Q1 2025 Finning International Inc Earnings Call
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Kevin Parkes: And so, you know, we need cash to be able And then, you know, finally, rental. So whether that's, you know, RPOs, or heavy rents, but particularly rent, cat rental services, which is the cat rental store, we see opportunities to grow profitably in that space, too.
Speaker Change: I would now like to turn the conference over to Greg Palast Chuck.
Thank you for standing by. This is the conference operator. Welcome to the Finning International Incorporated First Quarter 2025 Investor Call and Webcast. As a reminder, all participants are in listen-only mode and the conference is being recorded.
Speaker Change: Executive Vice President and Chief Financial Officer. Please go ahead.
Thank you operator, good morning, everyone and welcome to <unk> first quarter earnings call.
Speaker Change: Joining me today is our president and CEO Kevin Park.
Speaker Change: The remarks, we'll open the line to questions.
Speaker Change: This call is being webcast on the Investor Relations section of <unk> Dot com.
Speaker Change: Also provided a set of slides on our website that we will reference an audio file of this call and the accompanying slides will also be archived.
Speaker Change: Before I turn it over to Kevin I want to remind everyone that some of the statements provided during this call are forward looking please refer to slides 11, and 12 for important disclosures about forward looking information as well as currency and specified financial measures, including non-GAAP financial measures.
Kevin Parkes: We'll continue to look at if there are any opportunities or good adjacencies to be able to support that three-pronged strategy.
Speaker Change: Note. The forward looking information is subject to risks uncertainties and other factors as discussed in our annual information form.
Speaker Change: And our key business risks in our MD&A under risk factors in management and forward looking information disclaimer. Please treat this information with caution as our actual results could differ materially from current expectations, Kevin over to you. Thanks.
Devin Dodge: Okay, good color. Thanks for that.
Devin Dodge: Maybe just sticking with rental. It looked like dollar utilization may have been stronger year over year. Kevin, I think you've mentioned in the past, there's more diversity in your rental fleet than maybe some others in the sector.
Kevin Park: Thanks, Greg and good morning, everyone.
Speaker Change: In the first quarter, we continued our positive momentum from 2024, and I am proud of our employees' positive impact on the strong execution.
Kevin Parkes: But within your rental operations, which parts of the business are doing really well, where you're looking to deploy more growth capital in the near term, and which parts are maybe a bit more challenged and the focus is more on realigning or optimizing the office? Yeah, so I think, and our rental business is a little more complicated. So, you know, this time last year, we would have had, excuse me, more RPOs in the heavy equipment and even in the mining space. And, you know, that in the mining space, that's lumpy, and it's very much customer specific and, you know, lumpy demand related, you know, in terms of heavy rent.
Speaker Change: I'd like to start with a review of the first quarter before providing a brief recap of our last 12 months performance.
Speaker Change: I will then turn the call over to Greg who will provide more detail on our results. Please turn to slide two.
Speaker Change: We started 2025 with another strong quarter of results growing net revenue by 7% from Q1 2024 to $2 5 billion.
Speaker Change: The diversity of our business both in terms of geographic and end market exposure provides resilience and stability for our ratings, which is particularly important given the uncertainty businesses are facing right now.
Kevin Parkes: That's a little softer for us right now as we recalibrate the fleet and reorganize the fleet, and that's directly linked with the lack of major infrastructure projects that we're seeing still. We're optimistic that the new government will start to kick that off, and we stand ready to invest in that heavy rents fleet. It's a good business for us, but in the heavy rents side, that RPO side in terms of facilitating sales and winning new customers and growing market share, that's something we're absolutely committed to investing in.
As a reminder, approximately half of our revenues into a volume from outside of Canada.
Speaker Change: We are really pleased with the continued growth in our backlog, especially considering we delivered another strong quarter of new equipment sales growth at 7%.
Speaker Change: Backlog grew from year end 2020 or by $240 million.
Speaker Change: Order intake was brought by consulting in all regions.
Kevin Parkes: And then we are really encouraged by our cat rental store. Our revenues are up 15% year over year. And whilst it may have been from a low base, that's encouraging. And that's all driven by utilization. And so that's an area that we continue to look at and refine the fleet, make sure it's a complete and market-differentiated service. And there will be more opportunities to invest in that area.
Speaker Change: These orders were saving the orders received in Canada are especially encouraging providing us with a good level of confidence.
Speaker Change: Outlook for new equipment for the rest of the year and for product support opportunities for years to come.
Speaker Change: Order intake in the construction segment results relative to order intake in Q1 of 2024.
Speaker Change: The big driver of our backlog and increase however was related to the mining segment, while we received orders from several customers, including over 20 also plus whole folks multiple shallow holes on a range of support equipment.
Devin Dodge: Okay, excellent.
Devin Dodge: Congrats on the good results.
Devin Dodge: We'll turn it over.
Speaker Change: The steady growth in our business, coupled with our improved earnings phosphate due to our focus on resiliency provides a strong foundation for continuing to have dividend growth. This year with an increase of 10% the 24th consecutive annual increase for Feeney.
Steve Hansen: The next question is from Steve Hansen with Raymond James. Please go ahead. Yeah, good morning, guys. Thanks for your time. Greg, I think there are two of you both referenced, I think the more normal weather pattern is helping contribute to the product support growth. If the customer's giving you any sort of indication as to how the balance of the year is going to play out, should you continue to expect to see growth through the balance of 25?
Speaker Change: Moving to product support.
Speaker Change: <unk> revenue grew in all regions, reflecting reinvigorated sales efforts and a more constructive environment.
Kevin Parkes: Yeah, Steve, it's Kevin. Yeah, you know, I mean, you know, we're part of what we're trying to do with our major customers is sit down with them and plan more effectively so that we can provide better physical availability of their assets and ultimately, you know, lower our costs of execution in terms of logistics and supply chain. You know, the outlook, the precise outlook for that outside of major components. is more challenging. But from a major components side, and you've been to our OEM facility a number of times where we rebuild the engine, the visibility there is good.
Speaker Change: And Canada mining activity improved and as I spoke about on our last call. We are totally committed to supporting our customers to lower production costs through strong partnerships planning and execution.
Speaker Change: Revenue grew 10% year over year.
Speaker Change: 9% from Q4 2024 helped by normal more normal.
Speaker Change: More normal winter conditions.
Speaker Change: In South America product support revenues were up 6% in functional currency and continued strong mining activity.
Speaker Change: While we continue to deliver neutral build capacity and capabilities. Indeed, we added our 100 technicians in the region just in this quarter.
Kevin Parkes: And we would see that, you know, that remaining encouraging for the rest of the year. In terms of the timings of major rebuilds, that can change with mine plans. And so that's a little more difficult. You know, I would say that as we look forward, we expect that business to grow in line with the publicly disclosed production growth figures that, you know, all of the public oil sands producers have disclosed. And, and we, you know, we do believe that more trucks are required to meet those production requirements as the mine plans change and the haul distances get longer.
Speaker Change: In the UK and Ireland product support revenues were up 4% in functional currency on improved power segment activity levels. As a result of many years of population growth.
Speaker Change: We will continue to maximize product support revenues across all regions.
Speaker Change: Building on the momentum of 2024, we continue to execute on our full cycle resilient strategy with combined electric combined with product support growth strengthen and stabilize our earnings capacity.
Speaker Change: SG&A SG&A as a percentage of net revenue decreased from Q1, 2024 by 50 basis points to 16, 4%.
Kevin Parkes: And I think that's what you're seeing in the equipment backlog, Steve. So, you know, I mean, you might not see it positive encouragement for our company. Hard to predict what's going to happen in the next three months or six months, but we're totally committed to that region and the backlog supports that.
Speaker Change: And we will continue to look for opportunities to build more flexibility into our cost base and invest in sales and service capabilities to drive future growth.
Speaker Change: We also continued our strong focus on free cash flow generated $135 million.
Speaker Change: Execution of our sustainable growth initiatives is progressing strongly.
Steve Hansen: Okay, that's helpful. Thanks.
Speaker Change: Systems backlog is up over 50% from this time last year to over $900 million.
Greg Palaschuk: And then just on the cadence of buyback, you've consistently funded the buyback here for a while now through cash flow from operations and free cash flow. You've got this, you know, this inflow coming in from the four refuel deal. Should we expect the cadence of buybacks to change at all going forward, Greg? Or should it be more consistent rateable? How do you think about that? Thanks. Yeah, I mean, for quite a while now, we've done about 1% per quarter as we just did this last quarter. So we'd expect that in kind of a, you know, that would be the typical pattern.
Speaker Change: With strong data center activity in the UK and South America.
Speaker Change: In Canada <unk> systems backlog is at 18 month highs a stronghold in tight from both electric power and oil and gas end market.
Speaker Change: It is important to consider our pilot systems backlog in the context of our overall backlog driven by our focus on this secular trend.
Speaker Change: This population is to 40 patents systems product support revenue growth, which was up year over year in Canada, and the U K more than 15%.
Greg Palaschuk: And then, of course, you know, we have the proceeds coming in that we'd expect to put the majority in that direction. So we just renewed our NCIB and, you know, that gives us about 10% of capacity and we think we've got the capacity to do both. Very good. That's helpful, guys. Thanks.
Speaker Change: Revenue in our used equipment segment decreased this quarter largely due to lumpy mining business.
Speaker Change: Margins have stabilized and in some cases improved to levels above our expectations.
Cherilyn Radbourne: The next question is from Sherilyn Radbourne with T.D. Cowan.
Cherilyn Radbourne: Please go ahead. Thanks very much and good morning.
Speaker Change: Total revenue decreased slightly versus Q1 2024. However, we are encouraged by the improvement in our cat rental store revenue, which was up 15% in Canada as an agent shipping fleet changes, we made last year have improved the efficiency and performance of this business in a challenging market.
Kevin Parkes: I wanted to start with a bigger picture question regarding the new federal government in Canada and the potential for renewed nationalism in Canada, if you want to call it that, if you could send a policy wish list that would be supportive of growth in Western Canada, what would be some of the key items on that list? Yeah, that is a very good question, Sharon. I think that, you know, as we look forward, I mean, number one policy would be, you know, resource development and, you know, changes to the approach to pipelines. You know, that would be a huge, I just think we need a rethink on that after the last 10 years, and that would be top of the list.
Speaker Change: We remain committed to growing this important line of our business.
Speaker Change: Please turn to slide slide three.
Speaker Change: I'd like to spend a few minutes recapping the last 12 months and reiterate some of the progress we've made in executing our strategy.
Speaker Change: Overall net revenue has grown 5%, while our equipment backlog is up almost 900 million from this time last year.
Speaker Change: Importantly, our backlog is diversified and is larger in each of mining construction and power.
