Finning International Inc.

Thank you for standing by. This is the conference operator. Welcome to the Finney International Inc. second quarter 2023 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. To join the question queue, you may press star then one on your 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 Greg Palaszczuk, Executive Vice President and Chief Financial Officer. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to Finning's second quarter earnings call. Joining me today is Kevin Parks, our President and CEO. Following our remarks today, we'll open the line to questions. This call is being webcast on Finning.com. We have also provided a set of slides that we'll reference during our prepared remarks. The slides are posted on the investor relations section of the website. An audio file of this call and accompanying presentation will be archived on our website as well. 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 10 and 11 for important disclosures about forward looking information. as well as currency and specified financial measures, including non-GAAP financial measures. Please note the 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. Kevin, over to you. Thanks, Greg.

Good morning, everyone. Please turn to slide two. We are very pleased with how our teams continue to execute and deliver strong performance. In quarter two, we achieved significant revenue growth in all lines of business, led by a 30% increase in product support revenue and strong deliveries from our record equipment backlog. Importantly, we continue to drive strong operating leverage, grow earnings, and expand our ROIC. We are pleased to see our quarterly earnings per share reach $1 and our adjusted return on invested capital above 20% for the first time. This is a result of our hard work by our employees and the plan we put in place two years ago to drive product support, lower costs, and reinvest to compound our earnings. We are carefully managing our costs, and given our strong product support growth, which is SG&A intensive, and inflationary environment, we've used 17% SG&A over the last 12 months as a very good outcome. And we believe we have opportunities to continue to find ways to make our cost base more flexible. We are simplifying our strategic priorities. Product support, which is the most resilient part of our business and a key driver of earnings, remains top of our list. And we're also focused on growing other aspects of our business in a sustainable way. Two areas where we see attractive opportunities are the growing demand for electric power generation in all of our regions and an increase in our participation in the rental and used equipment market to capture a larger share of the retail market and the subsequent aftermarket opportunities. The other key element of our strategy is building greater resiliency into our operating model and more velocity into our invested capital performance to ensure we deliver reliable performance in all market conditions. We're also challenging ourselves to build stronger engagement and greater empowerment of our people, particularly at the front line, as this is where the customer experience happens and the strategy is executed. We look forward to providing more details on our strategic priorities at our upcoming investor day. Now please turn to slide three. Market activity in our regions remains robust and our outlook is positive. Our order intake is healthy and our equipment backlog for delivery in 2024 continues to grow and now stands at 0.9 billion. We're also seeing broad-based strength in product support with significant levels of demand for service work, including growth in machine rebuilds. We remain diligent in our execution, controlling what we can, and continue to optimize our labor and facility productivity, building capabilities and capacity to capture strong demand and grow our share of aftermarket in a thoughtful way. Our absorption ratio, which is a measure we use to measure the profitability of our product support business in the context of our total cost structure has shown significant and sustained positive trend over the past few years. Compared to 2018, our absorption is up 18 percentage points, reflecting improvements we've made in our cost structure and efficiencies in our operations. Given our continued growth, particularly in sectors with longer lead times for equipment and parts, we are very pleased with free cash flow generation in the quarter, I remain committed to optimizing working capital through the balance of the year, whilst ensuring we can support our customers. We are optimistic about continued momentum and focused on driving strong performance going forward. We are building our equipment backlog for 2024 and expanding our installed base of equipment. We have recently received significant orders from our mining customers, which will be added to our backlog in quarter three. We continue to execute on our product support strategy, Our service work in progress balance is up 20% compared to June 2022. We're also pleased with the business performance of our rental and use departments and target them as key growth areas for the future. Our operations continue to hire technicians and expand our product support capabilities and capacity. We added 145 technicians in the first half of the year, growing our technical workforce by 18% since 2021. We currently employ about 5,300 technicians globally. We're also making targeted investments in our facilities to better serve our customers. In Canada, we have just moved into our new RRR facility in Kamloops with more bays and more workshop warehouse space. We expect to be able to hire as many as 100 technicians to work in the new facility. We also plan to expand our capabilities in Antofagasta, Chile, over the next couple of years to support the strong outlook for increased copper production and growing mining equipment populations. We are excited about the long-term growth opportunities in South America and look forward to demonstrating our strong capabilities in the region when we host our investor day and tour in Antofagasta in September. I will now hand it back to Greg to provide a greater level of detail on our second quarter results.