Toromont Industries Ltd

TSX:TIH

Good morning. Today is Thursday, May 1, 2025. Welcome to the Toromont Industries Limited First Quarter 2025 Results Conference Call. Please be advised that this call is being recorded. [Operator Instructions] Your host for today will be Mr. John Doolittle, Executive Vice President and Chief Financial Officer. Please go ahead, sir.

Okay. Thank you very much, Angelene. Good morning, everyone. Thanks a lot for joining us today to discuss Toromont's results for the first quarter of 2025. Also on the call with me, as usual, is Mike McMillan, our President and Chief Executive Officer. Mike and I will be referring to the presentation that is available on our website. To start, I would like to refer our listeners to Slide 2, which contains our advisory regarding forward-looking information statements. After our prepared remarks, we'll be more than happy to answer questions. So let's get started and move to Slide 3, and over to you, Mike.

Great. Thanks very much, John. Good morning, everyone. I'm pleased with the performance of the team in the quarter. In a somewhat challenging market, we had consolidated revenue growth of 7% overall with growth in both the Equipment Group and CIMCO. Although we did not match our bottom line performance from last year due largely to business mix and lower interest income, the team managed expenses very well and enhanced our already solid financial position. The Equipment Group continued to execute well against order backlog. Revenue increased on improved new equipment deliveries in construction, mining and power systems, which includes the newly acquired AVL operations. Rental revenue improved in the quarter, reflecting the larger fleet, while used equipment sales declined year-over-year. Product support revenue decreased on lower parts volume and was partially offset by higher service activity.

Operating income was lower versus the prior year as expected, given a strong comparator, which reflected the dynamics at play at the time, along with unfavorable sales mix, lower gross margins and slightly higher expenses. CIMCO revenue and bottom line improvements demonstrated the team's strong execution. CIMCO had a solid start to the year in both Canada and the U.S. against a strong order backlog, resulting in good package revenue growth. Product support activity continues to demonstrate good growth in the U.S. and Canada, supported by our larger technician workforce. Operating income increased on the higher revenue and good execution, partially offset by unfavorable sales mix, that is lower product support revenue to total revenue and slightly higher expenses to support activity and growth.

As previously announced, we acquired a 60% ownership interest in AVL Manufacturing, Inc. at the end of January. We see a good fit for this business with our current operations and markets. While we expect the business to be accretive to results, the business is building its productive capacity and the bottom line contribution is not expected to be significant over the near term. We will also buy out the remaining ownership by 2031, which will follow a predefined schedule.

At this time, I'd like to also welcome Vince DeCristofaro, the President of AVL and the AVL team to the Toromont family. During Q1, our solid financial position was maintained while we continue to exercise disciplined capital management and allocation. Across the organization, we continue to focus on our long-term investment strategies and remain committed to our operating disciplines while driving aftermarket strategies and delivering customer solutions. On Slide 4, I'd like to touch on a few key financial highlights.

Investment in noncash working capital increased 40% versus a year ago with higher levels of inventory, higher accounts receivable, slightly offset by lower accounts payable balances due primarily to the timing of equipment received. Accounts receivable increased in part, reflecting higher revenue as well as receivables acquired with AVL. DSO increased up 1 day compared with last year at 42 days overall. Our team continues to do a nice job closely managing the aging of our receivables and monitoring customer credit levels and metrics. Inventory levels are higher than the prior year, driven by a number of factors, including delivery timing, inflation, foreign exchange rates on U.S. sourced supplies, improving availability through the supply chain and activity levels.

We ended the first quarter with ample liquidity, including cash of $977 million, an additional $456 million available to us on our existing credit facilities. We successfully issued a $300 million in senior debentures in the quarter as a result of our plan to refinance one of our bonds, which was due to mature later this year. Our net debt to total capitalization ratio was negative 1%. Overall, our balance sheet remains well positioned to support operational needs, and we are prepared to manage challenges related to the economic variables and business conditions. As one would expect, we will continue to exercise the operational and financial discipline as we support our customer requirements and evaluate investment opportunities that may develop over time.

