Q1 2021 Mullen Group Ltd Earnings Call

Thank you for standing by this is the conference operator welcome.

Welcome to the Mullen Group Ltd, first quarter earnings conference call and webcast.

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I would now like to turn on a conference over on Murray K Mullen, Chairman CEO and President. Please go ahead.

Good morning on welcomed Eyeballing. This quarterly conference call. So before I commence today's review I'll remind everyone that our presentation contains forward looking statements.

Based upon current expectations that are subject to a number of uncertainties and risks.

Actual results may differ materially no further information identifying the risks uncertainties and <expletive>umptions can be found on the disclosure documents, which are filed on SEDAR.

And at Www Dot Mullen group Dot Com. So with me this morning, and we're all social distancing.

It's near all everyone else on my line is I'm <expletive>uming.

I have our entire executive team, which as CFO.

Clark, Richard Maloney Senior VP Joanna Scott.

<unk> who's our corporate secretary on VP of corporate services, and Carson or blocker.

Our corporate controller.

So thanks for joining us from participating at our quarterly financial and business update call today.

I'll be reviewing the financial results for the first quarter or we will be for the first quarter of 2021 will provide an update on the two acquisitions that we've recently announced thus far in 2021.

And discuss our view of what the freight environment looks like post COVID-19.

We all must be realistic and I caution every wasn't until this virus is brought under control.

Nothing is really certain.

But and this is the really good news there is ample evidence to suggest that once the impact of Covid has minimized the economy will recover quickly and show very strong growth.

Active ingredient for freight demand and improve margins.

Now, we only need to look to the U S for guidance.

<unk> economy is on fire and freight demand has never been better.

So later shortly I'll be turning the call over to Japan to highlight our first quarter results on overall operating performance, but before I do let me recap what I see is the emerging trends.

Significant events that are impacting the supply chain logistics and our business.

Now once again, the consumer reign Supreme the evidence is compelling and it's widespread.

Yes, Covid has impacted all of our lives. It is a disaster from a health care perspective, but nothing seems to stop the insatiable appetite of the consumer so even though the in store.

It has been disrupted.

The ease with which you can buy online has transformed the shopping experience E. Commerce has revolutionized how consumer spend.

But this is also change the supply chain dramatically today consumer goods are shipped directly to home from warehouses or fulfillment centers, usually in packages and boxes. So if youre on the cardboard industry, it's booming, but the trees are crying out of distress.

We see more deliberate smaller packages and lots of boxes that all need recycling.

So the consumer this is now the safest most convenient and cheapest way to shop Beast.

Besides if you don't like it send it back this emerging trend is not only is not necessarily changed the truckload industry. However.

Uh huh.

And it also was kept freight demand, especially the van and container shipment industry is strong where the change has occurred is in the final mile component of the delivery process as I mentioned more on smaller packages delivered to the home as compared to pallets delivered to the storefront in essence, a significant amount of consumer created the diverse.

From the retail malls to warehouses.

And this trend is the primary reason our L. T L business has been outperforming.

Second trend I see as the supply chain is very tight it's driven by a combination of strong consumer banner just demand I just spoke about.

And supply chain disruptions.

There was a reduction in manufacturing capability to see the workplace issues additional sickness, and whose safety protocols et cetera. As a result bottlenecks are now appearing regularly.

And that's placing tremendous strain on the age old concept just in time management in fact, I personally believe business must be prepared to pivot towards just in case inventory management and this implies higher costs forward planning and lots of warehousing.

Okay.

Number three candidate is not seeing as of yet at least a return to capital investment now Theres, new the new paid your projects are not being sanctions in capital goods continue to leg.

And we know it's not because of interest rates or the cost of capital. This is the primary reason the flatbed and specialized hauling component of the Canadian trucking industry continues to underperform.

Number four there is what I'd call a mega trend occurring in the logistics space and it's called consolidation mergers and acquisitions are occurring quite regularly in this space and I'm happy to report we have found two acquisitions of size to start 2021, both the <unk> group, which is based on British Columbian apps transport group out of Ontario.

Our brand name companies, they provide our company with new growth platforms, and most importantly, the opportunity to enhance profitability. Once we capture the synergies in fact synergies are the most critical component. We look forward Act was in our acquisition strategy.

<unk> acquisitions are too expensive let.

Let me give you a perfect example, several years ago, we acquired another platform company. It's called the guard wide group based on Manitoba in five short years under our ownership. The guard one management team with our capital support has increased revenue guys revenues by approximately 50% and doubled operating profitability. So we know the plan.

Sure.

The fifth trend I see as technology on this is nothing new everyone knows about a day boys at changing and changing fast.

Here at our group, we're on the leading edge when it comes to inventory management systems data management and security, we're investing heavily in handheld technology, we're bringing real time data tracking to every customer and we were preparing for the digital Revolution, we are accelerating our investment in energy efficient delivery vehicles to ensure we minimize our environmental footprint.

Now this is a transition that will take some time, but it is irreversible. So we've already started the journey.

And six on lastly, there's ample evidence to suggest a recovery in Canada is all on natural gas industries within reach commodity prices are rising additional takeaway pipeline capacity is getting closer to reality. The industry is changing its focus to meet new standards. The balance sheets have been restored it day after nearly collapsing last year.

So all in all we believe it's only a matter of time before the service industry, we will see much better days.

I'm not quite ready to commit a bunch of capital to this segment, yet, but we are definitely more constructive than we have been for quite some time.

So on each of these emerging trends I'm delighted to report our organization is well position, we've always been a leading edge of company and this is not about to change. We're always looking forward now a quick comment on our quarterly results before I turn it over to Japan.

A L T O was solid and up year over year logistics and warehousing was in line with last year, but as of yet no growth as the Canadian economy continues to be held back by government restrictions and a lack of capital capital goods investment.

In other words on segment results were decent just not where I'd like to see them and specialized industrial was down noticeably primarily due to a reduction in pipeline construction activity, which was really slow due to government mandated closures of the two major projects Trans mountain crude oil pipeline and coastal gas to the new Kitimat LNG plant in <unk>.

Slower oil production work, where pricing remains interest rates distress levels. So overall our results were in line with our expectations from within our prior guidance to shareholders, where we cautioned that COVID-19 would be the deciding factor so Cisco and I'll now turn it over to you Europe and you'll give a little more detail on our quarterly risk.

<unk>.

So all you.

Thank you Murray and good morning, fellow shareholders I'll get a little bit more granular. However, our interim report contains the details that fully explain our performance as such I will only provide some high level commentary.

For the quarter consolidated revenue declined by approximately 9% or down to $295 million as compared to $318 $2 million in 2020, the effects of COVID-19 continue to negatively impact the economy and it is still below pre pandemic levels as efforts to contain the virus continue to consume.

