Finning International Aktie

Thank you for standing by. This is the conference operator. Welcome to the Finning International Inc. Second Quarter 2026 Investor Call and Webcast. [Operator Instructions] The conference is being recorded. [Operator Instructions]

I would now like to turn the conference over to David Primrose, 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 on today's call is Kevin Parkes, our President and CEO. Following our remarks, we will open the line to questions.

This call is being webcast on the Investor Relations section of finning.com. We have also provided a set of slides on our website that we will reference, and 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 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.

In addition, unless otherwise noted, this presentation reflects the results of continuing operations only.

Kevin, over to you.

Thank you, Dave, and good morning, everyone. Thank you for joining us, and thank you to our teams, our customers and Caterpillar for your hard work, trust and partnership.

Strong strategic execution delivered record quarterly EPS of $1.22, up 21% year-over-year. Revenues exceeded $3 billion for the first time, and product support grew year-on-year for the ninth consecutive quarter, growing 11%. And even with record new equipment deliveries, which were up 34%, backlog remained strong at $3.8 billion, driven by strategically significant mining orders in Chile and gas compression orders in Canada.

Quoting activity and fleet enhancement discussions are increasing in Chile and Argentina. Oil sands production, pipeline activity and infrastructure build in Canada, are gaining momentum, and market share gains across all regions give us confidence in future backlog growth. Most importantly, the machine and engine population continues to grow across our territories. That installed base is the engine for future product support growth and the clearest line of sight to long-term value creation.

As in prior quarters, my prepared remarks will focus on the long-term earnings potential we are building. Dave will then cover our quarterly results in more detail.

Please turn to Slide 2. Our performance across our three strategic pillars of our strategy is fundamentally increasing our EPS potential. Product support revenue reached $6.2 billion on a last 12-month basis. In the quarter, product support was up 11% year-over-year, led by 19% growth in Canada. Canadian product support is growing across every sector, supported by larger mining population, rebuild activity and increased contracted labor penetration. Indeed, customer value agreements with labor grew by 70% in the quarter, enabled by a deliberate strategic investment in capacity, including a 20% increase in technicians year-over-year.

Our rental businesses are also gaining momentum in each region, with revenue up 19% led by Canada. Strategic fleet investments are allowing us to capture our improving end market demand while growing with new customers and growing our population. At the same time, our cost and capital discipline continue to anchor our resilient operating model. We are investing in building capacity and capability to create long-term growth, while maintaining strong operational leverage. SG&A as a percentage of revenue was 14.5% on a last 12-month basis, down by 120 basis points from 12 months of Q2 2025. Invested capital turns increased to 2.35x, and these are not just efficiency metrics. They are proof points that our operating model is more resilient, more scalable and more capable of compounding earnings.

Before I hand back to Dave, I want to talk about a long-term opportunity for power and for data centers in Western Canada and specifically Alberta. We are working with operators, power producers and government on primary bridging and backup solutions. This is a generational power opportunity for Canada, Alberta and Finning, and it fits directly with our core strategy of building an installed base in our operating territories and supporting it over its life cycle by converting that population into long-term product support growth.

I also want to say that this is not a new territory for us. Our U.K. and Ireland dealership has been supporting the build, maintenance and operation of data centers for more than a decade, developing a trusted capability and deep application experience. That capability is showing up in the numbers. In power and energy, new equipment sales in our U.K. and Ireland business are up 38% year-to-date, supported by a healthy product backlog.

Turning to Canada. While we are encouraged about the generational opportunity for data center builds in Western Canada, our incumbent power and energy business is also building momentum ahead of any data center contribution. Sales are up 63% year-to-date, and our backlog is up more than 100% compared to Q2 2025. This is primarily driven by gas compression as the oil and gas outlook improves following significant business development announcements in the quarter. It is clear, power is becoming a larger strategic platform for Finning, and it strengthens the same installed base and product support flywheel that underpins our long-term earnings potential and growth.

To close, quarter 2 demonstrates the power of the strategy. We are growing the installed base. We are converting that growth into product support, and we are maintaining disciplined cost and capital execution. And we are building a more resilient operating model and the combination is the foundation of our earnings growth potential and the reason why we remain highly optimistic about Finning's long-term future.

With that, I'll hand the call back to Dave.

Thank you, Kevin. I'll now turn to Slide 3. Our Q2 revenue of $3.1 billion was up 20% compared to Q2 2025, primarily driven by strong new equipment deliveries across all regions and continued product support growth, particularly in Canada, exceeding $3 billion in quarterly revenue for the first time in our history, helped to drive record EPS and reflects continued execution momentum. We are pleased with our growth across our diversified end markets. New equipment deliveries accelerated in all regions, increasing our installed population and creating a base for future product support opportunities.

Product support revenue also continued to grow, supported by robust mining activity and an improving construction sector. EBIT was $249 million, up 16% compared to Q2 '25 adjusted EBIT. And EPS of $1.22 was up 21% compared to Q2 '25 adjusted EPS of $1.01. Long-term incentive plan expense was $21 million this quarter or approximately $0.13 per share of EPS impact, driven by continued strong share price appreciation. This compares to LTIP expense of $25 million or approximately $0.13 per share of EPS impact in Q2 '25.

Our balance sheet and capital efficiency remained strong. Free cash flow was a positive $15 million with increased collections from higher revenues, largely offsetting investments in working capital to support growth. Net debt-to-adjusted EBITDA was 1.6x at the end of June. Invested capital turns were 2.35x and adjusted return on invested capital from continuing operations was 19%, all within our target ranges.

On Slide 4, we show changes in our revenue by line of business compared to Q2 '25 and the composition of our equipment backlog by market sector. New equipment sales were up 34%, driven by increased mining deliveries in Canada and South America as well as construction deliveries in all regions. Used equipment sales were up 18%, primarily driven by increased activity in the Canadian construction business. Rental revenue was up 19%, reflecting improving construction and power and energy activity across all regions. Product support revenue was up 11%, primarily driven by strong activity in Canada, where product support was up 19%, led by mining.

Despite the record level of new equipment sales in the quarter, equipment backlog remained at record levels of $3.8 billion at June 30, '26, in line with March 31, '26, and up 26% from June last year and up 22% from December 2025. Order intake continued to outpace deliveries in the quarter. Power and energy benefited from oil and gas activity in Canada, while mining was supported by strong activity in South America. Backlog remains well diversified by market sector with approximately half in mining, about 1/3 in power and energy and the remainder in construction. Backlog strength continues to provide confidence in future product support opportunities.

Turning to our EBIT performance on Slide 5. Gross profit margin was 21.3%, down 240 basis points compared to Q2 '25, reflecting lower product support margins on strong volume growth and a higher proportion of new equipment revenue in the sales mix. SG&A margin was 13.3%, down 220 basis points from Q2 '25. This demonstrates continued cost discipline through the growth cycle and also reflects a higher mix of new equipment sales.

EBIT margin was 8%, down 30 basis points from Q2 '25 adjusted EBIT margin, reflecting lower product support margins and higher new equipment revenue mix. Importantly, EBIT dollars increased 16% year-over-year. Q2 EBIT margin was 9.7% in South America, 8.3% in Canada and 6.2% in the U.K. and Ireland. Looking ahead, we will continue to seek opportunities to reduce costs, improve efficiency, enhance operating leverage and strengthen resilience to drive higher earnings capacity.

Moving to our South America results and outlook, which are summarized on Slide 6. In functional currency, new equipment sales were up 35% from Q2 '25 due to higher construction and mining deliveries in Chile. Product support revenue was up 3%, driven by higher mining activity in Chile and also increased revenue in all sectors in Argentina. EBIT margin of 9.7% was down 40 basis points from Q2 '25 adjusted EBIT margin, primarily driven by the higher proportion of equipment revenue in the mix and also lower product support margin, partially offset by lower SG&A margin.

Adjusted return on invested capital of 23.5% was down 240 basis points, impacted by working capital investments supporting growth and the resulting increase in average invested capital. In Chile, our longer term outlook remains positive, underpinned by growing global demand for copper, strong copper prices, capital deployment into large-scale brownfield expansions under supportive government priorities and customer confidence to invest in greenfield projects. We are continuing to see a broad-based level of quoting, tender and award activity for mining equipment, product support and technology solutions. Some of these awards hit our order backlog in Q2, while others are expected to be finalized in Q3 and beyond.

In the near term, we continue to expect some moderation in product support activity levels and a more stabilized labor environment through 2028. In the Chilean construction sector, we continue to see a healthy demand from large contractors supporting mining operations, and we expect infrastructure construction activity to remain steady. In power and energy, activity remains strong in the industrial and the data center markets. In Argentina, the outlook is increasingly positive and quoting activity remains high. We are diligently monitoring what is a dynamic operating environment to ensure we are best positioned to capture opportunities, particularly in oil and gas and mining, as they arise.

Turning to Canada on Slide 7. New equipment sales were up 33% from Q2 '25, with strong sales across all market sectors, led by mining and continued market share gains in construction. Used equipment sales were up 25%, reflecting increased activity in the construction sector, in line with overall market activity. Rental revenue was up 22%, driven by improving construction and power and energy activity. Product support revenue was up 19%, reflecting strong demand across all sectors and particularly in mining. EBIT margin of 8.3% was down 110 basis points, driven by lower product support margin and increased equipment sales mix, partially offset by an improved SG&A margin.

Return on invested capital from continuing operations was 18%, up 170 basis points, driven by higher profitability and improved capital efficiency over the last 12 months. Our outlook for Western Canada remains positive. Mining activity continues to strengthen with customers actively looking to increase production and fleet capacity through both performance and investment. In power and energy, oil and gas activity remains strong and backlog is increasing. Data center sentiment continues to grow, supported by recent announcements, although the timing remains uncertain, pending project approvals. Construction sector activity continues to improve with customer demand increasing ahead of anticipated major project confirmations.

We expect this to have a positive impact on new, used and rental revenue, while remaining cautious with respect to the exact timing and magnitude of future projects. Our focus remains on building resilience by managing costs and invested capital levels, while driving productivity improvements through the growth cycle.

Please turn to Slide 8 for our results in the U.K. and Ireland.

In functional currency, new equipment sales were up 34% from Q2 '25, driven by delivery of delayed sales from Q1, as mentioned last quarter. Product support revenue was down 2% due to lower activity in both construction and power. We expect the product support business to remain stable in the short and mid-term. EBIT margin of 6.2% was up 100 basis points, driven by robust SG&A control on higher revenues. Adjusted return on invested capital of 21.6% was up 320 basis points year-over-year, reflecting the higher profitability achieved during the quarter and optimization of the pension assets.

In terms of outlook, market sentiment in construction is improving, but we continue to expect demand to remain soft, in line with low projected GDP growth. We continue to expect a growing contribution from power and energy as we execute our strategy. Quoting activity remains strong, driven by healthy demand for both primary and backup power generation solutions.

I'll now turn it back to Kevin for some closing remarks.

Thank you, Dave. Before I close, I wanted to talk about the leadership transition in South America and recognize my colleague, Juan Pablo Amar, who will be retiring later this year. For more than 30 years, Juan Pablo has made an enormous contribution to our business. His loyalty, flexibility and commitment to our company, customers and employees, has been inspiring.

Under his leadership, our South American business has more than doubled by many metrics. And importantly, he has positioned our business for the next phase of growth. He has led critical investments in our team, facilities and capabilities to ensure our business is ready to support our customers as they embark on their growth plans. I feel lucky to have had his support for the past 4 years and wish him well in his retirement. He will continue to support me and the new team led by Sebastian Reisch to ensure we have an effective and energized transition.

To close, we are pleased with the continued execution of our strategy and the results we are generating. We are committed to growing our product support business by growing population and building new capacity and capabilities. And we are excited about the more transformative opportunities we have in Argentina, power generation and rental.

With that, we'll open for questions.

[Operator Instructions] The first question comes from Cherilyn Radbourne with TD Cowen.

I do want to quickly wish Juan Pablo our very best on his retirement.

Thank you.

Kevin, the prospects for energy egress in Western Canada have shifted in a fairly short period of time. So I was hoping you could spend a bit more time addressing that opportunity set for Finning and also sort of the timing and scale of a corresponding production response?

Yes. So I mean, undoubtedly, it's been a good summer for positive sentiment and collaborative announcements between the federal and provincial government in Alberta. And -- so that's really encouraging. And I think that are built on an already improving sentiment and outlook from the major producers in Alberta. I think that there is a -- there's a long way to go.

There's a lot more discussions to happen, some critical hurdles or agreements to overcome and some infrastructure to build out as well before we see any kind of real meaningful growth in production in the region. But I expect -- I mean, it's a tailwind, and I expect miners, the oil sands producers and energy producers to be organizing themselves around that positive outlook for more production in Western Canada. And we're seeing some of that just in general confidence and sentiment today.

I point to our gas compression business being a good example of that, but also we delivered a truck a week into the -- in Canada in the quarter, and we expect that to continue from our very healthy backlog. And so we're seeing some of that immediately, I guess, Cherilyn, in our backlog and how we deliver that. Dave mentioned about strong gas compression sales in the quarter. And so it's more an incremental and positive improvement right now rather than a step change in production and impact on our company.

And related to that, as we think about the labor that will be needed to support nation building infrastructure, do you think the government needs to be doing more on that front in addition to expediting the approval process?

A 100% and I've had some of those conversations with the major projects' office. There's a lot of positive momentum, but it's companies like Finning that supply the equipment and the labor and the talent to really make the projects happen. We are -- we have been recruiting, as we've said, a technician a day. That's still going very well. Our technician base, not including OEM, is up 20% in Canada year-to-date.

And so we are encouraged by our ability to attract talent in the marketplace. And we're kind of preempting the projects. But any confidence that the government can provide and the market can provide in terms of what they think that demand will actually look like, will help us to organize ourselves even more effectively. I think the most important thing to say about that, Cherilyn, is that we're doing it anyway because of our opportunity and our ambition to increase -- dramatically increase our -- the percentage of labor that we have are working on our -- on and around our machines anyway.

So we have a market share opportunity ahead of us anyway, which we're getting after. And that gives us momentum in the recruitment, the training that's required, that we can lever up and down as the demand materializes.

What I would add there, Cherilyn, is, I mean, we're certainly supportive to any government initiatives there. But in the meantime, like Kevin said, we've had very good success in Western Canada. We have a very strong brand in the employment market. And we've doubled down even further this year with the various trade schools all across Western Canada. So the teams had very good success to date.

The next question comes from Devin Dodge with BMO Capital Markets.

For data center-related projects in Western Canada, would Finning consider internalizing the packaging of that power system? I know Finning has done some of that work in the past, but I'm not sure if the capacity is available to do that work at the scale required for the opportunities in front of you? And just wondering if that approach would differ between prime and backup power?

Yes. So the answer to your question is absolutely yes. We are totally committed to packaging the data center requirement in our territory. We have a fantastic facility that requires minimal investment to move that forward. You've been following us for a long time, Devin, and you probably remember our investment in Collicutt and the facilities we have in the Red Deer region. And so we feel well positioned that we can build that capability and capacity relatively quickly and without a kind of major investment.

And we think it's critical to participate in all aspects of the data center opportunity, including controlling the quality and the velocity of packaging. Particularly as it relates to cold weather in Alberta and being associated and working with that package as it goes through build and deliver and commissioning and ultimately to participate and to partner with the product support opportunity, which is really the big opportunity for us as we look forward.

From a packaging perspective, there's no real difference, material difference between prime and backup from a packaging perspective. But obviously, there's a demonstrable difference as it relates to life cycle product support in a prime application. I think that was the second part of your question, but forgive me if I got it wrong.

Yes. No, that was great. Second question, product support margins, they're compressed in both, Canada and South America. Just wondering if you could provide a framework for how much of the margin pressure was related to the mix versus maybe some cost inefficiencies to accommodate the growth that may be more transient?

Yes. I think we would -- I put it down to three aspects actually, Devin, and you've hit on two. Certainly, mix within mix. I mean we've seen about a 3% product support shift in Canada specifically to our larger customers. So when you normalize that 3% product support at a more normalized product support rate, you'd account for about half of the difference. There's also the second point that you raised is very valid and fair. There are some -- as you grow a technician a day, there are some training and productivity ramp-ups that you need to work on. And so there is a little bit of a drag there and something that might take you 100 hours might take you 110, for example.

And then there's one other one, which is an aggressive approach to product support growth in commodities that are more less proprietary and to that end, more competitive. But they offer us great opportunity to grow our business at a healthy -- which is still a healthy margin, but it will have an overall impact on the overall product support margins. And the last one really, which is more transient than the -- is just the impact of tariffs on heavy steel products, which impacts us due to the proportion of our business, which is mining. So we're managing through that with our customers because we do see it as transient.