Toromont targets a return on equity of 18% over a business cycle. Return on equity was slightly above this target level at 18.5% compared to 22% for Q1 of 2024. Return on capital employed was 24.1%, comparatively lower than 29% in Q1 of 2024. Both of these metrics reflect our higher capital investment and comparatively lower earnings. And finally, as announced yesterday, the Board of Directors approved a regular quarterly dividend of $0.52 per share payable on July 3, 2025, to shareholders on record on June 6, 2025. John, I'll turn it over to you for some more detailed comments on the results.

Okay. Thank you, Mike. Let's turn to Slide 5 for additional comments on the consolidated results. As Mike noted, profitability for the first quarter of 2025 was lower than the first quarter of 2024 as expected given the current economic environment. Uncertain market conditions led to cautious end customer purchasing decisions. Higher revenue was generated by both the Equipment Group and CIMCO with new equipment deliveries and execution against order backlog and project schedules. Rental revenue improved during the period. However, utilization levels remained lower than the prior year. Product support revenue was lower overall with an increase at CIMCO more than offset by a decrease in the Equipment Group. Gross profit margins were lower compared to the prior year, in large part due to sales mix with a lower percentage of product support revenue to total revenue. Additionally, the prior year was a stronger comparator in the Equipment Group given market dynamics in play at the time.

Operating income was down 8% compared to strong results last year as the higher top line revenue was offset by lower gross margins and slightly higher expenses. Bookings decreased 12% compared to Q1 2024 in both the Equipment Group and CIMCO, reflective of the lumpy nature of the projects and the current economic uncertainty causing delays in customer buying decisions. Backlog remains healthy at $1.3 billion, down 6% year-over-year, with a decrease in the Equipment Group down 9% and an increase at CIMCO up 8%. Backlog is supportive and reflects good order intake over the last year and supported by improving equipment inflow through the supply chain.

On a consolidated basis, revenue increased 7% in the quarter with the Equipment Group up 7% and CIMCO up 9%. Expense levels decreased to 13.3% of revenue, reflecting the strong focus on cost controls. Expenses increased 1% in the quarter with a $4 million increase in expenses from AVL. Excluding ABL, expenses were down 2%. Allowance for doubtful accounts was down $3.8 million on improvements in certain exposures and good collections as well as lower DSU mark-to-market adjustments, down $2.3 million on the lower share price. Other expenses increased modestly on higher volumes and other investment initiatives.

Operating income decreased 8% in the quarter and was 9% of revenue compared to 10.5% in the similar period last year. Although revenue was higher, lower gross margins in the Equipment Group and slightly higher expenses dampened results. Interest income was down $4.5 million or 29%, reflecting a slightly lower interest rate year-over-year. Net earnings decreased 11% or $9.5 million in the quarter compared to last year. Basic earnings per share was $0.98 in the quarter, tracking to the decrease in earnings.

Turning to the Equipment Group on Slide 6. Revenue was up 7% in the quarter. Equipment sales, including both new and used equipment were up 17% in the quarter across most market segments and regions. New equipment sales increased 24% in the quarter with good increases in mining and Power Systems, which includes the acquired operations. Used equipment sales decreased 21% in the quarter, predominantly in the construction market with lower rental fleet dispositions on fleet management decisions and lower sales of used equipment from trade and purchases, reflecting supply and demand economics.

In the quarter, total equipment revenue increased 4% in construction, 50% in mining, 5% in Material Handling and 32% in Power Systems. Rental revenue was up 11% in the quarter. While market conditions remain soft, revenues increased compared to the prior year, reflecting a larger fleet and improved utilization in some areas. Revenue improved in most areas for the quarter as follows: Light equipment rentals up 8%, heavy equipment rentals up 16%, material handling up 12%, partially offset by a decrease in power rentals down 20%. The RPO fleet was $101 million versus $70 million a year ago, and rental revenue was up 51% compared to last year.

Product support revenue declined 3% in the quarter with a decrease in parts down 5%, partially offset by service up 4%. Activity was lower across most markets and regions, reflecting end-user demand and activity levels. Looking at specific markets for the quarter, change in revenue is as follows: Construction was down 3%, mining down 3%, Power Systems unchanged and material handling down 6%. Gross profit margins decreased 260 basis points in the quarter compared to Q1 2024. An unfavorable sales mix with a lower proportion of product support revenue to total dampened margins 110 basis points. Equipment margins decreased 60 basis points on cautious market conditions. Rental margins decreased 30 basis points on higher recent fleet acquisitions, in part due to a weaker Canadian dollar and higher maintenance and repair costs. Product support margins decreased 60 basis points on generally higher costs.

