TSE:MTL Mullen Group Q2 2024 Earnings Report C$13.09 +0.03 (+0.23%) As of 04:00 PM Eastern Earnings HistoryForecast Mullen Group EPS ResultsActual EPSC$0.37Consensus EPS C$0.30Beat/MissBeat by +C$0.07One Year Ago EPSN/AMullen Group Revenue ResultsActual Revenue$495.60 millionExpected Revenue$490.50 millionBeat/MissBeat by +$5.10 millionYoY Revenue GrowthN/AMullen Group Announcement DetailsQuarterQ2 2024Date7/25/2024TimeN/AConference Call DateThursday, July 25, 2024Conference Call Time10:00AM ETConference Call ResourcesConference Call AudioConference Call TranscriptInterim ReportEarnings HistoryCompany ProfilePowered by Mullen Group Q2 2024 Earnings Call TranscriptProvided by QuartrJuly 25, 2024 ShareLink copied to clipboard.There are 10 speakers on the call. Operator00:00:00Thank you for standing by. This is the conference operator. Welcome to the Mullen Group Limited 2nd Quarter 2024 Earnings Conference Call and Webcast. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. Operator00:00:31I would now like to turn the conference over to Murray K. Mullen, Chair, Senior Executive Officer and President. Please go ahead. Speaker 100:00:40Good morning, all, and welcome to Mullen Group's quarterly conference call. This morning, we're going to provide shareholders and interested investors with an overview of the Q2 financial results. And in addition, we will discuss the main drivers impacting these results, our expectations for the balance of the year and we'll close with a Q and A session. Now before I commence today's review, I'll remind everyone that our presentation contains forward statements. These forward looking statements are based upon current expectations and are subject to a number of risks and uncertainties. Speaker 100:01:12And as such, actual results may differ materially. So further information identifying the risks, uncertainties and assumptions can be found in the disclosure documents, which are filed on SEDAR Plus and at www.mullen group.com. Now with me this morning, I'm joined by the senior executive team. We have Richard Maloney, we have Joanna Scott, who happens to be traveling and on the road, and we have Carson Urlecker. In a few moments, I'll be turning the call over to Carson Urlacher, our Senior Financial Officer, who will be providing you with an overview of the second quarter financial results. Speaker 100:01:49And for those of you interested in detail, we've posted the MD and A, a detailed report covering all aspects of our results. So they're available for your viewing pleasure. I will keep my commentary short and provide a few of what I consider are the highlights in the quarter. Let's begin by acknowledging that this is a different market today than the last year, in fact, the last 2 years. So it is reasonable to expect results to be different than prior years. Speaker 100:02:19Besides, a simple comparison to what happened in prior years can be very misleading. What is more relevant is what is the state of the markets today is what will it look like tomorrow. But in addition, asking how we fared in this new market is a relevant question. Now when I look at the markets, I really focus on 2 fundamentals of the economy, the consumer and business investment. Nowhere is the change more acute than what the consumer today, the average consumer is stretched and under stressed, but it's not broken, thankfully. Speaker 100:02:55Their income doesn't go as far as it used to and mostly out of necessity. They become very price sensitive. This means suppliers must adapt as well. The move by central bankers around the globe to slow inflation by raising interest rates is working. Not only has a consumer been hit hard, so too is business which has slowed capital investment quite noticeably from our perspective. Speaker 100:03:18And once the economy slows, the supply chain disruption, a major contributor to inflation, these get resolved. So yes, this is a different market, but that doesn't mean there's no opportunity. At the Mullen Group, we thrive in this type of market environment. One where we capitalize as other struggle fundamentally, I believe there is this is the simple key to our success and that is that we were prepared for this market. So for example, we didn't bite when times were abundant. Speaker 100:03:48We just stayed in our lane and we executed, being quite satisfied to generate as much free cash as we could, never overpaying or over leveraging the balance sheet with overpriced acquisitions. Why? Because we did not believe that the policy driven good times would last. In other words, we maintained our discipline. Another key to our success is that we take a long term view. Speaker 100:04:10So for example, over the last 30 years, we've invested in lines of business where we view the competitive landscape as more rational. This is probably the single most important reason why our business is generating solid results today. We invest in business verticals we believe can generate free cash. In summary, we are happy to generate cash at the top of the cycle. We do not overcommit when it seems easy and then we grow at the bottom of the cycle when opportunity arises. Speaker 100:04:40The Potato World is a prime example and a major contributor to our strong revenue performance in Q2. More importantly, I'll just advise, we've just started working with the team at Canadian World on how to improve the bottom line. Now it will take our senior team a few quarters, but like all other acquisitions and we have many examples to prove this point out, profitability will ultimately be enhanced at Container World. This is what we do at Mullen Group. We acquire companies, then we strive to improve performance. Speaker 100:05:12So today, we have a large and diversified portfolio of business units that operate within multiple verticals in the economy. These business units are led by seasoned industry veterans that understand what it takes to be successful in changing markets. Quarter 2 just reinforces this and strategically we have invested significant capital in the less than truckload vertical, which just happens to not only be the largest component of our business, but also the most stable. The Specialized Industrial Service segment has a cyclical component to it, but it also has the most potential to overachieve in future quarters years because the business in this segment will eventually need new capital and this implies higher margins. The Logistics and Warehousing segment has been bolstered by the acquisition of Container World, adding another large business line for the likes of Banster Transportation and Cleason Group. Speaker 100:06:02And lastly, the U. S. 33PL segment business remains solid with the potential to grow as new features like AI are added to Silver Express, which is our proprietary IT platform on Holistic. So in terms of the quarter, nothing surprises, not the market, not the economy and not the outstanding performance by our business units. We came into 24 with a realistic game plan and we are executing to the plan. Speaker 100:06:28Now I'll turn it over the call over to Carson for more of the financial analysis and then we'll close with the Q and A session. Carson, you are up. Speaker 200:06:36All right. Well, thank you, Murray, and welcome, everyone. So as Murray mentioned, I will focus on the highlights from the Q2, the details of which are fully explained in the Q2 interim report, which is available on SEDAR Plus and on our website. So before I dive into the 2nd quarter highlights, I would like to make a couple overarching comments to help put our second quarter results into perspective. There are a couple of fundamental concepts regarding our long term investment strategy that enables us to generate free cash every quarter. Speaker 200:07:07First is our acquisition strategy. As Murray pointed out, for years, we've invested in niche businesses that have a moat or certain barrier to entry that tend to lead to more price stability. Container World is a great example. And had we completed this acquisition at the beginning of the second quarter, our revenues would have easily been in excess of $500,000,000 for the quarter. We also acquired tuck in acquisitions that drive margin improvement at our well managed business units. Speaker 200:07:33The acquisition of B and R being the most recent example. The second concept is our diversification. Over 40 business units each operate in their own region and are leveraged to a distinct vertical of the economy. Diversification adds stability and predictability to our free cash flows. In the Q2, consolidated revenues were $495,600,000 which is fairly consistent compared to last year as acquisitions added $26,900,000 of incremental revenue, most notably from the 2 months of financial results from Container World. Speaker 200:08:07The main reason revenue is generally flat year over year was due to the lower demand for major construction projects, including pipelines, as both the Trans Mountain expansion project and the Coastal GasLink pipeline project have essentially been completed. Overall freight demand was negatively impacted as suppliers and manufacturers were reluctant to increase inventory levels. Economic activity levels slowed in Canada due to a lack of capital investment in the private sector. That said, revenue per working day declined by a modest $100,000 per day to $7,700,000 in the quarter. However, as at June 2024, revenue per working day improved to $8,300,000 dollars This increase was mainly due to the incremental revenue generated from the Container World acquisition. Speaker 200:08:54This trend is consistent from a seasonality as we head into Q3, which is now typically our strongest quarter of the year. We generated OIBDA of 85,700,000 dollars an increase of $2,300,000 compared to prior year and is the 2nd highest Q2 ever recorded at Mullen Group, 2nd only to Q2 of 2022. Acquisitions added $4,700,000 of OIBDA, and we also experienced improved results in our LTL segment. These increases were somewhat offset by lower OIBDA in the L and W segment and from higher corporate costs. Operating margin improved to 17.3% as compared to 16.9% last year, despite more competitive pricing conditions in certain markets and a reduction in higher margin specialized business. Speaker 200:09:42DOE as a percentage of consolidated revenues decreased by 0.8% as our business units did a great job adapting to the current market conditions and controlling costs. S and A expenses as a percentage of consolidated revenue increased, resulting from higher costs experienced at Container World and from the relatively fixed nature of these expenses. Now let's take a closer look at how we performed by segment. So starting with our largest segment, revenues in the LTL segment were $189,800,000 down $3,600,000 from last year due to a softening in overall freight demand and really from a demarketing underperforming business. These declines were somewhat offset by $1,800,000 of incremental revenue from acquisitions. Speaker 200:10:27OIBDA was $37,500,000 up $3,000,000 from last year despite lower segment revenue, while operating margins improved by 2% to 19.8%. The main reason for the improved operating margin was due to how we integrated B and R's LTL operations at the start of the year into our existing network, which drove greater lane density as well as using our existing technology platform resulted in more efficient operations. So a great tuck in acquisition resulting in margin improvement. Our 2nd largest segment is our L&W segment. Revenues in the L&W segment were $150,900,000 up $8,000,000 from last year. Speaker 200:11:08Acquisitions added $22,200,000 of incremental revenue, which was somewhat offset by lower revenue generated by our existing business units due to shippers electing to keep a tight rein on inventory levels, a lack of capital investment and from competitive pricing in certain markets. OIBDA was $29,000,000 down $1,000,000 from last year due to lower revenues generated by our existing business units excluding acquisitions. This decrease was somewhat offset by $4,200,000 of OIBDA generated by Container World. Operating margins declined by 1.8% to a respectable 19.2%, primarily due to a more competitive pricing environment. Now moving to our S and I segment. Speaker 200:11:50Revenues were up 2 point $3,000,000 to $109,600,000 which was mainly due to $2,900,000 of incremental revenue from acquisitions. Our remaining business units in the segment generated relatively consistent revenue compared to last year. This is really a testament to our diversification strategy. The completion of the Trans Mountain and Coastal Gas projects resulted in a $9,100,000 reduction in revenue of Premay Pipeline, and Canadian dewatering also experienced lower demand for their services. These declines were offset by higher revenue generated by our drilling related services business units as activity levels in the Western Canadian Sedimentary Basin increased. Speaker 200:12:31In addition, our production services business units benefited from the commencement of plant turnaround and maintenance projects. Our business units participate in large capital projects like Trans Mountain and Coastal Gas from the beginning to its ongoing use, whereby we assisted in the construction phase to eventually filling the pipelines through our exposure of providing support services to the natural drilling activity as well as maintenance and turnaround work. OIBDA was $23,500,000 