The others, we'll work through, but we see that continuing for a while as we improve productivity. We're not going to stop aggressively going after market share. And we see -- we do see improvement in product support in construction and power. It's just not growing as fast as mining, which is a nice problem to have. They're all growing, but one is growing really substantially, which is just having an impact on the margin in the near term.

And what I would add to that, Devin, is in Canada, they had a remarkable 19% product support growth. All 3 segments, mining, construction and power were double digit, but mining led the way. So their growth was even higher. So again, that mix plays into that.

The next question comes from Steven Hansen with Raymond James.

Congrats on the product support growth. It's great to see. I think back in '24, it wasn't that long ago when it was a lot more difficult. I just want to dig into a little bit more. I think you've referenced your desire to grow your labor share on the machines a couple of times now in recent calls. And I just wanted to get maybe a sense or some sort of framework to think about that? Is it -- do you have an ability to grow that share by 5%, by 20%? Do you have a sense for just sort of putting some bookends around what the growth opportunity could be over the next period of time?

Yes. So I think it's different in the different regions, but specifically targeting Canada, we would have a lower market share of labor on the supporting Caterpillar equipment. I would say that there's line of sight to say, doubling that in Canada, and we're on the way to that. And that effort has been well received.

And as I mentioned to Cherilyn, we've totally reengineered our apprenticeship program because we grew out of the last one and the partner we were using. So we've reengineered that to -- we were very focused on one college. We're now working with multiple colleges to help us expedite and expand our apprenticeship programs. So I would say it's a doubling and then we'll continue the effort and then we'll recalibrate at that point in time. In South America, we have a relatively high market share given the contracts in mining and the proportion of our business in South America, which is mining.

The opportunity there is just the increased population. You'll notice we've added to backlog in the quarter where we talked about a moderating growth environment for a few quarters here in South America, and I'm encouraged by the backlog add in Q1 with Alumbrera and then the significant win in Q2 here that put the backlog up 40% quarter-over-quarter here in South America. And a lot of the proportion of that population is under some kind of contract with Finning.

And so it's -- there's an opportunity to maintain our product -- our market share in labor in South America, but just the volume of trucks that are under contract is going to increase in Chile and in Argentina. So -- and then in the U.K., it's -- the growth there, we have relatively high market share as major customers have outsourced product support over a decade. But where we're seeing the big growth opportunity in the U.K. is in our servicing contracts.

We're seeing that in Canada, too, but we were -- the number of machines that are under service contract with Finning labor is increasing dramatically in Canada and in the U.K. And so that's where the drivers are coming from.

That's really great color. And just one quick follow-up then, a smaller line of your business in rental, but it has demonstrated some solid growth here of late. And -- so I think back to the '23 Investor Day down south, I think you had started to prioritize some growth there. That was subsequently pulled back from an expectation standpoint. But it does feel like now your commitment to growing that business, I guess, in partnership with Cat has come back to the fore here. Maybe just give us a sense for where you're viewing that business today and where it stands and where you want to take it here in the next year or 2?

Yes. Good questions, Steve. I mean let's be clear, we've never pulled back from it under my leadership. I'm committed to rental. I think it's a great business. It's a different business, and it needs to be effectively run. But the pullback which you're alluding to, which is fair, was more market conditions in '23 and '24 that didn't support aggressive growth. And back again to Cherilyn's question around how -- what are the impacts you're seeing on the more positive sentiment, particularly in Western Canada, it's across the board, right? It's in gas compression. It's in new trucks, in the oil sands. It's in rental projects for enablement and things like that.

So actually, the vast majority of our rental business is in construction in Canada today. That's where the big proportion of our business is. And that business actually was up 60% in the quarter, 50% year-to-date. And so that's heavy rents and rental services. So that -- we're really encouraged by that, and we've got a big -- like similar to your question around service, let's double it and then we'll have a calibration and see what the next step is, but doubling would be the ambition from the outset.

And I would say that in Canada and U.K. specifically, we're super encouraged by the opportunity in power rentals. It complements our business well. It supports the need for reliable power generation. It supports the opportunity to bridge to more permanent power generation for mines, for communities, for data centers. And so we're seeing really healthy growth in terms of our power rental business. So that business is up 25% year-to-date in the U.K., 20-ish percent in Canada year-to-date. So not seeing the kind of really great product -- growth levels that we're seeing in construction right now, but moving along really, really nicely.

So -- and the rental figure that Dave mentioned as well previously, that [indiscernible] some pretty big declines in mining rentals because that's lumpy, right? We rent for 9 months 1 year or 18 months and then they come off rent. So we don't necessarily have with -- typically they get bought. The customer purchased the rental units. So no, I think our rental performance is extremely encouraging right now. We're really committed to it and we believe it can make a meaningful contribution to our EPS. And I would suggest that in Q2, the EPS contribution, I'm not going to share it, but the EPS contribution from rental service -- from rental to the Canadian business was very helpful.

[Operator Instructions] The next question comes from Krista Friesen with CIBC.

I was just wondering on the power side in Alberta when it comes to data centers, we've seen a little bit of movement with the AESO coming up with updated guidelines back in June, and there's a comment in there about bridging capabilities. And I'm just wondering how you're thinking about the prime power opportunity with some of the changes and announcements coming out of the AESO in the past month or 2?

Yes. So I mean, I would describe the situation is evolving right now, as you mentioned. And it's kind of quick, quick, slow, quick, quick, quick -- Yes. And we're trying to stay across all of that opportunity and make sure that we're ready to support the opportunities for prime bridging or backup power. Clearly, prime power has a higher value creation for Finning. So we're super focused in that area and working with customers behind the meter.

I think the first opportunity probably is going to be coming -- is going to be backup as there is some capacity in the grids. But then I think as it moves forward, the opportunity will probably shift to bridging power whilst permanent capacity is constructed and built. And then as it relates to the permanent power, that's the kind of crown jewel. That's where we're really focused on participating in that prime power generation. But as you know, there are multiple ways you can produce that power. There's already been some announcements that support the build of new gas-fired power generation.

But we think the opportunity in and around that to bridge and to participate in the resiliency of that behind the fence power generation is super exciting. And right now, it doesn't feature in our financials. And our 100 -- more than 100% growth that we're seeing in our power generation business today is in prime power, is in gas and is in gas compression.

Okay. And then maybe just a follow-on. As we think of the backup opportunity and we see some of these data center projects be announced like Project Greenlight, would that be a one-for-one backup to prime power solution? Or would you not necessarily need that level of replication?

Yes. There's not a -- we tried to give some examples of how it might pay in terms of one-for-one to help shape the model. It's a very dynamic -- As I mentioned previously, it's evolving and dynamic. There certainly isn't a one-for-one relationship between prime and backup if you're providing prime power generation because when you're building prime generation, you're building in a level of redundancy.

It's not like the grid goes off and you have to back it up. If you've got 10 engines, 10 gas engines, the likelihood that all 10 go down at once is very low. And so you've always got some redundancy in the system. So it's not one-for-one. There will be backup generation opportunities. And there'll be some bridging opportunities while that prime power is being constructed and built. But then you've got diesel backing up grids.

When you've got behind the meter to bring your own power, there's an element of redundancy built into those projects, which reduces -- it doesn't reduce it to 0, but it reduces the need for the proportion of backup generation you need. There's also the different types of data centers that have different latency and productivity requirements, right? So there's different data center use cases that require -- that are less critical and so require less backup generation.

This concludes the question-and-answer session. I would like to turn the conference back over to Mr. Primrose for any closing remarks. Please go ahead.

Thank you, operator. And thanks, everyone, for joining. Kevin and I are in Santiago, Chile today, and we appreciate you joining us, and we look forward to joining you in November when Kevin and I will be in Dublin with the U.K. and Ireland team for that call. So thank you again, and have a safe day.

This brings to a close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.

Thank you for standing by. This is the conference operator. Welcome to the Finning International Inc. First Quarter 2026 Investor Call and Webcast. [Operator Instructions] The conference is being recorded. [Operator Instructions] I would now like to turn the conference over to David Primrose, Executive Vice President and Chief Financial Officer. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to Finning's first quarter earnings call. Joining me on today's call is Kevin Parkes, our President and CEO.

Following our remarks, we will open the line to questions. This call is being webcast on the Investor Relations section of finning.com. We have also provided a set of slides on our website that we will reference and 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 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 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. In addition, unless otherwise noted, this presentation reflects the results of continuing operations only.

Kevin, over to you.

Thank you, Dave, and good morning, everyone. Thank you for joining us, and thank you to our teams, our customers and Caterpillar for your hard work, support and partnership. Let me start with the headline. Finning is executing. We delivered our strongest Q1 adjusted EPS of $1.02. Year-over-year product support grew for the eighth consecutive quarter, and we maintained our disciplined approach to cost and capital allocation. Most importantly, we continue to build the installed base and backlog in our operating regions, driving long-term product support opportunities and value. Helping our customers solve their toughest challenges and increase the performance from their investments is the foundation of what we do, which in turn helps build population, improve utilization and increase product support opportunities.

As with the last quarter, my prepared remarks will concentrate on the long term. I'll then turn the call over to Dave, who will provide details on our results in the quarter. Please turn to Slide 2. Momentum from 2025 carried into Q1. Revenue was $2.5 billion, driven by strong product support growth, up 6% globally and 13% in Canada. Our mining business is a real strength. Over the past 2 years, we increased the Canadian large mining truck population by 25%. These assets operate in high-intensity applications and create decades of product support opportunities. Mining in Chile moderated as expected, driven by a few of our large mining customers who are recalibrating their mining plans and equipment requirements.

We are excited about mining in Argentina. Last week, I attended a very important mining conference in the San Juan province, and we are pleased to see investments starting to flow. Backlog was up 32% year-over-year, up in all segments, most notably more than doubling in mining and Power and Energy in Canada. Sequentially, backlog is up 20% from December 31, 2025, up in all regions driven by Canada mining. I want to highlight our Power and Energy business. Backlog ended in the quarter at $1.2 billion across prime power, oil and gas and data center standby solutions. Similar to mining, engines deployed within our operating regions create a long-term population and product support opportunity with customers where our penetration is high, even in standby applications.

It is also pleasing to see construction backlog building in all regions with South America and the U.K. and Ireland, both up more than 50% since the end of the year. Construction performance remains solid across all regions despite the lack of any shovel-ready major projects. We are controlling what we can by expanding coverage and taking share. Rental growth is also building, which grows our addressable market by expanding our customer base and loyalty through rental services. Cost and capital discipline remains a real priority. We are investing in our capabilities and capacity to support our growth.

We will open two new branches in Canada this month alone and continue to make thoughtful investments in our inventory. Despite these targeted investments and higher LTIP expense on a trailing 12-month basis, our SG&A margin declined 60 basis points, evidencing our progress in optimizing our cost structure. Invested capital turns held at 2.3% as we continue to see further opportunity to optimize both cost and capital intensity. Maintaining a lower fixed cost base and turning our larger invested capital base with more velocity will support more resilient earnings and return on invested capital in the future.

Turning to Slide 3. Here, we are illustrating the growth in ultra-class and large mining trucks across our Western Canada and South American regions since 2021. As I commented earlier, a growing truck population is critical as a base for future product support revenue. You can see on the chart that truck population has consistently grown year-over-year, suggesting that, that growth is influenced by a broader set of factors beyond mining production volumes and commodity prices. As customers evolve their brownfield operations, mining operations can move further away from the processing facilities. This, combined with, in some cases, with lower ore grades can lead to opportunities for increased equipment requirements. We are also seeing greenfield operations and contractors add to their fleet population. As you can see on the slide, since 2021, mining truck population in our Western Canada and South America regions has increased 35%.

And during the same period our total product support revenue has increased by 59%, demonstrating the importance of equipment population as a key driver for product support growth. Of course, we remain committed to supporting our customers to lower their cost per ton through increased truck utilization. Optimizing repair and maintenance and deploying technology are essential to helping our customers solve this difficult challenge. A good example of this and partnering with our customers is the upcoming trial with Codelco in Chile for the innovative Cat Dynamic Energy Transfer System. This system transfers electricity directly to the trucks while they're in motion and is designed to enhance efficiencies while managing energy demands. This trial will involve 798 trucks and is expected to start in Q2 2026.

To close and to reinforce my remarks, we are building population, helping our customers increase utilization and lowering costs and penetrating the aftermarket more than ever, while remaining disciplined on cost and capital. This is how we compound value over the long term. With that, I'll hand the call back over to Dave.

Thank you, Kevin. I'll now turn to Slide 4. Our Q1 revenue of $2.5 billion was up 2% compared to Q1 2025, primarily driven by higher product support revenue in Canada, offset by lower mining equipment deliveries in South America. We are pleased with our consistent execution momentum as we start 2026, where our team continues to deliver outstanding results under our strategic pillars. We are also encouraged by the overall positive business momentum across our diversified end markets with notable growth in power and energy opportunities as well as improving construction activities.

Our first quarter earnings were adjusted for $16 million of severance costs in South America for headcount reductions related to changes in our organizational structure aimed at simplification and consolidation while strengthening service resiliency. Excluding the severance cost, adjusted EBIT was comparable to Q1 '25. LTIP expense was $15 million this quarter or $0.09 per share of earnings, driven by strong share price appreciation. In Q1 2025, LTIP expense was $7 million or $0.04 per share of earnings. Adjusted EPS of $1.02 was up 7% from Q1 '25 EPS, primarily reflecting lower finance costs on lower average debt level and the benefit of share repurchases.

Meanwhile, our balance sheet and working capital velocity remained healthy. Working capital velocity remains healthy despite planned inventory investment to support backlog growth, enabling us to continue funding the business and increase our shareholder returns through our 7.4% dividend increase, marking our 25th consecutive year of dividend growth. Our net debt to adjusted EBITDA ratio was 1.6x at the end of March. Our invested capital turns and adjusted return on invested capital were 2.3x and 18.7%, respectively, all within our target ranges. On Slide 5, we show changes in our revenue by line of business compared to Q1 '25 and the composition of our equipment backlog by market sector.

New equipment sales were down 4%, primarily due to lower mining equipment deliveries in South America, partially offset by strong sales in Canada across all market sectors. Used equipment sales were down 13% as Q1 '25 had higher conversions of rental equipment with purchase options in Canada. Product support was up 6%, primarily driven by strong mining activity in Canada. Our equipment backlog reached a new record of $3.8 billion at the end of March, up 32% from March 2025 and up 20% from December '25, reflecting order intake outpacing deliveries across all market sectors, particularly in mining and construction sectors. In mining, order intake was up approximately 70% compared to Q1 '25, led by Argentina, as Kevin mentioned earlier, and also the oil sands in Canada.

We currently have over 140 ultra-class and large mining trucks in backlog with deliveries into 2027 and '28, demonstrating strong customer confidence in their markets and our partnership. In Construction, order intake was up approximately 30% compared to Q1 '25, higher across all regions, reflecting early signs of increased activity level and emerging new projects. In Canada, we are also pleased to see our team capturing a higher market share with a refreshed sales and marketing strategy. In the power and energy sector, our backlog is approaching $1.2 billion, primarily supported by data center orders in the U.K. and Ireland as well as gas compression equipment orders in Canada. We expect to deliver the majority of our backlog in 2026.

Turning to our EBIT performance on Slide 6. Gross profit margin was comparable to Q1 '25. SG&A margin was up 20 basis points to 16%, primarily reflecting higher people costs to support business growth, along with $8 million higher LTIP expense accounting for approximately 30 basis points of SG&A margin. Looking ahead, we will continue to seek opportunities to reduce overheads, improve efficiency and operating leverage and build more resilience to drive higher earnings capacity. Q1 adjusted EBIT margin was 11.1% in South America, 8.1% in Canada and 5.1% in U.K. and Ireland. Moving to our South American results and outlook, which are summarized on Slide 7. In functional currency, new equipment sales were down 26% from Q1 '25, primarily due to lower mining deliveries.

In addition, we delivered a large equipment package to a construction customer in Q1 2025, which did not repeat. Product support revenue was up 2%, driven by higher construction activity and mining rebuilds in Chile. Adjusted EBIT margin of 11.1% was up 50 basis points from Q1 '25 EBIT margin, primarily driven by a higher mix of product support revenue, partially offset by higher SG&A margin. In Chile, our outlook for longer term remains positive, underpinned by growing global demand for copper, strong copper prices, capital deployment into large-scale brownfield expansions under supportive priorities from the new government and customer confidence to invest in greenfield projects.

We are seeing a broad-based level of quoting, tender and award activity for mining equipment, product support and technology solutions. However, in the near term, we expect some moderation in product support activity levels as customers adjust their mine plans and existing equipment fleets. While demand for skilled labor remains high, we expect a more stabilized labor environment through 2028 as we have successfully concluded negotiations with all major unions as of Q1 2026. In the Chilean construction sector, we continue to see healthy demand from large contractors supporting mining operations, and we expect infrastructure construction activity to remain steady. In the power and energy sector, activity remains strong in the industrial and data center markets.

