I look forward to reporting our Q3 results in February. But I want to take a moment to say that I can't be more proud of the great work the ATS team is doing, and it certainly shows in our results. Thank you for joining us today. Stay safe, and goodbye for now.

This concludes today's conference call. You may now disconnect.