Q4 2023 Toromont Industries Ltd Earnings Call

Good morning, today's Wednesday February 14th 2024.

Good morning. Today is Wednesday, February 14th, 2024.

Well I'll kind of get a tournament industries limited tiny tiny for your fourth quarter and full year results conference call.

Operator: Welcome to the Toromont Industries Ltd. 2023 4th Quarter and Full Year Results Conference Call. Please be advised that this call is being recorded and all lines have been placed on mute to prevent any background noise. Your host for today will be Mr. John Doolittle, Executive Vice President and Chief Financial Officer. Please go ahead, Mr. Doolittle.

Please be advised that this call is being recorded and all lines have been placed on mute to prevent any background noise.

Your host for today will be Mr. John Doolittle, Executive Vice President and Chief Financial Officer. Please go ahead, Mr. Good level.

John Doolittle: Thank you. Thank you, Lyra. Just double-checking that you can hear me okay.

Thank you Laura just double checking that you can hear me okay.

Yes that sounds great.

Okay fantastic good.

John Doolittle: Thank you very much for joining us today to discuss Toromont's results for the fourth quarter and full year. Also on the call with me this morning is Michael McMillan, President and CEO. Mike and I will be referring to the presentation that is available on our website, and to start, I'd like to refer you to slide two, which is highly entertaining and informational, and it includes an advisory on our forward-looking information and statements. After our prepared remarks, we will be more than happy to answer questions. So let's get started and move to slide three. Please also note that our discussion today will be focused on continuing operations unless otherwise noted. Mike, it's over to you to start us off.

Everyone.

Thank you very much for joining us today to discuss store months results for the fourth quarter and the full year.

Also on the call with me. This morning is Michael Macmillan, President and CEO.

Mike and I will be referring to the presentation that is available on our website.

To start I'd like to refer you.

You to slide two which is highly entertaining and informational and it includes the advisory on forward looking information and statements.

After our prepared remarks was more than happy to answer questions. So, let's get started and move to slide three. Please also note that our discussion today will be focused on continuing operations unless otherwise noted Mike.

Mike over to you to start us off.

Michael McMillan: Great. Thank you very much, John. And good morning, everyone.

Thank you very much John and good morning, everyone.

We're pleased with the good operating and financial performance, which our teams delivered in the fourth quarter and throughout 2023.

Michael McMillan: We're pleased with the good operating and financial performance that our teams delivered in the fourth quarter and throughout 2023, ending the year in a strong financial position. We continue to monitor supply and other market and economic variables. The equipment group continued to execute well, delivering against the opening order backlog in line with customer schedules and improvement in inventory flow, coupled with good growth in rental and product support activity, as well as continued focus on expense control. Chemical revenue and the bottom line improved for the year on good execution and higher product support activity. Across the organization, we continue to navigate through evolving economic conditions and remain committed to our operating disciplines, driving our aftermarket strategies, and delivering customer solutions. 2023 has had its share of challenges.

Ending the year in a strong financial position.

We continue to monitor supply and other market and economic variables. The equipment group continued to execute well delivering against the opening order backlog in line with customer schedules and improvement in inventory flow coupled with good growth in rental and product support activity as well as continued focus.

On expense control.

Simple revenue and bottom line improved for the year on good execution and higher product support activity.

Across the organization, we continue to navigate through evolving economic conditions and remain committed to our operating disciplines, driving our aftermarket strategies and delivering customer solutions.

2023 has had its share of challenges however over the last couple of years. We've made some key organizational changes, which has enabled our team to manage well through post pandemic challenges and a variety of economic dynamics, we have not seen for some time.

Michael McMillan: However, over the last couple of years, we've made some key organizational changes, which have enabled our team to manage well through post-pandemic challenges in a variety of economic dynamics we have not seen for some time. Our team has executed very well, and although there is always room to continuously improve, I am proud of our team, how they are supporting our customers, and remain focused on building our business for the future. Turning now to our financial results, highlighted on slide four, I want to start off by noting that in the fourth quarter of 2022, many of you may recall that a Quebec property was sold, resulting in a pre-tax gain of approximately $17.7 million, which was $15.4 million after tax, or approximately $0.19 per share. In Q4 of 2023, we had an after-tax gain of just over $1 million on a property sale.

Our team has executed very well and although there is always room to continuously improve.

I'm proud of our team how they are supporting our customers and remain focused on building our business for the future.

Turning now to our financial results highlighted on slide four.

Wanted to start off by noting that within the fourth quarter of 2022. Many of you may recall that our Quebec property was sold resulting in a pretax gain of approximately $17 7 million, which was $15 4 million after tax or approximately <unk> 19 per share where in Q4 of 'twenty.

'twenty three we had an after tax gain of just over $1 million for property sale.

Michael McMillan: This impacts the comparability of our results in both the quarter and year to date. However, fourth quarter results demonstrated strong, focused execution from our team. While operating income decreased 3% in the quarter, excluding property gains in both years, operating income increased 5%.

This impacts the comparability of our results in both the quarter and year to date.

Fourth quarter results demonstrated strong focused execution from our teams while operating income decreased 3% in the quarter, excluding property gains in both years operating income increased 5%.

Higher revenues were largely offset.

Michael McMillan: Higher revenues were largely offset by lower gross margins. However, higher revenues and good expense control drove positive results in the equipment group with strong year-end customer demand. Results at Simcoe were moderately down from the same period last year, with continued growth and product support activity levels partially offset by higher expenses and lower gross margins. For the full year of 2023, the company delivered strong bottom-line results, reflecting good execution on our opening backlog, customer demand for products and services, and favorable operating leverage. Higher revenue in both the Equipment Group and Simcoe, lower relative expenses, and higher interest income on cash balances were partially offset by lower gross margins. Rental and product support revenue increased on higher customer activity, utilization of the larger fleet, and improved execution. Year-end backlog was healthy and relatively unchanged for the year.

And by lower gross margins higher revenue and good expense control drove positive results in the equipment group with strong year end customer demand.

Results at Simcoe were moderately down from the same period last year with continued growth in product support activity levels, partially offset by higher expenses and lower gross margins.

For the full year 2023, the company delivered strong bottom line results, reflecting good execution on her opening backlog customer demand for our products and services and favorable operating leverage.

Higher revenue in both of your equipment group and Simco lower relative expenses and higher interest income on cash balances were partially offset by lower gross margins.

Rental and product support revenue increased on higher customer activity utilization of the larger fleet and improving execution.

Year end backlog was healthy and relatively unchanged for the year.

Year over year at $1.2 billion and reflects the strong 2023 order activity equipment.

Michael McMillan: Year over year at $1.2 billion and reflects strong 2023 order activity. Equipment inflow through the supply chain continues to generally improve, on a consolidated basis. Revenue increased 9% in the quarter and was up 12% for the year.

Equipment inflows through the supply chain continues to generally improve.

On a consolidated basis rare.

Revenue increased 9% in the quarter and was up 12% for the year.

Michael McMillan: Equipment and package sales increased in both the quarter and on a year-to-date basis, with good increases in both groups in the quarter. Product support and rental revenue also increased in both the quarter and on a year-to-date basis. Product support increased on stronger demand and technician availability, with work and process levels remaining relatively high, while rental revenue increased on a larger fleet and higher utilization. However, operating income was down 3% in the quarter and up 14% year-to-date, reflecting lower property gains in the quarter versus the comparative period and lower gross margins partially offset by higher year-to-date revenue.

Equipment and packaged sales increased in both the quarter and on a year to date basis with good increases in both groups in the quarter.

Product support and rental revenue increased in both the quarter and on a year to date basis product support increased on stronger demand and technician availability with work in process levels remaining relatively high while rental revenue increased on a larger fleet and higher utilization.

Operating income was down 3% in the quarter and up 14% year to date, reflecting the lower property gains in the quarter versus the comparative period and lower gross margins, partially offset by higher year to date revenue.

On a full year basis expense levels decreased to 11, 7% of revenues.

Michael McMillan: On a full-year basis, expense levels decreased to 11.7% of revenue. Expense management continues to be an area of focus, and net earnings from continued operations decreased 3% in the quarter, again reflecting the property gain last year, and increased to 18% for the full year versus 2022. Basic earnings per share were $1.87 in the quarter and $6.43 for the year from continuing operations.

Expense management continues to be an area of focus and discipline.

Net earnings from continuing operations decreased 3% in the quarter again, reflecting the property gain last year and increased to 18% for the full year versus 2022.

Basic earnings per share was $1 87 in the quarter and $6 43 for the year from continuing operations.

