Hello, everybody. Good afternoon. Welcome to Jefferies 2024 Investors Conference. My name is Augustine, and it's my pleasure to introduce you Andrew Hider, here for ATS. Thank you very much. Andrew, the stage is yours. Go for it.
Thank you. Good afternoon, everyone. I'm gonna walk through a bit about ATS Corporation, and for those of you newer to the story, walk through what we do, how we operate, the markets we serve, and really an update on our journey and where we're taking the corporation. So to start, we're a decentralized corporation, all aligned with technology and solutions for the markets we serve. The simple way to think about our business is if you're in the injector space or you're in the pharmaceutical space, and you come out with a new product, and this product here is an injectable device that treats something, it treats cancer. You just got FDA approval. So you built a thousand prototypes, and now you need to go from a thousand prototypes to a thousand a minute. Oh, and your demand has gone through the roof.
You're 70% gross margin, and because it's a direct injectable, you're held accountable to the FDA, and so if you have a defect or contamination, you have a potential market cap hit. You come to ATS, and we design the entire process around building this product. We know the ins and outs of how to operate, how to meet your qualification and criteria, and we've acquired companies that do the filling, that do the movement, that do the vision. So we build the product, or we build the solution that proves out the product. We then prove it, and then rebuild it at your site, and we serve and support it over the life of the equipment. So we support many of our customers on their key initiatives and their key drive into markets like life sciences, regulated food, nuclear, EV space, and consumer products.
Really quick at a glance, roughly around a CAD 3.3 billion business. Our five-year CAGR with acquisition was a little over 19%. Our adjusted EBITDA, a little over 15%. As importantly, our focus has been around driving profitable growth. As you can see, we're almost 24% on our growth and our adjusted EBITDA. We're constantly driven around markets and technologies we serve within those spaces. That higher value creation for our customer base. We operate in over 65 facilities, 85 offices. We do business in over 20 countries, and we're greater than 7,000 people. You'll hear me talk more and more about this number, but as a start, as a framework, we're roughly between our businesses, between 25% and 35% recurring revenue.
You're gonna see us drive and continue to focus on expanding that to really support the markets we serve. Our largest market, and I'll walk through a little bit about portfolio management here in a little bit. Life sciences. We continue to expand, evolve, really drive into key technologies, key niches that support this market. We support the EV shift. We're also involved in energy. We're in multiple areas of energy, mostly nuclear. Within nuclear, we do refurbishment, which is decommissioning and recommissioning for CANDU reactors. We're in small modular reactors, and we also do decommissioning. We're in food and beverage, and lastly, we're in consumer products. What do we do? We talked about that custom integration. That used to be the biggest piece of our business.
That's where we take a concept, we take a product, we determine how do we take it from a prototype to mass production, making the equipment, making the solution. We've also invested and continued to grow our products and standard equipment business. This was intentional. And as we look at our shift and our focus on strategic markets and solutions, we've gone from a highly integrated, customized business to now that's a little over 40%, and standard machine, standard products is now roughly 30%. And lastly, as I mentioned in the beginning, we serve and support our equipment over the life of the equipment. It's not good enough for our customers anymore to get the product the initial time. They wanna know how do they continue to produce the product and grow their expansion, and they expect ATS to be with them in that journey.
One of the areas we talk often about is we are a key player in the GLP-1 launch, the auto-injector space. Our customers look to us not only in that first phase of the equipment, which is buying and building out capability, but they wanna know, "Can you continue to help me ramp? Can you continue to help me support so that we don't have down equipment, that we can ensure that we meet the market demands and our customer demands?" So our business has evolved. So our customers look to us, they look to us for efficiency, for output, looking at their cost of ownership, as well as they're now assessing, can we help them with their ESG targets?
Because we've expanded into digital, we have the ability to understand on a per part level what the impact is, as well as how they can reduce their emissions, and lastly, as we talk about time to market, huge market demand, high margin profile. The more we can help them drive that, and the faster we can go with a high-quality product, which the quicker time they can monetize their solution. ATS is one of the key players around that area, so I talk about this because we're decentralized, but we all align with our central operating system. It's called our ABM, our ATS Business Model. I've been here now little over seven years. It's a constant drive for continuous improvement.
