Q3 2024 Mullen Group Ltd Earnings Call
Thank you for standing by this is the conference operator, welcome to the Mullen Group Limited third quarter 2024 earnings conference call and webcast.
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Speaker Change: I would now like to turn the conference over to Murray K Mullen Chair Senior Executive Officer and President. Please go ahead.
Speaker Change: Thank you and welcome to Mullen group's quarterly conference call.
Speaker Change: So once again, we will provide shareholders and interested investors with an overview of the third quarter financial results.
Speaker Change: And in addition, we will discuss the main drivers impacting these results or expectations for the year and will close with a Q&A session.
Speaker Change: But before I commence today's review I'll remind everyone that our presentation contains forward looking statements.
Speaker Change: And these are based upon current expectations and are subject to a number of risks and uncertainties and as such actual results may differ materially.
Speaker Change: Further information identifying these risks uncertainties and assumptions can be found in the disclosure documents, which are filed on SEDAR plus and at Www Dot Marlin Hyphen group Dot com. So with me. This morning. Once again I have this full senior executive team I have Richard Maloney Senior operating officer, Joanna Scott Senior corporate Officer and Carson.
Speaker Change: Her locker, who is the senior financial officer.
Speaker Change: So just wondering what happened in Q3 'twenty four in terms of our financial operating performance, while the three main topics that will.
Speaker Change: We will be discussing this morning, and then we'll turn the call over to the operator, and we'll go straight to the Q&A session.
Speaker Change: I'll begin with the call was talking about the macro environment that we had to migrate through last quarter, along with discussing what has changed year over year, then I'll turn the call over to Carson Urlacher, who will provide an overview of the third quarter financial results.
Speaker Change: And I will remind you for those interested in detail we've posted the M. D. N. A detailed 60 page report covering all aspects of the results and balance sheet well both on our website.
Speaker Change: Which is www Mullen hyphen grouped I'll comment on SEDAR plus.
Speaker Change: So then after that we will close with a discussion on the macro environment as I see it in the end.
Speaker Change: However results might be infected for the rest of the year.
Speaker Change: Then we'll go to the Q&A session.
Speaker Change: So let's talk about the macro environment, so last quarter, you'll recall that.
Speaker Change: But I stated that really in the in our markets that kind of everything that changed acknowledging the fact that the market is different than last year. In fact, the last two years. So under this scenario it would be reasonable to expect that results would be different than in prior years.
Speaker Change: And this is precisely the case with the results that youre seeing for most carriers and from ourselves.
Speaker Change: Except for one reason and that's acquisitions I've commented that I think acquisitions were the only way you could grow in a no growth economy.
Speaker Change: So we were right on the first and perhaps we were.
Speaker Change: One of the very few public companies to acknowledge that acquisitions would be the only way to grow given the market fundamentals.
Speaker Change: And we didn't see a whole bunch of a reason to change that.
Speaker Change: From them from the internal market dynamics that were going on so in early 'twenty for you.
Speaker Change: Now after we were comfortable with the prospects of strengthening the balance sheet with a new and expanded bond issuance and we expected a meaningful acquisition, we executed a meaningful acquisition.
Speaker Change: Finding what we believe is a real market leader in container world.
Speaker Change: And on that container World has a significant presence in the beverage and alcohol and vertical and problems of British Columbia.
Speaker Change: They generate around $120 million of annual revenues.
Speaker Change: They operate as a freight forwarder.
Speaker Change: They operate a customs bonded warehouse and they are a delivery company. So these are three attributes that we considered crucial to being successful in this market.
Speaker Change: Now we also know we got lots to do with this business to make it a profitable venture for our shareholders and we will turn our focus and attention.
Speaker Change: To that in 2025 and beyond it'll take a while to change the culture to one of cost driven and.
Speaker Change: Would be very focused on those kind of things but.
Speaker Change: For right now thus far we've been focused on and making sure that there was a smooth transition from a customer perspective.
Speaker Change: And next year, we're going to focus on the cost side as I talked about and that's really kind of come from a combination of investing in new operating assets technology and some business process improvements.
Speaker Change: But I got to tell you I think there was more to our results in Q3 than acquisitions, you we could not have achieved.
Speaker Change: Record revenues and near record profitability.
Speaker Change: For our existing 39 business units are not managing the challenging market conditions as well as they did so.
So a big shout out here to all of our business units your hard work and disciplined cost management initiatives are a big reason MTL had a very good quarter.