In Argentina, we continue to closely monitor the government's rules and policies and are carefully positioning our business to capture growth opportunities, particularly in the oil and gas and mining sectors. We are seeing an increase in quoting activity for equipment and encouraged by our recent win with Glencore's Alumbrera copper mine. We expect activity levels to continue to improve in the coming years, subject to a constructive investment environment. Now turning to Canada on Slide 8. New equipment sales were up 23% from Q1 '25 with strong sales across all market sectors, led by construction on higher market share and activity level. Additionally, power and energy sales nearly doubled year-over-year. Used equipment sales were down 21% as Q1 '25 had higher conversion of rental equipment with purchase options. Rental revenue was up 20%, reflecting improving construction and power and energy activity.

Product support revenue was up 13%, primarily driven by strong demand from mining customers and increased rebuild activities. EBIT margin of 8.1% was down 30 basis points, driven primarily by lower product support margins on strong volume growth, partially offset by improved SG&A margin. Adjusted return on invested capital from continuing operations of 18.2% improved 230 basis points from Q1 '25, driven by both improved trailing 12-month profitability and higher invested capital turns. Our outlook for Western Canada is positive. We expect strong activity levels in our mining business as customers renew, maintain and rebuild aging equipment. In the power and energy sector, activity remains steady in the oil and gas market with longer-term potential in the data center market, where we have started active discussions with numerous customers on both primary and backup power generation opportunities.

We are leveraging the expertise of our U.K. and Ireland team with over a decade of experience in the data center space to become a trusted and value-added partner to our customers. Construction sector activity is showing signs of improvement. We are encouraged by recent announcements regarding the potential to accelerate resource development and infrastructure project activity, but we remain cautious with respect to the exact timing and magnitude. And finally, we remain focused on managing costs and invested capital levels while driving productivity improvements. Please turn to Slide 9 for our results in the U.K. and Ireland. In functional currency, new equipment sales were down 6% from Q1 '25 due to a shift in timing of order backlog delivery into Q2. Product support revenue overall was comparable with Power and Energy up 5%.

EBIT margin of 5.1% was up 40 basis points, primarily driven by higher new equipment margins and a higher proportion of product support revenue. Adjusted return on invested capital of 19.3% was up 240 basis points year-over-year, primarily reflecting the optimization of pension assets. In terms of outlook, we expect demand for new construction equipment in the U.K. and Ireland to remain soft, in line with low projected GDP growth. We continue to expect a growing contribution from power and energy, driven by our strategic execution and healthy demand for both primary and backup power generation, particularly in the data center market. Our product support business is expected to remain stable.

I will now turn it back to Kevin for some closing remarks.

Thanks, Dave. We are pleased with our business performance and encouraged about the future prospects for our company. Our core business is performing well, and we have exciting growth opportunities, both in mining and power generation and in expanding construction market share. Today, we have highlighted the increased mining truck population and how that is a driver of product support growth. We have talked about our backlog, which is driven by mining in Canada right now after a strong period of growth in Chile. We are encouraged about the new government in Chile and incrementally more positive about mining in Argentina.

Three weeks ago, I attended the CESCO conference in Chile. And last week, I attended a very important mining conference in the San Juan province of Argentina, where we held discussions with federal and local politicians, economic chambers and education establishments. We also had productive discussions with customers who are actively working in Argentina and others that are preparing for their mine developments. We are pleased that our commitment to our business, customers and employees in Argentina is positioning us well for future growth opportunities in both mining and oil and gas. And we are now pleased to see investments starting to flow.

This includes a recent order for more than 20 mining trucks that is in our backlog, and we expect deliveries to start later this year and continue through 2028. The mining outlook in both of our territories and the incremental power and energy opportunities ahead of us provide a level of confidence that we can continue to grow our product support for future years.

With that, that concludes our remarks, and we can open the call for question and answers.

[Operator Instructions] Our first question is from Cherilyn Radbourne with TD Cowen.

Kevin, I was hoping you could elaborate a little bit more on what you're seeing in terms of nation building infrastructure projects in Canada and particularly the momentum behind the potential for a pipeline.

Yes, sure. Thanks, Cherilyn. Yes. So I guess our position on nation building projects is that we are really encouraged by the government stance and the discussions that are going around the importance of building, nation building and strong infrastructure for Canada. It's certainly demonstrably more encouraging and positive than it was a couple of years ago. And we're monitoring those projects really carefully to make sure that we're well placed to support customers who win those awards and start to build those projects. That being said, there's very -- there's not a lot of shovel-ready projects that we're working on right now. And so we'd like to see that speed up.

We'd like to see not only speed up so we can get working, but speed up so companies like Finning can get organized both in terms of labor supply and equipment supply, so we can get some commitments and get some things moving in Canada. So yes, we are encouraged by it. You mentioned pipelines there. I mean, ultimately, that's the area where we are seeing some more activity right now and pipelines tend to get ready relatively quickly. And some of that construction activity, particularly in heavy rents actually, Cherilyn, is driven by increased -- not just the major pipelines that have been announced, but there's a lot of activity in pipeline maintenance and expansion.

So I would say that pipelines are closer to us in terms of impacts on our business for the remainder of this year. But we are encouraged in the long term about the other nation building projects. And that includes the more positive outlook about mining in Northern BC.

That was actually a really nice segue into my next question, which was in terms of the strong order intake in Canada, how much of that is still the oil sands? And to what extent are you seeing things in the Golden Triangle?

Yes. Actually, so I mean, it is very, very much dominated by the oil sands, Cherilyn. So -- and that's the benefit of having that amazing resource and opportunity in our territory and the strong relationships we have with our customers, we're really encouraged to see the success that our customers are seeing in the oil sands and the small contribution we can pay to helping them be more successful. So it is mostly oil sands. That being said, we're actually seeing some of the orders in our backlog are actually from coal. And that would be the second biggest contribution to our backlog, but there's a lot of work going on in the coal and metal space -- sorry, in the metals and critical mineral space. But I would say that's a small part of the backlog build right now. So that's an upside.

The next question is from Steven Hansen with Raymond James.

Kevin, Canadian product support growth has clearly been outstanding here, up 13% in the quarter. I think you referenced some market share gains in your opening remarks. I have to assume that the market is growing given some of the data you provided. But just again, can you perhaps speak to the 2 or 3 key drivers here that are driving the market share gains within your new sales approach, the type of work you're going after, the implications around that, how much further is to go? Just trying to get a sense for what inning we're in, in the sort of broader push for market share and what's driving it?

Yes, sure. So just to be clear, in terms of that product support growth for Canada, that is more driven by truck population. We have good market share in truck population in Canada, and that continues. The recent wins evidence that in the backlog build. So that -- the majority of that growth there is in mining and it's in truck population, which is kind of market share, I guess, but it's -- I wouldn't say we're making big gains there, but we are maintaining our strong position of market share in the oil sands in trucks, particularly. So -- and then in power generation, power and energy, we have very strong market share from a prime products perspective in that.

And we're seeing the benefits of that come through that product support line. So they're contributing more and more to the product support overall number in Canada. My reference around market share growth is particularly focused around construction new equipment sales where I believe the first quarter has seen us have some of the best market share we've seen for over a decade, which is super encouraging when you think about the competitive nature of construction industries and it plays to the great work that the team are doing in Canada to get closer to customers, to reach more customers, and expand our customer base. There's a lot of new business being won, particularly in the smaller equipment and excavation areas.

So I think it's safe to say that we've had a renewed and reinvigorated approach to winning market share in the construction equipment and that will play through in terms of product support growth in the future, which we are encouraged about the product support contribution from construction in Canada in Q1.

Steve, one thing I'll just add, we talked a lot about the mining trucks. It's a bit of a proxy for overall population. And we're really focused on increasing the population in the field, especially in high utilization environments like mining, and that's been the key driver for product support in Canada in recent times.

Okay. Very helpful. And just as you start to contemplate this emerging power and data center opportunity, in particular for Western Canada, I'm just curious if you thought about or contemplated whether you need to add any derivative products or services to help your win rates as you sort of go after some of these new projects. As you're aware, one of your peers in Eastern Canada has added the enclosure business to their portfolio is just an example. But not speaking to maybe to that specifically, but is there any other services or products that you think you need to add that would help you in that growth profile going forward?

Yes. Thanks, Steve. It's a great question, and it's a good timing. We actually have a Strategy Day today with our Board where we're going to engage in some more of those discussions about how we can participate more in this very vibrant sector. But I -- just to remind, we do, do this today. We're building enclosures. We've been packaging engines for a long time with Caterpillar in the U.K. and Ireland, and we've been packaging power generation in our Sur branch for, again, for decades, more than a decade. And so we have that skill.

We have those capabilities. And so we are looking at how we expand those capabilities for this growing sector. I want to -- for us, this could be an ever-increasing sector, and you can expand your capabilities far and wide. I want to make sure our strategy at Finning is to -- remains the same. It's to populate our operating regions with Caterpillar equipment. And if we need to have additional capabilities to do that, we will -- or there's a bottleneck or a constraint, we will look at how we do that in the future. But we're not actively looking to necessarily build a revenue stream from a different capability. Our focus is populating the market with high utilized assets, so we can then service those assets for the long term as we do with mining trucks.

The next question is from Saba Khan with RBC.

This is Patty on the line for Saba. So just kind of on the demand environment for power systems and data centers in Canada. It looks like the commentary kind of shifted from longer-term potential last quarter to more active discussions today with numerous customers. So I was wondering if you could give a bit of additional color on this, specifically maybe the mix you're seeing between primary versus backup power and the role you can play in each.

Yes, sure. Great question, Patty. So right now, I mean, we are seeing the discussions are incrementally more active, particularly in Western Canada. Remember, this has been -- we've had a very strong business in the U.K. and Ireland for a number of years now more than a decade, and that continues to be steady as well. And we've got a good opportunity in Chile, which we've been executing well and is providing a good incremental boost to that business down there. But realistically, the headlines are around Canada and how that market evolves and grows.

Right now, I would say the balance is weighted to more backup power as we use the grid capacity that's available in Western Canada. And so we're very focused on supporting customers. And you'll have seen announcements in Saskatchewan and in British Columbia in the last couple of weeks. And so we're very close to those opportunities.

We have good capabilities. It's a competitive environment, but we are -- I would say, quarter-on-quarter, the realization of the opportunity for data centers in Western Canada is more prevalent than it was. For me, the big opportunity for us though as I go back to Steve's question, is the opportunity for prime gas power, particularly in Alberta. And there, the opportunities -- all data center business is incremental and good, but a prime power opportunity for us with the data center would be a huge lift for us at Finning. And it provides that long-term product support opportunity, rebuild opportunity, very much like a static mining truck.

And so if you think about the opportunity to build campuses in Alberta, we're really working hard with government to try and progress those end customers. In fact, we had -- Finning held and organized a data center conference about 10 days ago in Calgary, attended by more than 100 people. And that shows you the -- it was a Finning organized event, and that shows you the opportunity and the encouragement that is in the -- building in that space. So I would say it's back up right now, and we'd like to see some things hit our backlog here in the second half of the year.

But we hope to see it quickly transition into some more prime power gas opportunities in the future. That being said, in both cases, it's important that you understand that the delivery schedules for these projects are -- they're into the '28, '29 period. So this is a -- it's a long term -- I mean it's a long-term visibility of business that we wouldn't have typically had in the past. So that's good, but important that you understand some of the timing on that.

Okay. Great. That's very helpful. And then maybe switching gears to capital allocation. You continue to be active on the share buyback in the quarter, albeit at a slightly slower pace, it seems, and you're looking to renew the NCIB. So just today, maybe your high-level thoughts with the stock trading north of $100. Can you comment on maybe your capital allocation priorities and the value you see today in your own stock and how that stacks up against other initiatives or internal investments?

Sure. I'll comment on that. I mean we think -- we strongly believe returning capital to shareholders is important, and we've been consistently doing that. As Kevin said earlier, our 25th consecutive year of dividend growth. And we are active in the buybacks. And it is dynamic. We look at a variety of factors there, near-term cash flow, capital spending. Right now, in particular, we look at growth opportunities and inventory purchases. So it's dynamic. We look at it at least weekly, if not more frequently. So we don't give guidance on buybacks, but we do believe consistency is important. And as you noted, we have pulled down the levels, but we have remained active.

The next question is from Krista Friesen, with CIBC.

Maybe just back on the data center opportunity. It sounds like one of the advantages is the speed to market for a reciprocating engine versus some of the other power generation sources. Are you seeing the wait times for reciprocating engines increase at all just as other regions like in the U.S. are starting to use these engines for data center prime power as well?

Yes. I mean, obviously, the demand -- thanks for the question, Krista. The demand and you can read about it in the Caterpillar press release is incrementally more positive and you're seeing some awards. So that naturally will push out engine lead times. Caterpillar announced last week that they're going from 2x manufacturing capacity to 3x on large engines. So that will take some time to come on. But obviously, that will push out lead times. That being said, we're not trying to sell engines today for tomorrow, right? Discussions we're having to have those lead times in mind. And so the data center builders are -- do anticipate and understand the latest -- late lead time performance.

And so we find -- they're planning for that '28, '29 period, which we can get engines for that period. But you're dead right. I mean, the opportunity here is speed to market and that includes the approval to build and permitting of data centers. So if you can -- the data center builders are looking at where they can get permits approved really quickly and when they -- how they can get power. And you're right, the reciprocating engine does increase the speed to market. And so there are two advantages. If we can get Western Canada, we're seeing some permitting, that's good. And we've got the ability to supply in the time frames that customers are looking for. So I think we're well positioned. And of course, we've got the added benefit of the gas supply in Alberta, which should give Alberta an advantage in this space, too. So as I said -- we're optimistic.

Okay. That's great. And then maybe just a follow-on of that. We've heard plenty of announcements of intentions for data centers in Alberta, and I think there's 20 or 21 gigawatts in the queue wanting power. What do you think is the biggest bottleneck at this point in time between the desire to build these data centers and actually getting shovels in the ground? And I'll leave it there.

Yes. Like I said before, I think it's just -- it's permitting. So permitting and then -- because the quicker we can get moving and we can get the orders into the system, the quicker we can get the engine. So for me, it's actually moving forward and permitting and government and data center and energy companies working together to get this thing moving so they can take advantage of this amazing opportunity.

The next question is from Maxim Sytchev with National Bank Capital Markets.

Is it possible to get a bit of, I guess, a cadence/inflection point when it comes to product support as obviously, Canada is accelerating and LatAm is a little bit slower right now. But how should we think about sort of the back half of the year and maybe more importantly, 2027?

Yes. So I mean, Canada, we see no reason to -- for that to change. And so we see that continuing into the second half of the year. It is dynamic, Max. Slight decisions can change that. So it can be lumpy at times, and that's what's happening in South America right now. We've got 3 of our top 10 mines that have -- we're experiencing some moderation and some readjustment in the mine plans, and that can have a disproportionate effect on the overall product support growth rate. And so we're always mindful of that as mines plans change. But we are going to deliver trucks into Canada in the second half of this year and into next year with the deliveries to Alumbrera in Argentina.

And there's also existing trucks, I think, 8 or 9 trucks in Alumbrera to reactivate as well.

So there's some work to do on those as well. So yes, we're -- I would say we're more -- we'd like to see a slight uptick in the second half of the year in South America and nothing to suggest that the approach in Canada changes in the second half of the year other than we're always mindful that one customer making a different plan or a different change or even an event on the site can change that. So we stay close to that.

Okay. Makes sense. And then quickly, you mentioned Argentina, exciting to see the -- a decent package there. Can you maybe talk about sort of like oil and gas versus mining opportunity and how we should be thinking about the timing in this obviously recovering geography?

Yes. Yes. So thanks for that, Max. The Argentina -- so the oil and gas activity has really carried us through for the last couple of years yet. It's an incremental opportunity. Argentina is developing its natural resources. So if you look at the -- if you look at Argentina in Q1, new equipment sales were up 120%, rentals up 28%. Total business was up 17%. So that -- and a lot of that is driven by even the construction activity because there is zero public works going on right now.

A lot of that activity is either driven by oil and gas enablement and oil and gas extraction or mining enablement, which is in the very early phases. So I would say that probably half of our business opportunity right now in Argentina is driven by oil and gas. But we would see -- I think over the next couple of years, you'll probably see mining be half and oil and gas be more like as mining activity ramps up down there. So the net impact of that, Max, is just that it's a higher-quality business. We've been driven by construction activity, which has been very cyclical and very much dependent on the government at the moment. We believe that these two resource developments expand beyond any administration development.

I was there last week, and I got this question a lot, what do you think about administration development? And we think with the [indiscernible] and the benefit to the country of this resource development, it probably expands beyond any one customer, any one government, sorry. And ultimately, we've been around there for -- we're a 93-year-old company, right? We don't make decisions based on one administration in any of our territories. So we just think that -- and we hope that Argentina is on a different path now and this resource development can change the face for the people who live there, for the companies who have been loyal and operate there. And -- but we just see the quality construct of our business in Argentina is so much different than it was in the past.