It starts with people, having the best team and winning as a team, and then it's part of process, being formal and disciplined, knowing when we're off, what do we do about it? How do we understand what caused us to be off, and how do we course-correct? And lastly, performance. I like to say we're all ex-athletes. We like to measure our performance. We like to know, are we improving, red or green? Are you getting better or not? And if not, what are you driving in your business to understand and improve? And our teams have aligned around this, and through that, we've created now our flywheel within the organization, talking about strategic layouts, where we're going to invest, and also where we're going to pull back.
That leads to an operating plan, that leads to our goal deployment, where we're gonna set stretch targets, to then how we operate the business on a continuous basis. So I like to always talk about it's common sense vigorously applied. We like to understand what matters most, and then we hammer it and hammer it and hammer it again to improve it. So our teams are aligned around that. They understand how we think. To give you a context, our global turnover is less than 5%. Our engagement scores are high because it's an empowerment tool. It allows our leaders to understand and drive impact. And it starts with the value drivers. Eight, not 10, not seven, not 16, eight. The first four are financial: bookings, revenue, margin expansion, and working capital.
'Cause we know as we go to any business, and they're gonna have annual targets that go monthly and daily, where possible. We know where every business sits based on their performance to their annualized targets, but it's not just about financial, 'cause that's the end result. To get there on a continuous basis, you need to also drive that improvement for your customer. When we talk to our customers, they say two things: "Give me my product on time, at the highest level of quality. We wanna buy more of it," so we measure and hold ourselves accountable to on-time delivery and quality, to improve on an ongoing basis, and lastly, and I'd say one of the more strategic areas, internal fill rate, our employee base. Why is internal fill rate so important to us? Because we're an acquisition-based organization. We deploy capital.
We're a growth-oriented business, so we have to train and develop our leaders to take on the challenges of today and tomorrow. When we get the best leaders, we don't wanna lose them. So we measure our global turnover. So I know every division, every business, every site on a global scale, where we sit. So it's a repeatable model that focuses on key metrics, so we know are we winning or losing, and how do we improve? These are all tied to our ROIC. Our total target of ROIC is to be greater than our weighted cost of capital. We can understand, are we improving? Are we driving results? Do we need to course-correct when we make an acquisition? Are we meeting our white paper? Are we improving the business to drive the tangible results we expect?
Are we achieving the set out targets within the organization? And it's changed and evolved. We've done, with the latest one this week, I think over 25 acquisitions in the last 5 years. Now, it started, and we learn from every acquisition. None of them goes perfect, by the way, but you learn from everyone, and we have our playbook wrapped around integration. What do you do on day 1? What do you do on day 90? We walk in with our model, and people often ask me, "Andrew, is it easier, harder? What's harder to launch a continuous improvement program?" Oftentimes easier, 'cause an acquisition wants to learn. The team is thirsty to figure out how to improve. So we train, we call it an ABM boot camp.
We train the leaders of the organization how to run Kaizen events, how to look at their inventory in a different way, how to understand their customers and drive the metrics of their customers back into the business. Because we're a CAD 3 billion organization, we also have supply chain leverage. One of the earliest things we do, 'cause we know what their material spend is, we bring that in, and we apply that to that business the first week. 'Cause we know if they're buying a million of these, and we buy 10 million, our discount rate's probably a little more. So we can get pocket margin very quickly from each business. That doesn't mean it's easy, but it's a repeatable model, and it's our playbook around how do we identify, how do we build out, and how do we improve? So we've shifted the business.
I walked through, if you see all the way on the left, that big blue is integration. Big project base, and we generally call that CapEx. When we looked at the CapEx, we said, "Okay, there's two strategic areas of pure focus for our organization." One is markets. Understand more resilient, stronger markets. Number two, how do we wanna serve those markets and make sure as we identify, we grow and continue to grow within those spaces? So we need to balance our CapEx with the OpEx spend. So we intentionally drove services, we intentionally drove service, digital. We also acquired more and more IP and technology in the product set. To where we are today, call it 47% is integration. Still a large piece of our business, still growing.
