Q3 2025 Finning International Inc Earnings Call

Thank you for standing by.

This is the conference operator.

Welcome to the fitting International Inc, third quarter, 2025 investor call on webcast.

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I would now like to turn the conference over to David Primrose Executive Vice President and Chief Financial Officer. Please go ahead.

Thank you, operator. Good morning, everyone and welcome to Finn's third quarter earnings call.

Joining me on today's call is Kevin parkes, our president and CEO.

Following our remarks, we will open the line to questions.

This call is being webcast on the investor relations section in fitting.com.

We have also provided a set of slides on our website that we will reference and an audio file of this call and the accompanying slides will be archived.

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, 9, and 10 for important disclosures about forward-looking information as well as currency and specified Financial measures, including non-gaap Financial measures

Please note, that forward-looking information is subject to risks uncertainties and other factors as discussed in our annual information form under key business risks and in our mdna under risk factors and management, and forward-looking information disclaimer.

please treat this information with caution as our actual results could differ materially from current expectations, in addition, unless otherwise noted, this presentation reflects the results of continuing operations only,

Kevin over to you.

Thank you, Dave. And good morning everyone. Thank you for joining us today.

We are really pleased with another strong quarter of results made possible by the Relentless focus of our team.

We are encouraged by the evolution of our business over the last few years, which, along with the diversity and positive shifts in our end markets, have significantly improved product support growth and the resilience of our business.

This in turn has driven expansion and reliability of our earnings capacity for the long term.

While we continue to comment on our quarterly results, we operate our business with the long term in mind. So, my remarks today will generally take a longer-term perspective.

As we previously mentioned several times, they can often be quarter to quarter fluctuations across our operations and we believe it is important to consider the long-term evolution of our business.

Starting on slide 2.

I'll highlight the execution of our strategy with a prospective spanning several quarters instead of just 1, I'll then turn it over to Dave who will provide details on the results in the court at consistent with our past calls.

The strong momentum. We have delivered continues with revenues for the last 12 months up to 7%.

In Canada, product support revenues were up 7% on a trading 12-month basis, led by mining.

In South America product, support revenues, were up 6% in functional currency on a 12-month rolling basis. Also led by strong mining activity levels

In the UK and Ireland, despite more challenging market conditions, product support revenues were up 2% in functional currency on a trailing 12-month basis, on steady power segment activity.

Maximizing product support remains our key value driver and the focus of our company.

We also continue to improve our cost and capital efficiency, with SG&A margin of 15% on a trailing 12-month basis.

And our invested Capital firms remain in line with the last quarter of 2.3 times.

These metrics are a result of the execution of numerous initiatives across the company over the last several quarters such as previously announced restructuring activities, that are enabling additional operating leverage and improve our earnings capacity for the long term.

We continue to challenge ourselves to be more and more resilient over time while at the same time, continuing to Earth, invest in growing, our business improving customer experience and driving loyalty.

From a sustainable growth perspective, we continue to see strong growth in our Power Systems business.

Our trailing 12-month revenue from Power Systems, was up 5% compared to the same period last year with a 7% increase in product support Revenue, driven by solid activity levels in all regions.

Our Power Systems backlog at the end of September remain robust at nearly 1 billion dollars up. 23% from September 2024.

This reflects a diverse mix of Prime power packages oil and gas related equipment, orders and data center. Standby packages to be delivered through 2027

Power Systems deliveries during Q3 2025 nearly doubled from Q3 2024, higher across all regions, as we continue to build the equipment population in our territories.

In Canada, we continue to see healthy demand for gas, compression, and oil and gas segments, with long-term potential for data center development in Alberta.

In South America, Power Systems activities are steady supported by data center growth in Chile, and oil, and gas activity in Argentina.

and in the UK and Ireland, our Power Systems continues to be a strong Revenue, contributor amidst, a slower construction Market with higher activity levels in data center applications and Industrial and Marine applications

And then, we expect steady and dynamic growth in mining activity levels in South America and Canada.

We're excited about a very constructive long-term outlook, for mining driven by the demand for minerals.

We are encouraged by the growing number of medium-term mine expansion opportunities and as I previously said, every Mayan plant is unique and we do not control the near-term Dynamics and timing of decisions and remain committed to partnering and working closely with our customers to meet their goals.

Tony to construct Construction in Canada. We are seeing some signs of improvement in construction and certainly an encouraging narrative from the new government.

In the UK and Ireland, the angle of construction remains subdued and we are seeing some green shoots in quoting activity.