Speaker Change: Similarly product support revenues of 5% over the last 12 months relative to the same period the prior year.
Speaker Change: This includes adding over 400 technicians to meet growing needs of our customers and the larger installed base of equipment.
Kevin Parkes: I think as the administration already talked about, removing inter-provincial trade barriers would be great for all of Canada and to increase trade and economic prosperity. And I think, you know, a policy and an approach around energy supply and production and, you know, potentially data centre development, participating more in that sector would be on the list, as well as, you know, a more helpful immigration strategy to support the growing demands of technician base that we have.
Speaker Change: This growth means not only capacity has improved and has been supported through the continued improvement in SG&A as a percentage of net revenue, which is a 16, 2% over the last 12 months.
Speaker Change: Our free cash flow has been a significant $1 2 billion.
Speaker Change: Which is particularly pleasing given the growth.
Speaker Change: Our sustainable growth initiatives I'll also progressed well with used equipment revenue of 8% power systems revenue of 10% and we will continue to progress these opportunities and allocate resources to these growth initiatives.
Speaker Change: Before I turn the call back over to Greg I'd like to briefly discuss some cooler having spent some time in each of our regions recently and I am.
Kevin Parkes: I could go on, but there's a long list there, but if you think about it in the context of our business, we've got to get the economy moving in the first instance, and then we've got to make sure that we've got the opportunity to build the capabilities, to have the productivity gains, to have an investment-friendly environment, and to have the right people and employees and union strategies to drive our business forward. It's just got to get a lot more friendly. Great.
Speaker Change: Very pleased to see the commitment of our employees to our strategy.
Speaker Change: In South America, I was able to spend some time with our employers employees at our expanded Antofagasta facilities, where we have added more than 20 will advise.
Speaker Change: And incremental warehousing capacity and technology to meet the growing product support needs of our customers.
Speaker Change: I was also able to meet with several customers many of whom planted four additionally equipment investments in the future to meet that growth objectives.
Cherilyn Radbourne: And then my second question is just, you flagged the potential for labor cost inflation in South America.
Speaker Change: Yes look for investments in copper mining from a south American.
Speaker Change: MS remains very positive.
Kevin Parkes: Just what do you think your ability is to pass that through as you progress through those union negotiations later in the year? Yeah, so we have a few of our unions coming up in the back half of the year, we've been fortunate that the last round we actually did proactively. So we've had a good 18 month two year gap since our last negotiation. But as we see across the industry across the mining landscape, some higher compensation and deals that are struck as well as some of the upfront payments, you know, increasing. So we're being proactive again, and we're going through those discussions, but we do expect higher rates, those obviously flow through a lot of the contracts, but we need to be mindful that it's, you know, all online with industry benchmarks.
Speaker Change: In the UK and Ireland, our employees continue to demonstrate a strong commitment to resiliency, particularly in the face of more subdued macroeconomic environment.
Speaker Change: There is some encouragement in certain areas of the market and our sales focus is driving rebuild activity new equipment order intake and backlog growth.
Speaker Change: <unk>, which is up 8% sequentially and 8% versus the same quarter last year.
Speaker Change: We do still however remain overall cautious on the new kind of either market.
Speaker Change: Our execution is thoughtful.
Speaker Change: With this in mind, our teams continues to look at ways in the UK to generate further efficiencies and optimize the skills of our frontline technicians, including through the use of digital tools to optimize workforce planning and scheduling and work by utilization.
Cherilyn Radbourne: So from me, thank you.
Speaker Change: We see solid progress from these tools, enabling improved productivity and better visibility to rebuild activity levels.
Operator: Once again, any analyst who has a question may press star then 1 on their telephone keypad.
Maxim Sytchev: The next question is from Maxim Sytchev with National Bank Financial. Please go ahead. Hi, good morning, gentlemen. Hi. Good morning, Max.
Speaker Change: Turning to Canada, I'm pleased to see our employees employees embracing resiliency initiatives, while at the same time growing our business in the face of a more challenging market conditions.
Maxim Sytchev: Actually, I just wanted to build on Shalin's question around Chile, you know, the labor dynamic. How does it factor in, in terms of your SG&A targets, I guess, like over the medium term? How do you think about the potential offsets, etc.? Sure. So, you know, at the end of the day, we have, you know, labor costs, you know, a lot of the business in South America, you know, yesterday, we highlighted about 70% is contracted. So a lot of those will be back-to-back in the contracts. Of course, there's some business that's non-contracted, and some, you know, training and other costs that aren't recoverable.
Speaker Change: We believe demonstrates an attention and responsiveness to customer needs will now further wins.
Speaker Change: Wins and growth in market share and expand that customer base.
Speaker Change: To date the impact of enacted tariffs have had limited impact on our business.
Speaker Change: We have not seen a major shift in our end market activity levels or our product support or new equipment spending from our customers relative to expectations.
Speaker Change: There remains opportunity to improve the resiliency of our Canadian business and I'm excited to stay what Tim and the team are working on.
Kevin Parkes: So, in general, there'll be some inflation. You know, we tend to have a price increase each year that absorbs some of that. But everywhere else, we're absolutely looking for productivity gains. We've had a number of them over the last five years. We look at areas to leverage shared service centers. And just general administration, you know, we continue to march down the cost curve. We also continue to make investments, like at our warehouse in Antofagasta that you would have seen the beginnings of. It's now a full auto store operation. Obviously, that continues to drive productivity, and we continue to look to just many more opportunities for that.
Speaker Change: Overall, we are encouraged with our strong start to the year I remain confident in and committed to the execution of our strategy.
Speaker Change: We are excited about the future as we sharpen our focus and allocate resources to growth opportunities in areas, such as product support addressable market power generation in rental.
To date the impact of enacted tariffs have had limited impact on our business.
We have not seen a major safety not end market activity levels or our products for all new equipment spending from our customers relative to expectations.
Speaker Change: We also plan to invest in future adoption of technology like autonomy and digital capabilities to enable growth and improve customer outcomes.
There remains opportunity to improve the vision as I sit back and IBM business and I'm excited to stay what Tim and the team are working on.
Speaker Change: I don't have seen in our announcement last week, we have reached an agreement to sell for a fuel for $460 million and we think <unk> is a great outcome for cleaning and for your fuel.
Overall, we are encouraged with the strong start to the year I remain confident in and committed to the execution of our strategy.
Kevin Parkes: And so, resilience is top of mind for everybody, and we know that there's cost offset. We've been doing it for the last few years, and we'll continue.
Speaker Change: We will finance this style advances many of our strategic objectives, we set out in our 2023 Investor day.
We are excited about the future as we sharpen our focus and allocate resources to growth opportunities in areas, such as product support addressable market power generation rental.
Kevin Parkes: Actually, in the back end of last year, or the start of this year actually, Dino Moll joined us. He's a 30-year veteran of the mining industry. He's a Chilean, and I was very fortunate to spend some time with him about three weeks ago. We're very confident that through his expertise and experience, there's tons of process and productivity improvements. That's where the big gain is. As you mentioned, as labor cost goes up, and it gets up to the levels we've seen more so in the fully developed world, then we need to see productivity improvements to match that as well.
Speaker Change: Allow us to simplify our business and focus on growing our core dealerships.
Speaker Change: From a financial perspective, the transaction will allow us to optimize our invested capital position and lower our SG&A costs, and we expect the transaction and allocation of net proceeds to be accretive to earnings per share.
We also plan to invest in that in future adoption of technology like autonomy and digital capabilities to enable growth and improve Christopher agriculture.
I have seen in our announcement last week, we have reached an agreement to sell for a fuel for.
Speaker Change: We do extend our gratitude to full refuel president Larry radar and all of the Florida field employees and team for that partnership dedication and strong performance and we wish them future success.
$450 million, we think the salaries of great agricultural Feeney and for your fuel.
Well failure in this style of advances many of our strategic objectives, we set out we cannot 'twenty to 'twenty three investor day.
Greg: And with that I'll hand, the call back to Greg.
Greg: Great. Thank you Kevin.
It allows us to simplify our business and focus on growing our core dealerships.
Speaker Change: Turn to slide four.
Speaker Change: Q1, net revenue of $2 5 billion was up 7% from Q1 of 2024 led by strong growth in product support revenue and new equipment sales.
From a financial perspective as far as action will allow us to optimize our invested capital position lower higher SG&A costs, and we expect the transaction allocation of net proceeds to be accretive to earnings per share.
Maxim Sytchev: You've been down there, Max. There's lots of opportunity there. We feel like through the mixture of technology investment and strong expertise directly from the mining segment, we can try and You can try and find out some of those opportunities. Yeah, absolutely.
Speaker Change: Our first quarter earnings.
Speaker Change: Adjusted for 'twenty, two sets impairment loss related to the write down of assets in Comtech in line with the value of the transaction announced last week.
We did extend our gratitude to four refuel president Larry radar and all of the Florida field employees and team for that partnership dedication and strong performers and we wish them future success.
Speaker Change: Excluding this EBIT was up 6% from Q1 2024 on strong volume growth adjusted EPS of <unk> 99 was a record for the first quarter and up 18% from Q1 of 'twenty four reflecting higher earnings in South America as well as the benefit of our share repurchases.
Kevin Parkes: And I guess kind of, you know, staying with the geography, like around Argentina, I mean, it feels like it's becoming a little bit more sort of business as usual dynamic. Do you mind providing a bit of an update in terms of, you know, where we are? Can you start deploying a bit more equipment there? Just maybe any data points that we should be tracking? Yeah, thanks, Max. So we certainly see a lot of activity right here and now in the oil and gas sector. So that's certainly picked up. But as you know, we've taken a low risk approach, because there's been lots of challenges, I would say the government has made a lot of progress, a lot of incentives for businesses to make large scale investments and structural, the structural advantages with a timeline.
With that I'll hand, the call back to Greg.
Greg: Great. Thank you, Kevin I'll turn to slide four.
Speaker Change: We also continued to generate strong free cash flow in the quarter at $135 million, which compares to a use of cash of $210 million in Q1 of last year.
Greg: Q1, net revenue of $2 5 billion was up 7% from Q1 of 'twenty 'twenty four led by strong growth in product support revenue and new equipment sales.
Speaker Change: This was driven by higher inventory turns improving invested capital philosophy and reduced working capital working capital to net revenue, which has now declined to 26, 5%.
Greg: Our first quarter earnings were adjusted for 'twenty, two set impairment loss related to the write down of assets in context in line with the value of the transaction announced last week.
Greg: Excluding this EBIT was up 6% from Q1 2024 on strong volume growth adjusted EPS of <unk> 99 was a record for the first quarter and up eight.