Selling and administrative expenses were relatively unchanged compared to the same period last year. The acquisition of AVL increased expenses $4 million, which includes noncash expenses related to purchase price accounting items. Compensation costs were lower year-over-year, reflecting lower profit sharing accruals and DSU mark-to-market expenses, partially offset by regular annual increases. Other expenses such as training, travel, information technology, professional and consulting fees and occupancy costs have increased in light of activity levels and inflationary pressures. Allowance for doubtful accounts decreased $3.6 million, reflecting good collections and improvement in certain exposures.

As a percentage of revenue, selling and administrative expenses improved to 12.9% in the current period versus 13.8% in the similar period last year. Operating income decreased 10% for the quarter, mainly reflecting higher revenue more than offset by lower gross margins. Bookings decreased 4% in the quarter. Mining bookings were down 41% versus last year on a strong comparable, which included several large customer orders. Construction bookings were up 1%, along with material handling orders up 39%. Power Systems orders increased 48% on good market activity, including the acquired business.

Backlog of $982 million at March 31, 2025, remains at healthy levels -- backlog includes approximately $230 million acquired with AV Health, which has a strong delivery schedule over the next 2 years. Excluding this backlog was 32% lower compared to the same period last year, reflecting good deliveries against customer orders over the last 12 months, along with good order intake -- new order intake. Approximately 80% of the backlog is expected to be delivered over the next 12 months, but of course, subject to the timing differences depending on vendor supply, customer activity and delivery schedules.

Let's turn to CIMCO on Slide 7. Revenue was up 9% in the quarter. Package revenue increased 15% in the quarter with good execution on equipment delivery and progress on customer schedules. Industrial market revenue was up 24% with higher activity in the U.S., relatively unchanged in Canada. Recreational activity decreased 6% as higher revenue in Canada was more than offset by lower activity in the U.S. Product support revenue increased 5% in the quarter on higher activity levels in both Canada and in the U.S. Activity levels continue to improve on good customer demand and increased technician base.

Gross profit margins increased 100 basis points in the quarter versus the comparable period last year. Package margins were up 160 basis points on good execution and the nature of the projects in process. Product support margins decreased 40 basis points on the profile of activity. An unfavorable sales mix with a lower proportion of package revenue to total revenue dampened margins by 20 basis points. Selling and administrative expenses increased 8% in the quarter. Compensation costs increased, reflecting staffing levels, annual salary increases and higher profit sharing accruals on higher earnings. Other expenditures such as travel, training expenses increased to support activity and staffing levels.

As a percentage of revenue, selling and administrative expenses improved to 17.8% in the current period versus 17.9% in the similar period last year. Operating income was up $1.8 million or 23% for the quarter, reflecting improved gross margins and higher revenue. Operating income as a percentage of revenue increased 110 basis points to 10% compared to the first quarter of last year. Bookings decreased 54% or $55 million in the quarter against a strong comparator. Industrial orders were down 70% and recreational orders were down 32% with lower orders in both Canada and the U.S. Generally, activity is continuing with good strategic capital investment levels. However, the current economic uncertainty has delayed customer buying decisions.

Backlog of $348 million was 8% higher versus last year. Approximately 75% of the backlog is expected to be realized over the next 12 months. However, again, this is subject to construction schedules and potential changes stemming from supply chain dynamics. And with that, we can move to Slide 8, and I'll turn again to Mike to highlight some key takeaways as we look forward to Q2. Mike?

