Q4 2021 Toromont Industries Ltd Earnings Call

Speaker 1: We want to thank you for your patience. The conference was very simple. We want to thank you for your patience for a long time, and we want to thank you for your patience.

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Speaker 2: MUSIC.

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Speaker 3: This conference is being recorded. This conference is being recorded.

This conference is being recorded.

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Speaker 3: Good morning. Today is February 10th, 2022. Welcome to the Toromar fourth quarter and full year 2021 results conference call. Please be advised that this call is being recorded. Your host for today will be Mr. Michael McMillan, Chief Financial Officer for Toromar Industries Limited. Please go ahead, Mr. McMillan.

Good morning.

Today is February 10th 2020 to welcome to the trauma <unk> fourth quarter and full year 2021 results conference call. Please be advised that this call is being recorded your host for today will be Mr. Michael Mcmillan, Chief Financial Officer for Trauma and Industries Limited. Please go ahead Mr. Mcmillan.

Speaker 4: Great, thank you, Eric. Good morning, everyone. Thank you for joining us today to discuss Torremont's results for the fourth quarter and full year of 2021. Joining me this morning is Scott Medhurst, President and Chief Executive Officer.

Great. Thank you Eric Good morning, everyone. Thank you for joining us today to discuss tour months results for the fourth quarter and full year of 2021.

Joining me. This morning is Scott <unk>, President and Chief Executive Officer.

Speaker 4: For those on the phone lines, we encourage you to log into our webcast and refer to our website as well as it features our quarterly slide deck including slide two containing Toromont's advisory and cautionary statements regarding forward-looking information and statements therein. After our prepared remarks, we will be more than happy to answer questions. So let's get started. Over to you, Scott. Thank you, Mike, and good morning, everyone. Before I begin, I would ask you to move to slide three.

For those on the phone lines, we encourage you to log into our webcast and refer to our website as well as it features our quarterly slide deck, including slide two containing tour months advisory and cautionary statements regarding forward looking information and statements therein.

After our prepared remarks, we will be more than happy to answer questions. So let's get started over to you Scott.

Thank you, Mike and good morning, everyone before I begin I would ask you move to slide three.

Speaker 4: The company delivered solid results in the fourth quarter and full year of 2021, reflective of our focus on operational execution and favorable operating leverage, including the benefit of ongoing integration and alignment of our dealership territory across eastern Canada.

Our company delivered solid results in the fourth quarter and full year of 2021.

Selective of our focus on operational execution and favorable operating leverage including the benefit of ongoing integration and alignment of our dealership territory across eastern Canada.

Speaker 4: The equipment group reported strong product support deliveries while rental activity and fleet utilization improved. However, pandemic and macroeconomic factors continue to influence customer buying patterns and affect crime, product and parts availability.

The equipment group reported strong product support deliveries, while rental activity fleet utilization improved however, pandemic and macro economic factors continue to influence customer buying patterns and affect prime product in parts availability.

Speaker 4: Simcoe revenues increased year over year on strong package deliveries as construction on industrial projects progressed.

Chemical revenues increased year over year on strong package deliveries as construction on industrial projects progressed.

Speaker 4: Product support activity continued in the equipment group, dampened somewhat by pandemic and supply chain related factors.

Our it support activity continued in the equipment group dampened somewhat by pandemic and supply chain related factors.

Speaker 4: We continue to leverage the learnings from the past two years with respect to cost structures and new ways to do business while maintaining focus on customer service and support.

Continue to leverage the learnings from the past two years with respect to cost structures and new ways to do business, while maintaining focus on customer service and support.

Speaker 4: Current backlog levels are healthy and supportive of future results. However, the global supply chain, including vendor production, continues to be challenged.

Current backlog levels are healthy and supportive of future results. However, despite global supply chain, including vendor production continues to be challenged.

Speaker 4: Product availability, prime equipment, components, and parts were affected in Q4, and we will likely continue to see shifts in delivery schedules.

<unk> availability prime equipment components and parts were affected in Q4, and we will likely continue to see shifts in delivery schedules.

Speaker 4: Inflationary pressures, anticipated industry changes, and pandemic-related developments are also being monitored closely.

Inflationary pressures anticipated interest rate changes and pandemic related developments are also being monitored closely.

Speaker 4: technician hiring remains a key priority and is essential to support the growing demand for our product support and project construction business.

Technician hiring remains a key priority and is essential to support the growing demand for our product support project construction business.

Turning now to the financial results highlighted on slide four.

Speaker 4: Turning now to the financial results highlighted on slide 4.

Speaker 4: And markets continue to be active with solid bookings in most market segments.

End markets continued to be active with solid bookings in most market segments.

Speaker 4: We are particularly pleased to see some recovery starting in the recreational market as facilities began to open for the winter season. As mentioned, total backlogs were healthy at 1.3 billion at year end, reflective of customer buying patterns influenced by the pandemic and macroeconomic factors and supply challenges which have been overshadowing normal seasonality.

We are particularly pleased to see some recovery starting in the recreational market as facilities began to open for the winter season as.

As mentioned total backlogs were healthy at $1 3 billion at year end reflective of customer buying patterns influenced by the pandemic and macroeconomic factors and supply challenges, which have been overshadowing normal seasonality.

Speaker 4: In the fourth quarter, the equipment group reported lower revenues, similarly reflecting the impact of the pandemic and macroeconomic factors.

In the fourth quarter equipment group reported lower revenues, similarly, reflecting the impact of the pandemic and macroeconomic factors.

Speaker 4: Some purchases were accelerated earlier in the year, while others were shifted into 2022.

Some purchases were accelerated earlier in the year, while others were shifted into 2022.

Speaker 4: Simcoe also reported lower revenues in the quarter on the timing of construction projects with a tough comparable last year.

<unk> also reported lower revenues in the quarter on the timing of construction projects with a tough comparable last year.

Speaker 4: Consolidated revenues decreased 4% in the quarter versus last year.

Consolidated revenues decreased 4% in the quarter versus last year.

Speaker 4: Despite the lower revenue, operating income was up 17% in the fourth quarter, reflecting higher gross margins, strong demand, improved rental fleet utilization, and a favorable sales mix.

Despite the lower revenue operating income was up 17% in the fourth quarter, reflecting higher gross margins strong demand improved rental fleet utilization and a favorable sales mix disc.

Speaker 4: Discipline focused on cost containment and operational efficiency continue to support results.

Disciplined focused on cost containment and operational efficiency continued to support results.

The strong start to the year revenues increased 12% on a full year basis compared to 2020.

Speaker 4: strong start to the year, revenues increased 12% on a full year basis compared to 2020.

A solid opening order backlog and strong demand resulted in improved equipment and package revenues up 18%, while product support and rental revenues also increased.

Speaker 4: Solid opening order backlog and strong demand resulted in improved equipment and package revenues up 18% while product support and rental revenues also increased.

Speaker 4: For the full year, operating income increased 28% compared to 2020 reflecting improved revenues and higher overall gross margin.

For the full year operating income increased 28% compared to 2020, reflecting improved revenues and higher overall gross margin.

Speaker 4: revenue growth, exceeded growth in expenses, resulting from the team's discipline focused on improved efficiencies and cost management.

Revenue growth exceeded growth in expenses, resulting from the team's disciplined focused on improved efficiencies and cost management.

Speaker 4: Net earnings increased 19% in the quarter versus a year ago and was up 31% for the full year. Tracking the higher activity levels and positive operating leverage.

Net earnings increased 19% in the quarter versus a year ago and was up 31% for the full year tracking the higher activity levels and positive operating leverage.

Speaker 4: Our team has expended incredible effort, dedication, and commitment over the last two years adapting to a rapidly changing business environment while maintaining focus on employee safety and executing our customer deliverables.

Our team has expanded credible effort dedication and commitment over the last two years adapting to a rapidly changing business environment, while maintaining focus on employee safety and executing our customer deliverables.

Speaker 4: thank them for their resiliency and dedication.

We thank them for their resiliency and dedication.

Speaker 4: The diversity of our business, extensive product and service offerings, technology investments and financial strength together with our disciplined operating culture continue to position us well for the future. Mike, I'll turn it over to you for some more detailed comments on the group results.

The diversity of our business extensive product and service offerings technology investments and financial strength together with our disciplined operating culture continue to position us well for the future.

Mike I'll turn it over to you for some more detailed comments on the group results.

Speaker 4: Thanks, Scott. Let's dig a little deeper with respect to the operating results starting with the equipment group found on slide five. The equipment group delivered strong operating income growth in the fourth quarter despite lower revenues reflective of the operating leverage of our business model.

Thanks, Scott, let's dig a little deeper with respect to the operating results starting with the equipment group found on slide five.

The equipment group delivered strong operating income growth in the fourth quarter, despite lower revenues reflective of the operating leverage of our business model.

Speaker 4: The last quarter of the year has historically been the strongest for the equipment group. However, the impact of the pandemic over the past two years in more recently supply chain challenges has disrupted this trend. Delivery schedules have been altered based on customer requirements with some pulled forward earlier in the year and some being shifted to 22.

The last quarter of the year has historically been the strongest for the equipment group. However, the impact of the pandemic over the past two years and more recently supply chain challenges has disrupted this trend delivery.

Delivery schedules have been altered based on customer requirements with some pull forward earlier in the year and some being shifted to 'twenty two.

Speaker 4: Equipment group revenues were down 3% in the quarter versus last year.

Equivalent group revenues were down 3% in the quarter versus last year.