Sure. And I guess, I mean, as coffers are replenished in terms of currency, theoretical over time, we should also see pickup in construction, i.e., public works, et cetera, right?

Yes. I mean, so public works is still difficult in Argentina. The government are holding a very tight rein on that. But it's -- I think as things -- I mean, like I said, our new equipment sales were up 120% in Q1 -- and so there is activity going on, but nothing to the extent that we've seen in the past. And construction is notably more competitive in Argentina than mining and oil and gas.

So it's a more challenging market. But things like our rental business is up 28%. So there is -- there are things going on, Max, but I kind of think of the business down there being like 50-30-20 in the future. That's 50 mining, 30 oil and gas and 20 construction. That's a very broad estimate, but that's the kind of way we're thinking about it right now.

The next question is from Jonathan Goldman with Scotiabank.

I joined a bit late, so I apologize if this has already been asked. But in South America, the product support, the lower levels, you've made a lot of disclosure there, you've telegraphed that well. But should we think about product support kind of tracking copper production in the region? And with the elevated copper prices right now that we're seeing, do you expect production levels to accelerate? Or could there be some bottlenecks on the supply side and sort of mine issues that are going on?

Yes. So as I said, I attended the CESCO conference in Chile 3 or 4 weeks ago. And I would say that the tone there was constructive realism. So to your point, there are challenges to increasing copper production. There are bottlenecks. There are labor challenges, there are equipment challenges. So we're trying to help our customers solve those challenges and build loyalty with our customers there. I wouldn't necessarily say that you can draw a correlation between copper production and our product support rate because the correlation just hasn't happened over the last 3 years.

The better correlation is the number of trucks, which we've put in. We haven't broken that down by country, but the number of trucks in South America has grown demonstrably over the past 3 or 4 years, and we expect that to continue. If you think about the net zero impact of -- from working from 0 in Argentina, we expect that to be a benefit in the future as well. So I wouldn't say there's that correlation.

And I'm not sure when you joined, but I think we've had an impact in Chile right now in the moderation of product support growth is actually 3 out of 10 mines that are seeing some moderation in activity due to mine planning and reorganization. Some of the larger mines can have a disproportionate effect on our overall product support revenue. And like we've seen in the oil sands, we expect that to normalize over time. And so we'd like to think that the second half of the year is slightly better in Chile for product support.

Okay. That's great color. And then maybe related, the actions you've taken in the region to rationalize headcount, how should we think about SG&A levels or cost expense levels going forward and if there's any sort of payback on those restructuring actions?

Yes, I wouldn't bank any payback from that necessarily. For us, the work that we're doing, particularly in South America, but also in Canada, for every opportunity we see to save money and to restructure, it's more about the type of work we're doing, and we need the right capabilities in the right places. So in South America specifically, it's after a period of very strong growth and the moderation. We're taking the opportunity to look at it -- look at the business down there from a higher performance lens.

And so most of the changes we're making in South America relate to increasing capability and making sure we've got the very highest quality technicians that we possibly can be, can have. But we're always seeing opportunities to restructure and to reallocate resources. But I don't think you should think about the SG&A level for the company. I think we're in the kind of range that we're going to be in for a little while here. But I think the allocation of cost and the work that we do will change over time.

The big -- what I'll add there is there were some back office as part of that, but a big focus there was service productivity. They had a few years of very high hiring rates and don't necessarily always make the right decisions at the time. So this was an opportunity to go back and really focus on productivity.

Okay. That's really good color. And I guess maybe one more, if I can squeeze it in. The product support in Canada, a pretty strong print here. I mean it's been strong for two quarters in a row now. I feel, I did the math, you'd probably be close to your Investor Day targets that you set out in '23. Could you maybe give us an update on the progress of some of the initiatives that you laid out in product support on the Investor Day, the share gains, the CVA -- because it does seem like those are accelerating and gaining traction.

Yes. So like I said, a lot of that growth, Jonathan, is on -- is like we are highlighting in the chart there. It really is the impact of two years of very strong population growth in Canada. And with our backlog, we see that continuing for another couple of years. And so population is the biggest driver. But with Tim coming into the business here, he's one of his 3 big drivers and 3 strategic strands, I guess, is to increase our labor sales. When we provide labor, we win more product support. And so it's not so much the CVA, percentage of CVAs has gone up that much, but the percentage of CVAs with labor is increasing. They're adding a technician.

So if you think about the truck additions and you think about adding a technician a day right now, which is what they're doing in Canada, they're the two biggest drivers of product support growth in Canada, the population and the technicians. But we're seeing a continued strong level of rebuilds in the area. More and more customers are considering rebuilds as an option as we move forward. So I would say really pleased with those product support initiatives and -- but boosted by this different approach to labor and the additional population.

This concludes the question-and-answer session. I'd like to turn the conference back over to Mr. Primrose for any closing remarks.

Thank you, operator. This concludes our call today. I'd like to thank everyone for your participation. We appreciate you joining us today, and please have a safe day. Thank you.

This brings to a close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.

Good afternoon, everyone, and welcome to the Finning International 2026 Annual Meeting. My name is Charles Ruigrok, and I am the Board Chair. I would like to call this meeting to order. Joining me at the head table are Kevin Parkes, our President and CEO; and Dori Assaly, our General Counsel and Corporate Secretary.

We're pleased to be holding our annual meeting today in person in Vancouver. I would like to acknowledge that this meeting is being held on the traditional, ancestral and unseated territory of the Coast Salish peoples, Squamish, Tsleil-Waututh and the Musqueam nations.

I will start with some introductory matters and outline the order of business for the meeting. In a minute, I will introduce our Board members. After I make those introductions, we will move to the formal part of the meeting where we will discuss and vote on the proposed resolutions included in the management proxy circular for the meeting.

In accordance with the provisions of the Canada Business Corporations Act, we will vote on the appointment of the auditors by a show of hands and for resolutions to approve the election of Directors and the advisory vote on executive compensation, which we will vote by ballot. To my knowledge, the proxies deposited in advance of the meeting are sufficient to pass each resolution to be considered today. In order to expedite our meeting formalities, either I, Dori Assaly or Kevin Parkes will move and second the required motions in our capacities as registered shareholders or proxy holders for registered shareholders of Finning.

Any person who is attending the meeting as a registered shareholder or a duly appointed proxy holder may address the meeting when there is a call to discuss a motion before the meeting. Please raise your hand and when you're called upon, you may proceed to the microphone located in the middle of the room. Anyone who is attending this meeting as a guest will not be able to address the meeting. After we've completed voting on the business of the meeting, Kevin will give a brief presentation, and we will then receive the results of the ballots. We will then conclude the meeting and continue with a question-and-answer session. If you have any general questions not specifically related to the matters that are being put to a vote, we ask that you hold your questions until the question-and-answer session.

Now if there's no objection, I will ask our General Counsel and Corporate Secretary, Dori Assaly, to act as Secretary of the meeting; and Marissa Beintema of Computershare Investor Services to act as a scrutineer. I will now ask the Secretary to report on quorum for this meeting.

Mr. Chairman, I am pleased to report that we have a quorum with 87 shareholders present in person or by proxy, representing 78.25% of the common shares outstanding.

As we have quorum and have received the affidavit of mailing from our registrar and transfer agent, I declare that this meeting is regularly called and properly constituted for the transaction of business.

Now to the business of the meeting. First, I will introduce our new nominee, Robert Atkinson, who was appointed to the Board in August of 2025, and we're pleased to nominate for election this year. Robert Atkinson brings over 35 years of leadership experience in the global mining industry. Bob serves as a senior operating partner at Appian Capital Advisory LLP, an investment adviser to private capital funds in the metals and mining sector. He is the former Chief Operating Officer of Newmont Corporation and prior to that, held senior executive roles at Rio Tinto. He is based in Buckinghamshire, United Kingdom. In addition to Robert, all of our current Board members, including myself, are standing for reelection.

The Board members standing for reelection in addition to myself are Mary Lou Kelley of South Bend, Indiana, has been a Director since 2018; Andrés Kuhlmann, Santiago, Chile, who has been a Director since 2019; Kevin Parkes, our President and CEO, who has been a Director since 2022; Michael Putnam of Oxford, United Kingdom, who's been a Director since 2024; John Rhind of Calgary, Alberta, who's been a Director since 2024; Edward Seraphim of North Vancouver, British Columbia, who's been a Director since 2019 and is one of our designated Audit Committee financial experts; Manjit Sharma of Toronto, Ontario, who's been a Director since 2022 and is also one of our designated Audit Committee financial experts; and Nancy Tower of Halifax, Nova Scotia, who's been a Director since 2022.

Our first item of business is the presentation of our financial statements. A copy of the 2025 financial report, which includes Finning's financial statements for the year-ended December 31, 2025, and the auditor's report is available via notice and access on our corporate website at finning.com and was mailed to shareholders who requested it. If there's no objection, we will dispense with the reading of the financial statements and auditor's report. We'll pause for a moment to allow for any questions.

As there are no objections or questions, we'll proceed to the next item of business. The first matter to be voted on is the approval of the appointment of the auditor. Your Board is recommending the reappointment of Deloitte LLP as Finning's auditor for the fiscal year 2026.

Dori, will you please move the motion to approve the appointment of Deloitte LLP as Finning's auditor for fiscal 2026 with the remuneration to be determined by the Board of Directors.

Mr. Chair, I so move.

Thank you, Dori. Kevin, would you please second the motion?

Yes, I second the motion.

Thank you, Kevin. We'll pause for a moment to allow for any questions.

Seeing none, I will call for the vote on the motion before the meeting. This vote requires a simple majority to pass. All those in favor by show of hands.

Contrary, if any? The motion is carried by requisite majority. Thank you.

As I mentioned earlier, we have 2 matters to be voted on by ballot today. The first is the approval of the advisory vote on executive compensation. As part of Finning's commitment to strong corporate governance practices, the Board is providing shareholders the opportunity to cast an advisory vote on our approach to executive compensation. The purpose of this advisory vote is to provide our shareholders with an opportunity to indicate their acceptance of the Board's overall approach to executive compensation at Finning, which is described in the management proxy circular for the meeting. The text of the resolution to approve Finning's approach to executive compensation is set out on Page 17 of the management proxy circular and is being projected on the screen.

Dori, will you please move the motion to approve this resolution?

Mr. Chair, I so move.

Thank you, Dori. In my capacity as a registered shareholder or proxy holder for a registered shareholder, I second the motion. We'll pause for a moment to allow for any questions.

As there are no questions, I now call for a vote on the motion before the meeting. Each shareholder or proxy holder entitled to vote on this motion has been given a ballot. If you've already voted in advance and do not wish to change your vote, no further action is required. Otherwise, please complete your ballot and it will be collected by the scrutineer. This motion requires a simple majority to pass.

[Voting]

Thank you. The final matter to be voted on by ballot is the election of Directors. In accordance with Finning's bylaws, the Board of Directors has set the number of Directors at 10. So today, we will elect 10 Directors. In accordance with Finning's advance notice bylaw, advance notice must be provided for anyone to be nominated as a Director at this meeting. As no advance notice has been received, the nominees standing for election are the 10 nominees set out in the management proxy circular, who I introduced to you earlier in this meeting and whose names are being projected on the screen.

Each of these nominees is nominated for election to hold office until the next annual election of Directors or until their successors are appointed. Although I'll start by -- I will be asking for one motion to elect each of the nominees, registered shareholders and proxy holders will be able to vote for or against each individual Director nominee. In accordance with the Canada Business Corporations Act, a Director will be elected if they receive at least a majority of eligible votes in favor.

May I have a motion to elect each of the nominees as Directors of the corporation?

Mr. Chair, I so move.

Thank you, Dori. In my capacity as a registered shareholder or proxy holder for a registered shareholder, I second the motion. We will pause for a moment to allow for any questions.

As there are no questions, we will proceed to a ballot vote for the election of each of the 10 Director nominees. Each shareholder or proxy holder entitled to vote on this motion has been given a ballot. If you've already voted in advance and do not wish to change your vote, no further action is required. Otherwise, please complete your ballot and it will be collected by the scrutineer.

[Voting]

Thank you. As all items of business have now been voted on, the results will be tabulated by the scrutineer. While we're waiting for the results of the voting, I would ask Kevin to come up and make a few remarks for you.

Kevin, over to you.

Thank you, Charles. Good afternoon, and welcome, everyone. As we've done in prior years, after we've completed the required business of the meeting, we will have time for questions. To begin, I would like to take a moment to introduce the Finning leadership team. Firstly, David Primrose, Executive Vice President and Chief Financial Officer; Neal Lamont, Executive Vice President and Chief Technology Officer; Pablo Amar, Finning South America President; Tim Ferwerda, Finning Canada President; and Gary Megarrell, Finning U.K. and Ireland Managing Director.

Before I begin my remarks today, I want to remind everyone that some of the information presented may be forward-looking. This forward-looking information reflects our current expectations and is subject to risks, uncertainties and other factors as discussed in our annual information form and our MD&A. Please treat this information with caution as our actual results may differ materially from our current expectations. Today, I'll speak briefly about last year's successes and our first quarter results.

In 2025, we grew our business, strengthened our resilience and delivered strong performance. We continue to bring our purpose, positive impact to life across the organization, and we're seeing meaningful progress in our teamwork and collaboration as well as how we support and engage with our customers and partners. Our people are the foundation of everything we do and keeping them safe is our first responsibility. We continue to focus on proactive planning, strong critical controls and a shared commitment to keep everybody safe. We are also working with frontline employees and leaders to identify hazards, strengthen psychological safety and support continuous learning and improvement.

Turning to our results. This past year, our earnings capacity took a significant step forward as we built our business foundation that is more resilient in all market conditions. Annual revenue increased for 2025 by 7% and highlights included product support revenue, which reached nearly $6 billion and new equipment revenue, which posted an all-time high of $3.9 billion. The disciplined execution of our strategic priorities provides solid momentum and future growth opportunities.

Turning to our customers. We know they are navigating complex challenges, trying to improve productivity and manage costs in an ever-changing world. We are committed to helping our customers solve their toughest challenges. With the sale of 4Refuel and ComTech approximately a year ago, we sharpened our focus on product support growth, which includes maintaining, remanufacturing and rebuilding. Our world-class technicians keep equipment running efficiently, reduce downtime and rebuild to like-new performance conditions. To better support our customers, we expanded our technician team, recognizing the critical role that service plays in product support growth, and we'll continue to add technicians across all regions.

Earlier today, we released our first quarter 2026 results, and our business continues to grow. We delivered another strong quarter, including product support revenue growth led by double-digit growth in Canada. We also maintained discipline in our cost and capital management whilst proactively capturing growth opportunities. Through strong execution, our teams achieved a result of $1.02 earnings per share -- adjusted earnings per share. This is a record for Q1. Meanwhile, our equipment backlog reached $3.8 billion at the end of March, bolstered by equipment orders from mining customers in Argentina and Canada.

Our U.K. and Ireland business continues to demonstrate resilience. In South America, we are operating in a moderating growth environment in the near term. And in Canada, we're seeing strong momentum across all market sectors. To support this growth, we are investing in our business and our Board approved a 7.4% increase to our quarterly dividend to $0.325 per share. This marks the 25th consecutive year of dividend growth and is well supported by our transformed earnings capacity, and it reinforces our commitment to returning capital to shareholders.

Turning to our recent sustainability efforts. We continue to take an incremental and holistic approach to reducing our environmental footprint. We are working to meet our 2027 emissions reduction target. And across all regions, our impact -- the impact of our initiatives is starting to add up from fuel alternatives to operational efficiency programs. As we grow, we remain focused on the continuous improvement everywhere we operate. We are deepening our commitment to indigenous reconciliation in Western Canada, and we are building relationships with indigenous communities grounded in respect and long-term partnership.

Across the business, we are also supporting the communities where our employees live and work, from food bank drives to training, education and trades program. Our robust community investment program makes a meaningful difference in the operating regions. We plan to publish our 2025 sustainability report next month, and I encourage all of you to read it once it's released. Our purpose, positive impact continues to guide our decisions at Finning. Our strategy is working, and our momentum continues to build.

To close, I want to recognize and thank our employees for their dedication and their positive impact they bring to every opportunity and challenge. I'm also grateful to our customers, partners and shareholders for your continued support of Finning throughout the past year.

With that, I'll turn the meeting back to Charles to report the results of our shareholder votes, close the formal meeting and open the question-and-answer period.

Thank you, Kevin. We now have the voting results for the advisory vote on executive compensation and the election of the 10 Directors. I will ask Dori to provide the results.

