Q1 2023 Mullen Group Ltd. Earnings Call
Could the presentation there'll be an opportunity to ask questions to join the question queue. You May Press Star then one on your telephone keypad should you need assistance during the conference call you May signal, an operator by pressing Star then zero.
I would now like to turn the conference over to Murray K Mullen Chair Senior Executive Officer and President.
Please go ahead.
Thank you and good luck.
To to everyone.
For our quarterly conference call and we will provide shareholders and interested investors with an overview of the first quarter financial results.
In addition, we will discuss the main drivers impacting our operating performance.
Our expectations for the year and close with Q&A sessions.
So, but before I commence today's review I'll remind everyone that our presentation contains forward looking statements that are based upon current expectations.
And are subject to a number of risk as uncertainties such action.
Actual results may differ materially Li for further information identifying the risks uncertainties and assumptions.
All of these documents can be found in the disclosure documents, which are filed on SEDAR and at Www Dot Mullen hyphen group Dot com. So with me. This morning, I have our executive team virtually Maloney senior.
Senior operating officer, we have Joanna Scott Senior corporate Officer, and Carson Urlacher, who is the senior accounting officer.
Yes.
So let me start off.
Before I turn it over to Carson.
Let's start off with.
A review of the financial and operating performance for Q1.
Yeah.
It was a good good quarter for our company.
<unk>.
And that probably suggests to me that shareholders should be pleased with our performance thus far in 'twenty three.
So I'm going to discuss the major reasons behind the results and my good friend Carson will provide a deeper animals over the numbers.
Let's start by looking into the macro issues in the economy. So because it all starts there. So from my perspective, there was no sign of that economic recession that so many experts we're calling board.
Two actually happened it didnt happen, but there was a freight recession and I think we need to differentiate between the two.
Which was more intense in the United States.
Now there are a few reasons for the current challenging transportation environment and firstly, you'll recall that the freight surge that began in earnest in late 2021.
That's what a time when consumers are loaded with cash and buying what seemed like anything and everything at the same time productivity levels decline due to new regulations health and safety protocols and the lack of available workforce to meet the surge in demand. So in other words, what we had was a supply shortage cost skyrocketed bottlenecks emerge.
Prices rose and inflation pressures became entrenched, but like always nothing stays the same forever.
By late 'twenty, two we started to see consumers shifting their spending habits towards doing things such as travel and leisure.
Versus buying things and when this happened the demand for freight services softened from peak levels.
Quite simply consumers were still spending just spending differently. This meant the freight industry started to show signs of fatigue, whereas the travel and leisure industry begin to flourish.
Now this shift in spending however, it was not the only reason the so-called freight recession emerged.
We have to take into consideration that manufacturers and shippers ordered far too much inventory during the pandemic either because they misread overall consumer demand or they preordered too much inventory, believing the supply chain issues would last longer than they actually did.
Either way they create an inventory overhang and are trying to rectify this like curtailing new orders.
That translates into.
No new free chip shipments. So it's my belief that the mismanagement of inventories by manufacturers and shippers is the single most important reason for last year's freight surge in this year's freight recession.
The good news is that inventories will eventually be brought into balance and volumes will normalize and when this occurs the freight recession will end.
Now I'll speak about future pricing trends and market dynamics in the outlook section, but for the rest of my comments here before I turn it over to Carson I'll say this the reality of the events that created the freight surge in 'twenty, two or unwinding in 'twenty three.
To what I would call a more normal or traditional freight environment and I think that investors will soon have enough information to evaluate how companies will perform in today's reality.
Clearly our first quarter was pretty good and that was despite the fact.
That we were generally quite quiet on the acquisition front last year.
You might.
You might want to take a pause for a second you might want to just take consideration.
Ever believed that the freight surge was caused by end consumer demand I believe that was caused by other supply chain issues. So that's why we didn't buy anybody last year.
So what are some of the reasons for our solid performance well, let me let me give you a couple a couple of the reasons number one.
It really I think it really has to do with our business mix, we have a diversified portfolio of service offerings, which includes some exposure to business investment now this is important because business spending and capital investment is also a key driver of overall economic activity and from what I saw in the quarter. This part of the economy was still pretty good particularly here.
