Q3 2023 Mullen Group Ltd Earnings Call
Speaker 1: Thank you for standing by. This is the conference operator. Welcome to the Mullen Group Limited third quarter earnings conference call and webcast.
Thank you for standing by this is the conference operator.
Walk up to the Mullen Group limited third quarter earnings conference call and webcast.
Speaker 1: As a reminder, all participants are in listen only mode and the conference is being recorded.
As a reminder, all participants are in listen only mode and the conference is being recorded.
Speaker 1: After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press a 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.
After the presentation, there will 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.
Speaker 1: I would now like to turn the conference over to Murray K. Mullen, Chair, Senior Executive Officer and President. Please go ahead.
I would now like to turn the conference over to Murray K Mullen Church, Senior Executive Officer and President.
Go ahead.
Speaker 2: Thank you and welcome all to Mullen Group's quarterly conference call.
Thank you and welcome all to Mullen group's quarterly call from school.
Speaker 2: We'll be providing shareholders once again and our interested investors with an overview of the third quarter financial results. And in addition, we will discuss the main drivers impacting our operating performance expectations for the year. And of course we'll close with that Q&A session.
We'll be providing shareholders once again.
And our interested investors with an overview of the third quarter financial results. In addition, we will discuss the main drivers impacting our operating performance expectations for the year and of course, we'll close with a Q&A session now.
Speaker 2: Now before I commence today's review, I'll remind everyone that our presentation contains forward looking statements.
Now before I commence today's review I remind everyone that our presentation contains forward looking statements.
Speaker 2: that are based upon our current expectations and are subject to a number of risks and uncertainties and as such actual results may differ materially. Further information identifying the risks, uncertainties and assumptions can be found in the disclosure documents which are filed on CEDAR and at www.mullen-group.com.
Based upon our current expectations and are subject to a number of risks and uncertainties and as such actual results may differ materially further.
Further information identifying the risks uncertainties and assumptions can be found in the disclosure documents, which are filed on SEDAR.
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Mullen hyphen grouped I'll call them now with me this morning.
Speaker 2: I have our senior team, but you might recall that last quarter I called in from our new terminal in Kamloops, British Columbia, that our apps group, we were just commissioned it and I called in from our new terminal. However, we pressed
I have our senior team, but you might recall that last quarter I called in from our new terminal in Kamloops British Columbia.
Our apps group, which was commissioned it.
Holden from our new terminal.
This morning, I'm, calling in from the Great State of Texas.
Speaker 2: Earlier this week, I was in Austin, Texas. I was attending the annual American Trucking Association Conference. That management conference, I can tell you, was very well attended. It showcased the newest technologies, including a preview of the engines of the future electric, hydrogen, CNG, and hybrids. I must say the mood in terms of the prospects for the industry was quite positive. There was a general tone of the current freight recession.
And earlier this week I was in Austin, Texas.
Attending the annual American trucking, So Shanghai Association.
Confidence now that management conference.
He was very well attended and showcase the newest technologies, including a preview of the engines of the future electric hydrogen C N G and hybrids.
I must say the mood in terms of the prospects for the industry was quite positive there was a general tone of the current free restart shouldn't cause.
Speaker 2: has found the bottom. And this is all good news for an industry that's so essential to the economy.
Found the bottom.
And this is all good news for an industry that is so central to the economy.
Speaker 2: I can also validate that the industry will be significantly more environmentally friendly in the future based upon the technologies that were on display.
I can also validate that the industry will be significantly more environmentally friendly in the future based upon the technologies that were on display.
Speaker 2: So this morning I'm calling in from Dallas, Texas. I'm attending the annual meeting with our station owners and partners that are based throughout North America. That includes Canada, Mexico and the United States. And this annual event is hosted by the holistic guitarist, US3PO business. The
So this morning, I'm, calling in from Dallas, Texas, I'm attending the annual meeting with our station owners and partners that are beach throughout North America that includes Canada, Mexico, and the United States. In this annual event hosted by holistic concern U S. Three P L business.
And they bring.
They bring a network of station partners together to strategize about the future of the benchmark and blend and holistic.
Speaker 2: They bring in net work of fashion bargains together to strategize about the future of the benchmark and plan. In holistic...
Speaker 2: utilizes a proprietary IT platform known as Silver Express. That's where we're able to track the station partners and station owners.
Utilizes our proprietary IP platform known as Silver Express, that's where we're able to attract these station partners and station owners.
Speaker 2: And then we have a professional sales group. And what the silver express allows us to do is access capacity, as well as identify real-time pricing visibility from the network of over 6,000 carriers. We like this business because it's asset-like. It's totally scalable, and it provides mall and group with insight into new opportunities with the U.S. market and global supply.
And then we have a professional sales group.
What good Silver Express allows us to do is access capacity as well as identify real time pricing visibility from a network of over 6000 carriers. We like this business because it's asset light, it's totally scalable and it provides small and group with insight into new opportunities with the U S market and global supply chain.
Speaker 2: So it'll come to no surprise to anyone on the line today that technology is the most important differentiator for any business in today's interconnected digital world.
So it'll come to no surprise to anyone on the line today.
Technology is the most important differentiator for any business in today's interconnected digital world.
Speaker 2: For this reason, we believe Silver Express for life elustic with one of those competitive advantages.
This reason, we believe silver expressed for Liza, let's stick with one of those competitive advantages.
Speaker 2: Back in Oakville, we're joining them online today by the senior team. I got Richard Malone, Senior Operating Officer. Joanna Scott, Senior Corporate Officer and Got Carson Urlacker, who's a Senior Accounting Officer, who by the way is the primary architect and author of the interim report. Carson will be providing an Allison discussion on our Q3 Profinancial Performance. But before I turn the call over to Carson, I'll provide some opening comments.
Back in OCA dose are we're joined on the line today by the senior team I got Richard Maloney Senior operating officer.
Joanna Scott Senior corporate office here and got Carson Urlacher, Who's a senior accounting officer, who by the way is the primary architect and author of the interim report.
Of course, we'll be providing analysis and discussion of our Q3 financial performance, but before I turn the call over to Carsten will provide some opening comments.
Yeah.
Speaker 2: So what happened in terms of Q3 financial and operating performance?
So what happened in terms of Q3 financial and operating performance.
Cause I was preparing for today.
Speaker 2: One has to think that one of these days investors will warm up to the fact that we have a good company.
One has to think that one of these days investors will warm up to the fact that we have a damn good company.
Speaker 2: We continue to generate great results. Just look at the Q3 performance.
We continue to generate great results just look at the Q3 performance.
Speaker 2: And I'm confident that our results will show favorably when Ben's Mark can gain start peers.
And I'm confident.
But our results will show up favorably when benchmarked against our peers.
Speaker 2: Now, furthermore, if I could be so bold as to suggest that if one wants to look into other companies that derive business from the supply chain.
Furthermore, if I could be so bold as to suggest that if one wants to look into other companies that derived business from the supply chain.
Let's say like Shopify.
Speaker 2: I will argue that our businesses actually involved in the most important part of the supply chain. And that's the delivery to the end user. Now, just to be clear, I know the trucking certainly is and is appealing to investors as say the Shopify world. But let's not forget, if you got it, a truck driver brought it. In simple terms, everyone relies on the-
He will argue that our business is actually involved in the most important part of the supply chain and that's the delivery to the end user.
Just to be clear I know the trucking certainly isn't as appealing to investors see the shopify world, but lets not forget if you got it.
Rock driver brought it in.
In simple terms, everyone relies on the trucking industry is an essential service to the economy in here at the Mullen group. We are one of the largest most diversified and most profitable trucking logistics businesses in Canada. Our business is also unique in that not only do we have scale and size. We also have one of those weird business attributes of attributes that moat.
Speaker 2: It is an essential service to the economy. And here at the Mullen Group, we have one of the largest, most diversified and most profitable trucking logistics businesses in Canada. Our businesses is also unique in that, not only do we have scale and size, we also have one of those where business attributes that most in our industry do not have. And that is when we are one of the premier liquidity providers to industry entrepreneurs, those people that go out and build small, great small, medium-sized businesses. And eventually the
Our industry do not have and that is what we are one of the premier liquidity providers to industry entrepreneurs.
Those people that go out and built small a great small and medium sized businesses.
And eventually they all need a liquidity event.
Speaker 2: So acquisitions will remain an important element of our long-term growth strategy.
So acquisitions will remain an important element of our long term growth strategy.
Speaker 2: Now we know what to look for, and we don't just look for growth just to grow. We need synergies to derive value for our shareholders. I'm lastly.
We know what to look for and we don't just look for growth just to grow we need synergies to derive value for our shareholders and lastly.
Speaker 2: I will say this, I'm open to debate any one of the things we will not continue to grow. Executed high level or be leaders in the communities we serve.
I would say this I'm open to debate anyone who thinks we will not continue to grow and execute at a high level or be leaders in the communities we serve.
So in terms of the quarter.
Speaker 2: I'll just leave you with these three comments. Really, not much has changed as compared to Q2, at least from a macro perspective. What do I mean by that? The economy continued on a slow go.
I'll I'll I'll just leave you with these three comments really not much has changed as compared to Q2 at least from a macro perspective, what do I mean by that the economy.
Continued on a slow growth trajectory.
Speaker 2: The remnants of the freight recession lingered on, with consumers prioritizing their spend on doing things rather than buying everything, which is precisely what they did last.
The remnants of the freight recession lingered on with consumers prioritizing their spend on doing things rather than buying everything which is precisely what they did last year.
Speaker 2: accompanied by shippers doing what they needed to do, which is draw down bloated inventories. Yes, the demand for freight and logistics services was not as robust as it was in 2022. This in itself did not deal a serious setback to Mullen. The reason being, our specializing in the Delta Service segment grew nicely year-old.
Accompanied by shippers doing what they needed to do with just draw down bloated inventories. So yes, the demand for freight and logistics services was not as robust as it was in 2022. However, this in itself did not deal with serious setback to Mullen and the region D.
Our specialized industrial service segment grew nicely year over year.
Speaker 2: No, we all also know the inflation I interest rate.
Now we all also know of an inflation of high interest rate.
Speaker 2: It bites the average consumer the most, and that's the most troubling part of what we have going on in the economy today. Because the less these individuals have to spend on the discretionary items, the greater the impact on the demand for freight services will ultimately be.
It's the it bikes the average consumer the most and that's the most troubling part of what we have going on in the economy today, because the less these individuals have to spend on discretionary items the greater the impact on the demand for <unk> services will ultimately be.
And lastly.
Speaker 2: Consolvated revenues last quarter, they were negatively impacted by lower fuel prices.
Consolidated revenues last quarter, they were negatively impacted by lower fuel prices.
Speaker 2: That's good for the economy, but that reduces our consolidated revenues. And that's because crude oil prices moderated year over year. So in fact, fuel surcharge revenues, personal break is down for you, but they were down 20, 23 million until the third quarter of these of you last year. And that represents the majority of the revenue to clients year over year, at business units that we own for a full year. So in spite of all these challenges,
That's good for the economy, but that's reduces our consolidated revenues and that's because our crude oil prices moderated year over year. So in fact fuel surcharge revenues.
Personal break this down for you, but they were down 23 million until third quarter Beasley last year and that represents the majority of the revenue declines year over year.
MS units will be owned for a full year. So in spite of all of these challenges.
Speaker 2: and changes to the market our business performed very well and I'll say once again the reasons are the same as last quarter we have a diversified business model
And changes to the market our business performed very well and I'll say once again. The reasons are the same as last quarter, we have a diversified business model.
Speaker 2: We serve as a wide range of verticals. We backstop that 40 independently managed business units. And these teams, they all strive for best in class performance. Every day, every quarter, every year. It is therefore our job at the corporate office, the senior executive team. In fact, all of our 60 plus dedicated professionals are corporate to help and support our business units to be the best they can be. So I would say this, well done team. I couldn't be happier. Great quarter. Thank you very much.
We service a wide range of verticals, we backstop at 40 independently managed business units and these teams. They all strive for best in class performance every day every quarter every year is therefore, our job at the corporate office the senior executive team in fact, all of our 60 plus the dedicated professionals at corporate to.
To help and support our business units to be the best they can be so I would say that's well done team I couldn't be happier great quarter. Thank you very much.
Speaker 2: Now the second reason we had a good quarter. Once again, it's acquisition, which is another key responsibility to senior executive team. And while we didn't find lines any new acquisitions as past quarter, previously announced acquisitions and transactions contributed to our strong performance last quarter. And speaking of last quarter, I'll now want to turn the call over Carson for a more detailed analysis. Carson, you're up, my man. Thank you.
Now the second reason, we had a good quarter once again exactly.
Which is another key responsibility the senior executive team and while we didn't find lanes any new acquisitions. This past quarter, our previously announced acquisitions and transactions contributed to our strong performance last quarter.
Speaking of last quarter.
I'll now turn the call over to Carsten for a more detailed analysis of crush in Europe My man.
Speaker 3: All right, well thank you, Murray, and welcome everyone. Tail provide you with some of the highlights of our third quarter, the details of which are fully explained in our Q3 interim report.
Alright, well, thank you Mary and welcome everyone.
Today I'll provide you with some of the highlights of our third quarter. The details of which are fully explained in our Q3 interim report consol.
Speaker 3: Infallordated revenues in the third quarter were 504 million, our sixth straight quarter of generating approximately 500 million irreb-
Consolidated revenues in the third quarter were 504 million, our sixth straight quarter of generating approximately $500 million of revenue.
Speaker 3: Revenue declined by a modest 2.8%. Compared to the prior year period, which was really due to three facts.
<unk> declined by a modest two 8% compared to the prior year period, which was really due to three factors.
Speaker 3: First, as Marie mentioned, fuel surcharge revenue declined by 20.3 million, as diesel fuel prices decreased by 10.5% on a year over year.
First as Mary mentioned fuel surcharge revenue declined.
By $23 million as diesel.
Fuel prices decreased by 10, 5% on a year over year basis.
Speaker 3: Second, revenue declined by 19 million, due to lower fuel or freight volumes, particularly in Eastern Canada, and from a more normalized pricing environment, compared to the elevated levels that we experienced in the prior years.
<unk> revenue declined by $19 million due to lower fuel or freight volumes, particularly in eastern Canada and from a more normalized pricing environment compared to the elevated levels that we experienced in the prior year.
Speaker 3: We dispose of our HydroVac business in 2022, which contributed to a $2.7 million reduction in revenue.
Third we disposed of our hydro Vac business in 2022, which contributed to a $2 $7 million reduction in revenue.
Speaker 3: So somewhat offsetting these declines was a $27.6 million of incremental revenue that we generated from that.
Somewhat offsetting these declines was at $27.6 million of incremental revenue that we generated from acquisitions.
We generated or IBD, a of just under $90 million at $88 6 million, which was a decrease of $9 5 million compared to the prior year largely due to a decline in the L. T. L. L N W segments.
Speaker 3: We generated OIVDA of just under 90 million at 88.6 million, which was a decrease of 9.5 million compared to the prior year. largely due to a decline in the LPL and LNW sake.
Speaker 3: So offsetting these declines was the strong performance of our SNI's.
Offsetting these declines was the strong performance of our F&I segment.
Speaker 3: Operating margins declined by 1.3% to 17.6%. Now let's take a closer look at how...
Operating margins declined by one 3% to 17, 6% now let's take a closer look at how we performed by segment.
Speaker 3: Starting with our largest segment, revenues in the LTL segment were 194 million. Down 3.7% due to lower fuel surge charge revenue, lower freight volumes in Eastern Canada, and a more normalized pricing environment.