Speaker 4: with equipment revenue down twelve percent reflecting that change in normal seasonality that i just described rental revenues increased twelve percent on higher activity levels across most areas and we continue to see improved utilization of our fleet

With equipment revenue down, 12%, reflecting that change in normal seasonality that I. Just described rental revenues increased 12% on higher activity levels across most areas and we continue to see improved utilization of our fleet.

Product support revenues increased 4% in the quarter as activity continued to improve our shops and field technicians were more active in Q4 than last year and slightly above 2019 pre pandemic levels overall.

Speaker 4: Product support revenues increased 4% in the quarter as activity continued to improve. Our shops and field technicians were more active in Q4 than last year and slightly above 2019 pre-pandemic levels overall.

Speaker 4: Gross profit margins increased 330 basis points in the quarter compared to 2020. Sales mix accounted for almost one-third of the increase, or 100 basis points, with a larger proportion of product support revenues to total revenue.

Gross profit margins increased 330 basis points in the quarter compared to 2020 sales mix accounted for almost one third of the increase were a 100 basis points with a larger proportion of product support revenues to total revenues.

Speaker 4: Equipment, product support, and rental margins were all higher in the quarter, reflective of continued focus on efficiency and productivity, higher fleet utilization, and tight supply conditions.

The equipment product support and rental margins were all higher in the quarter reflective of.

<unk> focus on efficiency and productivity higher fleet utilization and tight supply conditions, selling and administrative expenses increased 1% in the quarter.

Speaker 4: Selling and administrative expenses increased 1% in the quarter.

Speaker 4: Expenses in 21 include a $5 million charge for the settlement of defined benefit pension obligations for certain retirees.

Expenses in 'twenty. One include a 5 million charge for the settlement of defined benefit pension obligations for certain retirees. Excluding this and the government wage subsidies recorded in 2020 expenses were down $8 3 million or 8% in the quarter, reflecting the benefit of our continued focus on cost containment.

Speaker 4: Excluding this and the government wage subsidies recorded in 2020, expenses were down 8.3 million or 8% in the quarter, reflecting the benefit of a continued focus on cost containment more than offsetting increases for items such as increased headcount, compensation adjustments, and some selective return to travel and training to support our team.

More than offsetting increases for items, such as increased head count compensation adjustments and some selective returned to travel and training to support our teams.

Speaker 4: Operating income for the quarter was up 18 percent, reflective of the higher gross margins and operating leverage.

Operating income for the quarter was up 18% reflective of the higher gross margins and operating leverage.

Speaker 4: For the full year, the equipment group reported an 11% increase in revenues and a 30% increase in operating income compared to 2020, which was dampened by the pandemic, of course, and related regional restrictions in response.

For the full year the equipment group reported an 11% increase in revenues and a 30% increase in operating income compared to 2020.

Which was dampened by the pandemic of course and related regional restrictions in response.

Speaker 4: Equipment sales, product support, and rental activity were higher across most geographic markets and product groups, most notably construction and mining. Equipment sales were up 17% overall, with improved demand in end markets. However, use sales were lower year over year, again demonstrating the strong customer preference last year during the early stages of the pandemic.

Equipment sales product support and rental activity were higher across most geographic markets and product groups, most notably construction and mining equipped.

Equipment sales were up 17% overall with improved demand in end markets. However, use sales were lower year over year again, demonstrating the strong customer preference last year during the early stages of the pandemic.

Speaker 4: Rental revenues increased 8% year-over-year on higher fleet utilization. And product support revenues increased 6% reflective of improved activity levels.

Rental revenues increased 8% year over year on higher fleet utilization and product support revenues increased 6% reflective of improved activity levels.

Gross profit margins increased 130 basis points year over year equipment product support and rental margins were higher for the same reasons as mentioned for the quarter.

Speaker 4: Gross profit margins increased 130 basis points year-over-year. Equipment, product support, and rental margins were higher for the same reasons as mentioned for the quarter.

Speaker 4: Sales mix dampened gross profit on a full year basis due to unfavorable sales mix in the first nine months of the year with a lower percentage or ratio of product support revenues to total.

Sales mix dampened gross profit on a full year basis due to unfavorable sales mix in the first nine months of the year with a lower percentage or ratio of product support.

Revenues to total.

Speaker 4: Selling and administrative expenses increased 2% for the year when excluding the pension settlement in 2021 and the government wage subsidies recorded in 2020 noted earlier. The team's focus on efficiency, productivity, and cost containment has had a positive impact while spending was selectively increased to support activity levels and certain investments as appropriate. Operating income for the year increased 30% on higher revenues and good expense levels.

Selling and administrative expenses increased 2% for the year when excluding the pension settlement in 2021 and the government wage subsidies recorded in 2020 noted earlier.

The team's focus on efficiency productivity and cost containment has had a positive impact while spending was selectively increased to support activity levels and certain investments as appropriate.

Operating income for the year increased 30% on higher revenues and good expense levels.

Speaker 4: Bookings have maintained a healthy pace over the year, increasing 10 percent in the quarter and 58 percent year over year. Construction up 66 percent and power markets up 55 percent have been stronger compared to the lower economic activity level experienced in 2020. Additionally, several large mining orders in the early part of 2021 led to a 228 percent increase in mining bookings for the year.

Bookings have maintained a healthy pace over the year, increasing 10% in the quarter and 58% year over year construction up 66% and power markets up 55% have been stronger compared to the lower economic activity level experienced in 2020.

Additionally, several large mining orders in the early part of 2021 led to a 228% increase in mining bookings for the year.

Speaker 4: Backlogs ended 2021 at a healthy level of Scott mentioned at 1.1 billion for the equipment group more than double than that this then

Backlog ended 2021 at a healthy level as Scott mentioned at $1 1 billion for the equipment group more than double.

Then that this than this time last year.

Speaker 4: with increases across all sectors. We expect approximately 85% of this backlog to be delivered in 2022. However, this is subject to changes in equipment availability, delivery schedules, and specific customer requirements. Now let's turn

With increases across all sectors, we expect.

Approximately 85% of this backlog to be delivered in 2022. However, this is subject to changes in equipment availability delivery schedules and specific customer requirements.

Now, let's turn to Simcoe on slide six.

Speaker 4: Revenues in the fourth quarter were lower with package revenues down 11% and product support down 1%. Package revenues can be variable from quarter to quarter reflecting the timing of customers' construction schedules can also be impacted by larger project commissioning. We are also seeing some equipment supply issues and customer delays which have shifted some schedules during the year.

Revenues in the fourth quarter were lower with package revenues down 11% in product support down 1% package revenues can be variable from quarter to quarter, reflecting the timing of customers' construction schedules can also be impacted by larger project commissioning. We are also seeing some equipment supply issues and customer delays, which.

Shifted some schedules during the year.

Speaker 4: We did see order levels improve in Q4 relative to 2020, up 31.4 million and also sequentially

We did see order levels improve in Q4 relative.

Relative to 2020 up $31 4 million.

And also sequentially from Q3 2021.

Speaker 4: positive sign reflective of market activity. We are pleased to see improvements in the recreational markets as some facilities have begun to open up after a lengthy pandemic shutdown. Gross margins improved on good execution, improved package margins, and favorable sales mix with a higher proportion of product support revenue to total.

A positive sign reflective of market activity, we are pleased to see improvements in the recreational market as some facilities have begun to open up after a lengthy pandemic shutdown.

Gross margins improved on good execution improved package margins and favorable sales mix with a higher proportion of product support revenue to total.

Speaker 4: Selling and administrative expenses increased 2.3 million, or 19% in the quarter, with some specific items driving.

Selling and administrative expenses increased $2 3 million or 19% in the quarter with some specific items driving that.

Speaker 4: That debt expense increased $1.3 million quarter over quarter on some specific allowances. Additionally last year...

Bad debt expense increased $1 3 million quarter over quarter on some specific allowances. Additionally last year.

Speaker 4: benefited from the government subsidies of approximately $600,000 which were not repeated in 2021.

Benefited from the government subsidies of approximately $600000, which were not repeated in 2021.

Speaker 4: Compensation was higher as we continue to hire and other investments to support activity levels for future growth.

Compensation was higher as we continue to hire.

And other investments to support activity levels for future growth.

Speaker 4: Overall, operating income improved 10% in the quarter, primarily related to improved gross margins partially offset by expenses, as noted. On a full-year basis, Simcoe reported solid results. A strong opening backlog supporting Simcoe revenues in 2021, up 15% overall as construction progressed and projects were completed. Year-over-year package revenues led by industrial deliveries were up 30%, while product support revenues were effectively unchanged year-over-year. For more information visit www.fema.gov

Overall operating income improved 10% in the quarter, primarily related to improved gross margins, partially offset by expenses as noted on a full year basis Simcoe reported solid results a strong opening backlog supporting Simcoe revenues in 2021 up 15% overall as construction progressed and projects were completed.

Year over year package revenues led by industrial deliveries were up 30% while product support revenues were effectively unchanged year over year.

Speaker 4: Gross profits were lower for the full year, reflecting tight margins on certain large projects early in the year, combined with unfavorable sales mix of product support revenues to total. Selling and administrative expenses increased 11% for the year, reflecting the higher activity and staffing levels, training programs and facilities related expenditures related to office moves.

Gross profits were lower for the full year, reflecting tight margins on certain large projects early in the year combined with unfavorable sales mix of product support revenues to total selling and administrative expenses increased 11% for the year, reflecting the higher activity in staffing levels training programs and facilities related expenditures related to office moves.

