Finning International Inc.

Thank you for standing by. This is the conference operator. Welcome to the Finning International Inc. first quarter 2022 investor call and webcast. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. Analysts who wish to join the question queue may press star then one on their telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Amanda Hobson, Senior Vice President, Investor Relations and Treasury. Please go ahead.

Thank you, Operator. Good morning, everyone, and welcome to Finning's first quarter earnings call. Joining me on today's call are Scott Thompson, President and CEO, and Greg Palaszczuk, EVP and CFO. Following our remarks today, we will open the line to questions. This call is being webcast on Finning.com. We have also provided a set of slides that we will reference during our prepared remarks. The slides are posted on the investor relations section of our website. You can also view the slides on our webcast page. An audio file of this call and the accompanying presentation will be archived on our website. Before I turn it over to Scott, 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 MD&A 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. Scott, over to you.

Thank you, Amanda, and good morning, everyone. On today's call, I'll speak about the first quarter highlights and how we continue to support our customers as we're ramping up for increased activity for the remainder of the year. Greg will then provide more details on our strong performance in the first quarter and our outlook for the remainder of the year. Please turn to slide two. We are pleased with the strong start to the year. First quarter earnings per share was $0.59, bringing our last 12 months EPS to $2.42. This performance is a direct result of our disciplined approach to capturing market opportunities and the successful execution of our strategic plan to grow product support, reduce costs, and reinvest free cash flow to compound our earnings. Our product support revenue was up 16% from Q1 2021, exceeding $1 billion. We saw strong demand for parts, service and rebuilds across all regions and market sectors with construction product support revenue growing at 21% year-over-year. All our regions demonstrated strong operating leverage in the first quarter as we're actively managing inflationary pressures through continued focus on productivity gains. Consolidated EBIT as a percentage of net revenue was up 180 basis points from adjusted Q1 2021 results. Improved profitability drove higher return on invested capital, with ROIC in South America exceeding 21% and ROIC in the UK exceeding 15%. Ongoing constraints in the global supply chain continued in the first quarter. Our teams around the world put in an extraordinary effort to meet our customers' needs by providing various solutions to fill the supply gaps. We have been ramping up our value proposition for construction rebuilds, providing used and rental options to customers, and building a healthy inventory position to support delivery of our growing backlog. We are now offering a wide range of rebuild options on most large construction equipment models, providing attractive financing and warranty with Caterpillar, and leveraging our RRR network capabilities for faster rebuild turnaround and cost efficiencies. We are also prioritizing availability of our rental fleet and expanding our used equipment capabilities. Data from connected machines, value-added technology solutions, and our strong customer relationships play a critical role in successfully navigating the current tight supply environment. In addition, we continue to build a healthy inventory of both equipment and parts, which puts us in a great position to meet strong customer demand and deliver on our growing backlog. Our equipment backlog increased by 70% to $2.1 billion by the end of March, driven by strong market conditions coupled with increasing lead times. Our inventory was up 32% from Q1 2021 and up 25% or over $400 million from the end of 2021. Our improved earnings capacity and strong balance sheet provide us with opportunities to reinvest and return capital to shareholders. During the first quarter, we reinvested $177 million, including the acquisition of Hydroquip and $61 million of share repurchases. We also announced a 5% dividend increase, which marks 21 years of consecutive dividend increases. The Hydroquip acquisition in the UK is closely aligned with our strategy to drive product support growth and is immediately accretive to our EPS. It allows us to provide our customers with a wider range of complementary products and services that increase equipment uptime and reduce operating costs. In addition, Hydroquip expands our service capabilities across multiple industries and equipment types to both new and existing customers. We will be leveraging the experience we gained with successfully integrating and growing our forward fuel business, which operates a scalable hub-and-spoke model similar to Hydroquip. There is a great brand, reputation and cultural fit with Hydroquip and Finning and we welcome the 270 Hydroquip employees to Finning. At the end of March we released our fifth annual sustainability report which provides a detailed discussion of our progress towards reducing our carbon footprint and our success and commitments in other ESG areas. As we highlighted during our previous earnings calls, we increased our commitment to sustainable operations and raised our absolute GHG emissions reduction target. Our new target of 40% reduction, up from 20%, includes forward fuel and covers the same 10-year timeframe from 2017 to 2027. We continue to help our customers reduce their environmental footprint by providing low-carbon emissions equipment, remanufacturing, and technology solutions. To give you a few recent examples, we have developed a sustainability dashboard on our cubic platform to allow customers to monitor carbon emissions. We are seeing an accelerated adoption of alternative fuel engines among our oil and gas customers in Western Canada. Since the beginning of 2021, we have sold 72 Caterpillar Tier 4 DGB engines, including the orders we have received so far this year. These dynamic gas blending engines allow customers to substitute up to 85% of diesel fuel with natural gas and are capable of operating with up to 20% hydrogen blend, resulting in significant cost savings and emissions reductions. Safety is of critical importance to our customers and the latest advances in safety technology are generating a lot of interest. In the first quarter, we received an order for 127 Caterpillar DSS or Driver Safety System units from a large Canadian mining customer. The DSS technology alerts an operator when it detects fatigue or distraction by monitoring eye closure and head pose. We saw a significant increase in the DSS unit population in Canada over the last year. Before I turn it over to Greg, I would like to address the leadership changes we announced at the end of March. We are excited to welcome Kevin Parks back in the newly created role of Chief Operating Officer. Kevin will oversee our global operations with a focus on consistent execution across the business as we continue to improve the customer experience in a cost efficient fashion. David Primrose, who has over 35 years of experience with Finning in numerous senior level operational and corporate roles, will lead our Canadian business on a permanent basis. We have significant growth opportunities ahead of us, and the new leadership structure will position us to execute our global growth strategy even more effectively. In summary, Q1 was a great start to the year. Our outlook remains strong, and we are targeting above mid-teens EPS growth in 2022. I will now hand it over to Greg.