Michael McMillan: General economic and macroeconomic factors appear to be stabilizing, but factors such as inflation, higher interest rates, geopolitical instability, and Canadian dollar movements continue to challenge the business as well as influence customer buying patterns. We are proud of our team as they remain committed to the disciplined execution of our diverse operating model, adapting to changes in the business environment while remaining focused on executing solutions for our customers. Activity levels overall remain sound, with a healthy backlog that is supportive of near-term results.

General economic and macroeconomic factors appear to be stabilizing however factors such as inflation higher interest rates geopolitical instability and the Canadian dollar movements continued to challenge the business as well as influence customer buying patterns.

We are proud of our team as they remain committed to disciplined execution of our diverse operating model adapting to changes in the business environment, while remaining focused on executing solutions for our customers' activity levels overall remain sound.

With healthy with a healthy backlog, which is supportive of near term results.

Michael McMillan: As noted in Q3, we've seen some softening in construction markets, which is reflective of the current economic environment. However, as one would expect, we will continue to monitor market activity levels while we follow our disciplined approach. Delivering results for our customers, suppliers, and employees. Additional efforts continue to focus on managing our discretionary spend and actively recruiting technicians to effectively support our critical aftermarket service strategies and value-added product offering over the long term. With our solid order backlog and balance sheet, we are well positioned as we enter 2024 and will continue to support the business through thoughtful capital deployment. John, I'll turn it back over to you for some more detailed comments on the group results. Very good. Thank you, Mike.

As noted in Q3, we've seen some softening in construction markets, which is reflective of the current economic environment.

However, as one would expect we will continue to monitor market activity levels, while we focus while we follow our disciplined approach.

Delivering results for our customers suppliers and employees.

Additional efforts continue to focus on managing our discretionary spend and actively recruiting technicians to effectively support our critical aftermarket service strategies and value added product offering over the long term.

With our solid order backlog and balance sheet, we are well positioned as we enter 2024, and we will continue to support the business through thoughtful capital deployment.

John I'll turn it back over to you for some more detailed comments on the group result, very good. Thank you, Mike let's start with the equipment group on slide five revenue was up 9% in the quarter and 12% year to date taken together total new and used equipment sales were up 15% in both the quarter and the year.

John Doolittle: Let's start with the equipment group on slide five. Revenue was up 9% in the quarter and 12% year-to-date. Taken together, total new and used equipment sales were up 15% in both the quarter and the year. This growth reflects the inflow and delivery of equipment against the order backlog, coupled with end customer demand. New equipment sales increased 19% in the quarter on good deliveries in the construction, mining, and power system markets, while material handling markets were lower. Year-to-date, new equipment sales increased 20% across all market segments and regions as the supply of equipment improved. Sales decreased 7% in the quarter and 4% year-to-date.

<unk> growth reflects the inflow in delivery of equipment against the order backlog, coupled with end customer demand.

New equipment sales increased 19% in the quarter when good deliveries into construction mining and power system markets will materially.

We are handling markets were lower year to date, new equipment sales increased 20% across all market segments and regions as the supply of equipment improved use appointment soon.

<unk> decreased 7% in the quarter and 4% year to date used equipment sales from trades and purchases have been lower in the current year as supply and demand dynamics have shifted.

John Doolittle: Used equipment sales from trades and purchases have been lower in the current year as supply and demand dynamics have shifted. Used equipment sales also include rental fleet dispositions, which have increased in the current year after a period of constraints, reflecting fleet management decisions, as well as the availability and cost of new equipment. In the quarter, total new and used equipment sales increased 15% in construction, 13% in mining, 22% in power systems, and were 8% lower in material handling. Rental revenue was up 7% in the quarter, 8% for the year, reflecting higher market activity, strong execution, and an expanded heavy and light equipment fleet. Growth was experienced in most areas for the year with the following increases: light equipment rentals up 7%, heavy equipment rentals up 11%, power rentals up 12%, and material handling up 3%. Renault Fleet was at $81.1 million versus $44.7 million a year ago and is starting to return to more typical levels.

Used equipment sales also include rental fleet dispositions, which have increased in the current year. After a period of constraint reflect a fleet management decisions as well as the availability and cost of new equipment.

In the quarter total new and used equipment sales increased 15% in construction, 13% and mining 22% in power systems and were 8% lower in material handling.

Rental revenue was up 7% in the quarter, 8% for the year, reflecting higher market activity strong execution, and an expanded heavy and light equipment fleet growth was experienced in most areas for the year with a following increases light equipment rentals up 7%.

Or are your equipment rentals up 11% tower rentals up 12% and material handling up 3%.

[laughter] was at $81 1 million versus $44 seven a year ago, and it's starting to return to more typical levels.

Product support revenues grew 4% in the quarter and 10% in the year with increases in both parts and service revenue across all markets in most regions.

John Doolittle: Product support revenue grew 4% in the quarter and 10% in the year, with increases in both parts and service revenue across all markets in most regions. Looking at specific markets for the year, growth was as follows: construction up 7%, mining up 13%, power systems up 17%, and material handling up 8%. Gross profit margins decreased 150 basis points in the quarter and 50 basis points in the year compared to 2022.

Looking at specific markets for the year growth was as follows construction up 7% mining up 13 power systems up 17, immaterial Henry up 8%.

Gross profit margins decreased 150 basis points in the quarter and 50 basis points in the year compared to 2022.

John Doolittle: Equipment margins were lower in both the quarter and the year, mainly reflecting competitive market conditions after a period of constrained supply, an unfavorable sales mix, and a higher proportion of new versus used equipment. Product support margins were slightly lower in the quarter, but higher for the year compared to 2022. We continue to focus on operational efficiency. Rental gross margins were higher in the quarter, however, lower for the full year compared to 20

Margins were lower in both the quarter and the year, mainly reflecting competitive market conditions after a period of constrained supply.

Coupled with <unk>.

Unfavorable sales mix higher proportion of new versus used equipment.

Product support margins were slightly lower in the quarter, but higher for the year compared to 2022, we continue to focus on operational efficiencies.

Rental gross margins were higher in the quarter However, lower.

For the full year compared to 2022.

John Doolittle: Rental utilization is improving after a large upload to the fleet earlier in the year. Rental margins are somewhat challenged by higher recent acquisition costs, in part due to a weaker Canadian dollar and higher maintenance and repair costs. Sales mix was unfavourable in both periods with a higher proportion of equipment sales. Devin Dodge, Yuri Lynk, Cherilyn Radbourne, Sabahat Khan, Toromont Industries Ltd.

Rental utilization is improving after a large outflow to the fleet earlier in the year rental margins are somewhat challenged by higher recent acquisition costs in part due to a weaker Canadian dollar and higher maintenance and repair cost sales mix was unfavorable in both periods with a higher proportion of equipment sales.

Total revenue.

Selling and administrative expenses were up 15% in the quarter and 8% for the year gains on property dispositions to reduce expenses by $1 5 million in the fourth quarter of 'twenty, three and $17 7 million in the fourth quarter of 'twenty two.

John Doolittle: Selling and administrative expenses were up 15% in the quarter and 8% for the year. Gains on property dispositions reduced expenses by 1.5 million in the fourth quarter of 23 and 17.7 million in the fourth quarter of 22. Excluding these gains, expenses decreased $2.5 million, or 3% in the quarter. Thank you very much for levels in inflationary pressure. Allowance for double accounts decreased $1.7 million in a quarter and $7.3 million in a full year basis, reflecting good collection activity and improved aging of receivables.

Excluding these gains expenses decreased $2 5 million or 3% in the quarter.

Reflecting good focus on cost controls compensation costs were largely unchanged with good cost control focus offsetting costs in support of higher activity light.

<unk> and inflationary pressures.

The allowance for doubtful accounts.

Increased $1 7 million in the quarter and 7.3 on a full year basis, reflecting good collection activity and improved proved aging of receivables.

John Doolittle: Selling and administrative expenses were lower at 11.3% as a percentage of revenue versus 11.8% last year. However, operating income decreased 2% for the quarter and increased 12% year-to-date. For the quarter, the decrease mainly reflects the larger property gain in the prior year, along with the lower gross margins in the current period. For the year, the increase reflects higher revenue and lower expenses offset by lower gross margins. Bookings increased 53% in the quarter and 14% year-to-date.

Selling and administrative expenses were lower at 11, 3% as a percentage of revenue versus 11, 8% last year.

Operating income decreased 2% for the quarter and increased 12% year to date for the quarter. The decrease mainly reflects the larger property gain in the prior year along with the.

Lower gross margins in the current period for the year. The increase reflects the higher revenue and lower expenses offset by the lower gross margins.

Bookings increased 53% in the quarter and 14% year to date customer demand improved late in the quarter, mainly in the construction sector, which was up 94%, which had been slower throughout the year power systems and mining bookings were also up 32% and 14% respectively.