Speaker 4: Operating income was lower by approximately 1.5 million, reflecting the lower margins on large industrial projects, lower product support mix and expenses, again, as noted.

Operating income was lower by approximately $1 5 million, reflecting the lower margins on large industrial projects lower product support mix and expenses again as noted.

Speaker 4: Bookings for the year were healthy at just under $190 million. Last year, bookings included several large industrial orders, making it a tough comparable. Backlogs at the end of the year were also healthy at $161 million, again lower than last year due to the large industrial orders. However, recreational backlogs were 42% higher, with increases in both Canada and the U.S., reflecting good order intake over the latter part of 2021.

Bookings for the year were healthy at just under $190 million last year bookings included several large industrial orders, making it a tough comparable.

Backlog at the end of the year were also healthy at $161 million again lower than last year due to the large industrial orders. However, recreational backlogs were 42% higher with increases in both Canada and the U S. Reflecting good order intake over the latter part of 2021 substantially all of the backlog is expected to be real.

Speaker 4: Substantially, all of the backlog is expected to be realized as revenue in 2022. However, this is subject to construction schedules, component availability, and potential changes stemming from the COVID-19 pandemic.

<unk> as revenue in 2022. However, this is subject to construction schedules component availability and potential changes stemming from the COVID-19 pandemic.

Speaker 4: On slide 7, I'd like to touch on a few key financial highlights.

On slide seven I'd like to touch on a few key financial highlights.

Speaker 4: Our operating teams, with a keen focus on capital employed, have continued to proactively manage working capital to reflect activity levels and underlying demand. Accounts receivable aging is trending well, and DSO decreased five days from last year down to 36 days at the end of 2021.

Our operating teams with a keen focus on capital employed have continued to proactively manage working capital to reflect activity levels and underlying demand accounts receivable aging is trending well and DSO decreased five days from last year down to 36 days at the end of 2021.

Speaker 4: Inventory levels were largely unchanged from last year, which were also at a relatively low level. We would expect to see inventory levels increase as supply constraints ease.

Inventory levels were largely unchanged from last year, which were also at a relatively low level, we would expect to see inventory levels increase at <unk>.

Hi constraints ease.

Speaker 4: We ended the year in a strong financial position with ample liquidity, including cash of approximately $917 million and an additional $471 million available to us under our existing credit facilities.

We ended the year in a strong financial position with ample liquidity, including cash of approximately $917 million.

Additional $471 million of avail available to us under our existing credit facilities, our net debt to total capitalization ratio was at minus 16%. Our overall balance sheet is well positioned to support changes in demand as we emerge from the pandemic as supply opens up and as other investment opportunities arise.

Speaker 4: Our net debt-to-total capitalization ratio was at minus 16 percent. Our overall balance sheet is well-positioned to support changes in demand as we emerge from the pandemic, as supply opens up, and as other investment opportunities arise. Also of note, in 2021, we initiated our NCIB program, repurchasing approximately 470,600 shares, or approximately $50 million worth.

Also of note in 2021, we initiated our NCI program repurchasing approximately 470600 shares or approximately $50 million worth.

Speaker 4: Tormont targets a return on equity of 18% over a business cycle. Return on equity was 19.6% for 2021, up from 16.6% for 2020, reflecting the improved earnings year over year.

<unk> targets are return on equity of 18% over a business cycle return on equity was 19, 6% for 2021 up from 16, 6% for 2020, reflecting improved earnings year over year.

Speaker 4: Over the last five years, return on equity has averaged 19.8%. Return on capital employed was 26.6% for 2021, up from 20.4% for 2020.

Over the last five years return on equity has averaged 19, 8% return on capital employed was 26, 6% for 2021 up from 24% for 2020.

Speaker 4: And finally, as announced, the Board of Directors yesterday increased the quarterly dividend by 11.4% to $0.39 per common share. Tormund has paid dividends every year since 1968, and this is the 33rd consecutive year of dividend increases. We continue to be proud of this track record and our disciplined approach to capital allocation.

And finally as announced the board of directors yesterday increased the quarterly dividend by 11, 4% to 39 per common share <unk> has paid dividends every year since $19 68, and this is the 30 <unk> consecutive year of dividend increases we continue to be proud of this track record and our disciplined approach to cap.

<unk> allocation.

Speaker 4: On slide 8, we continue with some key takeaways as we look forward to 2022. We expect the business environment to remain fluid with a number of factors in play, including inflationary pressures, continued uncertainty with respect to the pandemic, and the related regional and market response required. And of course, the health of the global supply chain. We continue to proactively monitor developments closely, and we stand ready to respond appropriately and refine our business practices accordingly.

On slide eight we continue with some key takeaways as we look forward to 2022.

We expect the business environment to remain fluid in a number of factors with a number of factors in play, including inflationary pressures continued uncertainty with respect to the pandemic and the related regional and market response required.

And of course, the health of the global supply chain, we continue to proactively monitor developments closely and we stand ready to respond appropriately and refine our business practices accordingly.

Speaker 4: We will continue to focus on our three key priorities, protecting our employees, serving our customers, and protecting our business for the future. As discussed today, market activity was solid in the quarter and for the year overall. While pandemic and macroeconomic factors have affected customer buying patterns and supply chain pressures have affected delivery of both prime product and parts from suppliers, we continue to work actively with our business partners and suppliers to minimize the impact and support our customers.

We will continue to focus on our three key priorities protecting our employees, serving our customers and protecting our business for the future as discussed today market activity was solid in the quarter and for the year overall, while pandemic and macroeconomic factors have affected customer buying patterns and supply chain pressures have affected delivery of both prime product in <unk>.

From suppliers, we continue to work actively with our business partners and suppliers to minimize the impact and support our customers.

Speaker 4: Across the organization, we are continuing to leverage the learnings from the past year with respect to cost structures and new ways to do business. Our backlog levels are supportive, but delivery schedules are subject to global supply chain constraints for availability, including vendor production constraints.

Across the organization, we are continuing to leverage the learnings from the past year with respect to cost structures and new ways to do business. Our backlog levels are supportive, but delivery schedules are subject to global supply chain constraints for availability, including vendor production constraints.

Speaker 4: Technician hire remains a top priority to meet demand and to build our team for the future. Operationally and financially, we're well positioned to effectively respond to both customer requirements and market opportunities, leveraging our operating disciplines and culture.

Technician higher remains a top priority to meet demand and to build our team for the future.

Operationally and financially we are well positioned to effectively respond to both customer requirements and market opportunities leveraging our operating disciplines and culture.

Speaker 4: It has been another incredibly unique and challenging year, and we appreciate our entire team's exceptional effort and commitment to support our customers during this time. Thanks also to our valued customers, supply partners, and shareholders for their continued support.

It's been another incredibly unique and challenging year and we appreciate our entire team's exceptional effort and commitment to support our customers. During this time. Thanks also to our valued customers supply partners and shareholders for their continued support.

Speaker 4: That concludes our prepared remarks. We'll be pleased to take questions. Eric, over to you to stop the first call.

That concludes our prepared remarks, we'll be pleased to take questions Eric over to you to start the first call. Please.

Speaker 3: Thank you. We will now take questions from the telephone lines. If you have a question and you're using a speakerphone, please lift your handset before making your selection. If you have a question, please press star 1 on your device's keypad. You may cancel your question at any time by pressing star 2. Please press star 1 at this time if you have a question.

Thank you.

I'll now take questions from the telephone lines. If you have a question and you're using a speaker phone. Please lift your handset before making your selection.

If you have a question. Please press star one on your devices Keypad you may cancel your question at any time by pressing Star two please press star one at this time, if you have a question and.

Speaker 3: And we will take the first question from Jacob Bout from CIBC. Please go ahead.

And we will take the first question from Jacob bout from CIBC. Please go ahead.

Speaker 5: Good morning. My question is on the improvement of margins that we saw in the fourth quarter. Maybe just start off, break down maybe how much of this was mixed. I think you said in your commentary around 100 basis points versus rental revenues versus equipment margins and then maybe just talk a bit about the sustainability of each one of these buckets.

Good morning.

Okay.

Question is on the improvement of margins that we saw in the fourth quarter.

Maybe just start off a breakdown maybe how much of this was mix I think you said in your commentary around 100 basis point versus rental revenues versus the equipment margins and then maybe just talk a bit about the sustainability of.

Of each one of these buckets.

Okay. Thanks Jacob.

Speaker 5: Okay, thanks Jacob. You know, I think it's reflective of sort of the.

I think it's reflective of sort of the.

Some of all the parts and what took place there in the quarter.

Speaker 4: some of all the parts and what took place there in the quarter.

Speaker 4: As we said, the rental utilization really improved, continued to improve and we're delighted to see and particularly we saw improvement in our

As we said the rental utilization really improved continued to improve.

And so we're delighted to see and particularly we saw improvement in our.

Speaker 4: with the integration taking place in the Quebec and Maritimes area. So, I mean, we had some nice gain there, about five points on utilization. So, that certainly contributed, as did the mix, as Mike outlined in the opening comments. That was about 100 base points. Then you had some good closeouts at Simcoe on some of the projects, which was pleased to see that.

The integration taking place in Quebec, and Maritimes area. So I mean, we had we had some nice gain there about five points on utilization. So that certainly contributed as did the mix as Mike outlined in the opening comments and that was about a 100 basis points. Then you had some good closeouts.

<unk> co on some of the projects.

I'm pleased to see that and then of course, our total value propositions, including the.

