Finning International Inc. (FTT:CA) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary reflects strong financial performance, with projected growth in balance sheet, loans, deposits, and BHG earnings. The merger with Synovus and increased non-interest income guidance are positive indicators. Despite some uncertainties in Argentina and unspecified plans for data centers, the overall sentiment is optimistic, supported by proactive investment strategies and shareholder returns through buybacks and dividends.
Key Financial Performance
Revenue Revenues increased by 7% year-over-year to $10.6 billion in 2025. The growth was attributed to strong momentum in the first 9 months of the year and continued growth in product support and new equipment sales.
Backlog Backlog grew by 20% year-over-year to a record $3.1 billion at the end of 2025. This was driven by strong order intake across all market sectors, particularly in mining and power and energy.
Product Support Revenue Product support revenue increased by 8% year-over-year to nearly $6 billion in 2025. Growth was driven by strong activity levels in mining in Canada (10% growth) and South America (5% growth).
Adjusted Earnings Per Share (EPS) Adjusted EPS increased by 14% year-over-year in 2025. This improvement was supported by a lower fixed cost base and share repurchases throughout the year.
SG&A Margin SG&A margin decreased to 15% in 2025, down from the prior year. This was due to a lower fixed cost base and operational efficiencies.
Free Cash Flow Free cash flow reached nearly $550 million in 2025, turning positive in Q4 as expected. This was attributed to improved working capital velocity and operational improvements.
Power and Energy Backlog The Power and Energy backlog increased by 25% year-over-year to $1 billion at the end of December 2025. Growth was driven by diverse orders, including prime power packages, oil and gas-related equipment, and data center standby packages.
Rental Revenue Rental revenue in Canada increased by 9% year-over-year in 2025, reflecting a recovery in the construction sector.
Used Equipment Revenue Used equipment revenue increased by 31% since Q2 2023. This growth was attributed to increased participation in the used equipment market.
Power and Energy Revenue Power and Energy revenue increased by 41% since Q2 2023. This was driven by strong performance and a growing backlog in this segment.
Adjusted Return on Invested Capital (ROIC) Adjusted ROIC reached 19.2% in Q4 2025, up 130 basis points year-over-year. This improvement was due to increased capital velocity and improved earnings.
Net Debt to Adjusted EBITDA Ratio Net debt to adjusted EBITDA ratio decreased to 1.2x at the end of 2025, down from 1.7x at the end of 2024. This was due to strong free cash flow generation and improved financial position.
New Equipment Sales New equipment sales increased by 9% year-over-year in Q4 2025, driven by higher deliveries in construction and power and energy across all regions.
Product Support Revenue (Q4) Product support revenue increased by 8% year-over-year in Q4 2025, primarily driven by strong mining activity in Canada.
Used Equipment Sales (Q4) Used equipment sales decreased by 23% year-over-year in Q4 2025. This was due to large conversions of mining rental equipment with purchase options in Q4 2024 that did not repeat in Q4 2025.
Rental Revenue (Q4) Rental revenue increased by 10% year-over-year in Q4 2025, reflecting improved market conditions in Canada.
Adjusted EBIT Margin (Canada) Adjusted EBIT margin in Canada increased by 60 basis points year-over-year to 8.1% in Q4 2025. This was driven by a higher proportion of product support in the revenue mix and lower SG&A margin.
Adjusted Return on Invested Capital (Canada) Adjusted ROIC in Canada improved by 280 basis points year-over-year to 18.2% in Q4 2025. This was due to improved profitability and higher invested capital turns.
Adjusted EBIT Margin (South America) Adjusted EBIT margin in South America decreased by 50 basis points year-over-year to 10.4% in Q4 2025. This was due to lower product support margins, partially offset by lower SG&A margin.
Adjusted Return on Invested Capital (South America) Adjusted ROIC in South America decreased by 140 basis points year-over-year to 24.5% in Q4 2025. This was due to slightly lower trailing 12-month profitability.
Adjusted EBIT Margin (UK and Ireland) Adjusted EBIT margin in the UK and Ireland decreased by 120 basis points year-over-year to 4.6% in Q4 2025. This was due to a higher proportion of new equipment sales in the revenue mix.
Adjusted Return on Invested Capital (UK and Ireland) Adjusted ROIC in the UK and Ireland increased by 510 basis points year-over-year to 20.1% in Q4 2025. This was due to the optimization of pension assets.
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Operating Highlights
New Equipment Revenue: Achieved record new equipment revenue in 2025, contributing to a 7% increase in total revenues to $10.6 billion.
Technician Expansion: Added 225 new technicians and expanded workshop capacity to support growing product support opportunities.
Digital and Technology Capabilities: Enhanced digital and technology capabilities to improve customer service and operational efficiency.
Backlog Growth: Backlog increased by 20% year-over-year to a record $3.1 billion, with strong order intake in Canada, particularly in mining.
Power and Energy Sector: Backlog in Power and Energy reached $1 billion, up 25% from 2024, driven by diverse orders including data center standby packages and gas compression equipment.