As I said, previously, our business does not follow a straight line, quarter to quarter and we will continue to focus on the aspects of our business that are in our control, delivering value for our customers. And operating with a sustainable growth mindset and greater resilience over time,

And with that, I will hand it back to Dave, who will provide more detail on our results in the quarter, as well as provide more color on the medium to long-term outlook. Over to you, Dave.

Thank you, Kevin. I'll now turn to slide 3. Our Q3 revenue of 2.8 billion dollars was up 14% compared to Q3 2024 higher across. All regions in aggregate. All lines of business were also higher.

Q3 eBid of 240. Million was up, 25% from Q3 24 adjusted ebit reflecting, strong, Revenue, growth and cost control.

EPS of 1.17 was up 33% from Q3 24, adjusted, EPS driven by higher earnings and the benefit of share repurchases.

Our balance sheet remained healthy and are working capital velocity continued to improve from last year. We saw our invested Capital turns reach 2.31 times. And we maintained our working capital to sales ratio of 26.4% in line with last quarter with an improvement from Q3 24 of 260 basis points.

Primarily driven by higher investments, capital turns, net debt to adjusted debt remained within our target range at 1.7 times.

Our Q3 free cash flow usage of 56 million, reflected, higher inventory, to support increased activity levels.

We are pleased with another quarter of diligent and consistent execution, on all 3 of our strategic pillars marked by Steady product support growth, resilient cost, discipline and Capital Management as well as solid results and used Rental and Power.

On slide 4, we show changes in our Revenue by line of business compared to Q3 2424 and the composition of our equipment backlog by market sector.

New equipment sales were up, 12%, higher across, all regions, led by Mining and Power Systems in South America.

Used equipment, sales were up, 122% driven by sales of rental equipment, with purchase options in the mining sector, in Canada and the sale of a large package of mining trucks in South America.

Product support Revenue was up, 9% driven by strong mining activity in both Canada and South America.

Our equipment. Backlog remained robust at 2.9 billion dollars. At the end of September up, 26% from September 24 and down. Just 5% from June 25th, delivery slightly outpacing order intake.

Given that we delivered a quarterly record of over $1 billion in new equipment, our current backlog continues to provide confidence for our business in terms of activity levels and future product support opportunities.

Order intake was particularly strong. In Canada, this quarter up, 140% from Q3 24 market segments, we secured multiple large orders for key mining customers, as well as in the power system sector related to gas compression.

Turning to our ebit performance on slide 5.

Gross profit margin was down, 170 basis points. Primarily driven by lower product support margins and a higher proportion of used equipment in the revenue mix.

Sg&a margin was down 290 basis points to 13.4% reflecting strong cost control and savings from previously announced restructuring initiatives, along with operating leverage on higher revenues.

Looking ahead, we will continue to seek opportunities to further, improve efficiency, reduce overheads and build more resilience into our operating model to drive higher earnings capacity.

Q3 ebit margin was 9.7% in South America, 8.7% in Canada, and 6.5% in the UK, and Ireland.

Moving to our South American results and Outlook which are summarized on slide 6.

In functional currency, new equipment sales were up 23% from Q3 2024, driven by multiple data center project deliveries. In Chile, this was partly offset by slower construction activities.

Used equipment sales were up 267% driven by the sale of a large package of mining equipment in Chile, which we do not expect to repeat.

Product support revenue was up 5%, driven by strong demand from mining customers in Chile.

Ebit margin was down 120 basis points, from Q3 24, adjusted, ebit margin reflecting lower product, support margins, and a higher proportion of lower margin. Used mining equipment sales,

Sgna was down 2%, reflecting strong cost control.

In Chile, our outlook for the longer term remains positive, underpinned by growing Global demand for copper strong copper prices and customer confidence to invest in Brownfield and Greenfield projects.

We are seeing a broad-based level of quoting tender and award activity for mining equipment, product support and Technology Solutions.

While activity levels and Outlook are positive. We continue to expect some challenges in the labor environment as the demand for skilled. Labor remains High.

In the Chilean construction sector, we continue to see healthy demand from large contractors supporting mining operations and we expect infrastructure construction activity to remain steady?

In the power system, sector activity, remains strong in the industrial and data center markets.

Capture opportunities particularly in the oil and gas and Mining sectors. The recent midterm, election results and reduction of currency controls as an element of optimism for improving activity levels.

Now turning to Canada on slide 7.

