Great. Thank you, Donna, and good morning, everyone.

Thank you for joining us today to discuss Toromont's results for the first quarter of 2022. Also with me on the call today is Scott Medhurst, President and Chief Executive Officer.

Scott and I will be referring to a presentation that is available on our website. To start, I would like to refer our listeners to Slide 2, which contains our advisory regarding forward-looking information and statements.

After our prepared remarks, we will be more than happy to answer questions. So, let's get started.

If we can move to Slide 3? And Scott will kick us off.

Thank you Mike, and good morning everyone. We are pleased with our operating performance and financial results through a challenging business environment.

While end market activity levels remained solid as pandemic restriction eased in some markets, persistent supply constrained pressures and inflation contributed to a fluid, complex and uncertain operating environment. Equipment Group reported good activity in rental and product support, while global supply chain challenges persist and continued to impact timing of equipment deliveries.

CIMCO revenues decreased in the quarter on timing of project construction schedules, while product support activity improved. Across the organization we are continuing to leverage the learnings from the past year and maintain our operating disciplines on incorporating new ways to do business with uncertain conditions.

Current backlog levels are healthy and supportive of future results. However, the global supply chain challenges persist.

Product availability in most areas prime product components, parts continue to be tight, resulting in shifts in delivery of prime product and repair schedules. Inflationary pressures, anticipated interest rate changes, pricing increases from suppliers and other global economic factors and continued pandemic related developments are also being monitored closely.

Turning now to our financial results highlighted on Slide 4. Company reported improved results in the first quarter of 2022 compared to the prior year.

End markets continued to be active while bookings were lower by 16% in the quarter compared to the similar period last year, which included several large construction and mining orders. Backlogs were $1.5 billion at quarter end, up 68% versus Q1 2021 reflective of customer buying patterns influenced by the easing of pandemic restrictions, supply chain constraints, inflationary pressures, and other global economic factors which have been overshadowing normal seasonality.

In the Equipment Group, mining and construction represents approximately 30% and 45% of our backlog respectively. CIMCO backlogs were 3% lower, reflecting execution.

On a consolidated basis, revenues increased 7% reflecting improved activity in most areas and solid execution from our teams. Product support revenues increased 10% on increased demand and technician headcount, while rental revenues grew 29% on larger fleet and higher utilization.

Operating income was 26% higher, reflecting higher revenues and gross margins. Expense levels were up slightly at 14.8% of revenue and 9% versus prior year, reflecting our continued cost focus in an inflationary environment.

The team continues to manage discretionary spending areas reasonably well. Net earnings increased 24% in the quarter versus a year ago, while basic earnings per share increased $0.14 to $0.72 per share.

Technician hiring remains a key priority and is essential to support the growing demand for our product support and project construction business. We value our team's ongoing commitment to adapt to changes in the business environment and focus on safely executing customer deliverables.

Activity remains sound as demonstrated by new bookings and our current backlog levels. But as stated, supply chains are challenged.

This has restricted availability and is likely to result in delivery date extensions. We continue to monitor cost pressures and supply/demand dynamics as the economic environment changes.

Our team has also started to implement a gradual reentry plan enabling our employees to engage safely in our workplaces over time. We have learned a lot over the last few years, and new ways to work have clearly emerged.

One such example is the hybrid work from home and office model, which we will continue to be refined as we find the right balance for our team and business. It is great to begin to see a higher level of in-person engagement, although how we work has changed and we strive to build our work processes that maintain our strong culture, operational and financial disciplines, advance our service levels and enhance our competitive position across the business.

And with that, Mike, I'll turn it over to you for some more detailed comments on the Group results.

Thanks Scott. Let's start with the Equipment Group on Slide 5.

Revenues were up 8% in the quarter with higher activity in both rental up 29% and product support up 7%, combined with moderate equipment sales. Total new and used equipment sales were up 4% overall.

New equipment sales were constrained by supply chain challenges that are affecting the availability of inventory and delaying deliveries to customers. Sales across the market segments were as follows; construction markets up 7%, mining up 49%, power systems lower 25%, material handling lower 6%, and agriculture lower 11%.