up $2,900,000 dollars from last year on higher OIBDA generated by our production services and drilling related services business units. Operating margins increased by 2.2% to 21.4 percent despite the loss of higher margin pipeline construction work due to more efficient operations and from plant turnaround projects, which generally provide higher margins. In our non asset base U. Speaker 200:13:24S. 3PL segment, revenues were 40 $6,900,000 a decrease of $3,900,000 from last year due to the ongoing issue of lower freight volumes and excess supply of trucking capacity, creating competitive market conditions. But despite the lower segment revenue, OIBDA was generally flat year over year at $800,000 Operating margin on a net revenue basis improved to 20% compared to 18.8% last year. Now moving to the balance sheet. On July 10, 2024, we announced the closing of approximately $400,000,000 of private placement debt. Speaker 200:14:00There was strong demand from the bond markets and the offering was significantly oversubscribed, mainly due to our disciplined approach to acquisitions, our large real estate portfolio and our ability to generate free cash through all business cycles. These 10 year long term notes match our long term investment strategy and once again provides us with a well structured balance sheet for the next decade. We intend to use these funds to repay the 2 $17,000,000 notes that are maturing in October, and we also use the portion of these funds to repay the amounts drawn on our bank credit facilities. Speaking of the bank credit facilities, in conjunction with closing the private debt deal, we upsized our facilities from $375,000,000 to 525,000,000 dollars which is currently undrawn, giving us significant short term liquidity. Excluding the notes being repaid in October of 2024, the principal amount outstanding on our private placement debt is approximately $608,000,000 That's net of cross currency swaps. Speaker 200:14:59This amount is less than the $655,000,000 we have in historical costs on our real estate on our balance sheet. Our new blended interest rate, excluding the notes being repaid in October, is approximately 5.3% per annum. So in summary, our balance sheet is well positioned to take advantage of opportunities that come our way, whether it be tuck in acquisitions that improve and drive margin improvement or if we see a new vertical that we will continue to diversify our business model. So with that Murray, I will pass the call back to you. Speaker 100:15:32Great job. Thanks, Carson. Just before we get into what the last half of twenty twenty four might look like and give you what we call the outlook, let me take you back to our Q1 2024 conference call. On that call, I reiterated that in our 'twenty three financial review, we expected the first half of 'twenty four, it would be soft and that economic activity might start gaining momentum as the year progressed as long as central bankers started lowering interest Well, today it appears, at least from the Bank of Canada's perspective, that they now recognize that the economy has slowed dramatically. In fact, Mr. Speaker 100:16:14Macklem noted in his most recent remarks, that they want to see economic growth pick up. So maybe just perhaps the economy might start turning the corner soon, at least that's our hope. But as you know, hope is not a strategy. So we'll stay true to our plan and that means the only way to grow in the short term is via acquisitions preferably and Carson mentioned this through the tuck ins because this is one of the surest ways we know of to drive margin improvement. And on margin improvement, we're going to stay laser focused on margins. Speaker 100:16:49In fact, we will sacrifice growth as we endeavor to increase margins. Margin improvement is our highest priority today. Last quarter, we generated some decent results, especially within the context of the slowdown in consumer spending and the dramatic decline in capital investment in Canada. And furthermore, you will recall that the major pipeline projects in Western Canada have been completed leaving quite a void in terms of economic activity, especially in Western Canada. Yet despite these headwinds, our results are pretty acceptable. Speaker 100:17:21So our belief is that we can build off of these results during the last half of twenty twenty four. And while we're not predicting any meaningful growth in the economy quite yet, we believe that demand has stabilized across most verticals we serve. In other words, we believe we have a bit of a momentum on our side and with the potential to add additional revenue through M and A, that's our plan. But I remind everyone, we are more than just disciplined. We are picky when it comes to acquisitions. Speaker 100:17:52We will not chase growth. On the other hand, we will aggressively pursue opportunities that can help drive margin growth. Now lastly, let me just speak to the dividend. There really are 2 important reasons why the Board decided to increase the monthly dividend payable to shareholders. Firstly, it should be obvious now that we have a constructive view for the prospects of our business. Speaker 100:18:19And secondly, we now have the balance sheet in place where we are both comfortable for the longer term and for pursuing our acquisition strategy. So starting in September, your monthly dividend increases to $0.07 per share per month, dollars 0.84 annually. And last quarter, I reiterated that your dividend is sacred. So with today's announcement, your dividend just increased by nearly 17%. So thank you for joining us and now let's go straight to the Q and A. Operator00:18:51Thank first question comes from Konark Gupta with Scotiabank. Please go ahead. Speaker 300:19:14Thanks and good morning everyone. Speaker 100:19:17Good morning. Speaker 300:19:18Good morning, Murray. Murray, you mentioned like the second quarter was pretty good, I know, but you also mentioned that you are seeing some stability in across your business, I guess. I just wanted to kind of dig in a little bit here, especially on the freight side. From what a lot of your competitors are telling or saying or reporting, seems like we are still kind of finding an inflection point in the market. So I just want to kind of like grab your thoughts. Speaker 300:19:48Where do you see the stability and where do you see sort of green shoots in your businesses today? And what could be your differentiating factors versus some of those competitors who are still struggling? Speaker 100:20:05Well, you are spot on, is that most of our competitor and we're talking about our public company competitors or those of us that are in the supply chain logistics, and it doesn't matter if it's real or my fellow competitors in trucking, blah, blah, blah. But at the end of the day, I think all of us see the same thing at the same time today, which is the market it looks like demand has stabilized. Doesn't appear to be going down anymore, which is really good news. The supply chain issues have generally been have been resolved. So that's the good news, Clark, is that it's stabilized. Speaker 100:20:56The other part of that is though, if you're in the wrong verticals, it's stabilized and it's crappy, like it's stabilized at virtually variable cost. So if you're in the wrong verticals, it's still going to be a tough grind in our view. But not every vertical is in that position. Every vertical has got more competitive, but some have become ridiculously competitive. But for the general part, we have avoided investing in those verticals over the years. Speaker 100:21:26So but most of our competitors everybody wants it to improve, Mark. We do too. But it's going to take some time for it to prove. Our point is we think it's stabilized and we think that the verticals that we're in and the businesses that we've got, they'll be able to hold their own. And as the competition, the little guys are really getting squeezed, Konark, in this market. Speaker 100:21:51And customers will have no choice to start migrating more towards the stability of those that are going to be around for the longer term. That might take a couple more quarters, but it's just going to be part of a natural cycle in our view. And we're situated pretty good. Speaker 300:22:14Okay. That makes sense. Thanks for that. And in terms of M and A, if you can help us map out the lay of the land, the new debt issuance and the payment or the diamond coming up in October plus the facilities you have, so net net it seems like you have maybe more than $500,000,000 $1,000,000,000 sorry, of capital to deploy. How do you want to allocate the capital here? Speaker 300:22:44Like dividend obviously is growing. I don't think it's going to be a huge impact or consumption on your capital maybe, but you continue the buybacks. How much do you really want to kind of put aside for M and A? And where are you seeing sort of more imminent opportunities? Speaker 100:23:02Well, that's a really deep discussion that we have with us at the senior executive level and then at the board level too, which is M and A, which implies growth. I said that implies growth on the top line. It doesn't always really and translate into bottom line or in free cash. Acquisitions, particularly major acquisitions are complicated and we are extremely disciplined, Connor. I do not chase growth. Speaker 100:23:36I want to every acquisition we do must have the ability for us to generate free cash over and above our cost of capital. So that's why we say to you the easiest ones, the best ones, the ones that give us the best opportunity for us to drive margin growth is tuck ins because we already have the infrastructure in place. We already got great seasoned management teams and all we got to do is layer in some more business to them and realistically you get rid of undisciplined market butter when you do that. But doing big transactions, that's really not our game unless we see one that is really, really strategic. And that might be LTL as an example as the last week when we did Richard was GARP1 1 in that 2014. Speaker 100:24:282015 in the LTL business. So we're picky. We're not going to lose that discipline, I can tell you right now. That's not going to happen. And every acquisition that we do, we will do it to drive margin improvement. Speaker 100:24:46I'm not doing it just for top line growth. That's a fool's game in my view, and we're not pursuing that strategy. That means we've got lots of capital available. Carson just explained that we've got a lot of available and we can use that to continue to invest in the strong business verticals we've got and some tuck in acquisitions and we'll give the rest of the money back to shareholders and then it's when you give it back to shareholders, it's either through dividend or share buyback and I think we've with the dividend increase we've highlighted is that the little shareholders that we've got, the individual and investment in our stock, and we have a lot of them, the dividend is very, very important to them. We've got some big shareholders, big funds that are in us, that's not important to them. Speaker 100:25:39But to the small investor, the increased dividend is very, very important. So we took the path that says, you know what, we're going to look after those the little shareholder. And gave them a nice return because our balance sheet is in great shape and our business is solid. That's our strategy. Operator00:26:06The next question comes from David Ocampo with Cormark Securities. Please go ahead. Speaker 400:26:13Thanks. Good morning, everyone. Hey, David. Good morning. And Marie, just speaking of verticals that are operating on thin margins, I think in your MD and A, you guys did call out exiting some businesses in the specialized and industrial space that aren't meeting your return thresholds? Speaker 400:26:32And it may be a bit too early to comment on it, but maybe you can speak to some of the general pockets that you're seeing that are no longer attractive and maybe even commenting if that's a large portion of your S and I book? Speaker 100:26:48On the verticals, there's 2 parts of the verticals that don't meet our thresholds. 