Thanks, John. We continue to focus on key priority areas, including safe operational execution, serving and supporting our customer requirements and exercising the usual discipline and rigor expected as we focus on building our business for the future. We continue to expect the business environment to be influenced by a number of factors that are at play. Trade negotiations between the U.S. and Canada is resulting in ongoing uncertainty. Our team is highly engaged and has prepared an appropriate action plan to navigate the potential impacts, which will continue to evolve. Foreign exchange rate volatility and other -- and a weaker Canadian dollar are also being monitored given the majority of our supply of equipment and parts is sourced in U.S. dollars. Hedging practices and policies will continue to be used, of course, to manage the bottom line exposure to changing exchange rates. However, the impact on the economy as a whole may present further challenges. Other general economic and macroeconomic factors such as inflation and interest rates continue to be monitored.

Our backlog levels, as John mentioned, remain healthy, and the equipment supply chain is well positioned to support our customers. We continue to hire technicians to support our operations, and this remains an essential long-term focused investment supporting our aftermarket and value-added product and service offerings. Operationally and financially, we remain well positioned with ample liquidity and our strong leadership teams, disciplined culture and focused operating models. We continue to monitor key metrics, supply and global trade dynamics.

As noted, our long-term focus on growth and returns means we remain committed to our operating and financial disciplines to manage our cost structure while we invest in capacity and capabilities to provide exceptional service to our customers today and for the future. We appreciate our entire team's effort and commitment to support our customers and deliver value for our stakeholders. Thanks also to our valued customers, supply partners and shareholders for their continued support. That continues -- that concludes our prepared remarks. At this time, we will be pleased to take questions. Angeline, if we could, over to you for the first call, please.

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

The thing that surprised me the most in the numbers was a slight decline in product support in the Equipment Group because I thought customers might have stocked up on parts in anticipation of potential price increases. Was that surprising to you as well?

Yes. No, thanks for the question, Shirley. I think in part, what we're seeing is there's a couple of factors as we lead into the year. I think there's just broadly economic uncertainty. I think with some of the trade tensions and so forth. I think we haven't seen a lot of evidence of customers stocking up in advance in anticipation -- and -- but also keep in mind, what we -- we've gone through this period, I would say, even from a political perspective, provincially and federally, some uncertainty combined with the trade restrictions. And I think what we're seeing is just a tone of caution there. And so when you look at what we've seen in the quarter, you see that parts are slightly down and you see our labor and so forth is up. And so there is routine maintenance going on.

I think the other thing to keep in mind is in the last 18 to 24 months, we've delivered a fairly strong component of new equipment into the market, given the supply has improved. And some of those machines need to build hours before we get into higher levels of consumption. That's especially true when we think about the mining business where we've had some nice deliveries over the last couple of years. And those pieces of equipment need to build hours and experience before we start to see consumption pick up.

That makes sense. The other thing I noted was that the construction backlog, while it's down year-over-year, remains high by historical standards, especially considering that, that business doesn't typically operate with much of a backlog. What, if any, read-throughs do you take away from that?

Yes. I think we're still -- like you say, and that's a great observation because although comparatively, as you mentioned, we would be down if we take out AVL, construction is in a very strong position relative to historic trends. And I think part of it is we're still going through a little bit of an equipment replacement cycle that extends back into the early part of last year. And so with better supply and so forth, we -- and I would say the interest rate environment and other economic factors have led to stronger interest in new equipment. And so we certainly have seen that persist. Although I think in terms of delivery schedules and so forth, there is a bit of patience as customers wait on closing out bids and development opportunities.

And then last one for me. If memory serves, customers usually have a pretty good view of the highway program for the upcoming construction season by now. Can you make any comments on how that looks relative to prior years?

Yes. I would say it's a bit difficult to speculate. I'd sort of go back to my comments in terms of how we entered into the year in terms of some of the decision-making for -- when you think of provincially or federally sponsored projects and given the uncertainty that we've had leading into the year has probably delayed a little bit of that. I'd say -- the backdrop, though, as you mentioned, is constructive for the long term. We do have a number of projects that we're aware of that should be -- investment should be kicking off, and we see that as a longer-term positive trend. But at this stage, I'd say it's still a little bit early to know the exact timing given that we've just come through a couple of election cycles here and the budget process and everything else that follows, right.

The next question comes from Krista Friesen with CIBC.

I was wondering if you can just maybe elaborate a little bit more on what you're hearing from your customers at this point in time. Obviously, still a lot of uncertainty, but is there any comments around just pushing it out for a shorter period of time? Or are you starting to see some indefinite delays in projects?