Mr. Chair, the scrutineers' report for the approval of Finning's approach to executive compensation, we have 95.79% of eligible votes in favor and 4.21% against. And all Directors were elected individually, with each Director receiving at least 98.13% of eligible votes in favor.

Thank you, Dori. I declare the resolutions carried by the required simple majority, and I confirm that all of the nominees for election as Directors of the corporation received more votes for their election than votes against, and therefore, the nominees are declared elected as Directors for the coming year. With there being no further issues, this concludes the formal portion of the meeting, and I now declare the annual meeting concluded.

I will now open the floor for questions from shareholders. Please raise your hand if you have a question. And when you're called upon, proceed to the microphone in the room.

As there are no questions, that concludes our question -- go ahead. If you could take the mic, please. We got people online.

I'd be curious, how have your attach rates for your service attach rates evolved over the last few years? And how do you see them evolving over the next few years?

Yes. So the attachment rates are different by industry sector. So in mining, we have very high attachment rates, but there's always room for improvement, and we're looking to -- with our strategies to rebuild and CVAs and labor support, we're looking to grow that. In construction, attachment rates are a little less. So there's more room for growth there. Similar strategies to increasing that attachment rate.

And then the great thing about the growth in our power business is that the attachment rate is almost 100% in some cases. So the more -- you will see a growing contribution, although our power population is the smallest population we have, the attachment rate is so high that you'll see an increasing contribution from attachable product support in the power business.

Can you put any sort of numbers around that?

No, we don't give the exact numbers. It's very high in mining, even higher in power and lots of room for improvement in construction.

And my second question is, in the past, you've had these really interesting charts in your presentations that show all the potential mines that are in the pipeline. And I'd just be curious if everything that you can see sort of came online both on the mining and in power data centers and everything else and Caterpillar's market share remained the same, what would that look like in terms of your installed base if you look out, say, 5 years?

Yes. So we're going to talk a little bit about this on tomorrow's earnings release call, but we can see line of sight to -- so if you look at back 2 years, we had 400 trucks in the oil sands, and we've added 100 in 2 years. So it took 20-plus years to get 400 there. And now in 2 years, we've got another 100, so a 20% increase in just 2 years. And we kind of see that at the moment until the end of the decade, we kind of see that trend continuing. So that those kind of numbers towards the end of the decade.

In South America, the opportunity is probably a little bit more than that. So I think when we -- if you look at South America, we've got the opportunity to almost double the amount of large mining trucks we have in that region, including the starting of mining in Argentina.

And then power is really difficult to say because it's just picking up so fast. And the addressable market is really hard to identify because it's so wide ranging. But we expect to see power be a bigger contribution to our overall business between now and the end of the decade for sure.

Great. And I'll just squeeze in one more, if I can. In power, I see the backlog has gone up a lot. It's been growing dramatically. When would you expect the product support revenue from the power business to begin to kick in? Is that sort of a year after it's delivered? Or does that happen 4 or 5 years after it's delivered?

It really depends on the application. So if you've got prime power, so like a gas compression or a cogen power plant, then it would kick in almost immediately. Similar to a mining truck, you probably need a year or so just to -- but then you'd be rebuilding in years 7 to 10, something like that. But then in backup power, which a lot of the data center work is right now, obviously, they're very low utilization. But we see a constant stream of servicing and maintenance that starts almost immediately as well. So -- but it's very different based on the application.

Great questions. Any other questions before we close?

Seeing none, that concludes our question-and-answer session. I want to thank you all for joining us today and encourage you to mix with members of Kevin's team and the members of our Board for some more -- less formal dialogue. Thank you.

Thank you for standing by. This is the conference operator. Welcome to the Finning International Inc. Fourth Quarter 2025 Investor Call and Webcast. [Operator Instructions] And the conference is being recorded. [Operator Instructions]

I would now like to turn the conference over to David Primrose, Executive Vice President and Chief Financial Officer. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to Finning's Fourth Quarter Earnings Call. Joining me on today's call is Kevin Parkes, our President and CEO. Following our remarks, we will open the line to questions. This call is being webcast on the Investor Relations section of finning.com. We have also provided a set of slides on our website that we will reference and 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 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 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. In addition, unless otherwise noted, this presentation reflects the results of continuing operations only.

Kevin, over to you.

Thank you, Dave, and good morning, everyone. We appreciate you taking the time to join us on the call today. 2025 was another strong year for Finning. I am grateful for our team's hard work and their disciplined execution of our strategy. We are proud of our many accomplishments that we achieved together. We grew our business in all 3 regions. We built our backlog by 20% since the end of 2024 and simplified our operations to further focus on growth in our Caterpillar dealerships. This included restructuring areas of our back office and head office and completing the sale of 4Refuel.

We continue to grow our product support revenues in a dynamic business environment, where we strive to control what we can, supporting our customers with their toughest challenges and earning their loyalty from them in the long term. Our earnings are more resilient, and our cost and capital position has significantly improved, fundamentally enhancing the long-term earnings capacity and return profile of our business in all market conditions. We continue to be well positioned to capture opportunities for further product support growth driven by equipment population growth and transformational growth in power, energy, rental and used equipment.

As with last quarter, my prepared remarks will concentrate on the long term. I will also provide a brief update on our 2023 Investor Day objectives that we set out to achieve by the end of the year 2025. I'll then turn the call over to Dave, who will provide details on our results in the quarter.

Starting on Slide 2. The strong momentum we developed in the first 9 months of the year continued through the balance of the year, with revenues up 7% to $10.6 billion in 2025. We also continued to building our backlog to a record $3.1 billion at the end of the year, while at the same time achieving record new equipment revenue. Our product support revenue continued its steady growth trajectory, up 8% in 2025 to almost $6 billion with strong activity levels in mining in Canada and South America growing at 10% and 5% year-over-year, respectively.

Our strategy remains consistent. We are as focused as ever on growing rebuilds, contracted service, and we have recently launched a services commitment in Canada and improving our responsiveness and building loyalty. All of this means building our technician base where we added 225 new technicians across our region and expanded our workshop capacity to enable us to better serve our customers and capture growing product support opportunity. This is all, of course, enabled by enhanced digital and technology capabilities.

We are very pleased with the resilience and growth of our earnings year-over-year. Adjusted earnings per share increased 14% in 2025 and our SG&A margin is now 15%. The lower fixed cost base of our business will continue to support a more resilient earnings profile in the future. Our consistent focus on invested capital velocity continued all year, with our invested capital balance ending the year, only slightly higher than the prior year, while growing our revenue by 7%.

As we noted on our last call, we expected free cash flow to inflect positive in Q4, and we are pleased to have generated nearly $550 million of free cash flow during the year. From a sustainable growth perspective, we continue to see strong growth in our Power and Energy business as well as some recovery of rental activity in Canada.

Our Power and Energy backlog at the end of December remains strong at $1 billion, up 25% from December 2024 and continues to reflect a diverse mix of prime power packages, oil and gas-related equipment orders and data center standby packages to be delivered through 2027. We are pleased to start to see the recovery in construction sector in Canada, with rental revenues up 9%. We believe this market remains attractive, and we are committed to enhancing our rental business in the long term.

Turning to Slide 3. We are proud of the results we achieved by executing our strategy outlined at our Investor Day in 2023. As I mentioned earlier, product support revenues are nearing $6 billion from $5.2 billion on a trailing 12-month basis at the end of Q2 2023 just before our Investor Day. We have always remained constructive on our product support growth prospects despite some market dynamics that were out of our control, believe in, we have the opportunity to win share by supporting our customers to achieve their goals.

Our consistent focus on providing customers with comprehensive maintenance, repair and rebuild options, coupled with a growing technician base has positioned us well to continue to grow this important segment. The recovery in product support in 2025 supports our conviction to continue to drive product support. From a full cycle resilience perspective, we are extremely pleased to have delivered all of our objectives. We moved our invested capital turns into our target range of 2.3 to 2.5x. We lowered SG&A margin to 15%, well below our target of 17% and successfully executed a number of capital optimization initiatives, which we previously highlighted when we announced the 4Refuel sale.

In terms of sustainable growth, we have also made solid progress. We are participating more in the used equipment market with used equipment revenues up 31% since Investor Day. And our Power and Energy business continues to perform strongly with revenues up 41% since Q2 2023, and our backlog is up over 70%. The rental market opportunity remains large, and we will continue to invest carefully into this market as the outlook improves.

All of our initiatives and results have driven returns to a higher and more sustainable level within our 18% to 25% adjusted return on invested capital target range in all quarters but one since the Investor Day. In 2026, we will continue to execute on our strategy that we outlined in our 2023 Investor Day, as there remains meaningful opportunity in each of our 3 strategic priorities.

With that, I'll hand the call back to Dave, who will provide more detail on our results in the quarter and our outlook.

Thank you, Kevin. I'll now turn to Slide 4. Our Q4 revenue of $2.7 billion was up 6% compared to Q4 2024, higher across all regions, driven by strong performance in product support and new equipment. We are pleased with another quarter of consistent strategy execution alongside the positive business momentum with steady mining, improving construction and encouraging power and energy activities.

Our fourth quarter earnings were adjusted for a $22 million write-off related to the decommissioning of certain technology assets as we evaluate the business needs of our operations and align with Caterpillar's digital and technology strategy and solutions. Excluding the write-off, adjusted EBIT was down 2% from Q4 '24. LTIP expense was $21 million this quarter or $0.12 per share of earnings, driven by the continued strong share price appreciation whereas in Q4 '24, LTIP was a recovery of $3 million or $0.02 of earnings per share benefit.

Adjusted EPS of $1 was up 3% from Q4 '24 EPS, primarily reflecting higher earnings in Canada and the benefit of share repurchases throughout 2025. Meanwhile, our balance sheet remained healthy, and we continued to strengthen our financial position. We generated strong free cash flow of $642 million this quarter, and our net debt to adjusted EBITDA ratio was reduced to 1.2x compared to 1.7x at the end of 2024. Our working capital velocity also continued to improve. We thought our invested capital turns reached 2.34x, with an improvement in working capital balances. Our consolidated adjusted return on invested capital this quarter was 19.2%, up 130 basis points from Q4 last year, reflecting increased capital velocity and improved earnings.

On Slide 5, we show changes in our revenue by line of business compared to Q4 '24 and the composition of our equipment backlog by market sector. New equipment sales were up 9%, driven by higher deliveries in construction and power and energy across all regions. Used equipment sales were down 23%. Q4 '24 had large conversions of mining rental equipment with purchase options in Canada that did not repeat this quarter.

Product support revenue was up 8%, primarily driven by strong mining activity in Canada. Our equipment backlog reached a new record of $3.1 billion at the end of December, up 20% from last December and up 9% from September 2025, reflecting order intake outpacing delivery across all market sectors. Order intake continued to be strong in Canada this quarter, up nearly 50% from Q4 '24, driven by all market segments, particularly in mining. In Canada, we secured multiple large orders from key mining customers, and we currently have over 50 ultra-class trucks in addition to over 20 other large mining trucks in our backlog in Canada.

In the Power and Energy sector, our backlog was supported by a large data center order from a customer in the U.K. and Ireland as well as multiple orders for gas compression equipment in Canada. Overall, our current backlog continues to provide confidence for our business in terms of activity levels and future product support opportunities.

Turning to EBIT performance on Slide 6. Gross profit margin was down 70 basis points, primarily driven by lower product support margins. SG&A margin was down 10 basis points to 15.4% in the quarter, reflecting operating leverage offset by higher LTIP expense, which had approximately an 80 basis point impact on the Q4 2025 SG&A margin. Looking ahead, we will continue to seek opportunities to reduce overheads, improve efficiency and operating leverage and build more resilience to drive higher earnings capacity. Q4 adjusted EBIT margin was 10.4% in South America, 8.1% in Canada and 4.6% in the U.K. and Ireland.

Moving to our South American results and outlook, which are summarized on Slide 7. In functional currency, new equipment sales were up 4% from Q4 last year driven by strong growth in the construction and power and energy sectors, partially offset by lower sales in the mining sector. Product support revenue was up 5%, driven by higher activities in the construction sector in Chile. Adjusted EBIT margin of 10.4% was down 50 basis points from Q4 '24, reflecting lower product support margins, partially offset by lower SG&A margin. Adjusted return on invested capital was 24.5%, down 140 basis points due to slightly lower trailing 12-month profitability.

In Chile, our outlook for the longer term remains positive, underpinned by growing global demand for copper, strong copper prices and customer confidence to invest in brownfield and greenfield projects. We are seeing a broad-based level of quoting, tender and award activity for mining equipment, product support and technology solutions. However, in the near term, we expect some moderation in activity levels as customers adjust their mine plans and existing equipment fleets. We also continue to expect some challenges in the labor market as demand for skilled labor remains high.

In the Chilean construction sector, we continue to see a healthy demand from large contractors supporting mining operations and we expect infrastructure construction activity to remain steady. In the power and energy sector, activity remains strong in the industrial and data center markets. In Argentina, we continue to closely monitor the government's rules and policies, and we are carefully positioning our business to capture growth opportunities, particularly in the oil and gas and mining sectors. We have recently seen an increase in quoting activity for equipment, and we expect activity levels to improve in the coming years, subject to an improving investment environment.

Now turning to Canada on Slide 8. New equipment sales were up 2% from Q4 '24, primarily driven by stronger sales in the construction sector. Used equipment sales were down 42% due to large mining conversions of rental with purchase options in Q4 '24. Rental revenue was up 10% on improved market conditions. Product support revenue was up 12%, driven by strong demand from mining customers. Adjusted EBIT margin of 8.1% was up 60 basis points from Q4 '24, driven primarily by lower SG&A margin and a higher proportion of product support in the revenue mix. Adjusted return on invested capital from continuing operations of 18.2% improved 280 basis points, driven by both improved profitability and higher invested capital turns as we focused on working capital velocity through operational improvements.

Our outlook for Western Canada is improving. We are encouraged by recent announcements regarding the potential to accelerate resource development and infrastructure project activity but we remain cautious with respect to the exact timing and magnitude. Construction sector activity in general is moderate, but is showing signs of improvement. We expect steady activity levels in our mining business as customers renew, maintain and rebuild aging equipment fleets. In the power and energy sector, activity remained steady in the oil and gas market, with longer-term potential in the data center market. And finally, we remain focused on managing costs and invested capital levels while driving productivity improvements.

Please turn to Slide 9 for our results on the U.K. and Ireland. In functional currency, new equipment sales were up 21% from Q4 '24, primarily driven by strong power and energy project deliveries. Product support revenue was flat as lower machine utilization in the construction sector was offset by strong activity in power and energy. Adjusted EBIT margin of 4.6% was down 120 basis points from Q4 '24, primarily driven by the higher proportion of new equipment. Adjusted return on invested capital of 20.1% was up 510 basis points year-over-year, primarily reflecting the optimization of pension assets.

In terms of outlook, we expect demand for new construction equipment in the U.K. and Ireland to remain soft, in line with the low projected GDP growth. We continue to expect a growing contribution from Power and Energy, driven by our strategic execution and healthy demand for both primary and backup power generation, particularly in the data center market. Our product support business is expected to remain stable.

Before I turn it back to Kevin, I would like to provide a quick update on our 2026 capital expenditure plans. Following a slower-than-expected construction market in Canada in 2024 and '25, we expect to build our rental fleet to capture opportunities as the market improves and continue to thoughtfully execute our strategic pillar of sustainable growth. We also expect to make selected investments in our capacity and capabilities to drive operational improvement and efficiency including improving our warehouse operations in Edmonton, implementing case and workforce management in Canada, and focused investments in South America and the U.K. to better serve our customers. We expect our 2026 net capital and net rental fleet expenditures to be greater than $350 million.

I will now turn it back to Kevin for some closing remarks.

Thank you, Dave. We are really pleased with the continued execution by our teams in all regions, and we continue to build a more resilient and sustainably growing business that can produce strong returns in all market conditions. We're constructive on the long-term outlook in all of our markets. We're particularly pleased with the business in Canada, the core business strength led by mining, encouraging outlook for CI and exciting opportunities for core population growth in Power Systems.

Our backlog has grown more than 2x since this time last year in all 3 segments. We delivered 95 new trucks over the last 2 years, and we have more than 50 in backlog. Chile is a more dynamic environment with lots going on. And given the growth we've seen over the past 2 years where we delivered 132 new trucks and we have 16 more in backlog, we do see a period of moderation as fleets get reorganized ahead of what we hope to be an encouraging second half of the decade as evidenced by the strong quoting outlook we have today.

We're committed to our strategy, focused on growth, earnings expansion and a strong return on invested capital. This is evidenced by our performance in 2025 with 7% revenue growth, 8% product support growth, 14% EPS growth, all of that from our core dealership operations.

With that, I'll hand you back to the operator for questions.

[Operator Instructions] The first question today comes from Krista Friesen with CIBC.

Maybe just to follow up on your last comment there about some of the softness in South America. Can you speak to how you're thinking about near term? Is that next couple of quarters? Or are you thinking over the next year or 2? And then additionally, how you think this impacts product support in the region?