Speaker Change: Now we also know that solid senior leadership must also be accompanied by investments in the right verticals in order to achieve solid results. Today I've commented many times, there's lots of really good operators in our business, but if you're on the wrong vertical you're trapped right today.
Speaker Change: So I continue to state the case.
Speaker Change: This strategy because not all verticals are created equally.
Speaker Change: You may recall that over the years, we built a large diversified organization by focusing on acquiring quality companies and they operate.
And verticals of the economy that we believe are sustainable and where we can achieve acceptable rates of return. This means we must be disciplined and not chase incremental revenue streams simply for topline growth.
Speaker Change: Our strategy to invest where we generate acceptable returns on capital.
Speaker Change: For our shareholders well for example, let's consider the L T O segment and.
Speaker Change: Not only is this business in one of the most stable parts of the supply chain, but it also offers in our opinion the opportunity to expand margins through a combination of tuck in acquisitions that help us drive scale through the introduction of new technologies that reduce cost.
Speaker Change: And some are something that really you know the smaller competitors just simply cannot implement.
Speaker Change: And we focus on yield management and I think there's some evidence that this strategy is working.
Speaker Change: I refer you to our Q3 operating segment results, where operating margins and our L. T also.
Speaker Change: Actually increased quarter on a year over year.
Speaker Change: By a healthy one 1%.
Speaker Change: So pretty impressive given that the economy is stuck in neutral.
Speaker Change: So our discussion on the market trends last quarter is also relevant to our performance last quarter. So I'll highlight a few of the challenges our business units had to deal with lets start by looking at the overall economy Central banks have successfully brought inflation to the 2% range, but this only been achieved by slowing the economy through a more restrictive monetary.
Speaker Change: And our interest rates these initiatives.
Speaker Change: Have resulted in virtually no growth in the economy.
Speaker Change: But it has not collapsed the economy, either we also know that the consumer's pocket book as negatively been impacted by yesterday's inflation, which I called the worst tax of all all the vast majority of society and high interest rates. So in other words consumer spending has moderated as compared with prior years.
Speaker Change: And what this means for the freight and logistics business is in overall demand has softened from heightened levels of 'twenty two 'twenty three.
Speaker Change: But I always say this demand only tells one half the story suppliers the other.
Speaker Change: And in this case, it's pretty evident there was more supply today than there was two years ago.
Speaker Change: This means there's only one outcome pricing comes under pressure and I would argue that this is now the Achilles heel of the freight and logistics business.
Speaker Change: This freight to haul, but the rates are too low for the cost structure of the industry is burdened with a day in.
Speaker Change: Customers have been quick to bite on the low rates, giving precious little credence to long term relationships are quality. So.
Speaker Change: This explains why it's difficult to maintain margins today in most verticals and this in turn exposes the business models that are too dependent on full truckload market as an example, but and perhaps this is the good news.
Speaker Change: Nothing lasts forever and I'll have more to talk about this topic in the outlook section.
Speaker Change: So in summary.
Speaker Change: Nothing really surprises this quarter not the market fundamentals in the economy and the performance of our business units, which are professionally managed and focused on generating the very best results. They can.
Speaker Change: So I'm now going to turn the call over to Carsten for more on our Q3 financial analysis. So Carson you are right.
Speaker Change: Alright.
Carsten: Thank you Marie and welcome everyone as Mary mentioned I will focus on the highlights from the third quarter. The details of which are fully explained in our third quarter interim report.
Carsten: I thought this quarter it would only be fitting for me to first talk about the balance sheet. Since we closed a $400 million 10 year private placement debt financing in the quarter.
Carsten: This new financing enabled us to end the quarter with $344.4 million of cash on hand.
Carsten: Earlier this week, we used $217 2 million of this cash to repay some previous notes that came to maturity.
Carsten: After this week's repayment, we now have approximately $130 million of cash on hand.
We also have access to $525 million of Undrawn bank credit facilities, providing us with ample liquidity.
Carsten: In terms of our debt covenants, we have lots of room available.
Carsten: We effectively have one main debt covenant, which is total net debt to operating cash flow.
Carsten: Once adjusted for this week's debt repayment, our total net debt to operating cash flow Covenant is 2.26 to one and 2.54 to one under our new 2024 note agreement and on our previous private placement note agreement respectively.
Carsten: The total net debt to operating cash flow covenant is calculated differently under the new 2024 node agreement compared to the previous private placement debt agreement.
Carsten: The main difference being what is considered that for covenant purposes.
Carsten: Under the new 'twenty 'twenty four note agreement lease liabilities with respect to real property is excluded from that while our $125 million of convertible debentures is now included as debt for covenant purposes.