In Western Canada.
We have a significant presence in fact, one sector of the economy that was quite active was investment in the energy space now known as I said energy space, because we are seeing activity in all sorts of energy from solar to hydro to renewables to oil and natural gas in.
In addition.
There is renewed interest in mining because the world needs those minerals and metals to power. The next generation of energy deliverability.
You don't build batteries without minerals and metals.
And it just so happens and perhaps not by luck that we provide service offerings to all of these energy verticals and our portfolio of diversified service offerings.
Now in fact, I'll argue that our business is built for any market and is built for this market.
Let me now turn to the performance of the four operating segments.
Now there is no doubt there was a few challenges associated with the slowing demand for freight as the consumer just their spend.
There was the over supply capacity issue.
Especially in the long haul transportation sector.
And as I said to you that was primarily due to the inventory rebalancing trend.
And yes, there is a normalization of pricing due to supply and demand dynamics. So not only did all these translate the headlines they negatively impacted our logistics and warehousing segment, along with our U S. Retail segment, but this is only one part of our overall business mix.
In fact from my perspective, there is a lot of positive now consider our less than truckload segment. Now. This is the largest segment in our group.
And it held pretty steadily.
Primarily because of the nature of the business accompanied by end.
Solid and consumer demand.
Plus we added a couple of tuck in acquisitions that add scale and service coverage over the last 12 months.
Now specialized industrial services had a great quarter as investment dollars continue to be allocated to the energy sector of the economy.
And the last reason I'll highlight for our solid Q1 performance.
Is that our business units did an excellent job managing the margin they held firm on pricing, where it made sense to do so and they watch costs like a hawk. So I was very pleased with how they manage the business in Q1, So now I'll turn it over to Carson to discuss the details.
Alright, Thank you Marie and welcome everyone I will provide a bit more detail ever our interim report fully explains our financial performance.
As such I will provide you with some of the highlights.
Overall Q1 is highlighted by generating consolidated revenue of just under $500 million.
An increase of approximately $41 million or 9% compared to the prior year and a record compared to any previous first quarter.
<unk> $41 million increase in revenue resulted from a $15 4 million increase in fuel surcharge revenue $15 million of incremental revenue from acquisitions and $10 5 million from general rate increases along with steady customer demand.
EBITDA improved by 27, 7% to $77 million and was largely due to growth in the F&I and LPL segments earnings per share doubled to 34 cents as compared to the prior year.
On a trailing four quarters basis, we've now generated over $2 billion in revenue along with $346 6 million of <unk> and $1 87 in earnings per share return on equity improved to 13, 2% in the quarter.
In terms of operating margin it improved by two 3% to 15, 5% in 2023 compared to 2022 and it was mainly due to rate increases, which more than offset inflationary cost.
Let's take a look at how we performed way by segment Star.
Starting with our largest segment. The <unk> segment grew revenues by $17 2 million to $192 8 million.
$10 4 million of this increase was due to higher fuel surcharge $5 7 million was due to acquisitions, while general rate increases and day consumer demand at a modest $1 1 million in segment revenue.
<unk> increased by $8 7 million to $31 8 million in the quarter, which was largely due to rate increases while acquisitions accounted for zero point $8 million of the increase that.
The continued strength in consumer spending whole freight volumes steady.
Operating margin improved by three 3% to 16, 5%, primarily due to lower direct operating expenses as a percentage of revenue, resulting from productivity improvements and customer rate increases.
Our second largest segment is our <unk> segment. This segment generated a $144 1 million of revenue, which was essentially flat compared to the prior year period.
Surcharge revenue increased by $3 4 million.
Excluding fuel surcharge revenue declined by a modest $1 8 million and was mainly due to a $2 $6 million decrease in revenue, resulting from the sale of our hydro vac asset and business in the fourth quarter of 2022.
This segment generated $26 1 million or <unk> and operating margins of 18, 1% both of which remain consistent compared to 2020.
Moving to our F&I segments revenues were up nicely by $29 5 million to $112 8 million as virtually all business units experienced revenue growth rate.
