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Good morning, ladies and gentlemen. Welcome to the ATS Automation Fourth Quarter Conference Call. I would like to remind you that this call is being recorded on Thursday, May 17, 2018, at 10:00 a.m. Eastern Time. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] I'd now like to turn the call over to Stewart McCuaig, Vice President, General Counsel of ATS.
Thanks, operator, and good morning, everyone. 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.
Thank you, Stewart. Good morning, ladies and gentlemen, and thank you for joining us. This morning, I'm going to speak to you about our Q4 performance and outlook. But first, I'm going to provide some comments on our full year performance.I joined ATS a little over a year ago, with a commitment to our board and shareholders to delve deeply into our business, assess areas of strength and where we can improve, set strategic priorities and implement new processes with the goal of taking ATS' performance to the next level.We have made progress. We completed a thorough strategic review of our operations, technologies, customers and assessment of our markets. We have deployed the ATS Business Model, or ABM, across the organization and we've added a new -- a number of new significant customer relationships and continue to earn repeat business both with new and long-term customers. In our assessment, we evaluated both the markets and the value we bring. This included a deep dive to look at how our capabilities and technologies align with our customers' needs in each of the markets and submarkets where we play. As a result, we believe that we are well positioned in key attractive markets. Further, we have aligned our operations to drive growth and enable our strategies in those markets.Through the ABM, we have realized a number of successes, critical is that these are process-driven changes, implemented by our people in order to realize improved performance. The ABM is not about quick fixes, it's about the way we do things every day.Importantly, we have begun to change the culture to drive a continuous improvement mindset, where regardless of our performance, our people are focused on making tomorrow better than today. While making these changes, we continue to run the business for the benefit of our customers and shareholders.With the backdrop of a strengthening macroeconomic environment and strong characteristics in our current markets, ATS achieved record annual order bookings of $1.2 billion, record order backlog of a -- $746 million, 10% annual revenue growth and adjusted EBIT margin improvement of 90 basis points. I am pleased with what our team has accomplished so far, and I'm excited about the opportunities for growth and improvement that lie ahead.Now I will speak about our fourth quarter. Starting with our Q4 financial value drivers, bookings were $348 million, up 12% over Q3 and 8% over Q4 last year. Q4 bookings were strong in consumer products and life sciences, both of which included significant scope expansion orders from the new customers that I spoke about during our third quarter update.As a reminder, in consumer products, we have been engaged to produce a warehousing automation application for a new ATS customer, which they plan to deploy across their extensive global network of order fulfillment centers. And in life sciences, we are working to develop a critical manufacturing solution for an innovative wearable product used in the treatment of diabetes.In transportation, bookings were up over Q3 and we remain positive on our funnel in EV where the market has been strong and is growing. Included in our fourth quarter bookings was an EV program for a new European-based hybrid transmission assembly line. The energy market remains strong with new programs from existing customers in both solar and nuclear markets. Our goal is to drive year-over-year bookings growth despite some variability on a quarterly basis due to our project-based business.As I noted, for the year, we achieved order bookings of $1.2 billion, a 4% increase over last year. Q4 revenues were $298 million, up 12% over last year and up 7% over Q3. For the year, revenues were $1.1 billion. Our Q4 adjusted EBIT margin was 11%, up over both Q3 and Q4 last year.As we've previously announced, we initiated a restructuring plan that was designed to improve our cost structure, enhance capacity utilization at other facilities that will absorb work, realign resources to areas of the business where we expect to grow and improve the effectiveness of our management. The restructuring is well underway, and I expect it will be materially complete in the first quarter of fiscal 2019.Moving to our outlook. We ended the quarter with record order backlog of $746 million, up 10% over last year. Looking at our funnel, life sciences continues to be strong, and we are seeing good opportunities in both medical devices and pharmaceuticals. This is an attractive market with solid industry fundamentals, positive dynamics and opportunities to utilize ATS technology innovations.EV activity is strong and represents the majority of our transportation funnel. As the market continues to move investment from traditional propulsion to EV and fuel cell platforms, we are well positioned with demonstrated experience and a track record of delivering value. EV represents a considerable changeover for the transportation