Speaker Change: Overall, we're pleased to see our momentum exiting 2024 continue into the first quarter and a strong performance, particularly in mining and the power system sector.
Greg: 18% from Q1 of 24, reflecting higher earnings in South America, as well as the benefit of our share repurchases.
Speaker Change: Coupled with our team's diligence on strategic execution and product support full cycle resilience made a big difference.
Kevin Parkes: And so you'll see a lot of the mining projects moving pretty fast to qualify for those criteria. And so we're seeing a lot of activity there. Of course, the deal with the IMF in the last month here was super important. And and the resulting removal of a lot of the FX restrictions certainly helps us in terms of speed. And, you know, risk in terms of currency has gone down a lot. So that's been super helpful. Of course, there's elections in the fall where we need to make sure that the current administration, you know, can gain continues its momentum and support.
Greg: We also continue to generate strong free cash flow in the quarter at 135 million, which compares to a use of cash of 210 million in Q1 of last year.
Speaker Change: I will now move to slide five.
Speaker Change: We showed changes in our net revenue by line of business compared to Q1, 2024, and the composition of our equipment backlog by market sector.
Greg: This was driven by higher inventory turns improving invested capital philosophy and reduced working capital the working capital to net revenue, which has now declined to 26, 5%.
Speaker Change: <unk> sales were up 7% driven by strong activity across all market sectors in South America.
Speaker Change: Equipment sales were down 27% in Q1 of 2024, we had large conversions of rental equipment for the purchase option to sales in Canada, which did not repeat this quarter.
Greg: Overall, we're pleased to see our momentum exiting 2024 continue into the first quarter and a strong performance, particularly in mining and power systems sector.
Speaker Change: Product support revenue was up 11% with consolidated growth rate, having some benefit from the weaker Canadian dollar.
Maxim Sytchev: I think that's the next major milestone. But certainly, whether it's, you know, customs timing, or cash flow timing, that's improved a lot, and make this a lot helpful for us to make lower risk decisions. And so that is all encouraging. But of course, we want to see the evidence and the replication for for more than just six months before we go too far into Okay.
Greg: Coupled with our team's diligence on strategic execution and product support full cycle resilience made a big difference.
Speaker Change: Solid growth across all regions led by Canada and across all market sectors.
Greg: Well now move to slide five.
Greg: We show the changes in our net revenue by line of business compared to Q1, 2024, and the composition of our equipment backlog by market sector.
Speaker Change: We're proud of the team's strategy execution as we rebuild momentum.
Speaker Change: Our equipment backlog reached a new record of $2 8 billion to the end of March up 45% at the end of March 2024% and 9% from December of 2024.
Greg: Sales were up 7% driven by strong activity across all market sectors in South America.
Maxim Sytchev: Okay.
Maxim Sytchev: Super helpful.
Greg: Equipment sales were down 27% in Q1 of 2024, we had large conversions of rental equipment for the purchase option sales in Canada, which did not repeat this quarter.
Speaker Change: Sequential backlog growth reflected order intake outpacing delivery in mining and power systems with multiple large mining equipment.
Jonathan Goldman: The next question is from Jonathan Goldman with Scotiabank. Please go ahead. Hi, good morning, team. Thanks for taking my questions. Maybe just one on the UK, the SG&A down 5% year-on-year. I mean, sales are down 2%, but product support up nicely.
Speaker Change: Canada.
Speaker Change: Now turning to EBIT performance on slide six.
Greg: Product support revenue was up 11% with consolidated growth rate, having some benefit from the weaker Canadian dollar.
Speaker Change: Gross profit as a percentage of net revenue was down 70 basis points, primarily due to lower product support margins, partially offset by higher proportion of product support and the revenue mix in Canada, the UK and Canada lower product support margins were driven by sales mix and cost to fill fulfill accelerated demand.
Greg: Saw solid growth across all regions led by Canada and across all market sectors. We're proud of the team's strategy execution as we rebuild momentum.
Kevin Parkes: Are there any initiatives going on in that region, or how should we think about expense levels for the balance of the year? Yeah, I think that, you know, what you're seeing there, Jonathan, is, is the impact of the work that Tim and the team did in the towards the end of the second quarter last year. Obviously, as we've said before, 2024 At the end of 2023 and 2024, we saw a softening in the UK business, and it's so important that we retain our agility and ability to flex our cost base in a resilient way. And so, I think that those cost-saving initiatives really started to take hold in the third quarter last year.
Greg: Our equipment backlog reached a new record of $2 8 billion to the end of March.
Greg: 45% at the end of March 2024, and 9% from December of 2024.
Speaker Change: Meanwhile, we remain very focused on cost control with SG&A as a percentage of net revenue down 50 basis points to 64%. We will continue to build on this progress.
Greg: Sequential backlog growth reflected order intake outpacing delivery in mining and power systems with multiple large mining equipment win in Canada.
Speaker Change: To build a more resilient cost structure and drive earnings capacity higher going forward.
Greg: Now turning to EBIT performance on slide six.
Speaker Change: Q1, adjusted EBIT as a percentage of net revenue was 10, 6% and South America eight 7% in Canada, and four 7% in the UK and Ireland.
Greg: Gross profit as a percentage of net revenue was down 70 basis points, primarily due to lower product support margins.
Speaker Change: Now moving to South America results and outlook on slide seven.
Greg: Partially offset by higher proportion of product support and the revenue mix in Canada and the U K.
Speaker Change: In functional currency, new equipment sales were up 42% for Q1 24, reflecting higher.
Greg: Canada lower product support margins were driven by sales mix and cost of fill fulfill accelerated demand.
Kevin Parkes: And so, you're seeing the impacts of that work that carried through the end of the year, and it's against the comp of the higher cost base at the start of Q1 last year. You know, good examples of that, and it plays through to some of the work that Tim's doing in Canada right now. I mean, it starts... We are a people business. and it starts with organisational effectiveness and design. you know, de-layering and combining roles. Tim is very passionate about having no more than, you know, two layers from his direct reports to the front of the, you know, to the front of the house.
Higher across all market sectors led by construction and mining.
Greg: Meanwhile, we remain very focused on cost control with SG&A as a percentage of net revenue down 50 basis points to 16, 4%. We will continue to build on this progress.
Speaker Change: Product support revenue was up 6% driven by strong demand for mining customers in Chile.
Speaker Change: EBIT was up 13% in functional currency and EBIT as a percentage of net revenue was down 40 basis points, reflecting a higher proportion of new equipment sales SG.
Greg: To build a more resilient cost structure and drive earnings capacity higher going forward.
Greg: You Wanna adjusted EBIT as a percentage of net revenue was 10, 6% and South America.
Speaker Change: SG&A was comparable to Q1 of 'twenty four despite a 17% net revenue growth.
Greg: 7%, Canada at 447% in the UK and Ireland.
Speaker Change: Our outlook for Chilean mining remains strong underpinned by growing demand for copper strong copper prices as well as salt solid levels of quoting tender and award activity for mining equipment and product support.
Greg: Now moving to South America results and outlook on slide seven.
Greg: In functional currency, new equipment sales were up 42% for Q1 24, reflecting higher.
Kevin Parkes: And so, you know, what everything I'm saying now you can read through into some of the initiatives that Tim is working on in Canada too. So, organizational designs, spans and layers, you know, there's also within the organization, organization design, there's some things that we've challenged ourselves and stopped doing. Things that, you know, we've determined don't, you know, support the strategy to the level that we require.
Greg: The.
Greg: Higher across all market sectors led by construction and mining.
Speaker Change: Activities and outlook remain positive. We also expect a more challenging labor environment, including higher compensation and Union agreement payments and upcoming Union negotiations.
Greg: Our support revenue was up 6% driven by strong demand for mining customers in Chile.
Greg: EBIT was up 13% in the functional currency and EBIT as a percentage of net revenue was down 40 basis points, reflecting a higher proportion of new equipment sales S.
Speaker Change: In Chile, we continue to see healthy demand from large contractors supporting mining operations, and we expect infrastructure construction activity to remain steady.
Greg: SG&A was comparable to Q1 of 'twenty four despite a 17% net revenue growth.
Speaker Change: On the power system sector activity remains strong and industrial and data center markets.
Kevin Parkes: And so, there's an organization design piece, then there's an operational execution and discipline piece. A lot of that comes in terms of the cost of execution and, you know, really simple examples of that would be, you know, costs of emergency expediting parts and people and over time to execute the business. As well as looking for opportunities for automation, as we've talked about in Chile there, in answer to Max's question about labour costs increasing, so lots of automation activities. I also mentioned in my remarks, we've launched a program called Case and Workforce Management, which is really helping us to manage a customer experience in terms of a repair from start to finish.
Speaker Change: In Argentina, we continue to take a low risk approach and closely monitor the government's new rules and policies at the same time, we're also positioning ourselves to capture potential growth opportunities in oil and gas and mining sectors and are encouraged by the steps taken by the government to reduce currency restrictions.
Greg: Alright look for Chilean mining remains strong underpinned by growing demand for copper strong copper prices as well as all solid levels of quoting tender and award activity for mining equipment and product support.
Greg: Activities and outlook remain positive. We also expect a more challenging labor environment, including higher compensation and Union agreement payments and upcoming Union negotiation.
Speaker Change: Turning to Canada on slide eight.
Speaker Change: Equipment sales were down 14% from Q1 of 'twenty four due to timing of power system deliveries and slower activity in the construction sector.
Greg: In Chile, we continue to see healthy demand from large contractors supporting mining operations, and we expect infrastructure construction activity to remain steady.
Speaker Change: Used equipment sales were down 31%, primarily due to large conversions of rental equipment with a purchase option Q1 of 24 that were repeated red.
Greg: Our system sector activity remains strong and industrial and data center market.
Speaker Change: Rental revenue was comparable to prior year.
Greg: In Argentina, we continue to take a low risk approach and closely monitor the government's new rules and policies at the same time, we're also positioning ourselves to capture potential growth opportunities in oil and gas and mining sectors and are encouraged by the steps taken by the government to reduce currency restrictions.
Speaker Change: We would also note we are seeing more evidence of price and utilization normalization this quarter and used and rental which serves as a supportive backdrop for our commitment to profitably grow these lines of business and the long term.
Kevin Parkes: It helps with the administration of that work, it helps with expediting the invoicing of that work at the end, and it helps us with productivity improvements so we can make sure we've got a longer term plan for our technicians moving out. Ultimately, there's the good old stuff as well. When you're in an uncertain environment, which we were in the UK and we are in Canada to a certain degree, there's the discretional spend. It's just the tightening of the belts, prioritising travel, prioritising where we spend money, being really effective in terms of how you run the business.