Yes. I mean I don't think we call it softness, Krista. There's still a lot of activity, but Chile copper mining production is growing. What we've seen is a period of real success in our business there and some substantial significant truck population deliveries. As I mentioned, 132 new trucks over the last 2 years. That's more than one a week. And we've seen those trucks be added to the fleet.

And I think miners now, as they continue to strive for lowering the cost of production and productivity, they're putting those fleets to good use now, and there is some retirement of some of the older fleets now. Some of those are retired and stay in region. Some of those are retired and leave the region. And so that's the dynamism that we're referring to. We don't see any inherent, so there may be some changes to product support over the near-term as trucks get retired and the fleets get realigned. But the production outlook for Chile is still strong. And we do have 16 trucks in backlog that are going to be added to the fleet, added to the population this year.

As I said previously, we have multiples of that backlog in the pipeline for good quality in activity, including in Argentina, which could be an offset to some of the Chilean dynamism as well. So I think that it's not softness in the market. It's just a reorganization of the fleets there. And we remain very confident that we've got a good population of trucks there. We also remain very focused as we did in the oil sands for the last couple of years on supporting our customers with their productivity and utilization efforts and ultimately lowering their cost to serve, which ultimately grows market share in the long term.

I would just add that Kevin said -- I mean, with the medium term, we're very bullish on South American copper, very positive outlook. Quoting activity remains very active in both Chile and now Argentina, but those cycle times can be longer for awards. And in the near term, like Kevin said, there's just some mine plan adjustments, fleet adjustments, but we're still going to deliver a number of new ultra-class trucks into Chile this year as well as very active tenders for future, including Argentina.

Appreciate the color there. Just a second one from me. Can you share if any conversations that you might be having at this point on being a prime power source provider for data centers in Alberta or Canada in general?

Yes. I mean, we can't provide any specifics, Krista. But I can tell you, I actually had a meeting on Friday about this. And Alberta, I think they've had more than 20 gigawatts of power requests going into the power providers. And I think just over 1 gigawatts is being allocated so far. So the most encouraging part of that, as you mentioned, Krista, is the prime power opportunity. So it's kind of come to Alberta, build a data center, but bring your own power. And that being prime power is a fantastic opportunity for us.

And if you look at some of the recent releases from Caterpillar, you've seen more evidence of natural gas prime power for data centers. Given Alberta has a plentiful supply of natural gas and a good pipeline network, we're really excited. I'm not saying we're encouraged. We're excited about that opportunity, particularly, as you mentioned, given its prime power. We're working on one specific opportunity at the moment, but it's too early to give any more details on that. But hopefully, you can tell in my voice that there's a level of excitement around that opportunity, particularly for our business in Alberta.

The next question comes from Cherilyn Radbourne with TD Securities.

It sounds like there's a lot of upside optionality in Argentina if things play out in a positive way. Can you talk about how you're positioning the company for those potential mining opportunities and when you think more of those might materialize as bookings and backlog?

Yes, sure. Thanks, Cherilyn, it's a great question. And it's going to be a big effort from the team to get organized for what we do believe will be a substantial opportunity in Argentina. And we know that Argentina hasn't been the easiest country to operate in over the years. And so we remain really thoughtful about how we organize. So it's a real -- we're really optimistic about the opportunities. And some of those opportunities are really coming to life now. And -- but we remain thoughtful about investing behind the capabilities and capacities because we need to -- when you're running large fleets of mining trucks, you need capacity capabilities, you need inventory, you need technicians, trained technicians and management and supervision. But we don't want to get ahead of ourselves. So it is a tricky planning process, which I think is what you're referring to. But the team are all over it. I would say it's one of Juan Pablo, who runs our South American business. It's one of his top 3 priorities for this year, organizing an enablement in Argentina.

And to the last part of your question, I'm really confident that you'll start to see some of that activity show up in our backlog and order intake through the course of this year.

Great. My second question is you've had 2 strong quarters of JV earnings from Pipeline International, which I assume is outside of Canada. So maybe you can give us some color on that? Based on what is developing in Canada, what do you think is the likelihood of a pipeline in Western Canada going forward or an incremental pipeline in Western Canada going forward?

Yes. So I mean pipeline machinery is a fantastic JV that we're involved in. And the beauty of that business is that we are exposed to opportunities outside of our territory. And they extend to South America and the Middle East in some cases. And I would say, since I've been in Canada, I always look at the ratio of the revenues in that business and how they swing between the different geographic jurisdictions. And I would say that there's a renewed optimism in the U.S., as you would expect, from the new administration's focus on natural resources and oil and gas production. So that's why that business is seeing the permitting and licensing of those pipelines is way more proactive than it has been in the past. Some challenges still remain there, but that business is really optimistic.

But I would say the opportunities in Canada are very healthy. So we see it through PLM, our pipeline business, but we also see it through our core business. And I would say we've had a really encouraging start here in Canada in our core business that -- fundamentally, a lot of that business is around energy infrastructure and pipelines. And so I think we'd be encouraged in both the U.S. and in Canada around pipelines.

And as it relates to the big question around an incremental pipeline in Canada, it's not something that's in our immediate plans right now. And I think it takes a while to work through the system. I think we have -- my view is there's a lot of opportunity to grow. I don't think that the lack of that pipeline inhibits oil production growth in Canada and Alberta in the near term, but it certainly helps realize the full potential of the region for both the region and for Canada. And so we'd be a big supporter of that work.

But like I say, I don't think that it will happen in the near term, and I don't think we need it in our near-term plans to grow. But accessing -- it feels like Canada is doing a great job to look to diversify its revenue streams from oil and gas. But we need infrastructure to be able to access those markets, which is the big question right now. And I guess the big debate between Alberta and Ottawa.

The next question comes from Sabahat Khan with RBC Capital Markets.

Just, I guess, on the product support side, just a 2-part question there. There's a lot of installed fleet that went out into the market in the last 3, 4 years post the pandemic. Just want to understand where those machines are on the product support life cycle are you starting to see some initial work? And then there's also a push a few years ago to get a bit more into construction product support. Just want to get an update on where those efforts are.

Yes. So I would say that the installed base, as I mentioned previously, nearly a truck a week in Canada for the last 2 years and more than a truck a week in South America over the last 2 years, but some of those were delivered last year. So in terms of -- we typically see a substantial parts of service increase as they hit their first components, which will be after 2 years. So I would say that we're probably running into some of those right now, but obviously, they're distributed over deliveries over the last 2 years. So I mean it's hard to pinpoint when you see that inflection point. And I wouldn't focus too much on that per se, more so that those trucks have been added to the population and they'll be there for a decade or more, right? And so that's the opportunity.

And I would say in Canada, we are seeing that the trucks that are added in Canada, the majority of those are incremental trucks as haul distances increase, and we're still rebuilding the oldest truck. We will add our 500 truck to population at some point in this year, which we're really excited about.

In South America, I think those trucks are a little -- they're on the same timeline, but remember, they're electric drive trucks, so less components. But again, there's 132 trucks in population, which we articulated at our Investor Day. And I would encourage you to think about not specifically what point in time they start producing product support. There's a certainty that they will produce product support, and we'll be right there to support our customers and capture it.

In terms of CI, I think the effort has been there for 2, 3 years on CI, on construction, sorry, product support growth. The challenge we've had then more so is just the softness in the market. So I think we've been well organized and ready, and then we've built capabilities in that regard. We're adding a lot of technicians right now. The Canadian business is super focused on growing the labor force. And I mentioned the service commitment in my remarks. That's our commitment to grow labor. And so I would say we saw that kind of inflect in the post-summer last year. The comments will be a little easier for a while here, but I think we've got some real encouragement in construction product support.

In Chile, it's been strong. We've grown double-digit for, I think, 6 years on the balance consecutively. So that strength has always been there in Chile, but it's a smaller part of the business, so you don't see it so much. And then similarly to Canada and the U.K., the softer market hasn't helped, but we see some encouragement there. We're probably slightly behind Canada in that inflection point.

Great. And then just one follow-up on Argentina. It sounds like in the commentary, that is an emerging opportunity, obviously, a market that's evolving. Sort of how are you balancing positioning yourself and the CAP products to take advantage of the growing mining opportunity, but sort of keeping in mind just a volatile backdrop that's been in the market and just being careful of how that could evolve? Just additional color on that market, please.

Is that for Argentina? Is that for that question?

Yes, on Argentina, yes. Sorry, I missed.

Yes. Like I said to, Cherilyn, similarly, I think we are acutely aware of some of the challenges in the past and the volatility. We are supporting major customers in the area, major international customers. We're obviously closer to the government and closer to the conversations. We're encouraged about the general Argentina outlook. And we can clearly see the investment through the RIGI process, people investing behind that. Our focus is to invest behind those and work hand-in-hand with those blue-chip international companies to make sure that we can demonstrate to them that when we're ready to go, we're ready, we're a good partner. We can provide the services that they require to be successful.

And as I said to Cherilyn, we're -- that is gathering momentum right now. And I'd like to think that we'd have some encouraging updates through the course of this year.

I'll just add to that. We have existing facilities in the region. So most of the requirement for us will be investing in people and tooling on-site and things like that. And the other thing is we're working with large, global, sophisticated customers. So we're structuring those discussions that work well for both of us and reduce risk for both of us.

The next question comes from Devin Dodge with BMO Capital Markets.

So I want to start with a question on Chile. Look, the elections last year, I think they seem to go pretty much as expected. But just wondering if you see many puts and takes for your business, either from a commercial perspective or customers may be more or less willing to invest? And then on the labor side and if you expect changes in immigration policy to exacerbate some of the already job tightness down there?

They are good questions, Devin, I would say. So let me try and answer each one of those. So in terms of the elections, they did go I guess, as expected as well as you can predict elections these days. But I'd say, they did go as expected. And generally, we would be encouraged by the direction of travel with the government and for business in general. And for mining production, you have to believe that it's a more constructive administration for resource development. So I think that's a big plus in terms of permitting and support for the mining industry.

In terms of the puts and takes, it's too early to say. They're not even in the office yet. But you would say that coming to your third point around labor relations, you would expect that notwithstanding their commitments to strong immigration policies and lowering crime. They still need to support the -- one of the biggest drivers of their economy, which is copper mining.

I would say there are 2 opportunities there. One is in the permitting and the support for expediting permitting processes. The second is having skilled labor and enough labor to execute on the programs. And the third is given companies like ours, good confidence and line of sight so we can invest behind that and make sure we're ready to go when the new mines or the brownfield expansions are permitted.

So it's too early to say in terms of detailed puts and takes, but I would say it's an encouraging direction of trouble for the administration in Chile. There's encouraging sentiment from customers and from major producers, Codelco, for example, in terms of their outlook. And so we would hope that things will get a little easier in the country in terms of executing on these activities and major projects. And so I would hope that they will help with the challenges of labor in terms of both investing in growing labor but also helping with labor relations.

I think it's fair to say for both us and our customers in the region, Bolivia, Argentina, and Chile, it's all net positive is the sentiment, I would say.

Okay. Good color. Okay. Second question, just wondering if you can give an update on the rental business, specifically how utilization has trended across the various fleets? And are there -- there were some comments about rental CapEx stepping up in 2026. Just wondering if you could provide some color on which fleets are likely to see the most investments this year?

Yes. Sure, Devin. And so just to start at the top of the that discussion. On rental, as you know, is a secular trend. You're seeing it all over the world, but specifically in North America. And we are committed to growing and investing behind that secular trend. And we've said that since the Investor Day, it was part of our sustainable growth strategy. The reason why we haven't necessarily invested behind it as much as we could have is because of the construction outlook. It just wasn't the market there to get excited about investing behind. We're seeing that pivot a little bit or inflect and we have a more encouraging outlook for this year in Canada.

And so that's why you see a stronger investment profile, particularly in rental services, which is the smaller side of our business, the smaller machine side of the business. So particularly in that area, and there might be even a little bit of catch-up in there as the market inflects. Equally, we're excited about the opportunities within power rental in Canada and in the U.K. And so you'll see some more investment going into those areas.

The most important thing to mention is that it will still remain to be a very thoughtful approach. We have a super robust review and approval process. So we'll invest with the market and beyond the market to a certain degree where we're confident our capabilities can win market share. But we've got a very thoughtful process, and we'll walk through that as we walk through the year and make sure that we're not getting ahead of ourselves, but we are ambitious in terms of growing market share. And rental revenues were up 9% in Canada last year. Utilization is healthy and we're more optimistic about that this year and even last year.

[Operator Instructions] The next question comes from Maxim Sytchev with National Bank Financial.

I was wondering if it's possible to get a bit more color on product support. And I guess if you can segregate the velocity between kind of parts, labor rates and rebuild penetration? What's kind of happening in these different buckets?

Yes, sure. So it's a good question. So product support growth in Canada, specifically, is being driven by the mining sector, more than construction. Power is healthy, but there was a softness towards the end of the year with some of the lower gas oil and gas pricing. But we've seen that start in a pretty encouraging way this year. As I mentioned previously, I mean, to Saba, the construction market has inflected in the fall last year. And so we'd be more encouraged about the construction outlook there.

I just go around the regions first, and then I'll talk about the segments. And then in South America, product support is robust. It's not -- wouldn't be growing as fast as it is in Canada right now, but it's the biggest part of our business. But the construction product support has been growing for 6 years consecutively, as I mentioned previously. And the power installed base is very small down there, but it's -- the product support growth rates for power are encouraging, and they're almost like a bonus for that part of the region.

And then in the U.K., most of the growth last year was driven by power population that we've built over a number of years, encouraging product support growth in the oil and gas sector actually in the U.K. And then construction, as we mentioned, that's been softer with the softer market. We've got -- we're hopeful that, that will return to growth and be more positive this year.

In terms of the key aspects of product support growth, population is the biggest driver, and we continue to see that and the 3.5 -- sorry, the $3.1 billion backlog is evidence that's one of the best leading indicators to future population growth. So I would say that's the key driver. So we got population and then we go utilization, and we're seeing utilization of equipment, particularly in mining, improve, but also in construction. Utilization is different in power because it can be prime power and it's very highly utilized. And then -- but obviously, in data -- in backup power, less so. And then penetration, we continue to focus on penetration, rebuilds being the biggest driver. And I would say our rebuild performance is sustained, and it's demonstrably better than it was pre-pandemic.

Our CVA population or contracted service business continues to grow. And particularly in Canada, we have a big opportunity to increase the labor proportion of the service contracted business. So that's exciting.

And I think the final one, Max, is just the number of technicians. So we added over 200 technicians last year across the 3 different regions. And we have plans to continue to do that to continue that. We're adding a technician a week in Canada right now, which is, a, encouraging. It's a good indication of the market segment, but it's also a positive statement of intent from the Canadian business in terms of their participation in the labor market. But I would say that -- I would say parts has increased faster than labor, but we're committed to that labor proportion as well. We think it's one of our key differentiators in the market. And attracting technicians in Canada right now, I'm super encouraged about our ability to attract technicians in this marketplace.

What I would add, Max, is your rebuilds -- Kevin said rebuilds remain very stable. But in mining, in particular, we're seeing very strong product support growth over and above the stable level of rebuilds that we're doing.

Okay. No, that's great to hear. And sorry, just maybe, David, one quick question for you. Given the fact that obviously, top line is growing nicely, et cetera, how should we be thinking about the working capital consumption in 2026?

Yes. I think you saw that last year, we're willing and wanting to invest in that growth, and we'll continue to do that. There's always some seasonality through the year on construction season and then also -- mining can be very lumpy. But we do feel confident about further growth, and we will make sure we're invested and ready for that.

Well, ultimately, Max, that we're committed to our ROIC range that we put out in the Investor Day. And we need to invest behind the growth. And so, as you can invested capital went up slightly, but turns are now into that Investor Day target range of more than 2.3. And that then obviously supports the return on invested capital, and that's the backstop that we talk about all the time at Finning. When we look through the growth opportunities and the opportunity to invest behind the growth, we are always committed to that return on invested capital range. And we examine all opportunities thoroughly when they come across the table.

The next question comes from Carol Adu-Bobie with Scotiabank.

This is Carol on for Jonathan Goldman at Scotiabank. And on construction in Canada, you've mentioned several times that you've reached an inflection point. Can you talk about the signs that you're seeing that could potentially drive this higher activity?

Yes. I think -- I mean, the primary one, Carol, is order intake. And so when we see customers placing orders, I mean, it's not like mining where they've got long-term plans. They're really investing behind, particularly in Canada, seasonal construction outlook. So when we see your order intake improve through Q4, and then actually, I'm pretty encouraged about the order intake that's, as we've carried into the new year. That's the primary driver of construction activity that we see.