Rental revenues were up 29% year-over-year across all market sectors and most regions. Please note, the year-over-year breakdown in our MD&A was understated and should be as follows.

Combined light equipment and heavy equipment rentals increased 23% on improved utilization and recent fleet expansions, both reflecting improved market activity. Power rentals increased 32% and material handling rentals were up 19%.

RPO revenue was about double on a larger average fleet. The RPO fleet was at 50 million versus 39 million a year ago, a nice increase, but still well below pre-pandemic levels.

Product Support revenues grew 7% on higher parts at 6% and service up 11%. Market activity in construction and mining markets increased 11% and 7% respectively, with increases in all of our regions.

Power systems activity was relatively unchanged compared to the prior year, while material handling and agriculture were down on a smaller base. Service revenue growth also represents the increase in technicians headcount to service demand.

Gross profit margins increased 140 basis points in the quarter versus last year. Rental margins contributed 120 basis points to margin, reflecting improved activity and fleet utilization.

Equipment margins contributed 110 basis points to margin reflecting strong demand in sales mix. Product Support dampened margin 90 basis points overall, with higher input costs due mainly to supply chain challenges and pandemic impacts.

Selling and administrative expenses in the quarter increased $10 million or 10%. The increase is mainly attributable to higher compensation costs of $5.5 million reflecting higher staffing levels, regular salary increases and increased profit sharing accruals on the higher income in the period.

Other expenses such as training, travel and occupancy costs have increased in light of activity levels, resumed spending and inflationary pressures. This was offset by a decrease in bad debt expense of about $1.7 million on improved collections.

Selling and administrative expenses were 20 basis points higher as a percentage of revenues at 14.6% versus last year. Operating income was up 22% reflective of the higher revenues and gross margins.

Bookings were lower 17% in the quarter, as several large mining and construction orders were received in the prior period. Bookings in the construction and mining sectors were lower partially offset by higher power systems and agricultural orders.

Material handling orders were relatively flat to prior year. Backlogs of $1.4 billion were 85% higher than this time last year across all sectors, approximately 80% of which are currently expected to be delivered this year, but subject of course to timing differences depending on vendor supply, customer activity and delivery schedules.

Now let's turn to CIMCO on Slide 6. Revenues were down 7% in the quarter on lower package revenues on construction schedules partially offset by higher product support revenue.

Package revenues were down 34% with decreases in both the recreational and industrial markets. Package revenues were dampened by prolonged winter conditions and supply chain challenges, which resulted in construction delays.

In Canada, package revenues were lower 41%. In the U.S.

package revenues increased 5% on a smaller activity base. Products Support revenues increased 32% versus the first quarter of last year on higher activity levels in both Canada and the U.S.

Activity levels increased with the easing of pandemic restrictions, and a reopening of recreational centers after prolonged pandemic closures. The increased technician base continues to support our backlog and positions the business for the gradual improvement of activity levels.

Gross profit margins increased 230 basis points in the quarter versus last year. A favorable sales mix with a higher proportion of product support to total contributed 310 basis points.

Gross profit margins and product support were up 10 basis points, while package margins were lower by 90 basis points. Margins mainly reflect the activity levels, nature of projects and process, and construction schedules which can be somewhat variable.

Selling and administrative expenses were largely unchanged from the similar period last year and expenditure control measures on discretionary spend remained in effect. As a percentage of revenue selling and administrative expenses were higher at 17.3% versus last year, reflecting the lower revenues in the current period against the consistent level of expenses.

Operating Income improved to $1.2 million, resulting mainly from the higher gross margins with a favorable sales mix. Bookings were $40 million in the quarter up 5% versus last year.

Industrial bookings were up 17% with increases in both Canada and the U.S. as activity increased with the continued lifting of most pandemic restrictions.

Recreational bookings were 8% lower on reduced market activity, mainly on lower bookings in Canada down 23%, while bookings in the U.S. were up 80%.