New equipment sales were up slightly relative to Q3 24 with strong activity, and Power Systems, primarily oil and gas. Related offset by timing of mining deliveries.

Used equipment sales were up 105% driven by the conversion of mining equipment with rental purchase options.

Product support Revenue was up, 13% driven by strong demand from mining customers.

Ebit margin was up. 180 basis points, from Q3 24 adjusted. Ebit margin primarily driven by lower sgna margin.

Adjusted return on invested Capital improved 170 basis points year-over-year driven by higher invested Capital turns as we focused on working capital velocity through operational improvements.

Our outlook for western Canada is mixed but improving we are encouraged by recent announcements regarding the potential to accelerate resource development and infrastructure project activity. But we remain cautious with respect to the exact timing and magnitude

Construction sector activity in general, is moderate.

We expect steady activity levels in our mining business as customers renew maintain and rebuild aging Fleet.

In the power system, sector activity remains steady in the oil and gas market with longer-term potential in the data center market. And finally, we remain focused on managing costs and working capital levels.

Please turn to slide 8 for our results in the UK and Ireland.

In functional currency, new equipment sales were up, 11% compared to Q3 24. Mainly driven by higher construction sales.

Product support Revenue was down 3%, due to lower machine, utilization and construction, offset by Steady Power Systems activity in the electric power, and Marine markets.

Ebit margin was up, 20 basis points from Q3 2424 adjusted ebit margin. Primarily driven by higher new equipment, margins and strong cost control.

Adjusted return on invested Capital improved 870 basis points year-over-year driven by the optimization of pension assets as part of our invested Capital reduction initiatives. Outlined during our 2023 investor day.

Coupled with higher trailing 12 months, adjusted ebit margin.

In terms of Outlook, 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 a growing contribution from Power Systems driven by our strategic execution, and healthy demand for both primary and backup power generation, particularly in the data center Market,

Our product support business is expected to remain stable.

Before turning it back to Kevin I would like to provide a quick update on our Union. Negotiations and capital expenditures. We are very pleased to report the conclusion of negotiations. With several of our labor unions, these successful negotiations, de-risk are near-term operations, and allow us to continue to focus on growing product, support revenues and hiring technicians to meet customer demand.

From a capital expenditure perspective. We expect to see the impact of these negotiations. Reflected in Q4 2025,

We will also continue to invest strategically in our core dealership to support future, sustainable growth opportunities.

I will now turn it back to Kevin for some closing remarks.

Thank you, Dave.

We are really pleased with the continued execution by our teams in all regions. And we continue to build a more resilient and sustainable business that can produce strong returns over the long term.

Our equipment backlog has now been sustained above 2 billion dollars since the end of 2021 a testament to our strong sales performance and a positive signal for future product support opportunities.

We have also generated strong returns with an adjusted Relic within our target range of 18 to 25% since 2022 in all quarters but 1

in addition to put this quarter's earnings in perspective,

the $1.17 EPS is more than our adjusted earnings per share for all of 2020.

Or is more than half of our full year 2021 adjusted earnings per share? This clearly demonstrates the transformed earnings capacity of our business.

Remain very confident and committed to Growing our business through 2026, by executing our strategy of maximizing product, support driving full cycle, resilience and sustainably growing population. In our own markets by building our used equipment, rental and power capabilities.

We are excited by caterpillar as investor day last week, especially the strong focus on growth and the competitive advantage of the dealer Network.

We introduced by the growth opportunities in our regions in power energy, Mining and construction.

I'd like to thank everybody for joining the call today, and with that operator, I'll turn it back to you for questions.

Thank you. We will now begin the question and answer session.

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Today's first question comes from sabah.com with RBC. Please go ahead.

Great, thanks, and good morning. I appreciate the color on the outlook. I just wanted to see if you can directly share some thoughts on some of the larger puts and takes as we head into 2026. Obviously knowing you guys don't provide guidance, but just, you know, there's a lot of moving pieces around oil and gas, and the construction outlook in Canada.

The mining cycle, you can just give us some big picture parameters, or directional puts and takes as we think about how sort of you follow a strong earnings growth here in 25 things.