industry, which I expect will result in increased market activity. That said, our customers are being thorough and cautious in making their capital investment decisions.Our niche positions in both energy and consumer have continued to positively contribute to our business, and we have opportunities for which we are uniquely qualified and positioned. On after-sales services, our positive momentum continued as both bookings and revenues were up over Q3 and Q4 last year. This is an area where we can provide significant value and our customers recognize this. We are making progress, but we have more work to do to make this a meaningful part of the business.Moving to the development of our ATS Business Model. We continued to make progress in the fourth quarter. As a reminder, the ABM is our playbook. It is a set of tools that enable us to pursue our strategy, evolve, drive continuous improvement, outpace the markets we choose to participate in and drive sustainable, long-term value for our shareholders.In Q4, we kicked off our ABM boot camps, which are 3-day workshops that bring together leaders from across our global operations to participate in training. This allows us to advance deployment of the ABM through trained champions in all of our divisions. In addition, we have launched 1-point lessons, which cover a specific topic in a weekly global training session. These 1-point lessons were kicked off in Q4 and participants joined globally.Our team has continued to drive process improvements, completing over 10 Kaizen events in Q4. For example, one of our service groups has implemented on-time delivery improvements by over 50% through problem-solving and daily management processes. We have continued to drive improvements in our commercial execution such as the development of KPIs for our contract process to ensure we are maximizing efficiency and throughput.Overall, the adoption of our ABM across the business is very encouraging, and we have many opportunities ahead for continued improvement. Looking forward, we're launching new tools to improve our business in areas such as goal deployment, strategic planning and leadership. We are at the beginning of our journey with the ABM. As we develop new tools and drive training and adoption of current tools, I expect the ABM will serve us well in driving growth and margin expansion in our business over the long term.As we move forward into 2019, we will continue to execute our value creation strategy, build, grow and expand. Earlier in my remarks, I noted some of the areas that we had made progress in 2018. Going forward, I am mindful of the challenges we have ahead in the areas we'll focus on improving.For example, we need to accelerate the rate of internal innovation. While we have moved forward on our digital capabilities, IoT and other key product innovations such as co-bot, vision systems and linear movement systems, we have more work to do to drive this important aspect of our business. As well, we have more to do in talent development. In order to achieve our growth plans, developing our people to take on the challenges of today and tomorrow will be critical in achieving our goals.In summary, fiscal 2018 and Q4 were both periods of financial growth and improvement. Our balance sheet is strong and we are well positioned to pursue our strategies going forward. Our team is aligned to drive long-term shareholder value through our ABM by engaging and developing our people to the application of disciplined and robust processes with the goal of driving continuous and sustainable performance improvements. 2018 has been a foundational year for ATS. I am pleased with our progress this year, and I'm excited about our future.Now I will turn the call over to Maria.
Thank you, Andrew. Q4 performance demonstrated continued year-over-year and sequential improvement in our key financial value drivers, bookings, revenues and adjusted earnings from operations margin, while noncash working capital as a percentage of revenue remained low. This morning, I will discuss these results and our balance sheet. I'll start with operating results.Q4 bookings of $348 million were up 8% over last year's bookings of $322 million. Approximately half of this growth was organic, and the other half was due to foreign exchange rate translation as bookings earned by our foreign operations, primarily in Europe, were translated at higher rates due to the weakening of the Canadian dollar against the euro.For the year, bookings of $1.182 billion were 4% higher than prior year bookings of $1.134 billion. We generated $298 million of revenues in Q4, a 12% increase over last year's Q4 revenues of $266 million and a 7% sequential increase over Q3 revenues of $278 million.Year-over-year growth was primarily due to our order backlog of $689 million at the start of Q4, along with strong bookings in the current quarter. Compared to last year, foreign exchange translation accounted for approximately 3% of the growth while 9% was organic.Relative to our expectations, higher Q4 revenues were due to several factors. Certain programs were accelerated. We received certain third-party materials in the quarter, which was earlier than anticipated, and we generated higher-than-forecasted bookings within the fourth quarter itself.As well, foreign exchange rate movements resulted in revenues from our foreign operations being translated at higher rates due to the weakening of the Canadian