Starting with our largest segment revenues in the L. T. L segment were $194 million down three 7% due to lower fuel surcharge revenue lower freight volumes in eastern Canada, and a more normalized pricing environment.
Speaker 3: OIBDA was down 6.6 million to 34.5
<unk> was down $6 6 million to $34 5 million operating margin declined by two 6% to 17, 8% primarily due to the lower margins experienced by being or our most recent acquisition.
Speaker 3: operating margin declined by 2.6% to 17.8% primarily due to the lower margins experienced by B and R, our most recent X.
Speaker 3: financial results of B&R contributed to a 1.1% decline in operating margins within this segment. Our second largest
The financial results of DNR contributed to a 1.1% decline in operating margins within this segment.
Our second largest segment is our L. N W segment revenues.
Speaker 3: Revenues in the L&W segment were 137.1 million, down 12.3 percent due to the freight recession and the continuation of the inventory rebalancing site.
Revenues in the El N. W segment were $137 1 million down 12, 3% due to the freight recession and the continuation of the inventory rebalancing cycle.
Speaker 3: Other factors contributing to the decrease in revenue, consisted of lower fuel charge revenue, and a reduction in revenue from the sale of our hydro back.
Other factors contributing to the decrease in revenue consisted of lower fuel surcharge revenue and a reduction in revenue from the sale of our hydro Vac business.
Speaker 3: Boy VDA was a respectable $2.6.8 million or 19.5% of segment revenue.
I V D a.
It was a respectable $206 8 million or 19, 5% of segment revenue.
Speaker 3: and operating margins decline due to higher S&A costs as a percentage.
And operating margins declined due to higher SG&A costs as a percentage of revenue.
Speaker 3: Moving to our SNI segment, revenues were up 16.6 million to 125.4 million. On 16.3 million of income men.
Moving to our F&I segment revenues were up $16 6 million to $125 4 million on.
$16 $3 million of incremental revenue from acquisitions.
Speaker 3: We did experience some revenue declines associated with fuel surcharge, along with the sale of our Hydroback business and from lower demand for pipeline hauling and stringing service.
We did experience some revenue declines associated with fuel surcharge, along with the sale of our hydro vac business and from lower demand for pipeline hauling and streaming services. However, these declines were more than offset by greater activity levels for our drilling related and production services business units.
Speaker 3: However, these declines were more than offset by greater activity levels for our drilling related and production services business.
Speaker 3: OIVDA in absolute dollar terms increased by 5.1 million to 29.7 million with acquisitions adding 3.6 million of incremental OIVI.
Oh I V D. In absolute dollar terms increased by $5 1 million to $29 7 million with acquisitions, adding $3 6 million of incremental or IBD eh.
Speaker 3: Operating margins were strong at 23.7% on lower direct operating expenses as rate increase.
Operating margins were strong at 23, 7% on lower direct operating expenses as rate increases and greater activity levels resulted in more efficient operations.
Speaker 3: and greater activity levels resulted in more efficient operation.
Speaker 3: In our non-ASAD-based US-3PL segment, revenues declined to 48.8 million due to lower freight volumes in the United States for full truck load.
And our non asset based U S. Three PL segment revenues declined to $48 8 million due to lower freight volumes are in the United States for full truckload shipments.
Speaker 3: OIBDA declined by a modest $400,000 and margins were down by 0.4% due to higher direct operating expenses as a percentage of segments.
BDA declined by a modest four.
$400000 and margins were down by 0.4% due to higher direct operating expenses as a percentage of segment revenue.
Operator: Thank you for standing by. This is the conference operator.
Operator: Welcome to the Mullen Group Ltd. Third Quarter Earnings Conference call ad webcast. As a reminder, all participants are in listen only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press a 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.
Speaker 3: operating margins on a net basis on a net revenue basis was 25.5% compared to 28.8%.
Operating margins on a net basis on a net revenue basis was 25, 5% compared to 28, 8% in 2022.
Speaker 3: When we look at net income, net income increased by 1.1 million to 39.1 million, or 44 cents per common share. This increase was mainly attributable to a positive variance in net foreign exchange.
When we look at net income net income increased by 1.1 million to $39 1 million or <unk> 44 cents per common share.
This increase was mainly attributable to a positive variance in net foreign exchange and lower income tax expense, which was somewhat offset by lower OE BDA and from a reduction in earnings from equity investments.
Speaker 3: and lower income tax expense, which was somewhat off-fed by lower OIVDA and from a reduction in earnings from equity investments.
Murray Mullen: I would now like to turn the conference over to Murray K. Mullen, Chair, Senior Executive Officer, and President. Please go ahead.
Speaker 3: The number of common shares of the standing decreased by 4.5%, the 88.7 million common shares in the quarter. As we continue to repurchase and cancel shares under our NCIB program.
The number of common shares outstanding decreased by four 5% to $88 7 million common shares in the quarter as we continue to repurchase and cancel shares under our N CIB program.
Murray Mullen: Thank you and welcome all to Mullen Group's Quarter Earnings Conference call. We'll be providing shareholders once again in our interested investors with an overview of the third quarter financial results. In addition, we will discuss the main drivers impacting our operating performance expectations for the year, and a course will close with that Q&A session. Now, before I commence today's review, I remind everyone that our presentation contains forward-looking statements that are based upon our current expectations, and they're subject to a number of risks and uncertainties, and that such actual results may differ materially.
Speaker 3: On the balance sheet side, we continue to maintain a very well structured balance sheet with a book value of over 2.1 billion of total assets. Our debt to operating cash will covenant under our private debt agreement is less than two at 1.98 to one. We have a total of 250 million of bank credit facilities available to us of which we had 114.2 million drawn at the end of the quarter.
On the balance sheet side, we continue to maintain a very well structured balance sheet with a book value of over $2 1 billion of total assets our debt to operating cash flow covenant under our private debt agreement is less than two at 198 to one we have a total of $250 million of bank credit facilities available to us.
Murray Mullen: Further information identifying risks on certainties and assumptions can be found in the disclosure documents which are filed on Cedar, and at www.mullen-group.com. Now, with me this morning, I have our senior team, but you might recall that last quarter I called in from our new terminal in Camelib's British Columbia, that our APS group was just commissioned it and I called in from our new terminal. This morning, I'm calling in from the Great State of Texas.
Of which we had $114 2 million drawn at the end of the quarter.
Speaker 3: In October , 2024, we have 217 million private debt notes.
In October 2024, we have $217 million of private debt notes coming due.
Speaker 3: Our ability to consistently generate predictable free cash over many economic cycles, and our large unencumbered real estate portfolio has provided us with receiving many different refinancing alternatives.
Our ability to consistently generate predictable free cash over many economic cycles, and our large unencumbered real estate portfolio has provided us with receiving many different refinancing alternatives.
Speaker 3: We're currently evaluating a number of these alternatives and we expect to finalize and announce to the market by the end of this year how we intend to structure our balance sheet going into 2020.
We are currently evaluating a number of these alternatives and we expect to finalize and announced by the ER to the market by the end of this year, how we intend to structure our balance sheet going into 2024.
Speaker 3: So with that, Marie, I will pass the conference back to you.
So with that Murray I will pass the conference back to you.
Murray Mullen: In earlier this week, I was in Austin, Texas. I was attending the annual American Trucking Association conference. Now, that management conference, I can tell you, it was very well attended. It showcased the newest technologies, including the preview of the engines of the future electric hydrogen, CNG, and hybrid, and I must say the mood in terms of the prospects for the industry was quite positive. There was a general tone that the current freight besession has found the bottom.
Speaker 2: Thanks, Clarks, and well done once again, Ellipse. Let's now turn to what we think might happen in the future. That's always important to all the listeners.
Yeah. Thanks course, and are well done once again I'll, let's let's now turn to what we think might happen in the future that's always important to all the listeners.
Speaker 2: Well, I had a little bit of an vision of what we think will happen in the last quarter of 23. And then how we're looking at the markets we serve. So I'll start with some expectations.
Hmm.
Little bit into vision of what we think will happen in the last quarter of 'twenty three.
And then how we're looking at the markets. We serve are so I'll start with <unk>.
Some expectations for Q4.
Speaker 2: And I would say based upon everything we see in Notre-Bade, the consumer-driven part of the economy.
And I would say based upon everything we see and know today, the consumer driven part of the economy.
Murray Mullen: This is all good news for an industry that's so essential to the economy. I can also validate that the industry will be significantly more environmentally friendly in the future based upon the technologies that were on display. So this morning, I'm calling in from Dallas, Texas. I'm attending the annual meeting with our station owners and partners that are based throughout North America. That includes Canada, Mexico, and the United States. And this annual event is hosted by Elistic.
Speaker 2: can and most likely will remain at levels consistent with the last three quarters. And the reason we say that is primarily because the job market looks pretty steady.
Can and most likely will remain at levels consistent with the last three quarters.
And the reason, we say that is primarily because the job market looks pretty steady.
Speaker 2: So when we summarize that, I say it's solid, but it's not spectacular and we don't see growth, but it should remain pretty solid going into Q4.
So let me summarize that I'd say, it's solid, but it's not spectacular and we don't see growth, but it should remain pretty solid going into Q4.
Speaker 2: In addition, as I mentioned earlier, there are signs that this inventory rebalancing cycle that the shippers and manufacturers had to adjust their inventory by. It now seems you found a bottom. All the indications suggest that that's the case.
Murray Mullen: It starts US3PO business and they bring a network of station partners together to strategize about the future, the benchmark and plan. And Elistic utilizes a proprietary IT platform known as Silver Express. That's where we're able to track these station partners and station owners. And then we have a professional sales group. And what the Silver Express allows us to do is access capacity as well as identify real-time pricing visibility from a network of over 6,000 carriers.
In addition, as I mentioned earlier, there are signs that this inventory rebalancing cycle that our shippers and manufacturers had to had to adjust your inventory inventories by you now.
Now seem to have found a bottom in all of the indications suggest that that's the case.
Speaker 2: And this suggests the freight market is now in balance, at least from a demand perspective.
And this suggests that the freight market is now imbalance at least from a demand perspective.
Speaker 2: So from that point of view, we can start now talking about a recovery and free demand. These are the a free recession.
So from that perspective.
Point of view, we can start now talking about a recovery in freight demand he used to be a freak recession.
Murray Mullen: We like this business because it's asset-like. It's totally scalable. And it provides small and group with insight and a new opportunities with the US market and global supply. So, it will come to no surprise to anyone on the line today that the technology is the most important differentiator for any business in today's interconnected digital world. For this reason, we believe Silver Express for Lifelistic with one of those competitive advantages. Back in Okotokes, we're joining on the line today by the senior team, I got Richard Maloney Senior Operating Officer, Joanna Scott, Senior Corporate Officer, and Dr. Carson Urlacher, who's a Senior Accounting Officer, who by the way is the primary architect and author of the Interim Report.
Speaker 2: Our view is pricing, it's probably gonna remain challenged for a while, and that's because at the moment there's excess capacity that was built up during 21-22, when times were so good, everybody had a little added capacity.
Our view is pricing, it's probably going to remain challenged for a while and that's because at the moment, there's excess capacity that was built up during 'twenty, one 'twenty two one times or so good everybody.
Add a little added capacity.
Speaker 2: Now, it's not significant, but it's just enough to impact pricing at the margin. So in other words, we believe that our LPL or LMW US-RPL segments can deliver another strong quarter that's consistent with the first three, but I don't see any growth rate the most.
No, it's not significant but its just enough to impact pricing at the margin. So in other words, you know, we believe that our L. T. L. A L. M. W are in U S. B O segments can deliver and others.
Strong quarter, that's consistent with the with the first three but I don't see any growth rate at the moment.
Speaker 2: Now let's talk about our SNI services statement. The news is generally more positive, primarily because commodity prices are pretty attracted.
Now, let's talk about our restaurant services segment are the news is generally more positive primarily because commodity prices are pretty attractive.
Murray Mullen: Carson will be providing an Allison discussion on our Q-3 per financial performance, but before I turn the call over to Carson, I'll provide some opening comments. So, what happened in terms of Q-3 financial and operating performance? You know, as I was preparing for today, one has to think that one of these days investors will warm up to the fact that we have a good company. We continue to generate great results. Just look at the Q-3 performance, and I'm confident that our results will show favorably when benchmark against our peers.
Speaker 2: In fact, we're bullish on this segment, and except for one part, and that's the large diameter pipeline business.
In fact, we're bullish on the segment and except for except for one part and that's the large diameter pipeline business. The big projects that are a premade pipeline group has been working on for the last three years, they're nearing completion.
Speaker 2: The big projects that our pre-made pipeline group has been working on for the last three years, they're nearing completion.
So.
Speaker 2: That's the bad news. The good news is for our group is that the pipelines now being built Capital's going to be deployed by all in that your gas companies into drilling or as I like to say Now we drill the fill otherwise why built On balance we should have another strong quarter in ASI segment
That's the bad news the good news is for our group as the pipelines now being built capital is gonna be deployed by oil and natural gas companies into grilling, whereas I like to say now we drill to fill otherwise why built so on balance we should have another strong quarter and I guess I segment.
Murray Mullen: Now, furthermore, if I can be so bold as I suggest, that if one wants to look into other companies that derive business from the supply chain, let's say like Shopify. I will argue that our business is actually involved in the most important part of the supply chain, and that's the delivery to the end user. Now, just to be clear, I know the trucking certainly isn't as appealing to investors as say the Shopify world, but let's not forget, if you've got it, a truck driver brought it.
Speaker 2: And if we want to take a longer term view for this setting, there's some positive developments that...
And if we want to take a longer term view for this setting there are some positive developments that.
Speaker 2: all of us are hearing recently increased talk of lng expansion plans and of course the supreme court canada ruling on bill c 69 federal government impact assessment
All of US are hearing recently increased talk of LNG expansion plans and of course, the Supreme Court of Canada ruling on Bill C 69, and federal governments impact Assessment Act.
Speaker 2: was deemed to be unconstitutional by the Supreme Court. Now this is welcome news, not just for
Oh that was deemed to be unconstitutional boats from court.
Now this is welcome news not just for.
Murray Mullen: In simple terms, everyone relies on the trucking industry. It is an essential service to the economy, and here at the Mullen Group, we have one of the largest, most diversified, and most profitable trucking logistics businesses in Canada. Our businesses is also unique in that, not only do we have scale and size, we also have one of those where business attributes that most our industry do not have. And that is when we are one of the premier liquidity providers to industry entrepreneurs, you know, those people that go out and build small, great small and medium sized businesses.
Speaker 2: The only gas business is welcome news for any major capital project plan for Canada and it'll make sure that there's a more balanced approach to how we all these big projects are viewed. So that's any good capital projects I can tell you is very good for us and I say.
The oil and gas business is welcome news for any major capital project plan for Canada, and it'll make sure that there's a more balanced approach to how we all these big projects are argued.
So that's any good pick up of projects I can tell you is very good for us in our statement.
Speaker 2: Lastly, let me comment on acquisitions. Never seen so many opportunities across our desk. Our challenge is to kind of pick through these ones that we meet our main criteria. And I'll reiterate what those are. That's the right fit.
Lastly, let me comment on acquisitions never seen so many opportunities across our desk. Our challenge is to kind of pick through these ones that meet meet our army and criteria and I'll reiterate what those are that's the right fit.
Speaker 2: the right price point and there must be synergies to be at. And when we find them, we'll acquire these companies.
It's the right price point, and there must be synergies to be had and when we find them. We'll acquire these companies.