Rate increases and strong demand for specialized services, including pipeline hauling and training services.
Instruction projects in northern Manitoba, and from greater activity levels in the energy sector resulted in higher revenue.
Acquisitions added incremental revenue of $9 $3 million in this segment.
Or DDA increased by $7 1 million or 53, 4% to $20 4 million, while operating margins increased by two 1% to 18, 1% compared to the prior year operating.
Operating margins improved due to lower direct operating expenses as a percentage of revenue as rate increases and greater demand for the majority of our services resulted in more efficient operations.
In our non asset based <unk> segment revenues declined to $51 million.
Freight demand in the United States for full truckload shipments continued to soften compared to the prior year.
However, <unk> remained relatively flat at $1 $2 million operating.
Operating margins improved slightly to two 4%.
Due to the timing of when contract freight rates were entered into compared to spot market pricing and the availability of contractors in the open market.
Essentially we manage the spread in a down market.
Operating margin on a net basis with 25% compared to 23, 4% in 2022.
Net income improved by 93, 3% to $31 7 million and was mainly due to the $16 7 million increase in IBD and the positive variance in net foreign exchange being somewhat offset by higher income taxes.
Earnings per share doubled to 34 per common share compared to the prior year due to the combination of higher net income and a reduction in the number of common shares outstanding as we continue to buyback our stock in the quarter, we repurchased and cancelled two 2 million common shares at an average price of $14 45.
We continue to generate cash in excess of our operating needs as net cash from operating activities in the quarter was $34 2 million compared to $18 million in 2020 to the.
The increase of $16 2 million or 90% is mainly due to two things one being a $16 $7 million increase in IBD and the other due to a $22 million variance and changes from noncash working capital items.
This strong cash flow generation was somewhat offset by a $28 million increases increase in cash tax paid which resulted from us paying the final taxes, owing related to fiscal 2022 due to the strong financial performance that we had last year.
Our balance sheet remains strong our.
Our debt to operating cash flow covenant under our private debt agreement is at 70 174 to one we have a total of $250 million of bank credit facilities available to us of which we had $68 3 million drawn on the linked quarter, leaving us with over $180 million of room available. So.
We have ample flex financial flexibility on both the private debt covenants and on our credit facilities, allowing us to continue our <unk> program and fund acquisition opportunities.
As the private our private placement debt has an average annual fixed rate of 393%.
That debt matures in two tranches with principal repayments net of cross currency swaps at $217 million and $208 million due in October 2024, and October of 2026, respectively.
So with that Murray I'll pass the conference back to you. Thanks cars.
So let me now provide.
A look into how we're looking at the markets the economy and our business today and I will start with clearly we had a pretty good start to 2023, but I think really the question for today is will these trends continue because if the trends do continue.
Continue as is which they might.
We don't know for sure than the 2023 business plan, we articulated in January needs updating.
Now recall that I suggested.
2023 would be challenging in January and now it appears that my peers.
In our in this in our industry are catching up to my earlier prognosis, because they are all lowering our expectations I on the other hand.
I don't we don't mean to.
Adjust our expectations because I was cautious all along so let's revisit where were at.
The economy should and probably will slow throughout the balance of the year and.
We all know that because primarily theres, a theres a bit of liquidity, that's coming out of being removed from the financial system, and we know thats going to slow economic activity.
How much I'm not sure I'm not certain.
So we will watch for any cracks and we'll adjust accordingly, but as of today.
We expect the consumer side of the economy to be okay, not growing but I don't see significant declines. This suggests that the <unk> segment should continue to generate solid results.
Not just not as good as last year when demand was at a feverish level.
A level so.
So with demand leveling off and no signs of growth in the economy.
And our business units in the <unk> segment will focus on productivity gains and yield management and cost control initiatives.
And maintaining margin is our focus.
Secondly.
This freight recession that we're currently in it's going to continue for a while yet in my view.
Because there really is no demand push and supply is remaining sticky meaning pricing will be a challenge this will be a drag on our long haul business, it's impacting several of our business units and our logistics and warehousing segment.