Rental Market: Rental revenues in Canada increased by 9%, with plans to enhance the rental business further.
SG&A Margin: Reduced SG&A margin to 15%, below the target of 17%, supporting a more resilient earnings profile.
Free Cash Flow: Generated nearly $550 million in free cash flow during 2025, with Q4 contributing $642 million.
Capital Velocity: Improved invested capital turns to 2.34x, reflecting better working capital management.
4Refuel Sale: Completed the sale of 4Refuel to simplify operations and focus on Caterpillar dealerships.
Sustainable Growth: Used equipment revenues increased by 31%, and Power and Energy revenues grew by 41% since 2023.
Strategic Investments: Planned over $350 million in 2026 for rental fleet expansion and operational improvements, including warehouse upgrades and workforce management systems.
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Risk or Challenges
Decommissioning of technology assets: The company incurred a $22 million write-off related to the decommissioning of certain technology assets, which could indicate challenges in aligning with Caterpillar's digital and technology strategy.
Labor market challenges in Chile: High demand for skilled labor in Chile is expected to create challenges in the labor market, potentially impacting operations and project execution.
Economic and regulatory environment in Argentina: The company is closely monitoring government rules and policies in Argentina, which could pose risks to growth opportunities in the oil and gas and mining sectors.
Soft demand for construction equipment in the U.K. and Ireland: Demand for new construction equipment in the U.K. and Ireland is expected to remain soft due to low projected GDP growth, which could impact revenue in this region.
Moderation in mining activity in Chile: Near-term moderation in mining activity in Chile as customers adjust mine plans and existing equipment fleets could impact revenue and operations.
Supply chain and backlog management: The company has a record backlog of $3.1 billion, but order intake outpacing delivery could create challenges in managing supply chain and meeting customer expectations.
Used equipment sales decline: Used equipment sales were down 23% year-over-year, which could indicate challenges in this segment of the business.
Higher LTIP expense: The company incurred $21 million in LTIP expense this quarter, driven by strong share price appreciation, which could impact profitability.
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Guidance & Outlook
Revenue Growth: The company expects to continue its revenue growth trajectory, with a focus on product support and new equipment sales. Revenue grew by 7% in 2025, and the backlog reached a record $3.1 billion, providing confidence in future activity levels.
Product Support Growth: Product support revenue is expected to continue growing, driven by equipment population growth and increased activity in mining and construction sectors. The company has added 225 new technicians and expanded workshop capacity to support this growth.
Power and Energy Sector: The Power and Energy backlog remains strong at $1 billion, up 25% from December 2024, with deliveries planned through 2027. The company sees strong growth opportunities in prime power packages, oil and gas-related equipment, and data center standby packages.
Rental Market: The company expects to enhance its rental business as the market improves, with rental revenues up 9% in Canada. Investments in rental fleet expansion are planned for 2026.
Capital Expenditures: Net capital and rental fleet expenditures for 2026 are expected to exceed $350 million, focusing on rental fleet growth, operational improvements, and capacity enhancements in Canada, South America, and the U.K.
Mining Sector: The company anticipates steady activity levels in mining, with a focus on maintaining and rebuilding aging equipment fleets. In Canada, over 50 ultra-class trucks and 20 large mining trucks are in the backlog.
Construction Sector: The construction sector in Canada is showing signs of recovery, with rental revenues up 10%. The company expects steady activity levels in Chile and moderate demand in the U.K. and Ireland.
Operational Efficiency: The company plans to continue reducing overheads, improving efficiency, and building resilience to drive higher earnings capacity.
Strategic Focus: The company remains committed to its 2023 Investor Day strategy, focusing on growth, earnings expansion, and strong returns on invested capital.
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Shareholder Return Plan
Dividend Program: Adjusted EPS of $1 was up 3% from Q4 '24 EPS, primarily reflecting higher earnings in Canada and the benefit of share repurchases throughout 2025.
Share Repurchase Program: Adjusted EPS of $1 was up 3% from Q4 '24 EPS, primarily reflecting higher earnings in Canada and the benefit of share repurchases throughout 2025.
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Key Q&A
Q:Can you speak to how you're thinking about the near-term outlook in South America, particularly in Chile, and how this impacts product support in the region?
A:Kevin Parkes clarified that the market is not soft but undergoing fleet reorganization. Chile's copper mining production remains strong, with 132 new trucks delivered over the last two years and 16 more in backlog for this year. There may be near-term changes in product support as fleets are realigned, but the production outlook remains positive. Argentina is also showing promising activity, which could offset Chilean fleet adjustments.
Q:Can you share any conversations about being a prime power source provider for data centers in Alberta or Canada in general?
A:Kevin Parkes expressed excitement about the opportunity, particularly in Alberta, where there is a significant demand for power. He mentioned a specific opportunity being worked on but did not provide details. He highlighted Alberta's natural gas supply and pipeline network as key advantages for prime power opportunities.
Q:How is the company positioning itself for potential mining opportunities in Argentina, and when might these materialize as bookings and backlog?