Murray Mullen: And eventually, they all need a liquidity event. So acquisitions will remain an important element of our long-term growth strategy. Now, we know what to look for, and we don't just look for growth just to grow. We need synergies to derive value for our shareholders. And lastly, I would say this, I'm open to debate any one of the things we will not continue to grow, execute at a high level, or be leaders in the communities we want to look at. We serve.
Speaker 2: And furthermore, there's no doubt in my mind that I think this trucking industry is right for major consolidation trend. Many carriers of over extended their balance sheets added way too much capacity during 21, 22, and they're now paying the price.
And Furthermore, theres no doubt in my mind that I think this trucking industry is ripe for a major consolidation trend many carriers have over extended their balance sheets added weight too much capacity during 'twenty, one 'twenty, two and they're now paying the price.
Speaker 2: especially with interest rates where they're at today. So that's causing stress amongst those that got overextended.
Especially with interest rates, where they're at today. So that's that's causing stress amongst those that got overextended.
Murray Mullen: So in terms of the quarter, I'll just leave you with these three comments. Really not much has changed as compared to Q2, at least from a macro perspective. What do I mean by that? The economy continued on a slow growth trajectory. The remnants of the freight recession lingered on with consumers prioritizing their spend on doing things rather than buying everything, which is precisely what they did last year. Accompanied by shippers doing what they needed.
Speaker 2: Let me just make a comment about that. How did we handle 2122? We actually didn't really add any capital to our business. We sold off assets. We stayed disciplined and we didn't do a bunch of acquisitions and overpaid. So we think that discipline will pay huge dividends for our shareholders in the future. But for some, the business is going to be a huge
Let me just make a comment about that how do we how do we handle 'twenty one 'twenty two.
We actually didn't really add any capital for business, we sold off assets. We stayed disciplined and we didn't do a bunch of acquisitions in overpaid. So we think that discipline will pay.
Huge dividends for our shareholders in the future.
Murray Mullen: They needed to do, which is draw down bloated inventories. So yes, the demand for freight and logistics services was not as robust as it was in 2022. However, this in itself did not deal a serious setback to Mullen. And the reason being, our specialized industrial service segment grew nicely year over year. No, we all also know the inflation and I interest rate. It bites the average consumer the most, and that's the most troubling part of what we have going on in the economy today.
But for some the day of reckoning as close there.
Speaker 2: There's going to be other carriers that are going to be looking for a liquidity event and will acquire brand name companies in Canada, especially in the LPL segment.
There's going to be other carriers that are going to be looking for a liquidity event and will acquire brand name companies in Canada.
Especially in the L. T O segment.
Speaker 2: In the US market, I see exactly the same thing. They've got the same dynamics as going on in Canada. And we will look at US-based opportunities, but as of today, our preference, it's gonna be in this 3PL, non-asset-based business logistics market. That's what we think. We provide the middleware for...
In the U S market.
I see exactly the same thing there they've got the same dynamics is going on in Canada.
And we will look at U S based opportunities, but as of today, our preference it's gonna be an issue three P. M on asset based business logistics market.
That's why we think we provide the middleware for.
Murray Mullen: Because the less these individuals have to spend on the discretionary items, the greater the impact on the demand for freight services will ultimately be. And lastly, consolidated revenues last quarter, they were negatively impacted by lower fuel prices. That's good for the economy. But that's reduces our consolidated revenues. And that's because crude oil prices moderated year over year. So in fact, fuel surcharge revenues, personal break is down for you, but they were down 20, 23 million until the third quarter of these of you last year.
Speaker 2: for the shippers and also for the carriers and there's all the carriers out there. So providing that middleware, which is what Silver Express does is, we think that's an opportunity for our group and we'll be capitalizing on that as best we can.
For for the shippers and also for the for the carriers and there's a lot of carriers out there so providing that middleware, which is what a silver express buses. So we.
We think that that's an opportunity for our group and we will be capitalizing on that as best we can.
Speaker 2: And by the way, that's why I'm down to Dallas right now, meeting with all our partners down here in Station,
And by the way, that's why I'm down at Dallas, right now meeting with all our.
Partners down here on station station owners.
And lastly, the energy and mining sectors of the economy. They they look interesting to US you know.
Speaker 2: And while I say the energy and mining sectors of the economy, they look interesting to us. You know, we'll continue to add to our service coverage if we can find good fits, especially what we see the valuations in the segment today, which are quite reasonable. So that concludes our presentation. I'm going to turn back over to the conference coordinator and we'll go straight to the Q&A session. So thank you very much folks, and I look forward to answering some of your questions.
We'll continue to add to our service coverage, if we can find good fits especially when.
Murray Mullen: And that represents the majority of the revenue declines year over year, you know, business units that we own for a full year. So in spite of all these challenges and changes to the market are business performed very well. And I'll say once again, the reasons are the same as last quarter. We have a diversified business model. We service a wide range of verticals. We backstop that 40 independently managed business units. And these teams, they all strive for best in class performance every day, every quarter every year.
Well, we see the valuations in the segment are today, which are quite reasonable. So that concludes our presentation I'm going to turn it back over to the conference coordinator and will go straight to the Q&A session. So thank you very much folks and look forward to answering some of your questions.
Speaker 1: Thank you. We will now begin the question answer session to join the question queue. You may press star then one on your telephone keypad. You will hear a tone acknowledging your request.
Thank you we will now begin the question answer session to join the question queue. You May Press Star then one on your telephone keypad.
Murray Mullen: It is therefore our job at the corporate office, the senior executive team. In fact, all of our 60 plus dedicated professionals at corporate to help and support our business units to be the best they can be. So I would say this well done team. I couldn't be happier. Great quarter.
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Murray Mullen: Thank you very much. Now the second reason we had a good quarter. Once again, it's acquisition, which is another key responsibility to senior executive team. And while we didn't finalize any new acquisitions this past quarter, are previously announced by acquisitions and transactions contributed to our strong performance last quarter.
We will pause for a moment as callers join the queue.
Speaker 1: The first question comes from Konart Gupta with Scotia Bank. Please go ahead. I felt brighter.
The first question comes from Qunar Gupta with Scotiabank.
Please go ahead.
Thanks, operator, and good morning, everyone money way.
Good morning.
Speaker 4: I just wanted to follow up on your commentary on inventory rebalancing. We have been hearing similar commentaries from other companies about these talking cycle hours.
Carson Urlacher: And speaking of last quarter, I'll now want to turn the call over Carson for a more detailed analysis. Carson, you're up on that. All right. Well, thank you, Murray. And welcome everyone. Today, I'll provide you with some of the highlights of our third quarter, the details of which are fully explained in our Q3 interim report. Consolidated revenues in the third quarter were 504 million, our sixth straight quarter of generating approximately 500 million of revenue.
I just wanted to follow up on your commentary on inventory rebalancing, we have been hearing similar.
Into these from other companies about Destocking cycle.
Speaker 4: almost done and I think the retailers are kind of a little bit afraid of restocking in this cycle given the consumer demand is not really certain here. Just wanted to understand like from the European conversation with your customers and shifters, what are these thinking or planning in terms of restocking cycle? I'm like is there a pent up?
Almost.
Done and I think the retailers are kind of loaded up pretty hit a restocking in the cycle given the consumer demand is not really certain here just wanted to understand like from your conversations with your customers and shippers, what what are they thinking or planning in terms of restocking.
Carson Urlacher: Revenue declined by a modest 2.8% compared to the prior year period, which was really due to three factors. First, as Murray mentioned, fuel surcharge revenue declined by 20.3 million as diesel fuel prices decreased by 10.5% on a year over your basis. Second, revenue declined by 19 million due to lower fuel or freight volumes, particularly in eastern Canada, and from a more normalized pricing environment compared to the elevated levels that we experienced in the prior year.
And I guess, the pent up and restocking that could happen big time next year, because they did not can be stock this year.
Speaker 4: in restocking that could happen big time next year because they did not restock this year.
Speaker 2: You know that, you know that appears to be
You know that our current debt you know that appears to be.
Speaker 2: Some of the general consensus from some of the people that we speak to.
Some of the general consensus from some of the people that we speak to.
My personal opinion is I think some of that is wishful thinking.
Speaker 2: My personal opinion is, I think, that all of that is wishful.
Carson Urlacher: Third, we disposed of our HydroVac business in 2022, which contributed to a $2.7 million reduction in revenue. So somewhat offsetting these declines was a $27.6 million of incremental revenue that we generated from acquisitions. We generated OIVDA of just under 90 million at 88.6 million, which was a decrease of 9.5 million compared to the prior year, largely due to a decline in the LPL and LW segments. So offsetting these declines was the strong performance of our SNI segment. Operating margins declined by 1.3% to 17.6% 36%.
Speaker 2: The old inventory is today very expensive. Cost of money.
The old inventories today, it's very very expensive cost of monies.
Through the roof. These would be the last cycle.
Speaker 2: Everybody's a little bit, you know, the consumer.
Everybody's a little bit you know the.
Consumer.
Speaker 2: This consumer's just about in balance right now, but there's stress points there. So I suspect that the freak recession is over. So I don't think it's gonna get any worse, but I think it's basically in balance right now. We still on our floors and our facilities, we've got capacity now to take more business in, and we're hearing about that all over the place. So within that,
As consumers just about imbalance right now, but there's stress points. There. So I I suspect that the freight recession is over so I don't think it's going to get any worse, but I think it's it's basically imbalance right now we still one off on all fours and art facilities, we've got capacity now to take more.
More business and we're seeing.
Carson Urlacher: Now let's take a closer look at how we perform by segment. Starting with our largest segment, revenues in the LTL segment were 194 million. Down 3.7% due to lower fuel surge charge revenue, lower freight volumes in eastern Canada, and a more normalized pricing environment. Due to the lower margins experienced by B&R, our most recent acquisition. The financial results of B&R contributed to a 1.1% decline in operating margins within this segment.
Hearing a boat that all over the place so within that.
Kind of overlay.
Speaker 2: I think it's going to stay pretty price competitive. So you better have a being good business model or you're going to be trapped.
I think it's gonna stay pretty price competitive so you better have a.
Good business model, where you're gonna be trapped.
Speaker 2: And I think that's our general thesis and our job at corporate is to take advantage of situations and where we think that we like the markets that maybe the management made a couple of missteps. And that's where we're gonna look at opportunity. We think the market's in balance.
And I think that's our general thesis.
And our job at corporate it used to.
Take advantage of situations and where do we think.
We like the markets, but maybe the management made them. They made a couple of missteps and that's where we're going to look at opportunity we think the market's imbalance.
Speaker 2: You might get a little bit uptake here or there, but on I don't I don't see a lot of growth.
You might get a little bit uptick here or there, but I don't I don't see a lot of growth going on and I just.
Speaker 2: It's not going to get much worse, I don't think. Everything's back in balance. So now you've got to be pinpoint accurate in your business.
It's just it's not going to get much worse I don't think we're everything's back in balance so now you've gotta be pinpoint accurate in your business models.
Carson Urlacher: Our second largest segment is our L&W segment. Revenues in the L&W segment were 137.1 million. Down 12.3% due to the freight recession and the continuation of the inventory rebalancing cycle. Other factors contributing to the decrease in revenue consisted of lower fuel surge revenue and a reduction in revenue from the sale of our hydro back business. Boy VDA was a respectable 2.6.8 million or 19.5% of segment revenue and operating margins declined due to higher S&A costs as a percentage of revenue.
Okay. It makes sense and that's kind of a it's a good segue into what I wanted to kind of hear about you know how you plan.
Speaker 4: Again, it makes sense. And that's a good segue into what I wanted to hear about how you plan for the next year, knowing what you know today, given where the environment is and the rate increases are now starting to impact the consumer and the Canadian consumer obviously living on a lot of variable rate, more gadgets and all those kind of things.
Or the next year, knowing what we know today.
You know like given where the environment does end up rate increases are kind of starting to impact the consumer and the Canadian consumer obviously living on a lot of variable rate mortgages and all those things.
Speaker 4: might see a little bit more finished next year. How do you approach the business planning from the management perspective next year? You said you have capacity, but are you assuming, you know, stable and why I'm in next year or a big change in other direction, especially for your free business?
Might see a little bit more bench next year, how do you approach the business planning.
Carson Urlacher: Moving to our S&I segment, revenues were up 16.6 million to 125.4 million on 16.3 million of incremental revenue from acquisitions. We did experience some revenue declines associated with fuel surge charge along with the sale of our hydro back business and from lower demand for pipeline hauling and stringing services. However, these declines were more than offset by greater activity levels for our drilling related and production services business units. Boy VDA in absolute dollar terms increased by 5.1 million to 29.7 million with acquisitions adding 3.6 million of incremental Boy VDA. Operating margins were strong at 23.7% on lower direct operating expenses as rate increases and greater activity levels resulted in more efficient operations.
From a demand perspective next year, you said you have capacity, but are you assuming.
You know its stable and while I'm in next year.
A big change in either direction, especially if I paid businesses.
Speaker 2: I don't see a lot of change for next year, to be honest with you, where I see use disruption. And then it's just a matter of who's a group can take it.
I don't see a lot of I don't see a lot of change for next year to be honest with you, we're whereas sees disruption.
And then it's just a matter of who's who can take advantage of the disruption.
Speaker 2: So let me just point out, if you look at our third quarter, if you look at our year to date, you take a look at our direct operating status. We just...
But let me just point out if you look at our third quarter. If you look at our year to date you take a look at our our our direct operating expenses, we've just come through a major.
Speaker 2: prequel session, off the massive highs of last year and 21. And our DOE stayed very, very flat.
Pretty recession.
Off the massive highs of last year and 'twenty one.
We stayed very very flat.
Speaker 2: Our folks do a great job of managing those costs and finding productivity gains, and we're asking them to up their game on that. Well, we lost some marginals, is an SNS.
Or our folks do a great job of managing those costs and finding productivity gains and we're asking them to up their game on that where we lost some margin years, he's an SMA.
Carson Urlacher: In our non-asset based US 3PL segment, revenues declined to 48.8 million due to lower freight volumes in the United States for full truckload shipments. Boy VDA declined by a modest $400,000 and margins were down by 0.4%. Due to higher direct operating expenses as a percentage of segment revenue. Operating margins on a net basis on a net revenue basis was 25.5% compared to 28.8% in 2022.
Speaker 2: And that's because our revenues came down a little bit. Close revenues are down, field surcharge is down, blah, blah. And so we lost, I think Carson maybe a point point to half, as SNAs higher. And we're going to have to focus on that part of our cost structure next year, unless we can, our businesses can...
And that's because our revenues came down a little bit gross revenues down fuel surcharges down blah blah.
And so we lost I think Carson, maybe a point point and a half.
S and he is higher.
And we're gonna have to focus on on that part of the overall cost structure next year, unless we can our businesses.
Speaker 2: can begin market year expensive people that are have got over standard. I think that's going to be our overall game plan for next year. And we're challenging all of our business units. Remember, they're independently managed. The day know the game plan.
Can gain market share at the expense of people that are have got overextended I think that's gonna be our overall game plan for next year and we're challenging all of our business units remember, they're independently managed but they know the game plan.
Carson Urlacher: When we look at net income, net income increased by 1.1 million to 39.1 million or 44 cents per common share. This increase was mainly attributable to a positive variance in net foreign exchange and lower income tax expense, which was somewhat offset by lower OIVDA and from a reduction in earnings from equity investments. The number of common shares outstanding decreased by 4.5% to 88.7 million common shares in the quarter as we continue to repurchase and cancel shares under our NCIB program.
Speaker 2: They could manage if your competitors and meet some missteps, eat some market share, and corporate office does not have to be quick so tough on S&A.