However, also included in this segment of our business units and we will continue to generate solid results, namely our two our two largest leasing group Investor group and that's primarily due to their customer base and service offerings.
So as such I expect the results for our logistics horizontal segment to be similar to Q1 for the balance of the year.
I'd call that a mixture of wins and losses.
The U S. <unk> segment, that's going to be impacted by that most from the freight recession in the U S revenues will continue to be down from last year. However, because holistic exclusive exclusively utilized third parties. They can effectively manage the spread.
SG&A expenses will probably be up from prior year, and that's because we're adding new talent to support the next generation of silver expressed now thats our proprietary.
ERP system Thats going to Thats, the future of holistic, making sure we've got the best platform for for our users.
And our customers as a result revenues will be down from 2022 and overall profitability. In this segment will most likely be impacted slightly.
The one area of potential growth in the Canadian economy is the energy sector.
And I would say primarily in oil and gas and in mining more new facilities.
Are being sanctioned in British Columbia in Northern Ontario.
<unk> capital is invested in these sectors of the economy several of our business units are well positioned to capitalize on transportation logistics demand our specialized <unk> industrial services segment will be a beneficiary of new demand.
Offsetting.
Major pipeline projects that are nearing completions and honestly, we don't see any new pipeline projects on the horizon for a premium above planned growth.
So they will probably experience a pretty good decline after three really active years. So once again I would say this is a pretty good mixture of wins and losses of spill. It is going to be at least as good as $22 two I believe.
In summary, we've had an excellent start to 'twenty three but we maintain a cautious outlook for the balance of the year. We will use the next few quarters to make some small businesses decision smart business decisions, we're going to grow market share and plan for the next rebound in consumer driven demand.
Besides markets like this differentiate the week and the unprepared from the strong and prepared so at the corporate office. We continue to evaluate numerous acquisition opportunities and were going to be consider making investments. If we believe the new opportunity is a good fit within our organization and evaluate your valuation metrics are accretive to <unk>.
All of our shareholders.
Now we only have three criteria for any acquisition here at the moment.
Fifth price and synergies we need all three.
So my last point relates to managing our balance sheet now given the economic uncertainties.
Exercise a degree of caution there is no reason to try and gamble on the future and our estimation. So it will be we'll be pragmatic. So thank you I'll now turn the call over to the conference operator, and let's go right to the Q&A session.
We will now begin the question and answer session.
Going the question queue. You May Press Star then one on your telephone keypad, you will hear tone acknowledging your request.
If youre using a speakerphone please pick up your handset before pressing any Keith to withdraw your question. Please press Star then two.
The first question comes from corner.
From Scotiabank. Please go ahead.
Thanks, operator, and good morning, Murray and the team.
Good morning.
Great results.
And I wanted to kind of dig into one of your key segments LPL.
Really trying to get at.
What we have seen a lot of <unk>, that's coming out and reporting I would probably say maybe not as good <unk>. So what that is.
Whats, helping you or is there something else in your LDL cap that maybe our competitors don't have.
The second one is.
In Canada that really impacted.
Not that I'm the smartest.
Near full capacity.
Due to those do those factors, but.
Just to the top line they will be accretive to the bottom line.
So either we're going up where they are coming down I would prefer that we go up.
Guys.
Comic activity and then you.
You might as well watch another data point, which is what's happening with.
In the packaging business and.
The cardboard business because they.
They are the ones that package the goods.
On the M&A side.
Sounds like your peer is also starting to pick up some tuck in activity in Canada.
When you look at where you're focusing your M&A is is it on a Canadian <unk> or could you see some.
Some activity industrial services as well just curious what segments you might be deploying capital. Both both of those are are interesting to us <unk>. Our largest segment. So we will continue to build around the edges on our <unk> segment.
Walter for sure that's what we're going to do okay.
And then there is some really good specific opportunities that I think are going to happen is the build out and the transition of our economy from.
Traditional oil and gas to all forms of energy, we see some good opportunity in the mining business coming up Thats been underinvested in so we'll look at those things and make sure that we're positioned so that we can drive good value for our shareholders.