1 is there like we just don't have any businesses that are generating some type of cash. We will shut them down. We don't wait on them. Where we get concerned, David, as we start taking a look and this is primarily in the specialized side where future capital requirements, we don't know whether the market will be able to justify those capital replacement cycles. Speaker 100:27:19So we've said, well, we might as well cut bait and are okay drilling and Trio drilling, Richard, are prime examples of that. So we just said, you know what, there's no growth. They might need more capital in a year or 2. We just said, you know what, we're not going to support the new capital. So we might if you're not going to support it, you might as well get out of it. Speaker 100:27:42So that's what we're going to do and we'll just have a transition plan for some of them. Those are not big verticals for us. Those are involved in we're involved in the heydays when drilling activity was very strong. They made us a ton of money. But right now, they're breakeven. Speaker 100:28:01But pretty soon, they're going to need new capital. I said, hey, getting it. So we might as well just take them to Ritchie Bros. And sell the assets and we'll redeploy that capital somewhere else, right, Richard? Absolutely. Speaker 100:28:12We got that wrong. Speaker 200:28:13Well, I Speaker 500:28:13think part of that is, that comes back, the people, it's hard to get the people as well. So we just looked at the winding that's down and it was a different day and different time in terms of how it will impact specialized and industrial services, Carson is very de minimis, virtually nothing, because they haven't been we haven't been busy in that in those operating lines for the last few years. Speaker 200:28:38Yes, that's correct, Rich. Those two business lines haven't really generated much of anything over the last couple of years. Speaker 100:28:46They haven't really cost us much, David. But what we're concerned about is that the capital replacement cycle start to come in and there's not enough activity in those for us to justify new capital. That's primarily why we decided to streamline that down in those. And I think the second part of your question, I think, had to do with was it share buybacks? Speaker 400:29:12No. I think that was a Conor question. Just shifting gears here, I mean, Container World is now under your corporate umbrella. But if I take a look at the margins, they're already pretty close to the L&W Group average. So maybe you could walk us through some of the operational improvements that you have already identified and where you see margins ultimately going once it's fully integrated? Speaker 100:29:37Yes. So let's just be clear. Yes, they've got margin, but those margins is being eaten up by your right of use assets, right, Corus, which is really leased facilities. So the company is paying its bills. It's generating enough cash to pay its bills, but it doesn't generate free cash yet. Speaker 100:30:00So that's where you can get a little tricked by IFRS rules, right? Speaker 600:30:07Right. Speaker 100:30:08So it generates the EBITDA, it generates the EBITDA, it pays all of its bills, but it's not generating free cash. That's where we come in as a senior team is that we will work with them on how to drive new better business processes, better measurement and a better focus on bottom line. That's where our investment the capital investment we made in the shares, we will get that return for our shareholders. And we have a long history of improving performance in the business units that we acquire. And that will be, I'm pretty sure, the same at Container World. Speaker 100:30:47But they've got to move away from running the business just to pay their bills to where we generate That's our job and that's what shareholders pay the senior team to do. Speaker 400:31:01And in terms of timing of the integration process? Speaker 100:31:04Yes, David, it's covering its bills, it's covering all the lease payments on a cash basis, so it's not a cash drain. But we don't invest to breakeven. We invest to make money. That's why we focus on free cash. And we just saw so many opportunities there when we did our due diligence. Speaker 100:31:20And there's some low hanging fruit that we'll get in the short term and early next year and then process improvements will drive margin improvements for many, many years for our shareholders because it's a great vertical to be in. Speaker 500:31:33And if I can add, David, as we face that line, as we've articulated in prior calls, that is a very difficult business to get into because of the severance bond requirements to bring alcohol and wine into the country and to move that around and the requirements to disclose or provide all the payments to the excise tax and so on. They have a very, very strong presence with roughly 1,300,000 square feet of space in BC that gives us a great opportunity and when we bring our disciplines to this team and we have a very eager leadership team that is looking to move forward on a go forward basis here. So we are pretty excited about the opportunity. It will take time, but we are we think it's a great opportunity. Speaker 400:32:19Okay. That's all I had for you guys. That was perfect. Operator00:32:26The next question comes from Cameron Doerksen with National Bank Financial. Please go ahead. Speaker 700:32:32Yes, thanks. Good morning. I just wanted Speaker 800:32:34to maybe ask a little bit about the, I guess, the full year outlook. I mean, obviously, Q2 was a pretty solid quarter in a tough market. But beginning of the year, you kind of highlighted a target of $325,000,000 in EBITDA. I'm just wondering what your updated thoughts are on hitting that number and just on hitting the broader targets as well? Speaker 100:32:59Yes. Cameron, I think that once again, you will probably take a look and at the end of the year, it will all shake out. Personally, I doubt if we're going to be far off the $325,000,000 is what we highlighted. And that was totally predicated upon the fact we thought the 1st part of the year would be difficult. We cautioned everybody, this is a difficult market. Speaker 100:33:25In fact, I would highlight that many of our competitors both sides of the border here in North and South were way more optimistic about the economy than what we were. We were just very realistic. And we did say, but it won't last forever, but the first part is going to be tough. Well, guess what, the first part was goddamn tough. But the central bankers will have no choice but to lower interest rates and the governments will have no choice but to help the consumers on the lower end of the scale. Speaker 100:34:01The average consumer that just grinds it out every day, they'll have no choice but to help them. That will stabilize our business and we'll be just fine as our view. So, yes, I think the full year outlook is pretty much I feel pretty good about that. We're clearly on a path now of 500 again, Carson. And I think we've always said, Cameron, that the 3rd quarter is now traditionally has been our stronger quarter, and I would expect that will show up in this quarter because as Carson reiterated even in the second quarter, we would have if we would have had Container World in for the full quarter, we would have had $505,000,000 $507,000,000 We would have been up nicely on revenue. Speaker 100:34:53And I don't see any I don't see much change. I see the markets pretty stable right now. So that implies we're generating Carson somewhere around $8,000,000 Per working day. Per working day. Of revenue. Speaker 100:35:06Yes, of revenue and those kind of things. So I think we and then if we do additional M and A that will pop up our full year guidance that we had at the start of the year. Speaker 200:35:18So Cameron, if you look at our trailing 12 months OIBDA, our EBITDA, we're sitting right around 320,000,000 dollars So you're right in that ballpark of what we articulated at the beginning of the year. So coming into the back half of twenty twenty four, Q2, we were virtually we were up a little bit in EBITDA this quarter compared to last year. So the trend is very close to what we articulated when we came out with the budget in January. Okay. Speaker 800:35:51No, that's very good. Maybe just a quick follow-up on just on the M and A and balance sheet. Just sort of wondering about your comfort level around leverages at this point. I mean, obviously, you got a little more stable market, free cash flow is good. But just wondering where you would potentially take the leverage to if you were to get more aggressive on the tuck in M and A? Speaker 100:36:20We would I think it would be a major transaction. I don't think we'd be comfortable in doing a major. We got lots of bank lines available, but we'd be awfully careful of stretching that over too much, Cameron, to be honest with you. If we see a great like a superstar opportunity, yes, we will stretch and then we'll go back to shareholders and say, look, let's do it again. But you know what, I can tell you, we can continue to do tuck ins all day long with the balance sheet we got and with the cash we generate and that will help us drive our revenue growth, but more importantly, drive our margin improvement. Speaker 100:37:07So don't look for us to go do a monster deal. We've grown we've doubled the company since COVID hit, since 2020, revenue side and everything else. And I go, we've grown a whole bunch and whatever we're now focused 100% on margin improvement. In fact, if you go to margin, in 2020, our operating margin was 21.4%. And then we grew like a son of a gun and we acquired companies and we're still working on improving the margins of these business units. Speaker 100:37:41And we hit the low point in 23 at 16.9, but we're on our way back up 17.3 this quarter. And in fact, if you back out our US 3PL business, which is a low margin business, but has no capital requirements, we'd have been 18.9%. So our focus is right now 100% on operating margin, not growth. We've already done the growth. We're just going to make more money now and then when we get more money, we'll give it back to shareholders, probably in the form of dividend to be honest with you. Speaker 100:38:09That's what we've highlighted. Speaker 500:38:10Cameron, I think it's worth pointing out as well in terms of M and A, the phone, the emails are constant right now with smaller, medium sized companies who are looking to sell, because just as we projected and prognosticated the operating environment is very difficult now with higher interest rates, labor costs that are sticky, everything costs more and these people do not are smaller enterprises cannot do not want to compete anymore. So we get calls virtually daily on looking to sell. We will not buy them all, but we will look at ones that tuck in and as tuck in implies, doesn't mean we are going to go and overpay for them. I'll use B and R as an example. Last year we bought B and R, we looked at and you see our operating results within the LTL side which as we pointed out in the report MD and A that we tuck them into Highway 9 and Grimshaw which both reported improved results. Speaker 500:39:01We are now going to destinations with fuller trailers that's called lane density and load factor. Those are the types of M and A opportunities we are going to look at, not some giant deal that's going to stretch our after we have done all this work getting our balance sheet in order and we are not stretched out. Speaker 100:39:18So the easiest way for me to really summarize it, Cameron, for everybody that's on the line and all of our shareholders, investors, We're not going big game hunting. We're going to be pinpoint accurate and we're out to improve margins. Hopefully that clarifies our M and A strategy for you. Speaker 800:39:34Absolutely, it makes total sense. I appreciate the color. Thanks very much. Speaker 500:39:38Thank you. Operator00:39:42The next question comes from Walter Spracklin with RBC Capital Markets. Please go ahead. Speaker 700:39:48Yes. Thanks very much, operator. So Murray, I'm going to ask kind of the same question, but in the more in the context of your share price, I mean, mean, obviously, you're having a good run here today, but still even after today's run, it's only up 3% year to date. Your valuation, I mean, you got an 11% free cash flow yield now. You're trading at a, by my metric, a 40% discount to your 2 Canadian peers. Speaker 700:40:17So you're not getting the credit for when I look at your business, I mean, you pointed to a stabilized market, but you've done a fantastic job at managing your cost base. Your margins are poised now for any macro growth that comes along, it should come out with nice operating leverage. Your debt leverage is reasonable. It's even opportunistic. So I'm struggling to see the valuation levels where they are, what causes it and it goes back I guess to M and A. Speaker 700:40:48I mean you want to garner some attention in your share price and tuck ins, I hear you, they're the way to kind of low risk capital allocation. But I'm wondering, you mentioned if a larger good opportunity came along, I think certainly that would be a catalyst and garner some attention. Do you start looking a little bit more broadly at those type of opportunities that maybe that acquisition maybe is not in your core market, but maybe adjacent enough and to open up a new growth avenue for you. Is that something you contemplate going adjacent with a larger transaction. I remember back in the day you did Livingston or you made a run at Livingston, right? Speaker 700:41:41I mean that kind of thing is that in the cards at all? I just love to hear your thoughts on that in terms of the catalyst to kind of get that valuation address? Speaker 100:41:54So that's something we talk about here. That's something you and I talked about and others have talked about. But here's the facts. We doubled the company since COVID hit. So we've done a lot of acquisitions and we do I don't think we really got a lot of credit for it. Speaker 100:42:10So I can't understand this thesis that while you're not going to grow, I said, well, we doubled the company in 5, 4 years. How's that for growth? Will we do additional ones? Yes, we'll do them if they're the right ones, Walter. But we are not going to do an acquisition to show top line growth. Speaker 100:42:33I'm not interested in that one iota. Here's what you need to think of our company. We're not going to be this fast paced growth. I'll tell you what we are. We focus and we study like a son of a gun ODFL, Old Dominion Freight Lines. Speaker 100:42:57I've known them for years. I love this and the senior team has heard me here. Okay, we've now got huge critical