dollar. It is important to note that although foreign exchange translation impacts the revenues we recognize from period-to-period as we experienced in our Q4 results, our overall margins are not materially impacted by foreign exchange rate changes on a quarter-to-quarter basis.We ended the quarter with $746 million of order backlog, a 10% increase over last year. Based on the composition of our backlog at the end of the quarter and our estimates of in-quarter orders, which may be booked and converted to revenue in the same quarter, Q1 fiscal '19 revenues are estimated to be at the higher end of the 35% to 40% range of backlog.For the year, revenues of $1.115 billion were up 10% over last year. This was primarily the result of higher order backlog entering the year and higher bookings generated during the year. We improved our Q4 gross margin to 26.3% compared to 26% in Q3 and 24.1% in Q4 last year.Fiscal '18 gross margin was 25.8%, up 100 basis points over last year. The increase in gross margins in both periods was due to better program execution and greater operational utilization, supported by the ongoing implementation of the ABM and our focus on continuous improvement. As you know, we are advancing our ABM, and it will provide incremental benefits to the business over the long term.Moving to SG&A. Excluding restructuring and acquisition-related amortization expenses in both periods, Q4's SG&A was $42.4 million, approximately $5 million higher than Q4 last year. SG&A has increased over prior year due primarily to increased employee costs and sales-related expenses.Excluding acquisition-related intangibles and nonrecurring expenses, we expect SG&A to be in a similar range going forward. Compared to Q3, SG&A increased by approximately $1.7 million due primarily to employee incentive costs. Our higher gross margins more than offset increased SG&A expenses.Q4 adjusted earnings from operations of $32.8 million were 11% of revenue, up from $24.5 million or 9.2% last year, and up from $29.3 million or 10.6% of revenue in Q3. We are pleased with the continued improvement in our margins, and our goal is to drive further improvements through the deployment of our ABM, capacity utilization, supply chain and program management. For the year, adjusted earnings of $117.3 million or 10.5% of revenue have increased by 21% over fiscal 2017 when we generated adjusted earnings of $97.1 million or 9.6% of revenue.As with bookings and revenues, our goal is to deliver year-over-year improvements in operating margin. However, the nature of our project-based business can cause variability in our margins. Variables such as revenue levels, mix of costs, program cycle and the mix of program terms are examples of what can cause quarter-over-quarter variability.On restructuring, we recognized $11.2 million of expenses in the year. We expect this restructuring to have a payback of approximately 18 to 24 months following completion, which is expected in the first quarter of fiscal 2019.Moving to the balance sheet. Our noncash working capital as a percentage of revenue remained low in Q4 at 8.3%. This compares to 8.3% in Q3 and 8% at the end of Q4 last year. We do expect an increase going forward, although our target is to be below 15%. In Q4, cash from operations was $19.9 million compared to $80.7 million last year. Last year's metric included a number of significant milestone payments that drove unusually high cash from operations.For the year, we generated cash from operations of $59.7 million compared to $127.9 million in the prior year due to increased investment in noncash operating working capital. Although we have quarter-over-quarter variability in our cash generation due to the size of our programs and significant milestone payments, we have produced good cash flows as demonstrated by our results.We finished the quarter at a net cash position of $12 million, an improvement from prior year's net debt of $42 million. We continue to have strong liquidity with cash on hand of $330 million and a credit facility, of which approximately $656 million is unused.Our fourth quarter earnings per share was $0.16, up from $0.08 in Q4 last year. On an adjusted earnings per share basis, we generated $0.22 in Q4, up 47% from $0.15 last year. The increase reflected higher revenues and improved operating margins.For the year, we generated earnings per share of $0.50 compared to $0.38 last year. On an adjusted earnings-per-share basis, we generated $0.74 this year, up 30% from $0.57 in fiscal 2017. Improved earnings per share reflected higher revenues and gross margins, partially offset by increased SG&A.Our effective tax rate was 25% in the quarter and 23% for the year. Going forward, our effective tax rate is expected to continue to be in the range of 25% of pretax earnings. As I noted last quarter, with respect to the recently announced U.S. tax reform, we do not expect a material impact.In summary, we finished fiscal 2018 with better performance in all of our financial value drivers. Going forward, we have record order backlog, a strong balance sheet and with the ongoing advancement of the ABM, a clear focus and solid foundation to pursue growth through our strategic framework.Now we'd like to open the call to your questions. Operator, could you please provide instructions to our listeners? Thank you.
[Operator Instructions] Your first question comes from the line of Mark Neville with Scotiabank.