And then as I mentioned to Max previously, I mean, the more population we have in the field with service contracts, that gives us line of sight to the population we need to drive product support. So I would say that the best indicator we have for construction activity right now is order intake. I would say, and it would be remiss of me not to say this and to congratulate the team in construction that we are really pleased with what we believe is a very healthy market share gains within 2025. And as I said previously, so it's not just the market as well. It's a very determined approach to market share growth, and I think we've seen that carry on into this year.

And could you also provide some color on order intake trend in the Power Systems segment?

Yes, sure. So we've seen -- we're really encouraged about -- like we're more than encouraged to talk about excitement in the Power Systems sector. So in terms of in power and energy, the order intake in Q4 last year was nearly double in Canada, and it was double in the U.K. And Chile is a much smaller part of the business, but we're -- I say it's lumpier in Chile, but we've had a really good run in Chile and it's additive to the business in Chile. But yes, order intake in Q4 in Canada and in the U.K., which is our primary power businesses, was more than double it was in the same quarter in 2024.

I appreciate the color. And if I could just squeeze in one more. We saw a very strong working capital performance this quarter. Could you remind us of your capital allocation priorities given leverage is at all-time lows?

Sure. I'll touch on that. I mean returning capital to shareholders is important, and we've been consistently doing that for many, many years now, buybacks and dividends. We have the NCIB in place. We've been buying back shares. We think there's volume being consistent in our approach. But the process of capital allocation, it's always dynamic. We look at that all the time. And key factors being near-term free cash flow expectations, capital spending and inventory purchases is given the significant growth opportunities that we've got ahead of us. And potential M&A and customer activity levels.

So I mean, it can be quite -- invested capital demand is going to be quite seasonal through the year. But overall, if I come back to it, again, we strongly believe in returning that capital to shareholders and being consistent in our approach.

This concludes the question-and-answer session. I would like to turn the conference back over to Mr. Primrose for any closing remarks.

Thank you, operator, and that concludes our call today. I want to thank all of you for your participation, and have a fantastic day. Thank you.

This brings an end to today's conference call. You may now disconnect your lines. Thank you for participating, and have a pleasant day.

Thank you for standing by. This is a conference operator. Welcome to the Finning International Inc. Third Quarter 2025 Investor Call and Webcast. [Operator Instructions]

The conference is being recorded. [Operator Instructions]

I would now like to turn the conference over to David Primrose, Executive Vice President and Chief Financial Officer. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to Finning's third quarter earnings call. Joining me on today's call is Kevin Parkes, our President and CEO. Following our remarks, we will open the line to questions. This call is being webcast on the Investor Relations section of finning.com. We have also provided a set of slides on our website that we will reference and 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 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. In addition, unless otherwise noted, this presentation reflects the results of continuing operations only. Kevin, over to you.

Thank you, Dave, and good morning, everyone. Thank you for joining us today. We are really pleased with another strong quarter of results made possible by the relentless focus of our team. We are encouraged by the evolution of our business over the last few years, which, along with the diversity and positive shifts in our end markets have significantly improved product support growth and the resilience of our business. This, in turn, has driven expansion and reliability of our earnings capacity for the long term.

While we continue to comment on our quarterly results, we operate our business with the long term in mind. So my remarks today will generally take a longer-term perspective. As we've previously mentioned several times, they can often be quarter-to-quarter fluctuations across our operations, and we believe it is important to consider the long-term evolution of our business.

Starting on Slide 2. I'll highlight the execution of our strategy with a perspective spanning several quarters instead of just one. I'll then turn it over to Dave, who will provide details on the results in the quarter consistent with our past calls.

The strong momentum we have delivered continues with revenues for the last 12 months up 7%. Importantly, our product support revenue continued its steady growth trajectory up to $5.8 billion over the last 12 months with growth across all regions.

In Canada, product support revenues were up 7% on a trailing 12-month basis led by mining. In South America, product support revenues were up 6% in functional currency on a 12-month rolling basis, also led by strong mining activity levels.

In the U.K. and Ireland, despite more challenging market conditions, product support revenues were up 2% in functional currency on a trailing 12-month basis on steady power segment activity.

Maximizing product support remains our key value driver and our focus across our company. We also continue to improve our cost and capital efficiency with SG&A margin of 15% on a trailing 12-month basis and our invested capital turns remained in line with the last quarter at 2.3x.

These metrics are a result of the execution of numerous initiatives across the company over the last several quarters, such as previously announced restructuring activities that are enabling additional operating leverage and improve our earnings capacity for the long term. We continue to challenge ourselves to be more and more resilient over time, while at the same time, continuing to invest in growing our business, improving customer experience and driving loyalty.

From a sustainable growth perspective, we continue to see strong growth in our Power Systems business. Our trailing 12-month revenue from Power Systems was up 5% compared to the same period last year, with a 7% increase in product support revenue driven by solid activity levels in all regions.

Our Power Systems backlog at the end of September remained robust at nearly $1 billion, up 23% from September 2024. This reflects a diverse mix of prime power packages, oil and gas-related equipment orders and data center stand-wide packages to be delivered through 2027. Power Systems deliveries during Q3 2025, nearly doubled from Q3 2024, higher across all regions as we continue to build equipment population in our territories.

In Canada, we continue to see healthy demand in gas compression and oil and gas segments with a long-term potential for data center development in Alberta. In South America, Power Systems activities are steady, supported by data center growth in Chile and oil and gas activity in Argentina. And in the U.K. and Ireland, our Power Systems continues to be a strong revenue contributor amidst a slower construction market with higher activity levels in data center applications and industrial and marine applications.

In the near term, we expect steady and dynamic growth in mining activity levels in South America and Canada. We're excited about a very constructive long-term outlook for mining driven by the demand for minerals. We're encouraged by the growing number of medium-term mine expansion opportunities. And as I previously said, every mine plant is unique, and we do not control the near-term dynamics and timing of decisions and remain committed to partnering and working closely with our customers to meet their goals.

Turning to construction. In Canada, we are seeing some signs of improvement in construction and certainly an encouraging narrative from the new government. In the U.K. and Ireland, the angle of construction remains subdued, and we are seeing some green shoots in quoting activity.

As I said previously, our business does not follow a straight line quarter-to-quarter, and we will continue to focus on the aspects of our business that are in our control, delivering value for our customers and operating with a sustainable growth mindset and greater resilience over time.

And with that, I will hand it back to Dave, who will provide more detail on our results in the quarter as well as provide more color on the medium to long-term outlook. Over to you, Dave.

Thank you, Kevin. I'll now turn to Slide 3. Our Q3 revenue of $2.8 billion was up 14% compared to Q3 2024, higher across all regions. In aggregate, all lines of business were also higher. Q3 EBIT of $240 million was up 25% from Q3 '24 adjusted EBIT, reflecting strong revenue growth and cost control.

EPS of $1.17 was up 33% from Q3 '24 adjusted EPS, driven by higher earnings and the benefit of share repurchases.

Our balance sheet remained healthy and our working capital velocity continued to improve from last year. We saw our invested capital turns reached 2.31x, and we maintained our working capital to sales ratio of 26.4% in line with last quarter with an improvement from Q3 '24 of 260 basis points.

Consolidated adjusted return on invested capital improved 130 basis points from Q3 '24 to 19.3%, primarily driven by higher invested capital turns. Net debt to adjusted EBITDA remained within our target range at 1.7x. Our Q3 free cash flow usage of $56 million reflected higher inventory to support increased activity levels.

We are pleased with another quarter of diligent and consistent execution on all 3 of our strategic pillars marked by steady product support growth, resilient cost discipline and capital management as well as solid results in used rental and power.

On Slide 4, we show changes in our revenue by line of business compared to Q3 '24 and the composition of our equipment backlog by market sector. New equipment sales were up 12%, higher across all regions led by mining and power systems in South America. Used equipment sales were up 122%, driven by sales of rental equipment with purchase options in the mining sector in Canada and the sale of a large package of mining trucks in South America.

Product support revenue was up 9%, driven by strong mining activity in both Canada and South America. Our equipment backlog remained robust at $2.9 billion at the end of September, up 26% from September '24 and down just 5% from June '25 due to equipment delivery slightly outpacing order intake.

Given that we delivered a quarterly record of over $1 billion in new equipment, our current backlog continues to provide confidence for our business in terms of activity levels and future product support opportunities. Order intake was particularly strong in Canada this quarter, up 140% from Q3 '24, driven by all market segments. We secured multiple large orders for key mining customers as well as in the power systems sector related to gas compression.

Turning to our EBIT performance on Slide 5. Gross profit margin was down 170 basis points, primarily driven by lower product support margins and a higher proportion of used equipment in the revenue mix. SG&A margin was down 290 basis points to 13.4%, reflecting strong cost control and savings from previously announced restructuring initiatives, along with operating leverage on higher revenues.

Looking ahead, we will continue to seek opportunities to further improve efficiency, reduce overheads and build more resilience into our operating model to drive higher earnings capacity. Q3 EBIT margin was 9.7% in South America, 8.7% in Canada and 6.5% in the U.K. and Ireland.

Moving to our South American results and outlook, which are summarized on Slide 6. In functional currency, new equipment sales were up 23% from Q3 '24 driven by mining and included multiple data center project deliveries in Chile, partly offset by slower construction activities. Used equipment sales were up 267%, driven by the sale of a large package of mining equipment in Chile, which we do not expect to repeat.

Product support revenue was up 5%, driven by strong demand from mining customers in Chile. EBIT margin was down 120 basis points from Q3 '24 adjusted EBIT margin, reflecting lower product support margins and a higher proportion of lower margin used mining equipment sales. SG&A was down 2%, reflecting strong cost control.

In Chile, our outlook for the longer term remains positive, underpinned by growing global demand for copper, strong copper prices and customer confidence to invest in brownfield and greenfield projects. We are seeing a broad-based level of quoting, tender and award activity for mining equipment, product support and technology solutions. While activity levels and outlook are positive, we continue to expect some challenges in the labor environment as the demand for skilled labor remains high.

In the Chilean construction sector, we continue to see healthy demand from large contractors supporting mining operations, and we expect infrastructure construction activity to remain steady. In the Power Systems sector, activity remains strong in the industrial and data center markets.

In Argentina, we continue to take a low-risk approach and closely monitor the government's new rules and policies. At the same time, we are positioning our business to capture opportunities, particularly in the oil and gas and mining sectors. The recent midterm election results and reduction of currency controls as an element of optimism for improving activity levels.

Now turning to Canada on Slide 7. New equipment sales were up slightly relative to Q3 '24 with strong activity in Power Systems, primarily oil and gas related, offset by timing of mining deliveries. Used equipment sales were up 105% driven by the conversion of mining equipment with rental purchase options.

Product support revenue was up 13%, driven by strong demand from mining customers. EBIT margin was up 180 basis points from Q3 '24 adjusted EBIT margin, primarily driven by lower SG&A margin. Adjusted return on invested capital improved 170 basis points year-over-year, driven by higher invested capital turns as we focused on working capital velocity through operational improvements.

Our outlook for Western Canada is mixed but improving. We are encouraged by recent announcements regarding the potential to accelerate resource development and infrastructure project activity but we remain cautious with respect to the exact timing and magnitude. Construction sector activity in general is moderate.

We expect steady activity levels in our mining business as customers renew, maintain and rebuild aging fleet. In the Power Systems sector, activity remains steady in the oil and gas market with longer-term potential in the data center market. And finally, we remain focused on managing costs and working capital levels.

Please turn to Slide 8 for our results in the U.K. and Ireland. In functional currency, new equipment sales were up 11% compared to Q3 '24, mainly driven by higher construction sales. Product support revenue was down 3% due to lower machine utilization and construction, offset by steady power systems activity in electric power and marine markets. EBIT margin was up 20 basis points from Q3 '24 adjusted EBIT margin, primarily driven by higher new equipment margins and strong cost control.

Adjusted return on invested capital improved 870 basis points year-over-year driven by the optimization of pension assets as part of our invested capital reduction initiatives outlined during our 2023 Investor Day, coupled with higher trailing 12 months adjusted EBIT margin.

In terms of outlook, we expect demand for new construction equipment in the U.K. and Ireland to remain soft, in line with lower projected GDP growth. We continue to expect a growing contribution from Power Systems, driven by our strategic execution and healthy demand for both primary and backup power generation, particularly in the data center market. Our product support business is expected to remain stable.

Before turning it back to Kevin, I would like to provide a quick update on our union negotiations and capital expenditures. We are very pleased to report the conclusion of negotiations with several of our labor unions. These successful negotiations derisk our near-term operations and allow us to continue to focus on growing product support revenues and hiring technicians to meet customer demand.

From a capital expenditure perspective, we expect to see the impact of these negotiations reflected in Q4 2025. We will also continue to invest strategically in our core dealership to support future sustainable growth opportunities.

I'll now turn it back to Kevin for some closing remarks.

Thank you, Dave. We are really pleased with the continued execution by our teams in all regions, and we continue to build a more resilient and sustainable business that can produce strong returns over the long term.

Our equipment backlog has now been sustained above $2 billion since the end of 2021, a testament to our strong sales performance and a positive signal for future product support opportunities. We have also generated strong returns with an adjusted ROIC within our target range of 18% to 25% since 2022 in all quarters but 1.

In addition, to put this quarter's earnings in perspective, the $1.17 EPS is more than our adjusted earnings per share for all of 2020 or is more than half of our full year 2021 adjusted earnings per share. This clearly demonstrates the transformed earnings capacity of our business.

We remain very confident and committed to growing our business through 2026 by executing our strategy of maximizing product support, driving full cycle resilience, a sustainably growing population in our end markets by building our used equipment, rental and power capabilities.

We are excited by Caterpillar's Investor Day last week, especially the strong focus on growth and the competitive advantage of the dealer network. We are enthused by the growth opportunities in our regions in power, energy, mining and construction.

I'd like to thank everybody for joining the call today. And with that, operator, I'll turn it back to you for questions.

[Operator Instructions]

Today's first question comes from Sabahat Khan with RBC.

I appreciate the color on the outlook. Just wanted to see if you can directionally share some thoughts on some of the larger puts and takes as we head into 2026. Obviously, knowing you guys don't provide guidance, but just there's a lot of moving pieces across oil and gas, construction outlook in Canada, the mining cycle. Can you just give us some big picture parameters or directional puts and takes as we think about how sort of we follow a strong earnings growth here in '25?

Yes. Thanks, Sabahat. Yes. I don't think it remains consistent with a lot of the messages that we've given for the last few quarters here. We're really constructive on the long-term trends for our business, particularly around oil and gas and mineral growth. So the way we think about our business is mine the minerals and the oil and gas. We will play a big part in building the infrastructure. And obviously, the emerging and incremental side of our business is providing even more power resiliency as not just to data centers, but to prime power also.

So super constructive on the long-term trends. As a business, we talk about this a lot. And I would say that our medium-term encouragement continues to grow. So if I think about another couple of years, if I think about our backlog being sustained for a number of years now.

Power backlog is being sustained at $1 billion, whilst we're still delivering a good amount of projects in any given quarter. We've been delivering a truck a week roughly in Canada and South America, one truck each a week. So that gives us a lot of optimism in that kind of medium-term area.

And we are seeing some encouragement, I would say, in construction. Chile is well. Obviously, interest rates dropping in Argentina and a good election result for the current administration, should help us there with construction activity. And really pleased kind of the construction backlog is up 70% year-over-year and 30% sequentially, which says that we're entering into this kind of ordering for next year.

So in U.K. and Canada, we do have these ordering and selling cycles, right? So if I think about U.K. backlog is up 10% versus this time last year in Canada, it's up 70% versus this time last year. And so that gives us a lot of optimism for the flow-through of that product into the construction season in those 2 countries as we look forward.

You mentioned puts and takes Sabahat, I don't think there's a lot of talk. I think ultimately, our -- when we're producing strong results like we are, it is challenging. There's a lot of work goes on from the teams. That's why I'm always quick to thank them and congratulate them on these calls. And every day, it can be challenging. There's a lot of dynamics at play. A lot of cost and capital discipline with customers across all segments.

We don't control the spend decisions of our customers, but we're very committed to staying close to them so we can support them when they do. But if you think about delayed permits, delayed contract awards or and execution challenges, which can be labor, supply, there's a lot of play on a day-to-day basis. And so we're committed to executing well here and now. But we have alternative encouragement for the medium term, and I would say, super constructive on the long term.

I appreciate the color. And maybe if I could dig a little bit into the Power Systems side. And I think you guys have been talking about Power Systems in the U.K. and Ireland region for probably 5-plus years now. But I think this quarter, there's a -- feels like a bit of a notable focus on that market across all 3 regions. Can you maybe just talk about the U.K. and Ireland seems like it's been doing well on the Power Systems side. Maybe just talk about the emerging opportunities in Canada and in Chile as it relates to Power Systems and the runway ahead there.