John Doolittle: Customer demand improved late in the quarter, mainly in the construction sector, which was up 94%, which had been slower throughout the year. Power systems and mining bookings were also up 32% and 14%, respectively, while material handling was down 12%. For the full year,

Materials handling was down 12%.

For the full year.

John Doolittle: Bookings were as follows: mining was up 66%, power 23%, and construction 1%, partially offset by lower material handling bookings, which were down 21%. The backlog of $957 million was 7% lower than last year, reflecting improving equipment delivery for manufacturers, as well as planned deliveries against customer orders. Approximately 90% of the backlog. It's expected to be delivered in 2024, but of course, subject to timing differences, it's depending upon vendor supply, customer activity, and delivery schedule. Now to slide six in Simcoe.

Bookings were as follows my name was up 66% power, 23% and construction, 1%, partially offset by lower material handling bookings, which were down 21%.

And backlog of $957 million was 7% lower than last year, reflecting improving equipment delivery for manufacturers as well as planned deliveries against customer orders approximately 90% of the backlog.

It is expected to be delivered in in 2024, but of course subject to timing differences, depending upon vendors fly customer activity and delivery schedules.

Now to.

Slide six in Simcoe ER revenue was up 2% in the quarter and 13% on a full year basis with the progress on construction schedules against strong order backlog and good customer demand.

John Doolittle: Revenue is up 2% in the quarter and 13% on a full year basis due to progress on construction schedules against strong order backlog and good customer demand. Package revenue decreased 8% in the quarter as equipment supply issues and customer delays deferred some projects into 2024.

Package revenue decreased 8% in the quarter as equipment supply issues with customer delays have deferred some projects into 2024.

John Doolittle: Recreational revenues were up 25%, but they were more than offset by lower industrial revenues down 25% against a strong comparison. In Canada, revenue is down, with stronger recreational activity being offset by weaker industrial activity. In the U.S., package sales were also down, mainly due to lower recreational activity.

Recreational revenues were up 25%, but were more than offset by lower industrial revenue is down 25% against a strong comparative.

In Canada revenue was down with stronger recreational activity being offset by weaker industrial activity.

In the U S package sales were also down mainly on lower recreational activity.

John Doolittle: For the year, package revenues were up 8% with increases in both markets. Industrial market revenue was up, with higher activity in the U.S. offset by lower revenue in Canada. Recreational market revenue increased as higher revenue in Canada was offset by lower revenue in the U.S. Product support revenue improved 14% in the quarter and 18% for the year with increases in both Canada and the U.S. Activity levels have continued to improve on good customer demand and an increased technician base. Margins were down 100 basis points in the quarter versus a comparable period last year, as lower product support margins were only partially offset by higher package margins and a favorable sales mix. On a year-to-date basis, gross profit margins increased 220 basis points versus last year. Good project execution and the nature of projects in process, along with favorable sales mix, all contributed to the increase in margins. Selling and administrative expenses were up 9% in the quarter and 11% in the year. Bad debt expenses decreased $0.7 million in the quarter and increased $2 million for the year.

For the year package revenue was package revenues were up 8% with increases in both markets industrial market revenue was up with higher activity in the U S offset by lower revenue in Canada.

Recreational market revenue increased as higher revenue, Canada was offset by lower revenue in the U S.

Product support revenue improved 14% in the quarter and 18% for the year with increases in both Canada and the U S activity levels have continued to improve our good customer demand and the increased technician base Mara.

Margins were down 100% in the quarter, sorry, 100 basis points in the quarter versus the comparable comparable period last year as lower product support margins were only partially offset by higher package margins and a favorable sales mix on a year to date basis gross profit margins increased 220 basis points versus last year.

Good project execution and the nature of projects in process, along with favorable sales mix all contributed to the increase in margins.

So are you in a minute stative expenses were up 9% in the quarter and 11% in the year bad debt expenses decreased $1 7 million in the quarter and increased $2 million for the year. Overall, we remain focused on collection activity and monitor closely our aged receivables compensation costs increased due to an.

John Doolittle: Overall, we remain focused on collection activity and monitor closely our age receivables. Compensation costs increased due to an increased headcount, annual salary increases, and higher profit sharing accruals with a higher earnings level. Other expenditures, such as travel and training expenses, increased support activity and staffing levels. As a percentage of revenue, selling administrative expenses improved 16% in 2023 versus 16.3% in 2022, reflecting continued focus on expense control. Operating income decreased $1.7 million for the quarter, as the higher revenue was dampened by lower gross margins and higher SG&A.

Increased headcount annual salary increases and higher profit sharing accruals with a higher earnings level other expenditures such as travel and training expenses increased support activity and staffing levels.

As a percentage of revenue selling and administrative expenses improved to 16% in 2023 versus 16, 3% in 2022, reflecting continued focus on expense control.

Operating income decreased $1 7 million for the quarter as the higher revenue was dampened by lower gross margins and higher SG&A operating income increased 49% for the year, reflecting improved gross margins and higher revenue.

John Doolittle: Operating income increased 49% for the year, reflecting improved gross margins and higher revenue. Bookings increased 24% for the quarter on higher orders in Canada and lower orders in the U.S. Timing of decisions by customers and receipt of orders can vary from period to period. On a full year basis, bookings were up 19%, at $246 million, with a 35% increase in Canada and an 18% decrease in the US.

Bookings increased 24% in the quarter on higher orders in Canada, and lower orders in the U S timing of decisions by customers and receipt of orders can vary from period to period.

On a full year basis bookings were up 19% at $246 million with a 35% increase in Canada, and an 18% decrease in the U S. Industrial bookings were up 58% and recreational orders down 30%.

John Doolittle: Industrial bookings were up 58%, and recreation orders were down 30%. Backlog of $255 million was 29% higher versus last year with an increase in the industrial market on good order intake, partially offset by a decrease in the recreational market. Approximately 85% of all the backlog is expected to be realized as revenue in 2024. However, again, this is subject to construction schedules and potential changes from supply chain constraints. On slide 7, I'd like to touch on a few key financial highlights. Investment in non-cash working capital increased 20% versus a year ago, mainly driven by higher inventory levels.

Backlog of $255 million was 29% higher versus last year with an increase in the industrial market on good order intake, partially offset by a decrease in the recreational market approximately 85% of all the backlog is expected to be realized as revenue in 2024. However, again this is subject to <unk>.

Construction schedules and potential changes from.

Supply chain constraints.

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

<unk> and noncash working capital increased 20% versus a year ago, mainly driven by higher inventory levels inventory levels are higher than the prior year driven by a number of factors, including our strong backlog delivery timing for anybody variability in the supply chain for both equipment and parts, coupled with foreign exchange and inflation.

John Doolittle: Inventory levels are higher than the prior year, driven by a number of factors, including a strong backlog, delivery timing, variability in the supply chain for both equipment and parts, coupled with foreign exchange and inflation. Accounts receivable continue to receive focus. And while DSO remained flat at 42 days compared to the prior year, we are closely managing the aging of our receivables and credit. We ended the year with ample liquidity, including cash of over a billion and an additional $460 million available to us under existing credit facilities. Our net bet to total cap was negative 17%. Under our NCIB program, the company purchased and canceled 353,000 common shares for $37.5 million to date for the year.

Accounts receivable continue to receive focus and while DSO remained flat at 42 days compared to the prior year. We are closely managing the aging of our receivables and credit metrics we.

We ended the year with ample liquidity, including cash of over $1 billion, an additional $460 million available to us under existing credit facilities, our net debt to total cap was negative 17%.

Under in CIB program, the company purchased and canceled 353000 common shares for $37 5 million to date for the year. These purchases are reflected with good capital hygiene intended to help mitigate option exercise dilution.

John Doolittle: These purchases are reflective of good capital hygiene intended to help mitigate option exercise dilution. Overall, our balance sheet remains well positioned to support operational needs, and we're prepared to manage challenges related to economic variables and business conditions. We will continue to exercise operational and financial discipline as we evaluate investment opportunities that may develop over time. As you know, Toromont targets a return on equity of 18% over a business cycle. Return on equity decreased to 22.8% compared to 23.3% for 2022, while our five-year average is 20.8%. Return on capital employed was 30.1%, down from 32.1% last year. Both metrics decreased year over year, reflecting higher investments in working capital.

Overall, our balance sheet remains well positioned to support operational needs and we're prepared to manage challenges related to economic variables and business conditions. We will continue to exercise the operational and financial discipline as we evaluate investment opportunities that may develop over time.

As you know the term on targets are return on equity of 18% over a business cycle.

Turn on equity decreased to 22, 8% compared to $23 three for 2022, while our five year average is 28%.

Return on capital employed was 31% down from 32, 1% last year, both metrics decrease year over year over year, reflecting higher investments in working capital.

And finally.

Whereas as announced yesterday the board of directors to increase the quarterly dividend by 11, 6%.