Take advantage of your competitors have made some missteps gains in market share.
And corporate office doesn't have to be quite so tough on F&I.
Speaker 4: with a ton of color over and you see the color next.
At the time to call their word and appreciate the color. Thanks.
Thank you.
Speaker 1: The next question comes from Kevin Chang with CIBC. Please go ahead.
The next question comes from Kevin Chiang with CIBC.
Please go ahead.
Speaker 5: Thanks for taking my question and, you know, it's a solid result here, so congrats on that to the Mullen team. I noted in your MDNA, you talked about a little bit of, I'll call it Transient Headwind as you integrate the BNR acquisition and you spoke of some of the margin impact that had in some of your segments, specifically LTL. It seems like you're on the way to kind of rectify some of that stuff and it seems like you're pretty confident. Thank you.
Thanks for taking my question and solid results here. So so congrats on that went to the Marlin team.
Carson Urlacher: On the balance sheet side, we continue to maintain a very well structured balance sheet with a book value of over 2.1 billion of total assets. Our debt to operating cash flow covenant under our private debt agreement is less than 2 at 1.98 to 1. We have a total of 250 million of bank credit facilities available to us of which we had 114.2 million drawn at the end of the quarter. In October 2024, we have 217 million of private debt notes coming due. Our ability to consistently generate predictable free cash over many economic cycles and our large unencumbered real estate portfolio has provided us with receiving many different refinancing alternatives.
Hum.
I noted in your in your MD&A, you talked about a little bit of I'll call. The transient headwinds as you integrate the.
The Vietnam acquisition, and you spoke of some of the margin impact that had and.
Some of your segments, specifically L. T. All it seems like you are on the way to to kind of rectify some of that stuff and it seems like you're pretty confident.
Speaker 5: You'll get LTL margins back to historical levels.
They'll get El Chelle margins back to a back to historical levels.
Speaker 5: you know, as that integration progresses here, maybe if you can give us a sense of the timeline of that, is that a 2024?
Is that integration progresses here, maybe you can give us a sense of of the timeline of that is that a 'twenty 'twenty four.
Speaker 5: Common or do you actually see? You know some of that benefit in Q4 here is the exit this year and maybe just a level set like what are what do you consider? Historical LPL margins should we look at last year's it kind of benchmark just just because you kind of Re-segmented and then the pandemic it so there's been a little bit of volatility there
Carson Urlacher: We are currently evaluating a number of these alternatives and we expect to finalize and announce to the market by the end of this year how we intend to structure our balance sheet going into 2024. So with that, Murray, I will pass the conference back to you.
Comment or do you actually see it you know some of that benefit in Q4 shows you exit this year and maybe just a level set like what are what do you consider historical L. T O margins shall we look at last year's as kind of a benchmark just just because you're kind of re segmented and then the pandemic hit so theres been a little bit of volatility there.
Murray Mullen: You thanks, Clarks, and well done once again, now let's now turn to what we think might happen in the future. That's always important to all the listeners. Well, I had a little bit of vision of what we think will happen in the last quarter of 23. And then how we're looking at the markets we serve. So I'll start with some expectations for Q4. And I would say based upon everything we see in no today, the consumer driven part of the economy can and most likely will remain at levels consistent with the last three quarters. And the reason we say that is primarily because the job market looks pretty steady.
Speaker 2: Yeah, so we were quite a B and R.
Yeah, So we may acquire being or.
Speaker 2: echoes was a brand name company in Alberta and they really were involved in two two main verticals. One was the energy business. They were servicing the oil and gas business and the energy business in northern Alberta and the other part was servicing all the communities in the LTO. So when we do our due diligence and we acquire, we knew that they were not performing as way they should in the LTO side. In the other part of the business they were
Nichols was a brand new company in Alberta, and they really were involved in two two.
Two two main verticals one was the energy business they were servicing the oil and gas goes up somewhat energy business in northern Alberta, and another part with servicing all the communities in the L. T O. So when we do our due diligence when we acquire <unk>.
We knew we knew that they were.
Not a performing as they should.
In the wholesale side and the.
And the other part of the business they were superstores.
Speaker 2: So, but, you know, when we acquire a company, and we, from families, we have to be somewhat respectful of.
Murray Mullen: So when we summarize that, I say it's solid but it's not spectacular and we don't see growth but it should remain pretty solid going into Q4. In addition, as I mentioned earlier, there are signs that this inventory rebalancing cycle that the shippers and manufacturers had to adjust their inventory by. It now seems you found a bottom. All the indications suggest that that's the case. And this suggests that the freight market is now in balance, at least from a demand perspective.
So, but you know when we acquire a company handsomely from families. You we have to be somewhat respectful of.
Speaker 2: you know, and I'm not trying to scare the people up too much. We gave it time, we tried to figure it out, make sure we're doing the right things. And then we just now announced, you know, for October 1st with entered phase three of our integration plan, which is, we're gonna be shutting that LPL business down and integrated in with our two of our other companies, which is Grim Shrop's Rucking in Highway 9. So we've already got the technology there, we've got the system in the process of the terminals. So we were just too much duplicated. So we'll...
And I'm not trying scared people out too much we gave a time, we tried to figure it out and make sure. We're doing the right things and then we just now announced for October 1st we've entered phase three of our integration plan, which is we're gonna be shutting that L. P. L business down in integrated your name with or with two of our other companies, which is grimshaw trucking.
And highway so we've already got the technology, there and you've got this system are in the process of their terminals. So we were just too much duplicated. So we'll once we layer that into those other business units, though will get their margins, maybe maybe margin improvement if we.
Speaker 2: Once we layer that into those other business units, they'll get their margins, maybe margin improvement. If we're so fortunate on that.
Murray Mullen: So from that point of view, we can start now talking about a recovery and free demand. These are the a free recession. Our view is pricing that's probably going to remain challenged for a while. And that's because at the moment there's excess capacity that was built up during 21-22 when times were so good, everybody had a little added capacity. Now, it's not significant but it's just enough to impact pricing at the margin.
If we're so fortunate on that but.
Speaker 2: You know, we're probably going to have about 50 people that we consider as duplicated people now, headcount. And you know, that's about $5 million on a runway for 50 people, if you average about 100 grand a year per head.
You know, we're probably going to have about 50.
People that we consider as duplicated people now head count and you know that's about $5 million on a run rate for 50 people that would be the average for about 100 granted your per head.
Speaker 2: And so we're gonna make sure that's all buttoned up in the fourth quarter. So we don't think it'll help our LTL division in the fourth quarter because we've got to go through all of them. Right. All of the last of the phase of the integration. But we get 24 with no real lingering legacy based costs.
And so we're going to we're going to make sure that's all buttoned up in the.
Murray Mullen: So in other words, we believe that our LPL or LNW US-RPL segments can deliver another strong quarter that's consistent with the first three but I don't see any growth rate at the moment.
Fourth quarter. So we don't think it'll help our Elk Hills division in the fourth quarter, because we gotta go through all of them.
Right.
Last of the phase of the integration, but we hit 24 with no real lingering legacy base costs were going up.
Murray Mullen: Now, let's talk about our SNI services segment. The news is generally more positive, primarily because commodity prices are pretty attractive. In fact, we're bullish on this segment and except for one part, and that's the large diameter pipeline business. The big project that our premium pipeline group has been working on for the last three years, they're nearing completion.
Speaker 2: We're just going to lay that in and it will not be part of the B&R group. B&R is going to focus 100% on energy services. That'll be a big company on its own. And that is a very complimentary to many of the other service offerings that we have within our SNI group. So, yeah, we think our basically, our LTO folks at a pretty darn good job of maintaining margin. We lost some revenue just because
Just going to layer that in and it will not be part of them being our group B and are just going to focus 100% on energy services that'll be a big company on its own.
And that is very complementary to.
Many of the other service offerings that we have within our F&I group. So yeah, we think we think our.
Basically our L. P. All folks that have a pretty darn good job of maintaining margin. We lost some revenue I'm just because.
Murray Mullen: So that's the bad news. The good news is for our group is that the pipelines now being built, capital is going to be deployed by all in the natural gas companies into growing. Or as I like to say, now we drill the fill. Otherwise, why build? So on balance, we should have another strong quarter and an asset. I say one.
Speaker 2: You know, it just wasn't quite as active and, and you know, those things was last year, but generally they give a very good job of protecting margin. But we did in the fourth quarter, we lost about 1.1. I think it was 1.1, wasn't a person of... Yeah, it was 1.1%. 1.1% in our LTO division, about 1.1%. So add that back in for next year.
You know just wasn't quite as active in and you know those things as last year, but generally they did have a very good job of them protecting margin but.
But we did in the fourth quarter, we lost about 1.1 I think it was one one wasn't a person yeah. It was 1.1% in our L. T O Division Oh about 1.1 for central add that back and for next year.
Murray Mullen: And if we want to take a longer term view for this setting, there are some positive developments that all of us are hearing recently increased talk of LNG expansion plans. And of course, the Supreme Court of Canada ruling on Bill C69, the Federal Government's Impact Assessment Act was deemed to be unconstitutional by the Supreme Court. Now this is welcome news, not just for the only gas businesses, welcome news for any major capital project plan for Canada. And it'll make sure that there's a more balanced approach to how we, how these big projects are viewed. So that's any good capital projects I can tell you is very good for us in our statement.
Speaker 2: would be a pretty good room. That is a separate house. That's a rule of a good room. Yeah. The core part of our business, Kevin, you know that. It's our biggest.
Would be you would have pretty good rule of thumb.
And that is somewhere else, that's what we'll look at doing yep Yep.
I'll still a core core core part of our business, Kevin you know that it's our biggest.
Speaker 2: segment that we have will continue to add because in in LTO it's not a transaction you can actually change you know the the the denominator you can manage the the spread by getting either content or making sure that you have good good density in your lanes
Segment that we have will continue to add because in L. P. O. It it's not a transaction you can actually change you know the the phenomena you can manage the spread by getting either content or making sure that you have got good good density in your language. So.
Murray Mullen: Lastly, let me comment on acquisitions. Never seen so many opportunities across our desk. Our challenge is to kind of pick through these ones that meet our main criteria. And I'll reiterate what those are. That's the right fit. It's the right price point and there must be synergies to be at. And when we find them, we'll acquire these companies.
Speaker 2: And the reason that we rolled B&R, the LPL side into our other business is because our business humans have a really good technology and big investors in that.
And the reason that we we we rolled a b N R V. L. P O side into our other businesses, it's because our business units have really good technology and big investors are not.
Speaker 2: B&R did not invest in technology, so they would left kind of on an island, but themselves the people are. And that's what we're good at as a company. And we take smaller carriers, and we lay them into our network, where we've got professional management.
<unk> did not invest in technology. So they would be would left kind of on an island by themselves. The people are and but that's what we're going to as a company and we.
Murray Mullen: And furthermore, there's no doubt in my mind that I think this trucking industry is right for major consolidation trend. Many carriers have over extended their balance sheets, added way too much capacity during 21, 22 and they're now paying the price, especially with interest rates where they're at today. So that's causing stress amongst those that got over extended. Let me just make a comment about that.
We take smaller carriers, when we layer them into our network, what we've got professional management and <unk>.
Speaker 2: good networks and great technology. And we should be able to drive margin over time.
Good networks, and great technology, and we should be able to drive margin overtime.
Speaker 2: LTL's should improve over time with density and technology.
L T L should improve overtime with density.
Technology.
Speaker 5: That is a great color and very helpful. Just in your SNI division, as you pointed out, obviously the standout segment, especially this past quarter and that look is maybe a little bit more differentiated versus your more freight exposed segment. If I run some quick math here, it looks like back in the acquisition, some of the fuel search hedgehogs, it looks like you posted an organic growth of roughly call of four to five percent. You also called a premay was a headwind. If you were to back out premay, what did the rest of the business grow at? Because it seems like you're going to lap some of the premay headwind in 2024. So just trying to kind of sense up, what the rest of that SNI revenue might be growing at X, some of the large diameter pipeline headwinds you're facing in 2023 here.
Not a lot that is great color and very helpful.
Murray Mullen: How did we, how did we handle 21, 22? We actually didn't really add any capital to our business. We sold off assets. We stayed disciplined and we didn't do a bunch of acquisitions and overpaid.
Just in your F&I Division as you pointed out obviously the standout a standout segment are especially this does this past quarter and the outlook is maybe a little bit more differentiated versus versus your more freight exposed segments. If I run some quick math here. It looks like you know backing out the acquisition some of the fuel surcharge headwinds it looks like you had.
Murray Mullen: So we think that discipline will pay huge dividends for our shareholders in the future. But for some, the day of reckoning is close. There's going to be other carriers that are going to be looking for liquidity event and will acquire brand name companies in Canada, especially in the LPL segment. In the US market, I see exactly the same thing or they've got the same dynamics is going on in Canada. And we will look at US based opportunities.
You posted a.
Organic growth of roughly kind of call it 4% to 5%.
You you also called out Premier was it was a headwind if you were to back out pre may well what did the rest of the business grow out because it seems like you're going to lap some of the <unk>.
Premier headwind in 'twenty 'twenty four so just trying to get a sense of what the rest of that F&I revenue might be growing at ex <unk> ex some of the some of the large diameter pipeline headwinds you're facing in 2023 here.
Murray Mullen: But as of today, our preference, it's going to be in this three P L non asset based business logistics market. That's what we think we provide the middleware for for the shippers and also for the for the carriers and there's a lot of carriers out there. So providing that middleware, which is what silver express does is we think that's that's an opportunity for our group and we'll be capitalizing on that as best we can.
Okay.
Clarkson this sounds like a question for you.
Speaker 2: Carson, this sounds like a question for you. I can give a...
I can give them.
Speaker 2: I can give a general comment, but any person might have a little more detail on that. So let me give him that one to that one.
I can give a general comment, but I think Carson might have a little more detail on that so yeah. Let me give him that went to that one Kevin.
Speaker 3: Thank you, Eric. Thank you, Eric. So I would say on a go-forward run rate, you're gonna start seeing a pre-May pipeline, as you mentioned.
Thank you Eric.
So I would say on a go forward run rate youre going to start seeing a pretty nice pipeline as you mentioned to start to come back to a position where it's you're not seeing those big headwinds going next year is as you start looking at the comps I think you know going into.
Murray Mullen: And by the way, that's why I'm down to Dallas right now meeting with all our partners down here in station station owners. And lastly, the energy and mining sectors of the economy, they look interesting to us. You know, we'll continue to add to our service coverage if we can find good fits, especially what we see the valuations in the segment today, which are quite reasonable.
Speaker 3: I start to come back to a position where you're not seeing those big headwinds going next year as you start looking at the comps. I think going into 2024, there's still going to be down year over year, but I don't think it's going to be as significant.
2020 for they're still going to be you know.
Are there still going to be down year over year, but I don't think it's going to be as significant as what we're seeing right now.
Murray Mullen: So that concludes our presentation.
Murray Mullen: I'm going to turn back over to the conference coordinator and we'll go straight to the Q&A session. So thank you very much folks and look forward to answering some of your questions. Thank you.
Speaker 3: You know, I think that's the general trend that you're going to see for
You know I think that the general trend that youre going to see for our pipeline.
Operator: We will now begin the question and answer session to join the question to you. You may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speaker phone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two. We will pause for a moment as caller is joined the queue.
Speaker 3: Pipeline stringing and hauling in that segment for 20.
Pipeline.
And hauling and in that segment for 2024.
Speaker 3: The other parts of our business within that segment are looking fairly strong and fairly robust. And I think we're just at the beginning stages of it. Now that those pipelines are in the ground and they're nearing completion, now you gotta fill it. So we kind of participate in that market all the way through its life.
