Wajax (WJX) Scotiabank 24th Annual Transportation & Industrials Conference summary

Quarter recap and market environment

• Sales declined due to the absence of a major mining shovel sale and margin compression from increased supply and cautious customer spending.

• Margins fell about 300 basis points, with higher expenses and inventory levels impacting leverage and interest, but margins remain above 2019 levels, with recent softening seen as episodic due to inventory adjustments.

• Customers postponed large capital expenditures amid election and interest rate uncertainty, though some positive earnings from public customers were noted.

• Equipment backlog increased, supported by OEM financing programs and improved inventory normalization post-COVID, reaching $554 million in 2023.

• Reported 2023 revenue of $2.15 billion, a 10% increase from 2022, with 55% from heavy equipment and 45% from industrial parts and ERS.

Strategic initiatives and operational adjustments

• Shifted business mix to 55% industrial parts and ERS, supporting higher margins and more stable revenue, with parts and service accounting for 70% of revenue in 2023.

• Implemented cost-saving measures, including headcount reductions and facility consolidations, with further opportunities identified.

• Leveraged a unified ERP system to streamline product and pricing management, and rationalized vendor relationships.

• Strategic priorities for 2024 include building a people-first culture, expanding parts and service, leveraging the Hitachi partnership, targeted acquisitions, cost structure improvements, and ERP rollout.

• Maintained focus on profitable growth, emphasizing margin enhancement over rapid expansion.

Hitachi partnership and product strategy

• Expanded direct distribution agreement with Hitachi since March 2022 enhances access to products, parts, and customer support, enabling product differentiation and exclusive parts/service opportunities.

• Hitachi aims to triple North American market share, with ongoing initiatives in financing, parts logistics, and potential product line extensions.

• No need for additional locations; focus remains on optimizing existing footprint and possibly adding a distribution center.