Yeah, thanks s. Yeah, I don't think um, it remains consistent with a lot of the messages that we've given for the last few Quarters here. Um, you know, we're really constructive on the long term trends for our business particularly around, uh, you know, oil and gas and and mineral growth, you know. So the way we think about our business is mine the minerals and, and the oil and gas, um, build build. Build play a big part in building the infrastructure and, you know, the, the emerging and incremental side to our businesses and providing even more power, resiliency, as not just a data centers. But, uh, to Prime power, uh, also. So,

Super constructive, um, on the long term Trends, you know, as a business, we talked about this a lot and, you know, I would say that our medium-term encouragement continues to grow. So if I think about out another couple of years, you know, if I think about, uh, our backlog being sustained, uh, for, for, for a number of years now,

Um, you know, power backlog is being sustained at a billion dollars, whilst we're still delivering, uh, a good amount of projects in, in any given quarter, you know, we've been delivering, you know, a truck a week roughly, um, you know, in Canada and South America, 1 truck each a week, so that gives us a lot of, um, optimism in that kind of medium term.

Um uh, medium-term area and, you know, we are seeing some, some more, you know, some encouragement, I would say in construction at, you know, chili is is, uh, is well, obviously interest rates dropping in, in in um, Argentina and a good election result, uh, for the, for the current Administration should help us there with, uh, with construction activity, um, and you know, I'm really pleased, you know, Canada's construction backlog is up 7, 70% year-over-year and 30% sequentially, which says that we're entering into this kind of ordering for next year. So in, in UK and Canada, we do have these ordering and selling Cycles, right? So if I think about UK battle is up. 10% versus this time last year in Canada, is up to 70% versus this time last year. And so that gives us a lot of optimism for the flow through of that product into the construction season in those 2 countries. As we look forward. Um, you mentioned puts and takes Sabra. I, I don't think there's

there's a lot of tank, I think, ultimately, you know, our, you know, when we're producing strong Arielle results, like we are, it is challenging. There's a lot of work goes on from the teams. That's why I'm always quick to thank them and and congratulate them on these calls and every day can be challenging. There's a lot of Dynamics at play. Um, a lot of cost and capital discipline with customers across all segments. Uh, and our, you know, we don't control the spend decisions of our customers, but we're very committed to staying close to them so we can support them when they do.

Okay.

Thanks for that. I appreciate the color. Um, and maybe if I could dig a little bit into the Power Systems side. Um, I think you guys have been talking about Power Systems in the UK and Ireland region for probably five plus years now. But I think this quarter there feels like a bit of a notable focus on that market across all three regions. If you can maybe just talk about, you know, the UK and Ireland. It seems like it's been doing well on the Power Systems side. Maybe just talk about the emerging opportunities in Canada and in Chile as it relates to Power Systems and the runway ahead there. Thanks, in El Paso line.

I think I think you you nailed it. So, you know, I think that we've been building Power Systems, our Power Systems business for a number of years which in the UK is is primarily electric power generation. And the majority of it is to support data center growth over the last 10 years and we've developed a a really precise capability which we're now exporting to the other 2 regions. But I would describe the UK Market as, as quite mature. Um, you know, we're exporting that capability. I would say that Chile is developing. And, you know, if you think about our, our South American Business server and you think about, um, the opportunity for data center bills, where in a region, which has largely been considered mining in the past. Um, it's really, um, really we're really optimistic and, and encouraged by that. And and I would describe Canada as emerging as it relates to electric power generation. Um, you know, with lots of opportunities, um, for data center to build in,

The future. But if you think about the, um, the, you know, it's not just about electric power generation. In fact, caterpillar last week have renamed their segments, power and energy. So, you know, I'd urge you to think about LNG development, particularly in Canada, but also in Argentina. Um, so if, if you look at the power backlog year-over-year in Canada, it's up 170%. And the, the majority of that, if not all of that relates to gas, compression, and oil, and gas development, which um, is super encouraging for 2 Reasons, uh, what it means. We've still got more to go at in in the emerging data center piece but also that oil and gas power generation is used 24/7. So the product of support opportunities are plentiful. So um,

You know, and we're also looking at, you know, the third element is that power power reliability. So whether it's providing backup power or a supplementary power to remote communities. Um, in all of our regions, or, um, or backup power or resilience to, uh, major infrastructure like airports. Um, that's also a growing part of our business. So we, we're very, uh,

Very encouraged about all aspects of that business.

Thanks very much.

Thank you. And our next question comes from Sharon rod with TD Cowen.

Please go ahead.

Thanks very much and good morning. Um, I also wanted to touch on the data center opportunity, and just asked what extent spinning is providing backup power versus perhaps crime, power increasingly. Um, and can you comment on the relative product support opportunity for 1 versus the other? And and is the lag time similar, you know, for the product support, uh, annuity to ramp up as it is when you deliver a, a new machine or is it a bit faster for those engines?