John Doolittle: And finally, as announced yesterday, the Board of Directors increased the quarterly dividend by 11.6%, to $0.48 per share.

To <unk> 48 per share for them. It has paid dividends every year since 1968, and this is a 35th consecutive year of dividend increases we continue to be proud of this track record and our disciplined approach to capital allocation.

John Doolittle: Toromont has paid dividends every year since 1968, and this is the 35th consecutive year of dividend increases. We continue to be proud of this track record and our disciplined approach to capital allocation. On slide eight, we conclude with some takeaways as we look forward to 2024. We expect the business environment to be influenced by a number of factors that are in play, some of which include the evolving dynamics of the global supply chain, improving availability, inflationary and macroeconomic trends, and managing customer credit risk, along with growth opportunities, all of which can overshadow normal seasonality and customer buying patterns. We continue to proactively manage, proactively monitor developments closely, and take actions that we believe are appropriate.

On slide eight we conclude some takeaways as we look forward to 2024.

We expect the business environment to be influenced by a number of factors that are in play some of which include the evolving dynamics of global supply chain, improving availability inflationary and macroeconomic trends and managing customer credit risk along with grow broth growth opportunities all of which can overshadow normal seasonality and customer buying patterns.

We continue to proactively manage.

Proactively monitor developments closely and take actions that we believe are appropriate.

As one would expect we consistently focus on key priority areas, including safe operational execution, serving and supporting our customer requirements and our disciplined approach to capital allocation as we focus on building the business for the long term.

Our backlog remains.

Remains well positioned for personal care must be taken to monitor customer buying patterns and preferences.

Michael McMillan: As one would expect, we consistently focus on key priority areas, including safe, operational execution, serving, and supporting our customer requirements, and our disciplined approach to capital allocation, as we focus on building the business for the long term. Our backlog remains well-positioned, but we must be taking a monitor of customer buying patterns and preferences. In terms of technician hiring, we continue to actively recruit.

Terms of technician hiring we continue to actively recruit and this remains in a central focus and support growth in our aftermarket and value added products.

Service offerings operationally and financially we are well positioned with ample liquidity and strong leadership disciplined culture and focused operating models.

Models.

Do you want to finish.

Yeah, we appreciate our entire team's exceptional exceptional effort and commitment to continue to support our customers and deliver value for our stakeholders.

Michael McMillan: And this remains an essential focus of support growth in our aftermarket and value-added product service offer. Operationally and financially, we are well positioned with ample liquidity and strong leadership, a disciplined culture, and a focused operating model. Do you want to finish this... We appreciate our entire team's exceptional effort and commitment to continue to support our customers and deliver value for our stakeholders. Thanks also to our valued customers, supply partners, and shareholders for their continued support. And so that concludes our prepared remarks and operator. If we could turn it back over to you, we're all set to take questions. Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the number 1 on your touchtone phone. You will hear a three-tone prompt acknowledging your request. Should you wish to decline from the polling process, please press star followed by the number 2. If you are using a speakerphone, please lift your handset before pressing any key.

Also if you are a valued customers supply partners and shareholders for their continued support and so that concludes our prepared remarks and operator.

If we could turn it back over to you and we're all set to take questions.

Laura Thank you Sir.

Ladies and gentlemen, we will now begin the question and answer session. So do you have a question. Please press star followed by the number one on your Touchstone.

You will hear at Visteon com.

Okay.

Thank you Mr. Kurt on the polling process. Please press star followed by the number thank you.

Thank you Peter.

Can you please lift your handset before pressing.

We have our first question coming from the line of Joanne Rob Cohen from from Cowen. Please go ahead.

Very much and good morning, good morning, Tim Good morning, Sharon.

Operator: Thank you. We have our first question coming from the line of Cherilyn Radbourne from T.D. Callen.

As you've noted.

Jim.

Hum.

Jackson.

Q4 bookings were quite strong.

Cherilyn Radbourne: Thank you very much and good morning. As you've noted, you've seen some softness in construction, and yet your Q4 bookings were quite strong, in part due to late quarter strength in construction. So I'm curious what you make of that. Do you attribute that to a late-year budget flush or other factors? Thanks for the question, Cherilyn. I think a couple of things I would say, as we've been talking about, first of all, I'd say availability of equipment and inflow for certain models have improved a fair bit. I think it's also not unusual, as you know, for us to see a little bit of a year-end buy, depending on where customers are positioned and so forth. I think we want to be cautious on that. The third thing I'd mention is the team just did a tremendous job working with our customers and moving products through our supply chain and getting them ready for distribution. It was a big effort.

Linked quarter.

Construction, so I'm curious what you make it that you can be back to a rate year budget flush or other factors.

Yeah no. Thanks for the question Cherilyn I think a couple of things I would say is.

As we've been talking about you know first of all I would say you know availability of equipment inflow for certain models has improved a fair bet and I think you know I think also it's not unusual as you know.

For us to see a little bit of a year end by depending on where customers are positioned and so forth and so I think we want to be cautious on that where at the team did a third thing I'd mentioned is the team just did a tremendous job working with our customers and moving products through our supply and getting them ready for distribution and sell.

You know it whether it was a considerable effort and so.

It's a number of factors I would say again, we you know when we look at the construction markets. You know, we we would position it conservatively just given the activity levels again.

Michael McMillan: It's a number of factors, I would say. When we look at the construction markets, we would position it conservatively, just given the activity levels. Again, I don't think a month makes a trend, but I would say it was a great finish. Again, we have to monitor things as we go into the first quarter here and be mindful of the activity that we see in front of us.

I don't think a month makes a trend, but we you know I would say it was a great finish but.

Again, we have to monitor things as we go into the first quarter here and be mindful of the activity that we see in front of us.

Okay, and then I was hoping you could give us some color on the strength that you're seeing in Paris.

Michael McMillan: And then I was hoping you could give us some color on the strength that you're seeing in power systems specifically and the extent to which engine supply is a constraint on that activity, if at all. Yeah, it's a good question. You know, I think on the one hand, I would say the team has done a really nice job. There have been a number of changes, some leadership, and the team has executed really well in the past year. And so, you know, a lot of focus on that business over the last bit while we had a couple of nice projects come through, which we're working through for, you know, backup power and standby, and peak shaving and so forth. And so those were in progress.

What's likely.

And the extent to which <unk> Mcguire.

Okay.

No not at all.

Yeah. It's a good question I think on one hand, I would say the team has.

<unk> has done a really nice job theres been a number of changes in leadership and the team has executed really well in the past year.

And so you know a lot of focus in that business over the last little while we had a couple of nice projects come through which we're working through for.

Backup power and standby and peak shaving and so forth and so those are in progress by tiers. The second part of your question I think is important in that.

I would say when we look at availability of equipment one of the one of the areas that certain models are constrained and still or have longer lead times put it that way would be on some of the large bore engines and areas like that and so.

Michael McMillan: But to your second part of your question, I think it is important in that, you know, I would say when we look at availability of equipment, one of the areas that, you know, certain models are constrained in still or have longer lead times, put it that way, would be some of the large bore engines in areas like that. And so, you know, again, if you look at our order backlog, you can see that, you know, power makes up a fairly significant portion of the equipment group's order backlog, right? And so that's promising as well, but lead times are still relatively long... Thank you. Thank you.

You know again, if you look at our order backlog.

You can see that power makes up a fairly significant portion of the equipment group's order backlog.

And so that's promising as well, but lead times are still.

Relatively extended.

Yeah.

Thank you. Thank you great. Thank you Shannon.

We have our next question coming from the line of.

<unk> <unk> from Canaccord Genuity. Please go ahead.

Hey, good morning, guys. Thank you Monica and good morning.

Just on your your SG&A.

Yuri Lynk: Great. We have our next question coming from the line of Yuri Lynk from Canucoy Canoity. Please go ahead.

Excluding excluding the gain on the real estate.

That was a really good good quarter I mean, that's the lowest ratio in our revenue on SG&A that I've I think I've ever seen out of the company.

Yuri Lynk: Hey, good morning guys. Hey, good morning. Hey, good morning.

John Doolittle: Just on your SG&A, excluding the gain on the real estate, that was a really good quarter; I mean, that's the lowest ratio to revenue on SG&A that I think I've ever seen in the company. Was there anything unusual in the SG&A, whether it be LTIP expense or anything that would have explained such a really low ratio relative to revenue? No, there was nothing unusual there.

Was there anything unusual in the SG&A, whether it would be L tip expense or anything that would have explained.

Such a really low ratio relative to revenue.

No. There was nothing unusual there I would just say you know having having been here for.