Yes. I think just to start, and thanks for the question, Kris. I think, like I said earlier, I think what we've seen is a fairly cautious environment. One would think when you look at the Canadian environment, interest rate backdrop and so forth, we're in a pretty reasonable position from that perspective when you think of capital goods investment. I think what we've seen slower is due to the uncertainty south of the border, potential for a recession or depressed economic conditions for a period of time. But then also just as the new governments and leadership get positioned, the investment decisions that they'll make in the project initiation, which is a bit early yet at this point, right, as we've just seen. So...

Yes. I would just add, Mike, like the overall backdrop, assuming we reach an agreement with the U.S. is very positive, I think, in terms of the development of our minerals in our territory, pipelines across our territory, that thing that kind of infrastructure spend is a positive long-term feature. So...

Okay. Great. And then maybe just one more on the AVL acquisition. If there's any update you have there just on the integration, if there's anything that's been surprising to you in the short period of time that you've had it?

No, I don't think there's been anything that's surprising. We have a great team at AVL led by Vince, as Mike said. And the production facility in Hamilton is terrific. I think the over -- the economic backdrop there is very positive in terms of data center build-outs, particularly in the U.S. I mentioned on the last call that we realized we know as part of this deal that we're going to have to increase the capacity of that business, and it will likely be in the U.S., and that remains a focus of ours at the moment.

The next question comes from Yuri Lynk with Canaccord Genuity.

Maybe just on the gross margin, much weaker than what I was expecting for what that's worth. I appreciate the color given in the MD&A, but just wondering if you're seeing any more -- is there one thing that caused it more than others? Was it the dollar? Was it more of the mix shift? Are you seeing anything on change in terms of competitive conditions on pricing?

Well, let me just take the first part of that, Yuri. I mean, really, in my mind, it was a shift in mix. It was a shift in mix between new and used equipment and product support. That was the primary reason for the decrease in margins in the equipment group. And then in the competitive environment, Mike, I don't know if you want to comment on there.

Yes. I guess a couple of things there. I would say, like we mentioned, we certainly are in a period where the market is well supplied, right? That's probably the right way to think about it. And so certainly, if you look at our mix within the equipment as well, you'll see a much stronger -- like the team did a really nice job on new equipment sales. In terms of when we think about our market share and competing in our marketplace, we're quite pleased with how the team delivered in Q1 on that side. And you see it in our new equipment sales. Now you see lower performance relative in the used market, and that's natural in the sense that there's a bit of a fleet renewal process. And again, good supply in both new and used markets.

I think the other piece to keep in mind there, too, Yuri, is when you think of mix, you think of the rental side of our business, we've mentioned that it's up slightly and so forth, but on a higher invested fleet cost. When you think of what we've been through over the last several years, we've renewed the fleet, we've added significantly to our fleet. Our acquisition costs are a little bit higher. And so there's certainly a little bit of pressure on that side, but the team is doing a nice job in terms of starting to see utilization rates improve. And of course, that's a function of activity in our marketplace that we've talked about earlier in the call. So there are a number of levers there that I think you should consider as you evaluate the margin going forward.

Okay. And for my model, especially with the AVL acquisition in the quarter, just wondering if the $63 million of D&A in the quarter is a good run rate going forward? Or was there some accelerated D&A in there?

Yes. I think John can speak to our run rates and so forth a little bit. But I would say, like just sort of building off my last comments, I think it's -- like you say, we've got a higher fleet. We do-- we do manage that part of our financials very conservatively and straight line a lot of our fleet, as you know, within the rental business, for example, and so forth. And so I think it's probably a reasonable level for you consider. I don't know, John, if there's anything else you wanted to mention.

Well, just on the accounting for AVL, we'll treat that as a purchase accounting transaction. And there weren't a lot of hard assets in the deal. So there will be intangibles and there'll be amortization of those intangibles over time. So you could expect an ongoing amortization there, if that was your question.

Yes. That's helpful. And just last one. Any -- again, from my model, Capex, both rental and on the -- your base assets, particularly around your comments on maybe increasing capacity at AVL. I don't know if any of that comes this year or next year?