<unk> the economy Rev.

Revenue in the consumer driven less than truckload segment rose by six 9% in part due to the acquisition of Pacific Coast Express.

Adjusting for this acquisition and for fluctuations in fuel surcharge revenue revenue grew by two 1% due to the over underlying strength of consumer spending.

Revenue in the logistics and warehousing and specialized <unk> industrial services segment declined by $5, one and 28, 8% year over year, respectively.

Should come as no surprise to anyone given the current situation as a resurgence of the virus has prompted governments to reimpose containment measures and the start stop nature will likely haunt us for the foreseeable future. Additionally, despite higher oil prices our customers remain cautious in the rig count remains well below pre pandemic levels.

I know many analysts work on sequential type model. So a quick recap on a sequential basis consolidated revenue decreased by $7 2 million largely due to the seasonal effects of the post holiday and a poor February that was mired by bad weather and Covid shutdowns March however performed on par with.

Prior year, but it should be noted that March of 2020 was impacted by the initial effects of COVID-19, especially within our F&I segment. The <unk> segment was up three 7% on a sequential basis, a little bit better than historic trend.

Logistics and warehousing segment was down by $5, seven which was better than the 2020 sequential reduction of seven eight but more or less on par with historic seasonal trends.

As it was affected in 2020 by COVID-19.

This F&I segment that typically shows improved results on a historic basis saw a sequential decline of 6.5% simply put despite better commodity prices, our customers remain cautious and COVID-19 impacted construction activity for <unk> pipelines.

As for profitability operating income before depreciation.

And amortization, commonly referred to as EBITDA increased by $1 9 million or four 2% to 47, 1% segment EBITDA increased in the <unk> segment by $6 million. However, in the logistics and warehousing and the specialized <unk> industrial services segment.

Those segments declined by half a million dollars and $2 4 million respectively of course. This number comes in part as a result of Qs the underlying EBITDA number adjusted for Qs was $41 1 million compared to $45 $2 million in 2020 down an absolute dollar basis, but without <unk>.

Any benefit of Qs, our operating margin was virtually flat at 14, 1% from 14, 2% in 2020, primarily due to cost control measures, especially within the F&I segment. This margin management was achieved despite the rise in diesel fuel prices that rose nationally by 22.

In the last quarter.

Year over year.

Fuel surcharge revenue always lags as it is set after the drop or rising diesel prices and we have a small win on the way down like we did in for the most of 2020 and a small loss on the way up my hope is that we will be able to mitigate higher diesel fuel prices through higher fuel surcharge revenue, but also continued.

Focus on costs and the dollar cost averaging effect of generally fixed <unk> expenses over higher revenue of course higher revenue is always COVID-19 dependent but the revenue trend continues to improve.

Looking at other notable items net cash from operating activities for the period was essentially flat from prior year at $39 million overall, our cash build during the quarter was $12 $8 million and we exited the quarter with $117 7 million. However, our cash balance change materially after the quarter due to the acquisition of the Bachelor Group.

For the analyst community I'll refer you to note 17 or subsequent events.

Events note within our financial statements and you can see how much we paid for the Master Group you would also note that the apps group has similar revenue and so again you would expect similar consideration, although we have not publicly announced our apps consideration quite yet but.

But after these investments are after this investment for the balance for group as well as paying our taxes interest obligations on dividends.

On our $150 million line of credit remains undrawn. So as of today, we're still not borrowing any money.

No.

Lastly, a quick word on ESG profits and cash generation are good but not as they come at the expense of worker safety or the environment last year. This time, we were in the initial stages of a pandemic and we took unprecedented steps to protect our frontline workers lives and livelihoods by implementing new safety protocols and providing.

<unk> financial help well ahead of any government programs that ethos of taking a wholesome or balance approach is unwavering and our first quarter safety results continue to improve our lost time claim ratio improved to 0.61, and our total recordable injury rate was reduced to 3.05 in short our commitment to safe.

He will not be compromised by profit and on that note I would like to personally thank our frontline workers, who tirelessly deliver essential goods each and every day, ensuring our cupboards are full and our economy moves on.

Lastly for those who have not had time to review our information circular you will note that 2000, Twenty's EBITDA was up by $16 7 million or 8%, but our profit share was virtually flat in our total executive compensation was down simply put we excluded queues in any of our calculations of executive compensation, we did not need government to.

US into doing the right thing that's good governance, so with that Murray I'll p<expletive> the conference back to you. Thank you.

Thanks, Scott well that was also the disclosure.

Folks.

Typically I wouldnt have much new to offer in terms of guidance or update.

Because it was only eight weeks ago that I last provided some comments.

To our shareholders and investors you May recall for example, then in February I completed the conference call with the following I expect 2021 results to be slow out of the gate with a strong finish while I got the first part right and it sure seems I might get the second part right now.

As well, because we announced two pretty good sized transactions that will ultimately drive on.

Our future growth and profitability and of course, we all need to see COVID-19 to be stopped in his tracks for a return to full economic growth and.

And for my full year predictions to be accurate. So in other words, there is hope out there.

But we're not quite there yet in summary, I'm a belief that the Canadian economy will rebound post Covid I watch what is happening in the U S. For example on a successful vaccination program gets widely distribute it COVID-19 cases fall dramatically and the economy opens up so we know what's in store for Canada, It's only <unk>.

N.

The financial system is loaded with money and liquidity there will be pent up demand in both of these ingredients will.

We will drive the economic recovery.

Now LTE all remain on a steady as business. The consumer spend will continue and then we have one of the best networks of any company in Canada, which is only wider and stronger with the addition of masters in apps L. T O capabilities logistics and warehousing is poised for a robust recovery as demand.

For free returns and with just a marginal increase in additional demand comes pricing leverage the secret sauce to improve operating profitability, we are well positioned to take advantage when the opportunities presented.

And then I, even see some light on our oilfield and industrial segment as the year unfolds pipeline construction activity remains slower than last year due to COVID-19 shutdowns, but the work is still there in fact, it looks like the work that we had originally planned for this year will be now pushed out into 2022 at least a good portion of it.

Driving our drilling activity will be stronger than last year, how could that be.

But it's still going to lag 2019 levels, but I suspect the difference narrows as the year unfolds in 2022 will be better.

Our strategy as it relates to the old on natural gas industry is to make sure. We are positioned to capture business as demand increases and you invest capital, where we see we can help the industry adapt to new stricter ESG commitments. For example, we've already invested new state of the art technology to clean storage tanks.

These are remote gotta devices with zero tank entry required by our people, it's safer, it's efficient and it's the future of tank cleaning. We're also investing in digitizing our world.