Backlogs of $170 million or 3% lower than the end of March last year mainly related to progress of construction projects. Recreational backlog increases in both Canada and the U.S.

increased in both Canada and the U.S. Industrial backlog decreased in both Canada and the U.S.

reflecting project completions. Substantially all the backlog is expected to be realized as revenue this year.

However, this is subject to construction schedules and potential changes stemming from the supply chain constraints. On Slide 7, I'd like to touch on a few key financial highlights.

Noncash working capital was relatively unchanged versus a year ago. Our operating teams with a keen focus on capital employed have continued to proactively manage working capital to reflect customer requirements, activity levels and supply chain challenges.

Accounts receivable aging receives continuous focus is trending well with DSO down two days compared to Q1 of 2021. Inventory levels were higher than prior year levels driven mainly by the Equipment Group, including equipment work-in-process and parts levels.

Availability challenges however persist. We ended the first quarter with ample liquidity including cash of $796 million, and an additional $467 million available to us on our existing credit facilities.

Out net debt to total capitalization ratio was at minus 8%. Overall, our balance sheet remains well positioned to support changes in demand as supply challenges alleviate and as other investment opportunities arise.

Toromont targets are return on equity of 18% over a business cycle. Return on equity improved 0.1 percentage points to 19.7% in the quarter, compared to 19.6% for 2021.

This is close to our five-year average of 19.8%. Return on capital employed was 27.4% for the quarter, up from 21.5% for Q1 of 2021 reflecting improved earnings.

And finally, as announced by the Board of Directors yesterday, approved the regular dividend, quarterly dividend of $0.39 per share payable on July 5, 2022 to shareholders of record on June 9, 2022. On Slide 8 we conclude with some key takeaways as we look forward to Q2.

We expect the business environment to remain challenging with a number of factors in play. While industry activity levels have increased as pandemic and restrictions have eased in most markets, health of the global supply chain inflationary pressures, and other global economic factors are exerting pressure and presenting challenges that overshadow normal seasonality in customer buying patterns.

We continue to proactively monitor developments closely and we stand ready to respond appropriately. We will continue to focus on our three key priorities, protecting our employees, serving our customers and protecting our business for the future.

Across the organization, we are continuing to leverage the learnings from the past years with respect to cost structures and new ways to do business. Our backlog levels are supportive, but delivery schedules are subject to persistent global supply chain challenges.

Technician hiring also remains a top priority to meet demand and build our team for the future. Operationally and financially, we are well positioned to effectively respond to both customer requirements and market opportunities, leveraging our operating disciplines and culture We appreciate our entire team's exceptional efforts and commitment to support our customers during such unique and challenging times.

Thanks also to our valued customers, supply partners and shareholders for their continued support. That concludes our prepared remarks and at this time, we will be pleased to take questions.

Donna, over to you to accept the first call, please.

Good morning.

Good morning, Jacob.

Good morning, Jacob.

Yes, I had a question on supply chain and inventory, it looks like there was significant investment into inventory during the quarter, but I know inventory level is still well below pre-pandemic levels. Maybe just comment on the lead times from cat.

How does it compare today? You know, I know you've talked a bit about concerns going forward, but are you seeing any improvement today versus the past few quarters or do you think it's just going to get worse?

I'll speak to what we saw in the quarter. We continue to see challenges in there and some slippage in prime and end parts that the breakdown of that inventories is interesting.

You know, we had whip levels increased 43%. A portion of that is due to the parts challenges, so that impacted execution of some of those repairs.

Then you had parts and I think some of the parts build was due to some of the disciplines that were taking place last year by our team and our suppliers that worked really hard on demand planning schedules. You saw some offload in there large components and some remote site requirements.

So you saw some builds in there. But it still remains very challenging and complex environment.

There's a lot of variation in there, Jacob relative to the types of products and components you're ordering. So it's tough to isolate it into one type number, but a lot of variables in play and that's what we saw in the quarter and with inflationary factors starting to creep in.

And you talked about 80% of equipment backlog to be delivered over the balance of the year. You know, does this assume that supply chain constraints ease through the year or?