Yes. I would expect -- so Capex on rental, I mean, we're monitoring that every quarter. As I mentioned last quarter, we anticipate the net rental costs to be about where they were last year, about net $150 million. But as I said, we'll look at that each quarter depending upon market conditions. And then on the AVL acquisition in the U.S., increasing the scope there, I would anticipate that to be in the current year. So as I said last quarter, we would expect facilities, CapEx to go up this year vis-a-vis last year for a couple of reasons. One is the ABL transaction that I just mentioned. And secondly, we're going to begin to build out our new facility, head office facility and branch facility in the Toronto area. And so those 2 factors, combined with a few others, will increase the CapEx and facilities this year. And regular run rate CapEx will be about the same as it's always been.

The next question comes from Davis Baynton with BMO Capital Markets.

This is Davis on for Devin Dodge. So just touching on rental. So it seems like there's likely some crosscurrents in this business. So on the one hand, activity levels in some end markets seem sluggish, but on the other, increased customer caution could tip the scales in favor of renting over outright ownership. Just wondering if you could touch a bit more on what you've seen so far in the rental business.

Sure. Yes, it's a good observation, David. So a couple of things to point out. As you mentioned, sometimes what we do see in uncertain economic conditions with projects, we do see customers opt into the rental program and so forth while they see how cash flow and project bidding processes pan out. And one of the areas you see that very clearly on the heavy side is our RPO inventories. And John mentioned in his comments that our RPO level was about $101 million versus about $70 million last year, which is, again, I would look back to pre-pandemic periods, and you'd say that would be a strong number relative to that period. And I think that's a little bit of an indication that we are seeing customers look for options and alternatives to manage through the economic variables and dynamics that we're seeing today.

Okay. And then maybe just switching gears a little bit here. So equipment booking held up quite well in the quarter despite the uncertain backdrop. I know you touched on this a bit with parts, but did you get a sense that some customers were looking to buy ahead of tariffs?

Yes. I would say, again, when you break down the booking activity, one of the things certainly to your point, is you see the mix of new equipment and so forth going through the financials. You see some decent bookings, I think, across the space. One of the areas we do call out a lot of times is mining, where it tends to be a little bit more lumpy. And so you see mining is a little lower than it has run historically because we've earned our way into a number of deliveries and new development opportunities and expansion. So that is going to ebb and flow. But when you look at construction, for example, I think our backlog is about 28% of our backlog is construction, which is a pretty consistent level and trending positively. Power as well, but keep in mind, that includes some of the AVL activity.

Yes. I was just going to say just the comment that Mike made in response to Cherilyn's question, I would say it's the same on new equipment, which is we haven't seen a lot of orders advancing as a direct result of the potential tariffs, right?

Correct. Yes.

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

This is Arthur on for Saba. You might have just touched on this, but just wanted to dig into the indirect tariff impacts, especially, I guess, on the private construction customer side within the Equipment Group. Have you seen any projects getting delayed or canceled so far? Or are things generally still chugging along?

Yes. I would say maybe just to start on that is, I would say, as we mentioned earlier, we haven't seen any advanced buying in anticipation. I think there's certainly been a period of wait and see and folks are being prepared. I think because we're well supplied in the marketplace, I think that does give our customers a little bit more flexibility than we might have seen over the last couple of years.

I think a bigger trend, too, is also like we mentioned earlier, is the investment cycle and with some of the change in political positions and things like that, that had to work its way through and then the investment cycle would follow. So -- but I would say from a tariff perspective, again, it's -- we have a team in place that's actively managing the tariff developments as they occur. And I think we're monitoring, obviously, our customer impacts on U.S. tariffs. We're also trying to make sure we're keeping apprised of any potential reciprocal actions that our government takes because, as you know, our industry is largely an import market for heavy equipment and capital goods that we distribute. And so we do certainly receive from our largest supplier products that come from other markets outside of the U.S., obviously, like Brazil and other areas. However, I would say it's a bit early for us to comment or speculate. And I think our customers have just been cautious given the industry and the supply levels.

The next question comes from Steve Hansen with Raymond James.

Well, I recognize most of the margin pressure was related to mix, which you referenced earlier. Is it possible to parse out at all which areas of the market you're seeing more competitive pressures in that well supply and where that might be impacting margins? Is it in the general construction space in mining? I mean, how we think about that?

