Finning International Inc.

Thank you for standing by. This is the conference operator. Welcome to the Finning International Inc. fourth quarter 2024 investor call and webcast. As a reminder, all participants are in a 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 and then one on their telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and then zero. I would now like to turn the conference over to Greg Palaszczuk, Executive Vice President and Chief Financial Officer. Please go ahead, sir.

Thank you, operator. Good morning, everyone, and welcome to Finning's fourth quarter earnings call. Joining me today is Kevin Parks, our President and CEO. Following our remarks, we'll open the line to questions. This call is being webcast on the investor relations section of Finning.com. We've also provided a set of slides on our website that we will reference. 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 slide 11 and 12 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 and good morning everyone. I'm pleased to talk to you today about our 2024 performance. Following my remarks, Greg will provide more detail on our fourth quarter results. I would like to express my gratitude to our employees for their commitment to make it a positive impact on one another our company, our customers, and the communities in which we work. Through robust execution of our strategy, we are striving to build a strong, resilient business and a safe and secure workplace where our employees are empowered to build customer loyalty. Please turn to slide two. We are really pleased with the overall growth of our business. The geographic and market diversity of our business was critical to our strong performance in 2024. And this diversity will remain important as we move through 2025. In 2024, we grew net revenues by 6% over 2023 to $10.1 billion, a new milestone for our company by building equipment population and strengthening our product support capabilities and capacity. Our product support revenue alone was $5.5 billion, and it's a record high. and it's approaching the same level as our entire company revenues in 2020. This scale is a direct result of execution of our strategy, and when combined with a simplified, focused organization and operational discipline, this has enabled us to unlock a new level of earnings capacity. Our growth in 2024 was achieved through record high revenues in most lines of business, led by strong new equipment sales up over 10%, as well as used equipment sales up nearly 30%. We also grew our backlog during the year by over $550 million, an accomplishment we're very proud of, which represents the diversity in our geographies and our markets, and our partnership with Caterpillar to win strategically and critically important business. In 2024, we grew product support revenue year over year by 2%. led by a 6% increase in functional currency in South America. Importantly, we're exiting the year with solid momentum in all regions, with Q4 2024 consolidated product support revenues up 6% relative to Q4 2023. In South America, excluding the impact of a weaker Chilean peso to US dollar, product support revenue was up 8% year-over-year in Q4 2024. We continue to build capacity and capabilities to capture opportunities in this growing market, adding nearly 350 net new technicians during the year. In Canada, we saw product support levels stabilised quarter over quarter, reflecting strong activity levels in the power sector, related to oil and gas activity, and higher spending by mining customers, offset by continued slower activity in construction. Product support in the UK and Ireland is showing signs of improvement, exiting Q4 with a year-over-year increase of 5% in functional currency, with solid activity in rebuilds and power systems. We continue to focus on maximising product support revenues across all regions. We are pleased with the progress we are making in building a greater resilience into our business. Our SG&A's abstention of net revenue was 16.3%, a new low level, and this is a result of our continued focus on cost management across our business. We also delivered significant free cash flow in the year of $865 million, while at the same time delivering $3.80 of adjusting earnings per share. The last time we achieved this level of annual free cash flow, our adjusted earnings per share was $1.14. While we have made progress advancing our resilience initiatives, we believe there is more opportunity for us to improve our cost structure and working capital efficiency, and Greg will share an update later regarding our progress to increase invested capital velocity. We are making progress against our strategic priority of sustainable growth. We continue to develop our used equipment capabilities, including launching fused equipment a brand-agnostic online marketplace to expand our presence and participation in this important market. In power systems, we continue to see healthy demand for our services, with power systems revenues up 14% year-over-year, with strong contributions from all regions. Importantly, our power systems backlog was up 70% from the end of 2023 to approximately $860 million, driven by a 150% increase in multi-year data center backlog in the UK. In Canada, we saw healthy activity in power systems in the oil and gas industry that drove a 15% increase in power systems revenues. While in South America, power systems revenues were up more than 30% on strong oil and gas sector activity in Argentina and data center deliveries in Chile. Our rental business was softer than we anticipated, driven by the softer construction activity in Canada. but I want to reiterate we remain committed to growing this important line of business in the long term. Before I turn the call over to Greg, I wanted to just share with you some more information about some visits I've had in the regions this year. Two weeks ago, I was in South America, and each time I visit, I'm more and more impressed by the growing capabilities and the team's commitment to executing the strategy in the region. I had the pleasure of touring our expanding facilities in the Antofagasta region, met with our ever-growing team, and visited some critical and important customers and operations to discuss both execution and growth opportunities. We achieved record net revenues in 2024 in the region, and we delivered backlog and expanded our maintenance and repair contracts. We're optimistic that our mining customers in the region will continue to refresh and expand their fleets in many cases incorporating autonomous and electrification solutions. We are definitely mobilising for growth in the region, as we highlighted in our Investor Day in September 2023, and we are excited for our business in the region in 2025 and beyond. I also visited the UK and Ireland last week, where I met with new members of our leadership team, employees and customers. I had the pleasure of travelling to Ireland on Thursday, where I visited with a customer who's recently awarded us a significant agreement to supply new quarrying equipment to multiple sites both in Ireland and the UK. We then crossed the road to visit a data center site where we are supplying more than 60 megawatts of standby power. We're supporting both of these sites with long-term maintenance contracts. Despite continued soft market conditions and activity levels, We are showing signs of improvement in the region with solid order activity added to the backlog in the quarter. The UK and Ireland team has done a great job in controlling the controllables, managing costs in a lower growth environment and creating more sustainability in our operations. We're excited to promote Gary McGarrel as Managing Director of the UK and Ireland Leadership starting January this year. Gary has more than 25 years experience in the business, and we strongly believe that he will continue to sustainably grow this resilient business. In Canada, we have seen activities modestly improve, particularly in the oil sands. However, we remain cautious given customer discipline and the continued political landscape. We're exiting 2024 with substantially better product support sales and earnings before interest and tax. and we believe the market should improve as we move through 2025. Tim Verwerda has assumed the role of President of our Canadian business, and we are confident he will leverage the excellent work he led in the UK and Ireland to accelerate our strategic execution in our largest dealership. Our focus in 2025 will remain squarely on executing our strategy to maximise product support, drive full cycle resilience, and grow our US rental and power businesses to improve our return on invested capital. With that, I'll hand it back to Greg.