John Doolittle: I would just say, having been here for over three months now, the company is very focused on managing costs. And that continued in the fourth quarter, and that's what you see in the results. And you mentioned Yuri, just in terms of the ratio of revenue, again, strong revenue numbers, right? And so, beyond the discipline, which John mentioned, I think... You know, that's a factor as well, right? When you see, I had quite a strong quarter. Okay, good.

So over three months now the company is very focused on managing costs and that continued in the fourth quarter and that's what you see in the results.

And you mentioned here just in terms of the ratio of revenue again strong revenue numbers right.

So beyond the discipline, which John mentioned I think.

That's a factor as well right when you see.

Quite a strong quarter.

Yeah, that's certainly yeah blends down the ratio.

Okay, good nice to see.

Michael McMillan: Nice to see. For my second one, maybe just some clarification. I mean, it sounds like we're getting back to typical seasonality where Q1 would normally be the weakest quarter of the year, but then I look at your inventory levels and your WIP levels, and I do see the opportunity for another unusually strong first quarter. So how do I square that?

For my second one maybe just some clarity I mean, it sounds like we're getting back to.

Typical seasonality, where Q1 would normally be the weakest quarter of the year, but then I look at your inventory levels and your whip levels and I do see the opportunity for another unusually strong first quarter. So so how do I, how do I square that where are we in in terms of getting back to.

Michael McMillan: Where are we in terms of getting back to a typical seasonal year? Yeah, it's a good question. I would still say that we're seeing the effects of some of the macroeconomic factors we continue to reference there. And you can't get away from normal seasonality and weather patterns here in Canada, although it's been a little warmer and that sort of thing.

A typical seasonal year.

Yeah. Good question I would still say that we're seeing the effects of some of the macroeconomic factors we continue to reference there.

You can't get away from the normal seasonality and weather patterns here in Canada, although it's been a little warmer and that sort of thing but.

Michael McMillan: But, you know, I think, you know, we are, encouraged, I guess you'd say, in a sense, just in terms of the flow and the availability. Some constrained units still exist in the supply chain, which we'll continue to work through. But I would, you know, I think just broadly when you think of the marketplace, you know, we've mentioned construction, a little bit softer. Now, we've come through several years of pretty robust activity, so comparatively.

I think.

You know we are.

Encouraged I guess you'd say in a sense just in terms of the flow and the availability.

Some constrained units still exist in the supply chain, which for us to continue to work through.

But I would you know I think just just broadly when you think of the marketplace. We've mentioned constructions little bit soft right now we've come through several years of pretty robust activity. So comparatively speaking.

Michael McMillan: When you look at our other parts of the business, I think one of the benefits we have in the mining side, for example, is longer-term order books and so forth and working with customers to continue to work on that side of the business. And so that has its own unique cycle as well, and so that's been a benefit to us as we look back. And as we complete some of the orders in the back. Okay. Another nice quarter, guys. I'll turn it over.

When you look at our other parts of the business I think one of the benefits we have in the mining side. For example, as you know longer duration longer term order books, and so forth and working with customers continuing to work on that side of the business and so that.

It has its own unique cycle as.

As well and so that's been a benefit to us as we look back.

And as we complete some of the orders in the backlog as well.

Okay, another nice quarter, guys I'll turn it over.

Great. Thank you. Thank you.

Jacob Bout: Thank you. Thank you. Our next question comes from the line of Jacob Bout from CIBC. Please go ahead.

Thank you.

Our next question comes from the line of Jacob bout CIBC. Please go ahead.

Operator: Hi. Good morning, Mike and John. This is Rahul on for Jacob.

Okay.

Hi, Good morning, Mike and John This is Rahul on for Jacob.

Great. Good morning, Good morning, Ralph Good morning, good morning.

Operator: Great. Good morning, Rahul. Good morning, Rahul.

Michael McMillan: Morning. Good morning. So, I had a question on margins. Notice that the mix of mining equipment and backlog is higher this year, but you know, I suspect that product support and rental may be a bigger part of the mix this year as well. So, lots of moving parts as always, but just curious to get your thoughts on how you see overall margins evolving this year. Thanks for the question. Maybe I'll start with that, and John can add color later.

So I had a question on margins.

That mix in mining equipment in backlog is higher this year.

With respect that product support and rental may be a bigger part of the mix this year as well. So so lots of moving parts as always but just curious to get your thoughts on how you see overall margins are evolving this year, yes.

Yes, no. Thanks for the question, maybe I'll start with that and John can add color.

Michael McMillan: I think we would always direct you to the factors affecting margin. You look at our margin over the course of the year because we provide you with a blended number. You mentioned mining.

I think again, we would always direct you to the factors affecting margin and you look at our margin over the course of the year and because we provide you with a blended number and you mentioned mining again.

Michael McMillan: Again, we've had in our backlogs over the course of all of last year and probably back into 2022, some nice order bookings in the mining side of the business. Now they have a longer duration to fulfill those orders, and so forth, and they can be a little bit lumpy. But when you look at the order book today... We've got in the backlog, for example, mining is about 38%, and construction is 25-30%. Generally, you're going to see different profiles there.

We've had in our backlog over the course of all of last year and probably back into 'twenty two.

Some nice order bookings in the mining side of the business now they have longer duration.

You know to fulfill those orders and so forth and they can be a little bit lumpy.

But when you look at you look at the order book today.

You know we've we've got in the backlog for example of mining is about 38% I think.

And constructions, 25% to 30% so.

Generally youre going to see different profiles, there I think when it comes to margin, though when you think through it you know one of the things we've been talking about is a little bit of softness and better availability for everybody in the in the industry.

Michael McMillan: When it comes to margin, though, and you think through it, one of the things we've been talking about is a little bit of softness and better availability for everybody in the industry. We anticipate coming off a little bit on some of the historic high margins in certain segments. But offsetting that, you also need to think about, as you mentioned, the mining side, used equipment is a little bit more targeted, coming off some stronger numbers as well, especially with availability on new. But also on the rental side, for example, when we look at rental activity levels, utilization has been holding in nicely, even with higher acquisition costs. And product support mix, as you touched on, I think is the other factor to keep in mind.

And so we anticipate a little bit coming off a little bit on some of the historic high margins in certain segments.

But offsetting that you also need to think about as you mentioned in the mining side used equipment.

Is it a little bit more targeted coming off some stronger numbers as well, especially with availability on new but also on the rental side. For example, when we look at rental activity levels utilization had been.

And nicely, even with higher acquisition costs.

In product support mix as you touched on I think is the other factor to keep in mind the mix of product support.

Michael McMillan: The mix of product support, you know, will also affect our gross profit in terms of, you know, that ratio to total revenue, so keep that in mind too as we go through quarters. Again, one quarter. We always tend to look at it longer term because there can be some lumpiness when you think of, even on the Simcoe side, the mining side too. Great, thank you.

You know will also affect our gross profit in terms of that ratio of the total revenue. So keep that in mind too as we go through quarters again, one quarter, we always tend to look at it longer term because some are.

There can be some lumpiness when you think of even on the Simco side mining side and so forth.

Great. Thank you.

Michael McMillan: And then on the rental side, so high single-digit growth in 2023, following a couple years of pretty strong investment in expanding the fleet now. Do you expect this sort of growth rate to continue this year? And what sort of investment are you planning for the rental fleet this year? Yeah, a couple things there.

And then on the rental side, so high single digit growth in 2023 following.

Couple of years is pretty strong investment into expanding the fleet now.

Do you expect this sort of growth rate to continue this year and what sort of investment are you planning into the rental fleet this year.

Yes, a couple of things there I would say you know you're right. We have come off a couple of years with availability of higher investment and so when you look at our disclosure around Capex, you'll see two things actually youll see youll see higher investment this year.

Michael McMillan: I would say, you know, you're right, we have come off a couple years with the availability of higher investment. And so when you look at our disclosure around capital, you'll see two things. You'll see higher investment this year, and you'll also start to see a higher level of disposal which is in our use. You'll see some rollouts, and we do disclose rental proceeds and so forth from disposals, and so you'll see that ticking up a little bit as we turn over the older fleet and replace it with new at a higher acquisition cost. I think, again, we don't provide a lot of guidance, certainly, but I think John would concur as we look at our investment profile, the rental business on its own, the Quebec and Maritimes market, which we're still investing in and building market share there, and our presence, in particular, in that market, but we're always looking at different opportunities and different product lines to complement our allied fleet. We would say that, generally speaking, what Okay, very helpful.

And you'll also start to see a higher level of disposal, which is in our used youll see some rollouts and we do disclose.

Rental proceeds and so forth on disposals, and so youll see that ticking up a little bit as we turn it over the the older fleet and replace it with new at a higher acquisition cost you know I think again, we don't provide a lot of.

Guidance, certainly, but we you know I think John would concur as we look at our investment profile the rental business on its own.

The Quebec, and Maritimes market, which we're still investing in and building.