Speaker 4: Then, of course, our total value propositions, including the improvement on CVA offerings.

Improvement on CVA offerings.

Speaker 4: That all added up to an improved margin, and combined with the unique operating environments, we had some efficiencies operationally that we've been really focused on, particularly, you know, as you recall, last year we had the ERP plug-in to get a common platform in most of the equipment group. We got the material handling business done in the fourth quarter, so that'll be good going forward. So, you know, we continue to work hard on the operational efficiencies.

That all all added up to an improved margin combined with the unique operating environments. We had some efficiencies operationally that we've been really focused on particularly as you recall last year, we have the ERP.

Plug in to get a common platform and most of the equipment group, we got material handling business done in the fourth quarter, so that'll be good going forward.

We continue to work hard on the operational efficiencies.

But we had some really favorable operating leverage again to the unique environment.

Speaker 4: But we had some really favorable operating leverage, again, due to the unique environment. So those are the areas that really, I think, added up when you talk about the sum of all parts.

So those are the areas that really I think added up when you talk about the sum of all parts.

Speaker 5: So in your mind, this continues into 2022? I wouldn't want to speculate in this environment on anything right now. There's a lot of variables in play, as we outlined in those opening comments. You know, you've got, we're still operating.

So in your mind this continues into 2022.

I wouldn't want to speculate in this environment on anything right now there's a lot of variables in play.

As we outlined in the opening comments you've got.

We're still operating.

Speaker 4: Eastern Canada is demonstrating, trying to demonstrate discipline in the COVID environment and so.

Eastern Canada is.

Demonstrating trying to demonstrate discipline in the COVID-19 environment and so.

Speaker 4: You know, there's a lot of factors still in play there, so I wouldn't want to speculate. What we're doing is trying to stick to the disciplines, trying to stick to our core business components and philosophies, operating and improving our efficiencies while, you know, really focused on our customer value propositions. But, you know, I think the team operated it well.

There's a lot of factors still in play there. So I wouldn't want to speculate what we're doing is trying to stick to the disciplines trying to stick to our.

Core business components, and philosophies operating and improving our efficiencies well really focused on our customer value propositions, but.

I think I think the team operated it.

Speaker 4: Favorably in the quarter. I think it's tough to compare quarter over quarter. I think when we look at you know We try and what we've done is take a broader look at how we're performing And I think if you look at the full year, that's a better view Because there's a lot of uniqueness in these quarters from an historical basis quarter over quarter Okay

Favorably in the quarter I think it's tough to compare quarter over quarter I think when we look at.

We try and what we have.

Done is to take a broader look at how we're performing and I think if you look at the full year, that's a better view.

Because theres a lot of uniqueness in these quarters from a historical basis quarter over quarter.

Okay.

Thank you.

Great. Thanks, Jacob Thanks Jacob.

Speaker 3: Thank you. The next question will be from Michael Dumais from Scotiabank. Please go ahead.

Thank you.

The next question will be from Michael domain from Scotia Bank. Please go ahead.

Speaker 4: It's somewhat of a follow-up to Jacob's question, but on a like-for-like basis, SG&A declined 8% and the MD&A reads as though there were several moving parts, and Scott, you mentioned I think there was some movement within the quarters as well. How much should we read into that, particularly in the context of the inflationary pressures that were noted across the economy?

Hey, good morning, guys.

Morning, Michael.

So it's somewhat of a follow up to Jacob's question, but on a like for like basis SG&A declined 8% in the MD&A reads as though there were several moving parts and Scott you mentioned I think there are some movement within the quarters as well I mean, how should or how much should we read into that.

Particularly in the context of.

The inflationary pressures that were recorded across the economy.

Maybe just to start on that Michael Thanks for thanks for that I think a couple of things to mention.

Speaker 4: Maybe, maybe just to start on that, Michael, thanks for thanks for that. I think, you know, a couple of things to mention I with with the pandemic and call it the extension of some of the safety protocols and.

With the pandemic and call it the extension of some of the safety protocols.

Speaker 4: you know, constraints that we all operate under. I think, you know, what we're saying is, you know, we've learned a lot through the pandemic. We're also still restricting some of the discretionary spend, right? And so the operating leverage we're seeing is partly a function of that as well. There are two things really, I would say, you know, or three things, you know, what we've learned and how we're operating more efficiently and effectively. The second thing I think is what I just mentioned, the pandemic

Constraints that we all operate under I think what we're seeing is we've learned a lot through the pandemic. We're also still restricting some of the discretionary spend rate and so the operating leverage we are seeing is partly a function of that as well. There are two things really I would say our.

Three things, what we've learned and how we're operating more efficiently and effectively the second thing I think is what I just mentioned the pandemic.

Speaker 4: and some of the restrictions that we're managing and navigating very carefully through, you know, and then.

And some of the restrictions that we're managing and navigating very carefully through.

And then.

Speaker 4: You know, I think the other piece is, is, you know, there's certainly inflationary factors coming into play, and I don't think anybody's realized those affect, like, completely. And so, you know, I think through the course of the next year or two, depending on how the macroeconomic conditions change, we would likely see some additional inflationary factors over time, right? So that kind of gives you some backdrop, but I think the team has done a very good

I think the other piece is is theres, certainly inflationary factors coming into play and I don't think anybody realize those effect like completely and so.

Through the course of the next year or two depending on how the macroeconomic conditions change we would likely see some additional inflationary factors over time right. So.

With that kind of gives you some backdrop, but I think the team has done a very good.

Speaker 4: job of managing costs very effectively and trying to make sure that we preserve some of those learnings.

<unk>.

Managing costs, very effectively and and.

Trying to make sure that we preserve some of those learnings.

Speaker 5: That's a great color. And the second question, maybe a little bit of a nitpicky question, but can you provide some color as to why inventories increased sequentially, which isn't typical, I guess, for Q4? And again, equipment availability remained tight and backlog increased. I mean, is that explained by mix, you know, maybe more parts versus equipment? Any color there would be great. Yeah. Yeah, I think, well, part of it is...

That's great color.

And the second question, maybe a little bit of a nitpicky question, but can you provide some color as to why inventories increased sequentially, which isn't typical I guess for Q4.

Equipment availability remain tightened backlog increase I mean is that explained by Max maybe more parts versus equipment any color there would be great.

Yes, I think well part of it is.

No.

Speaker 4: There's so many moving parts in there. So part of it was like, you know, we had a significant amount of slippage in terms of our estimated deliveries in the quarter and what took place and slipped in the 20s. So what it was, we couldn't get iron through the shops because we were waiting on some components and parts when we're getting iron ready to ship. So that's part of it. So you've got a bit of a build there. We did see some increase on the RPO inventory, but again, it was up.

Yeah.

There's so many moving parts in there so part of it was we had a significant amount of slippage in terms of our estimated deliveries in the quarter and what took place and slipped into 2000 and some of it was we couldnt, we couldnt get iron to the shops, because we're waiting on some components and parts when we're getting iron ready to ship. So that's part of it so you've got a bit of a.

Build there.

We did see some increase on the <unk> inventory, but again it was up.

Think almost $10 million, but still historically very low right. I mean, we're used to seeing coming into the fourth quarter $80 million to $90 million of our appeal, but the <unk> revenue increased 10% and that reflects some increase there and the.

Speaker 4: 10 million, but still, historically, very low, right? I mean, we're used to seeing, coming into the fourth quarter, $80, $90 million of RPO, but the RPO revenue increased, I think, over 10%, and that reflects some increase there in the inventory on a comparable basis to last year. So you've got some, and WIP was up slightly. So, you know, again, a lot of different factors in there, but.

Inventory on a comparable basis to last year.

So you've got some some.

<unk> was up slightly so.

Again, it's a lot of different factors in there but.

Yes.

Speaker 4: You know, that inventory traditionally in Q4 declines, as you're saying, but, you know, there's still just unique environment right now with variables. Yeah, no, it makes sense. And just as a follow-up.

That inventory traditionally in Q4 declines as you are saying.

There is still.

Just unique environment right now with variables.

And it makes sense and just as a follow up I mean were those factors.

Speaker 5: help evenly across the corridor or did they worsen at some point through the corridor just to get a little bit of color there?

Evenly across the quarter or did they worsen at some point during the quarter just to get a little bit of color there.

Sorry, I missed that.

Michael in terms of yes.

Speaker 5: Yeah, just in terms of the slippage and the components coming a little bit late, I'm just wondering if that played, you know, quite evenly across the quarter or if that was felt a little bit more towards the end of the season.

Yes, just in terms of the slippage in the components coming a little bit late I'm. Just wondering if that played quite evenly across the quarter or if that was about the whether it more towards the end of the quarter.

Speaker 4: Towards the end, I mean, usually we're, you know, we build through that quarter in terms of deliveries and, you know, it was a.

Towards the towards the end I mean, usually.

We build to that quarter in terms of deliveries.

It was up.

Speaker 4: On a historical basis, I mean, it was a lot higher than normal on that slippage, both on our larger iron and our small iron. So we felt it in the rental services business as well as the heavy equipment. So you know, and then some jobs, even the rebuild activity was strong throughout the year. And that softened because we were waiting on some parts and components.

On a historical basis I mean it was.

It's a lot higher than normal on that slippage, both on our larger iron or small iron. So we felt this in our rental services business as well as the.

The heavy equipment so.

And then some jobs, even rebuild activity was strong throughout the year.

That soften because we just we were waiting on some some parts and components.

