Here okay, or just here? Just here. Also here? We can sit like this. Yeah? That's good. The middle one's good. Okay. Good afternoon. Good morning, Stuart. Morning. I gotta admit this is probably bittersweet for you, for Iggy. You did announce your retirement. Me, me too. I don't know who's gonna miss out more. Yeah. It's coming up in March. I just want to congratulate you on your career and the next phase of your life. Thank you. So with that, maybe we can move into some of the questions. Sure. Maybe just starting off with a Q3, a recap. You did report a couple weeks ago, maybe 10 days ago. Yep. Maybe just a recap of the quarter, some of the highlights, and what you're seeing in your regions and end markets. Yeah, so, you know, sales were down in a number of areas, and partly due to not delivering a mining shovel this year when we delivered one last year. So that's a mining shovel for us is basically a CAD 20 million piece of machinery. So that can have a huge impact on us. We saw some compression in our margins, as other competitors, not only in the heavy equipment but also on the industrial side, have shown. You know, I think partly due not only to, on the heavy equipment side, lower margins as we've got an abundance of supply of machinery, you know, nationally across all our competitors. Then, you know, on the industrial side, part of the issue has more been, I think, a little bit of uncertainty in terms of the markets. You know, many heavy equipment, you know, industrial customers have postponed some of their larger capital expenditures. Mm-hmm. So there hasn't been as much margin in some of the, you know, day-to-day MRO deals. So that, you know, impacted our margins down about 300 basis points in the quarter. And then, well, our expenses were higher than we wanted them to be. We started to see them come back down in the range. And then the other thing is, you know, we had over CAD 700 million of inventory, which is still a bit too high for us. So that impacted not only the balance sheet and leverage, but also interest. So, you know, it wasn't a stellar quarter, but we've, you know, taken some opportunities through the year, you know, especially on headcount to look at some redundancies that we thought that we had. Also, starting to look to make sure that we can continue to consolidate facilities. Mm-hmm. So we've taken some steps through the year and sort of more to come. I mean, the challenging environment is definitely not exclusive to Wajax. I do wanna dig into some of the pieces there. I guess one of the first ones is, and you brought this up on the previous call, is some election uncertainty that was kind of impacting customer investment decisions, some hesitancy there. I was wondering if you could elaborate on that, and have you seen any noticeable inflection since we have some resolution to that process? Yeah, I think the comments that Iggy made at the time were, you know, just general uncertainty in the market as to what was gonna happen with the U.S. election, which percolated to us. Also, you know, where interest rates were gonna go, were they gonna come down? And we have seen with some of our larger customers postpone some of the larger investments. Now, the good news is they can't postpone them forever, and we've seen some of our larger customers, especially the public ones, announce, you know, some really good earnings. Mm-hmm. Which is partly because they've delayed some of those larger capital projects. So we haven't seen anything immediately transpire, after the election, but think as interest rates continue to come down, which we expect that they will, that'll provide a little more certainty going into 2025. On the interest rate piece, we saw a second rate cut and look, it's early days, but that's obviously been a factor that's impacted your customers. Have you seen any inflection in conversations on the interest rate piece, even sentiment-wise, of them getting more, you know, optimistic about investing? Not necessarily as yet. I mean, you know, from the mining side, we've now got seven large mining shovels in backlog. So, you know, despite where interest rates have been, there's bullishness going out a number of years. I mean, if a shovel gets to the end of life, you gotta replace it. You don't have a choice. Mm-hmm. They run 24 hours a day. We've still seen, you know, positivity in some of the mining stuff. Forestry, while it's not a huge part of our business, came back a little bit through the year. We're seeing some positive stuff. Obviously, as the interest rates come down, and we've got some low interest rate financing on. Yeah. On our construction side. I mean, the interest rates don't really matter in some cases to our customers if you're getting low interest rate financing. The equipment backlog did increase quarter on quarter, and some other dealers have noticed equipment sales have been strong. One of the rationales for that is there's a lot of generous OEM financing programs out there, and maybe there's more availability on the ground, so I was wondering if you could go through some of the dynamics there. I think one of the interesting aspects, and we'll come back to this on the Hitachi relationship, like the ZAXIS financing program, I think is novel for you guys at least a year in now. Maybe if you can discuss the availability, the demand environment for new equipment, and then the financing program that you have in place. Yeah, so there's, I mean, if you go into any yard, there's