Market share there and our presence in particular in that market, but we're always looking at different opportunities in different product lines to complement our allied fleet and so we were we would say that generally speaking what you're seeing in the financials for 'twenty three we would we'd be pretty consistent for the next year or two yes I agree.

Okay.

Okay.

We'll leave it there. Thank you. Thank you. Thank you.

Operator: We'll leave it there. Thank you. Thank you. We have our next question from the line of Michael Dumais from Scotiabank, please go ahead. Hey, morning, Mike and John. Hey, morning, Michael.

We have our next question from the line of.

Michael <unk> from Scotiabank. Please go ahead.

Okay.

Hey, good morning, Mike and John.

Morning, Michael.

Good morning, So just to follow up on year. He's SG&A question.

Michael Dumais: So to follow up on Yuri's SG&A question, you know, strong cost containment in the quarter and the year, and really, I'd say in the last couple of years. Maybe the question is, can you call out if there's been any specific initiatives that the company has undertaken to help drive that, and how we should think about, you know, the potential for more operating leverage going forward. Yeah, a couple thoughts there to share with you. I mean, number one, as you know, we tend to manage our cost structure very consistently through the cycle. I would like to say a couple of things.

Strong cost containment in the corner in the year and really I'd say in the last couple of years.

Maybe the question is can you call out if theres been any specific initiatives that the company is undertaken to.

To help drive that.

And how we should think about the potential for more operating leverage going forward.

Yeah, a couple of thoughts there to share with you maybe I mean number one as you know we tend to.

Manage our cost structure and very consistency consistently through the cycle and so you know I would say a couple of things we own about 86% of our real estate and so when you look at our cost structure relatively fixed in that sense.

Michael McMillan: We own about 86% of our real estate, so when you look at our cost structure, it's relatively fixed in that sense. And so you don't see our numbers moving due to moving in and out of lease properties. We like to own our properties.

So you don't see our numbers moving due to moving in and out of leased properties, we like to own our property. So that's a fixed occupancy and maintenance costs are pretty pretty fixed I think what you're also seeing there is.

Michael McMillan: So that's a fixed cost; our occupancy and maintenance costs are pretty fixed. I think what you also see in there is intentional hiring and so forth, so when we're adding to our team, we're looking at the long-term requirements and not over- or under-reacting. That's a pretty consistent approach as well.

Intentional hiring and so forth, so and we're adding to our team we're looking at the long term requirements and.

Not over or under reacting so you.

You know that that's pretty consistent approach as well I think the discretionary spend areas. When you look at travel entertainment and so forth.

Michael McMillan: I think the discretionary spend areas, when you look at travel, entertainment, and so forth, we've learned, as we've always said, we've learned quite a bit through the pandemic. We are very actively going out and meeting with customers. However, we're trying to leverage what we've learned using different means, like electronically to touch customers, and also just trying to meet customers and how they prefer to interact. And so, that's helped us as well balance a little bit of the spend, even with inflationary factors when you consider travel and fuel and so forth. And so, I wouldn't say there's anything in particular you should just expect us to continue to do, aggressively manage our discretionary spend but also make sure that we're providing the appropriate support. You know, a helpful caller, obviously really impressive.

As we've always said, we've learned quite a bit through the pandemic.

We are very actively going out and meeting with customers. However, we're trying to leverage what we've learned using a different means like electronically to touch customers and just also just trying to meet customers and how they prefer to interact and so that's.

And that has helped us as well balance a little bit of the spend even with inflationary factors when you consider travel and fuel and so forth and so you know.

I wouldn't say there's anything in particular, you should just expect us to continue to do.

Aggressively manage our discretionary spend but also make sure that we're providing appropriate support.

Got it helpful color, obviously really impressive.

Michael McMillan: Maybe moving over to the part sales, which moderated in terms of the pace of growth versus the last couple of quarters, and I presume, you know, much of the slowdown relates to tougher comps and maybe some of the price increases we got in 2022. I guess the question is, did you get a sense at all that your customers may be destocking somewhat on parts given, you know, they're also probably adjusting to the better supply chains as well? And, you know, anything we should consider going forward. Yeah, I think I think you hit a couple of interesting items there, Michael.

Maybe moving over to the part sales, but that moderated.

In terms of pace of growth versus the last couple of quarters and I presume.

How much of a slowdown relates to tougher comps maybe some of the price increases about 2022.

The question is did you get a sense at all.

And your customers may be destocking somewhat on parts, given they're also probably adjusting to the better our supply chains as well.

Anything we should consider going forward.

Yes, I think you hit a couple.

Interesting items, there Michael I would say, it's hard to gauge when you think of customers' Destocking like I guess, you know well we did see early in the pandemic as in some areas like the other.

Michael McMillan: I would say it's hard to gauge when you think of customers destocking. Like, I guess, you know, what we did see early in the pandemic in some areas, it's like the toilet paper anomaly where everybody's just trying to protect their business and stock up where they think they need to. And so with availability, we certainly have seen some of that activity again. It's It's not something of great visibility, either.

Other paper anomaly, where.

But he is just trying to protect their business and stock up or they think they need to and so with.

<unk> ability, we certainly have seen.

We have seen some of that activity again, its not something thats, great visibility to but as we have monitor our parts flow we start to see the requirements normalizing to a certain degree and so I think I think that will ebb and flow a little bit there's more confidence in the supply chain and gone are the days I think at this point, where we're scrambling.

Michael McMillan: But as we have monitored our parts flow, we start to see the requirements normalizing to a certain degree. And so I think I think that 11 flows a little bit. There's more confidence in the supply chain. Gone are the days, I think, at this point where, you know, we're scrambling for even just. I would say we saw a few bumps last year just as the supply chain improved. The other piece is when you look at construction activity, as that is moderated, and you mentioned coming off some pretty active and tough comps, I think that will start to show some normalization on the product support side. Thanks.

For even just.

<unk> filters and other things so so that should that should it I would say we saw a few bumps last year, just as as the supply chain improved in.

The parts volume ebbed and flowed I think the other piece that was really importantly is when you look at like we've talked a little bit about the construction activity.

And so as that's moderated and you mentioned coming off some pretty active and tough comps.

That'll start to show some normalization on the product support side as well.

Yes.

Thanks, Scott Thanks, Mike.

Michael McMillan: Thanks, Mike. Thanks, Michael. Our next question is from the line of Steve Hansen from Raymond James. Please go ahead. Just a quick one to follow up on Cherilyn's earlier question. You described construction activity picking up late into the period. Has that been something that's continued into January and February? So we don't, as you know Steve, we don't comment on guidance or the current quarter until it comes out. And I would say it's, again, too early to tell.

Thanks, Michael.

Our next question is from the line of Steve Hansen from Raymond James. Please go ahead.

Oh, yes. Good morning, guys. Thanks for the time, just a quick one to follow up on <unk> earlier question. When you describe the construction activity picking up late in the period is that been something that's continued into January and February.

So we don't as you know, David we don't comment on guidance or.

Current quarter until it comes out.

And I would say it's again, it's early to tell.

Steve Hansen: I would say it's more a function of availability, some year-end activity by our team, as we mentioned, doing a tremendous job closing out the year, and also just our customers evaluating their own financial situation and looking at what they need to have for equipment in their year-end planning. Yeah, I would just add, like Steve, I think we talked about this on the third quarter call. Mike and I are watching this very, very carefully every week. Because, you know, to monitor whether there's a trend there, and we'll continue to do that. And like I said, we're not going to provide guidance on the corridor, but we're watching it very carefully like everybody is, so thank you for the question.

I'd say its more a function of availability.

Some year end activity by our team as we mentioned you know doing a tremendous job.

Closing out the year end and also just our customers are evaluating their their own financial situation looking at what they need to have for equipment and their year end planning process. Yeah, I would just I'd like Steve I think we've talked about this on the third quarter call.

Mike and I were watching this very very carefully every week.

Because.

To monitor whether there's a trend there and we'll.

We will continue to do that Mike said, we're not going to provide guidance on a quarter, but we're watching it very carefully like everybody is so thank you for the question.

I appreciate that and just one quick follow up is just around the rental market I think the activity increased in the quarter, which is good to see but you did note that heavy equipment rentals and material handling are both down notably in the period is there anything to read into that as being a continued trend or is it just something you're seeing as well.

Michael McMillan: Just one quick follow-up on the rental market. I think the activity increased in the quarter, which is good to see, but you did note that heavy equipment rentals and material handling were both down notably in the period. Is there anything to read into that as being a continued trend, or is it just something you're seeing as a one-off in the quarter? Yeah, I think it's probably more of a quarterly phenomenon.

A one off in the quarter.

Yes, I think it's probably more of a quarterly phenomenon I think.