Inventory management systems that formula about every product will be barcoded, ensuring we can minimize inventory shrinkage, but more importantly, our customer smell can will be easing it'll be easy for them to track what product was down on the drill hall in real time. This is the brilliance of digitizing inventory with handheld technology and inventory management.

Systems that we use at our E E Commerce businesses. For example, we can adapt the old paper guesswork system to real time data. So my message to our shareholders is this as it relates to the oil and natural gas industry is changing and we will adapt to capture market share as best we can because it remains a big business.

And if you don't believe me look at the trade data energy exports rain large.

Lastly, I will re iterate our approach to acquisitions, yes acquisitions provide headline grabbing attention and top line revenue growth, but only strategic acquisitions create long term value to me. This means investing in targets that are strategic where synergies can be realized.

We invest in technology to make the business more efficient and then seasoned management teams can deliver bottom line performance, we recently announced our intent to acquire two really good companies right here in Canada, and we will continue to look for more of these platform type acquisitions.

And then we always have the tuck in opportunities to drive scale and I always look to see how free cash can be generated so thanks for joining with US today and now let's open up the lines for Q&A session.

Operator, I'll turn it over to you.

Thank you we will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad.

Jarrod Cohen acknowledging quest.

If you are using a speakerphone, please pick up your handset before pressing and Keith.

On the J. Your question. Please press Star then two.

Well I'll pause for a moment as callers join the queue.

We have four questioners on the line and the first question comes from Walter <unk> with RBC capital markets. Please go ahead.

Yes, thanks very much.

Hi, everyone. How are you doing.

Hey, Barry Good morning, Good morning, Walter.

So I guess I'll start here with with your guidance you mentioned that you'd only provided guidance a few weeks.

Weeks ago, but I guess.

You've got a couple of acquisitions in there now.

Depending on when they close and then your guidance for your revenue guidance and one third one third seems a little bit.

I don't know if its still squares up is that one third one third one third where if you're reiterating that because it seems that perhaps.

Any major changes there might be a little bit of.

Separation from that equal split is there any any color you can.

Officially give us on on.

On where your guidance is going now that you've got the acquisitions under your belt in the first quarter behind us.

Yes, I would say that.

It's probably going to be skewed now because most of the acquisition.

Our growth is going to come both in the special on or in the LPL segment in logistics and warehousing. So.

Just by those themselves the specialized side will go down because that's where the growth was that in those two segments, which is our primary focus right now we've been articulating that for quite some time so.

Overall, both of these acquisitions, if you if you put them in totality.

As.

I think the total gross on a on a.

Full year fiscal basis will be somewhere around $200 million.

Debt, we would think in 2022.

And.

Operating margin is not quite where were at there there are a little bit below our standards are.

So it will take us a little bit of time to move those margins up to where we want them but.

Overall, that's a you know theyre not theyre not going to be substantially below where we're at but they are a little bit below.

So that's kind of what we're going to what we're going to target about so I think we're in pretty good shape for.

I think we targeted somewhere around 1213 from same store sales and then you add on top you're out acquisitions. So it will be for this year one three to one for now and then.

One four on above the one five for next year I think is basically what I'm seeing at the moment.

Okay great.

With margins being.

Somewhat similar I think to where we're at right now.

Perfect that's great color.

Second question here is really on the demand environment as you said Marie I mean, it seems that Ah.

There is a nice volume lift coming our way all the rails are saying it as well.

Can you talk a bit about what the risks are as you.

If volume comes in at or even above expectations and the risks I mean congestion supply chain partners failing on you.

Is that something we should consider or is that something we should be mindful of or do you think you have enough control over all of the moving parts that if we get some solid economic lift at or above expectations that you can drive at all to the bottom line.

Well, I think that disruptions or not.

In themselves are drivers of efficient bottom line.

To be honest with you Walter I think that you know disruptions whether check your factory or if.

If you.

Our trucks are delayed we don't get as much we don't get as much revenue from them et cetera. So in essence, the supply chain disruptions that.

That we've seen happen in certain parts of the economy now ship lines as an example.

They're not as efficient as it was where they're sitting in port wait too long now well somebody's got to pay debt cost originally it starts off as thick as the shipping line, but then a very quickly if it goes too well.

Higher shipping rates you only have to link a look at what's happening on the ocean freight rates in there.

The skyrocketing.

And Conversely, I think youll see the same thing in the in the Creek distribution.

Here I think there'll be some bottlenecks that'll that makes it look bottlenecks by the way make look demand is stronger than what it really is and that's part of what I'm talking about we're going to have an increase in.

In demand.

At the same time, you're not going to be as efficient well that debt.

That's kind of a contraction of supply.

So.

Our job is to price it appropriately.

And I can tell you my teams are fully aware of that.

We're not paying the price of inefficiency in the supply chain, we don't have control of the supply chain, we have control of our business and our capacity and we will be managing that spread and we'll be managing the cost very very aggressively but I can tell you that right now.

That's really encouraging Murray.

That's a great answer.

Last question here on on the buy I'm surprised given kind of your your tone last Paul that seemed like you were you know.

You were wanting to refocus a little bit more here on acquisitions into to zero in on that and certainly we've seen those two that you've announced I was surprised to see any buyback in the quarter given that given that you're really focused on acquisitions now can you talk to us about it.

Is this something now youre going to consider doing through the year, the buyback or was that kind of early in the year and now a couple of opportunities presented themselves we might see more perhaps put the buyback on pause just curious your strategy there.

While investing in our company is still.

Probably the best returns that we can get for our shareholders to be blunt with you oilfield acquisitions themselves are not like I said to you add acquisitions, giving your topline growth. They don't give you accretion necessarily.

Accretion on the real bottom line comes from doing all the right things finding synergies and then driving profitability by making those acquisitions better so.

Our stock price is still.

In our view.

Well well below where.

Its value is and so we will continue to buyback stock the higher the price goes probably the less we'll buy but.

We've announced to date.

Really a year.

Plus ago, we were going to put about $100 million into buying back our stock we just happen to get.

Lucky I guess last year that the market path.

Panic and some shareholders panicked and we took m<expletive>ive advantage of that.

Doing about 50% of it.

Of our <unk>.

Last year.

Our plan is to continue to do some share buybacks, but we will scale back the higher the price goes.

Stephanie indicated that it doesn't share buyback doesn't impact our ability to do acquisitions.

At all.

You've got <unk>.

Hello D. That's undrawn.

Would you draw down to do buyback versus acquisition or.

Now, we generate we generate enough free cash to.

Due to do buybacks the free cash that we've got funds Capex and is used for.

Dividends our share buyback so.