Well, again, I think that that's what we see based on our current variables, but there's risk, right? But with -- there's so many moving parts in there and I'll be honest, we haven't seen this type of variation before and slippage, so we'll see what happens.

We're just giving you a number of what we see now based on projections, but as we've been experiencing, these things continue to shift.

So if you look at the hierarchy of availability then where to large trucks and is it by size of machinery?

It is based on model, it is based, and it's throughout all the businesses. I won't isolate anything, because there some of the other businesses are experiencing similar factors.

So there's just a lot of variation in there by product families and models and components, different types of parts.

Okay, last question just on CIMCO. How are you feeling about that business right now?

I know there's been some focus specifically on U.S. do you feel like you're doing a good job there or is there a lot more work to be done?

There's still more strategic work to be done in there. We did see some progress in the quarter on revenues and profitability in there in the U.S.

So we're satisfied with what's going on there. What we were really pleased with CIMCO in the quarter was the product support side.

We started to see that recreational service activities really start to improve. That's why it was a key driver of those numbers.

And what we also saw on the project side in terms of some bookings was, and this is a example of what's happening is, inflationary pressures. Some of those recreational projects, there's a little bit of a pause in assessments that we were in quoting on because of the inflationary factors.

So now the budget had to be reevaluated with some of these recreational activities. So it shows you what can happen here with some of these inflationary pressures.

So, but you know what, we're, we still, we love the CIMCO business with return on capital component and strategically in the U.S. we remain focused on it.

Great, thank you for your answers.

Thanks Jacob.

Hi, good morning, guys.

Good morning.

Good morning.

Good morning. Can you talk a little bit about the steps you're taking to defend your margins from the inflationary pressures you talked about, and to ensure that you achieve the target return on equity of 18% that you've got out there?

Yes, that's, and that's really where we are right now. We're trying to work on improvement of our efficiencies.

We're really pleased we got those ERP platforms integrated. We did it in last year Q4 we got the material handling business integrated.

You know, that's all part of our operating disciplines are trying to improve our operating efficiencies, we're trying to maintain focus on discretionary expense as well. We're trying to be as efficient as possible in managing our asset management components of the business.

So these are all factors, but we did see shift in there in the quarter on expenses. We -- overall, I think the operating leverage remained favorable, similar to previous quarters, but you can't take that for granted.

And those are some of the areas we're working. You have anything to add there Mike?

Yes I think the only other piece there Yuri, you mentioned return on equity, and I think it goes without saying the team is working really closely with our model, we work closely with our customers in a decentralized basis on managing receivables, inventory levels, requirements, and so forth and so just really trying to optimize the capital employed in the marketplace as well. And so it's about margin, but it's also about managing the balance sheet and the team has done a nice job there.

This is so complex right now. You're balancing many factors, right?

You're even when one is certainly margin, but you've got to be careful. You know, you want to maintain your strategic approach on growth to embed populations and to make sure you're building over the long-term.

This quarter by quarter analysis right now is very delicate. I think we're looking at this more broadly, on full year than these quarter to quarters, because there's some historical shifts going on in there that behavioral changes in customer activity.

So these are things we're monitoring closely.

Got it. One thing you didn't mention in your margins, and then I do get the efficiency side, but what about, it's probably the last lever you want to pull, but passing some of this on to your customers, how have those discussions been?

That all comes down to your value propositions, right? And how you're positioning yourself in the market and how we provide overviews to our customers that's ongoing.

And yes, with these inflationary factors in play, it's we're monitoring end market activities closely.

Okay. Last one from me.

Just curious if you're seeing any decline in your parts market share due to the supply chain issues or are your competitors facing similar issues?

I think in a holistic view there's commonality throughout. It's timing to a large extent.

So I think we're holding up reasonably well. We were pleased with some of the increases in those revenues, both on parts and service, really pleased on the service side with our headcount.

On the technician side, even with -- we saw some challenges on absenteeism on the service side in the quarter. But we're moving forward reasonably well.

We're, working strategically on our online parts ordering, which improved in the quarter. Lots of work in there, but we did reasonably well and that remains an area of focus.