Speaker 5: Yeah, that makes sense in this environment. All right, guys. Thanks a lot. Thank you.

Yes that makes sense in this environment alright, guys. Thanks, a lot. Thank you.

Thank you.

Speaker 3: Thank you. The next question will be from Yuri Link from Canaccord Genuity. Please go ahead. Good morning.

Thank you. The next question will be from Yuri Lynk from Canaccord Genuity. Please go ahead.

Hey, good morning, good morning.

Yeah.

Im just.

Speaker 6: Just wondering if it's your sense that your competitors are facing the same parts availability issues or do you feel you might be at risk of losing some parts market share given the constraints?

I'm just wondering if it is your sense that your competitors are facing the same parts of the availability issues or do you feel you might be at risk of losing some some parts market share given the constraints.

Speaker 4: Well, this is where we're doing a better job tracking our data coming off the units and.

Well this is where we're doing a better job tracking our data coming off the units.

Speaker 4: I think we're, you know, I think everybody's feeling the same pressures. We were pleased with, when we look at our overall performance, parts and services, you know, I think the team did a reasonably good job on that front. When you look at the

I think we are.

I think everybody's feeling feeling the same pressures.

We were we were pleased with.

Look at our overall performance parts and services.

I think the team did originally good job on that front.

When you look at the activity levels. So.

Speaker 4: So, you know, we're, I mean, if you look at it like rebuilds, we're very focused strategically on our rebuilds and, you know, overall for the year on a unit basis, we were up 45%. There was some.

I mean, if you look at it like rebuilt we're very focused strategically on our rebuilt <unk>.

Overall for the year on a unit basis, we were up 45% there was some.

Speaker 4: slowing a bit, even though we're still up on a quarter-over-quarter basis, about 30% plus, but because we were, had to wait for components and some things and even some of the fast-moving parts that we had got into some tightness there. So, I think we've been performing reasonably well there. I mean the service numbers were coming up in the quarter. Good, that shows we're continuing to hire.

Slowing a bit even though we're still up on a quarter over quarter basis about 30% plus but because we were had to wait for components and some things and even some of the fast moving parts.

We had.

Got into some tightness there. So I think we've been performing reasonably well there I mean, the service numbers were coming up in the quarter did that shows we're continuing to hire.

Speaker 4: and be able to meet those demand signals. But the service was up more than the parts, and I think that's reflective of some of these constraints.

And to be able to meet those demand signals.

But the service was up more than the parts and I think that's reflective of some of these constraints.

Okay. That's helpful.

Speaker 6: Just to SG&A, in absolute dollars, you're kind of back to pre-pandemic levels in 2021.

Just to SG&A.

Absolute dollars youre kind of back to pre pandemic levels in 2021.

Speaker 6: albeit on higher revenue. Can you just talk about how you feel you're scaled here to handle additional revenue in 2022?

Albeit on higher revenue can you just talk about how you feel youre scaled here or to handle additional revenue in 2022.

Speaker 6: Is there a bit of slack in your overhead to handle additional revenue? It does look like you're running pretty lean at this point, so just wondering if you can comment on operating leverage and the ability to continue to drive that ratio to sales lower as we go through the year.

Is there is a bit of slack in your overhead to handle additional debt and it does look like you're running pretty lean at this point. So just wondering if you can comment on them.

Leverage and ability to continue to drive that ratio to sales are lower as we go.

Through the years there.

Speaker 4: Yeah, I think, you know, I think a couple things I've mentioned there just to start and Scott will have some color to, I think, as you look at our numbers, certainly, we put a lot of focus on the discretionary aspect of our spend, right? And so, when you look at, you know, I'd say from a staffing level, I mean, we've worked really hard.

Yes, I think I think a couple of things Ive mentioned, there just to start and Scott will have some color too I think as you look at our numbers certainly we put a lot of focus on the discretionary aspect of our spend rate and so when you look at.

From a staffing level I mean, we've worked really hard.

Speaker 4: to help our people through the pandemic, you know, we initially use some different programs and things, but you know, we bridge benefits and everything we could to retain our people. And so from a staffing level, managing our costs that way, you know, we're, we're really looking at the long term and preserving our.

To help our people through the pandemic.

We initially use some different programs and things, but we bridge benefits and do everything we can to retain our people and so from a staffing level managing our cost that way, we're really looking at the long term and preserving our our support for the future as we as we work our way through it. So what you are seeing there really is a function of.

Speaker 4: our support for the future as we work our way through it. So what you are seeing there really is a function of.

Speaker 4: you know more the discretionary side of the business and how we're going to operate manage that type of cost structure at this point and as I mentioned earlier on the call we you know we expect we're going to spend more on you know travel and training and some other things uh... as uh... conditions ease and we can get out a little bit more effectively but we are targeting lower levels because of what we've learned and how we use technology and things like that so so it's really a function of uh... a couple of those factors yeah and I think

More of the discretionary side of the business and how we're going to operate manage that type of cost structure at this point and as I mentioned earlier on the call. We expect we're going to spend more on travel and training and some other things.

As <unk>.

Condition of these and we can get a little more effectively but we're targeting lower levels because of what we've learned and how we use technology and things like that so it's really a function of a couple of those factors.

And I think Mike's.

Correct.

Speaker 4: We always try to be attentive over the long term, particularly with our skilled labour requirements, and that we were pleased that we were able to get some traction there last year with some increases, but we're also very focused.

We always tried to be attentive over over the long term, particularly with our skilled labor requirements and that we were pleased that we were able to get some traction there last year with some increases.

But.

We're also very focused you know having.

Speaker 4: Having that common platform, I think, helped out a bit last year. We still have some work in there, but that helped in some of these SDNA factors as well with some of the operating efficiencies. I mean, we really have been working hard, particularly in some of these, like material handling business, and there was some progress there.

Having that common platform I think helped out a bit last year, we still have.

Some work in there but.

That helped in some of these SG&A factors as well.

Some of the operating efficiencies I mean, we really have been working hard, particularly in some of these like material handling business and there were some progress there.

Speaker 4: And in some of our other parts and service areas that needed to improve so there was a bit of that and again a lot Of different variables on the SG&A, but it is it was a favorable as Mike alluded to on the discretionary I think our teams have showed a lot of discipline in there and There's been some favorable operating leverage in there as well

And some of our other parts and service series that needed to improve so there's a bit of that and again a lot of different variables on the SG&A, but it is it was a favorable as Mike alluded to on the discretionary I think our teams have showed a lot of discipline in there.

There's been some favorable operating leverage in there as well.

Okay. Another good quarter guys.

Thanks very much.

Thank you. The next question is from Cheryl Lynn Radburn from TD Securities. Please go ahead.

Speaker 3: you. The next question is from Sherilyn Radburn from TD Securities. Please go ahead.

Speaker 7: Thanks very much and good morning. Good morning, Charlotte. I was hoping you could give us a bit more color on the supply chain constraints that the company is experiencing and how they compare it in Q4 versus Q3 and how you would characterize them versus prior cycles.

Thanks, very much and good morning, good morning.

Carolyn.

I was hoping you could give us a bit more color on the supply chain constraints that the company is experiencing and how they compare it in Q4 versus Q3, and how you would characterize them sort of versus prior cycles.

Speaker 4: Okay, well that, okay, I'll start with Q4 a bit. So we saw, I'd say some further tightening because we saw that slip that there was.

Okay, well that okay, I'll start with Q4 a bit so we saw.

I'd say some further tightening because we saw that slipped.

Speaker 4: slippage occurred, right? And that's reflective in the backlog a bit as well, Sherrilyn, right, when we experienced that in Q4. You know, I'm actually, I think we applied our teams, our teams have been working very closely with all our supply partners throughout the year, and that's why there was a, you know, it's, be careful isolating Q4 because there was, you know, we saw that shift in buying pattern from a historical basis that really...

The slippage occurred right and that's reflective in the backlog a bit as well cherilyn right.

When we experienced that in Q4.

Actually I think we applied our teams our teams have been working very closely with all our supply partners throughout the year and Thats why there was a.

No.

Be careful isolate in Q4, because there is we saw that shift in buying patterns from a historical basis. It really so.

Speaker 4: You know, there was some softening in industry activity in Q4, but our teams worked hard with our supply partners to really get a hold of the demand signals. So when you look at it overall through the year, I mean, I applaud what our supply partners did to help us meet those demands, but there was some further tightening in Q4.

There was some softening in industry activity in Q4.

So so.

Our teams worked hard with our supply partners to really get a hold of the demand signals.

So when you look at it overall through the year.

Plywood, our supply partners to help us meet those demands.

There was some further tightening in Q4.

Speaker 4: And, um, you know, but we continue to work, work hard on that on historical when you compare it to cycles. Um,

And.

But we continue to work hard on that on a historical when you compare it to cycles.

Speaker 4: See, that's an interesting question. And I tell you, I haven't really thought about it on historical, I mean, you and I both been around a while. And so this one is unique, right? In some ways with a pandemic, right? And because it's added some complexities.

That's an interesting question I would tell you Joe I haven't really thought about it on a historical.

You and I, both been around a while.

So this one is unique right.

Some ways.

With the pandemic right and because its added some complexities.

Speaker 4: with both our employees and how we're managing through shutdowns and things of that nature that are, you know, there's, it's very variable. So I don't know how to compare it on a historical level, and I think both our teams worked well with our supply partners to try and meet these demands as best we could. But, you know, there was some tightening in that quarter.

With with both our employees and.

How we're managing through shutdowns and things of that nature that are.