Yes. I think maybe to start on that, Steve. Again, we try to give you a little bit of color when you look at the bookings and the backlog. I think that's your best indication in terms of how things go. Like I mentioned earlier, we've had some good mining deliveries in the past. We've seen some of that in Q1. And so I think as you balance out that backlog, that gives you an indication. The other markets, I would say, again, -- the team has done a nice job competing in the general construction equipment category, continuing to work hard at that with the supply levels we have. And so you'll see a mix there. And BCP and compact construction, again, is a very well-supplied market, especially in the compact areas with lots of participants. And so one might imagine that, that market has been quite competitive.

Now one of the things we have done internally is we transitioned our compact construction support from the Battlefield Rental Group for retail sales into the dealership. And that transition took place throughout the course of last year. And what that does is provide us with better coverage and so forth. And so I think you're going to see, again, some stronger activity, but also in a market that's quite competitive. on its own right.

Yes. The only other thing I would add there, Steve, is just if you look at the disclosure in terms of the revenue mix in the quarter, it was 4% -- construction was up 4%. Mining was actually up 50% in the quarter in terms of the equipment. So that's something to consider as you are thinking about your model.

Very helpful. And just going back to Cherilyn's question earlier on the product support. I know you referenced the economic uncertainty and the general tone of caution in the market. But do you have a sense for whether activity levels or utilization of the fleet at your customers is down as well? I know you've got some larger new packages out there that aren't consuming parts just yet, but just trying to understand how much that utilization rate might have changed in the fleet for the customers and whether that's going to continue ultimately through the balance of the year.

Yes. I would say you sort of touched on it there in your comments, Steve. I think a big part of it has to be -- like I would say it's 2 or 3 factors. One is broadly, I would say activity has been fairly flat in the sense that we talked a little bit about in the past about in our key markets, the lack of affordable housing and infrastructure projects, it's been a little bit slower to develop, although there's certainly a requirement for some significant investment in infrastructure and in that supporting everything that goes into like immigration and things like that. So we do see that coming over time.

But I think that more importantly, I think what you're seeing outside of, say, machine hours, which we monitor quite carefully is, as we talked about over the last couple of years, we have seen some good new product sales. And as those new products are put to work, it does take some time for them to accumulate hours and get to a stage where we start to see higher consumption on parts and so forth. And so we see a little stronger labor supply at times doing preventative maintenance, for example, versus component replacement and repair. So I think that's a factor you could see within those numbers as well.

Yes. I'll just go back to the comment that I made earlier and Mike's made as well, Steve, just as kind of we think about the long -- and we always think about the long term as opposed to a quarter this quarter or that quarter. With stability in our government, assuming we get a trade deal with the U.S., all of our governments across the country are talking about infrastructure spend, very significant infrastructure spend, be it in residential housing, be it in mining, construction, but you name it. So the long-term economic backdrop, assuming all these things come to fruition is positive.

Yes. No doubt. Looking forward to hoping getting some those things going. Is there just as a related question, do you slow down the technician adds in a new facility at this point just to sort of manage it with the demand side? Or how do you think about that part of the business?

Yes. I mentioned in my comments there, Steve, that we continue to hire technicians. I would say that in this market, again, what we're trying to -- the team has done a nice job. We talked about our expense levels and so forth and that they managed -- our team has managed that quite well. Part of that, obviously, is managing the productivity of our techs, the build hours, training and all those types of things. And what I would say is we continue to actively hire in the marketplace. I think we're monitoring that carefully, though, and we're targeting trades like more senior technicians in certain markets to make sure that we continue to not only cover our natural retirements and things like that, that we always have with, say, in the dealership with over 2,000 techs, but also just where we do have requirements in key markets where I would say that activity has continued in areas where we're well supplied or, say, for example, in apprentices and so forth, we will taper that back a little bit at times just because we want to make sure we have the right composition of workforce.

There are no further questions at this time. I would like to turn the call over back to Mr. John Doolittle. Please go ahead, sir.