Speaker Change: Product support revenue was up 10% with higher spending across mining customers, coupled with strong activity levels in power systems sector, primarily in oil and gas.
Greg: Turning to Canada on slide eight.
Greg: Equipment sales were down 14% from Q1 of 'twenty four due to the timing of power system deliveries and slower activity in the construction sector.
Speaker Change: Adjusted EBITDA as a percentage of net revenue was down 20 basis points from Q1 of 'twenty four as a percentage of net revenue primarily due to lower product support margins due to sales mix and cost to fulfill accelerated demand.
Greg: Used equipment sales were down 31%, primarily due to large conversions of rental equipment were the purchase option. He went up 24 that were computed.
Greg: Revenue was comparable to prior year.
Speaker Change: In terms of outlook with a new election results, we expect to focus on infrastructure spending removing interprovincial trade barriers and promoting growth in the energy sector.
Greg: I would also note we are seeing more evidence of price and utilization normalization this quarter and use and rental which served as a supportive backdrop for our commitment to profitably grow these lines of business and the long term.
Speaker Change: Therefore, we continue to expect ongoing commitments from government and private sector projects infrastructure development supporting activity in the construction sector.
Greg: Product support revenue was up 10% with higher spending across mining customers, coupled with strong activity levels in power systems sector, primarily in oil and gas.
Jonathan Goldman: There's a couple of examples and you can expect that to flow through into the work that Tim's doing in Canada also. That's great color. Very fulsome.
Speaker Change: On the mining side, we expect our mining customers to deploy capital to renew maintain and rebuild aging fleets for power systems, we continue to see healthy demand for reliable and efficient electric power solutions.
Greg: Adjusted EBITDA as a percentage of net revenue was down 20 basis points from Q1 of 'twenty four as a percentage of net revenue primarily due to lower product support margins due to sales mix and cost to fulfill accelerated demand.
Jonathan Goldman: I appreciate that.
Greg Palaschuk: And maybe, I guess, I'm missing the name then, Kevin or Greg, whoever wants to take this. The working cap was... Pretty amazing, you know, nominal draw, you know, in a seasonally.
Speaker Change: Due to higher levels of uncertainty related to tariffs and trade.
Speaker Change: As well as our resilient strategy, we remain focused on managing working capital levels and evaluating opportunities to create further sustainable cost efficient.
Greg: In terms of outlet with a new election results, we expect to focus on infrastructure spending removing interprovincial trade barriers and promoting growth in the energy sector. Therefore, we continue to expect ongoing commitments from government and private sector projects for infrastructure development supporting activity in the construction sector.
Greg Palaschuk: Question for the audience, how much of that can we read into the initiatives you've done and are ongoing to unlock invested capital versus maybe some other dynamics that are going on in the quarter? I think it's just the accumulation of a number of initiatives, and as you know from Investor Day, some are just pure unlocks, some have been real estate sales, some have been pension reorganizations, and some it's just been improvement of supply chain, while we've invested in automation and looking to make the turns go faster. So I wouldn't say it's something that happened exactly in Q1, but it's the building up and the execution of the plan, which is why we looked over the last 12 months in the recap, because $1.2 billion over 12 months is what we're trying to do.
Speaker Change: We saw encouraging progress in Q1, as Tim and his team started to execute plans to leverage the UK playbook on optimization optimizing the cost structure and reinvigorating sales efforts in Canada, we look forward to seeing further evidence and resilience in our Canadian business going forward.
Greg: On the mining side, we expect our mining customers to deploy capital to renew maintain and rebuild aging fleets for power systems, we continue to see healthy demand for reliable and efficient electric power solutions.
Speaker Change: Please turn to slide nine for our UK and Ireland results in.
Speaker Change: In functional currency, new equipment was down 10% compared to Q1 of 'twenty four due to timing of power system project deliveries, partially offset by strong sales execution and deliveries in the construction segment.
Greg: Due to higher levels of uncertainty related to tariffs and trade.
Greg: Well as our resilient strategy, we remain focused on managing working capital levels and evaluating opportunities to create further sustainable cost efficiencies.
Speaker Change: Product support revenue was up 4%, reflecting strong activity levels in the power system sector.
Greg: We saw encouraging progress in Q1, as Tim and his team started to execute plans to leverage the U K playbook on optimization optimizing the cost structure and reinvigorating sales efforts in Canada, we look forward to seeing further evidence and resilience in our Canadian business going forward.
Speaker Change: EBIT as a percentage of net revenue was up 20 basis points, reflecting higher proportion of product support and the revenue mix and a reduction in SG&A.
Greg Palaschuk: If you're looking at $4.50 of investment capital unlocked from Investor Day, getting our sales work and capital back down to pre-COVID levels, it all triangulates and it's all the accumulation of. Literally dozens of projects and investments and Q1 just happened. We're lining up of a few stars, which we're pleased with, but I think what's different is we're also growing at the same time. We invented an inventory within the quarter, the backlog grew, and we generated the cash. So that's what's most pleasing, but that's what we're trying to do. And just coming back, I'll just add one thing to that, Greg mentioned the inventory, so that working capital release is coming from the right areas, because we're growing and producing free cash flow, and you know, one of the, you know, data point I'll share with you that our service work in progress is up 8% over the previous peak, which was March 2020.
Speaker Change: We expect demand for new construction equipment in the UK and Ireland to remain soft in line with low projected GDP growth. We continue to expect growing contribution from used equipment and power systems and resilient product support as we execute our strategy.
Greg: Please turn to slide nine for our UK and Ireland results.
Greg: In functional currency, new equipment was down 10% compared to Q1 of 'twenty four due to timing of power system project deliveries and partially offset by strong sales execution and deliveries in the construction segment.
Speaker Change: I'll also touch on the global trade landscape as well as our corporate development initiatives and.
Speaker Change: In recent.
Greg: Product support revenue was up 4%, reflecting strong activity levels in the power system sector.
Speaker Change: And recent changing tariff related announcements by the U S. Canada and other countries globally has introduced the level of uncertainty cost and complexity of the operating for many businesses to date, the direct impact of announced and implemented tariffs to fitting has been limited and largely centered on our Canadian business.
Greg: EBIT as a percentage of net revenue was up 20 basis points, reflecting higher proportion of product support and the revenue mix and a reduction in SG&A.
Greg: We expect demand for new construction equipment in the UK and Ireland to remain soft in line with low projected GDP growth. We continue to expect growing contribution from used equipment and power systems and resilient product support as we execute our strategy.
Speaker Change: The indirect impact of reduced economic activity changes to inflation as well as deferred to later canceled investment decisions across our customer base remains unknown and difficult to predict.
Greg: I'll also touch on the global trade landscape as well as our corporate development initiatives and recent.
Speaker Change: At the moment, we have not seen major shifts in customer purchasing decisions supply chain environment, where changes in the competitive dynamics in the markets that we serve.
Greg Palaschuk: If I look back two years to March 2023, that was the highest service work in progress balance we had for the last two years. And today, service work in progress is 8% higher than that. So that bodes well for some of the other questions that we've had around, you know, continuation of that activity level. No, it's great work and definitely showing up in the results.
Greg: And recent changing tariff related announcements by the U S. Canada and other countries globally has introduced a level of uncertainty cost and complexity of the operating for many businesses today, the direct impact of announced and implemented tariffs Tiffany has been limited and largely centered on our Canadian business.
Speaker Change: Our teams remain cautious and continue to closely monitor the situation will actively engaging in contingency planning and mitigation initiatives.
Speaker Change: We believe our business is well positioned to remain resilient given the diversity of our end markets momentum in our product support business and the strength of our record backlog and momentum in our product support business.
Greg: The indirect impacts of reduced economic activity changes to inflation as well as deferred to later canceled investment decisions across our customer base remains unknown and difficult to predict at the moment, we have not seen major shifts in customer purchasing decisions supply chain environment, where changes in the competitive dynamics in the markets that we serve.
Speaker Change: Summarized on slide 10 is our sale of <unk>, if you will.
Operator: Thanks for taking my question.
Speaker Change: Comment.
Speaker Change: Yes.
Speaker Change: We reached an agreement to sell for a fuel for up to $450 million purchase price subject to customary closing conditions comprises of $330 million of cash $50 million of notes receivable that will match. The term of the buyers senior credit facility and bear escalating interest and contingent consideration of up to $20 million based on achieving certain financial performer.
Greg Palaschuk: This concludes the question and answer session.
Greg Palaschuk: I would like to turn the conference back over to Greg Palaschuk for any closing remarks. Great. Thank you, operator.
Greg Palaschuk: And thanks for everyone for joining today. And I hope you have a very safe day.
Greg: Our teams remain cautious and continue to closely monitor the situation will actively engaging in contingency planning and mitigation initiatives.
Operator: This brings to an end today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.
Greg: We believe our business is well positioned to remain resilient given the diversity of our end markets momentum in our product support business and the strength of our record backlog and momentum in our product support business.
Speaker Change: Metrics over the next two year period.
Speaker Change: Including leases and other indebtedness was approximately $50 million of the total implied transaction value is $400 million.
Speaker Change: Summarized on slide 10 is our sale of for fuel and I'll, let al comment that a few details.
Speaker Change: Through a combination of proceeds from this transaction and substantial free cash flow generation over the last six years <unk> has provided a strong return on investment for <unk> and our shareholders.
Speaker Change: Reached an agreement to sell for a fuel for up to $450 million purchase price subject to customary closing conditions comprises of $330 million of cash $50 million of notes receivable that will match. The term of the buyers senior credit facility and bear escalating interest and contingent consideration of up to $20 million based on foreign fuel achieving certain financial performance metric.
Speaker Change: We expect the transaction to close in Q3 of this year and through a combination of share repurchases debt repayment and reinvestment Stuart Ford dealership, we expect the transaction to be accretive to earnings per share.
Speaker Change: Overall, we are very pleased with the team's performance in the first quarter a strong start to 2025 comes at a very important time with double digit product support growth and record backlog level in Q1 being an excellent platform to demonstrate our improved resilience in earnings capacity in 2025, we remain focused on the execution of our strategic plan.
Speaker Change: Over the next two year period.
Speaker Change: Putting leases and other indebtedness. This is approximately $50 million of the total implied transaction value is $400 million.
Speaker Change: Through a combination of proceeds from this transaction and substantial free cash flow generation over the last six years, where if you will has provided a strong return on investment for fitting and our shareholders.
Speaker Change: <unk> product report continuously improve our cost and capital position to drive full cycle resilience and grow prudently and used rental and power.
Speaker Change: We expect the transaction to close in Q3 of this year and through a combination of share repurchases debt repayment and reinvestment Stuart Ford dealership, we expect the transaction to be accretive to earnings per share.