The other parts of our business within that segment are are looking fairly strong.
And fairly robust and I think we're just at the at the beginning stages of it.
You know now that those pipelines are in the ground and are nearing completion now you're going to fill it. So we kind of participate in that market all the way through its lifecycle now it's going to switch more to.
Konark Gupta: The first question comes from Konark Gupta with Scotia Bank. Please go ahead. Thanks, operator. Good morning, everyone. Good morning. I just wanted to follow up on your commentary on inventory rebalancing. We have been hearing similar commentaries from other companies about, you know, these talking cycle has almost, you know, done and I think the retailers are kind of a little bit afraid of restarting. And the cycle given the consumer demand is not really certain here.
Speaker 3: Now it's going to switch more to demand for our production services group or a drilling related services group.
Demand for our production services group or drilling and drilling related services group.
So so it's gonna backfill.
Speaker 3: It's going to backfill some of what those...
Some of what those Downdrafts are gonna be premade pipelines going to experience next year or so.
Konark Gupta: Just wanted to understand like from your conversation with your customers and shifters, what are these thinking or planning in terms of re-restocking cycle? I'm like, is there a pent up in re-stocking that could happen big time next year because, you know, they did not re-stock this year? You know, that, Konark, that, you know, that appears to be some of the general consensus from some of the people that we speak to. My personal opinion is, I think some of that is wishful thinking.
Speaker 3: Down drops are going to be that pre-made pipeline is going to experience next year.
Hopefully that.
Speaker 5: That gives me a sense, just a kind of level set trajectory-wise, how to kind of think of SNI as we look out into next year. So that's helpful. And maybe just maybe another housekeeping question. Maybe this is a few cars in as well. A little bit less activity on the NCI being Q3 versus what we saw in the...
The answers your question, but that gives me a sense of just.
Level set trajectory wise, how to how to kind of think of us and I are as we look out into next year. So that's helpful and maybe just maybe another housekeeping question. Maybe this is too Carson as well.
Little bit less activity on the NCI being cute Q3 versus what we saw in the.
Speaker 5: and the first half seems like you're keeping some drive powder available, given some of the M&A comments that have been made on this call. As we think of the activity on the buyback through the remainder of the year, should we think of something similar to Q3 just given the M&A pipeline looks pretty robust for you guys.
In the first half it seems like you're keeping some dry powder available given some of the M&A comments that had been made on this call.
As we think of the activity on on the buyback through the remainder of the year shall we shall we think of something similar to Q3, just given the M&A pipeline looks but it looks pretty robust for you guys.
Speaker 3: Yeah, I would agree with that comment, Kevin. You know, we want to obviously keep some power available based on the number of opportunities that being presented to us. You want to make sure that you're able to capitalize on the ones that we...
Yeah, I would agree with that comment Kevin.
We want to obviously keep some some powder available based on the number of opportunities are being presented to us.
You want to make sure that you.
You were able to capitalize on on the ones that we are.
Speaker 3: one end up executing on so I would say all in all NCIB you're probably
Konark Gupta: The whole of inventory today is very, very expensive. Cost of money is through the roof. These would be the last cycle. Everybody's a little bit, you know, the consumer is just about in balance right now, but there's stress points there. So I suspect that the freak recession is over. So I don't think it's going to get any worse. But I think it's basically in balance right now. We still on our floors and our facilities, we've got capacity now to take more, more business in and we're seeing, we're hearing about that all over the place.
One end up executing on so so I would say all in all and CIB you're probably.
Speaker 3: Probably going to be somewhere comparable to Q3 obviously depending on what this talk price does, but I'd say all things equal I don't foresee a change.
Q4 is probably going to be somewhere comparable to Q3, obviously, depending on what the stock price does but right. They are all things equal I don't foresee it changing that much.
Speaker 5: That's great. I'll pass it along here and best of luck as you close up the year. Thank you very much.
That's great I'll pass it along here and best of luck as you close out the year. Thank you very much.
Speaker 2: Thanks Kevin just took for for good
Kevin just.
For for her.
Speaker 2: to add on to that I would say is only on the MNH side. I think our primary objective is
Just to add on to that I would say is on the on the M&A side I think our primary objective is we don't want to put the cart before the worst since yours. So we Carson spoke earlier about the balance sheet and making sure that we bought in up and and we have the balance sheet, all all squared away and stuff like that we have.
Speaker 2: We don't want to put the car before the horse is here. So we Carson spoke earlier about the balance sheet and making sure that we button up. And...
Konark Gupta: So within that kind of overlay, I think it's going to stay pretty price competitive. So you better have a big good business model, or you're going to be trapped. And I think that's our general thesis. And our job at corporate is to take advantage of situations where we think that we like the markets that maybe the management made a, made a couple of steps. And that's where we're going to look at opportunity.
Speaker 2: and we have the balance sheet all scored away and stuff like that. We have multiple options that we're looking at. As he said, we're going to pick the best one for our shareholders.
We have multiple options that we're looking at as he said, we're going to pick the best one for our shareholders.
Speaker 2: And we will have that done before the end of the year. Once that's all tidied up and buttoned up and you got all of them, we're going to turn our attention to growth again. And there is on the globe, there's no hurry.
And we will have that done before the end of the year. Once that's all tidied up and buttoned up and you've got all of them were going to turn our attention to growth again and there is on the globe There's no hurry.
Speaker 2: because there's no going to be, in my view, there is no big fast rebound here in the economy. So we'll be able to just cherry pick what we want and that's very good for our shareholders. And remember, we'll get aggressive at the bottom of the market. I was not aggressive at the top of the market. That's.
Because there's no gonna be.
My view there is no big fast rebound here in the economy. So we'll be able to just cherry pick what we want and that's very good for our share for our investors and our shareholders and I remember you.
Konark Gupta: We think the markets in balance. You might get a little bit up to here there, but on, I don't, I don't see a lot of growth. I just, it's just it's not going to get much worse. I don't think we're everything's back in balance. So now you've got to be pinpoint accurate business models. Again, it makes sense.
We will get aggressive at the bottom of the market.
I was not aggressive at the top of the market.
Murray Mullen: And that, that's kind of a good segue into what I wanted to kind of hear about, you know, how you plan for the next year knowing what you know today. You know, like given where the environment is and the rate increases are kind of now starting to impact the consumer and the Canadian consumer obviously living on a lot of variable rate mortgages and all kinds of things. I might see a little bit more finished next year.
That's that's that makes it makes a ton of sense. Thank you very much.
Speaker 1: The next question comes from David O'Campo with Quarmark Securities. Please go ahead.
The next question comes from David Ocampo with <unk> Securities. Please go ahead.
Thanks, Good morning, everyone.
Speaker 6: You do. Mary, I guess I appreciate all the commentary that you've made on the outlook, particularly on the near term. And even in the release, you guys called out that you expect to come ahead of your initial guidance for 23. I was wondering if you could firm up the numbers there, maybe just on the bidon for cash law.
You didn't merit I guess I appreciate all the commentary that you've made on the outlook, particularly on the near term and even in the release you guys called out that you expect to come ahead of your initial guidance for 'twenty three.
Murray Mullen: How do you approach the business planning from the man perspective next year? You said you have capacity, but are you assuming, you know, stable environment next year or big change in other direction, especially for a great business. I don't see a lot of change for next year, to be honest with you, where I see use disruption and then it's just a matter of who can take advantage of the disruption. Let me just point out, if you look at our third quarter, if you look at our year-to-date, you take a look at our direct operating expenses.
Was wondering if you could frame up the numbers there maybe just on EBITDA and free cash flow.
Hmm.
Well you know once you get you know Carson August .
Speaker 2: I'll turn that over to Carson, let him answer that one before he did.
Gerald I'll turn that over to Carsten, let him answer that one for you David.
Speaker 6: Yeah, so if you take a look at what we originally came out with David, we guided towards 2 billion in revenue for 2023 and call it 300 million of EBITDAW for this year. You look at our year-to-date results.
Yeah. So if you take a look at our at what we had originally came out with David was we guided towards 2 billion and and revenue for 2023, and and you know call. It 300 million of of EBIDTA.
Murray Mullen: We just come through a major break with session off the massive highs of last year in 21, and our DOE stayed very, very flat. Our folks do a great job of managing those costs and finding productivity gains, and we're asking them to up their game on that. What we lost some margin is an S&A, and that's because our revenues came down a little bit. Close revenues are down, fuel surcharge is down, blah, blah.
For this year you look at our year to date results.
Speaker 6: You know, we're right in line with our original guidance. And in fact, one might argue that we may be slightly ahead in terms of operating income. Now the 300 million that we talked about earlier in the year was based on our traditional business units. So X, X.
You know what we're right in line with our with our original guidance and.
And in fact, one might argue that that we may be slightly ahead.
And in terms of operating income are now the $300 million that we talked about earlier in the year was it was based on our traditional business units. So ex acquisitions. So so we're we're.
Speaker 3: So we're, you know, you add in a little bit of acquisition, EBITDA into 2023 and you're probably going to be slightly above what that guidance was.
Murray Mullen: And so we lost, I think Carson maybe a point point to half, as S&A is higher. And we're going to have to focus on that part of our cost structure next year, unless we can, our businesses can gain market share at the expense of people that have got over extended. I think that's going to be our overall game plan for next year. And we're challenging all of our business units. Remember, they're independently managed, but they know the game plan.
Were you know you add in a little bit of acquisition EBIDTA into a into 2023 and and you're probably going to be slightly above of what that guidance was.
Speaker 3: You can also do a comparative and look at what we did in Q4 last year and kind of get a sense of what Q4 of this year might look like just based on the trend analysis that we're currently tracking for 2023. And again, it would probably suggest that we're going to close out a little bit better than ours.
You can also do a comparative and looked at what we did in Q4 of last year and kind of get a get a sense of what Q4 of this year might look like just based on the trend analysis that are that we're currently tracking for 2023 and again it would probably suggest that they were going to close out a little bit.
Murray Mullen: They could manage if your competitors have made some missteps, gain some market share, and corporate offer doesn't have to be quite so tough on S&A. It's great to come to the corner and appreciate the color. Thanks. Thank you.
Better than than our original guidance.
Speaker 6: Got it that makes sense. And then just another housekeeping question on the integration plan for BNR. Is there any real estate that potentially comes out of that as you can follow it into other health deals?
Got it that makes sense and then just another housekeeping question.
On.
The integration plan for being or is there any real estate that potentially comes out of that as you consolidate into.
Kevin Chang: The next question comes from Kevin Chang with CIBC. Can you go ahead? Thanks for taking my question and, you know, solid results here. So congrats on that to the Mullin team. I noted in your MD&A, you talked about a little bit of, I'll call it transient headwinds as you integrate the B&R acquisition, and you spoke of some of the margin impact that had in. And some of your segments specifically LTL. It seems like you're on the way to kind of rectify some of that stuff, and it seems like you're pretty confident.
All channels and segments.
Speaker 2: Good question. So we, we didn't buy the real estate from them.
Yeah. Good question. So we are we didn't buy the real estate from them.
Speaker 2: We entered into the facilities that we thought we needed long-term. We entered into longer-term leases, five-year leases with options on the lease.
We entered into the facilities that we thought we needed long term we entered into.
Kevin Chang: You'll get LTL margins back to historical levels, you know, as that integration progresses here. Maybe you can give us a sense of the timeline of that. Is that a 2024 comment, or do you actually see, you know, some of that benefit in Q4 here is the exit this year. And maybe just a level set, like what are, what do you consider historical LTL margins? Should we look at last year's if kind of the benchmark, just because you kind of segmented and then the pandemic hit.
Longer term leases five year leases with options on them on the leases.
Speaker 2: And the real estate we considered as quote non-core, we just took a one year lease on. So we matched that I think pretty well. I think Richard were only off that maybe one or two.
And the real estate, we considered as quote non core we just took a one year lease on so.
We match that I think pretty well I think Richard were only off by maybe one or two.
Speaker 2: terminals or facilities of all the ones they had off that initial off our initial due diligence and negotiating with the family. So we didn't buy that real estate. We have the option to buy. We always get that when we take leases where we can, but we took five year leases on the stuff that on the facilities that we considered core to the
Our terminals are for silver. One example came up all of the ones. They had all off that initial off our initial due diligence and negotiating with the with the family. So we didnt buy that real estate, we have the option to buy we always get that when we take leases, where we can but we took five year leases on this stuff.
We considered core.
To the business on long term.
Speaker 6: That makes sense. And I guess is the non-core factor into that 110 basis point improvement that you guys...
Got it that makes sense and I guess is that noncore factored into that 110 basis point improvement that you guys are seeing.
Speaker 2: I think it is a rip. If I heard that question, if I gather that question, the non-corro will expire in April . So we won't have anything pass on those legacy based costs after April .
Kevin Chang: So there's been a little bit of volatility there. Yeah, so when we acquired B&R, that was a brand name company in Alberta, and they really were involved in two main verticals. One was the energy business, they were servicing the oil and gas business, some energy business in northern Alberta, and the other part was servicing all the communities in the LTL. So when we do our due diligence and we acquire, we knew we knew that they were not performing as way they should in the LTL side.
I think it is a rich.
If I heard they're quite if I gather that question.
Well the noncore will expire in April so we won't have anything pass on almost legacy based costs after April .
Got it thanks man.
Speaker 2: So, you know, if I just add a comment to it. So last year, I took heat because we came out and said, look, the economy might not be as good and we came out early and said, you know, we still think we can do two billion, but...
So if I just add a comment to that so last year I took keep because we came out and said look it's the economy might not be as good and we came out early and said you know we still think we can do 2 billion but.
Kevin Chang: And they, in the LTL. In the other part of the business, they were superstars. But when we acquire companies and we from families, we have to be somewhat respectful of, you know, and not trying to scare the people up too much. We gave a time, we tried to figure it out, make sure we're doing the right things.
Speaker 2: some of this flux that we saw that happening in 21-22 that most people didn't want to talk about, but we tried to be rational about it. So we came out and said, we'll do 300 of OIVDA. And as Carson highlighted, it looks like we're...
Some of those flocks that we saw that happening in 'twenty, one 'twenty two that most people didn't want to talk about but we tried to be rational about it so.
So we came out and said, we'll do 300, Oh I P J.
And as of course and highlight it looks like.
Might be off by a couple of percent because when you add in the acquisitions, we did at my dad about $10 million.
Murray Mullen: And then we just now announced, you know, for October 1st, we've entered phase three of our integration plan, which is, we're going to be shutting that LPL business down and integrated in with our, with two of our other companies, which is Grim Shrack trucking in Highway 9. So, we've already got the technology there, we've got the systems and the process of the terminals. So, we were just too much duplicated. So, once we layer that into those other business units, they'll, we'll get their margins, maybe, maybe margin improvement if we, if we're so fortunate on that.
Speaker 2: because when you add in the acquisitions, if we did, it might add about 10 million on top. So we're gonna be 300, but.
On top so we're more we're gonna be 300, but.
Speaker 2: with some acquisitions to be did. But our initial, our same store sales and our existing businesses and what we saw in the market went on off by much.
We did some acquisitions to beat it but our our initial our same store sales in our existing businesses and what we saw in the market one off by much.
Speaker 2: So, you know, from that perspective,
So you know from my perspective.
Speaker 2: You know, I think that tells you when we take a look at the markets, we take a look at it on a very practical basis and we don't look at it.
You know I think that tells you when we took when we take a look at the markets. We take a look at it on a very practical basis.
And we don't look at it on a whole basis.