mass. We're $2,000,000,000 in sales and a little bit more. And I love what ODFL does. Speaker 100:43:10And now ODFL is maybe $5,000,000,000 maybe $5,500,000,000 in the U. S. So us at $2,000,000 we're bigger on a relative basis because we're just in this small little market called Canada. They make money and they do not chase acquisitions, Walter. They chase margin. Speaker 100:43:29We are chasing margin. We just happen to be in more verticals than ODFL because they've got up 350,000,000 people, but they're not growth hogs, Walter. They are just a great company and that's what we are and that's what we're going to focus on. Speaker 700:43:50So what I'm hearing is you want to focus on being a great company in your core market that you could parlay that into an adjacent segment that has great returns? I mean, like again, I go back to when you took a run at Livingston. I mean, what caused you to do that? Is that do you look back at that and say, okay, you know what, I wouldn't have done that if I had my time back or is that just what I'm asking is, is there another Livingston out there that might lure you in to an adjacent market if you saw the same type of shareholder? Yes. Speaker 100:44:30If we saw a vertical that we thought had the same opportunities to say LTL did in 2012, we really started to go into that. So LTL was a vertical that I thought was right for consolidation and for margin improvement whatever. That was over 10 years ago. Yes. So if we see another vertical like LTL that we think has a 10 year run and a long year run that we can that's underappreciated, yes, we would make that investment and move back to shareholders and make our case for it. Speaker 100:45:05But those will come around once in a while. Speaker 800:45:09Yes, you're not actively looking at anything there Speaker 400:45:12right now. Speaker 100:45:12Look, if we see it, we're going to do it. And that's the discussion we had internally and with the Board and everything else. And of course, we're going to continue to look at those. But let's those don't come around as often as we're talking every 10 to 12 years. So if it comes around, yes, we'll look at it. Speaker 100:45:33But let's not count on that. Let's count on just running a great business, improving margins over the next bit. If I see something opportunistic, you got it. I'll come and make my case. Awesome. Speaker 100:45:45Okay. Speaker 200:45:45Well, sorry, Speaker 500:45:45I'll add. Yes. 1 in 2009 when we looked at Livingston, right after the financial crisis, we saw the energy space starting to get that was when way back when Murray projected, hey, we're going to have problems in the oil space, energy because we can't get stuff out here. So we looked at Livingston, why? Because it's a different vertical that is tied to the bigger economy. Speaker 500:46:04So we looked at it very seriously, took a run at it. So would we and that demonstrates the forward thinking and that we needed to diversify our business. We lost out the CPP, IB and Sterling who had an infinite checkbook basically, but as we demonstrated shortly thereafter, started pivoting to the LTL side. Speaker 400:46:24All right. Speaker 700:46:24I appreciate the color as always guys. Thank you. Speaker 400:46:27Thank you. Thanks. Operator00:46:34The next question comes from John Gibson with BMO Capital Markets. Please go ahead. Speaker 600:46:41Thanks and congrats on a strong quarter in a tough market. I guess I'll ask Walter's question in another way. Wondering if you could talk about internal discussions around the dividend increase versus share buybacks. And just given where your valuation is, you're holding quite a bit of dry powder and you've talked about tuck in M and A, but could you potentially look at something like an SIB, just given where your valuation is sitting? Speaker 100:47:06We talk about that, John, all the time. That's a question that we get. And I don't know if there's a right or wrong answer to that. But under our NCIB over the last number of years, Carson, we've acquired we've bought back roughly Speaker 200:47:24Just shy of 19,000,000. Just 19,000,000 shares. For about 200,000,000, Bob. So let Speaker 100:47:33me flip it around on you, John. And I would say, okay, if we bought back 'nineteen and we spent $200,000,000 which obviously meant we generated free cash to be able to buy it back. And our stock price doesn't really reflect like why are we doing a bunch of share buybacks. And the problem is when you do a share buyback is you lose eyes that are following you. So I go, you know what, we're going to focus on the little investor and we're going to reward them for their loyalty with higher dividend. Speaker 100:48:05That's our primary focus right now. And you're going to get paid more and we're going to generate free cash. That's what we're all about. And then we can give that back. But share buybacks, I don't know if they're working. Speaker 100:48:20I'll be blunt with you. Speaker 600:48:25Okay. That's fair. Speaker 100:48:26We're going Speaker 300:48:27to find Speaker 100:48:27out whether shareholders want more money paid to them every month, which is dividends. I know our employees want more money every month, and I'm probably betting that the individual shareholder and we've got lots of small shareholders. I guarantee you they're happy today. Some big funds, they're probably not going to be happy with this. You should buy back the stock from me, so they can go invest in something else. Speaker 100:48:52Okay, yes, but it's not working for us. So I think you should be prepared. We're going to make as much money as you can, and we're going to give it back to shareholders with an emphasis more on dividend rather than share buyback. That's probably our strategy for the next bit. Speaker 600:49:13Okay, great. And last one for me, something I guess hasn't been really touched on. We're seeing strong energy driven activity in the WCSB and it's obviously showing up in your results. The outlook from my perspective also looks strong into 2025. Could you see yourselves putting capital to work here or even looking towards some M and A in the segment Speaker 100:49:33or is okay. Yes. Remember what I said in my comments about the S and I segment. I said over the next few quarters or the next few years, I do suspect that we're going to have to have a capital replacement cycle in that business and that implies our margins. That's why we like S and I as a vertical in our company. Speaker 100:49:52And yes, I can see I see a pretty good opportunities there. LTL is rock solid. That's only going to get stronger as we continue to do tuck in acquisitions in LTL. We've just proven it over and over and over again. So we'll stick on that game plan for us, Rich and Joe. Speaker 100:50:16Yes, absolutely. We're focused on that. S and I, we think has got good potential because we're going into a capital replacement cycle in that segment and that means you've got to have that implies some growth and some higher margins. So we like that. Logistics and warehousing, that's the big market and we will invest where we see opportunity for us to get some good loans. Speaker 100:50:46That's the work. And then even our US 3PL, we like what we're doing down there. We've got a great team down there that's got a new business plan. We're going to really expand these sales agents and expand the sales market as our major our big the big 3PLs are laying off 50% of their sales staff. We're not. Speaker 100:51:10And we're creating opportunities for these people that have been laid off and we're giving them an opportunity to be the Uber salesperson, if you will, because we have the technology platform and we are doubling up our investment in that to make sure that we have and Silver Express, we've got the right tools for that market. So we're okay with where we're at. We like our business model. We've got 40 business units. We've got lots of work to do to help each of them improve margin and when we do, we're going to give more back to shareholders. Operator00:51:51The next question comes from Tim James with TD Cowen. Please go ahead. Speaker 900:51:59Cowen. I just have one question Murray, just kind of a big picture question. When I think about the quarter and the performance, I mean, organic revenue was down. You had some headwinds from acquisitions and a bit of dilution while you get those streamlined. And yet your overall margin was up 40 basis points year over year. Speaker 900:52:23You also talked about sort of capital equipment spending headwinds and consumer headwinds. Should we be thinking about that improvement in your margin percentage? Is this just because and I'm oversimplifying a little bit, but you guys were really just ahead of the game and sort of getting ready for this. And so you were one step ahead with the cost structure. Or are there places you're getting some pricing That Speaker 100:52:50the that the market we've entered virtually a deflationary cycle to. No pricing. Or I'd say minimal. Just the LTI, you get some minimal price. But let me just highlight no pricing improvements all on the cost side and it's all on synergy. Speaker 100:53:12Get your cost down and focus, focus, focus. And then you get cost down because unfortunately when we did B and R, I think we had Speaker 300:53:2550 plus. 50 Speaker 100:53:28plus people that we were redundant as part of that acquisition. We knew it going in, Tim, but unfortunately 50 people had to find employment somewhere else, but not because it just wasn't at any value. And we were able to layer that into our network. And when you talk about synergy, but Speaker 300:53:52the verticals, Speaker 100:53:52it's all the verticals you're in, And but the verticals, it's all the verticals you're in of whether you can drive margin improvement by getting more critical mass and more operating efficiency. There is no pricing leverage in this market. That may becomes later 'twenty five, 'twenty six as the market as the competition just falters, but for right now, we're not counting on that. It's all operational efficiencies and watching your costs like a hawk. And as you said, yes, we prepared our business units going back to we hold our budget sessions in September of each year and we'll be outlining our game plan to our all of our senior teams in September of this year, but we expect for the next year. Speaker 100:54:38That's our job as senior executives is to prepare our business units and their job is to execute with the market that we've got. But we caution everybody, don't count on pricing yet. It's not here yet. Speaker 900:54:51Okay. Well, that's great. Congratulations. I mean, it's working well. Speaker 500:54:55Yes. Thank you. Speaker 900:54:55It's the only question I had. Speaker 200:54:57Tim, I would also add that we've really got to tip our hats to our business units. You look at the performance that they've done, these are long tenured people that have been with us through many cycles. They've seen this before. They know how to react and know how to make the changes that are needed. So them and their executive teams at each of our business units are really got to tip our hat to them too. Speaker 300:55:25Great. Okay. Thank you. Speaker 100:55:29Thanks, Tim. Cheers. Operator00:55:33This concludes the question and answer session. I would like to turn the conference back over to Mr. Mullen for any closing remarks. Please go Speaker 100:55:41ahead. Thanks for joining us folks and we look forward to chatting with you in, I guess late October, right? Yes. Or so when we've got we're going to be working with our business units to focus on our game plan and go from there. So thanks for joining us. Speaker 100:55:56Appreciate all the commentary and good questions. Cheers. Operator00:56:02This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallMullen Group Q2 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsInterim report Mullen Group Earnings HeadlinesRaymond James Raises Earnings Estimates for Mullen GroupApril 28 at 2:07 AM | americanbankingnews.comCormark Cuts Mullen Group (TSE:MTL) Price Target to C$17.00April 27 at 1:23 AM | americanbankingnews.comHere’s How to Claim Your Stake in Elon’s Private Company, xAII predict this single breakthrough could make Elon the world’s first trillionaire — and mint more new millionaires than any tech advance in history. And for a limited time, you have the chance to claim a stake in this project, even though it’s housed inside Elon’s private company, xAI.April 28, 2025 | Brownstone Research (Ad)Mullen Group (TSE:MTL) Upgraded at Raymond JamesApril 27 at 1:23 AM | americanbankingnews.comMullen Group (TSE:MTL) Price Target Cut to C$16.50 by Analysts at ScotiabankApril 27 at 1:23 AM | americanbankingnews.comCormark Issues Positive Estimate for Mullen Group EarningsApril 26 at 2:51 AM | americanbankingnews.comSee More Mullen Group Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Mullen Group? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Mullen Group and other key companies, straight to your email. Email Address About Mullen GroupMullen Group (TSE:MTL) is one of North America's largest logistics providers with a network of independently operated businesses provide a wide range of service offerings including less-than-truckload, truckload, warehousing, logistics, transload, oversized, third-party logistics & specialized hauling transportation. Mullen also provides a diverse set of specialized services related to the energy, mining, forestry, and construction industries in western Canada.View Mullen Group ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Alphabet Rebounds After Strong Earnings and Buyback AnnouncementMarkets Think Robinhood Earnings Could Send the Stock UpIs the Floor in for Lam Research After Bullish Earnings?Texas Instruments: Earnings Beat, Upbeat Guidance Fuel RecoveryMarket Anticipation Builds: Joby Stock Climbs Ahead of EarningsIs Intuitive Surgical a Buy After Volatile Reaction to Earnings?Seismic Shift at Intel: Massive Layoffs Precede Crucial Earnings Upcoming Earnings AstraZeneca (4/29/2025)Booking (4/29/2025)DoorDash (4/29/2025)Honeywell International (4/29/2025)Mondelez International (4/29/2025)PayPal (4/29/2025)Regeneron Pharmaceuticals (4/29/2025)Starbucks (4/29/2025)American Tower (4/29/2025)América Móvil (4/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. Start Your 30-Day Trial MarketBeat All Access Features Best-in-Class Portfolio Monitoring Get personalized stock ideas. Compare portfolio to indices. Check stock news, ratings, SEC filings, and more. Stock Ideas and Recommendations See daily stock ideas from top analysts. Receive short-term trading ideas from MarketBeat. Identify trending stocks on social media. Advanced Stock Screeners and Research Tools Use our seven stock screeners to find suitable stocks. Stay informed with MarketBeat's real-time news. Export data to Excel for personal analysis. Sign in to your free account to enjoy these benefits In-depth profiles and analysis for 20,000 public companies. Real-time analyst ratings, insider transactions, earnings data, and more. Our daily ratings and market update email newsletter. Sign in to your free account to enjoy all that MarketBeat has to offer. Sign In Create Account Your Email Address: Email Address Required Your Password: Password Required Log In or Sign in with Facebook Sign in with Google Forgot your password? Your Email Address: Please enter your email address. Please enter a valid email address Choose a Password: Please enter your password. Your password must be at least 8 characters long and contain at least 1 number, 1 letter, and 1 special character. Create My Account (Free) or Sign in with Facebook Sign in with Google By creating a free account, you agree to our terms of service. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
There are 10 speakers on the call. Operator00:00:00Thank you for standing by. This is the conference operator. Welcome to the Mullen Group Limited 2nd Quarter 2024 Earnings Conference Call and Webcast. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. Operator00:00:31I would now like to turn the conference over to Murray K. Mullen, Chair, Senior Executive Officer and President. Please go ahead. Speaker 100:00:40Good morning, all, and welcome to Mullen Group's quarterly conference call. This morning, we're going to provide shareholders and interested investors with an overview of the Q2 financial results. And in addition, we will discuss the main drivers impacting these results, our expectations for the balance of the year and we'll close with a Q and A session. Now before I commence today's review, I'll remind everyone that our presentation contains forward statements. These forward looking statements are based upon current expectations and are subject to a number of risks and uncertainties. Speaker 100:01:12And as such, actual results may differ materially. So further information identifying the risks, uncertainties and assumptions can be found in the disclosure documents, which are filed on SEDAR Plus and at www.mullen group.com. Now with me this morning, I'm joined by the senior executive team. We have Richard Maloney, we have Joanna Scott, who happens to be traveling and on the road, and we have Carson Urlecker. In a few moments, I'll be turning the call over to Carson Urlacher, our Senior Financial Officer, who will be providing you with an overview of the second quarter financial results. Speaker 100:01:49And for those of you interested in detail, we've posted the MD and A, a detailed report covering all aspects of our results. So they're available for your viewing pleasure. I will keep my commentary short and provide a few of what I consider are the highlights in the quarter. Let's begin by acknowledging that this is a different market today than the last year, in fact, the last 2 years. So it is reasonable to expect results to be different than prior years. Speaker 100:02:19Besides, a simple comparison to what happened in prior years can be very misleading. What is more relevant is what is the state of the markets today is what will it look like tomorrow. But in addition, asking how we fared in this new market is a relevant question. Now when I look at the markets, I really focus on 2 fundamentals of the economy, the consumer and business investment. Nowhere is the change more acute than what the consumer today, the average consumer is stretched and under stressed, but it's not broken, thankfully. Speaker 100:02:55Their income doesn't go as far as it used to and mostly out of necessity. They become very price sensitive. This means suppliers must adapt as well. The move by central bankers around the globe to slow inflation by raising interest rates is working. Not only has a consumer been hit hard, so too is business which has slowed capital investment quite noticeably from our perspective. Speaker 100:03:18And once the economy slows, the supply chain disruption, a major contributor to inflation, these get resolved. So yes, this is a different market, but that doesn't mean there's no opportunity. At the Mullen Group, we thrive in this type of market environment. One where we capitalize as other struggle fundamentally, I believe there is this is the simple key to our success and that is that we were prepared for this market. So for example, we didn't bite when times were abundant. Speaker 100:03:48We just stayed in our lane and we executed, being quite satisfied to generate as much free cash as we could, never overpaying or over leveraging the balance sheet with overpriced acquisitions. Why? Because we did not believe that the policy driven good times would last. In other words, we maintained our discipline. Another key to our success is that we take a long term view. Speaker 100:04:10So for example, over the last 30 years, we've invested in lines of business where we view the competitive landscape as more rational. This is probably the single most important reason why our business is generating solid results today. We invest in business verticals we believe can generate free cash. In summary, we are happy to generate cash at the top of the cycle. We do not overcommit when it seems easy and then we grow at the bottom of the cycle when opportunity arises. Speaker 100:04:40The Potato World is a prime example and a major contributor to our strong revenue performance in Q2. More importantly, I'll just advise, we've just started working with the team at Canadian World on how to improve the bottom line. Now it will take our senior team a few quarters, but like all other acquisitions and we have many examples to prove this point out, profitability will ultimately be enhanced at Container World. This is what we do at Mullen Group. We acquire companies, then we strive to improve performance. Speaker 100:05:12So today, we have a large and diversified portfolio of business units that operate within multiple verticals in the economy. These business units are led by seasoned industry veterans that understand what it takes to be successful in changing markets. Quarter 2 just reinforces this and strategically we have invested significant capital in the less than truckload vertical, which just happens to not only be the largest component of our business, but also the most stable. The Specialized Industrial Service segment has a cyclical component to it, but it also has the most potential to overachieve in future quarters years because the business in this segment will eventually need new capital and this implies higher margins. The Logistics and Warehousing segment has been bolstered by the acquisition of Container World, adding another large business line for the likes of Banster Transportation and Cleason Group. Speaker 100:06:02And lastly, the U. S. 33PL segment business remains solid with the potential to grow as new features like AI are added to Silver Express, which is our proprietary IT platform on Holistic. So in terms of the quarter, nothing surprises, not the market, not the economy and not the outstanding performance by our business units. We came into 24 with a realistic game plan and we are executing to the plan. Speaker 100:06:28Now I'll turn it over the call over to Carson for more of the financial analysis and then we'll close with the Q and A session. Carson, you are up. Speaker 200:06:36All right. Well, thank you, Murray, and welcome, everyone. So as Murray mentioned, I will focus on the highlights from the Q2, the details of which are fully explained in the Q2 interim report, which is available on SEDAR Plus and on our website. So before I dive into the 2nd quarter highlights, I would like to make a couple overarching comments to help put our second quarter results into perspective. There are a couple of fundamental concepts regarding our long term investment strategy that enables us to generate free cash every quarter. Speaker 200:07:07First is our acquisition strategy. As Murray pointed out, for years, we've invested in niche businesses that have a moat or certain barrier to entry that tend to lead to more price stability. Container World is a great example. And had we completed this acquisition at the beginning of the second quarter, our revenues would have easily been in excess of $500,000,000 for the quarter. We also acquired tuck in acquisitions that drive margin improvement at our well managed business units. Speaker 200:07:33The acquisition of B and R being the most recent example. The second concept is our diversification. Over 40 business units each operate in their own region and are leveraged to a distinct vertical of the economy. Diversification adds stability and predictability to our free cash flows. In the Q2, consolidated revenues were $495,600,000 which is fairly consistent compared to last year as acquisitions added $26,900,000 of incremental revenue, most notably from the 2 months of financial results from Container World. Speaker 200:08:07The main reason revenue is generally flat year over year was due to the lower demand for major construction projects, including pipelines, as both the Trans Mountain expansion project and the Coastal GasLink pipeline project have essentially been completed. Overall freight demand was negatively impacted as suppliers and manufacturers were reluctant to increase inventory levels. Economic activity levels slowed in Canada due to a lack of capital investment in the private sector. That said, revenue per working day declined by a modest $100,000 per day to $7,700,000 in the quarter. However, as at June 2024, revenue per working day improved to $8,300,000 dollars This increase was mainly due to the incremental revenue generated from the Container World acquisition. Speaker 200:08:54This trend is consistent from a seasonality as we head into Q3, which is now typically our strongest quarter of the year. We generated OIBDA of 85,700,000 dollars an increase of $2,300,000 compared to prior year and is the 2nd highest Q2 ever recorded at Mullen Group, 2nd only to Q2 of 2022. Acquisitions added $4,700,000 of OIBDA, and we also experienced improved results in our LTL segment. These increases were somewhat offset by lower OIBDA in the L and W segment and from higher corporate costs. Operating margin improved to 17.3% as compared to 16.9% last year, despite more competitive pricing conditions in certain markets and a reduction in higher margin specialized business. Speaker 200:09:42DOE as a percentage of consolidated revenues decreased by 0.8% as our business units did a great job adapting to the current market conditions and controlling costs. S and A expenses as a percentage of consolidated revenue increased, resulting from higher costs experienced at Container World and from the relatively fixed nature of these expenses. Now let's take a closer look at how we performed by segment. So starting with our largest segment, revenues in the LTL segment were $189,800,000 down $3,600,000 from last year due to a softening in overall freight demand and really from a demarketing underperforming business. These declines were somewhat offset by $1,800,000 of incremental revenue from acquisitions. Speaker 200:10:27OIBDA was $37,500,000 up $3,000,000 from last year despite lower segment revenue, while operating margins improved by 2% to 19.8%. The main reason for the improved operating margin was due to how we integrated B and R's LTL operations at the start of the year into our existing network, which drove greater lane density as well as using our existing technology platform resulted in more efficient operations. So a great tuck in acquisition resulting in margin improvement. Our 2nd largest segment is our L&W segment. Revenues in the L&W segment were $150,900,000 up $8,000,000 from last year. Speaker 200:11:08Acquisitions added $22,200,000 of incremental revenue, which was somewhat offset by lower revenue generated by our existing business units due to shippers electing to keep a tight rein on inventory levels, a lack of capital