Okay, I'd better turn it over there. Thanks, guys.

Thanks, Yuri.

Hey, good morning, guys.

Good morning, Michael.

Good morning, Michael.

First question, just wondering if you guys can elaborate a little bit on the supply chain challenges and what you call the pandemic impacts that compress the product support margins in the quarter, whether that had to do more with parts or service, and just trying to think if it's overtime, if it's logistics, and just how recoverable you think that is in subsequent quarters?

Yes, maybe just to start on that Michael, we mentioned both of those areas and Scott I think talked a little bit to the parts supply. I think there are two major factors, I would say supply chain generally, when we're doing repairs on equipment in the product support side, availability of parts, and so forth and just managing that flow as best we can.

You can imagine there's a little bit of inefficiency there at times, just as we move units in and out, based on parts availability, and trying to keep our technicians optimized and so forth. And so that creeps in a little bit.

Certainly, we've had to deal with that in a number of locations, but the team is doing a nice job. I think the pandemic component that we mentioned and we have seen, as Scott mentioned, some absenteeism and it's come off a little bit recently.

However, when you recall, early in the quarter, we came out of the Christmas season and for January, February, I think broadly speaking absenteeism levels were higher across most businesses and so we did see some improvement. We've maintained our protocols very tightly, masking, social distancing, trying to keep everybody safe and some testing and things and that's been helpful.

But we have noticed a higher level, which we're looking to try to manage very carefully, so that itself brings our capacity down a little bit as well and so there's some cost associated there.

Yes, that certainly makes sense, and I appreciate the color there. And the second question on SG&A, any way you guys can help us frame it, SG&A and how we should think about it through 2022?.

I guess whether growth and expenses will exceed CPIs, may be there's discretionary spend that comes back and you're looking to add capacity, or whether or not you still have levers that you think you could use to offset some of those inflationary pressures? Just trying to really place SG&A and the SG&A growth in 2022.

It's hard to speculate and you're Michael, the inflationary pressures are real, and that's where we're maintaining a lot of focus on the operating efficiencies, that's where I think we can make a difference, but things are starting to open up and we do have to be attentive to our culture here and reconnecting. It's been two years operating in this unique environment.

So but I think from our efficiencies perspective, and just on some of the discretionary, that's where we're going to focus in regards to these expense levels. But you know what, the inflationary pressures are real and we're going to try and manage them as best as we can and being efficient.

Your asset management comes into play here as well. Right?

And particularly when you're in these very fluid and complex environments, things can shift quickly. So you've got to be attentive to those assets as well, asset management.

Got it? I'm going to sneak in a third, I'm just curious and if this was discussed, I guess previously that with CIMCO, some pretty good product support growth there.

I'm just wondering whether there was kind of some kind of one timeish, based on the reopening in recreational and just the overall sustainability of those numbers, because I'm just trying to get a better sense really for CIMCO recreational and industrial activity volumes moved inversely since the pandemic started. I'm just trying to think about how we come out of into 2022 and beyond and how much growth to think about how those two markets shape up?

That's a great question because we've just been operating in such a unique environment at CIMCO as well, and that's what that recreational activity was a bit of a drag when you compare it on previous from historical levels. It came back in the quarter.

We're delighted and we were able with some execution taking place finishing projects, we were shifting over to recreational, so that worked out reasonably well. Again, I don't want to speculate, but it was just the recreational came back.

And I think hopefully, we're going to get back into a normal demand signals here with the recreational side and some on the service side. As I said, on the project side, there's some caution in there right now.

We'll see how that plays out, but the service certainly came back.

Yes, and maybe just on that, too, Michael, I think you sort of touched on it. I think one of the things we've been experiencing, like Scott mentioned, the uniqueness of the environment.

You know, overriding normal seasonality, we'd normally see more of a ramp up in Q4 may be spread over several months. We did see as Scott said, we did see some of that pickup here.

So I'd be careful there. I think also when you've had an ice plant down or you've had refrigeration down, there can be some costs for startup, especially if it's been idle for a year and a half.

