Toromont Industries Ltd.

Good morning. Today is Thursday, May 2, 2024. Welcome to the Torremont Industries LTD First Quarter 2024 Results Conference Call. Please be advised that this call is being recorded and all lines have been placed on mute to prevent any backer noise. Your host for today will be Mr. John Doolittle, Executive Vice President and Chief Financial Officer. Mr. Doolittle, please go ahead.

Okay, very good. Thank you, Ludi. Good morning, everyone. Thank you for joining us today to discuss Tormont's results for the first quarter of 2024. Also on the call with me this morning is Mike McMillan, President and CEO. Mike and I will be referring to the presentation that is available on our website. To start, I would like to refer our listeners to slide two, which contains our advisory regarding forward-looking information and statements. After our prepared remarks, we'll be more than happy to answer questions, and let's get started and move to slide three, and Mike, I'll pass it off to you.

Great. Thanks very much, John. Good morning, everyone. Results for the first quarter of 2024 are reflective of the evolution toward more normalized supply and demand dynamics when compared to the market factors we experienced last year. Overall, we saw a decline in revenues year over year. However, activity levels remain solid, with healthy bookings and backlogs across the business. Historically, this period reflects seasonality in areas of our business, including construction. The equipment group delivered lower results in the first quarter of 2024 versus the similar period of last year, which was a strong comparator given specific customer deliveries and market dynamics in play at that time. Prime product delivery was lower, impacted by delays in customer deliveries while rental was also lower, mainly due to market and abnormal weather conditions. Product support reported good market activity, and we continue to increase technician headcount. Improving equipment availability, solid bookings in the quarter, and a healthy opening order backlog remain supportive for the future. Simcoe had a solid start to the year, driven by good execution in both Canada and the U.S., coupled with healthy activity levels. Product support activity continued to demonstrate growth, supported by larger technician workforce. Operating income increased on the higher revenue, improved gross margins, and favorable sales mix, with a higher proportion of product support revenue to total, partially offset by higher expenses. Across the organization, we continue to focus on our long-term investment objectives and remain committed to our operating disciplines, driving our aftermarket strategies in delivering customer solutions. On slide four, I'd like to touch on a few key financial highlights. Investment in non-cash working capital decreased 9% versus a year ago, mainly driven by higher deposits and customer billings against long-term contracts and order backlog. Accounts receivable decreased in light of slightly lower revenue levels, while DSO increased up four days compared with last year at 41 days overall. Our team continues to closely manage the aging of our receivables and monitor credit levels and metrics. Inventory levels are higher than the prior year, driven by a number of factors, including delivery timing, inflation, foreign exchange rates on US source supplies, improving availability through the supply chain and activity levels. We ended the first quarter with ample liquidity, including cash of $983 million, and an additional $461 million available to us on our existing credit facilities. Our net debt to total capitalization ratio was negative 14%. Overall, our balance sheet remains well positioned to support operating needs, and we are prepared to manage challenges related to the economic variables and business conditions. We will continue to exercise the operational and financial discipline one would expect as we evaluate investment opportunities that may develop over time. Torremont targets a return on equity of 18% over a business cycle. Return on equity was 22% compared to 24.9% for Q1 of 2023 and exceeds our five-year average of 20.8%. Return on capital employed was 29%, down from 32.4% for Q1 2023. Both of these metrics reflect our higher capital investment. And as announced yesterday, the Board of Directors approved the regular quarterly dividend of $0.48 per share, payable on July 5, 2024, to shareholders on record on June 7, 2024. John, I'll turn it back to you for some more detailed comments on our Q1 results.