And then.

When we got the operating line to do growth Yeah got it I. Appreciate your time as always thank you have a great day always a pleasure. Thanks a lot Brian.

Yeah.

The next question comes from <unk> Gupta with Scotiabank. Please go ahead.

The money on the thanks, everyone. Good morning contract how are you.

Thanks, and good thanks, everybody. Thank you so much.

So maybe for a second kick off with the recent acquisition that you announced bench strength.

So as I mentioned in the disclosures I think it suggests you're paid $75 million cash consideration for that I was wondering if there was any debt <expletive>umption in there number one and then second it seems like there's some inter company revenue there.

Been babbling and bench strength.

I'm not sure if I'm pronouncing that right and.

Do you think it's a matter of revenue impact on the consolidation here.

Well Youre right.

Company has virtually a debt free company they are very very well run company.

So on on a net cash basis, they are debt free.

So long to add anything on that from on the debt side.

So it's a really.

Really strong brand company in British Columbia, exceptionally well and conservatively managed over the years, which is typically what we see and well run family businesses.

From that perspective that kind of answers to that.

There is a little bit of intercompany because they had this the OEM.

OEM or the repair facility and some of the capital <expletive>ets they bought equipment through their dealership network there.

And.

Individually they would've been I think step maybe be up a brown on the high Eighty's I guess, but if you consolidate.

Some of the intercompany stops might be.

Kind of mid eighties, or maybe low eighty's step I think thats the math, we see market yes.

So the bad being truck dealership.

In essence, the repair facility and then they can do third party repairs and maintenance as well, but it's about.

$6 million to $7 million of intercompany revenue out of.

What we've guided towards somewhere around 20, so it's it's.

It's significant but certainly not materially on the context of the greater Mullen and so youll add a little bit to our and that one I'll remind everyone is going to go into our specialized segment because it really isn't a trucking operations. So it kind of fits into that mixed bag of specialized.

Thanks, Yeah. That's good color on sorry, if I can follow on on that bench strength I think the press release also mentioned that you're expecting on returns.

For each oh on the individual segments similar to the Allen WNS Eni what are you referring to margins when he said victims or how should I think about the returns on differently.

Okay.

On the on the on the basic on the balance of the transportation side.

There are similar margins.

That we've got there on <expletive>et they've got a lot of <expletive>et based.

And they're so they're going to be very similar margins to what we've got maybe not quite as high but.

But pretty darn close so I don't expect any margin deterioration on our logistics and warehousing segment and on the specialized industrial side, it's not quite as good of margins as we typically would see.

Because there is some.

Some equipment sale in there that doesn't.

Like any OEM that you. So you don't make a large a large.

Percentage off of off of the sale of equipment you make most of your merchant on repairs maintenance on aftermarket sales of parts and service so.

It really depends on that could fluctuate a little bit depending on how many.

Truck sales there are during the quarter.

And as I said the.

The <unk> group is partly an OEM OEM distributor of the.

Of the more global.

Global Mac brand.

That's quite a quite a good brand up in northern BC.

They've got a pretty strong reputation in the answers that have had a great business model up there.

They happen to be big users of the Mac and global brands. So I guess on now you know why they.

They bought the dealerships so.

They had a really good day rates.

A whole integrated solution I got to give that family credit for building a really strong business model. They did a good job.

Right.

That's kind of a segue into what I wanted to ask you on but being it's.

Like that's an OEM that provide some MRO is tough as well I guess that a change in strategy. Do you think this is just one off because it came as a condition of buying good transportation from Bernstein was basically a one off as a condition that it was so integrated and intertwined it was difficult to spread it.

So or to two two.

Allocated out in this <expletive>ociated it's just it's really part of what the p<expletive>enger group is all about so I wouldn't say, we've targeted to get into the OEM business.

Whether we stay in it or not that debt that has yet to be determined.

But.

We took the whole smorgasbord on then we'll figure it out over time, but for right now, it's very very integral to the bounce stroke.

Total operating model.

That's great and then last one from me on the acquisition front. So I think you said in your prepared remarks that.

You are not ready yet to come on to a lot of capital in the oil and gas services business at this point, but when you do invest on decided to invest would you consider acquisitions that's on its organic investments.

Now that's going to be very interesting I haven't quite come to that group to grips on that.

Wood.

The oil and gas businesses, so capital intensive I think that.

I think we would probably go more for internal growth and new capital rather than acquisitions to be honest with you.

I don't see that as an emerging trend in that business. So we don't want to do acquisitions.

You know a little buggy whips, we'll look at.

At investing where we think that.

We can provide new value in a new way for customers.

But I don't think I don't think you'll see us do on.

On the old style acquisition model in the oil and gas service side I don't see that.

For example, we're not going to acquire more drilling rig companies or.

Stuff like that not not a chance, but the industry has to adapt and change to the new world and with that that means investment in capital.

And so we're looking at those opportunities and I gave you a couple of highlights already of where we're not throwing the baby out with the bathwater here. This is an industry that's still going to be.

Quite important to Canada.

It's not going to be the growth engine that it once was but it's still going to be important to the Canadian landscape.

And so we'll keep our eyes open, but I doubt if its acquisitions.

If it is it's you know we're going to be looking at adding capital and then then just growing internally I think is our preferred way.

Great I appreciate the time thank you.

The next question comes from David Ocampo, with Cormack Securities. Please go ahead.

Hey, good morning, everyone.

Good morning, David how are you.

Pretty good.

Marine your chairman's message I think a couple.

A couple of weeks ago, you mentioned that you know while pipeline activity remains strong and and quite active on it will start to wind down in 2022.

Can you give us a simple on how much is expected to fall off given some of the revenue from this year, that's been pushed off and and perhaps the bigger question is can you offset that with demand that youre seeing in the other businesses.

Yes, So I think what we've said is is that when we've been articulating quite some time is that.

First you got to build the pipeline capacity capacity to get the takeaway capacity and then you can add the drilling activity to feed that that's new takeaway capacity, which is essentially new demand. So what we think happens day that is the pipeline activity falls off drilling activity increases and it should be a net zero sum game.

And we thought that the drilling activity was going to be a laggard and it'll probably gained some momentum.

As that takeaway capacity comes on stream, which is probably.

But 2024.

When that LNG plant. That's finally built and then you really got to fill the pipeline.

So.

On the pipeline will probably be built will definitely be built before the plant.

But it's now.

We thought it would be a pretty active year. This year and then start.

Fall off next year.

But now it looks like it's going to be spread out over two years, but.

By 2023, I don't think we'll have a whole bunch of a whole bunch of business in the pipeline side, but but by that time youre going to have a I would suspect a pretty sharp increase in drilling activity. So net net it's probably.