Yeah that makes sense and then last question here is on equipment deliveries I know COVID-19.
Chip shortages and so on kind of kept those tight youre starting to see those come in and that should help.
Alleviate some of the restrictions you have but I'm wondering if it if it might.
If that's coming back to your competitors or new entrants as well as that.
As you mentioned, a cyclical downturn because of the freight recession stemming from everything we just talked about could this capacity would be coming on at the wrong time is there any concern there at all.
I don't think well I think I don't see a scenario with more capacity coming online I in fact, I would I would argue with you that I think the.
The.
Little carrier the ones that are under capitalized.
We're going to have a real problem, adding capacity because the equipment so expensive.
And Theres, a theres going to be a shift something's got to give on this on this front so.
I don't see more capacity coming on I think capacity is going to come out of the Sichuan come out of out of the market. Okay. That's encouraging okay well. Thank you very much that's all my questions. Thanks Marie.
The next question comes from Cameron Dukson from National Bank Financial. Please go ahead.
Yes, thanks very much good morning, Murray you mentioned.
I guess some of the interesting opportunities on the mining side I Wonder if you could maybe just expand a bit on that.
Specifically are you seeing these opportunities.
Units.
The magnitude of it is take a look at what Ontario was really advocating there which is the ring of fire up in northern.
There is some really good interesting.
Projects that are being looked out there and youre going to have to have if you're going to build batteries, where you're going to get the copper from where you're going to get the nickel from where youre going to get all of the lithium from you have to if.
Youre not going to build mines in Toronto, Okay, it's going to be in the north.
Where mines are going to be.
And so if you look at northern Ontario.
There's some really good interesting.
If we're going all in on batteries, you've got to go all in on mining.
Projects that are being looked out there and youre going to have to have if you're going to build batteries, where you're going to get the copper from where you're going to get the nickel from where you are going to get all of the lithium from you have to if.
Quebec will benefit a bit, Ontario is a big beneficiary of that.
If we're going all in on batteries, you've got to go all in on mining.
Canada's blessed.
And we've got strong market positions in both of those both of those areas of Northern Ontario really will end.
That there is a push towards that.
And.
Tobacco benefit a bit, Ontario is a big beneficiary of that.
Any development in the North is really going to help our <unk> group, because we've got such a strong position up there.
Columbia is now sanctioning new minds first time in 10 years that I've seen.
And we've got strong market positions in both of those both of those areas of northern Ontario really will.
Any development in the North is really going to help our LTE LR Guard wine group, because we've got such a strong position up there.
Okay, No that's really helpful.
Mining mining is energy.
Our Bachelor group that we acquired two years ago.
As a as a real good market presence in northern British Columbia, So and they do a lot of business with the mines.
All forms of energy and.
Okay, No that's really helpful.
Mining mining is energy.
Oil and gas.
And I think that.
No absolutely. It makes it makes a lot of sense and then just on the I guess on the specialized <unk> industrial services segment, I mean, youre talking about activity levels look good there and I think you've also seen some strength on the pricing side I just wonder if you could talk a little bit about the pricing how sticky you think that is and why they were kind of at a.
Thesis is we need more energy all forms of energy.
And theres going to be an increased focus on.
An alternative forms and youll need mining not just drilling.
Oil and gas.
No absolutely. It makes it makes a lot of sense and then just on the I guess on the specialized <unk> industrial services segment, I mean, youre talking about your activity levels look good there and I think you've also seen some strength on the pricing side. Just wondering if you could talk a little bit about the pricing how sticky you think that is and why they were kind of at a.
A new sort of stable environment for especially on some of the oilfield services related businesses.
Cameron I don't know I don't see any you won't get any more pricing leverage unless there's a demand push but I see pricing staying pretty sticky.
A new sort of stable environment for especially on some of the oilfield services related businesses.
Because demand is levels are going to be.
I think I think the pricing is pretty stable.
Cameron I don't know I don't see any you won't get any more pricing leverage unless there's a demand push but I see pricing staying pretty sticky.
Being in the range that it's at now and would only have more upside in the pricing is if there was.
Because demand is levels, they're going to be.