Okay, yeah. Uh, thank you, Charlene. Um, you know, it's different by market as I just mentioned, you know, almost all of the, the power generation in the UK business. Not all of it, but almost all of it is, um, is for data centers. Um, like I said, in Canada, it's almost all, uh, conventional oil and gas with some power generation more like 8020. Um, and then in Chile, it's almost all data centers in Chile, but almost all um, oil and gas in Argentina.

Is that different in each area? Um and the mark and the development of those businesses are at different levels of maturity.

Um, you know, I'd urge you to, you know, caterpillar had their investor day last week. They've got a really good section on this and, um, they have a slide in there that estimates, that the difference between a 24/7 application, and a backup generator is 40x.

Center today it has been back up but they're very sophisticated customers with very sophisticated testing requirements. And you know we we often equate 1 of those gen sets to like a medium-sized wheel loader.

As far as a product sport opportunity goes. So, you know there, there certainly is opportunity there because of the sophistication.

Right, that's helpful.

Um and then on the improving backdrop in Argentina I was hoping for a bit more Colour on the conversations you're having with mining companies that have potential projects in the country. And just the timing of when you think we could see some positive investment decisions.

Yeah, sure. So I was actually there 6 weeks ago in the in the San Juan region with the mining team from Chile, I'm actually sitting in Chile today, we have a board down here, uh, this week. And yeah, I visited the the, the San Juan reason I've visited our capabilities and our rebuild facilities out out there.

Um, I also had the opportunity to meet with the Cunha, um, and went to their offices. They have an office complex. Um.

In in the city. And so, uh, great discussion there, um, and lots of optimism and of course that I was there, I think it was a week or 10 days before, um, the midterm elections, which went I guess favorably for, for this, uh, for this initiative or this opportunity. And so I would say that there was a ton of optimism when I was there anyway. And I think that will have been helped by the midterm election, um, uh, results, in terms of timing. Um, we believe that, you know, we'll start to see enablement Works. Um, probably in the middle of next year. Um, so I would expect this is, you know, investment decisions on enablement um, pretty soon. Um, but obviously it might the actual mind development is going to take a number of years. I would say that um we have we have seen encouragement as well.

From other miners in the region. Um, and 1 thing to look at is that how, um, how they're applying for the the the the, um, stabilization Ricky scheme, which is available in the region. So, um, you can look at who's, who's applied for that and how far they are down the track in terms of their investment decisions. But I'd also say that the, my, the general mind and activity that is already existing in in Argentina is is very healthy and is bullied by the low. The the recent political environment,

That's all for me. Thank you.

Thanks Ron.

Thank you. And our next question comes from Yuri Link at canaccord. Please go ahead.

Good morning.

Um I'll uh I'll switch back to to some Power Systems questions here. Um maybe just on the on the it's it's about a billion of backlog. Can you give us a flavor for how much of that is is data center specific?

Yeah, as I mentioned, uh, on a previously Yuri, if I look at the the power backlog, across the 3 regions, um, you know, overall Power Systems backlog is up. 23% year-over-year down slightly quarter over quarter because of some good deliveries, um, in the UK and Chile. Um, but if so, if you look at it, um, in terms of the overall backlog, um, most of the backlog in Canada relates to, uh, oil and gas development, um, in the UK, all of the backlog, almost all of it will relate to Data Centers. Um, and I will say about half of that billion dollar backlog roughly is in the UK. Um, a third of it is in Canada and, um, about, you know, 10 15% is in, is in South America. So, I would say that like I said in Canada, almost all of it is, um, is oil and gas in, um, in

South America. It's almost, it's a mixture outside, 5050 of data, centers, and, and oil, and gas in in Argentina. And in the UK, uh, it's almost all data center,

I can get to the number with that, thank you. Um, when we think about Ireland, um, there's been some reports of of uh electricity shortfalls causing some delays on on new data, center development, does that present uh a threat to the business and and there's less data potentially less data centers or is it an opportunity to come in with uh Prime Power Solutions?

Yeah, like I said like we described the business year. I would say you know, obviously we're a very in the long term constructive on data centers.

With the backlog build um is encouraging in the near term. There's all sorts of dynamic supplies such as the ones that you've just mentioned and the team are working hard to work with customers to do that. I don't think it changes the medium-term encouragement or the long-term Trend. I think many whether it's, um, energy, requirement or space, um, or where these things are built. Uh, how big they are with the new Computing requirements. There's a lot of questions and calibration going on, um, in this space. And you saw some of that in the markets, at the end of at the end of last week, for me, it's a near-term dynamic that will get figured out um and uh it doesn't change the medium and long term trends.