investment and from competitive pricing in certain markets. OIBDA was $29,000,000 down $1,000,000 from last year due to lower revenues generated by our existing business units excluding acquisitions. This decrease was somewhat offset by $4,200,000 of OIBDA generated by Container World. Operating margins declined by 1.8% to a respectable 19.2%, primarily due to a more competitive pricing environment. Now moving to our S and I segment. Speaker 200:11:50Revenues were up 2 point $3,000,000 to $109,600,000 which was mainly due to $2,900,000 of incremental revenue from acquisitions. Our remaining business units in the segment generated relatively consistent revenue compared to last year. This is really a testament to our diversification strategy. The completion of the Trans Mountain and Coastal Gas projects resulted in a $9,100,000 reduction in revenue of Premay Pipeline, and Canadian dewatering also experienced lower demand for their services. These declines were offset by higher revenue generated by our drilling related services business units as activity levels in the Western Canadian Sedimentary Basin increased. Speaker 200:12:31In addition, our production services business units benefited from the commencement of plant turnaround and maintenance projects. Our business units participate in large capital projects like Trans Mountain and Coastal Gas from the beginning to its ongoing use, whereby we assisted in the construction phase to eventually filling the pipelines through our exposure of providing support services to the natural drilling activity as well as maintenance and turnaround work. OIBDA was $23,500,000 up $2,900,000 dollars from last year on higher OIBDA generated by our production services and drilling related services business units. Operating margins increased by 2.2% to 21.4 percent despite the loss of higher margin pipeline construction work due to more efficient operations and from plant turnaround projects, which generally provide higher margins. In our non asset base U. Speaker 200:13:24S. 3PL segment, revenues were 40 $6,900,000 a decrease of $3,900,000 from last year due to the ongoing issue of lower freight volumes and excess supply of trucking capacity, creating competitive market conditions. But despite the lower segment revenue, OIBDA was generally flat year over year at $800,000 Operating margin on a net revenue basis improved to 20% compared to 18.8% last year. Now moving to the balance sheet. On July 10, 2024, we announced the closing of approximately $400,000,000 of private placement debt. Speaker 200:14:00There was strong demand from the bond markets and the offering was significantly oversubscribed, mainly due to our disciplined approach to acquisitions, our large real estate portfolio and our ability to generate free cash through all business cycles. These 10 year long term notes match our long term investment strategy and once again provides us with a well structured balance sheet for the next decade. We intend to use these funds to repay the 2 $17,000,000 notes that are maturing in October, and we also use the portion of these funds to repay the amounts drawn on our bank credit facilities. Speaking of the bank credit facilities, in conjunction with closing the private debt deal, we upsized our facilities from $375,000,000 to 525,000,000 dollars which is currently undrawn, giving us significant short term liquidity. Excluding the notes being repaid in October of 2024, the principal amount outstanding on our private placement debt is approximately $608,000,000 That's net of cross currency swaps. Speaker 200:14:59This amount is less than the $655,000,000 we have in historical costs on our real estate on our balance sheet. Our new blended interest rate, excluding the notes being repaid in October, is approximately 5.3% per annum. So in summary, our balance sheet is well positioned to take advantage of opportunities that come our way, whether it be tuck in acquisitions that improve and drive margin improvement or if we see a new vertical that we will continue to diversify our business model. So with that Murray, I will pass the call back to you. Speaker 100:15:32Great job. Thanks, Carson. Just before we get into what the last half of twenty twenty four might look like and give you what we call the outlook, let me take you back to our Q1 2024 conference call. On that call, I reiterated that in our 'twenty three financial review, we expected the first half of 'twenty four, it would be soft and that economic activity might start gaining momentum as the year progressed as long as central bankers started lowering interest Well, today it appears, at least from the Bank of Canada's perspective, that they now recognize that the economy has slowed dramatically. In fact, Mr. Speaker 100:16:14Macklem noted in his most recent remarks, that they want to see economic growth pick up. So maybe just perhaps the economy might start turning the corner soon, at least that's our hope. But as you know, hope is not a strategy. So we'll stay true to our plan and that means the only way to grow in the short term is via acquisitions preferably and Carson mentioned this through the tuck ins because this is one of the surest ways we know of to drive margin improvement. And on margin improvement, we're going to stay laser focused on margins. Speaker 100:16:49In fact, we will sacrifice growth as we endeavor to increase margins. Margin improvement is our highest priority today. Last quarter, we generated some decent results, especially within the context of the slowdown in consumer spending and the dramatic decline in capital investment in Canada. And furthermore, you will recall that the major pipeline projects in Western Canada have been completed leaving quite a void in terms of economic activity, especially in Western Canada. Yet despite these headwinds, our results are pretty acceptable. Speaker 100:17:21So our belief is that we can build off of these results during the last half of twenty twenty four. And while we're not predicting any meaningful growth in the economy quite yet, we believe that demand has stabilized across most verticals we serve. In other words, we believe we have a bit of a momentum on our side and with the potential to add additional revenue through M and A, that's our plan. But I remind everyone, we are more than just disciplined. We are picky when it comes to acquisitions. Speaker 100:17:52We will not chase growth. On the other hand, we will aggressively pursue opportunities that can help drive margin growth. Now lastly, let me just speak to the dividend. There really are 2 important reasons why the Board decided to increase the monthly dividend payable to shareholders. Firstly, it should be obvious now that we have a constructive view for the prospects of our business. Speaker 100:18:19And secondly, we now have the balance sheet in place where we are both comfortable for the longer term and for pursuing our acquisition strategy. So starting in September, your monthly dividend increases to $0.07 per share per month, dollars 0.84 annually. And last quarter, I reiterated that your dividend is sacred. So with today's announcement, your dividend just increased by nearly 17%. So thank you for joining us and now let's go straight to the Q and A. Operator00:18:51Thank first question comes from Konark Gupta with Scotiabank. Please go ahead. Speaker 300:19:14Thanks and good morning everyone. Speaker 100:19:17Good morning. Speaker 300:19:18Good morning, Murray. Murray, you mentioned like the second quarter was pretty good, I know, but you also mentioned that you are seeing some stability in across your business, I guess. I just wanted to kind of dig in a little bit here, especially on the freight side. From what a lot of your competitors are telling or saying or reporting, seems like we are still kind of finding an inflection point in the market. So I just want to kind of like grab your thoughts. Speaker 300:19:48Where do you see the stability and where do you see sort of green shoots in your businesses today? And what could be your differentiating factors versus some of those competitors who are still struggling? Speaker 100:20:05Well, you are spot on, is that most of our competitor and we're talking about our public company competitors or those of us that are in the supply chain logistics, and it doesn't matter if it's real or my fellow competitors in trucking, blah, blah, blah. But at the end of the day, I think all of us see the same thing at the same time today, which is the market it looks like demand has stabilized. Doesn't appear to be going down anymore, which is really good news. The supply chain issues have generally been have been resolved. So that's the good news, Clark, is that it's stabilized. Speaker 100:20:56The other part of that is though, if you're in the wrong verticals, it's stabilized and it's crappy, like it's stabilized at virtually variable cost. So if you're in the wrong verticals, it's still going to be a tough grind in our view. But not every vertical is in that position. Every vertical has got more competitive, but some have become ridiculously competitive. But for the general part, we have avoided investing in those verticals over the years. Speaker 100:21:26So but most of our competitors everybody wants it to improve, Mark. We do too. But it's going to take some time for it to prove. Our point is we think it's stabilized and we think that the verticals that we're in and the businesses that we've got, they'll be able to hold their own. And as the competition, the little guys are really getting squeezed, Konark, in this market. Speaker 100:21:51And customers will have no choice to start migrating more towards the stability of those that are going to be around for the longer term. That might take a couple more quarters, but it's just going to be part of a natural cycle in our view. And we're situated pretty good. Speaker 300:22:14Okay. That makes sense. Thanks for that. And in terms of M and A, if you can help us map out the lay of the land, the new debt issuance and the payment or the diamond coming up in October plus the facilities you have, so net net it seems like you have maybe more than $500,000,000 $1,000,000,000 sorry, of capital to deploy. How do you want to allocate the capital here? Speaker 300:22:44Like dividend obviously is growing. I don't think it's going to be a huge impact or consumption on your capital maybe, but you continue the buybacks. How much do you really want to kind of put aside for M and A? And where are you seeing sort of more imminent opportunities? Speaker 100:23:02Well, that's a really deep discussion that we have with us at the senior executive level and then at the board level too, which is M and A, which implies growth. I said that implies growth on the top line. It doesn't always really and translate into bottom line or in free cash. Acquisitions, particularly major acquisitions are complicated and we are extremely disciplined, Connor. I do not chase growth. Speaker 100:23:36I want to every acquisition we do must have the ability for us to generate free cash over and above our cost of capital. So that's why we say to you the easiest ones, the best ones, the ones that give us the best opportunity for us to drive margin growth is tuck ins because we already have the infrastructure in place. We already got great seasoned management teams and all we got to do is layer in some more business to them and realistically you get rid of undisciplined market butter when you do that. But doing big transactions, that's really not our game unless we see one that is really, really strategic. And that might be LTL as an example as the last week when we did Richard was GARP1 1 in that 2014. Speaker 100:24:282015 in the LTL business. So we're picky. We're not going to lose that discipline, I can tell you right now. That's not going to happen. And every acquisition that we do, we will do it to drive margin improvement. Speaker 100:24:46I'm not doing it just for top line growth. That's a fool's game in my view, and we're not pursuing that strategy. That means we've got lots of capital available. Carson just explained that we've got a lot of available and we can use that to continue to invest in the strong business verticals we've got and some tuck in acquisitions and we'll give the rest of the money back to shareholders and then it's when you give it back to shareholders, it's either through dividend or share buyback and I think we've with the dividend increase we've highlighted is that the little shareholders that we've got, the individual and investment in our stock, and we have a lot of them, the dividend is very, very important to them. We've got some big shareholders, big funds that are in us, that's not important to them. Speaker 100:25:39But to the small investor, the increased dividend is very, very important. So we took the path that says, you know what, we're going to look after those the little shareholder. And gave them a nice return because our balance sheet is in great shape and our business is solid. That's our strategy. Operator00:26:06The next question comes from David Ocampo with Cormark Securities. Please go ahead. Speaker 400:26:13Thanks. Good morning, everyone. Hey, David. Good morning. And Marie, just speaking of verticals that are operating on thin margins, I think in your MD and A, you guys did call out exiting some businesses in the specialized and industrial space that aren't meeting your return thresholds? Speaker 400:26:32And it may be a bit too early to comment on it, but maybe you can speak to some of the general pockets that you're seeing that are no longer attractive and maybe even commenting if that's a large portion of your S and I book? Speaker 100:26:48On the verticals, there's 2 parts of the verticals that don't meet our thresholds. 