Michael McMillan: I think, again, you know, a little bit less activity in construction, but we are seeing some good results in other areas. You know, I think the other thing to keep in mind is just the broader economic factors. You know, when you think of interest rates, inflation, and the timing of projects, customers are going to rent depending on seasonality as well. You know, we've seen, for example, we're all aware of the weather patterns and things like that. And so, you know, as you can imagine, we're not renting a lot of heating. Maybe this week and going into next, we'll start to see more of that, but heating propane would be a little bit lower.

Again.

Little bit less activity and construction. However, we are seeing some some good results.

In other areas I think the other thing to keep in mind is just the broader economic.

Factors you know when you think of interest rates inflation and timing of projects.

Or is it going to rent depending on the seasonality as well.

We have seen for example, we're all aware of the weather patterns and things like that and so.

As you can imagine we're not renting a lot of heating maybe this weekend going into next will start to see more of that but heating propane would be a little bit lower having said that wheel.

The ground is a little easier to work with and so there'll be other opportunities there too. So it's really a function of I'd say the broader macro piece, but also.

Michael McMillan: Having said that, we'll, you know, the ground is a little easier to work with, and so there'll be other opportunities there too. So it's really a function of, I'd say, the broader macro piece, but also, you know, what we're seeing here in terms of weather patterns and just generally activity levels in construction, as everybody monitors, you know, the economic factors. Appreciate the time, thanks.

What we're seeing here in terms of weather patterns, and just generally activity levels in.

And construction is everybody.

Monitors the economic factors interest rates and so forth.

I appreciate it thanks. Thank.

Thanks, Steve.

Our next question is from the line of <unk> Khan from RBC capital markets. Please go ahead.

Great Thanks, and good morning.

Yes, just one took quite a bit of color by end market. I was wondering if you dig a little bit deeper into some of the commentary around the construction markets I think that at some point last year I think commented about the housing market moderating can you, maybe just talk a little bit about regions and across some of the sub segments within construction, what youre seeing there or whether it's on the demand front or just.

Sabahat Khan: Thank you. Our next question is from the line of Sabahat Khan from RVC Capital Markets. Please go ahead.

Michael McMillan: Great, thanks man. Good morning. I guess just one, you know, took quite a bit of color by and mark, but I was just wondering if you'd dig a little bit deeper into some of the commentary around the construction markets. I think at some point last year, you know, I think he commented about the housing market moderating. Can you maybe just talk a little bit about regions and across some of the sub-segments within construction, what you're seeing there, whether it's on the demand front or just the outlook?

The outlook.

Yeah. Thanks, Thanks have I think broadly if you step back I would say you know on one hand, where you have a pretty diversified customer base rate, where we're blessed with the GTA and Montreal as major markets and you know across the entire space, whether it's road construction residential sewer water.

A number of areas aggregates and support so you know on one hand, you know one of the things we mentioned in the past as well.

We did see and everybody is aware of some of the residential activity is sort of tapered off a wee bit having said that you know in some of the markets. We serve immigration policy in Ontario, and different things has been pretty pretty strong I think you know affordable housing the.

Michael McMillan: I think, you know, broadly, if you step back, I would say, you know, on the one hand, we have a pretty diversified customer base, right? We're blessed with the GTA, Montreal's major markets and, you know, across the entire space, whether it's road construction, residential, sewer, water, a number of areas, aggregates, and support. So, you know, one of the things we've mentioned in the past is that we did see, and everybody's aware of, some of the residential activity has sort of tapered off a wee bit. But having said that, in some of the markets we serve, immigration policy, say in Ontario and different things, has been pretty, pretty strong. I think, you know, affordable housing. The lack of affordable housing does mean, over the long term, that one would anticipate there's going to be some good investment there because that's a challenge that we all face. So our customers are there to provide infrastructure behind some of those opportunities. But again, we tend to look at that as a longer-term tailwind. You know, maybe those are just some thoughts to plant.

Lack of affordable housing a.

It does mean over the long term debt.

One would anticipate there's going to be some good investment there because that's a challenge that we all face. So you know our customers are there to provide infrastructure in behind some of those opportunities, but you know.

Again, you know as we look we tend to look at that as a longer term tailwind and so.

Maybe those are just some thoughts to plant I think at this point, we're coming off some pretty strong activities in comps and.

And I think patiently, we're investing for that longer term view.

Great and then just on the product support side I guess.

And in particular some of the other line items here as well that ground used.

I know you, obviously, you don't give guidance, but broadly speaking kind of the pickup in new kind of a moderation in used.

I'm just wondering kind of Directionally speaking are these in line with how we should think about just the mix as we go forward. What we saw maybe in the last quarter or two or how are you thinking about how you're planning for it.

Kind of inventory and things like that by kind of subs the business lines.

Michael McMillan: I think at this point, we're coming off some pretty strong activities and comps. And I think, you know, patiently we're investing for the longer term. Great, and then just on the product support side, I guess, and particularly some of the other line items here as well, like around used, I know obviously you don't give guidance, but broadly speaking, kind of the pickup in new, kind of the moderation in used, just wondering, kind of directionally speaking, are these in line with how we should think about just the mix as we go forward, what we saw maybe in the last quarter or two, or how are Yeah, a couple of things there, I think, and you hit a couple of key points there, I think, Sabah.

Yes.

Things there I think.

And you hit a couple of key points there are things, but when you. When you look at availability you know if you roll back 18 months team was really active in the used market as we are today.

It was a different approach in the sense that we were buying packages because of the shortages and we're working with customers customer might need a new year, if we can get it.

That is not available in the timeframe. They require we were actively looking for used we had a good containment business as well.

So fourth and rebuilds and so when you think about that and how it's changed availability is improving that gives our customers some different options.

And so maybe you know purchase activity is a little bit lower but we're coming off some pretty strong used comps and so all that to say, it's the used is a little bit down new is up.

And we continue to target products and the alternatives are customers are looking for as well as as the rebuild business and.

Every manufacturing facility in Bradford Salon Middle Little to latter part of Q2, we'll continue to build.

Michael McMillan: When you look at availability, you know, if you roll back 18 months, the team was really active in the used market, as we are today. But it was a different approach in the sense that, you know, we were buying packages because of the shortages, and we were working with customers. A customer might need a new unit if we could get it. If that's not available in the time frame they require, we are actively looking for used.

That facility as well to make sure that we have the option to the need for our customers. So.

Long answer to your question, but I think you know I think the mix there is reasonable at the moment I think you have to keep in mind, our historic trends.

And.

And also just when you think of.

The requirements of our customers, what's ideal for them depending on their utilization.

That's a new or used product they're looking for.

Great and then maybe just one on top of it we've probably discussed a while ago, but I think your comments around investment in Quebec, and Maritimes is that just sort of is that tied to some of the kind of the last bit of integration. There on you Ed.

Michael McMillan: We had a good consignment business as well, and so forth, and rebuilds. And so, when you think about that, you know, and how it's changed, availability is improving, that gives our customers some different options. And so, maybe, you know, purchased activity is a little bit lower, but we're coming off some pretty strong used comps. And so, all that to say it's, you know, the used is a little bit down, new is up, and we continue to target products and the alternatives our customers are looking for, as well as... As the rebuild business and our remanufacturing facility in Bradford come on in the middle to latter part of Subs by www.zeoranger.co.uk, that facility as well to make sure that we have the option.

Is there anything major that you wanted to get done there before the pandemic all kind of done with maybe just a quick update on maybe just the status of kind of the.

Additional kind of Quebecker maritime territories, where we stand today.

No I would say generally you know the team has done a nice job and you mentioned the pandemic did it did pause some of the activity there for a period.

We still feel that there's good opportunity there like where we've made some management changes there which is starting to bear some fruit, which we think is great.

We have invested heavily in that marketplace. We will continue to do that in the sense that you know market penetration, we still feel theres, great opportunity I think just broadly utilization ratio.

The team has done a nice job of improving operational execution in Quebec, and the Maritimes, but we still feel that there's opportunity there to improve that aspect of our business and so you know.

Michael McMillan: So, a long answer to your question, but I think, you know, I think the mix there is reasonable at the moment. I think you have to keep in mind our historic trends. You know, and also when you think of the requirements of our customers, what's ideal for them, right? Depending on their utilisation and whether it's a new or used product.

I would say the investment and the focus continues as one of the.

<unk> within the rental side I think the other piece for US too is just continuing across the rental business to look at.

Michael McMillan: Great. And then maybe just one that, you know, a topic we probably discussed a while ago, but I think your comments around investment in Quebec and the Maritimes, is that just sort of, is that tied to some of the kind of the last bit of integration there on Hewitt? Is there anything major that you wanted to get done there before the pandemic was all kind of dealt with?