We've grown our products, we've grown our systems, our standard systems, and we've also grown our services and digital capability. When we look at any acquisition, we look at under four criteria. First, the markets, and we go very deep on markets. We wanna understand where that business sits, what's its competitive advantage, what IP they have wrapped around. We just, we just announced an acquisition, Heidolph. This great example of a business that they're in the lab space for life sciences. We've been cultivating them for almost three years. Became available in a moment of time, and we could move very quickly 'cause we knew the market, we knew the space, we knew the competitors, and we knew what the customers felt about this business. So then it goes strategic value. Where does this fit? Is this an expansion, technology, services, a geographic?
We then look at the management team, the operational fit. How quickly can we launch the ABM? Do we need to replace the leadership team back to that internal fill rate? And one of the areas we also know is if we buy from a founder, usually the founder is gonna exit stage left. They get a big check, and they decide that they might not wanna work anymore. We have to have a bench ready to go as we integrate the business. And lastly, the financial return. Highest level, ROIC. Stated target, double digit within five years. Smaller acquisitions, we usually do it in less than three. We're also looking at things like margin accretion, recurring revenue. How do we help them expand their penetration? How do we drive the business? And we show some of the more recent acquisitions. One is Paxiom, which is on the food space.
They do primary and secondary packaging. Avidity, which got us into biopharma water processing, as well as SP. Lyophilization, really driving in the lab space, identifying solutions that support the customer base, and you'll see many others. If you look at the track record, the majority of our acquisitions, life sciences, food safety, and services, and digital. We continue to identify, build our capability, and drive for tangible results. Elements of our strategy. If you join my team, as a leader, you get two books. The first book is The Outsiders. The reason why you get that book is that I want you to know how we think about capital allocation, how we're gonna assess the business on an ongoing basis around investment to return, and I raise that because the greatest return to our shareholders is internal investment, and it aligns with innovation.
Utilizing innovation to drive expansion, understanding your customers, and build it into your capability. I mentioned the discussion around this GLP-1 launch and how we're big in the auto-injector space. One of the reasons why it's a key area for us is we launched a solution called Symphony. Effectively, what it allows you to do is you can build a product while it's in motion. And why that matters to customers, it's up to double the output and half the footprint. So when speed and output matters, which it does, and footprint matters, we have a core advantage. That was innovation in action. That's a big position. We look at every business, every alignment, to ensure that we're driving innovation for tangible results. Number two, digital growth, and we bring this as a whole basis, but it's not just about a dashboard anymore.
It's about how do we drive aftermarket digital solutions? How do we utilize AI for tangible impact? Because AI is a tool that doesn't drive impact, it's just a tool. We've launched it so we can identify defects, pattern recognition, to improve your output, to reduce your cost structure. We've acquired, we've built, and we've launched solutions, so we stay close with our customers. A bit of a mantra, own the floor. Because we own the automation, we know the integration. We know what goes into building this product. We can take that digital insight and drive process improvements. Allows us to stay close for a longer period of time and create revenue opportunities over a much longer period of time. Portfolio management, and I talked a bit about this, our shift to regulated spaces, our shift to focus on what we'd call more resilient markets.
Lastly, margin improvement. Every business has a target. Doesn't matter if you're at, above, or below the corporate average, you have a target to expand. You drive that through efficiencies, through Kaizen events, through ensuring that you're increasing your value, not only internally, but also externally. So we've launched, we've built out, and we've continued to grow. ABM has become the foundation of our organization. It's our culture, it's our DNA. When our teams launch their goal deployment, when they're off, they're challenging on, "How do we get back on? How do we drive the business to be more successful in the markets we serve?" And as you can see by the performance, we're never satisfied. We like to say in Canadian-based business, if you win the Stanley Cup, next year we wanna win it with more points on the board.
We wanna constantly always drive to make tomorrow better than today. A little bit about our leverage, and I won't go into a lot on here. We try to be between two and three times. We look to many avenues on how we would utilize to make an acquisition, whether it's equity, debt financing, and we always look at multiple areas on how we're gonna deploy capital. First and foremost, internal investment. Second, M&A. Third, ,we do share buyback when it's opportunistic. Obviously, then there's debt repayment. We don't pay a dividend. So the flywheel's there. We utilize our capital to deploy it, then drive improvement, and we take that improvement to then redeploy the capital, and it's that constant push around how do we look for, identify, and build out strong relationships in the markets we wanna to expand in and to grow into?