I just want to follow up on one of your comments. Some of the bookings you mentioned, scope expansion for some orders you had won in the past quarter, particularly the one for the global distribution business. Can you maybe just remind us the size of the original order and maybe the size of the scope expansion?
Sure. So the original order, it was caught around the $25 million mark, and the scope expansion on that is roughly half, and so as a reminder, scope expansion for us was they order as they expand up their capacity or they're viewing the capacity expansion in their business. Again, as a reminder, you know, but we have to continue to execute to deliver that value to the customer.
All right, so the expansion would be in the same facility as the original?
No, it's actually different facilities.
Okay. Do you have some sort of idea that you can share with us, potentially the -- how big this could be? I mean, is this 75% of how big it could be or 10%? I mean, just ballparking it, just a rough idea for us.
So Mark, when you -- the global automation, Mark, roughly, call it, $200 billion, growing at very low rates. You segment it down into this space, and it's a significant growth area. I will state, this application is a niche application, and we are testing it with this customer that has very, very sizable expansion plans. That said, it's a niche application and we need to help them fulfill this value as they deliver to their customers. So pretty early to tell, but the growth rate of this market, in general, is generally very positive over the next 5 to 10 years.
Okay. And then just, I guess, just generally in terms of bookings. It's been quite strong in the past few quarters, and I assume the macro is helping. But just curious, how significant -- or how much change have you made in terms of how you're approaching business or how you're bidding just to help sort of expand the bookings in the past few quarters because it's been a sizable step-up? I'm just trying to get a feel for run rates or what's happening in the business.
Sure. So a couple of items, and I mentioned this in the early discussion, the economic environment is positive and the markets we participate in, generally look, for the next, call it, 5 to 10 years, are in a positive trend. That said, we're constantly driving the ABM within our commercial execution. And what I mean by that is we look at both leading and lagging indicators in the process. And it's aligning the total value story of ATS to the needs of the customers, and it's around identification, it's around execution and it's around delivering their value. And just as an example, both with the warehouse automation project and the wearable device we talked about, both of those were executed and won. And as we deliver the value to the customer, we would expect to have repeat orders from them.
And just a -- and sorry, just another thing that I would add. I don't know that it's change in approach but we know that in Q4, our bookings, our transportation orders increased and we talked about this shift in the market from traditional ICE -- or ICE engines to EV. And in the quarter, we did get an order for EV and that's approximately $20 million. So that help bumped up -- bump up our Q4 orders. So that would be more of a market dynamic versus a change in our approach.
Yes, sure. That helps. And maybe another for you, Maria. Just on the SG&A, the $42.5 million this quarter you said roughly, that's -- sort of that's what we should be thinking going forward. But just on the restructuring, I guess, first question will there be more expense next quarter? And when we think about the SG&A, whatever credit we want to give you for this year and next, that sort of helps the SG&A line, is that right?
Yes. So if I understand correctly, you're asking, will the SG&A be impacted or reduced because of the restructuring? Is that what you're asking?
Yes. I guess, first, is there additional restructuring to be spent or additional spend in Q1 because I think there's still some restructuring going on. And then when we think about the $11 million or $12 million that you spent in the payback, most of that flows through G&A?
So the way I would answer that, a couple of parts. The $11 million that we've called out on restructuring, we've accrued all of that. And from a cash perspective, that will -- some of that will be going out in Q1. We've said that we expect to be substantially complete towards the end of Q1. So as of right now and in Q1, we still have some of those costs, incremental cost going through our financials. As far as where that impact is, it's across the board. So we talked about the closure of a few facilities and some headcount reductions. And I'd estimate that about 2/3 of those are in cost of sales and 1/3 are in SG&A. But then we'd have to offset that by some other inclusions that we've made in SG&A throughout the year or towards the latter half of the year, which are impacting our SG&A going forward. And for example, we've talked about further investment in innovation, supply chain services, a little bit more in M&A, and those are SG&A areas where we've seen some increase, and we saw that in Q4 also.
Okay. And then the 2/3 in the COGS, is that helping or did it help at all with the gross margin in Q4? Or is it sort of Q2 and beyond?
That didn't help Q4. So that -- yes, so that would be Q2 and beyond.
Your next question comes from Cherilyn Radbourne with TD Securities.