There is.

Variable.

So I don't know how to compare it on a historical other than I think both of our.

Our teams.

Well with our supply partners to try and meet these demands as best we could.

But.

There was some some tightening in that quarter.

Speaker 7: Okay. What impact, if any, did the Omicron wave have on your operations during the quarter and those of your customers, you know, whether as a result of absenteeism or other factors?

Okay.

What.

Impact if any did the omicron, we'd have on your operations during the quarter and those of your customers.

Whether as a result of absenteeism or other factors.

Yes, we started to see a bit of it.

Speaker 4: Yeah, we, we started to see a bit of it. You know, again, it's a very fluid environment with the COVID-19 situation. So I think we continue to operate with eyes wide open. We're trying to maintain disciplines here and um, you know, protect our employees. That's been our mantra from from day one. Um

You know.

Again, it's a very fluid environment with the Covid.

Covid situation. So I think we continue to operate with eyes wide open we're trying to maintain disciplines here.

<unk>.

Protect our employees that's been our mantra from day one.

So I mean that remains a very fluid environment.

Speaker 4: So, I mean, that remains a very fluid environment.

Speaker 4: Yeah, I think just on that too, Sherilyn, you know, as we look at Q4, it was starting to build. You know, Omicron was becoming...

Yes, I think just just on that two cherilyn.

As we look at Q4, it was starting to build omicron was becoming more prevalent.

Speaker 4: You know, you'd say that, you know, the peaks I think that you've seen publicly and stuff have hit really in January , February , you know, and it's an interesting dynamic. We've maintained strong protocols all the way through, like Scott mentioned, to protect our employees and protect our customers, frankly, and just make sure we're there to provide service. And so, you know, I would say from that perspective, the team has done a really nice job of really being disciplined and safe. But, you know, we are seeing, certainly are seeing,

You'd say that the peaks I think that you've seen publicly and stuff have hit really in January February .

It's an interesting dynamic we've maintained strong protocols all the way through like Scott mentioned is to protect our employees and protect our customers frankly, and just make sure. We're there to provide service and so.

From that perspective, the team has done a really nice job of it.

Really being disciplined in.

And safe.

But we are seeing certainly are seeing.

Speaker 4: more cases shorter duration on average but you know we expect to see some absenteeism.

More cases shorter duration on average, but we expect to see some absenteeism as.

Speaker 4: as we go into this year until this particular strain tapers off, and we see what happens after that.

As we go into this year until it until this particular strain tapers off and we see what happens after that.

Speaker 7: And if I could sneak in a last one, I assume that mining relates to the backlog that now stretches into 2023, so it'd be great if you could give us some colour on just the composition of the mining backlog by commodity and by geography as it stands today.

And if I could sneak in a last one.

I assume that mining.

Relates to the backlog that now stretches into 2023.

If you could give us some color on just the composition of the mining backlog by commodity.

<unk> as it stands today.

Okay.

Speaker 4: Yeah, it's, well, we're more diverse in there now, our integration, and, but we're still, you know, we're seeing, in that backlog, we saw good activity in gold, but there's, there's also some activity in other, the...

Yes.

We're more diverse in there now.

<unk>.

Integration and.

But we're still we're seeing in that backlog, we saw good activity in gold.

There's also some activity and others.

Speaker 4: nickel and iron ore, so there's a bit of a mix there, but gold was solid in that backlog. But construction is also quite prevalent in that backlog as well. So we're kind of pleased that it's...

Nicole.

And iron ore, so theres a bit of a mixed there, but gold was solid in the backlog, but construction is also quite prevalent in that backlog as well.

So we're kind of pleased that it's.

Speaker 4: It spread out a bit, even in power, so that's good.

It's spread out a bit even in power. So so thats good.

Speaker 4: Yeah, and you'll note that we do give some color there, and you mentioned the mining piece, which is, you know, round number is 30-31% of the backlog, roughly speaking, and when you look at the backlog that's there today, I think we note in the equipment side,

And you'll note that we do have we did give some color there.

And you mentioned the mining piece, which is round numbers, 30%, 31% of the backlog roughly speaking.

When you look at the backlog that's there today I think we note in the equipment side.

Speaker 4: About 85% of that's expected, you know, of course dependent on availability and so forth, but expected to be fulfilled within the year. The balance of that goes into 23 and would relate primarily to mining, right? So, it gives you a bit of flavor there. I think, you know, construction is about 45, 46% of that backlog number as well. Helpful. Thank you. I'll turn it over.

85% of that is expected.

Of course dependent on availability and so forth, but expected to be fulfilled within the year. The balance of that goes into 'twenty, three and would relate primarily to mining right. So it gives you a bit of flavor there I think.

Construction is about $45, 46% of that backlog number as well.

Helpful. Thank you I'll turn it over.

Thanks Sharon.

Speaker 3: Thank you. The next question is from Brian Fast from Raymond James. Please go ahead.

Thank you.

Next question is from Bryan fast from Raymond James. Please go ahead.

Yes, good morning, guys good.

Morning, Brian .

Speaker 8: Just on rental, we saw strength this quarter and has it performed in line with your expectations? And then maybe what kind of investment do you see to get your fleet size to where you want it to be?

Just on rental we saw strength this quarter.

Has performed in line with your expectations and then maybe what kind of investments do you see you get your fleet size to where you want it to be.

Speaker 4: Okay, that's a good question, Brian . We were very pleased as we progressed through the year. Our teams have been working.

Okay. That's good question Brian .

We're very pleased.

As we progress through the year our teams have been working.

Speaker 4: very hard on, you know, how we will look at and assess the utilization on the different product families. And that's in our rental services business, our heavy rents, our power and material handling where strategically we really had to work through a complete reset in there as well. So, um...

Very hard on.

You know, how we look at the Union SaaS utilization on the different product families and that's in our rental services business. Our heavy rents are power and material handling where strategically we really had.

I had to work through a complete reset in there as well so.

Speaker 4: You know, I think we've improved, the efficiencies have improved, still a ways to go in the utilization. We're very satisfied with the improved utilization as the year progressed. That said, it's been, you know, we might be a bit unique because we have strategically such a strong strategic view and investment strategy on the rental throughout all the different businesses.

I think we've improved the efficiencies have improved still ways to go in the utilization, we're very satisfied with the improved utilization as the year progressed that said it's been.

We might be a bit unique because we have strategically such a strong strategic view and investment.

Strategy on the rental throughout all the different businesses.

Speaker 4: It's been a balance, you know, with this tight supply on.

It's been a balance with this tight supply on fleet allocation as well as meeting retail and that might be a bit unique for us.

Speaker 4: fleet allocation as well as meeting retail, and that might be a bit unique for us in how things are balancing out here. I think the teams have done a nice job balancing those demand signals with our supply partners, but we were tight on fleet uploads, trying to balance both factors of retail and rental fleet uploads. So I think overall the team did a reasonably good job in there, and we're pleased with the progress we're seeing now on our rental business.

Things are balancing out here I think the teams have done a nice job balancing those demand signals with our supply partners, but I mean.

We were tight on fleet uploads.

Trying to balance. These these are both factors that retail and rental fleet uploads. So.

I think overall the team did it.

Good job in there and we're pleased with the progress we're seeing now.

On a rental business.

Speaker 8: Okay, thanks. That's good color. And then, maybe as you reflect on the last couple of years and the pressures you have faced on the supply side, will this change the way you approach inventory management going forward, or are there any learnings that you are able to take away? Yeah, so we...

Okay. Thanks, Thats good color.

Maybe as you reflect on the last couple of years the pressures you faced on the supply side.

Will this change the way you approach inventory management going forward or are there any learnings that you are able to take away.

Yes, so we.

It's a combination of.

Speaker 4: You know, I think we've always tried to be a good, showing good discipline on the asset management and when we try and be opportunistic relative to demand signals, but both on new used and how we look at rebuild activities and rentals, but there is some learnings in there. I think also we're assessing data better than we did a couple of years ago and how we work with our suppliers on ordering our parts.

I think I think we've always tried to be good.

Showing good discipline on the asset management.

And.

When we try and be opportunistic relative to demand signals, but both on new used and how we look at rebuild activities in rentals.

But there is some learnings in there I think also we're assessing data better than we did a couple years ago.

And how we work with our suppliers on ordering our parts.

Speaker 4: and being better providers of demand signals to our supply chain through the data points that we're monitoring closely, and as well as, you know, how we look at customers' fleet aging. We have better information there. So I think, you know, that's an area we continue to focus on with our investments in our digital strategies, and we continue to build on that strategy as well. I mean, we, you know, we're...

And being better.

Providers have demand signals to our supply chain through the data points that we're monitoring closely and as well as how we look at customers' fleet ages, and we get better information there. So.

I think that's an area we continue to focus on with our investments in our digital strategies.

And we continue to build on that strategy as well.

No.

We saw some.

Speaker 4: continuing improvement in our CVA activity as well as

Continued improvement in our CVA activity as well as <unk>.

Speaker 4: are how we're monitoring our parts flow. So yeah, those are all areas that we continue to look at strategically. Yeah, you know, a couple, a couple of things to Brian mentioned sort of elaborate on what Scott mentioned when we look at what we've pandemic aside.

Or how we're monitoring our parks flow. So those are all areas that we continue to look at strategically.

A couple a couple of things too.

Bryan just mentioned the sort.

Sort of elaborate on what Scott mentioned, when we look at what we've pandemic aside.

