Toromont Industries Ltd.

Good morning. Today is Wednesday, July 31st, 2024. Welcome to the Torremont Industries Limited Second 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 background noise. Your host for today will be Mr. John Doolittle, Executive Vice President and Chief Financial Officer. Please go ahead, Mr. Doolittle.

Thank you very much, Joelle. Good morning, everyone, and thank you for joining us today to discuss Tormund's results for the second quarter of 2024. Also on the call with me this morning is Michael McMillan, President and Chief Executive Officer. Mike and I will be referring to the presentation that is available on our website. And to start, I would like to refer you to slide two, which contains our advisory regarding forward-looking information and statements. After our prepared remarks, we will be more than happy to answer questions. So let's get started and move to slide three. Mike, over to you to start us off.

Great thanks very much John. Good morning everyone and thanks for joining us. John and I will be commenting largely on a continuing operations basis since Q2 of 2023 included the sale of our Ag West business and for better comparability we will generally exclude Ag West in our comments. Results for the second quarter of 2024 improved on a continuing operations basis against the same the similar period last year with revenue up 16% and net income up 2% from Q2 of 2023. As expected, we are seeing more normalized supply when compared to the market factors we experienced last year. During the quarter, we commenced operations that are remanufacturing center in Bradford, Ontario, and we continue to increase volume and activity at this facility, along with the installation of new equipment and hiring technicians. We are excited about this new facility. And we are increasing our capacity for remanufacturing and how this will efficiently enhance our service offer for our customers. The equipment group executed well in Q2. Revenue increased year over year as a result of improving prime product delivery against the strong order backlog. Rental markets were somewhat softer, mainly in light of the equipment rental segment. However, product support activity levels remain healthy. and we continue to increase technician headcount. Improving equipment availability, good bookings over the first half, and a healthy opening order backlog remain supportive. Timco continued to deliver solid results for the second quarter, driven by good execution in Canada and the U.S., coupled with healthy activity levels. Package revenue in the quarter reflects good progression on the order backlog. Product support activity continued to demonstrate strong growth supported by the larger technician workforce. Construction and mining markets provided solid equipment ordering and product support activity. Rental markets have eased somewhat through the first half of the year, challenging bottom line results. However, we are very comfortable managing through such cycles and remain committed to this market and its long-term prospects. Across the organization, We continue to focus on our long-term investment strategies and remain committed to our operating disciplines, driving our aftermarket strategies and delivering customer solutions today and in the future. Our strong financial position and order backlog position us well for the remainder of the year. On slide four, I'd like to touch on a few key financial highlights. Investment in non-cash working capital increased 17% versus a year ago. We are comfortable with this increase as it was mainly driven by higher inventory levels and accounts receivable balances, reflective of the higher levels of activity and normalizing supply conditions. Inventory levels are higher than the prior year, driven by a number of factors, including delivery timing, inflation, foreign exchange rates on U.S. source supplies, improving availability through the supply chain, seasonality, and activity levels. Accounts receivable increased in light of the higher trailing revenue. Day sales outstanding at both the Equipment Group and Simcoe were unchanged from this time last year. Our team continues to closely manage the aging of our receivables, monitor credit levels, quality and metrics. We ended the second quarter with ample liquidity, including cash of $804 million and an additional $461 million available to us under our existing credit facilities. Our net debt to total capitalization ratio was negative 6%. We purchased and canceled 608,000 shares for approximately $75 million on a year-to-date basis under our NCIB program. These purchases are mainly reflective of good capital hygiene and help to mitigate auction exercise dilution. Overall, our balance sheet remains well-positioned to support operational needs and we're prepared to manage challenges related to economic variables and business conditions. We 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 lower at 21% compared to 25.1% for Q2 of 2023, and it remains above our five-year average of 20.8%. Return on capital employed was 27.9%, down from 32.2% for Q2 of 23. Both of these metrics reflect our higher capital investment and excess cash on hand. Finally, as announced yesterday, the Board of Directors approved the regular quarterly dividend of $0.48 per share, payable on October 2, 2024, to shareholders of record on September 6, 2024. John, I'll turn it back to you for some more detailed comments on the results.