And that likely won't persist, but the ongoing maintenance we're hoping is going to be more consistent.

And that's a good point. Listen, we had a lot of close out some of that service that were pent up a bit, as well.

So that certainly contributed as well as we were waiting for supply and things. So you've got to be careful on your interpretation in there.

I appreciate the color, next quarter again guys.

Well, thank you.

Thank you.

Thanks very much and good morning.

Good morning, Cherilyn.

Good morning.

I was hoping if you would give us a bit of perspective on how your customers are reacting to these supply chain constraints and whether you're starting to see them come to you more proactively to understand what their options are for projects a little further out, are they starting to try to get ahead of inflationary price increases? Just a bit of color there.

Yes, well, that's been going on for a while now and that's why our planning is really important with our customers, as well as our supply partners. The teams have been doing a lot of work, and they're working closely with customers on their demand signals, so that continues.

In terms of end market activities, we again these quarters and buying behaviors have shifted dramatically over the last year and a half or so. We talked about that a lot last year, particularly in the first half last year, those were incredible, historical, and user activity levels.

So we actually -- overall, the numbers are still solid on market activity. Some of the smaller, we did see some softening, you know, but had to happen.

I mean, the demands have been so strong. But what we were pleased when you look at and try to interpret end markets, we were very pleased with that rental activity.

That rental activity and started to come back, we were positioned for our fleets of sizes have increased slightly, still not where we want to be surely. And that, but strictly on the rental services business, I mean, we expanded the footprint last year, and invested there a bit more, really was pleased with the QM activities on rental, still a long way to go in there, but that improvement and really satisfied with how the team on the rental services side started to move forward.

And the market, the end user activities improved both on time, and the dollar utilization, so that was that was good to see that, and we monitor that key strategy going forward.

And presumably being able to share inventory between your own branches, whether it's prime product or rental fleet, and with other Cat dealers is critical in this environment. Can you just give us a bit of color on the extent to which you're taking advantage of that to satisfy customer requirements and the extent to which having a broader franchise of your own is helpful in that regard?

That's extremely helpful. Right now, it shows the power of scale.

And with that expanded territory, because that's been going on for a while, it's shifting products in normalized environment, you really stay disciplined on your pipeline, and the more you deliver directly, but that's part of expenses we're dealing with right now, because you are moving around a bit relative to demand, but at least we have the bit more scaled to handle that. In terms of acquiring iron from other dealers everybody's tight.

So I think everybody's been cautious on that front in terms of movement of iron outside territory.

Yes. One other aspect of that I think too Cherilyn is just the remanufacturing.

You know our shops rebuild, buying or helping customers with alternatives I think also has been very important for us, as we've talked about over several quarters, right? It's been an active part of our business.

We were satisfied again with the used revenue streams, particularly on the larger products, construction, mining, our used purchases were up again 52% and there are teams working hard in there. It's tight, it's not easy, but it was good to see a little more progress on that front.

But it's a delicate environment Cherilyn and we're not getting ahead of ourselves here. We're very fortunate in some areas in that quarter.

May be just in terms of a longer term question. Can you give us some color on the critical minerals strategy that was in the latest federal budget and just what that might mean for your territory kind of medium to long-term?

Sorry, I missed that critical…?

The critical minerals strategy…?

Minerals, yes. That's interesting.

We're monitoring that closely with our customers. I mean, I think mining industry overall for us over the last year has been favorable with the backlog and the team has done a nice job earning some business in their customers.

We'll see how that plays out. I think obviously a lot of activities in there with electrification and things and how to play in our territory with some of the mineral diversity in there.

We'll see how that plays out, early stage, but we're monitoring things in there closely.

Thank you for the time.

Thank you, Cherilyn.

Hi, good morning, gentlemen.

Good morning, Max.

Maybe I'll start with, I think Mike made that comment around how the supply chain issues right now are kind of impacting the typical seasonality, I'm just wondering if you can maybe clarify or kind of build on that comment in terms of, I don't want to be too obviously short term focused, but in terms of how that could be impacting kind of the upcoming Q2 relative to how we see sort of revenue ramp, typically each quarter?