Speaker 4: For a year now we've been on TDMS on our on our platform for the Tormont Cat business with Quebec and Maritimes That's given us that visibility Scott talks about the ability to

For a year now we've been on television on our on our platform for the Tomo CAD business with Quebec, and Maritimes Thats, given us that visibility as Scott talks about the ability to to optimize better plus we're still working the integration and working with the teams on that side of things. So that's been helpful, but outside of that to.

Speaker 4: to optimize better. Plus, we're still working the integration, right? And working with the teams on that side of things. So that's been helpful. But outside of that.

Speaker 4: two businesses that have done a really nice job on the inventory side in the interim have been like in the material handling side and also in the AQS business. And so both of those businesses have really done a nice job managing their inventories and those are of course smaller pieces for us within the equipment group, but we've taken the opportunity during this time to really work on those businesses and the teams have done a nice job. So I would say.

Two businesses that have done a really nice job on the inventory side in the interim have been like in our material handling side.

And also in the <unk> business and so both of those business have really done a nice job managing their inventories and those are of course smaller pieces for us within the equipment group, but.

We've taken the opportunity during this time to really work on those businesses and the teams have done a nice job so I would say.

Speaker 4: you know, there's better optimization across the business units, partly due to systems, but also the, you know, the focus that the team has put on it. And.

Theres better optimization across the business units, partly due to systems, but also the focus that the team has put on it.

Speaker 4: Again, the third piece may be as we look at some of the new opportunities and mining spaces and things like that, we often with CVAs and things, we'll invest to partner with those customers for the long-term or provide long-term service agreements. We would expect to be strategically investing and partnering with those folks as well.

Again, the third piece, maybe as we look at some of the new opportunities in mining spaces and things like that we often with CVA and.

And things, we will invest to partner with those customers for the long term and provide.

Term service agreements, so we would expect to be strategically investing and partnering with those folks as well.

Great. Thanks, very good color that's it for me.

Once again.

Once again, please press star one on your device keypad, if you have a question.

Speaker 3: And once again, please press star 1 on your device keypad if you have a question.

Speaker 3: And the next question is from Maxim Sychev, National Bank Financial. Please go ahead.

And the next question is from Maxim <unk> National Bank Financial Please go ahead.

Hi, good morning, gentlemen.

Morning Max.

Speaker 4: I just have a couple of quick ones, if I may. So, Scott, when I look at the language in terms of, you know, some of the equipment deliveries were brought forward, and then there was obviously slippage at the back end. I don't know if you can quantify this, like is it like sort of 40-60, 60-40, in terms of how that played out for the entirety of the year, so we can just try to think about calibration on a go-forward basis?

Just a couple of quick ones if I may.

When I look at the language in terms of.

Some of the equipment deliveries were brought forward and then there was obviously a slippage at the backend.

I don't know if you can quantify this like is it like sort of 46% to 60 40 in terms of how that played out for the entirety of the year. So we can just trying to think about calibration of the going forward basis.

Well.

Speaker 4: kind of difficult to break it down, but I'll give you some color on like there was a combination of again that first half, particularly in the second quarter, from a historical basis, that industry activity was incredibly strong. And then so as the year progressed, and we expected it because it was such a heated market, and I was pleased that we were able to meet those demands reasonably well with the iron that we had ordered. In the fourth quarter, there was some softness that came in. I think the overall industries were down almost 10%, so there was some softness in there. But we were pleased again that our bookings on the equipment side were still up in the quarter 10%. But in terms of the slippage, I think

And it's difficult to break it down but I will give you some color on like there was a combination of again that first half, particularly in the second quarter.

From a historical basis that industry activity was incredibly strong and then so as the year progressed and we expected it because it was such a heated.

Market and I was pleased that we were able to meet.

Those demands reasonably well with the iron that we had.

<unk>.

In the fourth quarter. There was some softness that came in I think the overall industries were down.

This 10%. So there is some softness in there, but we were pleased again that our bookings on the equipment side were still up in the quarter, 10%, but.

In terms of the slippage.

Speaker 4: It was mainly on the new units both on

It was mainly on the new units.

Both on the <unk>.

Speaker 4: some of the general construction products as well as the

Some of the general construction projects as well as the.

Speaker 4: smaller products. So CCE, but you know, there's just a lot of moving parts in there.

Smaller products so.

C C.

Yeah.

Theres, just a lot of moving parts in there.

Okay.

Speaker 4: You know, we just, I think we did as best we could with our suppliers, but there was delivery slippage and for various factors. And, you know, it shifted in, you see some of it in the backlog, but.

We just.

I think we did as best we could.

With our suppliers, but there was delivery slippage and for various factors and.

It shifted in your seat and they see some of it in the backlog but.

You know.

That's what took place.

Speaker 5: Yeah, for sure. And I guess, just in terms of maybe, again, thinking forward a little bit, has that dynamic accelerated throughout? Especially as, you know, as you mentioned, Omicron picked up its face in Jan and, well, I guess February already. Or the learnings that you have had in late Q4 sort of moderated a little bit. So how should we think about that?

Yeah for sure and I guess, just in terms of maybe again thinking forward a little bit has that dynamic.

Accelerated throughout <unk>.

Especially as as you mentioned on the chrome picked up.

It's pacing in Shannon, well I guess what February already.

The learnings that you've had in late Q4 sort of.

Moderated a little bit so how should we think about that.

Well I think it was.

Speaker 4: You know, again, we were thinking we were going to deliver more, particularly on the new product in the quarter.

Again, we were thinking we were going to deliver more particularly on the new product.

In the quarter.

<unk>.

So it began to tighten a little more as the quarter progressed.

Speaker 4: So it began to tighten a little more as the quarter progressed.

Speaker 4: But again, we're working hard with our suppliers on the demand signals, and I think it's been stated throughout the industry that it's a very fluid environment on that front with many factors. And so we'll see how things play out here, but we are pleased with that backlog. I mean, that backlog, I think, represents a bit of the slippage as well as some good execution with providing good customer value propositions. And so that's reflective in there as well.

But.

Again, we're working hard with our suppliers on the on the demand signals and.

I think it's been stayed at throughout the industry that it's a very fluid environment on that front with many factors.

So we'll see we'll see how things.

Layout here, but we are pleased with that backlog that backlog I think represents a bit of a slippage as well as.

Some good execution.

Providing customer value propositions, and so thats reflective in there as well.

Speaker 4: The efforts for 20

For 2021.

Speaker 5: Given the state of the balance sheet, I'm just curious if you have an updated thought process around continuing to invest via M&A versus return potentially off capital. Obviously, you've become a bit more active on the CIB, but I'm just trying to see if your thoughts or priorities have shifted at all, given all the moving parts that we're seeing right now.

100% and then given obviously the state of the balance sheet.

I'm just curious if you have.

Sort of an updated thought process around it.

Continuing to invest via M&A versus return potentially off capital, obviously, you've become a bit more active on the CIB, but just trying to see if your thoughts on priorities have shifted at all.

Given all the moving parts are placing right now thanks.

Speaker 4: Yeah, good. There's a couple of things. I think, you know, first and foremost, I don't think...

Yes, Theres a couple a couple of things I think first and foremost I don't think.

Speaker 4: Our approach and our thinking process, our discipline around capital allocation really has changed. First and foremost, Max, we will be focusing on supporting the business requirements, right? Investing organically, supporting availability and reinvestment in the balance sheet to a certain degree, like on the inventory side, we certainly have said that we would be investing more there as availability is there to put some capital to work. We've now lapped a reasonably low inventory level and we expect to see that come back up over time. We'll support growth in the business, of course.

Our approach and our thinking process, our discipline around capital allocation really has changed.

It's first and foremost Max we will be focusing on supporting the business requirements right investing organically.

Supporting availability and investment reinvestment in the balance sheet to a certain degree like on the on the inventory side. We certainly have said that we would be investing more there as availability.

Is there to put some capital to work and so we've now lapped.

Reasonably low inventory level, and we expect to see that come back up over time will support growth in the business of course as opportunities come up.

Speaker 5: as opportunities come up, you know, and I

And I think.

Speaker 4: Again, we'll be looking at a very disciplined approach and projects on a return basis. We haven't deviated from that.

Again, we'll be looking at a very disciplined approach and projects on a return basis, we haven't deviated from that and then sitting on I guess, we're sitting on the cash balance right now.

Speaker 9: And then sitting on, you know, I guess we're sitting on the cash balance right now.

Speaker 9: which is pretty reasonable, but we're a pretty patient company. And so we'll look at opportunities. Integration is the other piece that we've done a lot of work on the QM business. We continue to work through that.

Which is pretty reasonable, but we're pretty patient company and so we will look at opportunities integration is the other piece that well.

We've done a lot of work on the QM business. We continue to work through that that's been a real priority for us throughout and we're I'd say in the battlefield side and so forth. We still have a couple of years to get to full cycle, there where there'll be some more investment going in as.

Speaker 9: That's been a real priority for us throughout and we're, you know, I'd say in the battlefield side and so forth, we still have a couple of years to get the full cycle there. There'll be some more investment going in as we optimize that fleet as well. And so those would be the priorities first and foremost.

As we optimize that fleet as well and so those would be the priorities first and foremost.

Speaker 4: Yeah, I think, you know, that rental fleet, again, we've been, that's been a tough environment to manage over the last few years, Max.

That rental fleet again, we've been that's been a tough environment to manage over the last few years back we would like to have been investing more in there in certain areas.