1 is there like we just don't have any businesses that are generating some type of cash. We will shut them down. We don't wait on them. Where we get concerned, David, as we start taking a look and this is primarily in the specialized side where future capital requirements, we don't know whether the market will be able to justify those capital replacement cycles. Speaker 100:27:19So we've said, well, we might as well cut bait and are okay drilling and Trio drilling, Richard, are prime examples of that. So we just said, you know what, there's no growth. They might need more capital in a year or 2. We just said, you know what, we're not going to support the new capital. So we might if you're not going to support it, you might as well get out of it. Speaker 100:27:42So that's what we're going to do and we'll just have a transition plan for some of them. Those are not big verticals for us. Those are involved in we're involved in the heydays when drilling activity was very strong. They made us a ton of money. But right now, they're breakeven. Speaker 100:28:01But pretty soon, they're going to need new capital. I said, hey, getting it. So we might as well just take them to Ritchie Bros. And sell the assets and we'll redeploy that capital somewhere else, right, Richard? Absolutely. Speaker 100:28:12We got that wrong. Speaker 200:28:13Well, I Speaker 500:28:13think part of that is, that comes back, the people, it's hard to get the people as well. So we just looked at the winding that's down and it was a different day and different time in terms of how it will impact specialized and industrial services, Carson is very de minimis, virtually nothing, because they haven't been we haven't been busy in that in those operating lines for the last few years. Speaker 200:28:38Yes, that's correct, Rich. Those two business lines haven't really generated much of anything over the last couple of years. Speaker 100:28:46They haven't really cost us much, David. But what we're concerned about is that the capital replacement cycle start to come in and there's not enough activity in those for us to justify new capital. That's primarily why we decided to streamline that down in those. And I think the second part of your question, I think, had to do with was it share buybacks? Speaker 400:29:12No. I think that was a Conor question. Just shifting gears here, I mean, Container World is now under your corporate umbrella. But if I take a look at the margins, they're already pretty close to the L&W Group average. So maybe you could walk us through some of the operational improvements that you have already identified and where you see margins ultimately going once it's fully integrated? Speaker 100:29:37Yes. So let's just be clear. Yes, they've got margin, but those margins is being eaten up by your right of use assets, right, Corus, which is really leased facilities. So the company is paying its bills. It's generating enough cash to pay its bills, but it doesn't generate free cash yet. Speaker 100:30:00So that's where you can get a little tricked by IFRS rules, right? Speaker 600:30:07Right. Speaker 100:30:08So it generates the EBITDA, it generates the EBITDA, it pays all of its bills, but it's not generating free cash. That's where we come in as a senior team is that we will work with them on how to drive new better business processes, better measurement and a better focus on bottom line. That's where our investment the capital investment we made in the shares, we will get that return for our shareholders. And we have a long history of improving performance in the business units that we acquire. And that will be, I'm pretty sure, the same at Container World. Speaker 100:30:47But they've got to move away from running the business just to pay their bills to where we generate That's our job and that's what shareholders pay the senior team to do. Speaker 400:31:01And in terms of timing of the integration process? Speaker 100:31:04Yes, David, it's covering its bills, it's covering all the lease payments on a cash basis, so it's not a cash drain. But we don't invest to breakeven. We invest to make money. That's why we focus on free cash. And we just saw so many opportunities there when we did our due diligence. Speaker 100:31:20And there's some low hanging fruit that we'll get in the short term and early next year and then process improvements will drive margin improvements for many, many years for our shareholders because it's a great vertical to be in. Speaker 500:31:33And if I can add, David, as we face that line, as we've articulated in prior calls, that is a very difficult business to get into because of the severance bond requirements to bring alcohol and wine into the country and to move that around and the requirements to disclose or provide all the payments to the excise tax and so on. They have a very, very strong presence with roughly 1,300,000 square feet of space in BC that gives us a great opportunity and when we bring our disciplines to this team and we have a very eager leadership team that is looking to move forward on a go forward basis here. So we are pretty excited about the opportunity. It will take time, but we are we think it's a great opportunity. Speaker 400:32:19Okay. That's all I had for you guys. That was perfect. Operator00:32:26The next question comes from Cameron Doerksen with National Bank Financial. Please go ahead. Speaker 700:32:32Yes, thanks. Good morning. I just wanted Speaker 800:32:34to maybe ask a little bit about the, I guess, the full year outlook. I mean, obviously, Q2 was a pretty solid quarter in a tough market. But beginning of the year, you kind of highlighted a target of $325,000,000 in EBITDA. I'm just wondering what your updated thoughts are on hitting that number and just on hitting the broader targets as well? Speaker 100:32:59Yes. Cameron, I think that once again, you will probably take a look and at the end of the year, it will all shake out. Personally, I doubt if we're going to be far off the $325,000,000 is what we highlighted. And that was totally predicated upon the fact we thought the 1st part of the year would be difficult. We cautioned everybody, this is a difficult market. Speaker 100:33:25In fact, I would highlight that many of our competitors both sides of the border here in North and South were way more optimistic about the economy than what we were. We were just very realistic. And we did say, but it won't last forever, but the first part is going to be tough. Well, guess what, the first part was goddamn tough. But the central bankers will have no choice but to lower interest rates and the governments will have no choice but to help the consumers on the lower end of the scale. Speaker 100:34:01The average consumer that just grinds it out every day, they'll have no choice but to help them. That will stabilize our business and we'll be just fine as our view. So, yes, I think the full year outlook is pretty much I feel pretty good about that. We're clearly on a path now of 500 again, Carson. And I think we've always said, Cameron, that the 3rd quarter is now traditionally has been our stronger quarter, and I would expect that will show up in this quarter because as Carson reiterated even in the second quarter, we would have if we would have had Container World in for the full quarter, we would have had $505,000,000 $507,000,000 We would have been up nicely on revenue. Speaker 100:34:53And I don't see any I don't see much change. I see the markets pretty stable right now. So that implies we're generating Carson somewhere around $8,000,000 Per working day. Per working day. Of revenue. Speaker 100:35:06Yes, of revenue and those kind of things. So I think we and then if we do additional M and A that will pop up our full year guidance that we had at the start of the year. Speaker 200:35:18So Cameron, if you look at our trailing 12 months OIBDA, our EBITDA, we're sitting right around 320,000,000 dollars So you're right in that ballpark of what we articulated at the beginning of the year. So coming into the back half of twenty twenty four, Q2, we were virtually we were up a little bit in EBITDA this quarter compared to last year. So the trend is very close to what we articulated when we came out with the budget in January. Okay. Speaker 800:35:51No, that's very good. Maybe just a quick follow-up on just on the M and A and balance sheet. Just sort of wondering about your comfort level around leverages at this point. I mean, obviously, you got a little more stable market, free cash flow is good. But just wondering where you would potentially take the leverage to if you were to get more aggressive on the tuck in M and A? Speaker 100:36:20We would I think it would be a major transaction. I don't think we'd be comfortable in doing a major. We got lots of bank lines available, but we'd be awfully careful of stretching that over too much, Cameron, to be honest with you. If we see a great like a superstar opportunity, yes, we will stretch and then we'll go back to shareholders and say, look, let's do it again. But you know what, I can tell you, we can continue to do tuck ins all day long with the balance sheet we got and with the cash we generate and that will help us drive our revenue growth, but more importantly, drive our margin improvement. Speaker 100:37:07So don't look for us to go do a monster deal. We've grown we've doubled the company since COVID hit, since 2020, revenue side and everything else. And I go, we've grown a whole bunch and whatever we're now focused 100% on margin improvement. In fact, if you go to margin, in 2020, our operating margin was 21.4%. And then we grew like a son of a gun and we acquired companies and we're still working on improving the margins of these business units. Speaker 100:37:41And we hit the low point in 23 at 16.9, but we're on our way back up 17.3 this quarter. And in fact, if you back out our US 3PL business, which is a low margin business, but has no capital requirements, we'd have been 18.9%. So our focus is right now 100% on operating margin, not growth. We've already done the growth. We're just going to make more money now and then when we get more money, we'll give it back to shareholders, probably in the form of dividend to be honest with you. Speaker 100:38:09That's what we've highlighted. Speaker 500:38:10Cameron, I think it's worth pointing out as well in terms of M and A, the phone, the emails are constant right now with smaller, medium sized companies who are looking to sell, because just as we projected and prognosticated the operating environment is very difficult now with higher interest rates, labor costs that are sticky, everything costs more and these people do not are smaller enterprises cannot do not want to compete anymore. So we get calls virtually daily on looking to sell. We will not buy them all, but we will look at ones that tuck in and as tuck in implies, doesn't mean we are going to go and overpay for them. I'll use B and R as an example. Last year we bought B and R, we looked at and you see our operating results within the LTL side which as we pointed out in the report MD and A that we tuck them into Highway 9 and Grimshaw which both reported improved results. Speaker 500:39:01We are now going to destinations with fuller trailers that's called lane density and load factor. Those are the types of M and A opportunities we are going to look at, not some giant deal that's going to stretch our after we have done all this work getting our balance sheet in order and we are not stretched out. Speaker 100:39:18So the easiest way for me to really summarize it, Cameron, for everybody that's on the line and all of our shareholders, investors, We're not going big game hunting. We're going to be pinpoint accurate and we're out to improve margins. Hopefully that clarifies our M and A strategy for you. Speaker 800:39:34Absolutely, it makes total sense. I appreciate the color. Thanks very much. Speaker 500:39:38Thank you. Operator00:39:42The next question comes from Walter Spracklin with RBC Capital Markets. Please go ahead. Speaker 700:39:48Yes. Thanks very much, operator. So Murray, I'm going to ask kind of the same question, but in the more in the context of your share price, I mean, mean, obviously, you're having a good run here today, but still even after today's run, it's only up 3% year to date. Your valuation, I mean, you got an 11% free cash flow yield now. You're trading at a, by my metric, a 40% discount to your 2 Canadian peers. Speaker 700:40:17So you're not getting the credit for when I look at your business, I mean, you pointed to a stabilized market, but you've done a fantastic job at managing your cost base. Your margins are poised now for any macro growth that comes along, it should come out with nice operating leverage. Your debt leverage is reasonable. It's even opportunistic. So I'm struggling to see the valuation levels where they are, what causes it and it goes back I guess to M and A. Speaker 700:40:48I mean you want to garner some attention in your share price and tuck ins, I hear you, they're the way to kind of low risk capital allocation. But I'm wondering, you mentioned