In terms of the seasonality, yes, that's what you're focused on there is right, the normal behaviors.

Yes, exactly. Yes.

Again, these quarter-over-quarter comparisons right now are very complex in my view, because you had and last year we saw in the first half we saw some historical behaviors with end user. I think we got a look at how these markets evolve over, over rolling 12 at least, to see how it all plays out.

Because of the complexities, because of your supply challenges and shifts that are taking place right now, with new to used. I mean, it's just a lot of variables in play there on the normal behaviors, and then the historical quarter-over-quarter.

So and there's always some lumpiness, as you know, Max, with large structure and power in particular, and mining, you get some lumpiness in there even on we see that are cyclical business. So that's another factor that has always been there and that's the impact some of these comps as well.

Right. Okay, that's helpful.

And then just Scott maybe, thinking about labor and kind of the fights to get the technicians, especially when I see sort of Hitachi decoupling from on their marketing agreement in North America and I think they're going to be looking to scale up the distribution network. I'm just wondering, in terms of labor, and how you are addressing this issue specifically?

Thanks.

Yes, there's no question Max. That's another key variable that is challenging right now.

I'd say we're satisfied. We still want to do better in there in terms of recruitment, and retention, but also, it goes beyond that.

Like we're -- we were pleased last year with our buildup of apprenticeships. In the apprenticeship program, I think we're up 31% on apprentices.

So that's good and you need to continue to focus on that as well, that's another variable. We focus on the training component.

We're starting to see our training costs go back up where we need to. This environment over the last few years are challenging on that front.

So we're ramping up there and we think that's a recruitment component that we really can offer. So these are things we're focused on, on that front.

There's a lot of moving things that we think we can do to retain, but it is challenging, there is no question.

And then maybe just one last one if I can sneak in, you mentioned in MD&A Ag being down year-on-year, and I'm just curious in terms of the output for that part of the business given where obviously food pricing has gone up. So presumably, we should see improvements in this, but just curious ?

Thanks.

Tight, tight, tight supply again.

Yes, okay, all right excellent. That's it from me.

Thank you very much.

Thank you.

Hi, great, thanks, and good morning. Just I guess, directionally speaking, can you talk about the inventory that you do have on hand and how does that align with the backlog in terms of composition?

I mean you just made comment about 80% is your sort of best estimate at this time, but how do you feel about the mix of what you have on hand or what might be available in the next little while relative to the demand that you have?

We'd like to be better. That's again that 80% that's what we saw based on our signals in the quarter.

But that, like things are changing rapidly. So we're being careful with that number, right?

It just continues to vary by model, so and it goes beyond just prime products in your component rebuilds as well. I mean, we were pleased our rebuilds increased again on revenue, on volume, I think it was over 80%.

So that, you know, we just got to be careful with projecting here right now. We're just staying within the quarters and see how it plays out, because it is tight.

And but I -- our inventory levels did go up a bit, but a lot of that was due to the whip. Some of it was in some models that are new, which was helpful, as well, as we described the parts components so…

Yes, in addition to that, too Sabahat, I think, you know, at times our units have gone up, and you'll see the breakdowns in our disclosure, but we could be waiting on attachments or add-ons and things as well as parts on certain areas. Right?

So, again, supply constraints are the challenge. And we're just kind of working through it, as Scott mentioned.

It is by model, but it's also on things like that, that also complement the base product.

And I think I mentioned it before, it's I mean, we're, you know, we've got to execute that backlog. So we've got to prove as well, with all these variables in play.

Okay that makes sense. And then there's this big picture, I guess, backlog is in a good shape, but how are your discussions going with your clients, whether it's across infrastructure, or maybe even more so on the mining side?

The demand looks to be good for now, but getting it on the macro stuff that's happening with its rates, geopolitical stuff, like every change at tone, noted a change in tone at all or is it more just business as usual, still?

You know, we're working closely with our clients. We were fortunate last year with business that was earned, it's in that backlog.