Speaker Change: Operator, I will now turn the call back to you for questions.
Speaker Change: We will now begin the question and answer session.
Speaker Change: Analysts who wish to join the question queue May Press Star then one on your telephone keypad, you will hear a tone acknowledging your request.
Speaker Change: Overall, we're very pleased with the team's performance in the first quarter.
Speaker Change: <unk> start to 2025 comes at a very important time with double digit product support growth and record backlog levels in Q1 being an excellent platform to demonstrate our improved resilience in earnings capacity in 2025.
Speaker Change: If you were using a speakerphone please pick up your handset before pressing any keys.
Speaker Change: To withdraw your question. Please press Star then two.
Speaker Change: <unk> focused on city execution of our strategic plan.
Speaker Change: We will pause for a moment as callers join the queue.
Speaker Change: Maximize product support continuously improve our cost and capital position to drive full cycle resilience and grow prudently and used rental and power.
Speaker Change: Our first question today is from Yuri Lynk with Canaccord Genuity. Please go ahead.
Speaker Change: Operator, I'll now turn the call back to you for questions.
Speaker Change: We will now begin the question and answer session.
Yuri Lynk: Hey, good morning, good morning.
Speaker Change: Analysts who wish to join the question queue May Press Star then one on their telephone keypad you.
Speaker Change: Good morning.
Speaker Change: Congrats on the quarter nice numbers.
Speaker Change: Big backlog growth in Canada.
Speaker Change: You'll hear a tone acknowledging your request.
Speaker Change: Just wondering if you can help us with the cadence of that backlog burn in terms of how much of it in two.
Speaker Change: We're using a speakerphone please pick up your handset before pressing any keys to.
Speaker Change: To withdraw your question. Please press Star then two.
2025, and if any of that spills into the into the outer years.
Speaker Change: We will pause for a moment as callers join the queue.
Speaker Change: Yes, we're definitely pleased to add a few wins with a few customers in the quarter and.
Speaker Change: Okay.
Speaker Change: Our first question today is from Yuri Lynk with Canaccord Genuity. Please go ahead.
Speaker Change: A couple of that were pretty strategic actually so really pleased with that but it's a really solid cadence some are delivering.
Speaker Change: Yeah.
Speaker Change: As we speak and someone will extend out all the way into the middle of next year.
Speaker Change: Hey, good morning.
Speaker Change: Good morning.
Speaker Change:
Speaker Change: Congrats on the quarter nice numbers.
Speaker Change: Okay.
Speaker Change: And given what we saw with the order intake in Canada and also the good good product support.
Speaker Change: Big backlog growth in Canada, I'm, just wondering if you can help us with with the cadence of that that backlog burn them in terms of how much of it does in 2025, and if any of it spills into the into the outer years.
Speaker Change: Was there an element of catch up.
Speaker Change: In terms of some deferrals that I think you referenced last year on behalf of some some customers just any any additional color would be helpful.
Speaker Change: Yeah, we were definitely pleased to have a few wins with a few customers in the quarter and.
Speaker Change: Yes.
Speaker Change: I don't think we mentioned before.
Speaker Change: A couple of them are pretty strategic actually so really pleased with that but it's a really solid cadence some are delivering as.
Speaker Change: Yuri I mean, there is a general sentiment that.
Speaker Change: Spending, particularly in the oil sands.
Speaker Change: As we speak and someone will extend out all the way into the middle of next year.
Speaker Change: With the.
Speaker Change: The <unk> was a little different last year.
Speaker Change: Okay.
Speaker Change: We're not in control of that as I've said, a number of times our job is to stay close to customers understand.
Speaker Change: Given what we saw with with the order intake in Canada and also the good the good product support.
Speaker Change: What their requirements will help them to meet their objectives and be right by their side.
Speaker Change: Was there an element of of catch up.
Speaker Change: Theyre my employment develop in their fleet utilization changes.
Speaker Change: In terms of some deferrals that I think you referenced last year on behalf of some some customers just any any additional color would be helpful.
Speaker Change: For sure 2024, we saw some different.
Speaker Change: Situations or different conditions.
Speaker Change: Yeah, I mean, I don't think we mentioned before deferrals Yuri I mean, there is a general sentiment that you know.
Speaker Change: And I would say that through this course of this winter.
Speaker Change: What are the pluses are more normal.
Spending, particularly in the oil sands.
Speaker Change: A more normal season.
Speaker Change: You know the parts one was a little different Lafayette.
Speaker Change: We call I'll comment on whether that was <unk> fallen off we just.
Speaker Change: You know we're not in control of that as I've said, a number of times our job is to stay close to customers understand.
Speaker Change: Just.
Speaker Change: We want to be right there by the side of that question is to support them.
Speaker Change: And I think that's what you saw in Q1.
Speaker Change: What their requirements are helping to meet their objectives and be right by their side as their mine plan was developed in their fleet utilization changes. So you know for sure 2024, we saw some different.
Speaker Change: Very helpful. Thank you I'll hop back in the queue.
Thanks, Larry.
Speaker Change: The next question is from Devin Dodge with BMO capital markets. Please go ahead.
Speaker Change: Situations all of different conditions.
Devin Dodge: Okay. Thanks, good morning.
Speaker Change: And I would say that through the course of this winter. It was publicly what your classes are more normal.
Speaker Change: On 11.
Speaker Change: Look to the balance sheet.
Speaker Change: Really good shape here.
Speaker Change: A more normal season.
Speaker Change: It seems like 2025 should be another year of strong free cash flow.
Speaker Change: You know we call I'll comment on whether there was cocktail falling off we just.
Speaker Change: And obviously with the sale of four refuel will unlock even more capital there.
Speaker Change: We want to be right that a lot of thought about Christmas and to support them.
Speaker Change: Beyond just returning capital to shareholders I think Kevin touched on this a little bit in his remarks, but just can you speak to where you see opportunities to invest in the core <unk>.
Speaker Change: And I think that's why you saw anything in Q1.
Speaker Change: Very helpful. Thank you I'll hop back in the queue.
Gary: Thanks, Gary.
Speaker Change: Dealership operations going forward.
Speaker Change: The next question is from Devin Dodge with BMO capital markets. Please go ahead.
Speaker Change: Yes, I appreciate it thanks Sherry.
Speaker Change: Firstly, I mean, it's completely aligned with our strategy. So firstly <unk>.
Devin Dodge: Okay. Thanks, good morning.
Gary: Kevin.
Speaker Change: Look to the balance sheet is really good shape here.
Speaker Change: Product support capabilities.
Speaker Change: And.
Speaker Change: Seems like 2025 should be another year of strong free cash flow and obviously the sale of four refuel will unlock even more capital there.
Speaker Change: Ultimately inventory to support that and you can see despite the.
Speaker Change: <unk>, Inc, including the free cash flow I should say.
Speaker Change: Our inventory did go up in the quarter as we support the growth that we're articulating and our outlook.
Speaker Change: So beyond just returning capital to shareholders I think Kevin touched on this a little bit in his remarks, but just can you speak to where you see opportunities to invest in the core.
Speaker Change: And so we need cash to be able to invest in that growth and make sure we have the right.
Speaker Change: Dealership operations going forward.
Speaker Change: Inventories.
Speaker Change: Yeah for sure. Thanks Sherry.
Speaker Change: Workshop capabilities to support that product support growth and then you just tend to our sustainable growth initiatives used rental and power.
Speaker Change: Firstly, I mean, it's completely aligned with our strategy. So firstly, it's around product support capabilities.
Speaker Change: And we believe that there is opportunity to our Utica program.
Speaker Change: And and it ultimately inventory to support that and you can see despite the ink.
Speaker Change: Inventories did come down.
Speaker Change: In the quarter, but there's always opportunities to grow in that space.
Speaker Change: Including the free cash flow I should say you know Arab countries did go up in the quarter as we support the growth.
Speaker Change: As there is in power systems capabilities in and then finally rental and so whether that's.
Speaker Change: We're all speculating.
Our outlook.
Speaker Change: So you know we need the cash to be able to invest in that growth to make sure we have the right.
Speaker Change: <unk> or heavy rents will particularly.
Speaker Change: Car rental services, which is the cat rental store.
Speaker Change: Our inventories and.
Speaker Change: We see opportunities to grow profitably.
Speaker Change: Shop capabilities to support that product support growth and then you just tend to our sustainable growth initiatives, you know used rental and pallet.
Speaker Change: That space too.
Speaker Change: We will continue to look at if there are any opportunities or good adjacencies to be able to support that three pronged strategy.
Speaker Change: And you know, we believe that there's opportunity to use it.
Speaker Change: Inventories did come down.
Speaker Change: In the <unk> in the quarter, but there's always opportunities to grow in that space.
Speaker Change: Okay. Good color. Thanks for that maybe just sticking with rental.
Speaker Change: Everything in our power systems capabilities, and and then finally rental so whether that's all P o's or heavy rents will particularly a rent cut rental services, which is the cat rental store.
Speaker Change: Looked like dollar utilization.
Speaker Change: They have been stronger year over year.
Speaker Change: Kevin I think you've mentioned in the past Theres more diversity in your rental fleet.
Speaker Change: Maybe some others in the sector, but within your rental operations, which parts of the business are doing.
Speaker Change: We see opportunities to grow profitably.
Speaker Change: It really well, where youre looking to deploy more capital in the near term and which parts are maybe a bit more challenged and the focus is more on realigning our optimizing the offering.
Speaker Change: In that space too.
Speaker Change: We will continue to look at you know if there are any opportunities or good adjacencies to be able to support that three pronged strategy.
Speaker Change: So I think Ken and I had rental businesses, a little more complicated so.
Speaker Change: Okay. Good color. Thanks for that maybe just sticking with rental it looked like dollar utilization.
Speaker Change: I'm not sure we would have had excuse me more.
Speaker Change: <unk>.
Speaker Change: The heavy equipment and even in the mining space.
Speaker Change: They have been stronger year over year.
Speaker Change: That in the mining space, that's lumpy and it's very much customer specific.
Speaker Change: Kevin I think you've mentioned in the past Theres more diversity in your rental fleet than maybe some others in the sector, but within your rental operations, which parts of the business are doing.
Speaker Change: Lumpy demand.
Speaker Change: <unk>.
Speaker Change: In terms of heavy rents.
Speaker Change: That's a little softer for US right now as we recalibrate the fleet and reorganize the fleet and not directly linked with the lack of major infrastructure projects that were seeing still optimistic that the new government will start to kick that off and we stand ready to invest in that heavy rents fleets. It's a good business for us but in the heavy branded side is that all.