And congratulations on that strong finish to the year. I wonder, Andrew if you could talk a little bit more about your progress during the year in laying a foundation for a larger recurring revenue stream in product support.
So a couple of items. First, the -- and I talked a little bit about this, but we have seen the trend in our services organization, and it's been a positive trend throughout the year. And so that's one of the key areas and aspects that both serve us well as far as reoccurring revenue as well as customers, and this is an important aspect. As customers look at new business, services are becoming a big piece of their decision process because they want to ensure that a company has the ability to service them regardless of location. And so we have made progress, but there's more work to do. And the exciting piece, and I talked a bit about this, our digital growth, our IoT and what we have is what we call our toolkit program, which is more a predictive maintenance and it aligns well to help the customers' needs and we've had this product. There's -- we view it as an area we can continue to offer value to our customers and add on as we work on our services and allow us to -- allow the customers to achieve greater success and obviously, ATS being a partner with them through that.
So would that be some kind of a monitor on the machine that sends kind of performance data back to ATS?
So okay, so it is -- so it's on the machine and it's -- what it will do is it allows you to both monitor the performance of the machine so it meets your expectations. And then as the machine itself might have a lapse or if there's any type of issue within it, you can trigger it down to the actual event and drill in very quickly so you can understand what happened and improve it. So a -- for instance, one of our customers, they saw that the machine wasn't performing at the level they expected when they first bought the machine. And they called ATS, and our service organization went out and they put toolkit on the machine because the customer hadn't ordered that with the original machine. And so they went out and they realized, through the movement, they had sliced one of the air hoses in the process and the cylinder wasn't properly performing. They changed the air hose out, boom, the machine was back up and running to the level expected, and that customer became a toolkit customer immediately. So we believe, both with our progress on services as well as continuing to offer these aftermarket solutions and these solutions that truly help our customers, that puts us in a position to both have the longevity of the relationship as well as continue on our reoccurring revenue.
And is it possible to retrofit a toolkit like that on older machines within the installed base?
Absolutely. And Cherilyn, another piece is we can take this toolkit, and we're starting to look at machines that aren't ATS machines. So it's -- we view it as an opportunity, again, we have more work to do here.
Great. And then one for Maria. Your working capital as a percentage of sales continues to be well below that target that remains unchanged at less than 15%. Is there a point at which you move the target because something sustainable has happened?
There could be a point, and that's something that we'd talk about. But right now, we're just not comfortable doing that, and we're not comfortable doing that just knowing the variability that we have in our programs and the material impact that that could have on our working capital to percentage of revenue. So we continue to look at this. And if we think it makes sense to reduce it, we will. But right now, we're just comfortable talking or stating that we will be below 15%.
Your next question comes from David Tyerman with Cormark Securities.
My first question is on the backlog that you have. Is the gross margin in the backlog consistent with the 26% you did last year? Or would there be some improvement on that consistent with your idea that you get margin expansion over time?
It's very consistent with the 26%, nothing unusual in our backlog.
Okay. And my second question is on the backlog turnover. When I'm thinking longer term about the backlog turnover, you seem to be running roughly 40% over a long time, and it's close to what you're guiding for the next quarter. Would that 40% be a good number, do you think, based on how the business is evolving?
As you know, we take a look at this every quarter, and it's really difficult to say because it depends on the type of orders that we get in the quarter. And it depends on the size of orders that we also have and where they are in their life cycle. We tried to provide this range. And as you saw in this quarter, we were a bit off. And when we look at it, it's a difficult exercise so to call it more than a quarter out, it becomes even more difficult, so difficult to answer. And I would hesitate to provide a range other than what we know and what we've seen over the last 8 quarters or so, is 35% to 45%. And I would expect it to be somewhere in that range, but that's a big range and we recognize that.
[Operator Instructions] Your next question comes from Justin Keywood with GMP Securities.
We saw a large announcement by Toyota and the Ontario government recently for a $1.4 billion investment, including one of its plants in Cambridge. I'm wondering, does ATS expect to be involved in this project? And if so, has any of this work shown up in the backlog yet?
So Justin, thank you for the question. As you know, we don't talk about our customers and -- both from a customer perspective, that they oftentimes don't allow us to. And secondly, with this announcement, we're well aware of it. But again, I can't comment beyond that. We're well aware of the announcement, and we can't add additional insight in that space, unfortunately.