Okay, last Quick 1, maybe for Dave uh just on the the free cash flow outlook for 2025. Um should we expect the normal seasonal cash generation out of out of working capital in the fourth quarter, anything special that to call out there as we think about uh full year of free cash flow?

yeah, we do feel Q4 is an inflection point and um,

You know, we are we're expecting that um, Strong finish. Um so we are very focused on that. You know, most of the build has been supporting increased activity, um but we feel like we've got more of that in place and you know we uh,

Like I said, we do feel. It's we're in that inflection point now.

Thank you.

Thank you. And our next question comes from Devin Dodge a BML Capital markets. Please go ahead.

Yeah, thanks. Uh, good morning. Um good morning.

So, very good sgna cost in the quarter. Um, this has been a big Focus. Uh, so congrats on the continued progress there. Just operating leverage was 1 of the drivers, but do you see the sgna performance in Q3 as being sustainable? Or were there? Other factors that helped in the quarter that may not, or maybe more, uh, transient

All right, she'll answer is, yes, definitely. It's absolutely sustainable. I think we have, uh, more opportunities in uh, in Canada, to find even more efficiencies, you know, team has been in place for what 9 months, 10 months, now. Um, I want I'm not going to suggest how far we are through the plan and the execution there. But I'll, I will say that there's more to do. Um, and, um, you know, so I would say, there's opportunity remains in, you know, in in, in, in Canada equally, we know we have some costs in the business in South America that as a result of the rapid growth and some of the operational execution challenges of operating in a, in a, in a difficult environment in a very difficult part of the world. So we believe as the business settles down and the team continued to, um, uh, you know, improve particularly in areas, like, supply chain, um, they'll be opportunities to

Um to uh, improving that area, you know, 1 of the things with, you know, the book we have the board here. This week, 1 of the things that I'll see is our, our warehouses to Friday a little bit of the warehouses. And, and to figure out and I'll see the investment in auto store, which you saw, which you saw on, on a plan. When you, you traveled with us a few years ago and, um, you know, we're taking that to the, to the big Warehouse that big with new Warehouse in in Edmonton, as well before the end of the year. So, there's no sort of things we're working at, um, you know, I would say that, you know, we're very focused in investing in the growth opportunities. And so, not all of that, you know, continues to come out of the business. So I don't know whether there's another step down there or whether it's a sustained and reinvesting, the right areas.

What? What I would just add their Devin is you

You know, it's really probably 3 things. I mean, the the very strong cost control across all the regions.

The benefit of the actions that have been taken over the last, um, you know, really couple of years and then the other 1, you and the quarter, we did have a very strong new and used equipment, which is a very low sgna, uh, business. So that helped us as well, but like Kevin said, we believe there's more and we're going to, you know, keep building that resiliency in the business.

Okay, makes sense, thanks for that. Um, and then second question,

Um, product, support, gross. Margins were flagged as being lower year-over-year in Canada and in South America, just trying to get a sense. If you feel that is largely due to mix or were there, some inefficiencies in the operations, just due to the strong growth in that line of business?

I I, I wouldn't, I mean, I would say to mix with those things. It's definitely a mix of shift towards large mining. Um, is obviously a very competitive area of our business. So, there is some mix in there. And, but I would say that, you know, markets are very Dynamic. And so, I was our commercial approach, you know, we want to grow our business. Um, we're very focused on long-term population growth and, and then executing on those product support opportunities. So, we've been very Dynamic. Shall we say in our approach there? And I think, um, you can see that's working

To your previous question. You know, we're all looking at the ways that we, um, we offset that with cost and capital efficiencies, um, and we have to make sure we have the inventory and the capabilities and the capacity to grow too. So the timing of the, you know, I guess proactive approach to Growing product support and the, um, offsets in terms of the efficiency within the business are not always in sync. Um, and I think that's what you're seeing particularly in South America right now, but we're happy with the, the way the business is put our performing, um, you know, roic and and, um, and, and profitability is also in the other 2 regions. Um, but so is, uh, product support growth. So, you know, we think it's the right approach to working, uh, and we'll continue to be, um, really proactive in terms of how we win product support business,

Good caller. Thanks for that. I'll turn it over.

And our next question comes from Maximum stitch up with National Bank Capital markets. Please go ahead.