It keeps our specialized industrial about flat I think is my expectation right at the moment.

Okay. That's that's helpful and pretty good color yes.

I mean are we were fortunate as drilling activity came down it's not fortunate. It is just the nature of a diversified business model is that as drilling activity came down on got crushed last year, Yeah, I know, but we did well because we had this pipeline division that was doing exceptionally well and then it's the pipeline division does well I suspect that drilling active.

But it will come back so.

That's our that's what diversification gives you.

Alright.

And then just circling back here on the acquisition pipeline that you guys are seeing.

Thank you guys noted that you are in discussion with several opportunities when we think about the size of those or are they more tuck ins that you're seeing in your pipeline or are they similar to the apps and Bachelor group.

Look the apps Bastard group or brand name companies. My view is brand named companies don't come around all the time.

They are.

Like all of the seats in the building, but you don't see them very often and so but when they are there you got to seize the opportunity and go for them.

And then when the when it's a brand name company.

Or what I'd call a platform company that you can use then build around you've got to make sure you can as you can see growth or synergies otherwise you're just trading dollars you're trading capital for a return that comes in slow over a really long period of time.

So.

There will be.

More on.

<unk> <unk>.

In Canada, but they are spotty the tuck ins they're available every every week.

And what we do is we just look at putting those tuck ins into those 35 and then we will have 36 companies that we've got so the.

The tuck ins, just where you drive scale and you get your best margin expansion.

Platform companies.

Buying a good company from smart people and it's a transaction it's the building around it with new growth and tuck ins and technology on an expansion that gives you the margin improvement and then makes those acquisitions work out.

Well on the long run and that's why I gave you. The example of guard won.

You take a platform and then you build around it and you put in a really good management team.

We invest heavily in technology and you, but you got to you got to add that scale and size around it and that's how you get there.

<unk> got a really good return on that platform company. So lots of I think tuck ins will happen.

And then we will look for those platform ones that come around once in a while.

I think the.

You know we're continue to look for those and we'll put more capital work, but I'll be honest with all shareholders. If I don't find the right opportunity.

Then we're not going to just chase growth will just harvest and we will because at the end of the day I'm always looking for free cash and then free cash if we can't put it to work smartly I'll give it back to shareholders and that's either through share buyback or dividend.

Right and it's been a pretty active year from from most truckers in terms of consolidation are you starting to see an uptick in the multiples paid for companies.

Well I mean, obviously I mean interest rates go to zero.

Liquidity is all over the place valuation goes up it's no different than a home prices have on price has gone up yeah.

So have acquisition targets.

All a function of interest rates.

Available capital Okay.

That's it from me Thanks, a lot.

Yeah.

Okay.

The next question comes from Aaron Macneil with TD Securities. Please go ahead.

Hey, good morning, guys.

Good morning, Eric.

Okay.

Questions on the acquisitions.

On the balance during the Transportation Act.

Acquisition.

How would you characterize it in terms of sector exposure and I guess, specifically what drives the revenue is it consumer driven or is it capital driven.

It's in debt, that's a unique business model and as I said day, because they've kind of stayed close to home.

In B C.

They are very diversified there kind of a mini.

Mullen group, if you have to be honest with you there.

Because they are based on our smithers, we see they have a very strong component in the mining business in D. C, which is very active so that's a good chunk of their business.

They are up and Oh.

They have a plan and they have a facility in.

In Kitimat, and tariffs and then Prince Rupert so there.

We're really tied in with.

Rio Tinto.

On the aluminum side, which I think you could give us kind of a hybrid of.

Consumer and in manufacturing so that you know.

On the aluminum just ships all over all over the place. So there there are kind of a core carrier for Rio Tinto.

They are now going to be they're very active right now with the LNG development, that's going on in Kitimat. So there.

They are in the sweet spot.

As that builds out.

Lots of fourth Street.

You know northern B C has lots of timber.

And then they've got this great business model, where the services. They started with all the servicing all the communities with L. T L and and that's a that's a good chunk of their business. So I think <unk> is probably.

It's going to be somewhere around a third of their business.

And they just got they've got a great network. They just service.

Most of the central and northern part of British Columbia on they've got a brand new facility and.

And Vancouver, but I had a chance to be a part of and look up and see it go up over the last bit.

That really fits in our overall network.

In our <unk> side, so I'm really excited about that that's where I see some good synergy and then the rest of the stuff. They just do a good they just run a good business.

Got it now they're going on.

With me what the development of <unk>.

<unk>.

Of the LNG facility in Kitimat.

North East BC and northwest D. C is going to experience the same challenges that happened in Alberta coal Port Macquarie.

And that is you've got these m<expletive>ive capital projects that take a lot of people and a lot of capacity.

And then there there's not all that workforce in British Columbia, So they can learn from our experience and draw from US and then we've got just a great network of equipment and facilities that we can help.

Capture market share and we kind of have a plan on how to do it and.

So we've already started started down that path of how we can work together more with our existing businesses and we'll just share some of that those capital resources that we've got that were used once in Alberta, the BCC growth platform.

It's making that call it <unk> got a better.

It was going to have more capital going in there then the province of Alberta, which is more Alberta is more heavily weighted to oil D. CS heavily weighted to natural gas.

Got it.

And then on the dealership side I think I know the answer to this question, but have you had any interest historically and pursuing like on a dealership.

No no no no. It's this just came because it's so intertwined.

It's not core.

The Mullen group, but it's core demand strong.

And from that perspective, we'll make sure that.

You know that that part of the business remains.

A high focus for for the Bachelor group for sure and for that for those communities that they provide a lot of service up there they're there they've got a big network one of the largest ones up on the north.

Okay.

And then switching gears a bit on the apps acquisition do you have any updated views on the timing of close or.

Hands on it depends on the competition Bureau.

That's a large scale acquisition that is a subject to competition Bureau for review.

And so the applications have all been made and it's up to them just.

Taking a look at it.

And on.

I don't know if it helps us it hurts us, but there actually is a couple of other big acquisition that are on their desk right now once called Rogers and Shaw on the other ones are.

CN, maybe CP in Kansas City Southern so.

Where we fit in the Q I'm not exactly sure.

Understood.

That's all from me I'll turn it on but we're still we're plowing ahead I don't expect any issue with competition Bureau to be honest with you.

Yeah.

But it's just part of it you have to go through the process.

And that that's what will delay the acquisition. That's the only thing is just we got to get that.

We got to get that blessing too.

Consummate the deal.

Understood. Thanks for your time.

You bet. Thank you.

The next question comes from Michael Robertson with National Bank Financial. Please go ahead.