We're working very closely with our mining customers to make sure we're meeting their demands, both on the product support side as well as prime product. Again, looking at mining is very cyclical.

We don't get ahead of ourselves there. We've seen interesting shifts before for many, many years through mining, and particularly with this type of environment.

So we're being cautious and working closely with our suppliers, as well as our customers to keep things in check there. So a lot of work going on in there to make sure we deliver and execute with our customers.

And then just one last one from, me, and you're probably anticipating this question, but I guess within the cap allocation side, you know, at this point in the cycle I think the focus of the last, we've heard a lot on CapEx and working capital, is that still the focus, how are you thinking about that now, given the balance sheet?

Yes, yes, good question. I wouldn't say anything's shifted there Sabahat.

When you look at our cash balance, you see it come down about 120 or so this quarter, just on inventory and they are supporting the business. So first and foremost, we anticipate that, like we've said, for the last several quarters frankly, working capital read, as we can be building some inventory and getting up to more normalized levels, and just managing the demand there.

CapEx as you mentioned, we have been talking about, again, putting more capital into the fleet. We are quite pleased with how the rental business is going in production, and Maritimes and Battlefield.

And, we're adding more capital as we did last year, versus 2020 to build out that fleet and so forth. We have a few facilities we're also putting some capital into.

We have mentioned a few new opportunities in Battlefield. We're moving our CIMCO office, a little bit of capital there, and then also on the Toromont Cat side to support some of our product support business.

So the focus right now is supporting the organic growth and the requirements of the business. And working our way through the year on that basis as availability improves.

And sorry, if I could just squeeze in one quick one, and just the mention of QM region, is there any still major integration stuff still left to do on that front or is it more just kind of getting used to the systems that you've rolled out and then you know, whether it's Battlefield location or any of that? So just maybe even a percent update on where you are on your plans relative to what you initially anticipated?

Yes I'd say we've come a long way there, even pandemic is focused down a bit, but getting those systems integrated was key and that's certainly helping on the operational side. We still have a ways to go as noted with, yeah, training and on the rental services, a lot of work took place last year to give us a better outcome, but we still have room to improve in there.

But, you know, we don't like talking about, like proving it. So that's sort of where we are.

But we did make progress in there, particularly with our coverage model. And, and then in Ontario, of course, we expanded the footprint a bit and we were satisfied with early stage results there.

We'll keep working hard at that and then there's some other areas of the business on some of the larger equipment in QM that we continue to work on so and our coverage model as well. So I'd say we've done reasonably well there.

Certainly, when you go through these types of cycles, the scale has been, we've been fortunate with that scale, I'd say, but we still have ways to go. But well, we have to prove it still.

Progress is being made.

Thank you.

Yes, good morning, gentlemen.

Good morning.

Just one question from myself here, the bulk of them have been answered. I was hoping to get some more color just on rebuilds.

Have you noticed an increase, I guess, in customer appetite for rebuilds as they look to address their own sustainability goals?

Yes, that's a great question, Bryan. The rebuild in our manufacturing centers, that we probably don't talk about that enough in terms of the circular economy.

And, you know, even last year, I mean, I think we rebuilt over 400 engines, so it continues to be a key strategic area for us. The end user demand for it continues to increase, particularly given the shifts and constraints here.

So we saw in the quarter, we saw continued improvement on the rebuilds activity, both on the units and the total volumes. As I said, I think our total volume was up quarter-over-quarter about 80% on rebuilds, those are large rebuilds certified and CPT.

So that, you know, we continue to invest in there and that's we continue to really be focused on what the main signals for component requirements, they are tight. So yes, that's a key area and good on -- makes a lot of sense on the ESG side from the circular economy perspective.

Good, that's it from me, thanks.

Thank you.

Great, thank you again, Donna. Before concluding the call, I'd like to remind listeners that our annual and special meeting of shareholders will be held today at 10 AM.

This is a virtual meeting only. Website details are available on our website of course at @toromont.com.

Thanks to everyone for their participation today. This does conclude our call.

Please be safe and have a great day.