Hi, good morning, John.

um,

Kevin you mentioned that uh caterpillar uh invested today and I was wondering though there was a couple of discussions around um the kind of the large corporate clients and how there was a clause of relationship between the OEM and the dealer network. Uh, do you mind maybe talking about the benefits of of that sort of strengthening uh go to to Market strategy and how that could potentially uh benefit you guys. Thank you so much.

Yeah, I think the, the, the benefit comes from the strength of the combination, you know, as, as they talked about, you know, we believe caterpillar are are the best business partner and, uh, and they believe that the dealer network is a competitive Advantage. So, the combination of those 2 things, so we think it's pretty compelling. Um, of course, you've got many customers that, um, work across dealer territories so it makes sense for them to be more involved than to uh, to have a stronger relationship with, with corporate accounts. But we do that in Partnership, um, and we work together and we provide local um, support and local expertise and capacity, um, to support that, you know, the global um perspective or overreach from from Caterpillar. So we think the combination of the 2 is really important and it's not just Global customers. You know, some of our biggest customers here in Santiago, they want to speak to Caterpillar. Um, they want caterpillar at the table. Um, it's important part of the partnership and, you know, we

Consider the customers to be our customers, the hours, in terms of everybody's customers. And uh, yeah, we just think the combination of the 2 and ultimately, both of us being closer to the customer the closer we can get there. Um, we think that's a pretty compelling proposition.

Yes, absolutely. Thank you so much, and then, maybe just a quick 1 for David. If I met, can you please quantify that the impact of the upcoming? Um, Union negotiations with typically shows up in, in in the cash flow statement. Uh, is can you provide any range there? That should be. We should be aware of thanks.

Yeah, so we were very pleased, you know, we first saw the unions we we did in the quarter, have a lot of successor, we settled, uh, with our UK and Ireland Union, with our Alberta Northwest Territory Union and also with, um, uh, some unions here in South America, including the largest 1 in Chile. So it's, it's the ones here in Chile that will show up. In Q4 we, we are still, um,

You know, no change in our guidance that we gave earlier this year, and we will provide an update, uh, early next year on the 2026 guidance.

Okay, fair enough. Thank you so much.

Thanks Max.

Thank you. And our next question. Today comes from Steve Hansen at Raymond, James, please go ahead.

Yeah. Good morning guys, thanks for the time, appreciate it. Um look outstanding performance in product support the board in Canada specifically, Kevin curious. If if it's really a step change in activity at your large customers or or is it more incremental new customers or is it increase wallet share at the large customers, just trying to get a sense for how things have shifted, you know, double digit growth is feels like

You know, light years ahead of where we were a year and a half ago. So just trying to understand the, the sort of the complexion of that change in growth things.

um,

The difference between this year and last year, is that the utilization is higher. And you can see that through some of our major customers public releases. Over the last couple of weeks in terms of their their production figures. Um, and we've also, you know, talked a couple of times around, you know, the extended Hall distances, particularly in in the all stands, but the same can be said, for all grade decline in, in, in Chile as well. So, um, utilization is increasing. Um, and then your last part of your question around, um, market share. And, you know, I do think our penetration is, is improving. Uh, we are more proactive, um, with our labor offerings. Um, Tim has been very, very, um, very clear that he expects to win more labor in Canada and he'll no longer, you know, tolerate, um, you know, just selling parts. And so what we've seen there is an increase of scope of works as well. So for example, I was in, I spent the day on the floor, 10 days ago, in Fort McMurray, really

Encouraged to see the activity levels in our, in our major Branch there in Fort my. Um, but not only to see the um, to see the the activity levels, but to see the scope of work. So, in some cases, you know, we would have done, uh, elements of a rebuild and all the other elements are either done by the customer, or maybe they even have a third party for some of the, you know, for example welding, uh, maybe we didn't do all the welding and or super encouraged to see us doing the 100% scope.

With 1 of the truck rebuilds that are there. And so I think it's um it's a mix of of of all those 3 things that there's just a bigger population. The utilization is heavier and I think we're getting better at our jobs, so we're penetrating a lot more.

And Steve, I'll just add, you know, whether we've been consistent just that, you know, we are extremely focused on supporting our customers and, you know, quarter to quarter, it's not linear. But, you know, to the extent that um the C, you know, we're always ready to provide that support. So, you know, we're feeling good about that constructive long-term view again. As Kevin said, our population continues to grow, we've got very strong backlog of mining trucks for next year as well. And when um you know, that product sport opportunities, there we are ready.