Murray Mullen: But, you know, we're probably going to have about 50 people that we consider as duplicated people. Now, headcount and, you know, that's about $5 million on a runway for 50 people, if you average about 100 grand a year per head. And so, we're going to, we're going to make sure that's all buttoned up in the fourth quarter. So, we don't think it'll help our LPL division in the fourth quarter because we've got to go through all of them, all of the last of the phase of the integration.
Yeah.
Okay.
Speaker 1: The next question comes from Cameron Dirkson with National Bank Financial. Please go ahead.
The next question comes from Cameron Jackson with National Bank financial.
Please go ahead.
Speaker 7: Yeah, thanks. Good morning. I guess my question's on the sort of the competitive capacity situation that you mentioned, not significant excess, but still some excess capacity out there, I guess, particularly in the L&W segment. And sort of your expectation that we'll see a bit of a shake out in the market here, there with smaller carriers and financial difficulty or some consolidation. Just wondering if that's something you're seeing already, as far as you know.
Yeah. Thanks. Good morning, I guess my question is on the sort of the competitive capacity situation that you mentioned are not significant excess but still some excess capacity out there I guess, particularly in the L. N. W are segmented and sort of your expectation that we'll see a bit of a shake out in the market here, either with the smaller carriers and financial debt.
Murray Mullen: But, we get 24 with, with no real lingering legacy-based costs. We're just going to layer that in and it will not be part of the, being our group, being our, it's going to focus 100% on energy services. That'll be a big company on its own. And, that is very complimentary to many of the other service offerings that we have within our SNI groups. So, yeah, we think, we think our, you know, we are basically our LPL folks at a pretty darn good job of maintaining margin.
Goldie or some consolidation just wondering if that's something you're seeing already as.
As far as your companies.
Speaker 7: companies maybe going out of business or scaling back operations due to financial difficulty and you know if that's something you're seeing already I mean how do you kind of expect that to kind of play out is that something that's you're going to take a couple of years to play out or is that something you think will happen more quickly.
Companies, maybe going out of business or are scaling back operations due to financial difficulty and and you know if that's something you're seeing already I mean, how do you kind of expect that to kind of play out is that something that you're going to take a couple of years to play out or is that something you think will happen more quickly.
Yeah, that's a good question so.
Speaker 2: And for the most part, I would say the freight recession haven't really hit the L&W segment more than the LKL segment. LKL segment is just in consumer demand. That's basically what that is. L&W, you know, that's...
But for the most part I would say the freight recession, having really.
Murray Mullen: We lost some revenue just because, you know, it just wasn't quite as active and, you know, those things was last year, but generally they gave a very good job of protecting margin. But, we did in the fourth quarter, we lost about 1.1. I think it was 1.1. What's in the person? Yeah, it was 1.1 percent in our LTO division, about 1.1 percent. So, add that back in for next year. Would be a pretty good rule of thumb.
It's the L M w's.
Segment more than the L. T. L segment LPL Sigma is still in consumer demand, that's basically what that is.
Ellen W. That's full truckload that's.
Speaker 2: you know, a part of the inventory balancing blah, blah, blah, all those kind of things. So that's what we saw. We saw most of the risk in the pre-recession. Some of our businesses are not really that in the L&W are not really tied to the consumer, you know, that bloated inventory. Cleason as an example or Danstra, those are two pretty good size businesses in our group.
A part of the inventory balancing blah blah blah, all those kinds of things. So that's what we saw we saw most of the risk on the pre recession and some of our businesses are not really that here in the island W. We're not really tied to the consumer that bloated and for accretion as an example, the Astro pools are two pretty good sized.
Murray Mullen: That is a simple help. That's what we're looking for. Yeah, yeah. So, LTO, for the core, core part of our business, Kevin, you know that it's our biggest segment that we have. We'll continue to add because in LTO, it's not a transaction. You can actually change, you know, the, the, the denominator. You can manage the spread by getting either content or making sure that you have good, good density in your lanes.
This is in our group.
Speaker 2: But the industry talked, if you hear about all the negative and the difficulties, most of it is going to be in logistics and all business or where I was inside, as we classify it.
But the industry talk that you heard about all the negative and the difficulties most of it is going to be enrolled in logistics and long haul business of warehousing side as we classify them and.
Speaker 2: It's been pretty nasty on people. So if you were an asset-based carrier, in other words, you had a lot of company trucks. And you're in the long haul business. Last year was fantastic.
It's been pretty nasty on people. So if you were an asset based carrier.
Murray Mullen: So, and, and the reason that we, we rolled, uh, B&R, the LPL side into our other business is because our business humans have a really good technology and big investors in that. B&R did not invest in technology. So, they would, they would left kind of on an island, but themselves, the, the people there. And, but that's what we're good at as a company. And, uh, we take smaller carriers and we layer them into our network.
The words, you had a lot of company trucks.
When you're in the long haul business last year was fantastic.
And this year is a disaster and that's because of pricing.
Speaker 2: So when will pricing turn? When I'm talking to everybody down here at the conference down at the big US carriers, I'm down talking to them, I'm getting their viewpoints.
So when will pricing term when I'm talking to everybody down here.
The conference is kind of the big U S carriers, I'm kind of talking to them getting their viewpoints.
Speaker 2: They were caught off guard by it.
They were caught off guard by it.
Speaker 2: And of course now they think it's gonna turn quick. I'm not off that thing. I think this is a lot.
And of course now they think it's going to turn quick I'm not off that thing I think it's there's a lot.
Murray Mullen: Well, we've got professional management and good networks and great technology. And, uh, we should be able to drive margin over time. LTL's shooting crew over time would dance to me in technology. That is a great color and very helpful.
Speaker 2: independent contractors in the market that are really hungry.
Of independent contractors in the market that or really hungry.
Speaker 2: and the tough competitors. And so it could take a little bit longer on the full truckload side than what people anticipated. Unless you said to me, the economy's growing and demand increases. If demand increases,
And they're tough competitors and so it could take a little bit longer on the truckload side than what people are anticipating unless you said to me the economy is growing and demand increases if demand increases.
Carson Urlacher: Just in your SNI division, as you pointed out, obviously, the standout segment, especially this past quarter and that look is maybe a little bit more differentiated versus your more freight exposed segment. If I run some quick math here, it looks like back in the acquisition, some of you posted an organic growth of roughly called four to five percent, you also called a pre-May was a headwind. If you were to back out pre-May, what did the rest of the business grow at?
Speaker 2: I have to change my thesis, but I don't see demand increasing. Therefore, we're stuck in this.
I have to change my thesis, but I don't see demand increasing therefore, we're stuck in this.
Speaker 2: You know, lower price environment, you better focus on your costs, better be pinpoint accurate, and you know, we're back to old school from my perspective on that side. I think it's gonna take a little bit longer than a couple quarters.
And Ah you know.
Lower price environment, you'd better focus on your costs that'll be pinpoint accurate.
And.
We're back to old school and from my perspective on that side, I think it's going to take a little bit longer than.
A couple of quarters.
We're at the bottom, it's not going to get worse.
Carson Urlacher: Because it seems like you're going to lap some of the pre-May headwind in 2024. So just trying to get a sense of, you know, what the rest of that SNI revenue might be growing at X, some of the large diameter pipeline headwinds you're facing in 2023 here. Carson, this sounds like a question for you. I can give a, I can give a, a general comment, but I think Carson might have a little more detail on that.
Speaker 8: But I don't see an uptake. Well, well, Cameron and Twitter, if I could add...
But I don't see an uptick.
For a long time Kamran, it's Richard if I could add.
Speaker 8: You know, when we do see the acquisition opportunities presented to us, I think part of your question was
When we do see the acquisition opportunities presented to US I think part of your question was.
Speaker 8: Are they coming now? And are we seeing these challenges, these financial challenges? And the answer is yes. As we get them a couple of years today, they just are looking.
Coming now and are we seeing these challenges these financial challenges and the answer is yes, you know once we get them a couple of yesterday. They just are looking simply to get out.
Speaker 8: simply to get out. They want to get in some instances provide financial information. They say buy my assets.
It wasn't even in some instances provide financial information they sued by my assets because if you think about it in some of these smaller people were fully drawn on an operating line have gone from 2% to 8% in terms of real financial cost. They got up there and they have an old fleet five years or older is an old fleet they can't afford to get a new truck and they just said we're done.
Speaker 8: because if you think about it, some of these smaller people who are fully drawn on an operating line have gone from 2 to 8% in terms of...
Carson Urlacher: So let me give him that one to that one, given. Sure. Thank you, Kevin. So I would say on a go-forward run rate, you're going to start seeing a pre-May pipeline. As you mentioned, start to come back to a position where you're not seeing those big headwinds going next year as you start looking at the comps. I think, you know, going into 2024, there's still going to be, you know, there's still going to be down year over year, but I don't think it's going to be as significant as what we're seeing right now.
Speaker 8: real financial cost they got a bear and they have an old fleet five years or older is an old fleet they can't afford to get a new truck and they said we're done can you buy me
Can you buy me out.
And.
Speaker 8: As Murray said, in our acquisition, our precision-based acquisition strategy, we're very precise and we'll look at things that add value to us. So in those instances, those people, you know, what will this assume that somebody else acquire them? But yeah, it's present right now.
As Murray said and our acquisition of precision based acquisition strategy, we're very precise and we want to look at things that add value to us. So in those instances those people you know what we'll just assume that somebody else acquire them, but yeah. It is present right now.
Speaker 7: okay that's very helpful and i just made it maybe quickly on the l t l side of the business uh... you know obviously you're more exposed western canaverse eastern canada but you did call out uh... you know eastern canada in in the q3 is being you know obviously were most of the weakness was in in ltl are you seeing any signs of stabilization in the eastern kinebian ltl at this point
Okay. No. That's that's that's very helpful and just maybe quickly on the L. T. L side of the business, you'll obviously, you're more exposed western Canada versus eastern Canada, but you did call out Eastern Canada and at least in Q3 as being you know obviously, where most of the weakness was in L. T. L. A are you seeing any signs of stabilization in the eastern.
Carson Urlacher: So, you know, I think that's the general trend that you're going to see for, you know, pipeline stringing and hauling in that segment for 2024. The other parts of our business within that segment are looking fairly strong and fairly robust, and I think we're just at the beginning stages of it. You know, now that those pipelines are in the ground and they're nearing completion, now you've got to fill it. So we kind of participate in that market all the way through its life cycle.
Canadian L T L. At this point.
Speaker 2: Yeah, we saw a little bit of it. You know, the LTO side got a little bit of a bump on yellow.
Yeah, we saw a little bit of it.
You know the L. T O side got a little bit of a bump when yellow.
Speaker 2: announce that they're shutting the doors and you saw how that
Announced that they're shutting the doors and you saw how that.
Speaker 2: Capacity and that, you know, all that, all that freedom was just cobbled up like within two weeks like nobody cared.
Capacity and then you know I'll, let I'll.
I'll, let Craig was just gobbled up like within two weeks like nobody cared he was just okay.
Carson Urlacher: Now it's going to switch more to demand for our production services group or drilling related services group. So it's going to backfill some of what those down drafts are going to be that pre-made pipeline is going to experience next year. So hopefully that answers your question. No, that gives me a sense just to kind of level set trajectory-wise, how to kind of think of SNI as we look out into next year.
Speaker 2: So that added a little bit of capacity. Everybody, I'm sure you'll view that from all the other careers as well.
I'll take them, so that that added a little bit of capacity everybody I'm sure you'll hear that from all the other carriers as well.
Speaker 2: Okay, but that's over now. There's been a little bit of consolidation at business. It's very healthy for margins.
Okay, but that's over now.
Theres been a little bit of consolidation in that business, that's very healthy for margin, it's not healthy for demand our overall demand, but it is healthy for margin and it allows you those that are able to take advantage of it and.
Speaker 2: It's not healthy for demand, overall demand, but it's healthy for margin, and it allows you those that are able to take advantage of it and fill their lanes and get density, that was an unexpected win for most of us in that. So it went down and then we got a little bit...
Kill their lanes and get density.
That that was a that was an unexpected win for most of this or not so it went down and then at a we got a little bit.
Carson Urlacher: So that's helpful. And maybe just maybe another housekeeping question. Maybe this is a few cars in as well. You know, a little bit less activity on the NCF being Q3 versus what we saw in the first half seems like you're right, powder available, given some of the M&A comments that have been made on this call. As we think of the activity on the buyback through the remainder of the year, should we think of something slimmer to Q3 just given the M&A pipeline looks pretty robust for you guys?
Hum.
Speaker 2: a little benefit from that. The economy is in, I still see it in balance right now. I don't see a lot of growth. But it's not a bad spot. If this is bad, we'll take it all day long.
You know, we got a little benefit from that the economy is and.
You'll see it in balance right now I don't see a lot of growth, but it's a it's not a bad spot.
If this is bad will take it all day long.
Right no that's it.
That's great I appreciate that appreciate the time, thanks very much.
Thank you.
Carson Urlacher: Yeah, I would agree with that comment, Kevin. You know, we want to obviously keep some powder available based on the number of opportunities that being presented to us. You want to make sure that you're able to capitalize on the ones that we won't end up executing on. So I would say all in all NCIB, you're probably Q4 is probably going to be somewhere comparable to Q3. Obviously, depending on what the stock price does.
Speaker 1: Once again, if you have a question, please press star, then one.
Once again, if you have a question. Please press Star then one.
Carson Urlacher: But all things equal, I don't foresee it changing that much. That's great. I'll pass it along here and best of luck as you close at the year. Thank you very much. Thanks. Kevin, just to add on to that, I would say, is on the on the M&A side. I think our primary objective is we don't want to put the car before the horse is here. So we Carson spoke earlier about the balance sheet and making sure that we button up and we have the balance sheet all squared away and stuff like that.
Speaker 1: The next question comes from Tim James with TD Towen. Please go ahead.
The next question comes from Tim James with TD Cowen East.
Please go ahead.
Thank you good morning.
Speaker 3: My first question, I'm thinking out to 2024. I know it's early, I just want to, wondering if you can kind of frame how we should think about.
My first question I'm thinking out to 2024 and I know it's early I just wanted to wondering if you can kind of frame, how we should think about.
Speaker 9: pricing in your LPL business just given sort of spot.
Are you seeing in your L. T L business, just given sort of spot pricing versus contract in your mix and.
Speaker 9: pricing versus contract and your mix. And, you know, if there's any sort of remaining adjustments lower that are required to pricing in that business, just because of all the pressure over the last couple of years. And maybe there's a, which is the last couple of years, last year, year and a half. And maybe there's a lag effect there. Is there any kind of residual or is the pricing in the LTL business?
If there's any sort of remaining adjustments lower that are required CIT to pricing and that isn't this just because of all the pressure over the last couple of years and maybe there's a I shouldn't the last couple of years last year year, and a half and maybe theres a lag effect. There is there any kind of residual or is the pricing in the <unk> business sort of been.
Speaker 9: sort of been reset to kind of a line with current market conditions and there shouldn't be any sort of material change. Obviously other than changes in sort of market conditions are spot pricing in 2024.
Reset to kind of align with current market conditions, and there shouldn't be any sort of material change obviously other than even changes in in sort of market conditions or spot pricing in 2024.
Carson Urlacher: We have multiple options that we're looking at. As he said, we're going to pick the best one for our shareholders. And we will have that done before the end of the year. Once that's all tidied up and buttoned up and you got all of them. We're going to turn our attention to growth again. And there is on the growth. There's no hurry. Because there's no going to be, in my view, there is no big fast rebound here in the economy.