Speaker Change: Really well, where youre looking to deploy more capital in the near term and which parts are maybe a bit more challenged and the focus is more on realigning our optimizing the offering.
Speaker Change: Yeah, So I think Ken and rental business is a little more complicated so.
Speaker Change: I'm not sure we would have had excuse me more.
Speaker Change: I'll pose them in the heavy equipment and even in the mining space and you know that are in the mining space, that's lumpy and it's very much customer specific and you know.
Speaker Change: <unk> side in terms of facilitating sales winning new customers.
Speaker Change: And growing market share that's something we are absolutely committed to investing in and then we are really encouraged by our cat rental store.
Speaker Change: <unk> peak demand.
Speaker Change: In terms of heavy rents.
Speaker Change: <unk> were up 15% year over year and whilst it might have been from a low base, that's encouraging from a and that's all driven by utilization.
Speaker Change: That's a little softer for US right now as we recalibrate the fleet and reorganize the fleet and not directly linked with the lack of major infrastructure projects that were saying film we're optimistic that the new government will start to kick that off of as we stand ready to invest in that heavy rents fleets. It's a good business for us, but in the heavy rain in size that halt.
Speaker Change: And so that's an area that we'll continue to look at and refine the fleet make sure it's a complete and.
Speaker Change: Market.
Speaker Change: <unk>.
Speaker Change: Service and there'll be more opportunities to invest in that area.
Speaker Change: Oh, sorry in terms of facilitating sales and winning new customers.
Speaker Change: And growing market share that's something we're absolutely committed to investing in and then we are really encouraged by our cat rental store.
Speaker Change: Okay excellent congrats on the good results I'll turn it over thank you. Thanks David.
Speaker Change: The next question is from Steve Hansen with Raymond James. Please go ahead.
Speaker Change: Our revenues were up 15% year over year and whilst they might have been from a low base, that's encouraging from it and that's all driven by utilization and so that's an area that we continue to look at and refine the fleet make sure it's a complete and market differentiated our service.
Steve Hansen: Hey, good morning, guys. Thanks for your time.
Greg: Greg I think there Kevin you referenced I think the more normal weather pattern is helping contribute to the product support growth.
Greg: We are giving you any sort of indication as to how the balance of the year is going to play out we continue to expect to see growth.
Greg: Through the balance of $25.
Steve Hansen: Yes, Steve.
Speaker Change: Yes.
Greg: Steve It's Kevin.
Speaker Change: There'll be more opportunities to invest in that area.
Greg: Part of what we're trying to do with that.
Speaker Change: Okay excellent congrats on the good results I will turn it over thank you.
Our major customers they sit down with them and plan more effectively so that we can provide better physical availability of our assets and ultimately allow.
Speaker Change: The next question is from Steve Hansen with Raymond James. Please go ahead.
Steve Hansen: Yeah. Good morning, guys. Thanks for time.
Greg: Our cost of execution in terms of logistics and supply chain.
Steve Hansen: Greg I think there are Kevin you referenced I think the more normal weather pattern is helping contribute to the product support growth.
Greg: Yes.
Greg: The precise outlook for that outside of major components.
Steve Hansen: Customers, giving you any sort of indication as to how the balance of the year is going to play out do you expect to see growth.
Greg: It is more challenging but from a major components side and you've been to our OEM facility a number of times, while we rebuild the engine the visibility is good and we would see that.
Steve Hansen: Through the balance of 'twenty five.
Steve Hansen: Yeah.
Steve Hansen: Steve It's Kevin Yeah.
Steve Hansen: <unk>.
Steve Hansen: We're a part of what we're trying to do with the with our major coastal news they sit down with them and plan more effectively so that we can provide better physical availability of our assets and ultimately lower our cost of execution.
Greg: <unk>.
Greg: Remaining encouraging for the rest of the year in terms of the timing of major rebuilds that can change with mine plans and so that's a little more more difficult I would say that as we look forward, we expect that business to grow in line with the.
Steve Hansen: So that just takes in supply chain.
Greg: <unk> publicly disclosed production growth figures that all of the public oilsands producers have disclosed.
Steve Hansen:
Steve Hansen: The outlook the precise outlook for that outside of major components.
Steve Hansen: More challenging but from a major components side and you've been to our OEM facility a number times, while we rebuild the engine. The visibility is good and we would see that you know that.
Greg: And we do believe that more trucks are required to meet those production requirements as the mine plan. This change in the whole distances.
Steve Hansen: We remain encouraging for the rest of the year in terms of the timing of major rebuilds that can change with mine plans and so that's a little more more difficult you know I would say that as we look forward, we expect that business to grow in line with the the publicly disclosed production growth figures that you know.
Greg: Get longer and I think thats, what youre seeing in the equipment backlog Steve So.
Greg: You might not see it immediately but adding.
Greg: Adding folks to the oil sands is a long term positive inquiries about Frac company.
Greg: Okay. That's all I can tell you can happen in the next three months or six months, but we.
Greg: Totally committed to that region.
Steve Hansen: All of the public Oilsands producers have disclosed.
The backlog.
Steve Hansen: And we you know we do believe that.
Greg: Supports that.
Greg: Okay. That's helpful. Thanks, and then just on the cadence of buyback you've consistently funded the buyback here for a while now through cash flow from operations and free cash flow you've got this.
Steve Hansen: More trucks are required to meet those production requirements as the mine plans change and the whole distances.
Steve Hansen: Not long ago, and I think that's what you're seeing in the equipment backlog, Steve. So you know what I mean, he might not see it immediately but you know, adding I haven't spoken to the all of a sudden sees along to a positive inquiries have been for our company.
Speaker Change: This inflow coming in from before we feel so we expect the cadence of buybacks. The teams at all going forward, Greg or it could be more.
Greg: Consistent ratable, how do you think about that thanks.
Speaker Change: Yes, I mean for quite a while now we've done about 1% per quarter. As we just did this last quarter. So we would expect that and kind of.
Steve Hansen: Okay. That's all I can tell you can happen in the next three months or six months, but you know we.
Steve Hansen: Totally committed to that region.
Speaker Change: That would be the typical pattern and then of course, we have the proceeds coming in that we would expect but the majority in that direction. So we just renewed our in CIB and that gives us about 10% of capacity and we think we've got the capacity to do both.
Steve Hansen: The backlog.
Steve Hansen: Supports that.
Steve Hansen: Okay. That's helpful. Thanks, and then just on the cadence of buyback you've consistently funded the buyback here for for a while now through cash from operations and free cash flow you've got this.
Speaker Change: Okay, Great that's helpful. Thanks.
Steve Hansen: This inflow coming in for the four refuel deal should we expect the cadence of buybacks. The teams at all going forward, Greg or to be more consistent ratable. How do you think about that thanks.
Speaker Change: The next question is from Cherilyn Radbourne with TD Cowen. Please go ahead.
Cherilyn Radbourne: Thanks, very much and good morning.
Speaker Change: I wanted to start with a bigger picture question.
Steve Hansen: Yes, I mean for quite a while now we've done about 1% per quarter. As we just did this last quarter. So we would expect that in kind of a.
Regarding the new federal government in Canada.
Speaker Change: So for renewed National Windsor in Canada, if you want to call. It that if you could send the policy wish list that would be supportive of growth in western Canada, what would be some of the key items on that list.
Steve Hansen: No that would be the typical pattern and then of course, we have the proceeds coming in that we would expect but the majority in that direction. So we just renewed our in CIB and you know that gives us about 10% of capacity and we think we've got the capacity to do both.
Speaker Change: Yes.
Speaker Change: Very good that's helpful guys. Thanks.
Speaker Change: Yes.
Speaker Change: Very good question that shown and I think that.
Speaker Change: The next question is from Cherilyn Radbourne with TD Cowen. Please go ahead.
As we look forward I mean.
Speaker Change: Number one policy would be.
Cherilyn Radbourne: Thanks, very much and good morning.
Speaker Change: Our resource development.
Cherilyn Radbourne: I wanted to just start with a bigger picture question regarding.
Speaker Change: And changes to the approach too.
Cherilyn Radbourne: Regarding the new federal government in Canada.
Speaker Change: Two pipelines.
Speaker Change: That would be.
Cherilyn Radbourne: So for renewed National Atlanta in Canada, do you want to call. It that if you could send the policy wish list that would be supportive of growth in western Canada, what would be sort of the key items on that list.
Speaker Change: A huge I just think we need to.
Speaker Change: Rethink a lot after the last 10 years and that would be tough for the next I think as.
Speaker Change: The administration has already talked about moving into provincial trade barriers would be great for.
Cherilyn Radbourne: Yeah Okay.
Cherilyn Radbourne: Very good question that I think that.
Speaker Change: For all of Canada to increase trade and economic prosperity.
Cherilyn Radbourne: As we look forward I mean.
Cherilyn Radbourne: Number one policy would be resource development and.
Speaker Change: And I think.
Speaker Change: Our policy and approach around.
Cherilyn Radbourne: And changes to the approach to our two pipelines.
Speaker Change: <unk> supply and production and potentially.
Cherilyn Radbourne: No that would be a huge.
Speaker Change: Data center development participating more in that sector.
Cherilyn Radbourne: I think we need to.
Speaker Change: It would be on the list as well as.
Cherilyn Radbourne: Rethink a lot after the last 10 years and that would be top of his life studying as a as the administration have already talked about moving into provincial type areas would be great for us for all of Canada to increase trade and economic prosperity.
Speaker Change: More.
Speaker Change: And we will helpful immigration strategy to support the growing demands of technician base that we have.
Speaker Change: I could go on but there's a long list, but if you think about it in the.
Speaker Change: Context of our business, we've got to get the economy moving in the first instance, and then we've got to make sure that we've got the opportunity to build the capabilities.
Cherilyn Radbourne:
Cherilyn Radbourne: And I think you know.
Cherilyn Radbourne: Our policy and our approach around <unk>.
Cherilyn Radbourne: <unk> supply and production and.
Speaker Change: To have the productivity gains to have an investment friendly environment.
Cherilyn Radbourne:
Cherilyn Radbourne: Data center development participating more in that sector.
Speaker Change: You have the right people and employees.
Cherilyn Radbourne: It would be on the list as well as.
Speaker Change: And union strategies to drive our business forward.
Cherilyn Radbourne: More.
Cherilyn Radbourne: And we will helpful immigration strategy to support the growing demands of the technician base that we have.
Speaker Change: Just trying to get a lot more friendly.
Speaker Change: Alright, and then.
Speaker Change: My second question is just you flagged the potential for labor cost inflation in South America.
Cherilyn Radbourne: I could go on but there's a long list, but if you think about it in the in the in the.
Cherilyn Radbourne: The context of our business, we've got to get the economy moving in the first instance, and then we've got to make sure that we've got the opportunity to build the capabilities.