I think you nailed it, Saba. I think that we've been building Power Systems, our Power Systems business for a number of years, which in the U.K. is primarily electric power generation, and the majority of it is to support data center growth over the last 10 years, and we've developed a really precise capability, which we're now exporting to the other 2 regions. But I would describe the U.K. market as quite mature.

We're exporting that capability. I would say that Chile is developing. And if you think about our South American business, Saba, and you think about the opportunity for data center builds where in a region which has largely been considered mining in the past, it's really -- we're really optimistic and encouraged by that.

And I would describe Canada as emerging as it relates to electric power generation with lots of opportunities for data center builds in the future. But if you think about the -- it's not just about electric power generation. In fact, Caterpillar last week have renamed the segment Power and Energy.

So I'd urge you to think about LNG development, particularly in Canada, but also in Argentina. So if you look at the power backlog year-over-year in Canada, it's up 170% and the majority of that, if not all of that, relates to gas compression and oil and gas development, which is super encouraging for 2 reasons. One, it means we still got more to go at in the emerging data center piece, but also that oil and gas power generation is used 24/7. So the product support opportunities are plentiful. So -- and we're also looking at -- the third element is the power reliability. So whether it's providing backup power or supplementary power to remote communities in all of our regions or backup power or resilience to major infrastructure like airports, that's also a growing part of our business. So we're very encouraged about all aspects of that business.

And our next question comes from Cherilyn Radbourne with TD Cowen.

I also wanted to touch on the data center opportunity. And just ask to what extent Finning is providing backup power versus perhaps prime power increasingly? And can you comment on the relative product support opportunity for one versus the other? And is the lag time similar for the product support annuity to ramp up as it is when you deliver a new machine? Or is it a bit faster for those engines?

Okay. Yes. Thank you, Cherilyn. It's different by market, as I just mentioned. Almost all of the power generation in the U.K. business, not all of it, but almost all of it is for data centers. Like I said, in Canada, it's almost all conventional oil and gas with some power generation, more like 80-20, and then in Chile, it's almost all data centers in Chile, but almost all oil and gas in Argentina.

So different in each area and the development of those businesses are at different levels of maturity. Caterpillar had their Investor Day likely, they've got a really good section on this, and they have a slide in there that estimates that the difference between the 24/7 application and the backlog generator is 40x, if I remember correctly, around 40x incremental product support. And so we're blessed to have that mix of power and energy opportunities amongst our regions. And so yes, it works out differently.

In terms of the lag, in terms of 24/7, it would be very similar to a mining truck in terms of the -- how that product support opportunity develops over time. And so you should think about it the same way.

One thing I'll just add there. Most of the data center to date has been back up, but they're very sophisticated customers with very sophisticated testing requirements, and we often equate one of those gen sets to like a medium-sized wheel loader as far as the product support opportunity goes. So there certainly is opportunity there because of the sophistication.

Okay. That's helpful. And then on the improving backdrop in Argentina, I was hoping for a bit more color on the conversations you're having with mining companies that have potential projects in the country and just the timing of when you think we could see some positive investment decisions.

Yes, sure. So I was actually there 6 weeks ago in the San Juan region with the mining team from Chile. I'm actually sitting in Chile today. We have our Board down here this week. And yes, I visited the San Juan region. I visited our capabilities and our rebuild facilities out there. And I also had the opportunity to meet with Vicuna and went to their offices. They have an office complex in the city.

And so great discussion there and lots of optimism. And of course, that I was there, I think it was a week or 10 days before the midterm elections, which went, I guess, favorably for this initiative or this opportunity. And so I would say that there was a ton of optimism when I was there anyway, and I think that will have been helped by the midterm election results.

In terms of timing, we believe that we'll start to see enablement works probably in the middle of next year. So I would expect investment decisions on enablement pretty soon. But obviously, the actual mine development is going to take a number of years. I would say that we have seen encouragement as well the miners in the region. And one thing to look at is how they're applying for the stabilization [indiscernible] scheme, which is available in the region. So you can look at who's applied for that and how far they are down the track in terms of their investment decisions. But I would also say that the general mining activity that is already existing in Argentina is very healthy and is buoyed by the recent political environment.

And our next question comes from Yuri Lynk to Canaccord.

I'll switch back to some power systems questions here. Maybe just on the -- it's about $1 billion backlog, can you give us a flavor for how much of that is data center specific?

Yes. As I mentioned previously, Yuri, if I look at the Power backlog across the 3 regions, overall, Power Systems backlog is 23% year-over-year, down slightly quarter-over-quarter because of some good deliveries in the U.K. and Chile. But if you look at it in terms of the overall backlog, most of the backlog in Canada relates to oil and gas development.

In the U.K., all of the backlog, almost all of it will relate to data centers. And I would say about half of that $1 billion backlog roughly is in the U.K., 1/3 of it is in Canada and about 10%, 15% is in South America. So I would say that, like I said, in Canada, almost all of it is oil and gas in South America. It's almost -- it's a mixture, I would say, 50-50 of data centers and oil and gas in Argentina. And in the U.K., it's almost all data center.

Okay. I can get to the number with that. When we think about Ireland, there's been some reports of electricity shortfalls causing some delays on new data center development. Does that present a threat to the business and there's less data, potentially less data centers? Or is it an opportunity to come in with prime power solutions?

Yes. Like I said, we described the business, Yuri, I would say, obviously, we're very in the long-term constructive on data centers everywhere. In the medium term, there is -- the backlog build is encouraging. In the near term, there's all sorts of dynamics at play, such as the ones that you've just mentioned. And the team are working hard to work with customers to do that. I don't think it changes the medium-term encouragement or the long-term trend.

I think many -- whether it's energy requirement or space or where these things are built, how big they are with the new computing requirements. There's a lot of questions and calibration going on in this space, and you saw some of that in the market at the end of last week. For me, it's a near-term dynamic that will get figured out, and it doesn't change the medium and long-term trends.

Okay. Last quick one maybe for Dave. Just on the free cash flow outlook for 2025. Should we expect the normal seasonal cash generation out of working capital in the fourth quarter? Anything special to call out there as we think about the full year free cash flow?

Yes, we do feel Q4 is an inflection point. And we are expecting that strong finish. So we are very focused on that. Most of the build has been supporting increased activity, but we feel like we've got most of that in place. Like I say. We do feel it's -- we're in that inflection point now.

And our next question comes from Devin Dodge of BMO Capital Markets.

So very good SG&A costs in the quarter. This has been a big focus. So congrats on the continued progress there. Just operating leverage was one of the drivers, but do you see the SG&A performance in Q3 as being sustainable? Or were there other factors that helped in the quarter that may not or may be more transient?

Short answer is yes, Devin, it's absolutely sustainable. I think we have more opportunities in Canada to find even more efficiencies. Tim has been in place for 9 months, 10 months now. I'm not going to suggest how far we are through the plan and the execution there, but I will say that there's more to do. And so I would say there's opportunity remains in Canada.

Equally, we know we have some cost in the business in South America that as a result of the rapid growth and some of the operational execution challenges of operating in a difficult environment in a very difficult part of the world. So we believe as the business settles down and the team continue to improve, particularly in areas like supply chain, there'll be opportunities to improve in that area.

One of the things we have the Board here this week, one of the things they'll see is our warehouses to Friday, the warehouses in Antofagasta, they'll see the investment in AutoStore, which you saw on a plan when you traveled with us a few years ago. And we're taking that to the big warehouse, that big new warehouse in Edmonton as well before the end of the year. So there's those sort of things we're working on. I would say that we're very focused on investing in the growth opportunities. And so not all of that continues to come out of the business. So I don't know whether there's another step down there or whether it's sustain and reinvest in the right areas.

What I would just add there, Devin, is it's really probably 3 things. I mean, the very strong cost control across all the regions, the benefit of the actions that have been taken over the last really couple of years. And then the other one, in the quarter, we did have a very strong new and used equipment, which is a very low SG&A business. So that helped us as well. But like Kevin said, we believe there's more, and we're going to keep building that resiliency in the business.

Okay. Makes sense. And then second question product support gross margins for flight as being lower year-over-year in Canada and in South America. Just trying to get a sense if you feel that is largely due to mix? Or were there some inefficiencies in the operations just due to the strong growth in that line of business?

I wouldn't -- I mean, I would say it's a mix of those things. There's definitely a mix shift towards large mining is obviously a very competitive area of our business. So there is some mix in there. But I would say that markets are very dynamic. And so as our commercial approach. We want to grow our business. We're very focused on long-term population growth and then executing on those product support opportunities.

So we've been very dynamic, shall we say, in our approach there. And I think you can see that's working. To your previous question, we are looking at the ways that we offset that with cost and capital efficiencies and we have to make sure we have the inventory and the capabilities and the capacity to grow too. So the timing of the, I guess, proactive approach to growing product support and the offsets in terms of the efficiency within the business are not always in sync.

And I think that's what you're seeing, particularly in South America right now, but we're happy with the way the businesses are performing. ROIC and profitability is within the other 2 regions, but so is product support growth. So we think it's the right approach. It's working and we'll continue to be really proactive in terms of how we win product support business.

Next question comes from Maxim Sytchev with National Bank Capital Markets.

Kevin, you mentioned Caterpillar Investor Day. And I was wondering, there was a couple of discussions around the kind of the large corporate clients and how there is a closer relationship between the OEM and the dealer network. Do you mind maybe talking about the benefits of that sort of strengthening go-to-market strategy and how that could potentially benefit you guys?

Yes. I think the benefit comes from the strength of the combination. As they talked about, we believe Caterpillar are the best business partner, and they believe that the dealer network is a competitive advantage. So the combination of those two things, we think, is pretty compelling. Of course, you've got many customers that work across dealer territories.

So it makes sense for them to be more involved into have a stronger relationship with corporate accounts. But we do that in partnership, and we work together, and we provide local support and local expertise and capacity to support that -- the global perspective or overreach from Caterpillar. So we think the combination of the 2 is really important. And it's not just global customers. Some of our biggest customers here in Santiago, they want to speak to Caterpillar. They want Caterpillar at the table.

It's an important part of the partnership. And we consider the customers to be our customers, ours in terms of everybody's customers. And yes, we just think the combination of the two and ultimately, both of us being closer to the customer, the closer we can get there, we think that's a pretty compelling proposition.

Yes, absolutely. And then maybe just a quick one for David, if I may. Can you please quantify the impact of the upcoming union negotiations that typically shows up in the cash flow statement. Is -- can you provide any range that should be -- we should be one off?

Yes. So we were very pleased first on the unions, we did, in the quarter, have a lot of success here. We settled with our U.K. and Ireland Union with our Alberta Northwest Territory Union and also with some unions here in South America, including the largest one in Chile. So it's the ones here in Chile that will show up in Q4. We are still no change in our guidance that we gave earlier this year, and we will provide an update early next year on the 2026 guidance.

And our next question today comes from Steve Hansen at Raymond James.

Look, outstanding performance in product support growth across the Board. In Canada specifically, Kevin, curious if it's really a step change in activity at your large customers? Or is it more incremental new customers? Or is it increased wallet share at the large customers? Just trying to get a sense for how things have shifted. Double-digit growth is -- feels like light years ahead of where we were 1.5 years ago. So just trying to understand the sort of the complexion of that change in growth.

Yes. I think, Steve, the way we think about it and the way I'd encourage you guys to think about it is population, utilization and penetration, okay? So if you think about the Canadian product support, we've been growing the population, specifically in the oil sands. We added, as I said previously, not quite, but nearly a truck a week for the last 2 years, and we see that trend continuing, and you can see it continuing because it's in our backlog. And so that population continues to grow.

The difference between this year and last year is that the utilization is higher, and you can see that through some of our major customers' public releases over the last couple of weeks in terms of their production figures. And we've also talked a couple of times around the extended haul distances, particularly in the oil sands, but the same can be said for ore grade decline in Chile as well. So utilization is increasing.

And then your last part of your question around market share. And I do think our penetration is improving. We are more proactive with our labor offerings. Tim has been very, very, very clear that he expects to win more labor in Canada, and he'll no longer tolerate just selling parts. And so what we're seeing there is an increase in scope of works as well. So for example, I was in -- I spent the day on the floor 10 days ago in Fort McMurray, really encouraged to see the activity levels in our major branch there in Fort McKay, but not only to see the activity levels, but to see the scope of work.

So in some cases, we would have done elements of a rebuild and other elements are either done by the customer or maybe they even have a third party for some of the -- for example, welding. Maybe we didn't do all the welding and I was super encouraged to see us doing the 100% scope of one of the truck rebuilds that are there. And so I think it's a mix of all those 3 things. There's just a bigger population. The utilization is heavier, and I think we're getting better at our jobs. So we're penetrating a lot more.

And Steve, I'll just add. I think we've been consistent just that we are extremely focused on supporting our customers and quarter-to-quarter, it's not linear, but to the extent that we're always ready then to provide that support. So we're feeling good about that constructive long-term view. Again, as Kevin said, our population continues to grow. We've got very strong backlog of mining trucks for next year as well. And when that product support opportunity is there, we are ready.

That's great color, guys. I appreciate that. And just a quick follow-up is just around capital allocation. Stock obviously had a nice move here. Valuation you could argue is still discounted to some of your peers, et cetera. But how do you feel about the buyback continuing at sort of a ratable pace here on the back of the big move that we've seen?

I just want to make a comment, Steve, and then I'll turn it over to Dave. But ultimately, we believe capital allocation is dynamic but consistency is important too. And we still -- we're very happy with the rebates, I guess. The allocation has always been dynamic. So we've given -- we continue to give that ton of thought. So Dave, if you want to.

Yes. I mean we always are reviewing this, very active. We look at a variety of factors, as you would expect, when assessing capital allocation of the near-term cash flow, our CapEx inventory to support increased customer levels, any potential M&A. But I think what is important there is what Kevin said, we also believe it's important to be consistent. And so while it's dynamic and we review it continuously, we are also very focused on being consistent, and we've been doing that through buybacks and dividends. And again, expect to be consistent that way.

And our next question comes from Jonathan Goldman at Scotiabank.

So if we think back to the targets at the original Investor Day, the product support growth, I think, about 7%. Obviously, those were pulled for the market dynamics and you're lapping some of those easy comps this year. But as we look at product support over the next 3 to 5 years, how are you thinking about your ability to grow above market rates, whether that's production or customer growth plans? And how are you thinking about the second part of this is, do you have sufficient capacity to capture that growth?

Yes. Sure. Thanks, Jonathan. I think as Dave just said, so we don't provide guidance on product support because we don't believe it's linear because of the dynamics we see at play on a near-term basis. So we urge everybody is talking about product support over the longer term versus quarter-by-quarter.

We have -- typically, we have but it's end of year, we have weather changes. We have near-term dynamics with mine planning or specific opportunities within our mine. So it's not a straight line performance. Again, if construction activity, particularly in Canada, we see the impact of the end of the construction season and the freeze and then we see the breakup in the summer.

So we -- the reason why we removed that guidance is because we were getting drawn into talking about quarter-by-quarter product support run rate. We're really focused on growing product support over the long term, and we're really happy with our last 12 months of product support run rate sort of 8% over the last 12 months. We see -- we're confident that we can continue to grow in the future, and we continue to build capacity to continue that growth.

So -- and as Dave said, we're talking to our customers, how we grow that. So for example, we are looking to put a night shift on in that Fort McKay facility that I mentioned a few minutes ago when I was up there 2 weeks ago. We haven't had a night shift in Fort McKay for some time. And so that's super encouraging to increase the capacity we have to our listing physical infrastructure.

Our OEM where we remanufacture all the engines, which many of you have been to. We've added 20% capacity over the last 12 months, and we'll add more this year as those components come into that change out. We know for the new trucks that we've added to. So we're not going to talk about quarter-by-quarter or even our newer product support rates and just save that sort of switch the wheel, we're confident that we can continue to grow, and we're not done yet. And again, our partner at Caterpillar is helping us to continue to grow. And it's a big focus of theirs too. And so we're confident for the future.

Okay. That makes sense. And I guess the second one, I guess, more near term and cognant that you don't provide guidance. But if we're thinking about SG&A next year, I mean, fantastic performance in the quarter. But with all the things and the initiatives you have going on and with your expectations for growth, can we expect SG&A to grow below the pace of inflation next year?

Yes. I mean we think there's enough efficiency in our business, and I mentioned some access in South America that can offset those growth initiatives, and that's our intention. And to -- I was asked the question a few minutes ago, do you think sustainable? The answer is yes.

And that's a mixture of further efficiencies and opportunities in the company, offset by rallying and getting behind the growth opportunities we have in the business. So we believe we're in a good moment, and we don't see -- we see that being sustained at the rate that we are today.

That concludes the question-and-answer session. I'd like to turn the conference back over to Mr. Primrose for any closing remarks.

Thank you, operator, and that concludes our call for today. I want to thank everyone for your participation, and I hope you have a very safe day. Thank you.

Thank you. That brings to an end today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.