A:Kevin Parkes stated that the company is optimistic about Argentina's opportunities and is thoughtfully organizing to support large mining fleets. He emphasized the need for capacity, inventory, and trained technicians. He expects some activity to show up in backlog and order intake this year.
Q:Can you provide color on the strong JV earnings from Pipeline International and the likelihood of an incremental pipeline in Western Canada?
A:Kevin Parkes noted that the JV benefits from opportunities outside Canada, including South America and the Middle East. He mentioned optimism in the U.S. due to proactive permitting and licensing. In Canada, while there is no immediate plan for an incremental pipeline, the existing infrastructure supports growth, and the company remains a strong advocate for additional pipelines.
Q:What is the status of the product support life cycle for machines delivered post-pandemic, and what is the update on construction product support efforts?
A:Kevin Parkes explained that many machines delivered in the last two years are reaching their first component replacements, which will drive product support growth. In Canada, the company is adding technicians and focusing on labor force growth. Construction product support has been strong in Chile, with double-digit growth for six consecutive years, while Canada and the U.K. are seeing improvements after softer markets.
Q:How is the company balancing positioning itself in Argentina's mining market while considering its volatile backdrop?
A:Kevin Parkes emphasized working closely with major international customers and the government to mitigate risks. The company is investing in people and tooling on-site and is optimistic about the general outlook in Argentina. Updates on progress are expected this year.
Q:Do the recent elections in Chile have any implications for the business, particularly regarding commercial perspectives, customer investments, and labor policies?
A:Kevin Parkes expressed optimism about the new administration's constructive stance on resource development, permitting, and mining industry support. He noted that labor relations and skilled labor availability remain challenges but expects the government to address these issues to support the economy.
Q:Can you provide an update on the rental business, including utilization trends and planned investments for 2026?
A:Kevin Parkes highlighted a secular trend in rental growth, particularly in North America. The company plans to invest in smaller machine rentals and power rentals in Canada and the U.K. Utilization rates are healthy, and rental revenues in Canada grew 9% last year. Investments will be thoughtful and aligned with market opportunities.
Q:Can you segregate the velocity of product support growth between parts, labor rates, and rebuild penetration?
A:Kevin Parkes stated that product support growth is driven by population, utilization, and penetration. Rebuild performance has been stable, and contracted service business is growing. The company added over 200 technicians last year and is focusing on increasing the labor proportion of service contracts. Parts growth has outpaced labor, but labor remains a key differentiator.
Q:What are the signs of higher activity in Canada's construction market, and how is the company responding?
A:Kevin Parkes pointed to improved order intake as a primary indicator of higher activity. The company is gaining market share and is optimistic about the construction outlook. Efforts to grow the labor force and service contracts are also contributing to the positive trend.
Q:What is the order intake trend in the Power Systems segment?
A:Kevin Parkes reported that order intake in Q4 was nearly double in Canada and the U.K. compared to the same quarter last year. Chile's power business is smaller but has shown encouraging growth. The company is excited about the opportunities in this segment.
Q:What are the capital allocation priorities given the company's strong working capital performance and low leverage?
A:David F. Primrose emphasized returning capital to shareholders through buybacks and dividends while investing in growth opportunities. The company remains committed to its return on invested capital range and thoroughly evaluates all investment opportunities.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details about being a prime power source provider for data centers in Alberta, citing that it was too early to share more information. Additionally, while discussing Argentina's mining opportunities, they acknowledged the challenges but did not provide concrete plans or timelines for addressing them.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Canada
EBIT margin
Investor Day
Power Energy
Product support
SGA margin
South America
UK Ireland
activity level
backlog
capital basis
capital velocity
cash flow
center market
construction power
construction sector
currency
energy sector
equipment sale
fleet
gas
improvement
margin basis
mining
oil
power energy
product support
recovery
region
return capital
revenue
sector activity
technology
PNFP Transcript
Finning International Inc. (FTT:CA) Q4 2025 Earnings Call Transcript
Positive2-11
The earnings call summary reflects strong financial performance, with projected growth in balance sheet, loans, deposits, and BHG earnings. The merger with Synovus and increased non-interest income guidance are positive indicators. Despite some uncertainties in Argentina and unspecified plans for data centers, the overall sentiment is optimistic, supported by proactive investment strategies and shareholder returns through buybacks and dividends.
Pinnacle Financial Partners, Inc. (PNFP) Presents at Bank of America Financial Services Conference 2026 Transcript
Neutral2-11
Pinnacle Financial Partners, Inc. (PNFP) Q4 2025 Earnings Call Transcript
Positive1-22
The earnings call summary and Q&A indicate strong financial performance with optimistic guidance, including significant growth in BHG earnings, non-interest income, and net interest margin. The merger with Synovus and strategic hiring plans suggest future growth. While some management responses lacked detail, overall sentiment is positive, supported by raised guidance and strategic initiatives, likely leading to a stock price increase of 2% to 8% over the next two weeks.
Pinnacle Financial Partners, Inc. (PNFP) Presents at Goldman Sachs 2025 U.S. Financial Services Conference Transcript
Neutral12-9
PNFP Report
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