Speaker Change: Just what do you think your ability is to pass that through.
Speaker Change: As you progress through dose.
Speaker Change: In negotiations later in the year.
Cherilyn Radbourne: To have the productivity gains to have an investment a friendly environment and have the right people and employees.
Speaker Change: Yes, so we have a few of our unions coming up in the back half of the year. We've been fortunate the last round, we actually didn't proactively. So we've had a good 18 months two year gap since our last.
Cherilyn Radbourne: And union strategies to drive our business forward.
Just trying to get a lot more friendly.
Speaker Change: Negotiation, but as we see across the industry across the mining landscape.
Cherilyn Radbourne: Alright, and then.
Speaker Change: Some higher compensation and deals that are struck as well as some of the upfront.
Cherilyn Radbourne: My second question is just.
Speaker Change: You flagged the potential for labor cost inflation in South America.
Speaker Change: Payments, increasing so we're being proactive again and we're going through those discussions, but we do expect higher rates. Those obviously slow through a lot of the contracts, but we need to be mindful that at all.
Speaker Change: What do you think your ability is to pass that through.
Cherilyn Radbourne: As you progress through those union negotiations later in the year.
All online with industry benchmarks and standards.
Cherilyn Radbourne: Yeah. So we have a few of our unions coming up in the back half of the year. We've been fortunate that the last round, we actually didn't proactively so we've had it.
Speaker Change: So for me thank you.
Speaker Change: Thank you.
Speaker Change: Once again any analysts who has a question May press Star then one on your telephone keypad.
Cherilyn Radbourne: At 18 months, two year gap or lost.
Cherilyn Radbourne: Negotiation, but as we see across the industry across the mining landscape.
Speaker Change: Next question is from Maxim <unk> with National Bank Financial Please go ahead.
Cherilyn Radbourne: Some higher compensation and deals that are struck as well as some of the upfront.
Maxim: Hi, good morning, gentlemen.
Speaker Change: Hi, good morning Max.
Cherilyn Radbourne: Payments, increasing so we're being proactive again and we're going through those discussions, but we do expect higher rates. Those obviously flow through a lot of the contracts, but we need to be mindful that it's you know all online with industry benchmarks in theater.
Speaker Change: Actually Jim I, just wanted to build on Sharon's question around.
Speaker Change: Chile.
Speaker Change: The labor dynamics, how does this factor in in terms of your SG&A targets I guess, Michael over the medium term.
Speaker Change: How are you thinking about the potential offsets et cetera. Thanks.
Cherilyn Radbourne: Well for me thank you.
Speaker Change: Sure so yes.
Cherilyn Radbourne: Thank you.
Speaker Change: At the end of the day, we have labor cost a lot of the business in South America at Investor Day, We highlighted about 70% is contracted so a lot of those will be back to back in the contracts of course, there are some business thats non contracted.
Speaker Change: Once again any analyst who has a question May press Star then one on the telephone keypad.
Speaker Change: Next question is from Maxim <unk> with National Bank Financial Please go ahead.
Maxim: Hi, good morning, gentlemen.
Speaker Change: Hi, good morning, Mike.
Speaker Change: Some training and other costs that are comparable so in general there'll be some inflation.
Speaker Change: Actually I just wanted to build on Sharon's question around.
Chile.
Speaker Change: We tend to have a price increase each year that absorbs some of that but everywhere else, we're absolutely looking for productivity gains.
Speaker Change: The labor dynamics, how does it factor in in terms of your SG&A targets, I guess, Michael but the medium term.
Speaker Change: We've had a number of them over the last five years, we look at areas to leverage shared service centers.
Speaker Change: How you think about potential offsets et cetera. Thanks.
Speaker Change: Sure so yes.
Speaker Change: At the end of the day, where you have labor costs, you know a lot of the business in South America, you know at Investor Day, we highlighted about 70% is contracted so a lot of those will be back to back in the contracts of course, there are some business that's non contracted.
Speaker Change: And then just general administration.
Speaker Change: We continue to March down the cost curve.
Speaker Change: We also continue to make investments like in our warehouse in Antofagasta that you would've seen the beginnings of it's now full auto store operation, obviously that continues to drive productivity and we continue to look up just many more opportunities for that and so.
Speaker Change: Some training and other costs that aren't recoverable so in general there'll be some inflation.
Speaker Change: We tend to have a price increase each year that absorbs some of that but everywhere else, we're absolutely looking for productivity gains.
Speaker Change: Resilience is top of mind for everybody and we know that theres cost offset we've been doing it for the last few years and we'll continue to do so yes im actually.
Speaker Change: We've had a number of them over the last five years, we look at areas.
Speaker Change: The backend of last year, we started this year actually.
Speaker Change: <unk> shared service centers.
Speaker Change: Dino Mall joined Us.
Speaker Change: And then just general administration.
Speaker Change: This year veteran of the mining industry.
Speaker Change: We continue to March down the cost curve.
Speaker Change: He joined US in July.
Speaker Change: We also continue to make investments like at our warehouse in Antofagasta that you would've seen the beginnings of it's now a full auto store operation, obviously that continues to drive productivity and we continue to look up just many more opportunities for that and so.
Speaker Change: And I was very fortunate to spend some time with him.
Three weeks ago and we're.
Speaker Change: Very confident that he is.
Speaker Change: His expertise and experience.
Speaker Change: The process and productivity improvements I mean, that's where the big gain is as you mentioned labor cost goes up we need to.
Speaker Change: Resilience is top of mind for everybody and we know that theres cost off that we've been doing it for the last few years and we'll continue to do so yeah I'm actually.
Speaker Change: It gets up to the.
Speaker Change: The levels, we've seen in more so in the in the <unk>.
Speaker Change: The backend of last year, we started this year actually.
Speaker Change: Fully developed will then we need to see productivity improvements to match that as well.
Speaker Change: Dino mall joined us he's at the two year veteran of the mining industry.
Speaker Change: You've been dynamics, there's lots of opportunity there and we feel like through to make sure of technology investment.
Speaker Change: He said he joined us as the Chilean.
Speaker Change: And I was very fortunate to spend some time with him.
Speaker Change: Strong expertise in the from the directly from the mining segment, we can to try and.
Speaker Change: Three weeks ago, and we're very confident that through he's he's.
Speaker Change: We can try and find out some of those those opportunities.
Speaker Change: His expertise and experience there's tons of process and the productivity improvements I mean, that's where the big Guy and he's as you mentioned you know it was life of cost goes up we need to I need to get to to levels. We've seen in most of them in there and the fully developed world and we need to see productivity improvements to match that as well.
Speaker Change: Yes, absolutely and I guess.
Speaker Change: Staying with the geography like Argentina.
Speaker Change: I mean, it feels like it's becoming a little bit more sort of business as usual dynamic.
Speaker Change: Do you mind, providing a bit of an update.
Speaker Change: Where we are can you start deploying a bit more equipment. There just maybe any data points sequentially. Thanks.
Speaker Change: And as you've been down there in Mexico is lots of opportunity there and we feel like there's a mixture of technology investment.
Speaker Change: Yeah. Thanks, Matt So we certainly see a lot of activity right here and now in the oil and gas sector. So that certainly picked up.
Speaker Change: The strong expertise in the from the directly from the mining segment weekend to trial.
Speaker Change: But as you know we've taken a low risk approach because theres been lots of challenges I would say the government has made a lot of progress.
Speaker Change: You can try and find out some of those are those opportunities.
Speaker Change: Absolutely and I guess, the kind of thing.
Speaker Change: Lot of incentives for businesses to make large scale investments in structural structural advantages with a timeline and so youll see a lot of the mining projects moving pretty fast to qualify for those criteria.
Speaker Change: Staying with the geography like Argentina.
Speaker Change: I mean, it feels like it's becoming a little bit more sort of business as usual dynamic.
Speaker Change: Do you mind, providing a bit of an update.
Speaker Change: Where we are can you start deploying a bit more equipment. There just maybe any data points. Thanks.
Speaker Change: We're seeing a lot of activity there of course, the deal with the IMF and the.
Speaker Change: Months here with Super important and the resulting.
Speaker Change: Yeah. Thanks, Matt So we certainly see a lot of activity right here and now in the oil and gas sector. So that certainly picked up.
Speaker Change: Removal of a lot of the FX restrictions certainly helps us in terms of speed.
Speaker Change: But as you know we've taken a low risk approach because theres been lots of challenges I would say the government has made a lot of progress.
Speaker Change: Risk in terms of currency has gone down a lot. So that's been super helpful of course, there's elections in the fall, where we need to make sure that the current administration.
Speaker Change: Lot of incentives for businesses to make large scale investments in structural structural advantages with the timeline and so you'll see a lot of the mining projects moving pretty fast to qualify for those criteria as it were.
Speaker Change: <unk> continued its momentum and support I think that's the next major milestone, but certainly whether it's <unk>.
Speaker Change: <unk> timing or cash flow timing, that's improved a lot and make this not helpful for us to make lower risk decisions and so that.
Speaker Change: Seeing a lot of activity there of course, the deal with the IMF them in the last months here with Super important and the resulting.
Speaker Change: As all encouraging but of course, we want to see the evidence in their application for more than just six months before we go too far into it.
Speaker Change: The removal of a lot of the FX restrictions certainly helps us in terms of speed and risk in terms of currency has gone down a lot. So that's been super helpful of course, there's elections in the fall, where we need to make sure that the current administration.
Speaker Change: Okay. Okay Super helpful. Thanks, so much.
Michael: Thanks, Michael.
Your next question is from Jonathan Goldman with Scotiabank. Please go ahead.
Michael: Hi, Good morning team. Thanks for taking my questions, maybe just one on the UK the SG&A down 5% year on year, I mean sales were down 2% with product support up nicely are there any initiatives going on in that region or how should we think about expense levels for the balance of the year.
Speaker Change: Continues its momentum and support like that.
Speaker Change: The next major milestone.
Speaker Change: Certainly whether it's you know cut.
Speaker Change: <unk> timing or cash flow timing, that's improved a lot and makes it a lot helpful for us to make a lower risk decisions and so that is.
Michael: Yes, I think that.
Speaker Change: It's all encouraging but of course, we want to see the evidence in the replication for more than just six months before we go too far into it.
Michael: What are you seeing that Jonathan is is the impact of the work that team and the team did in the towards the end of the second quarter last year.
Speaker Change: Okay. Okay Super helpful. Thanks, so much.
Speaker Change: Thanks, Mike.
Michael: As we've said before 2024.
Speaker Change: The next question is from Jonathan Goldman with Scotiabank. Please go ahead.