inventory. And I think, you know, not to name, you know, a competitor per se, but you've seen some of them clear some of their inventory out, just to get to a more reasonable level. Clearly, if you go back to COVID, there was no inventory. Right. especially heavy equipment. That's kinda bounced back. It's normalized. Our COVID was two-pronged because when it came to Hitachi, by the time they, you know, exited with Deere, we had no Deere inventory, and we had no Hitachi inventory. Mm-hmm. So we've been over really the last, you know, 24 months building our inventory up, seeing how it's normalized with Hitachi. We had bought large mining shovels and loaders from them before, but we hadn't bought excavators directly, so they've had to increase their production to do that. So that's more normalized now. When we exited with sort of our Deere side of the relationship, we also exited their parts supply and their financing program. Right. So, when we got up and running with Hitachi, they didn't have a finance program. So we were kinda stuck with our customers going to various banks, which, you know, it's not a bad thing. Mm-hmm. But you know, we lacked that one point of contact, which we had with Deere. So salesmen could go to Deere, get a deal, do all the paperwork, out the door. We didn't have that. So we were, you know, kinda stumbling a little in the dark 'cause Deere had done a lot of the financing. ZAXIS finally came around in 2023, 2022, late early 2023. And you know, they were also coming into the U.S., so you know, we were part of that. And you know, I would say that it's gotten better as we've gone. It was bumpy in the beginning. It's still not where we want it to be. You know, good case in point was we didn't have low rate financing for the first quarter, and it really manifested itself in a reduction in our sales. That's a lot better now. But you know, again, I characterize the Hitachi agreement as a bit of a startup. Mm-hmm. So we've had some bumps along the way, but it gets better, you know, every day that we go through it with them. And they're a partner, whereas I don't think we and Deere were ever partners. We were competitors. Working together. Yeah, working together. Sort of. Sort of. You brought up the pricing. I mean, the equipment pricing has been very strong, right, for the past two, three years. I mean, that's a well-known dynamic. Yeah. It's also equally well-known that it was telegraphed that the pricing would come off, right, as availability normalized, and Cat has guided to flat pricing in the second half. It looks like the industry, the competitive dynamics have also accelerated given the increased supply and maybe a more cautious approach by customers. Could you level set us on where equipment margins are now versus 2019? Are we still above in line or potentially even below given the dynamics we've seen in Q3? Yeah, so if you look at our margins, you know, back to 2019 or 2018, they've improved. Mm-hmm. They've improved across the board, whether it's the equipment side or the industrial parts side. Okay. We've benefited from that. Both the equipment and the industrial sides are higher than they were in 2019. Okay. You know, to your point, what's happened recently, and again, you know, not to name competitors, you've seen some softening of those as given the overabundance of supply, especially in the heavy equipment side. I personally think it's episodic. Mm-hmm. Which is, you know, I need to reduce my inventory, so I'm gonna do it, but I'm gonna do it one time because I like those margins. I like the margins that we've seen before, and I don't wanna go back to 2019 margins, because I could lose hundreds of basis points. So I think what you will see is you will see some clearing, some adjustment to production, so they can retain those margins, and I don't think anybody other than maybe on an episode has blinked long-term. Can you maybe help us out to think about, like, longer term or past cycles? How long is this inventory destocking phase? Obviously, it's dependent on the cycle and the macro, but can you give us a ballpark on what we're looking at here quarter-wise? I mean, if I look at us, our inventory's too high. We've said, you know, on our call that we'd like to, over the next few quarters, continue to bring it down. I think we'll get to a point where we're comfortable. You know, maybe not at the level that we exited, you know, 2023 with, but we think that there's as Hitachi normalizes their production and their supply within Canada and the U.S., we think we can bring ours down. We also think that the competitors will, you know, again, if you go back through COVID and 2022, you can see them building their inventories up. I think they'll naturally come down a little bit, but not, you know, not back to COVID levels, certainly. Interesting. Yeah. I wanna dig into the dynamics between new equipment and product support. I get your point about customers dialing back CapEx. Yep. You know, maybe there's a trade-off right now where they're getting a better price. They'll buy the equipment, so, you know, kinda nets out for you. But we've also seen product support come off, and not just for you, but for the industry generally. I would assume the dynamics driving new equipment sales and product support are the same. Are the customers also dialing back OpEx as well, parking trucks, just not paying for product support? So, I guess, you know, my sense would be in some ways, you know, in our