if a larger good opportunity came along, I think certainly that would be a catalyst and garner some attention. Do you start looking a little bit more broadly at those type of opportunities that maybe that acquisition maybe is not in your core market, but maybe adjacent enough and to open up a new growth avenue for you. Is that something you contemplate going adjacent with a larger transaction. I remember back in the day you did Livingston or you made a run at Livingston, right? Speaker 700:41:41I mean that kind of thing is that in the cards at all? I just love to hear your thoughts on that in terms of the catalyst to kind of get that valuation address? Speaker 100:41:54So that's something we talk about here. That's something you and I talked about and others have talked about. But here's the facts. We doubled the company since COVID hit. So we've done a lot of acquisitions and we do I don't think we really got a lot of credit for it. Speaker 100:42:10So I can't understand this thesis that while you're not going to grow, I said, well, we doubled the company in 5, 4 years. How's that for growth? Will we do additional ones? Yes, we'll do them if they're the right ones, Walter. But we are not going to do an acquisition to show top line growth. Speaker 100:42:33I'm not interested in that one iota. Here's what you need to think of our company. We're not going to be this fast paced growth. I'll tell you what we are. We focus and we study like a son of a gun ODFL, Old Dominion Freight Lines. Speaker 100:42:57I've known them for years. I love this and the senior team has heard me here. Okay, we've now got huge critical mass. We're $2,000,000,000 in sales and a little bit more. And I love what ODFL does. Speaker 100:43:10And now ODFL is maybe $5,000,000,000 maybe $5,500,000,000 in the U. S. So us at $2,000,000 we're bigger on a relative basis because we're just in this small little market called Canada. They make money and they do not chase acquisitions, Walter. They chase margin. Speaker 100:43:29We are chasing margin. We just happen to be in more verticals than ODFL because they've got up 350,000,000 people, but they're not growth hogs, Walter. They are just a great company and that's what we are and that's what we're going to focus on. Speaker 700:43:50So what I'm hearing is you want to focus on being a great company in your core market that you could parlay that into an adjacent segment that has great returns? I mean, like again, I go back to when you took a run at Livingston. I mean, what caused you to do that? Is that do you look back at that and say, okay, you know what, I wouldn't have done that if I had my time back or is that just what I'm asking is, is there another Livingston out there that might lure you in to an adjacent market if you saw the same type of shareholder? Yes. Speaker 100:44:30If we saw a vertical that we thought had the same opportunities to say LTL did in 2012, we really started to go into that. So LTL was a vertical that I thought was right for consolidation and for margin improvement whatever. That was over 10 years ago. Yes. So if we see another vertical like LTL that we think has a 10 year run and a long year run that we can that's underappreciated, yes, we would make that investment and move back to shareholders and make our case for it. Speaker 100:45:05But those will come around once in a while. Speaker 800:45:09Yes, you're not actively looking at anything there Speaker 400:45:12right now. Speaker 100:45:12Look, if we see it, we're going to do it. And that's the discussion we had internally and with the Board and everything else. And of course, we're going to continue to look at those. But let's those don't come around as often as we're talking every 10 to 12 years. So if it comes around, yes, we'll look at it. Speaker 100:45:33But let's not count on that. Let's count on just running a great business, improving margins over the next bit. If I see something opportunistic, you got it. I'll come and make my case. Awesome. Speaker 100:45:45Okay. Speaker 200:45:45Well, sorry, Speaker 500:45:45I'll add. Yes. 1 in 2009 when we looked at Livingston, right after the financial crisis, we saw the energy space starting to get that was when way back when Murray projected, hey, we're going to have problems in the oil space, energy because we can't get stuff out here. So we looked at Livingston, why? Because it's a different vertical that is tied to the bigger economy. Speaker 500:46:04So we looked at it very seriously, took a run at it. So would we and that demonstrates the forward thinking and that we needed to diversify our business. We lost out the CPP, IB and Sterling who had an infinite checkbook basically, but as we demonstrated shortly thereafter, started pivoting to the LTL side. Speaker 400:46:24All right. Speaker 700:46:24I appreciate the color as always guys. Thank you. Speaker 400:46:27Thank you. Thanks. Operator00:46:34The next question comes from John Gibson with BMO Capital Markets. Please go ahead. Speaker 600:46:41Thanks and congrats on a strong quarter in a tough market. I guess I'll ask Walter's question in another way. Wondering if you could talk about internal discussions around the dividend increase versus share buybacks. And just given where your valuation is, you're holding quite a bit of dry powder and you've talked about tuck in M and A, but could you potentially look at something like an SIB, just given where your valuation is sitting? Speaker 100:47:06We talk about that, John, all the time. That's a question that we get. And I don't know if there's a right or wrong answer to that. But under our NCIB over the last number of years, Carson, we've acquired we've bought back roughly Speaker 200:47:24Just shy of 19,000,000. Just 19,000,000 shares. For about 200,000,000, Bob. So let Speaker 100:47:33me flip it around on you, John. And I would say, okay, if we bought back 'nineteen and we spent $200,000,000 which obviously meant we generated free cash to be able to buy it back. And our stock price doesn't really reflect like why are we doing a bunch of share buybacks. And the problem is when you do a share buyback is you lose eyes that are following you. So I go, you know what, we're going to focus on the little investor and we're going to reward them for their loyalty with higher dividend. Speaker 100:48:05That's our primary focus right now. And you're going to get paid more and we're going to generate free cash. That's what we're all about. And then we can give that back. But share buybacks, I don't know if they're working. Speaker 100:48:20I'll be blunt with you. Speaker 600:48:25Okay. That's fair. Speaker 100:48:26We're going Speaker 300:48:27to find Speaker 100:48:27out whether shareholders want more money paid to them every month, which is dividends. I know our employees want more money every month, and I'm probably betting that the individual shareholder and we've got lots of small shareholders. I guarantee you they're happy today. Some big funds, they're probably not going to be happy with this. You should buy back the stock from me, so they can go invest in something else. Speaker 100:48:52Okay, yes, but it's not working for us. So I think you should be prepared. We're going to make as much money as you can, and we're going to give it back to shareholders with an emphasis more on dividend rather than share buyback. That's probably our strategy for the next bit. Speaker 600:49:13Okay, great. And last one for me, something I guess hasn't been really touched on. We're seeing strong energy driven activity in the WCSB and it's obviously showing up in your results. The outlook from my perspective also looks strong into 2025. Could you see yourselves putting capital to work here or even looking towards some M and A in the segment Speaker 100:49:33or is okay. Yes. Remember what I said in my comments about the S and I segment. I said over the next few quarters or the next few years, I do suspect that we're going to have to have a capital replacement cycle in that business and that implies our margins. That's why we like S and I as a vertical in our company. Speaker 100:49:52And yes, I can see I see a pretty good opportunities there. LTL is rock solid. That's only going to get stronger as we continue to do tuck in acquisitions in LTL. We've just proven it over and over and over again. So we'll stick on that game plan for us, Rich and Joe. Speaker 100:50:16Yes, absolutely. We're focused on that. S and I, we think has got good potential because we're going into a capital replacement cycle in that segment and that means you've got to have that implies some growth and some higher margins. So we like that. Logistics and warehousing, that's the big market and we will invest where we see opportunity for us to get some good loans. Speaker 100:50:46That's the work. And then even our US 3PL, we like what we're doing down there. We've got a great team down there that's got a new business plan. We're going to really expand these sales agents and expand the sales market as our major our big the big 3PLs are laying off 50% of their sales staff. We're not. Speaker 100:51:10And we're creating opportunities for these people that have been laid off and we're giving them an opportunity to be the Uber salesperson, if you will, because we have the technology platform and we are doubling up our investment in that to make sure that we have and Silver Express, we've got the right tools for that market. So we're okay with where we're at. We like our business model. We've got 40 business units. We've got lots of work to do to help each of them improve margin and when we do, we're going to give more back to shareholders. Operator00:51:51The next question comes from Tim James with TD Cowen. Please go ahead. Speaker 900:51:59Cowen. I just have one question Murray, just kind of a big picture question. When I think about the quarter and the performance, I mean, organic revenue was down. You had some headwinds from acquisitions and a bit of dilution while you get those streamlined. And yet your overall margin was up 40 basis points year over year. Speaker 900:52:23You also talked about sort of capital equipment spending headwinds and consumer headwinds. Should we be thinking about that improvement in your margin percentage? Is this just because and I'm oversimplifying a little bit, but you guys were really just ahead of the game and sort of getting ready for this. And so you were one step ahead with the cost structure. Or are there places you're getting some pricing That Speaker 100:52:50the that the market we've entered virtually a deflationary cycle to. No pricing. Or I'd say minimal. Just the LTI, you get some minimal price. But let me just highlight no pricing improvements all on the cost side and it's all on synergy. Speaker 100:53:12Get your cost down and focus, focus, focus. And then you get cost down because unfortunately when we did B and R, I think we had Speaker 300:53:2550 plus. 50 Speaker 100:53:28plus people that we were redundant as part of that acquisition. We knew it going in, Tim, but unfortunately 50 people had to find employment somewhere else, but not because it just wasn't at any value. And we were able to layer that into our network. And when you talk about synergy, but Speaker 300:53:52the verticals, Speaker 100:53:52it's all the verticals you're in, And but the verticals, it's all the verticals you're in of whether you can drive margin improvement by getting more critical mass and more operating efficiency. There is no pricing leverage in this market. That may becomes later 'twenty five, 'twenty six as the market as the competition just falters, but for right now, we're not counting on that. It's all operational efficiencies and watching your costs like a hawk. And as you said, yes, we prepared our business units going back to we hold our budget sessions in September of each year and we'll be outlining our game plan to our all of our senior teams in September of this year, but we expect for the next year. Speaker 100:54:38That's our job as senior executives is to prepare our business units and their job is to execute with the market that we've got. But we caution everybody, don't count on pricing yet. It's not here yet. Speaker 900:54:51Okay. Well, that's great. Congratulations. I mean, it's working well. Speaker 500:54:55Yes. Thank you. Speaker 900:54:55It's the only question I had. Speaker 200:54:57Tim, I would also add that we've really got to tip our hats to our business units. You look at the performance that they've done, these are long tenured people that have been with us through many cycles. They've seen this before. They know how to react and know how to make the changes that are needed. So them and their executive teams at each of our business units are really got to tip our hat to them too. Speaker 300:55:25Great. Okay. Thank you. Speaker 100:55:29Thanks, Tim. Cheers. Operator00:55:33This concludes the question and answer session. I would like to turn the conference back over to Mr. Mullen for any closing remarks. Please go Speaker 100:55:41ahead. Thanks for joining us folks and we look forward to chatting with you in, I guess late October, right? Yes. Or so when we've got we're going to be working with our business units to focus on our game plan and go from there. So thanks for joining us. Speaker 100:55:56Appreciate all the commentary and good questions. Cheers. Operator00:56:02This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.Read morePowered by