Hey, good morning, Thanks for taking my call good morning.

Just a quick one I was wondering if you could give us an idea of what kind of progress youre, making with respect to alternative vehicles within your fleet.

And if you have any sort of target goals youre looking at further out perhaps as a rough percentage of the fleet and I know guard Weinstein dunce on progress on that front end.

Any extra color would be helpful.

Well Stephanie.

Is really active on this ESG E file.

And.

He he's.

Probably better to answer that one and I am I can tell you as I said look we were not in denial, we're moving forward.

But where we see the real easy wins is in the local delivery vehicles, those will migrate towards hybrid or full electric vehicles over this next period of time and we've already started that that those investments rights to that.

On the delivery vehicles.

Absolutely on the Evs.

What we call sprinter vans, that's well known we've ordered we news released last fall the order and we've just about doubled the orders since that time.

We are also partnering with some other Oems on alternative vehicles.

We're talking to heavy trucks now, but we're under confidentiality agreement. So we really can't speak to them that we're trialing in them and certainly we're going to be on the cutting edge, but have we ordered pure electric vehicles not as of yet we're still going to wait and see on that but certainly we're also making investments on.

Other things that save electricity, so whether it's led lights within our warehouses those are simple.

I won't say, we've got most of them done now, but we're certainly made good progress there and then we're doing things like on what we call snow shed so a different way of making sure that we're keeping cold free to cold. So these are investments from Canadian companies that were making into new ways of.

Thinking about energy and transportation of temperature controlled goods.

So again, we're working on all aspects. So it's not just vehicles. When you think about ESG. It's also on your your footprint your warehouses you're everything from.

Water usage like we're recycling water now to wash our trucks on alder side. So we.

We don't go on a big long thing about ESG, but I can tell you. It's in our DNA and has always been in our DNA and so we get a little frustrated but.

Be <expletive>ured that we are trialing. The what you are looking at which is big vehicles, and we're making strides in other areas as well.

Got it.

Jeff just to summarize I think that most of the delivery trucks that we see running around in our communities, whether they're going to deliver consumer goods or just the regular storefront, but on those trucks are all going to be hybrids or electric trucks on the future and where we're making we're transitioning our fleet to that right now.

In the medium haul lane.

Electric trucks, I don't see them quite having that.

That capabilities, yes, because.

The batteries become too heavy too much of a components.

We're looking at these dedicated halls of moving to new.

C N G.

On LNG.

On a kind of opportunities and then on the long haul.

<unk>.

I'd say theres, probably two opportunities there I would say one is hydrogen.

That's but that's a ways off but hydrogen is the fuel is a fuel of the future and then we've invested for example, with the apps will be doing a lot of intermodal is lets say, which.

We won't be investing as many trucks will be just doing intermodal then we'll be doing the final model with low.

Evs, which is all.

On.

More energy efficient and better for the environment less trucks on the road.

And more efficient.

Got it that's that's helpful color I appreciate the ESG angle, but I was sort of more curious just as you get more of those out there representing a larger portion of your fleet.

Yes.

Longer term the longer term.

I would suspect that it will.

Like all technology.

Wouldn't be surprised that it doesn't double every year on our investments into evs from it for quite a while.

So.

We're coming off a very we're coming off a very low level. So don't be surprised if we don't double it.

Our investments in the <unk> of some sort.

For for quite a long time, it'll double it'll just yet.

More and more.

And Michael all of our new facilities like our new facility that we just opened up for in China are all wired up for although I said, we havent ordered any electric vehicles. We are prepared for that eventuality that we have the infrastructure all of that.

The lines and the power and Thats going on there. So we'll have the grid to charge those at night.

And do you see that was on longer term sort of tailwind on the debt cost side as well helping out.

But I think that's it.

I I I can't see that yet to be honest with you Michael I think that there is.

Like I don't think there's going to be up.

Perfect weight on this I think it's.

It's it's required and it's just shifting so I think our electricity.

And our infrastructure required to do that and.

All those kind of they're going to have a different set of economic drivers to it in our cost drivers.

And then clearly offset is is that you don't.

Consume diesel fuel, but youre still continuing.

Brian I.

And that really helped I think but I think I think the net net is.

Is that Youre looking at there is no more free rise that you can.

You can just say well my cost is low but the cost of the world is sort of the environment is high it. It's an all inclusive look now not we just don't stop with US I think we have to look at all the cost of society and and I think thats.

We're pivoting towards that I would call it neutral to be honest I think there'll be more expensive.

But cheaper to operate.

And micro Hollister and.

And Michael just the carbon taxes announced by the Trudeau government. Currently is set to go to a $170 a ton by the end of the.

Decade that 60 cents a leader on diesel fuel so that'll that's quite a bit of inflation. So whether its replaced by electricity engines and whatever it's going to be built in there and it's going to go into freight rates and into inflation, some way somehow but at least for all and a level playing field when it comes to a carbon tax.

Right right, Okay, well, thanks for the color I'll turn it back.

Thanks, Mike.

The next question comes from Kevin Chiang with CIBC. Please go ahead.

Hi, Thanks for taking my question on good morning, all of you good morning, Kevin.

If I could ask a question on the <unk> front I appreciate some of your earlier comments Murray.

About the optimism you have especially what you see south of the border and and and and really it's a reflection of timing and vaccination rate momentum, but when you look at your <unk> business today could you give me a sense of.

I guess, the push and pull between volume and yield are you seeing it sounds like bonds are pretty good but I'm just wondering if youre seeing any yield pressure just given the change in mix and volumes from low maybe more industrial customers to more consumer customers I think you.

Had some at least when I look at the U S. <unk> players you know early in the pandemic that seem to have weighed on on the yields a little bit as they transition through through that is that something youre seeing as well on your wholesale business.

I don't think so Kevin Wheeler.

We know that we haven't seen that we think that the.

That.

The revenue side as you say the top line will grow.

No.

In line with Ah.

GDP and consumer spend on whatever but I think all the upside for US is all in the yield because.

Youre really able to.

Amortized kind of on.

More freight.

Over over your fixed cost facilities and.

And really fill up fill up to get your yield management on your vehicles. So those incremental.

<unk> three five shipments there is virtually very little cost to them. So that's where you get your yield management.

We continue to see.

Expansion and are held in our.

And on <unk> side, and I suspect that will.

Continue for quite some time as we build out scale and size and.

And then what we're gonna do you really having.

A.

Squeeze happening in the facility side, Kevin in <unk>, particularly as we see it.

It will not take much more demand you only have to go to every <unk> facility in this country and you will see the docs are full they can't handle much more.

Mhm.

In the existing facilities most of those existing facilities are old within Canada, and they're all in the inner city and you've seen how the price of real estate has gone up.