case, you know, product support and new equipment is disconnected just given the newness of the Hitachi brand. Mm-hmm. So, you know, over the first couple of years, you're not necessarily gonna service, you know, have a big service on them. You're gonna have service, but it may not be like a 10-year-old machine. So we're still doing some of that. So there's a, I guess, a sweet spot that'll come over the next one or two years where the machines that we put out in 2022 or 2023 will, you know, see a bunch of service. Are there machines parked? Yeah, there's machines parked. But, you know, we, personally, I think it's just the, some of the larger capital, that they would necessarily spend. They're just not spending now. That's an interesting dynamic. Is it possibly a year-end sort of thing? Because if you look at industry activity levels, I mean, outside of, I guess, residential construction, maybe softer in res construction, but commodities are stable. Some of them are doing even better. Production's still up. Do you think this dynamic can maybe sort itself out in the new year? I mean, not on January 1st, but I would expect that in the new year, given, you know, the election dynamics in the U.S. are done, interest rates are gonna come down. I would expect, not to put a number on it, I expect that people will be more confident going into 2025. Optimism. A little bit. Yeah, I have to. You touched on this on the margins. I don't wanna imply the margins are gonna revert all the way back to 2019 levels. I mean, there's a lot of internal initiatives that you've undertaken at Wajax to actually improve margins structurally. Part of that's the mix shift, right? Yeah. To IP and ERS. Yep. I was wondering if you can speak to that, kinda frame up how you shifted the mix, what it is now, and then there's some other internal initiatives that helped you support, higher margins versus, I guess, pre-COVID levels? Yeah, I mean, you know, one of the big shifts in mix for us was probably equipment to IP and ERS. So, you know, it's now 55/45, which is gonna give you a shift because a lot of that is service and parts. On the equipment side, like I said, we've seen positive margins just on selling equipment just based on the lack of supply, and even though that has probably been tempered over the last, you know, three or four months, it's still much higher than it ever was in 2019. and we've grown our margin over the last number of years, our percent, and we think there's still opportunity to do that not only by ensuring that we've, you know, we're selling the right products, we're selling to the right customers, we got the right products in stock, priced properly. We're now on one ERP, so that makes, for the most part, it a lot easier. Mm-hmm. For us to have the products and pricing all done in one system, and there's just, you know, tactical stuff around how many vendors do you really need to deal with, especially in the IP and ERS space. Mm-hmm. We deal with, you know, sort of the top tier one and tier two vendors, but we'd have a whole list of vendors underneath that we think we can sort of rationalize over time or are redundant. Interesting. And you mentioned IP and ERS, and we talked about the competitive dynamics, with the new equipment, and maybe, as you said, it's episodic. I feel there was some margin pressure in the IP, product support, ERS segments as well. Could you discuss what some of the peers have been doing there? Is there too much inventory in the network? Are any competitors acting rationally? You can reference some of the public comps that I think are relevant. Yeah, I'm not. I mean, I think other than somebody saying, "I'm gonna get rid of a whole bunch of inventory at a lower price," I think I believe that whether it's on the equipment side or the IP side, ERS side, and ERS is a little different because you don't necessarily have the competitors that you would in the IP side. I think everybody's been somewhat rational. Yeah. I think it's more the customer sentiment that's impacted, you know, the size of the jobs, the margins on the jobs, versus anybody kinda pulling a trigger and saying, "I'm dropping the price. Mm-hmm. I just haven't seen it even, you know, if you look at the public comps on the industrial side, they're all down, but you know, none of them are kinda saying, you know, "We're cutting prices. We're doing this. We're doing that." It's more the market dynamic that they're dealing with. You have been proactive on the SG&A side, right, to mitigate some of the impacts to gross margin in the quarter. I think you cut SG&A. I believe it was CAD 6 million-ish. Yep. Maybe you can talk about some of the right-sizing initiatives you did there, if there's anything else to undertake the different, I guess, buckets of cost savings that you have at your disposal. Yeah, I mean, for us, I mean, our two biggest costs are people and facilities. Right. But we think that there's always ways of looking at redundancies and productivity, to make sure that you've got, you know, the right level of people, the right level of facilities. So, you know, a good example is we just have two sites in you know one city in Canada where we think we can combine them into one site. So what's it gonna do? It's gonna make it easier to manage that site. There'll probably be an ability to increase productivity. And we have a number of those opportunities going forward in a number of our locations. So it's probably people and locations that'll