Increased activity, which I'm not counting on increased activity I think activity will be pretty solid and we will have pretty good pricing. The only area of our specialized industrial Carson thats really not.
Similar to last year.
Costs are up so pricing will stay up a bit so I can see it.
Being in the range that it's at now and would only have more upside in the pricing is if there was.
Really doesn't we don't see a lot of good.
Increased activity, which I'm not counting on increased activity I think activity will be pretty solid and we will have pretty good pricing. The only area of our specialized industrial Carson thats really not.
Premium pipeline was involved in building the infrastructure, so that we could move natural gas and crude oil out of the Western Canadian basin and they are nearing the.
Really.
It doesn't we don't see a lot of good.
The completion of those major projects and so there.
Inertia, there is really our <unk> pipeline group.
And that makes eminent sense because.
They are kind of run of good times in life is nearing the end and then it just translates over to other parts, which is mining and drilling.
Premium pipeline was involved in building the infrastructure, so that we could move natural gas and crude oil out of the Western Canadian basin and there.
Nearing the completion of those major projects.
And.
On balance our.
So there.
They are kind of run of good times in life is nearing the end and then it just translates over to other parts, which is mining and drilling in.
Building out in that area also because we see some really good opportunities there over the next five.
Support services there so.
Still think will be.
Our on balance are.
Specialized industrial will be will be better and.
As Murray alluded to as you put that pipe in the ground.
We're going to look at.
Building out in that area also because we see some really good opportunities there over the next five.
I think that speaks to the diversity of our services within the F&I segment.
As Murray alluded to as you put that pipe in the ground.
You are building that infrastructure out.
Now you've got to fill the pipe.
That natural gas to flow through you need that oil to flow through.
We participate in all of those sectors of the economy notwithstanding.
And building the infrastructure, we're putting in the pipe in the ground.
No.
Demand is going to shift more to drilling and filling those those lines. So we participate in virtually all the way along.
And the most recent acquisitions Cordova ridge reinforced that we saw that we negotiated that before.
We started reporting on this so again, just anticipation of where the puck is going.
So on those two almost two opportunities we hold a minority position. So we're moving from a minority position to a wholly owned position.
The next question comes from Tim James from TD Securities. Please go ahead.
Because we see good opportunity.
Okay, No that's great I appreciate it I appreciate the color thanks very much.
Thank you.
The next question comes from Tim James from TD Securities. Please go ahead.
Thank you very much good morning, congratulations on the <unk>.
For the year.
My first question.
Talk about the wearable.
<unk> I'm wondering if you can reflect.
More specifically on relative to your thoughts coming into the year, what what maybe surprised you about the strength as the quarter kind of in turn there was it very much the strengths, where where you expected or was there anything that was kind of surprising even to us and then I am thinking.
The industry backdrop, and what Youre seeing from some of your peers.
It surprised you to the upside if anything at all in the first quarter.
Well nothing nothing really.
Maybe it's just my cautious nature that.
Totally surprised us in the first quarter.
I would say that.
I looked at the year of 2023, maybe differently than my peers.
We all got experience but.
Maybe it's just my cautious nature that.
I've been in the Idaho nothing lasts forever.
And nothing that goes up forever, nothing goes down forever and so I just said this makes no sense.
We didn't get sucked into it. We played we played along it had a great year, everybody had a great year last year, but if everybody is having a great year, you know something's wrong.
So I just took the contrarian view and I said look it's going to come down let's plan for it let's be prepared that way you don't get hurt.
And so the market will be the market.
It's just that the market is shifting.
The prepared will do well the unprepared will get crushed.
It's just business and so I don't know if I really looked at any different but we.
My second and last question.
We just tell them the way we see it here, we never know if we're right or wrong, but we tell them, we tell everybody the way we see it.
Okay.
My second and last question.
When growth does pick up again.
In your I am thinking about your <unk> business in your logistics and warehousing business in particular.
What do you have in the way of capacity pressure points if anywhere.
Whether its warehouses or trailers.
Any type of equipment, where do you think you could kind of be restricted first or maybe I should say, where do you need to add some investment firms to increase your capacity to deal with that eventual pickup in growth.