Yeah, I think you know if you if you look at the <unk> side of the package business you watch.
Speaker 2: Yeah, I think, you know, if you look at the LPL side of the package business you watch.
Speaker 2: You take your queue from UPS, from FedEx, and whatever. They're generally in the 4% to 5% range that they're going to get in terms of pricing necklace off the book. And then the contract, it goes down from there. If you've got big shifters, you can negotiate deals. We had FedEx at our meeting here with our station agents, and we drive scale.
You take your cue from U P S from Fedex and whatever and they're generally in the 4% to 5% range that they think that you know that theyre going to get in terms of pricing that goes off the book and then the contract vehicles down from there you know if you've got big shippers you can negotiate deals we had fedex at our meeting here with our stationary James and you know we do.
Carson Urlacher: So we'll be able to just cherry pick what we want. And that's very good for our share for our investors and our shareholders. And remember, we'll get aggressive at the bottom of the market. I was not aggressive at the top of the market. That makes a ton of sense. Thank you very much.
<unk> scale and.
Speaker 2: We can't do that because we can't pass it on. So we have good discussions on that. I think there'll be enough pricing leverage.
We tell them, we can you know.
Can't do that because we can't pass it on so we have good discussions on that I think there'll be enough pricing leverage to <unk>.
Old margins margin improvement comes because we run a better business better technology. That's how we're looking at margin improvement can we get better Lane density can we acquire Oh, you know what.
Speaker 2: Margin improvement comes because we run a better business, better technology. That's how we're looking at margin improvement.
David Ocampo: The next question comes from David Ocampo with Cornmark Securities. Please go ahead. Thanks good morning everyone. You do. I guess I appreciate all the commentary that you've made on the outlook, particularly on the near term. And even in the release, you guys called it that you expect to come ahead of your initial guidance for 23. I was wondering if you could firm up the numbers there. Maybe just on the down free cash flow.
Speaker 2: Can we get better lean density? Can we acquire a nice tuck-in business that gives us that lean density and that layered in? And then we're really, really focused on as the soil charges and technology, which we're working on some really neat things in some of those units that are just absolutely doing a bang-up job and that.
Nice tuck in.
So that gives us that lane density and that.
<unk> layered in and then we're really.
Really focused on accessorial charges and technology, Richard we're working on some really neat things in.
And some of those business units that are just absolutely doing a bang up job in that.
David Ocampo: Well, you know, what's that, you know, Carson of this. I'll turn that over to Carson, let him answer that one for you, David. Yeah. So if you take a look at what we originally came up with, David, we guided towards $2 billion in revenue for 2023. And call it $300 million of EBITDAW for this year. You look at our year-to-date results. You know, we're right in line with our original guidance. And in fact, one might argue that we may be slightly ahead in terms of operating income.
Speaker 2: We'll be taking to all of our LTO businesses in the very near future. I'm not mistaken, Rich.
We'll be taking to all of our L. T. All businesses in the very near future if I'm not mistaken rich agreed.
Speaker 8: agreed. Yeah, you know, some of the systems we're working on, you know, just to rewain system, for example, that we do within our organization. Customers says it weighs 100 pounds and it shows up in a weight of 1000 pounds. You don't have to charge them any more in terms of rate, but you just charge them more on the weight that they forgot to tell you they missed by a few pounds type of things. We have technology that is able to identify that and we send it right back to the customer. It's all interlinked to our ERPR.
Some of the systems that we're working on.
Just to re weighing system for example that we do within our organization customer says.
100 pounds. It shows up in a wait and a thousand pounds, you don't have to charge them.
David Ocampo: Now, the $300 million that we talked about earlier in the year was based on our traditional business units, so X acquisitions. So we're, you know, you add in a little bit of acquisition EBITDAW into 2023. And you're probably going to be slightly above what that guidance was. You can also do a comparative and look at what we did in Q4 last year and get a sense of what Q4 of this year might look like just based on the trend analysis that we're currently tracking for 2023, and again, it would probably suggest that we're going to close out a little bit better than our original guidance. Got it. That makes sense.
In terms of rate, but you're just charging more on the way that they forgot to tell you that they miss by a few pounds type of things. We have technology that is able to identify that and we send it right back to the customer it's all inter linked to our ERP or enterprise resource planning system, and that's the efficiency and productivity improvements, where he talked about and all of our <unk>.
Speaker 8: our enterprise resource planning system and that's the efficiency and productivity improvements we're talking about and all of our business units are working to that. That's why we move B&R into the other entities because that's they do that very very well.
Units are working to that that's why we moved <unk> into the other entities because they do that very very well.
Okay. That's helpful. Thank you My second question and you talked and it provided some good detail on being out in the.
Speaker 9: That's helpful. Thank you. My second question and you talked and provided some good detail on B&R and the
The.
Speaker 9: the integration of that into the business. And I know you haven't been as active lately on M&A, but are there any other sort of underlying past acquisitions that still provide synergy opportunities at this point or have all sort of passed.
The integration of that into the business and I know you haven't been as active lately on M&A, but are there any other sort of underlying past acquisitions that still provide synergy opportunities at this point or have all sort of past M&A.
Speaker 9: M&A transactions, the synergies have been more or less realized from those links. Yeah, most of the...
Transactions, the synergies have been more or less realized from from those ones.
Yeah, most of them most of them we've derived most of those synergies.
Speaker 2: our business units, I think you heard me say that earlier, they have their marching orders for 2024. You know, we'll look.
But our business units I think you've heard me say that earlier they have their their marching orders for 2024.
David Ocampo: And then just another housekeeping question on the integration plan for BNR. Is there any real estate that potentially comes out of that as you can follow it into other LTL segments? Good question. So we didn't buy the real estate from them. We entered into the facilities that we thought we needed long-term. We entered into longer-term leases, five-year leases with options on the leases. And the real estate we considered as, quote, non-core.
You know we will look at doing.
Speaker 2: additional tucking acquisitions with our 40 business units, if not the smaller business units if you're not performing at a high level, you'll be tucked in with one of our high performers and we'll find either synerg easy.
Additional tuck in acquisitions with our 40 business units, if not the smaller business units or if youre not performing at a high level, you'll be tucked in with one of our high performers and will find either synergies within our group or by acquiring people outside so everybody's got their marching orders are up your game up your margins and protect your margin.
Speaker 2: or by acquiring people at all times. So everybody's got their marching orders.
Speaker 2: up your game, up your margins, protect your margins, and then we'll look at acquiring some really good value add tokens for our business. That's how we think we can really add margin. If we can't, we'll find the margin corporately because we're gonna shorten our bench. But our first objective.
And then we will look at acquiring some some really good value add tuck ins for our business and so that's how we think we can really add margin.
David Ocampo: We just took a one-year lease on. So we matched that, I think, pretty well. I think Richard will only off that maybe one or two terminals or facilities. The winners are all the ones they had off our initial due diligence and negotiating with the family. So we didn't buy that real estate. We had the option to buy. We always get that when we take leases where we can. But we took five-year leases on the stuff, on the facilities that we considered core to the business on long-term.
If we can't we'll find the margin corporately, because we're going to shorten the bench.
But our first objective is on our priority is.
Speaker 2: Let's go after and gain market share from our competitors. We think there's a, we think a lot of people of...
Let's go after and gain market share from from our competitors, we think they're saying.
We think a lot of people have trap themselves.
Speaker 2: in 2021-22 and we'll be here to take advantage of that for our investors. Not sure most.
In 'twenty, one 'twenty, two and I will be here to take it.
Take advantage of that for our investors and our shareholders.
Okay. That's great. Thank you very much.
Thanks, Tim.
Speaker 1: The next question comes from Trevor Reynolds with Acumen Capital. Please go ahead.
The next question comes from Trevor Reynolds with acumen capital. Please go ahead.
David Ocampo: Got it. That makes sense. And I guess the non-core factored into that 110-basis point improvement that you guys are seeing. I think it is a rip. If I got that question, the non-core will expire in April. So we won't have anything pass on those legacy-based costs after April. Got it. Thanks, Mary.
Speaker 2: Good morning, guys. Most of the questions that I have have been answered, but Murray, I was just wondering if there's any takeaways from the conference that you attended that changed your view in terms of the viability or timing of investments in the NGE and the electrification. Well, that's a great question and good observation.
Good morning, guys. Most of the questions that I had have been answered, but Maria I was just wondering if if there was any takeaways from the conference that you attended that.
That changed your view in terms of the viability or timing of it.
That's an E N E electrification.
It's a great question and good observation.
Speaker 2: Generally speaking, I would tell you there was just a real sense of...
Murray Mullen: So, you know, if I just add a comment to it. So last year, I took heat because we came out and said, look, the economy might not be as good, and we came out early and said, you know, we still think we can do two billion, but some of this flop that we saw that happening in 21-22, that most people didn't want to talk about, but we tried to be rational about it.
Generally speaking I would tell you there was just a real sense of.
Speaker 2: There was a positive attitude. Everybody was relatively happy. They thought that the worst was over.
There was a positive attitude everybody was relatively upbeat they thought that the worst was over.
I think that some of the big carriers are in the truckload side I think there.
Speaker 2: I think that some of the big carriers in the truckload side, I think they're...
Speaker 2: are living on hope. LPL is different. LPL, there's no new capacity coming in and you can work on your margin. That's why it's the biggest part of our business. But on the basic truck outside.
They're living on hope LPL has different L. T old there's no new capacity coming in and you can work on your margin and that's why it's the biggest part of our business, but on the on the basic truckload side.
Murray Mullen: So we came out and said, we'll do 300 of a YBDA. And as Carson highlighted, it looks like we might be off by a couple percent, because when you add in the acquisitions we did, it might add about 10 million on top. So we're going to be 300, but we did some acquisitions to beat it, but our initial, our same-store sales and our existing businesses and what we saw in the market went on off by much.
I I.
Speaker 2: I think they've missed the boat that there's a lot of competition, the competition is tough and pricing isn't going to go out.
I think they missed the boat that there is a lot of competition the competition is tough and.
Pricing isn't going to go up and big carriers.
Speaker 2: They increase their cost structure over this last bit, particularly on driver wages.
They they increase their cost structure over those lives, but particularly on driver wages and if he bought equipment last year, you bought get an acquisition last year you overpaid.
Speaker 2: If you bought equipment last year, you bought, get an acquisition last year, you're overpaid.
Speaker 2: Those acquisitions are not going to give you the return that you thought, that you found no way on this market.
Those acquisitions are not going to give you. The return that you thought that your thumb no way.
Murray Mullen: So from that perspective, I think that tells you, when we take a look at the markets, we take a look at it on a very practical basis, and we don't look at it on a whole basis.
I'm Gonna Miss Margaret So.
Speaker 2: You know, it was overall, there's a pretty good tone that the consumers still okay in the US. There's concern about things in the market, of course there is. But everybody's pretty much...
You know it was.
It was overall a good thing.
There's a pretty good tone that the consumer still okay in the U S. There's concern about things in the market of course there is.
Cameron Doerksen: The next question comes from Cameron Dirkson with National Bank Financial. See you, go ahead. Yeah, thanks.
But everybody's pretty much.
Speaker 2: in the same viewpoint as I am, which is, uh, grow to be difficult.
Cameron Doerksen: Good morning. I guess my question is on the sort of the competitive capacity situation that you mentioned, not significant excess, but still some excess capacity out there, I guess, particularly in the L&W segment. And sort of your expectation that we'll see a bit of a shake out in the market here with smaller carries and financial difficulty or some consolidation. Just wondering if that's something you're seeing already, you know, as far as, you know, companies maybe going out of business.
Same viewpoint as I am which is our growth will be difficult.
Speaker 2: But everybody thinks they're gonna win at the expense of the other guy. So everybody else is screwed up, except me. That's what I heard.
But everybody thinks they're going to win at the expense of the other guy so everybody else's screwed up except me.
Kurt.
Speaker 2: So, God, there will be a lot of, there's gonna be a lot of, there's gonna be some more pain in 2024. And this is really gonna get back to now. You've got a lot of good business, those are one of good businesses are gonna win and get market share. But you're hearing about, did the cold news and failures every day in the market? Look at today, you just read about Convoy, which was a startup and they're a broker and they're shut in the door.
So got it and there will be a lot if theres going to be a lot of there's going to be some some more pain in 'twenty 'twenty four and.
This was really going to get back to you now you've got a you've got to run a good business those that run good businesses are going to win and get market share, but you're hearing about difficulties in failures everyday in the market look at today, you just read about convoy, which was a startup and they were a broker and their load that they're shutting the doors.
Cameron Doerksen: Or scaling back operations due to financial difficulty and, you know, if that's something you're seeing already, I mean, how do you kind of expect that to kind of play out? Is that something that you're going to take a couple of years to play out? Or is that something you think will happen more quickly?
Murray Mullen: Yeah, that's a good question. So for the most part, I would say the freight recession having really hit the L&W segment more than the LKL segment. LKL segment is just in consumer demand. That's basically what that is. L&W, you know, that's full truckload that's, you know, a part of the inventory balancing blah, blah, blah, blah, all those kind of things. So that's what we saw. We saw most of the risk on the freight recession.
Speaker 2: yellow shut the doors and there were L.T.L. I mean there's gonna be a lot of, there's gonna be a lot of reshuffling of the deck.
Yellow shut the doors and there were L. T O I mean, theres going to be a lot of.
Ah theres going to be a lot of reshuffling of the deck.
Speaker 2: and the well-run companies that have a long-term game plan and good verticals, they will do quite.
And the well run companies that have a long term game plan and good verticals, they will do quite well.
Speaker 6: That's very helpful. Just sort of just, and I guess the question was around the viability and timing of investments in CNG and electrification, just curious what sort of takeaways you had from that conference.
That's very that's helpful I just.
So it just and I guess the question was around the viability and timing of our investments in C. N G and electrification just curious what sort of takeaways you had from that conference.
Murray Mullen: Now, some of our businesses are not really that in the L&W are not really tied to the consumer, you know, that loaded inventory, Cleason, as an example, or the answer. Those are two pretty good size businesses in our group, but the industry talk that you hear about all the negative and the difficulties. Most of it is going to be in logistics and all business where I was inside as we classify it.
Speaker 2: It's all over the place. Every major manufacturer, OEM, and...
It's all over the place if a major manufacturer Oh, we engine, they're all they've all got their coloring books out there goes up their prototype so.
Speaker 2: They're all, they've all got their coloring books out. They don't adopt their prototypes out.
It's not scalable yet.
Speaker 2: Okay, so nothing nothing there changed your your view in terms of timing and investment in that not a time no the future the futures and great hands but you're just not here tomorrow. It's
Okay. So nothing nothing there changed your view in terms of timing and investment in that timing.
Murray Mullen: And it's been pretty nasty on people. So if you were an asset based carrier, in other words, you had a lot of company trucks. And you're in the long haul business last year was fantastic. And this year is a disaster. And that's because of pricing. So when we're pricing term, when I'm talking to everybody down here at the conference, down at the big US carriers, I'm down talking to them, I'm getting their viewpoints.
The future the futures in great hands, but it's not here tomorrow, it's going to take a little bit time to get there.
Speaker 2: okay we know that you know we know we stay on top of this uh... i personally have been over to sweeten to uh... check the latest technology that they were talking about hey we can do this yeah but it's not scalable yet
Okay. Yeah, we know that you don't work you know we.
Stay on top of this I personally have been over to Sweden to.
Check the latest technologies that they were talking about hey, we can do it but it's not scalable yet.
So.
Speaker 2: you know, and our clearest path right now is.
You know and you know our clearest path right now is.