drive that SG&A most, versus anything else. Is there much flex left there? Yeah, I mean, we have 120 locations, so there's still some flex there. I mean, Quebec's a great example. We had three locations there. We have one now. Okay. And we still think that there's some opportunity with the acquisitions that we've made. So, you know, it's not gonna happen overnight, but we, you know, again, in Fort Mac, we had three locations. We're down to one. So that, that's something we can continue to do. Several years ago, we went on a field trip to one of your power locations in Quebec. I'm not sure if it's still there. It is. Oh, is it? You have to go in the winter? no. Oh, okay. You'd have to go in the winter. Yeah, so the power location, so we had a power equipment and industrial location. They're all in one location now. Okay. So. That's there. And we have that landlord has four or five of our locations, and we just think that that's a great framework to be able to manage our headcount, manage our facilities, and give the customer everything in one location. Interesting. So I guess one of the biggest value drivers for the Wajax story has been the new direct relationship with Hitachi. So I was wondering if you can spend a few minutes talking in the background there, if you wanna itemize, I guess, a few of the main initiatives that you're excited about. You talked about, you know, the dedicated financing program as one of them, but I feel like Hitachi has some pretty big aspirations to triple market share in North America. Yeah. So what are some of the initiatives you're most excited about, and what does it mean for Wajax? Maybe to go back, we have had a direct relationship in terms of mining shovels and loaders. Mm-hmm. Loaders, you know, five years old with Hitachi. So we've had a direct relationship with them before. It's been a good relationship. The direct relationship now is on the excavator that used to be built by Deere, and really what we're, you know, financing is okay. I think what we're more excited about is not only the product that they have, because that'll be differentiated over time with the Deere product. I mean, basically, they were the same excavator coming out of the same factory, just painted a different color. Right. While I'm dating myself, it was like Dodge and Chrysler. Mm-hmm. You'd have the same car. They just were the same body type coming out of a different factory with a different color. So, we have, over time, to differentiate the product, which then will differentiate the parts, which means that, you know, any of our competitors can't sell those parts or services. Before, they could. So, machine would come out, the Deere dealer would see it, they'd have the parts, they could service it, they could warranty it. They can't do that anymore. So we think that's one of the big exciting things that we have, the differentiation, potentially extensions of their product line, trucks potentially at some point in the future. They have trucks around the world. They just don't have them here. So we're working on that. You know, I'd say the one thing with Deere is we had a really good relationship in terms of parts. They had parts warehouses in Canada. Hitachi doesn't. But we've been working with Hitachi to get parts directly into Canada. So we had a pilot earlier this year that was successful, which is basically they come in one container, we de-stuff them and send them to our location. So it's basically one order now versus multiple orders. So that's another good thing. We still think that there's lots of room on the financing program. Mm-hmm. To do that. And there's just other huge parts of Hitachi that we haven't even, you know, touched yet. Some undercarriage stuff that we are, but there's Hitachi's a huge organization that we think there's lots of opportunity there. So as the relationship deepens and broadens and, you know, in conjunction with their aspirations to triple market share, what does that mean for you, in terms of operations or capital investment? Well, I think the good thing for us is we got 120 locations. Mm-hmm. So I don't necessarily see us having to build any more locations. In fact, I think we can reduce some over time. And just like Quebec City, you know, we can service Hitachi, Hyster, Tigercat, all out of one location along with industrial parts. So, the capital doesn't mean, you know, other than maybe if we put a DC in 'cause we don't do service parts out of a DC, we do them out of locations. That would be the only big thing that we probably have to do. Mm-hmm. if we ever did that. And on the equipment side, you're a diversified distributor. Are there any gaps in the product line? I mean, there'd be gaps on the Hitachi. I mean, we're not a full-line. Right. Dealer when it comes to Hitachi. So yeah, there would be some gaps. But we do benefit that we're, that we have multiple relationships: Hyster, Tigercat, MTU, etc. Right. So I guess maybe moving to IP and ERS, could you maybe start off just talking about some of the end markets you serve and maybe the growth opportunity you see for those businesses, either in relation to equipment or just on their own? Yeah, so I think the neat thing for us in, you know, one of the charts in the annual report is, you know, we deal in most end markets. Right. The one that really hurt us a number of years ago when we reorganized was conventional oil and gas, which has become a smaller portion, but you know, our 120 branches are across the