And so.

I think we're in a.

Pretty good space.

To get better yield management, and then you're just high grade the kind of quality of freight that comes across your your dock.

So that's where we that's where our margin on as much margin expansion is going to come from what free to put on the dock.

And youre going to squeeze out the low margin freight.

And Marie if I can just add to that Kevin.

Sure. So when you look at all the LTM free that's coming across our desk you've seen.

A movement towards smaller packages, that's why we've made investment and larger investments and accelerated here into sprinter vans into these hybrid sprinter van vehicles.

Because they are getting smaller, but you know when you take the relationship between consumer spending demographic growth and GDP, they're all at around zero rate or just slightly above zero you've seen our same store sales were up about 3% well that's because we're not turning down free if we were just a traditional LTE.

Trucker and we said, we only work with Palatin and packages that are over 100 pounds. We would have lost that market share what you're seeing with us not only within our L. T O groups, but also dws and R. R E Commerce.

Commerce logistics warehouses, we're capturing that and we're part of that trend and that's an important growth driver in the future of this company and we're not ignoring it and so Murray talked about investments into.

Technology as well so that's the only part of it but the big competitive advantage that we have against most other truckers is that we have such density and such a great network in Western Canada, and I cant Extenuate. The fact that bands to really filled in a piece of that puzzle where now we are ubiquitous from Toronto all.

The way to the coast West Coast now and so as we integrate these in and get bigger with key and core customers and it's not only.

<unk> e-commerce, but that network is irreplaceable.

That's that's that's great color, we'll have we'll have.

With the absent downstroke, we have a we we cover virtually every community in Canada from Mississauga West.

Absent Southern Ontario.

<unk> in northern Ontario.

<unk> and Manitoba, Jayson, Saskatchewan Highway 19, Grimshaw in Alberta, and northwest territories.

And then the answer with our Argus and inter urban and number eight creates and Pacific Coast and Vancouver in D. C. So we go right to Vancouver Island like it's virtually every community.

Within our network from Mississauga West.

But.

That's definitely a lot of Canada there.

Yep Yep.

It's a good chunk on them.

And it's it's it's all it's all a master puzzle and so we just we haven't done it as one brand I've done it a strong regional brands.

And the reason is you just have to go to their terminals and see how our people think they are very p<expletive>ionate about and their communities.

And the management teams and the people there that's their brand.

I would tell you they protect it.

They work hard at it.

And that's the that's our secret sauce.

Yeah.

Culture is important.

Maybe just on the bench strength I know that you've provided a lot of details here. If you could remind me or provide some insight in terms of how you service.

The northern BC market before was that when you're using a third party.

Partner to get up there or are you shipping stuff.

With your own <expletive>et base and if it was the former just wondering any you didn't speak a little bit about it more in terms of the synergy opportunities.

Bringing this all in house potentially just just what that means in terms of you know.

Potential margin opportunities or synergies you can capture now that you.

You directly extend deeper into northern British Columbia.

So in northern BC Theres really two parts of that puzzle one is the basic.

LCL business, we're talking about well clearly.

Just the synergies of having that all in house on what we can offer the big shippers and clients is.

As you know is just on paralleled.

And it's just incremental once again, it's just incremental freight.

In the back of your truck, that's going up and on the delivery trucks going out. So we'll just we'll manage that yield on the on the unmet trumping specialized or truckload or whatever.

Well, we could only participate with our existing network. So much in northern British Columbia, because <unk> was up there they have a dominant position where masters needs. Their help is they have to.

As it gets busier they need to either make the capital investments or now we can share that capital because we've got that in our group because it's not as busy in Alberta, and then secondly, we've got a really good workforce that we can transition up there. So we can take advantage of those.

Those growth opportunities, particularly as it relates to the LNG buildout.

No that's good.

That's gonna put added strain in northern British Columbia on the work portion on the communities and.

And.

We will be able to lay right on that so I see some good synergy there.

And then.

Just for all of our trucks that we service for the clients, we go in and out well now.

I mean, you've got a family member that's up there. They can look after your trucks. If you have an issue where you need to lay over or you need the interline or do whatever so.

Whereas before it might've been a little choppy now it's got them all in house.

I don't I don't see a downside to this one.

Just as I don't see a downside the apps to be honest with you.

Apps is more consumer product driven whereas dancers.

Combination of consumer product and and more.

On the capital side of that business, which has.

It's not about critical m<expletive>, it's about pricing properly and having the right equipment and people.

That makes a ton of sense. Those are my two questions. Congrats on getting a couple of big deals done not to start the year here I have a great yeah.

Thanks, Kip take care.

The next question comes from Elliot Boskovich with Industrial Alliance Securities. Please go ahead.

Good morning, and thanks for taking my call.

Oh, yes.

I've got a number of questions, perhaps on called limit them to two given sort of where we are.

So over the top of the hour.

Murray you hinted.

How about house prices going up.

Mullen group has a lot of real estate, so I'm going to give me maybe a two pronged question here.

Can you talk to us about you know.

The real estate and I think you valued it a few years back.

How that might be performing.

Is there any way that you could potentially monetize that you.

You know.

And I don't mean by necessarily by selling ads, but leverage it somehow.

Yes.

We are in the key markets of the Canadian space. It's just the way money is flowing at the moment.

But in the key markets, we continue to get.

Even this past week or so unsolicited offers for our facilities.

That we own in.

The Toronto, the GTA in greater Vancouver area unsolicited.

Big numbers, so what we're seeing in those markets right now.

Our industrial space land is going for around.

Upwards of $4 million an acre right now.

Let me give you a couple of.

Alberta that may be.

650, 750 acre in those two markets right at the moment.

It's parabolic day or you can't keep up with it.

So then we say well okay. That's good we've got our embedded derivative within our land.

Land and buildings book.

That's not price the fair market value.

But what do we do with it.

It's there.

We could get we could raise cash.

By monetizing those.

But then what do you do like I've always said you can't sell burgers with OTA Burger stand, where you can't be in.

The free from this up so without terminals so.

And then I think the I think the.

The question that we're starting to think about these numbers have now gone into such a.

Hi, Stratosphere. The question is do we.

Is there a way to.

Package to bundle real estate into a different type of financing arrangement, and then put that into long term money and those kinds of things. So I think.

We're exploring those kind of ideas.

But I would tell you. It's really this explosion in pricing has just happened over the last year as interest rates are.

Basically gone to zero so.

We haven't done anything yet Elias, but it's certainly on our radar to take a look at that for sure.

If I could just add a little bit more color. So one you're thinking about interest rates. That's one driver to higher prices. The other is the lack of warehouse space availability. That's another cause of inflation. So when our peers are now bidding and they've just got a 30 or 40% rate increase rent increase.