Our complementary products that we can offer our customers that we don't today or by market and region. We're always evaluating the demand locally with our decentralized model and just trying to make sure that we we have the products and services available for that unique marketplace. So we still feel quite positive that over the long term there is some good opportunity.

And you know across the rental market, but in particular in Quebec, and Maritimes, we still have some some opportunity there just to penetrate the market more deeply.

Michael McMillan: Maybe just a quick update on maybe just the status of the additional kind of Quebec and Maritime territories where we stand today. Yeah. No, I would say generally, you know, the team has done a nice job. You mentioned the pandemic. It did, it did pause some of the activity there for a period.

Great. Thanks very much.

Sure.

Okay.

Ladies and gentlemen, just a reminder, said you have a question. Please press star followed by the number one on your Touchtone phone.

Our next question coming from the line of Maxon.

Michael McMillan: We still feel that there's a good opportunity there. Like we've made some management changes there, which are starting to bear some fruit, which we think is great. We have invested heavily in that market. We'll continue to do that in the sense that, you know, market penetration, we still feel there's a great opportunity. I think just broadly about utilization rates.

National Bank financial please go ahead.

Hi, Good morning, gentlemen, good morning, Matt.

Mike I was wondering if you if you don't mind, maybe commenting on.

<unk>.

Some positive data points around the hydro, Quebec looking to invest.

And its capacity over the next 10 years and I'm just curious to see what do you think some of that spending could be spilling over into our P&L. So yeah. It's a good question, Matt I guess part of it is I wouldn't I wouldn't speculate certainly a longer term investment cycle, John and I had heard you know that there's quite a bit.

Michael McMillan: The team has done a nice job improving operational execution in Quebec and the Maritimes, but we still feel that there's opportunity there to improve that aspect of our business. And so, you know, I would say the investment and the focus continue as one of the opportunities within the rental side. I think the other piece for us too is just continuing across the rental business to look at complementary products that we can offer our customers that we don't today or by market and region. We're always evaluating the demand locally with our decentralized model and just trying to make sure that we have the products and services available for that unique marketplace. We still feel quite positive that, over the long term, there are some good opportunities across the rental market, but in particular in Quebec and the Maritimes, we still have. Great, thanks very much.

At of investment going into support expanded infrastructure over the next decade, and so I think broadly speaking.

That's an opportunity that our teams will have to work hard to earn their way into.

Infrastructure investment I think you know also if.

That also results in some some access into some of the resource industry side of things I mean that could be positive.

But longer term duration there.

Yes, I would agree I imagine.

Probably heard the same thing you have which as.

I can't remember the number but it's like a 100 plus $1 billion that needs to go into infrastructure.

Operator: Ladies and gentlemen, just a reminder, should you have a question, please press star followed by the number 1 on your touchstone phone. We have our next question coming from the line of Maxim Sychev from National Bank Financial. Please go ahead. Hi, good morning, gentlemen. Morning, Matt. Hey, man.

Infrastructure power infrastructure in Quebec.

And I'm sure, Ontario will have to do something similar so but it's over a long term over the long term cycle. So generally a positive tailwind, but I wouldn't speculate on exactly on time and I haven't seen too much detailed information or.

Maxim Sychev: We've heard some positive data points around Hydro-Québec looking to invest in its capacity over the next 10 years. I'm just curious to see when you think some of that spending could be spilling over into your new P&L. Yeah, it's a good question, Max. I guess part of it is I wouldn't speculate, that's certainly a longer-term investment cycle.

Or are any bidding process or anything at this stage for sure yeah.

Okay fair enough. Thank you so much and then in your outlook section gentlemen, you talked about.

The ability to leverage technology.

To engage with customers employees at some points I'm just wondering.

Michael McMillan: John and I had heard, you know, that there's quite a bit of investment going into supporting expanded infrastructure over the next decade. And so I think, you know, broadly speaking, that's an opportunity that our teams will have to work hard to earn their way into. You know, so infrastructure investment, I think, you know, also, if that also results in some access into some of the resource industry side of things, I mean, that could be positive, but for a longer term duration. Yeah, I would agree, Max, and we probably heard the same thing you have, which is... I can't remember the number, but it's like 100 plus billion dollars that need to go into it.

If you don't mind, putting a bit more color.

Are you doing exactly and the potential benefits that ultimately.

Flows down to the P&L. Thank you.

Yeah, No I think certainly digital in our business in general.

He has a focus both for you know our Oems, including caterpillar to ourselves in terms of.

The pandemic has forced a lot of folks to adult.

<unk> technology in a different way.

Given us an opportunity to interface with customers electronically you know if you look at what we've been doing we've talked a little bit about par.

Parts online and things like that which were you know a great opportunity for us to continue to make it easier for customers to do business with us.

John Doolittle: I'm sure Ontario will have to do something similar, but it's over the long term cycle. Yeah. Okay, fair enough. Thank you so much. And then in your Outlook section, gentlemen, you talk about the ability to leverage the use of technology to engage with customers, employees, and so forth. I'm just wondering, you know, if you don't mind providing a bit more color, what you are doing there exactly, and the potential benefits that ultimately, you know, flow down to the P&L. Yeah, no, I think certainly digital in our business, in general, is a focus both for our OEMs, including Caterpillar, and ourselves. You know, I think the pandemic has forced a lot of folks to adopt technology in a different way.

Of course, we have the infrastructure behind it with our branch network I think you know we have a we have some other applications for used and in online to auction and so forth and so you know that's.

That's sort of the go to market strategies I think you know in addition to that.

Just broadly with technology it continues to advance in the equipment itself.

And provide our customers with more efficiency on their fleets.

You know, whether you're talking about the autonomous equipment, we have up at with I am going to Cotai or do you think about even just using analytics in a way that we can reach out to customers and be more proactive on product support I think a number of a number of areas there to help drive different segments of our business.

John Doolittle: It's given us an opportunity to interface with customers electronically. You know, if you look at what we've been doing. We talked a little bit about parts online and things like that, which is a great opportunity for us to continue to make it easier for our customers to do business with us. Of course, we have the infrastructure behind it with our branch network. I think we have some other applications for used and online auctions and so forth. And so that's sort of our go-to-market strategies. I think in addition to that... Just broadly with technology, it continues to advance in the equipment itself and provide our customers with more efficiency in their fleet. You know, whether you're talking about the autonomous equipment we have up at with IAMGOLD at Coté, or you're thinking about even just using analytics in a way that we can reach out to customers and be more proactive on product support. You know, I think a number of areas are there to help drive different segments of our business, whether it's product support or even just.

Its product support or even just like.

Like you say, just how we reach our customer more effectively and just make it easier for them to do business rentals. Another piece to that we you know with our applications and so forth. We continue to advance to a degree and again is to support how we go to market and.

How we.

Ideally, we're going to be easy to do business with in the rental side for example, an easy easier for customers to locate equipment secure extend and do other things like that as well.

Okay. Okay. That's super helpful. Thanks, so much.

Great. Thank you Matt.

There are no further questions at this time I would now like to turn the call back over to Mr. <unk> for final closing comments.

Yeah. Okay. Thank you. Thank you Laura just wanted to thank everybody for joining us This morning, and thank you for the for the great questions for listening.

I appreciate your interest in and our results so Mike Thank you and.

Thanks to everybody on the call that's great everybody have a great day and please be safe.

Michael McMillan: Please see the complete disclaimer at https://sites.google.com. You know, with our applications and so forth, we continue to advance to a degree and again to support how we go to market and how we, You know, ideally, we're going to be easy to do business with on the rental side, for example, and easier for customers to locate equipment. Thank you. Okay, this is super helpful. Thank you so much. Great, thank you Matt. There are no further questions at this time. I'd now like to turn the call back over to Mr. Goodlittle for his final closing comments. Yeah, okay, thank you.

Thank you so much ladies and gentlemen. This concludes your conference call for today, we thank you for participating and ask would you. Please disconnect your lines have a lovely.

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John Doolittle: Thank you, Lara. I just wanted to thank everybody for joining us this morning. Thank you for the great questions, for listening, and I appreciate your interest in our results. So, Mike, thank you, and thanks to everybody on the call. That's great, everybody. Have a great day and please be safe. Thank you so much. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a lovely day, https://www.youtube.com.ac https://www.youtube.com.uk https://www.youtube.com Subs by www.zeoranger.co.uk, Subs By www.zeoranger.co.uk https://www.youtube.com or www.youtube.com or www.youtube.com Subs by www.zeoranger.co.uk, Thank you for watching. We'll see you next time. Subs by www.zeoranger.co.uk, Devin Dodge, Yuri Lynk, Cherilyn Radbourne, Devin Dodge, Toromont Industries Ltd, https://www.youtube.com Lyrics by BIRP.fm, Subs by www.zeoranger.co.uk

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