Okay. Thank you very much, Angeline. Thanks a lot to everyone for your participation in the call today. Before concluding the call, I'd like to remind our listeners that our Annual General Meeting of Shareholders will be held today at 10:00 a.m. Eastern. It's an in-person event being held at the Novotel Hotel at 200 Best Pro Mills Drive in Vaughan, Ontario. And for those unable to attend in person, a recording of the meeting will be available through [indiscernible] website at toromont.com. And that concludes our call. Please be safe. Have a great day. Thank you very much.

Thank you, everyone.

I'm sorry. Hello. You're still there.

Yes.

Yes. John, I do apologize. There was a quick hand that raised for the question. Is it okay to accommodate for that?

Sure.

Yes. I do apologize. It was a sudden hand raise. So let me call on Maxim Sytchev with National Bank Financial.

I'm not sure what happened on the phone there. But I just had a question in terms of capital deployment priorities right now. Obviously, you have been a bit more active on NCIB. But just curious around what you guys are thinking, especially where the share price is at the moment.

Yes. I mean it hasn't changed, Max, in terms of our priorities, same thing, continue to invest in organic growth -- the dividend, Mike talked about the $0.52 dividend. We have been a bit more active on NCIB, and we'll continue to monitor that. It's a tool in the toolbox. And fourthly, M&A, which you've seen we've been reasonably active over the last couple of quarters. So really no change in our thinking there. As we talked about, we'll monitor our capital investment in rental and that sort of thing quarter-by-quarter. But no real change in the philosophy. We're thinking about the long term here.

Right. And then just one quick question on power. I mean, obviously, positive commentary overall. And do you mind maybe differentiating between, again, like what's happening on the standby side of things and your initiatives on the cooling side of things? Maybe just any comment there? That's it for me.

Yes. No, thanks for that, Max. I think like we mentioned, you sort of touched on AVL, for example, indirectly in the comment. And I think as we look at the power side, we're seeing some interest in that space, I would say, both in standby power for data centers and other applications. AVL plays a part in that because they're the packager and the enclosures that go around the standby generation. And so we're certainly seeing good interest in the U.S. markets through the dealer network, for example, and in Canada, not as well developed. I would say on the heating and cooling side, we've talked a little bit on that. Certainly, CIMCO can play a part in those markets.

I think one of the keys there, though, is working with those in the data center space, for example. And as they develop their designs, for their facilities to have -- to be able to bid on those opportunities get designed in, which takes time. I'd say it's still early stage in Canada by far and something that we're keen to look into as we develop our presence with the AVL business down south.

We have another one. It's Jonathan Goldman with Scotiabank.

Just a couple for me. What is the lag time between when a new piece of equipment is delivered and when it starts requiring product support or consumption of parts?

Yes. It does vary by product, as you can imagine, Jonathan. I think, for example, if you think of mining applications and, say, large trucks, haul trucks, it could be a couple of years. Even though when you think of the application, those trucks are running very hard, 7x24, but quite resilient investments. And so we tend to see consumption outside of preventative maintenance and so forth pick up as they approach the third year of use, say, 2.5, 3 years and beyond. I think when you look at some of the other classes of equipment, it could be a little earlier in terms of the hours on the machine, but also keep in mind that the utilization of that equipment is less than you'd see in a mining environment. And so not unusual to see it in that rounded in that 2-year period where you start to see other types of consumption or unplanned requirements, right?

Very interesting color. And I guess my second question is, how are you thinking about any potential impacts of higher steel and aluminum prices as a result of recent announced tariffs?

Yes. I would say, again, we wouldn't want to speculate too much, especially specific to aluminum. I think, obviously, we're monitoring that in terms of our customers. And if you think of our mining segment and also their customers, those in the fabrication side of things over time. Again, we're monitoring it as we go forward. A lot of our equipment, as you know, has steel componentry and so forth. And so certainly, I think that has to work its way through the supply cycle and through our suppliers over time. Aluminum, perhaps less so in that sense, right? Modest.

There are no further questions at this time, and I will be turning the call over to Mr. John Doolittle. Please go ahead, sir.

Yes. Thanks, Angeline. So I already thanked everybody and reminded folks of the AGM. So I think that's it for us. So thank you very much.

Be safe, everyone. Thank you for your time.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.