And essentially what happens is the freight rates I'll have to move up because there is tremendous inflation not only in warehouse space in real estate generally in those two markets, but also with insurance insurance rates are going up substantially so as we have a competitive advantage and ultimately those economic rents will be captured by the landlord, which happens to be empty.

Investments on a wholly owned subsidiary or Conversely, we're able to capture some of those rate increases on the insurance side, because we have superior safety programs again, so our rate increases aren't as much. So again that goes to the house. So theres ways of monetizing and I'd say, it's also a way of leveraging it to so those inflation.

<unk>.

<unk> go back to us so we won't lose out that's for sure.

Okay Alright.

I appreciate that color on or just something I wanted to get more clarity on.

I'll keep the last question too.

It's kind of a related question earlier.

The the RTL segment has grown.

Through acquisitions, and it has held up quite well and debt.

Stepping back to a bit of it's not quite this the one third.

L T O. The one third logistics and warehousing, but I'm not interested in the one third one third I'm interested in is there a one to one relationship between those and now that you've built out L. T. L would you be looking more on organic or inorganic ganic building out the logistics side.

Is that something that we can maybe think about.

Later in 'twenty, one or 'twenty, two or is that something that im not an expert in this field debt might.

It might not occur.

I think it's gonna be it's gonna be.

It's going to be a combination of two we're going to we're going to extend our reach by providing a better service a better technology solution and a more holistic full mile service to our customers. Eventually that's just we've got we're going to we've got this wonderful LTE on.

Network final mile network to all of these communities and I'm not going to stop just with doing the final mile. We're going to look at providing a more holistic service because I think customers are going to want it.

<unk> going to want that.

So we're positioning ourselves to do that and then secondly, we'll always add in around in each of our each of our regional.

Hubs that we've got in our strong regional brands will always build around and adding that additional capacity the smaller carriers cannot get the debt to the technology scale and sizes that you got to have to be competitive in this new world.

It'll be a combination of both of those things are lives.

On LTE Oh I.

I can just give you some accurate Atlantic total evidence of what's going to happen in the OTR business once.

Covid is over and you add in some additional.

Economic driver into this business in the United States, the Big U S. L T O companies.

They're they're having.

Quarter over quarter increases in tonnage freight tonnage of.

5% to 8%.

And then you have along with that pricing leverage on top of that and that gives them.

Significant double digit margin improvement so.

It's going to be an increase in tonnage along with pricing leverage.

And Thats coming it is only a matter of time and I am delighted to say, we've got one of the largest LTE networks on the country.

Delighted to have that as one of our core platforms on our company.

I then suspect.

That are the trucking logistics side is going to have.

More freight demand and pricing leverage is going to follow on the truckload side, because we've seen it happen in the U S and on the.

Specialized industrial services side.

I think it will hold its own and.

It won't be as big a part of our company, but I would tell you I see at least two two parts of our business model.

Looking to be very attractive and we're going to continue to look at adding capacity in.

And size of those two sides I'm aggressive on.

Im not worried about the market not cautious on <unk>.

And that's why we announced two pretty good sized transactions.

And.

We just need to get post COVID-19.

Okay.

Well both of you. Thank you very much for that color on I think all on that at that point.

Thanks, a lot and take care.

The next question comes from <unk> Gupta with Scotiabank. Please go ahead.

Thanks, a quick follow up I'd say I know the call has been pretty long here, but wanted to be quick on the M&A just wanted to come back to your point and worry about the housing market analogy that you use obviously be I live in did you tea and there's not a day then there's no bidding law that I hear about so curious.

It has to be a pause in the M&A space, where trucking industry.

What's the let's see bidding war like it's in a bidding war and you often kind of.

Our bid against multiple players so and secondly can you.

Help us understand in terms of capital discipline and what's your approach.

Two elevation from Wendy's.

So it's how do you think about that.

Well I think it's the platform companies the quality companies.

Debt are seeing a nice on.

A nice valuation bump on it it's the same as real.

Real estate at certain markets that are seeing a real bump, but not every market that's seeing the m<expletive>ive bump.

All of them are going up a little bit.

But the key markets or just kind.

Parabolic on I'd say the same thing in the us.

On the acquisition side.

In our space on the logistics and warehousing quality companies.

Got to pay a premium for which means that your returns are.

On your cash invested are going to be somewhere between 6% to 10%.

Without synergy and that's why it's a to your synergies are so important because synergies is what drives your your returns from six to 10 10 to 15.

In the short term it if that's what you do.

And then it's the tuck in ones that you'd probably.

We have not you don't see a m<expletive>ive.

Bumping those valuations, yet and you're probably driving towards a 10% to 15% return on loans with synergies. It can go up 15% to 20.

That makes sense. Thanks, a lot on me.

Thanks.

The last question comes from Jeff Fetterly with Peters <unk> Company. Please go ahead.

Good morning, everyone. One quick from me Jeff.

Marie at the beginning of the call you referenced obviously the strength in the U S market and back in February you talked about how you're in the process of formulating your view and approach to the U S where do things stand today, what's your thinking today.

Oh, that's freaking markets. So hot right now you've got a you gave a little bit scared of it.

Jeffrey on buying in at the top end.

You know on those kind of things so.

We're looking at opportunities, Jeff, but you got to be really if you think I'm careful looking on the Canadian market I don't need to tell you how careful we'll be looking at the U S market, we're looking at opportunities, but it's absolutely has to be the right fit.

And.

I haven't found it yet although we look.

But the U S market is just.

Now on total piracy, you're buying at premium earnings and premium multiples, so I'll be awfully careful.

So it's safe to say that.

Close to apples youre seeing better opportunities in Canada right now.

Oh I see.

I see better upside opportunity, Jeff because Canada still has a laggard.

As in the U S. I don't know how it gets any better than what it is that right now.

Net.

They're operating at nearly full capacity.

Thank you I appreciate the color on that.

Okay take care.

This concludes our question and answer session I would like to turn the conference back over to Murray K Mullen for any closing remarks.

Okay.

Well, thanks for joining us folks were all like you.

By knowing what the future looks.

Really really bright at least we feel it.

But we got to get through this next debt and AR and.

And we all know what the what the challenges are that Canada is facing so we'll leave it at that we look forward to chatting with you and in July and by that time I fully expect we will have the apps transaction done and within our company and and.

And then we'll go from there so stay safe and we'll look forward to training on thanks for joining us again take care.

Okay.

This concludes today's conference call you may disconnect. Your line. Thank you for participating and have a pleasant day.

Okay.

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Yeah.

Yeah.

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Okay.

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