Oh boy.
<unk>.
I would say, yes, yes, and yes, if youre going to have growth in the economy.
Going to have to add capacity to meet that growth otherwise you go back to what we had last year, which is bottleneck bottleneck bottleneck.
We're going to have to add.
And thats what caused inflation inflation inflation is.
The whole market will have to add capacity, which I think I am seeing some of that happen now I think we all have a take a pause and say, we're all adding where we're positioned in the future to make sure we're efficient.
All of that so.
In my view, the only real solution to really controlling inflation is add capacity.
And.
And but I don't know of everybody, adding for a whole bunch of new growth over the next but I don't think we're going to see a market like we saw in 'twenty. One 'twenty two again for a long long time, probably not in my career, so I won't be planning for another one of my career it will happen, but probably not in my career, what we're planning.
We're going to have to add the whole the whole market will have to add capacity, which I think I am seeing some of that happen now I think we all have to take a pause.
We're all adding where we're positioned in the future to make sure we're efficient.
But I don't know of everybody, adding for a whole bunch of new growth over the next but I don't think we're going to see a market like we saw in 'twenty. One 'twenty two again for a long long time, probably not in my career, so I won't be planning for another one of my career it will happen, but probably not in my career, what we're planning.
On a steady growth.
Stable and we've got a focus on being pinpointed accurate.
We got to watch our costs, we've got to add productivity again.
Productivity again, and Youre going to have to work with your customers to make sure that we're adding value and.
That's what we'll look at all of those kind of things, but we're not planning on a major rebound in growth there will be a rebalancing of the inventory don't get me wrong, but thats not growth in the economy growth in the economy as more people spending more.
<unk>.
I am not.
I'm not so sure on that I think it'll be good but not great. Thanks, Tim.
On that one of the things, we're obviously investing significantly in the <unk> side from a capex perspective, we do know that we're making those investments. It takes time. We also know that there's going to be failures with smaller operators. So what we're our focus is going to be is about yield strategy Youll hear others talk about that so make sure.
For all of our traders are going to their final destinations absolutely full with the best rate, we can get in there as others do not make it and then we can start back filling with newer better equipment like our CMG trucks that we've recently.
<unk> talked about as well, we're going to continue to focus on that because we don't think there's necessarily growth in the overall economy, but we do know if others fans will be able to pick that up and people want to come and work for us and we're seeing people coming to our organizations and our business units wanted to work for us.
Yes, that's a good point rich like on <unk>, we're going to open up a brand new terminal facility in Kamloops, British Columbia here.
This month next month, it's already this month.
Being made.
We will be opening will be opening that up and that will allow for future growth in that future growth will come because the interior bucy grows but also because we are able to do some tuck in acquisitions to add scale.
Making sure we got good low density.
Being pinpoint accurate on making sure that we've got the most sufficient equipment along with you got to invest in technology I should I got to make sure I make that point clear.
To that business, so LCL is facilities, making.
Making sure we got good low density.
Being pinpoint accurate on making sure that we've got the most sufficient equipment along with you got to invest in technology I should I got to make sure I make that point clear.
Technology allows you to move the data faster obviously, but it also makes you allows you to make sure those traders are going full and we're getting good utilization out of everything. So that's our that's our plan we're going to continue to strive for higher margin and LTM.
Through a combination of adding tuck in acquisitions and being pinpoint accurate in how we apply our capital into those businesses.
Okay. Thank you maybe just around that often as possible just to give us sort of updated thoughts on approximately youre kind of Capex total capex spending plans for this year and any insights you have on 2024 and I'm not thinking about it so we're not changing our capex plans.
We have 25, where we have added about 25 million come through here in the first quarter.
Set out a plan at the first of the year and we're not we're not deviating from that $85 million or yes, we came out with $85 million at the beginning in January here.
Now you can see in our Q1 results.
We have about 25, when we only had about $25 million come through here in the first quarter.
And a lot of that was carryover from from what we had previously ordered so.
Thank you Tim.
At this point in time, I don't see any change.