And our teams are aligned around the expectations on return. Growth, margin expansion, and free cash flow generation. So some takeaways before I open it up to questions, and I wanted to leave a few minutes for questions. We're a strategic partner for our customers. They look to ATS to help them support and get their product to market. We're constantly looking at that evolution of our ability to have higher value within that value chain. Niche capabilities that are viewed as differentiators. Strong execution. Team continues to expand. That, that drive to always make tomorrow better than today. Performance and innovation, not just talking about it, but measuring tangible impact. Understanding when it's off, how do you course correct? Fail, fail fast, pivot. Improvement and growth, setting the bar higher every year, regardless of how we perform prior year.
Being in markets that enable and allow us to drive and continue to drive strong performance. With that, thank you so much for listening. I open it up to questions. Aha! So two books. First one is The Outsiders, second book is Extreme Ownership. And the reason why you get the second book, I'm a believer in, first, no excuses leadership. Or no excuses, if you own it or you don't, you still own it, and being a servant leader. Understanding we as leaders, our mission is to remove the obstacles. I'm overhead, I'm cost. I travel a lot to our divisions. My whole mission is to make sure we help them get better. What are the questions? Benjamin? Yeah, I better be careful when I remember your name, Benjamin.
Even though I took it off. Just any views on sort of what inning we're at on GLP-1? Obviously, you benefit pretty early in the life cycle of a drug, but is this sort of just the beginning, or have you already booked a lot of the new factories already?
To give you context, auto-injector supports the GLP-1 space. We've been in the auto-injector market for twenty years, EpiPen to where it is today. It's not new to us. We take that technology, that capability to support this market. If you look at the market, our view, this is another up to five years plus. We offer our solution set for the expansion of capacity and support of capacity. You're gonna see a little bit of cycle within it, but we do view this as a growth driver for ATS and supporting the growth drivers in the market. You guys can do your own assessment, but the obesity, the obesity %, as well as the launch of drugs and solutions, really enable that potential for ATS over the long haul.
I get asked a lot of questions around the pill form. There's, there's a lot of debate on this. Our view is this market will be with us for a while.
So we've not met before, so-
Yeah, I was gonna say, and you're hiding your name or else I... No.
There's probably people in the audience understand this, but taking, for example, GLP-1s and auto-injectors as a case, it's not entirely clear to me from the presentation as to sort of how you make money. It doesn't strike me that you're, you know, necessarily holding manufacturing IP. You know, your customer is bringing that to you, it seems, and then you're executing, is my understanding, executing in their premises, it sounds like, you know, the ability for them to then produce the product they've designed. But take GLP as an example. How do you generate revenues if Eli and Novo and Novartis sell another, you know, injectable pen, how does the revenue flow to ATS?
Great, and thank you for letting me clear that up then. First and foremost, they would look at their production process and then say, "We need to produce a hundred thousand, a million," whatever the number is. They'd come to ATS and say, "We need this amount of machines." They would place an order, and we would work with them on the design to have the machine produce this product. We would then build out that capability, and we do have IP, and I talked a little bit about the Symphony ability around twice the output and half the footprint, as well as we have a vision capability that utilizes our software to minimize defects within the process. So we would own all the process area. We don't actually own the space, whether it's the drug or the auto-injector itself.
We make all the equipment that makes the product, and we would get our first and foremost, our revenue from building that machine, and then we would have service and support and digital over the life of the equipment. So we would get that on an ongoing basis.
These are your machines, but you're not putting automation software on top of?
These are our machines, this is our software, this is our capability, our IP. We also utilize something in there, and I know I'm getting a little more deep. It's called the SuperTrak, which is a linear motion, which allows us to move it at a much faster pace as well. So when they come to ATS, what they're looking for, 'cause ultimately they want a quality product. And if they could push button, get banana, they would. We wanna be the ability to make that for them. And that's what we do, and we do it very systematically, and we measure our performance to that customer on that aspect. And then we have oftentimes ongoing contracts from a service and digital perspective, spare parts management, and new solutions that we have over the life of the equipment.
Additional question of how to dealings or-
Where we're different, and people, we also do the integration, and there are others that aren't as involved in integration. We view that as a key enabler for us. Answer your question?