Carsten: These two items different differ from the previous private placement debt agreement.
Our $130 million of cash it's not reflected in this covenant.
Carsten: So our covenants would actually be lowered even further once our cash is deployed to generate new operating cash flows.
Carsten: Excluding lease liabilities with respect to real property under the New 2024 note agreement provides us with greater flexibility in positioning our existing business units into strategic facilities and provides greater optionality when it comes to making long term investment decisions with respect to acquisitions.
Carsten: Our new blended interest rate excluding the notes that were repaid. This week is approximately five 3% per annum.
Carsten: So in summary, our balance sheet is once again, well structured and positions us to make long term strategic investment decisions with over a full turn of room available on our debt covenants and cash available on the balance sheet to grow.
Carsten: Now to our operating results.
Carsten: The third quarter highlights that really stick out or that we generated $532 million of consolidated revenue.
Carsten: Record compared to any previous quarter.
Carsten: We generated a very respectable $95 3 million of old IBD, a which is the third highest til IBD a compared to any previous quarter.
Carsten: We generated net cash from operating activities of $66 2 million and our return on equity was 15, 3% in the quarter.
Carsten: Earnings per share also remained consistent year over year at 44 cents per common share. So a very solid quarter from a financial perspective, considering current market conditions.
Carsten: I'll go through let's say our results by segment shortly but the overall theme is as follows topline revenues grew due to the acquisition of container world.
Carsten: We entered a new vertical of the economy at a reasonable valuation, giving our organization to a new platform and opportunity for future growth.
Carsten: We also improved operating margins that resulted from the combination of our tuck in acquisition strategy from the niche markets, we serve and from the diversity of our 40 business units.
Carsten: In the third quarter revenue per working day improved by approximately $500000 per working day to $8 6 million with revenue, peaking at $8 9 million per working day in the month of September.
Carsten: From a seasonality perspective, the revenue the revenue trend continues with Q3 typically being the strongest quarter of the year.
Carsten: We generated a IBD at $95 3 million, an increase of $6 7 million compared to the prior year and this is the second highest Q3 ever recorded.
Carsten: Only to Q3 of 2022.
Carsten: Acquisitions added $6 4 million of OA V. D. We also experienced improved results in the L. T L segment and in El N. W segment, excluding acquisitions. These.
Carsten: These increases were somewhat offset by lower or IBD eh in the F&I and U S. III P L segments and from higher corporate costs.
Carsten: Operating margin improved to 17, 9% as compared to 17, 6% last year, despite more competitive pricing conditions in certain markets and a reduction in higher margin specialized business.
Carsten: Direct operating expenses as a percentage of consolidated revenue decreased by one 3% as our business units did a great job adapting to current market conditions and controlling costs.
Carsten: <unk> expenses as a percentage of consolidated revenue increase resulting from higher cost experienced that container world and from a negative variance in foreign exchange.
Carsten: Now, let's take a look at how we did by segment.
Carsten: First our largest segment revenues in the <unk> segment were $188 7 million down $5 5 million from last year due to a softening in the overall freight demand overall freight demand from D marketing underperforming business and from a $1.6 million decrease in fuel surcharge.
Carsten: Oh IBD, a was $35 7 million up $1 2 million from last year, Despite lower segment revenue.
Operating margin improved by 1.1% to 18, 9% due to the tuck in of B <unk> L. T L operations into our existing network driving greater lane density as well as using our existing technology platform.
Carsten: Our second largest segment is our island W segment revenues and Neil N. W segment were $168 9 million, so up $31 8 million ACA.
Carsten: Acquisitions added $33 6 million of incremental revenue, which was somewhat offset by lower revenue generated from our existing business units due to the lack of capital investment in the private sector from competitive pricing in certain markets and from shippers electing to keep a tight rein on inventory levels.
Carsten: Oh, I BDA was $35 2 million up $8 4 million from the prior year with container world, adding $6 4 million of incremental of IBD Eh.
Carsten: While our other business units added $2 million of Hawaii, BDA due to more efficient operations.
Carsten: Operating margins improved by 1.3% to 28% primarily due to lower direct operating expenses.
Carsten: Moving to our F&I segment revenues were up $6 4 million to $131 8 million due to increased activity levels in the western Canadian sedimentary basin the.
Carsten: The diversity of our 17 business unit within this segment led to higher revenues.
Carsten: Our production service business units benefited from certain projects related to facility maintenance and plant turnaround work or drilling related services business units also saw an increase in demand for their services.