Just something to add though, that plant, the type of automation that's in there is body in white, and as you know, we don't make machines for body in white.
Okay. And then I just want to go back on the margin expansion initiative and the goal of increasing it to 15%. I'm wondering, is this expected to be kind of a consistent improvement over the next 4 years? Or will it be back-end weighted? Any additional color on that would be helpful.
We spoke a little bit about this last quarter, and we said that the -- we're targeting a 500 basis points improvement over 5 years. And when I tried to explain it, although I don't think I did a good job of it, I talked about it being a slope, so we would start to see more impact as time goes on. And we expect that because of the ABM, and although we've deployed the ABM, tools are being implemented. And as these tools are being implemented and continuous improvement and Kaizen events happen throughout the organization, it'll take a little bit of time to see those results. So the target is the 500 basis points over a period of time, and we will work to continuously -- we will work to improve our margins.
Okay. And then just as part of that margin improvement, just as a reminder, the after service segment, that could be -- was it around 100 bps?
Yes, that's what we said.
Your next question comes from David Tyerman with Cormark Securities.
Maria, the SG&A guidance that you provided, how long is that good for? Is it just next quarter or for a few quarters, do you think?
Right now, we'd say it's good for the next few quarters or we estimate, for the year. What could impact that is foreign exchange, and we've seen that in a number of the quarters. But based on current foreign exchange rates, we expect to be in and around that $42 million a quarter range for fiscal '19.
Okay. Excluding FX, what would change it in the future? Is it mainly going to be, if you move up to significantly higher revenue level or there's something else that could move it?
Yes. So if we -- if our revenues are increasing and we need more support, we -- our SG&A could increase. Another area that might increase is innovation although we've factored it into our numbers and we're spending more. But other than those 2 areas, I don't expect much more to impact.
Okay, fair enough. That's helpful. And then the other question I had was, I was just wondering if you could talk about the M&A environment right now, and what you're seeing and whether the valuations have improved any or whether it's still pretty tough to land anything.
Thank you, David. So the -- let's talk first. We're going to be disciplined in our approach, and I've talked about that often. The landscape continues to be. As you're aware, the landscape continues to be fairly decent valuations for organizations. That said, we -- our funnel has grown. And so if you step back and look at our process, our team has grown in this area, our funnel has grown, our vantage point from our strategic direction has allowed us to look at a couple of other areas that are -- offer interest to ATS. And so for us, we're still going to be -- we are continuing to be disciplined in our approach. But for the right asset, again, we are ready to move forward when that presents itself.
Okay. And when you say a couple of other areas, Andrew, what do you mean? Like these would be within your core automation but just different verticals? Or what does that mean?
Yes. So a couple of items. So in life sciences, and I've mentioned this a few times, we like the life sciences space. We like the regulation of the life sciences space and continuing to look at how we add value to our customer and shareholders through that. So there's opportunity within that space. And when we look at regulated spaces, we generally like regulated spaces from an automation perspective. For instance, when we look at the market dynamics of, say, a food and beverage market, there is some dynamics that we like in that space. That said, it would need to be extremely disciplined in our approach, need to be extremely disciplined in how we execute and drive that, just for 2 examples.
Okay. So these would be -- because you're already in life sciences. And I don't know if you do a lot in food and beverages, I'm not aware of it, but how are the other areas in what you're already doing?
So it could be in other area in the same application. So we don't necessarily -- let's state if you're looking at a life sciences area of pharmaceuticals, if you're going in and we provide, call it, 3/4 of the production line, it's an area that we could then add on value to do additional amount of work for the actual customer itself. So in our minds, it aligns with our synergies, it aligns with the market dynamics, our ABM implementation, as we've talked about, and then obviously, the ROIC wraps around the synergies that we, ATS, can bring.
Your next question comes from Cherilyn Radbourne with TD Securities.
Just a quick follow-up from me. Maria, could you clarify the comments that you made on foreign exchange? And just indicate if that was material on a dollar basis at the EBITDA or EBIT level?