Obviously as the year progresses, if something changes we can update you later on in the year, but we don't see anything at this point.
Okay. Thank you very much.
Thank you Tim.
Okay.
Once again, if you have a question. Please press Star then one.
Our next question comes from Matthew Li from <unk> Capital markets. Please go ahead.
Good morning, guys. Thanks for taking my question.
Obviously Q1 was.
Strong quarter and just as you think about how things kind of played out with the inventory destocking cycle.
You talked about it in kind of some strong areas of the business I'm wondering if you have a comment on kind of how the cadence.
Profitability or demand sort of evolves on a monthly basis.
Sort of.
More backend weighted in the quarter, how do you see it kind of.
All through March and then in April here, if you had sort of indications of how it's progressing.
I don't think it's.
We haven't seen any there is no demand push Matthew that we're seeing going through the cycle right now from that perspective, I think we're totally aligned with all of our peers. We just don't see the demand push so.
We think that the business that we have now is the business. We have is what we.
Is pretty stable I don't think its going to deteriorate a whole bunch more from what you see today, it's going to deteriorate from last year, because last year was a boon so let's I'm just giving you.
A seasonal push.
My our expectation and my expectation for the balance of the year, it's going to be kind of where we're at right now is about where the market typically you have a.
Seasonal push.
Last year, we had a seasonal bump like it was.
Not this year.
And the seasonal push.
Towards that as consumers get out of the winter and stuff like that it will be muted compared to last year and Thats why we still think we're on target for.
Then we got to change our R 23 assumptions and we will come back to you of that but.
What we articulated in opined in 'twenty in January of 'twenty, three which would which would say to you that our Q2 and Q3 will not be the same levels as last year. If it is.
Then we got to change our R 23 assumptions and we'll come back to you of that but.
I don't see it.
Matthew I think the market is what the market is right now I don't see it going up and I don't see it going down a whole bunch more from here.
Okay. Thanks, I appreciate the commentary and I am wondering if you can just talk a little bit about maybe some of the productivity gains that you made particularly on the on the outside and.
How much more kind of opportunity you see from a productivity standpoint going forward given sort of the strength in the <unk> margins.
Not just compared to last year, but in general looking historically at Q1, it was quite a strong quarter for LPL on the margin side. Just wondering if you have kind of a comment on that last year labor was killing us because we didn't have enough. When you were a double handling everything.
And.
Theres not as much urgency.
<unk> got a freight surge not enough workers, so you're double handling everything lots of overtime for those dedicated workers that help meet the arc of that surge in demand.
And therefore, we're able to plan more but were being all of our businesses are 100% focused on on yield and that's you've got to have lane density to get yield.
We don't have that same.
That same cost push that we got this year.
And our job at corporate office is to backfill some of that yield maybe the market doesn't give them and we're looking at opportunities.
Theres not as much urgency.
And therefore, we're able to plan more but were being all of our businesses are 100% focused on on yield and that's you've got to have lane density to get yield.
Okay. Thanks, I appreciate the commentary and I'll turn it back thanks. Thank you.
This concludes the question and answer session I would like to turn the conference back over to Mr. Mullen for any closing remarks.
And our job of corporate office is to backfill some of that yield maybe the market doesn't give them and we're looking at opportunities.
Okay. Thanks, I appreciate the commentary I will turn it back thanks. Thank you.
Thanks folks for joining us.
I think spring is strong although we have snow here this morning and over so.
Okay.
This concludes the question and answer session I would like to turn the conference back over to Mr. Mullen for any closing remarks.
I'm not complaining about that but.
Yes.
The market is going to be.
Im really pleased with what our business units are doing and how they're responding to the change in market and.
Thanks folks for joining us.
I think spring is strong although we have snow here this morning and over so we're going to.
That's right up our alley, we're well positioned and we look forward to chatting with you in.
Opining about that but.
Yes.
A few months time take care.
The market is going to be.
And then.
Im really pleased with what our business units are doing and how they're responding to the change in market and.
We'll talk soon.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
That's right up our alley, we're well positioned.
And we look forward to chatting with you in.
A few months take care.
And then.
We'll talk soon.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
Okay.
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