country. We deal in most end markets. You know, like I said, we've seen mining being positive. Forestry's been, you know, positive as much as forestry can be for us, but we think just by, given the our facilities, our key customers across the country, we have ongoing opportunity going forward. Mm-hmm. But I think, you know, we're at a point now where we've gone from probably in 20, you know, 2014, 2016, 2020, you know, CAD 1 billion, CAD 1.2 billion, CAD 1.4 billion. We're over CAD 2 billion now. Mm-hmm. I think it's not as much as how quickly you grow, but how profitably you grow, enhancing your margin and reducing your, you know, making sure it's more profitable sales going forward. It's the best way to grow. Yeah. So maybe in the last part of this conversation, we can focus a little bit on capital allocation. Mm-hmm. So, I'm not sure if you have a defined dividend policy, but how does the board view the dividend? So we meet with the board every quarter. We talk to them about the dividend. If you go back kind of in history, it was a buck. Right. and we were pretty comfortable with a dollar, because we felt that, you know, through thick or thin, we could pay that out. You know, since then, we've enhanced it a couple of times. You know, one big jump and then a smaller jump. So, there's not necessarily a dividend policy that says it has to be X. Right. It's more, what does the budget look like? You know, what do we think we can afford? Do we wanna continue to increase it? So I think even today, where it is, we're still pretty comfortable with that. But we'll have a, we have every quarter, I send a note out to the board and say, "Here's our recommendation." So. Speaking of comfort levels, could you remind us where the balance sheet sits today, and whether that gives you enough room to pursue M&A? Our leverage is about 2.78, thereabouts. We still have lots of capacity on our bank lines. We've always stated that we'd like to be at one and a half to two times. We're over that, partly due to our investment in inventory. I'd like to see inventory come down. Mm-hmm. At the same time, we're fortunate to have bankers that are willing to work with us should an acquisition come. We've been over three times before when we bought Tundra, so we've got a robust pipeline. Mm-hmm. I do like being in the one and a half, two range before we buy anybody. So it's, I think it's just a matter of, you know, do you have the right company? Are you within your leverage range? And even if you're not, you know, is the financing there to be able to do something? I'm sure bankers have no shortage of deals to bring you. Yeah, well, you know, we've got some pretty good bankers that are willing to work with us. And, you know, that all being said, as I was listening to the fellow that was before us, I mean, we have a robust pipeline too. You know, we have a guidance of where we'd like to see the EBITDA and what we'd be willing to pay. So, if the right company comes, then, you know, I think we've got the ability to do something. You know, my preference as the CFO is to do the tuck-ins because they're smaller, they're bite-sized. You can do more of them. They don't necessarily distract management. But, you know, Tundra was a platform that we were easily able to do and integrate. Is the focus still on ERS and IP? Yeah? Yeah. And again, I think, you know, whether it's the marketplace, whether it's not having kids that can take on the business, we think that there's lots of opportunities there. But it's, I think at this point, you know, we've got some scale. It's not about just growing for the sake of growing. And my understanding is ERS is still pretty fragmented. So, like, what competitive advantages do you have that would make Wajax a natural consolidator? I think the first thing is we're Canadian. Mm-hmm. The second thing is our culture. You know, we have not taken a business and completely destroyed it or blown it up. We've retained the management. We've retained, for the most part, the locations. Other than, you know, with Tundra, we had a natural opportunity to close one. So, we think the most important thing, and I think if Iggy were here, you know, we make a bunch of promises as to what we're gonna do, and we keep those promises. Mm-hmm. I think culture is probably the biggest one. Mm-hmm. Yeah, that's big on the people side. And I think that's one of the core values of the Wajax strategy. I guess just one more from me. So, you know, we saw the sell-off after the quarter. Shares are trading at a really attractive valuation, eight times, I believe, on consensus estimates for next year. What's the appetite for doing an NCIB, something bigger, or could Wajax even be a target for an acquirer? So from an NCIB, we've played around it, but we're so thinly capitalized that, you know, taking stock out doesn't necessarily make sense to us. I think, you know, from somebody wanting to potentially acquire us, you know, the issue is we're two businesses. Mm-hmm. Our contracts on the heavy equipment side are unique to Wajax. Right. So, you know, those dealer agreements would probably go by the wayside if somebody wanted to buy us, which then makes the company less attractive, I think. Interesting. So, Stu, we're close to time. Is there any closing remarks you have or highlights to take away? No, thanks for having us. We always enjoy this, and I will miss these. Likewise, maybe we'll have you in the audience next year. Yeah, maybe. Thanks again, Stu. Good on ya.