Speaker 4: We would like to have been investing more in there, in certain areas, and not just in the rental services business, but some of the other businesses like TMH and the heavy and the power. So we're going to be very focused on there in terms of capital allocation, again, some of it depends on availability and that balance between shifting from retail to rental. But we like the rental business strategically, right? And we think it's a growing market and we've got to invest in there. So that's important. We also need to invest.

Not just in the rental services business, but some of the other businesses like <unk> and the heavy and the power. So we're going to be very focused on there in terms of capital allocation again, some of it depends on availability and that balance between shifting from retail to rental, but we like the rental business strategically and we think it's a growing market and we.

Got to invest in there. So that's that's important we also need to invest in our product support continue to.

Speaker 4: And our park support continue to not.

Not.

Speaker 4: And that's a combination of not just investing in the old bricks and mortar, but investing in our digital and IT environment to take that to the next level in how we operate differently. So there's some areas in there that we're strategically focused on and, you know, historically we've...

That's a combination of not just investing in.

And the old bricks and mortar, but investing in our digital.

It environment to take that to the next level and how we operate differently. So there are some areas in there that were strategically Sean and.

Historically, we've had.

Speaker 4: kept our powder dry at times and, you know, it's a unique environment. But we, you know, we continue to look at different things that...

Kept our powder dry at times and.

It's a unique environment, but we continue to look at different things.

Speaker 4: might complement some areas, but you know, we're very focused on the organic growth opportunities that we see right now. Yeah, okay. Thanks. Thanks. Thanks. Thanks.

My compliments to our.

Some areas but.

We're very focused on the organic growth opportunities that we see right now.

Okay.

Bind to that okay.

Okay. Thanks, a lot.

Thanks, Matt.

Thank you. The next question is from <unk> Khan with RBC capital markets. Please go ahead.

Speaker 3: Thank you. The next question is from Sabahat Khan with RBC Capital Markets. Please go ahead.

Speaker 10: All right, thanks and good morning. I guess there's been a lot of discussion around the inventory position. And it looks like demand is obviously strong given the backlog. But maybe can you comment on the mix of demand or the type of products reflected in your equipment backlog and the inventory that you have or you're expecting? Is there a, is it more a matter of volume or maybe if you can comment on the type of products that customers are looking for versus what you're able to get your hands on. And how is that matching up?

Alright, thanks, and good morning.

Theres been a lot of there's been a lot of discussion around the inventory position and it looks like demand is obviously strong given the backlog well maybe can you comment on the mix of demand the type of products reflected in your equipment backlog and the inventory that you have are you expecting is there a is it more matter of volume or.

Maybe if you can comment on the type of products that customers are looking for versus what you're able to get your hands on and how is that matching up.

Well the.

Speaker 4: You know, there is a mix in there, I mean, obviously, but it's a mix with construction mining power, even at Simcoe and even in our smaller...we even have a backlog in there on our small compact equipment, which we, you know, you normally don't see it at that level for a year-end, so there is a mix in there, in the backlog. You know, we were very fortunate to secure some large orders as well.

There is a mix in there I mean, obviously.

But its a mix with construction mining power.

Isn't it.

<unk> and even in our smaller.

Have a backlog in there on our small compact equipment, which we.

Normally you don't see it at that level for for a year and so.

There is a mix in there in the backlog.

We were very fortunate to secure some large orders as well.

Speaker 4: the mining space. So that adds up on the dollar side. But so I think, you know, overall, we're pleased with that backlog and how it is balanced through the different areas. And, you know, now we got to go, you got to execute that backlog. So that's where our focus will be as well.

In the mining space so.

The.

Ads up on the dollar side, but.

I think overall, we're pleased with that backlog and how it is balanced through the different areas.

Now we Gotta go you got to execute that backlog, so that's where our focus will be as well.

Speaker 10: Okay, thanks. And then there's some interesting comments earlier around, you said you maybe want to spend some more, you know, I just want to get a bit of clarification on the digital commentary. Is it more a matter of maybe investing a bit more to get better demand signals or is it maybe spending a bit more time, you know, just better understanding of the data that you have on hand just to understand just kind of what's happening out in the field, just a bit more color on that.

Okay. Thanks, and then Theres some interesting comments earlier around you said, maybe you want to spend some more.

Wanted to get a clarification on the digital commentary is it more a matter of maybe investing a bit more to get better demand signals or is it maybe spending a bit more time.

Just better understanding of the data that you have on hand just to understand.

Just kind of what's happening out in the field just a bit more color on that please.

Speaker 4: Yeah, both. I mean, it's managing the data flow off equipment, and that's all our business is in understanding, you know, utilization factors, predictive analytics, things of that nature that help us be better service and solution providers to our customers. We're very focused on that. We saw, you know, we continue to make progress on our connected assets and our online buying. And then, you know, getting into investing in new platforms and how we connect with different channels, go-to-market channels with our customers. So, you know, that's a key strategic area, and we're being attentive to that area as well. But, you know, we like to go prove it, and that's what we're doing. I mean, we can talk about how many assets we got connected and all these good things, but it's about what we do with it, so that's what we're focused on.

Yes, bolster its managing the data flow of equipment and Thats, all our all our businesses and understanding.

Utilization factors.

Dave analytics things of that nature that help us be better service and solution providers to our customers. We're very focused on that we saw we continue to make progress on our connected assets and our our online buying so that in and then getting into investing in new platforms and how we connect with different <unk>.

Channels go to market channels with our customers so.

That's a key strategic area.

We're being attentive to that area as well.

We'd like to go prove it and that's what we.

We're doing I mean, we can talk about how many assets. We got connected in all of these things, but it's about what we do with it. So that's what we're focused on.

Speaker 10: Okay, great. And then just one last kind of quick follow-up there, you know, you obviously rolled out a lot of systems and undertook some integration with the Hewitt platform. Are you finding that, you know, the visibility to the digital data there and the fleet utilization, et cetera, is it at similar levels between Ontario and Quebec or is there maybe a little bit more work to do on the Quebec side as, you know, the folks here ramp up on the new tools that they have?

Okay, Great and then just one last kind of quick follow up there.

Obviously, you rolled out a lot of systems and undertook some integration with the Hewitt platform are you finding that the visibility to the digital data there in the fleet utilization et cetera is it at similar levels between Ontario, and Quebec or is there maybe a little bit more work to do on the Quebec side as you know the folks here ramp up on the new tools that they have.

Speaker 4: just in terms of getting kind of visibility of what's happening in the field? Yeah, well, we've got much better visibility now that we got that done. And again, I applaud our teams. I mean, we did that in a pandemic. You know, it's hard to move around. And I'm just really, you know, and it was a successful integration. I think everybody knows the complexities of those things and the investment. So I'm really pleased with that. So last year, we did get better visibility and on a more consistent level. And so that helped in some of the operating efficiency. Again, we got to continue to work on executing that. In terms of how that transcends into the digital strategies with our Quebec and Maritimes, yeah, I think we're on a more even playing field now. We're getting better intel from the equipment. But so that's encouraging.

Just in terms of getting kind of visibility into what's happening in the field. We've got much better visibility now that we got that done.

I applaud our teams I mean, we did that in a pandemic.

Hard to move around and I'm just really.

And it was a successful integration and I think everybody knows the complexities of those things and the investments. So really pleased with that so last year, we did get better visibility on a more consistent level and so that helped in some of the operating efficiencies and we've got to continue to work on executing that.

In terms of the how that transcends into the digital strategies with our Quebec and Maritime shot work I think we're on a more even playing field now.

We're getting better Intel off from the <unk>.

<unk>.

So thats encouraging.

Speaker 4: And even on our material handling, we just got the plug-in done on a common ERP on material handling business in Q4.

And even on our material handling and we just got the plug and done on a common ERP on material handling business in Q4, which is good because that's been very complex to operate I mean, we were at one point on three different platforms. So a lot of heavy lifting him there and.

Speaker 9: which is good because that's been very complex to operate. I mean, we were at one point on three different platforms. So, a lot of heavy lifting in there and we're delighted that that's now in a much better spot. Yeah, and I think importantly just on that point too, that Scott mentioned SABA is, I mean, the support staff. I mean, they're not spending time putting stuff together. They're able now to spend time looking at the platform, supporting the business more productively, right? And so those are...

We're delighted that Thats now in a much better spot and I think importantly, just on that point to that Scott mentioned <unk>. The support staff I mean, theyre not spending time, putting stuff together there as they are able now to spend time looking at the platform supporting the business more productively right and so those are those are some maybe digital but process.

Speaker 9: That may be digital, but process efficiencies are starting to take hold, and that's been helpful going into the year now. Perfect. Great. Thanks very much for the call.

Efficiencies are starting to take hold and that's been that's been helpful going into the year now.

Perfect great. Thanks, very much for the color.

Thank you. Thank you.

Speaker 3: Thank you. There are no further questions registered at this time. I would now like to turn the meeting back over to Mr. Michael McNulty.

Thank you.

There are no further questions registered at this time I would now like to turn the meeting back over to Mr. Michael Mcmillan.

Speaker 9: Great. Thank you very much, Eric, and thanks to everyone for the participation today. That concludes our call. Please be safe and have a great day. Thanks again.

Great. Thank you very much Eric and thanks to everyone for their participation today that concludes our call. Please be safe and have a great day. Thanks again.

Speaker 3: Thank you. The conference has now ended. Please disconnect your lines at this time. Thank you for your participation.

Thank you. The conference has now ended please disconnect your lines at this time. Thank you for your participation.

Yeah.

Okay. Thank you Eric.