Michael: At the end of 2023 and 2024, we saw a softening in the UK business in southern Poland that we will retain our agility and ability to flex our cost base.
Jonathan Goldman: Hi, Good morning team. Thanks for taking my questions, maybe just one on the UK the SG&A down 5% year on year, I mean sales were down 2% with product support up nicely are there any initiatives going on in that region or how should we think about expense levels for the balance of the year.
Michael: Two.
Dahlia Wei: Dahlia Wei.
Michael: And so I think that.
Michael: Those cost saving initiatives really starting to take hold.
Speaker Change: Yes, I think that what you say.
In the third quarter last year.
Speaker Change: And then Jonathan is is the impact of the work that team and the team did in the towards the end of the second quarter last year.
Michael: Seeing the impact of dot work that carried through the end of the year and.
Michael: So against the comp of the higher cost base in the store in Q1 last year.
Speaker Change: As we've said before 2024.
Michael: Good examples of that in place through to some of the work that team is doing in Canada right now I mean, it starts with our people business.
Speaker Change: Well at the end of 2023 and 2024, we saw a softening in the U K business in southern Poland that we would be kind of our agility and ability to flex our cost base to <unk>.
Michael: And it starts with the organizational effectiveness and design.
Speaker Change: Two.
Michael: <unk>.
Speaker Change: Why.
Michael: Combined relative is very passionate about having no more than.
Speaker Change: And so I think that.
Speaker Change: Those cost saving initiatives really starting to take hold.
Michael: Two layers from his direct reports to the front of.
Speaker Change:
Speaker Change: In the third quarter last year.
Michael: It has.
Speaker Change: Seeing the impacts of that work that carried through the end of the year end.
So.
Everything I'm, saying now you can read through into some of the initiatives that Tim is working on in Canada too.
Speaker Change: So against the comp at the higher cost space in the store and in Q1 last year.
Michael: So organizational design spans and layers.
Speaker Change: Good examples of that and it plays through to some of the work that team is doing in Canada right now I mean, it starts with our people business.
Michael: There is also within the organization organization design there are some things that we've challenged ourselves and stop doing things that.
Speaker Change: And it starts with our organizational effectiveness and design.
We determine Don.
Michael: Support the strategy to the level that we require and so theres a organization design pace than there is on operational execution and disciplined pace not a lot of that comes in terms of the cost of execution.
Speaker Change: De layering.
Speaker Change: And the combined relative team is very passionate about having no more than.
Speaker Change: Two layers from his direct reports to the front of the you know to the front of it.
Speaker Change: It has.
Michael: Really simple examples of that would be.
Speaker Change: So.
Speaker Change: Everything I'm, saying now you can read through into some of the initiatives that Tim is working on in Canada too.
Michael: Cost solve emergency expediting parts and people in overtime and to execute the business.
Speaker Change: So organizational design spans and layers.
Speaker Change: There's also within the organization organization designed there are some things that we've challenged ourselves and stop doing things that are you.
Michael: As well as looking for opportunities for automation as we've talked about in Chile there.
Michael: So to <unk> question about it.
Speaker Change: No we don't.
Michael: Labor costs, increasing so.
Speaker Change: To support the strategy to the level that we require and so there's an organization design pace than theirs and operational execution and disciplined pace and not a lot of that comes in terms of the cost of execution are really simple examples of that would be.
Michael: It has lots of automation activities I also mentioned in my remarks, we've launched this.
Michael: Program nickel case of workforce management, which is really helping us to go to manage the customer experience in terms of that repair from start to finish.
Speaker Change: Cost solve an emergency expediting parts and people in over time and to execute the business.
Michael: Helps with the administration of that.
Michael: Work it helps with expedited the invoicing of that work at the end and it helps us with.
Speaker Change: As well as looking for opportunities for automation as we've talked about in Chile there.
Michael: Productivity improvements so we can make sure we've got longer term planning for.
Speaker Change: So to Max's question about <unk>.
Speaker Change: Technicians moving out.
Speaker Change: Labor costs, increasing so.
Speaker Change: And then ultimately that is the good old stuff as well you know when youre in an uncertain environment.
Speaker Change: Lots of automation and activities I also mentioned in my remarks, we've launched this.
Speaker Change: We were in the UK and we are in Canada to a certain degree the discretional spend it's just the tightening of the belts.
Speaker Change: Grandma Cold case of workforce management, which is really helping us to go to manage the customer experience in terms of that.
Speaker Change: Prioritizing travel prioritizing, where we spend money being really effective in terms of how you run the business.
Speaker Change: From start to finish.
Speaker Change: <unk> with the administration of that that work it helps with expediting the invoicing of that work and any it helps us with our productivity.
Speaker Change: A couple of examples and you can expect that to flow through into the kind of Tim is doing in Canada also.
Speaker Change: Productivity improvements. So we can make sure we've got a longer term planning for our technicians are moving out and then ultimately that is the good all stuff as well you know when you're in an uncertain environment.
Speaker Change: That's great color very fulsome I appreciate that and maybe I guess some of the things that Kevin.
Speaker Change: Sure Greg whoever wants to take this the working cap.
Speaker Change: Pretty amazing.
Speaker Change: We were in the UK and we are in Canada to a certain degree this the discretional spend it's just the tightening of the belt it's the.
Speaker Change: The nominal drop seasonally.
Speaker Change: Quarter that takes a lot of investment I mean, how much of that could read into the initiatives you've done.
Speaker Change: Prioritizing travel prioritizing, where we spend money being really effective in terms of how you run the business. So there's a couple of examples and you know you can expect that to flow through into the kind of the team is doing in Canada also.
Speaker Change: And our ongoing to unlock invested capital versus maybe some other dynamics that are going on in the quarter.
Speaker Change: Sure Yeah, No I think it's just the accumulation of a number.
<unk> initiatives and as you know from Investor Day. Some are just pure unlocks rates some have been real estate sales some pension reorganizations.
Speaker Change: That's great color very fulsome I appreciate that and maybe I guess in the same vein that Kevin.
Speaker Change: It's just been improvement of supply chain, where we've invested in automation and looking to make the turns go faster. So I wouldn't say, it's something that happened exactly in Q1, but it's the building up and the execution of the plan, which is why we looked over the last 12 months and the recap because $1 $2 billion over over 12 months is what we're trying to do.
Speaker Change: Or Greg whoever wants to take this the working cap.
Speaker Change: Pretty amazing.
Speaker Change: Nominal draw you know in a seasonally.
Speaker Change: That takes a lot of investment I mean, how much of that can we read into the initiatives you've done.
Speaker Change: In our ongoing to unlock invested capital versus maybe some other dynamics that are going on in the quarter.
Speaker Change: If youre looking at the $4 50 of invested capital and lots of Investor day, setting our sales working capital back down to pre COVID-19 levels.
Speaker Change: Sure Yeah, No I think it's just the accumulation of a number of initiatives and as you know from Investor day.
Speaker Change: It's all Triangulates and it's all the accumulation of.
Speaker Change: Or just pure unlocks rates some have been real estate sales some of the pension reorganizations.
Speaker Change: Literally dozens of projects and investments in Q1, just happens to be.
Speaker Change: It's just been improvement of supply chain, where we've invested in automation and looking to make the turns go faster. So I wouldn't say, it's something that happened exactly in Q1, but it's the building up and the execution of the plan, which is why we looked over the last 12 months and the recap because you know at $1.2 billion over over 12 months is what we're trying to do right.
Speaker Change: Lining up.
Speaker Change: Hugh stars.
Speaker Change: Which we're pleased with but I think what's different is we're also growing at the same time.
Speaker Change: We invested in inventory within the quarter the backlog grew and we generated the cash. So that's that's what is most pleasing with us that's what we're trying to do.
Speaker Change: And just coming back to I'll, just add one thing to that Greg mentioned, the inventories down instead of that working capital release is coming from the right areas.
Speaker Change: Youre looking at $4 50 of invested capital unlock from Investor day, getting our sales working capital back down to pre COVID-19 levels.
Speaker Change: Because we are growing.
Speaker Change: All triangulates and it's all the accumulation of <unk>.
Speaker Change: Use your free cash flow.
Speaker Change: Literally dozens of projects and investments in Q1, just happened to be.
Speaker Change: And.
Speaker Change: One of the.
Speaker Change: Data point I will share with you that our our service work in progress.
Speaker Change: Winding up of a few stars.
Speaker Change: Which we're pleased with but I think what's different is we're also growing at the same time.
Speaker Change: 8% over the previous peak, which was March 2020, if I look back two years to March 2023 that was the that was the highest.
Speaker Change: We invested in inventory within the quarter the backlog grew and we generated the cash. So that's that's what is most pleasing, but that's that's what we're trying to do.
Speaker Change: Service work in progress balance we had for the last two years.
Speaker Change: The dice service working progress is 8% higher than that.
Speaker Change: And just coming back I will just add one thing to that Greg mentioned, the inventories got instead of that working capital release is coming from the right areas.
Speaker Change: That bodes well for some of the equal of the questions that we've had around.
Speaker Change: Continuation of the activity level.
Speaker Change: Because we are growing and are producing free cash flow.
Speaker Change: Now, let's great work and definitely showing up in the results. Thanks for taking my questions.
Speaker Change: And.
Speaker Change: One of the.
Speaker Change: Data point I'll share with you the hours our service work in progress.
Speaker Change: Okay.
Speaker Change: This concludes the question and answer session I would like to turn the conference back over to Greg Palast Chuck for any closing remarks.
Speaker Change: Is 8% over the previous peak, which was March 2020, if I look back two years to March 2023 that was the that was the highest.
Speaker Change: Great. Thank you operator, and thanks for everyone for joining today and I Hope you have a very safe day.
Speaker Change: Service work in progress balance we had for the last two years and the dice service working progress is 8% higher.
Speaker Change: This brings to an end today's conference call. You may disconnect. Your lines. Thank you for participating and have a pleasant day.
Speaker Change: So that bodes well for some of the equal of the questions that we've had around.
Speaker Change: Continuation of that activity level.
Speaker Change: No, it's great work and definitely showing up in the results. Thanks for taking my questions.
Speaker Change: Thanks, Kevin.
Speaker Change: This concludes the question and answer session I would like to turn the conference back over to Greg Palast Chuck for any closing remarks.
Speaker Change: Great. Thank you operator, and thanks for everyone for joining today and I Hope you have a very safe day.
Speaker Change: This brings to an end today's conference call. You may disconnect. Your lines. Thank you for participating and have a pleasant day.
Speaker Change: Yeah.
Speaker Change: Yes.
Speaker Change: [music].
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Speaker Change: Yeah.
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Speaker Change: Yeah.
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Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: Okay.