Speaker 2: were big and CNG compressed natural gas. I think Richard, I don't have leaves on the line, but leaves are headed this way. I think it's a little bit of color on that. Yeah, yeah, ENG truck.
We're big in C N Gs compressed natural gas.
Murray Mullen: They were caught off guard by it. And of course, now they think it's going to turn quick. I'm not off that thing. I think this is a lot of independent contractors in the market that are really hungry. And the tough competitors. And so it could take a little bit longer on the full truck alongside than what people are anticipating. Unless you said to me, the economy is growing and demand increases. If demand increases, I have to change my thesis, but I don't see demand increasing. Therefore, we're stuck in this lower price environment. You better focus on your costs. Better be from point accurate. And we're back to old school from my perspective on that side.
I think Richard.
Oh of leaves on the line, but these are ahead of us.
Any color on the Canada Love.
Yeah, you know Gee trucks.
Speaker 2: And they're performing quite well, they have not disappointed. Now, but they're way more expensive than a traditional diesel engine.
And they are performing quite well there they they have not disappointed in Alberta.
More expensive than a traditional diesel engine.
Speaker 2: But those price points will come down with the more critical mass around. We're hearing some big queries down here really starting to embrace CMG.
But those price points will come down with the more.
Master arm, we're hearing some vicarage down here are really starting to embrace a C N G.
Speaker 2: rather than diesel. It's a good transition to perfection, which is zero emission. But zero emission is, let's talk about that next decade. Let's have a good transition for this decade. And then we can go to zero, that's going to be our next objective. But we've got to get better. C and G is a path.
Rather than diesel it's a good it's a good transition to perfection, which is zero emission.
But zero emission.
Well, let's talk about that next decade, let's say have a good transition for this decade and then we can go to zero.
That's gonna be our next our next objective, but we gotta get better C N G a path towards that.
Murray Mullen: I think this can take a little bit longer than a couple quarters. We're at the bottom. It's not going to get worse. But I don't see an uptake.
Speaker 8: or maybe just a little more color on that. Me and some of the team went down to the Cummins organization as making strides in the natural gas engine, the X-15N, and we were driving it, and it works. And Murray's point, you know, you got reduced emissions. I mean, think that's the gap.
And Trevor maybe just little more color on that I mean, some of the team went down to the become in this organization is making strides in the natural gas engine, the <unk> and and we weren't driving it and it works and to Mary's point.
Richard Maloney: Cameron, it's richer if I could add. When we do see the acquisition opportunities presented to us, I think part of your question was, are they coming now? And are we seeing these challenges, these financial challenges? And the answer is yes. As we get them, a couple yesterday, they are looking simply to get out. They want to be in some instances provide financial information. They say buy my assets. Because if you think about it, some of these smaller people who are fully drawn on an operating line have gone from two to eight percent in terms of real financial costs they got to bear.
You got reduced emissions and we think that's the gap.
Speaker 8: you know fuel if you will and more importantly when you think of alternative energies you got to think about infrastructure how you're fueling that and as we know when we've announced we're part of that announcement formal lines working on this and there's more infrastructure for the compressed natural gas and it's a real thing and it's coming and we believe and today we're probably the biggest users of CNG we have 20
Fuel, if you will and even more importantly, when you think of alternative energy you got to think about infrastructure and how you are fueling that and as we know and we've announced with part of that announcement torma lines working on this and there's more infrastructure for them a compressed natural gas and it's a real thing and it's coming and we believe and today were probably the biggest users of C N Jamie.
Richard Maloney: And they have an old fleet five years or older is an old fleet. They can't afford to get a new truck. And they just said, we're done. Can you buy me? And as Murray said in our acquisition, our precision based acquisition strategy, we're very precise and we'll look at things that add value to us. So in those instances, those people, you know what, we'll just assume that somebody else acquired them. But yeah, it's present right now. Okay, you know that's very helpful.
Speaker 8: 20 units in Canada and only restricted by the amount of commons is making but having met with them last week or a couple weeks ago They're ramping up. This are doing this. So we're we're front center. I'm looking at that
2020 units in Canada, and Ronnie restricted by the amount of Cummins is making but having met with them last week or a couple of weeks ago Theyre ramping up just started doing this so we're we're front and center on looking at that.
You know in my last comment on this just look like every senior exec that I've talked to is an OEM.
Speaker 2: You know, my last comment on this is, look, every senior exact that I talked to was an OEM.
Speaker 2: and the engineering folks, everybody's focused on getting better. Everybody understands.
And the engineering folks here everybody's focus on getting better every everybody understands that.
Cameron Doerksen: And just maybe quickly on the LTL side of the business, obviously you're more exposed Western Canada versus Eastern Canada. But you did call out Eastern Canada in the Eastern Q3 as being where most of the weakness was in LTL. Are you seeing any signs of stabilization in the Eastern Canadian LTL at this point? Yeah, we saw a little bit of it. Um, you know, the LTL side got a little bit of a bump on yellow, um, announce that they're shutting the doors.
Speaker 2: the path forward, which is, let's get better. Let's do our part. And when everybody's focused on that, it'll eventually happen. I saw some really...
The path forward, which is let's get better.
Lets do our park and when when everybody's focused on that it will eventually happen.
I saw some really really.
Speaker 2: and I'm very, very optimistic that we're just in the first inning of a long game here.
Intriguing stuff and I'm very very optimistic but.
We're just in the first inning of a long game here.
That's great. Thanks, everyone.
Thank you.
Cameron Doerksen: And you saw how that capacity and that, you know, all that, all that was just gobbled up like within two weeks, like nobody cared. It was just all taken so that that added a little bit of capacity. Everybody. I'm sure you'll hear that from all the other careers as well. Okay, but that's over now. There's been a little bit of consolidation out business that's very healthy for margin. It's not healthy for demand overall demand that it's healthy for margin, and it allows you those that are able to take advantage of it and fill their lanes and get density.
Yeah.
Speaker 1: This concludes the question and their session. I would like to turn the conference back over to Mr. Mullen for any clothing remarks.
This concludes our question and answer session I would like to turn the conference back over to Mr. Mullen for any closing remarks.
Yeah, Thanks folks for joining us, we'll look forward to chatting with you as we wind up twenty-three I hate, saying that but we've already turned our attention towards trying to develop our business plan along with our budget in our Capex.
Speaker 2: Yeah, thanks folks for joining us. We'll look forward to chatting with you as we wind up 23, I hate saying that, but we've already turned our attention towards trying to develop our business plan along with our budget and our CAPEX for 2024. Once we get it, we will...
For 2024, once we get it we will.
Speaker 2: We'll share that information on our best analysis of what we see will happen in 24. Thank you very much for joining us. Appreciate it.
We'll share that information on our best analysis of what we see will happen in 'twenty four. Thank you very much for joining us appreciate it take care.
Cameron Doerksen: Uh, that that was, that was an unexpected win for most of us in that. So it went down and then it, uh, we got a little bit, um, you know, a little benefit from that. The economy is in, I still see it in balance right now. I don't see a lot of growth, but it's it's not a bad spot. Um, if, if this is bad, we'll take it all day long. Right.
Speaker 1: This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.
He says can clinically today's conference call you may disconnect your lines.
Thank you for participating and have a pleasant day.
Speaker 10: I that.
Yeah.
Okay.
Okay.
[music].
Cameron Doerksen: No, that's, that's great. Appreciate it. Appreciate the time. Thanks very much. Thank you.
Operator: Once again, if you have a question, please press star. Then one.
Tim James: The next question comes from Tim James with TD Cowan. Please go ahead. Thank you.
Tim James: Good morning. Um, my first question, uh, I'm thinking out to 2024. I know it's early. I just want to wondering if you can kind of frame how we should think about pricing in your LPL business, just given sort of spot pricing versus contract and your mix and, you know, if there's any sort of remaining adjustments lower. That are required to pricing in that business, just because of all the pressure over the last couple of years and maybe there's a, which is your last couple of years, last year, year and a half, and maybe there's a lag effect there.
Tim James: Is there any kind of residual or is the pricing in the LPL business sort of been reset to kind of a line with current market conditions and there shouldn't be any sort of material change. Obviously, other than then changes in, in sort of market conditions or spot pricing in 2024. Yeah, I think, you know, if you, if you look at the LPL side of the package business, you watch. You take your cue from UPS from FedEx and whatever.
Tim James: And they're generally in the 4 to 5% range that, that they think that, you know, that they're going to get in terms of pricing necklace off the book. And then the contract, it was found from there, you know, if you've got big shifters, you can negotiate deals. We had FedEx that are meeting here with our station agents and, you know, we drive scale and. Tell them we can't, you know, we can't do that because we can't pass it on.
Tim James: So we have good discussions on that. I think there'll be enough pricing leverage to hold margins. Margin improvement comes because we run a better business, better technology. That's how we're looking at margin improvements. Can we get better lean density? Can we acquire a, you know, a nice tucked in business that gives us that lean density and that layered in? And then we're really, really focused on as a soil charges and technology, Richard, we're working on some really neat things in some of our business units that are just absolutely doing a bang up job.
Tim James: And that will be taking to all of our LPL businesses in the very near future. If I'm not mistaken, Rich. Agreed. Yeah, you know, some of the systems we're working on, you know, just to rewain system, for example, that we do within our organization, customer says it weighs a hundred pounds and it shows up in a weight of a thousand pounds. You don't have to charge them any more in terms of rate, but you just charge them more on the weight that they forgot to tell you they missed by a few pounds type of things.
Tim James: We have technology that is able to identify that and we send it right back to the customer. It's all interlinked to our ERP or enterprise resource. And that's the efficiency and productivity improvements where we talked about and all of our business units are working to that. That's why we move B and R into the other entities because that they do that very, very well.
Murray Mullen: Okay, that's helpful. Thank you. My second question and you talked and provided some good detail on B and R and the integration of that into the business. And I know you haven't been as active lately on M and A, but are there any other sort of underlying past acquisitions that still provide synergy opportunities at this point or have all sort of past. M and A transactions, the synergies have been more or less realized from those moves.
Murray Mullen: Yeah, most of most of we've derived most of those synergies, but our business units, I think you heard me say that earlier, they have their marching orders for 2024. You know, we'll look at doing additional tucking acquisitions with our 40 business units. If not, the smaller business units, if you're not performing at a high level, you'll be tucked in with one of our high performers and we'll find either synergies within our group or by acquiring people outside.
Murray Mullen: So everybody's got their marching orders up your game, up your margins, protect your margins, and then we'll look at acquiring some some really good value add tuck ins for our business. That's how we think we can really add margin. If we can't, we'll find the margin properly, because we're going to shorten our venture. But our first objective is, and our priority is, let's go after and gain market share from our competitors, we think there's a, we think a lot of people have trapped themselves in 2021, 22, and we'll be here to take advantage of that for our investors.
Murray Mullen: Okay, that's great. Thank you very much.
Trevor Reynolds: Thanks. The next question comes from Trevor Reynolds, who's acting in capital. Please go ahead.
Trevor Reynolds: Good morning, guys. Most of the questions that I have have been answered, but Murray, I was just wondering if there's any takeaways from the conference that you attended that changed your view in terms of the viability or timing of investments in the NCE and the electrification. That's a great question and good observation. Generally speaking, I would tell you there was just a real sense of there was a positive attitude. Everybody was relatively happy.
Trevor Reynolds: They thought that the worst was over. I think that some of the big carriers in the truckload side, I think they're living on hope. LPL is different. LPL, there's no new capacity coming in and you can work on your margin. That's why it's the biggest part of our business. But on the on the basic truckload side, I think they've missed the boat that there's a lot of competition. The competition is tough and pricing isn't going to go up.
Trevor Reynolds: Big carriers, they increase their cost structure over this last bit, particularly on driver wages. If you bought equipment last year, you bought, get an acquisition last year, you're overpaid. Those acquisitions are not going to give you the return that you thought that you found no way out on this market. Overall, there's a pretty good tone that the consumers still okay in the U.S. There's concern about things in the market, of course there is.
Trevor Reynolds: But everybody's pretty much in the same viewpoint as I am, which is growth will be difficult. But everybody thinks they're going to win at the expense of the other guy. So everybody else is screwed up. It's at me. That's what I heard. There's going to be a lot of pain in 2024. This is really going to get back to now. You've got to run a good business. Those who run a good business are going to win and get market share.
Trevor Reynolds: But you're hearing about the difficulties and failures every day in the market. Look at today, you just read about Convoy, which was a startup and they're a broker and they're shut in the doors. Yellow shut the doors and they were LPL. There's going to be a lot of reshuffling of the deck and the well-run companies that have a long-term game plan and good verticals, they will do quite well. That's helpful. I guess the question was around the viability and timing of investments in CNG and electrification.
Trevor Reynolds: Just curious what sort of takeaways you had from that conference. It's all over the place. If we made your manufacturer OEM engine, they're all, they've all got their coloring books out. They don't adopt their prototypes out. No, it's not scalable yet. Okay, so nothing there changed your view in terms of timing and investment in that moment. The future's in great hands, but you're just not here tomorrow. It's going to take a little bit time to get there.
Trevor Reynolds: Okay, we know that. You know, we say on top of this, I personally have been over to Sweden to check the latest technologies that they were talking about. Hey, we can do this. Yeah, but it's not scalable yet. So, you know, and, you know, our clearest pathway now is, we're big and CNGs, compressed natural gas. I think Richard, they don't have leaves on the line, but these are ahead of us. Yeah, ENG trucks.
Trevor Reynolds: And they're performing quite well. They, they have not disappointed. Now there, they're way more expensive than a traditional diesel engine. But those price points will come down with the more critical master arm. We're hearing some victories down here, really starting to embrace CNG rather than diesel. It's a good, it's a good transition to perfection, which is zero emission. But zero emission is what let's talk about that next decade. Let's have a good transition for this decade.
Trevor Reynolds: And then we can go to zero. That's going to be our next, our next objective. But we've got to get better CNG is a path towards that. Well, maybe just a little more color on that. Me and some of the team went down to the, the commons organization is making strides in the natural gas engine, the X-15 and, and we were driving it and it works. And Murray, to Murray's point, you know, you got reduced emissions and we think that the gap, you know, fuel, if you will.
Trevor Reynolds: And more importantly, when you think of alternative energies, you've got to think about infrastructure. How are you feeling that? And as we know, when we've announced, we're part of that announcement, formal lines working on this and there's more infrastructure for the compressed natural gas. And it's a real thing and it's coming. And we believe, and today we're probably the biggest users of CNG. We have 20, 20 units in Canada and only restricted by the amount commons is making, but having met with them last week or a couple of weeks ago, they're ramping up to start doing this.
Trevor Reynolds: So we're, we're front center. I'm looking at that. You know, in my last comment on this is, look, every senior exec that I talked to was an OEM and the engineering folks, everybody's focused on getting better, everybody understands the path forward, which is, let's get better. Let's, let's do our part. And when, when everybody's focused on that, it'll eventually happen. I saw some really, really intriguing stuff and I'm very, very optimistic that we're just in the first inning of a long game here.
Murray Mullen: That's great. Thanks, everyone. Thank you.
Murray Mullen: This concludes the question and their session. I would like to turn the conference back over to Mr. Mullen for any clothing remarks. Thanks. Thanks, folks, for joining us. We'll look forward to chatting with you as we wind up 23. I hate saying that, but we've already turned our attention towards trying to develop our business plan along with a budget and our cat X for 2024. Once we get it, we will We'll share that information on our best analysis of what we see will happen in 24th. Thank you very much for joining us. I appreciate it. Take care.
Operator: This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day. Thank you very much.