That's a great color, guys. Appreciate that. Just a quick follow up is just around Capitol location. Stocks obviously had a nice move here evaluation You could argue is still discounted to some of your peers Etc. But you know how do you feel about the buyback continuing at a sort of a rateable piece here, uh, on the back of the big move that we've seen next.

Yeah, that's all. I'll make a comment, Steve and then I'll turn it out today. But ultimately we believe you know, Capital allocation is dynamic but consistency is important too. And uh, we still, you know, all that, we're very happy with the rewrites I guess. Um, the allocation has always been, uh, Dynamic. So we've given, you know, we continue to give that a ton of thought. So Dave, if you want to yeah, I mean we we we always are reviewing this uh, very active and we look at a variety.

Variety of factors. As you would expect when assessing Capital allocation or the near-term cash flow. Uh, our capex inventory to support increased customer level is the only potential m&a. But I think what is important, there is what Kevin said. You know, we also believe it's important to be consistent. And um, so while it's Dynamic and we, we, uh, review it continuously. We are also very focused on being consistent. And, you know, we've been doing that through BuyBacks and dividends and

You know, again expect to be consistent that way.

Appreciate the time guys. Thanks

Thank you and our next question comes from Jonathan Goldman, it's kosher Bay, please go ahead.

Hi, good morning. Thanks for taking my questions.

Um, so if you think back to the targets that the original investigation, the product support growth, I think above 7%, you know, obviously those were pulled for the market dynamics, and you're lacking some of those easy comps this year. But as we look at product support over the next 3 to 5 years, how are you thinking about your ability to grow above market rates, whether that's production or customer growth plans? And how are you thinking about the second part of this: do you have sufficient capture capacity to capture that growth?

Activity particularly in Canada, you know, we see, um, we see the impacts of the, you know, the end of the construction season and the freeze and then we see the break, you know, the break up in the summer. So you know, we the reason why we removed that guidance is because we were getting you know, getting drawn into talking about quarter by quarter uh product support run rates. You know we're really concerned. We're really focused on growing product support.

Over the long term and we're really happy with our last 12 months of product support, um, run rate. Um, you know, so 8% over the last 12 months, you know, we, uh, we see, we're we're confident that we can continue to grow, uh, in the future. Uh, and we continue to build capacity, um, to continue that growth. So, um, you know, and as Dave said, you know, we're talking to our customers. How we how we grow that. So, for example, you know, we are looking to put a night shift on in that form of Ky facility that I mentioned a few minutes ago. Uh, when I was up there, uh, 2 weeks ago, um, we haven't had a night shift in form of Chi for, for some time and so that's that's super encouraging to increase the capacity, we have through our existing physical infrastructure. Um, our OEM uh, where we remanufacture all the engines, which many of you have been to we've added 20% capacity over the last 12 months and we'll add We'll add more this year as those components come into that, change out. We

For the new trucks that we've added to. So um we're not going to talk about um you know quarter by quarter or even annual product support rates and

Just save that sort of such the wheel, we're confident that we can continue to grow and uh we're not doing that. And again our partner caterpillar is helping us to continue to grow and it's a big focus of theirs too. Um and so you know we're confident for the future.

Okay, that makes sense. I guess on the second one, in terms of your guidance, and you know, cognitive that you don't provide guidance. But if we're thinking about SG&A next year, I mean, fantastic performance in the quarter. But with all the things and the issues you have going on, and with your expectations for growth, can we expect SG&A to grow below the pace of inflation next year?

Um, yeah, I mean, we we think there's there's enough efficiency um uh in our business and I mentioned some excess in South America that um, that can offset those growth initiatives, uh, and that's our intention. Um, and to, you know, I was asked the question, a few minutes ago. Do you think it's sustainable? The answer is. Yes. And that's a mixture of, you know, further, efficiencies and opportunities in the, in the company offset by, you know, rallying and getting behind. Um, you know, the, uh, um, the growth opportunities we have in the, in the business. Um, so we, we believe we're in a good moment and, um, you know, we don't, we don't see, we see that being sustainable.

The right that we are today.

Okay, thanks for the color. I'll get back in queue.

Thanks Jonathan.

Thank you next. As soon as the question and answer session, I'd like to turn the conference back over to Mr. Primrose for any closing remarks

Thank you, operator, and and that concludes our call for today. I want to thank everyone for your participation and I hope you have a very safe day. Thank you.

Thank you. That brings to an end today's conference call. You may disconnect your line, thank you for participating and have a pleasant day.