Yes. I think what I was referring to is with foreign exchange when we -- and in the quarter, we had a higher absolute revenue dollars and we had corresponding higher absolute EBIT or adjusted earnings dollars. But from a margin perspective, nothing changes. So if we -- if the -- if foreign exchange or the Canadian dollar didn't weaken, we would've still had the 11% adjusted earnings margin that we actually had in Q4. It's just more absolute EBIT dollars as a result of the foreign exchange change.
And can you give us what the dollar impact was at the EBIT level ultimately?
I think it's about $1 million. I did the calculation at the EPS level in Q4, about a $0.01 impact.
Your next question comes from Robert Caldwell with Richardson GMP.
I'll add my congratulations Andrew, to you and your team on an excellent quarter. Very, very well done indeed. David Tyerman has actually asked most of the questions I was going to ask with regard to M&A. I'll just review, we've been asking questions on this topic for about 16 quarters now, including 5 under your helmsmanship, Andrew. And so one follow-up question, I'll ask what David had asked, how many people do you still employ in the M&A banking business?
Sure, Robert. First, really appreciate your comment around the performance and the team. I can't be more proud of what the team accomplished last year. And as I mentioned in my earlier comments, excited about the opportunities and where we're going as a corporation. So with that, to answer your question around M&A and the team, while small numbers, we've doubled the team in M&A. That said, we've also -- and stepping back, we have implemented KPIs in our process, key performance indicators, where they're both leading and lagging, and the leading is outreach programs to make sure that we are making the necessary cultivation calls with both the asset as well as investment banks, to ensure that they understand exactly where ATS plays. And so we've built out our process, we've built out the team and our funnel has increased. All that to be said, we are going to be disciplined in our approach and that will not change. That will not change today, tomorrow, in the future. We are going to make sure, as we look at assets, they're the right assets for our shareholders, both short term and long term.
Yes. I understand that, Andrew. Perhaps the other half of the question might be, in view of some of the growth you're now experiencing, is there a possibility you might be doing more organic growth, buying new buildings or building new buildings or taking on new space in order to accommodate some of this new business growth?
You bring up a good point. For us, we view it as the and. And while we're going through our reviews in M&A, it's an and on growing the business because we have a very solid business, and we're continuing to expand and drive improvements on that business. That's included in innovation, that's included in how we're going to look at our process to optimize our process. So for us, we have a very, very solid business and it's about how do we continue to drive that business while we're also looking to add on potentials to achieve our strategic aspirations. So for us, it's an and.
[Operator Instructions] Your next question comes from Mark Neville with Scotiabank.
I just want to follow up a bit, I guess, on the M&A discussion. Obviously, there's a lot happening sort of within your business and you're deploying your business model. I'm just, I guess, just curious at this time, sir, how important M&A is to you or how you're -- you'd be to do it? I mean, at this point, is there a risk that it could be potentially disruptive to the roles of your model? And at some point, has it become easier to do? Or maybe you're maybe willing, more aggressive in terms of what you want to do?
Thanks, Mark. Appreciate the follow-up question. Let me step back at it for a second. First, I often say disciplined because we are not going to rush on anything along the lines of deploying capital in this area. It needs to meet the 4 criteria that we outlined. And just as a reminder, the 4 criteria are market the strategic nature of the asset, how quickly we can deploy the ABM, how we're going to manage it and then ROIC. So all that being said, we believe our business is in a position that we could add on an M&A, but it needs to be the right asset. And if -- as we look at the ABM, our ATS Business Model, to describe it effectively is really about how do you make the car a better car while you're driving it. And so it's ready to be deployed, but we're going to be strategic in how we deploy it in future assets. So it would need to be the right strategic fit for us. Did that answer your question? Or did you want to have a follow-up on that?
No, is -- like there's nothing -- I guess, there's nothing preventing you now like with the ABM from doing something. Again, the role of that is not preventing you from doing anything, I guess, is sort of the question.
It is not. And as you know, but as a reminder, it starts with people, process, then performance. And I even mentioned in the remarks, it's about how we constantly really drive our people to have -- ready for the challenges of today and tomorrow, and that's both with our current business as potential future adds, so that's why it's an absolute focus for us and an area that we're going to continue to improve on.
Mr. Hider, there are no further questions at this time.
Thanks, operator. Thank you, everyone, for joining us today. We look forward to reporting our first quarter in August. Have a great day.
This concludes today's conference call. You may now disconnect.