Carsten: Somewhat offsetting these increases was a reduction in revenue of premium pipeline.
Carsten: Due to the completion of the Trans mountain and coastal gas projects.
Carsten: Canadian dewatering experienced lower demand for dewatering services and smooth contractors also experienced lower demand for civil construction services in northern Manitoba.
Carsten: <unk> was $28 5 million down $1 2 million from last year due to lower OE BDA being recognized at premade pipeline in Canadian dewatering.
Carsten: Lower alloy BDA was also experienced at our drilling related service business units is okay drilling experience certain onetime windup costs.
Carsten: Operating margins decreased by two 1% to a respectable 21, 6% due to the reduction of higher margin business and from higher SG&A costs.
Carsten: And our non asset based U S. Three P. L segment revenues were $45 7 million a decrease of $3 1 million from last year due to the ongoing issue of operating in a highly competitive market.
Carsten: Oh, a BDA declined to 0.3 million and operating margin on a net revenue basis was seven 5% compared to 25% in 2023 the.
Carsten: The decline in operating margin was primarily due to SG&A expenses are higher SG&A expenses as a percentage of segment revenue.
Carsten: So in summary.
Carsten: Very solid quarter from both an operating and financial perspective, as well as exiting the quarter with a balance sheet that puts us in a very enviable position going forward with cash on hand lots of room available on our debt covenants Undrawn bank credit facilities and long term notes in place at decent rates that mature in 10 years.
Speaker Change: So with that Murray.
Murray Mullen: I'll pass the conference back to you.
Murray Mullen: Thanks Carsten.
Murray Mullen: Now as I look to them as to what's going to happen in the outlook over the next let's think about the near term.
Murray Mullen: Personally I don't see much going on that's going to change in the near term.
Murray Mullen: Demand is definitely stabilized over the last quarter or so in most verticals, but as I noted in my earlier commentary.
Murray Mullen: Pricing is currently.
Murray Mullen: Kind of equally seal of the majority of industry. The industry right now, it's very price competitive and a lot of verticals.
Murray Mullen: So this is you know what I now describe as maybe a structural issue for the industry.
Murray Mullen: And if my analysis is correct then it's going to take some time for the industry to come to our senses.
Murray Mullen: And price to generate a return rather than price to gain market share.
Murray Mullen: This is a strategy that simply is not sustainable. So eventually we know that it will revert to the mean, but we.
We gotta get some common sense that returns to a to the market by many of the industry players.
Murray Mullen: So with this as the backdrop, let me just reiterate that our strategy our focus has not changed we.
Murray Mullen: We continue to keep a tight rein on costs, we will work with our customers to help streamline their supply chain needs.
Murray Mullen: We need to be profitable and of course, we will pursue acquisitions that meet our base criteria.
Murray Mullen: And we also know that the independent business model works for us into this and I will tell you. We just completed our annual or biannual insight conference. We brought together 160 of our business leaders.
Murray Mullen: To collaborate to learn and Oh about what's going on with the latest trends like AI and to hear from industry leaders like John Hinckley from Fedex.
Murray Mullen: His presentation.
Murray Mullen: How one of the biggest and best logistics companies in the World is navigating these choppy waters was fantastic.
Murray Mullen: I'll learn from one of the best.
So in terms of the four segments, let me share a few of the expectation so the less than truckload soon.
Murray Mullen: Where we see we still see the most stability.
Murray Mullen: And because the smaller carriers in our network are struggling in this market.
Murray Mullen: We think we can still continue to advance our tuck in acquisition model.
Murray Mullen: Which can help drive future margin improvement.
Murray Mullen: And that's through wrote terminal and equipment rationalization and to that end, we've already completed or in the process of bleeding through smaller tuck in acquisition system number one.
Murray Mullen: Those will help our existing business units that we rolled them into.
Murray Mullen: To help them so that'll be continue to be a strategy for us going forward.
Murray Mullen: In the logistics and warehousing segment, we still believe that our core business units will perform well.
Murray Mullen: And that's backstopped by the likes of Batra group and leasing group are companies that have unique and sustainable business models. So we do not however believe that there are any internal real internal growth opportunities for the foreseeable future growth in the segment is going to come from our acquisition of container world and that'll be for at least.
Murray Mullen: Or are there a few quarters.
Murray Mullen: And we have are of course on the look out for other quality companies that will fit in our organization, so logistics and warehousing, probably going to be up because of the acquisition of the container world.
Murray Mullen: Pre Peel holistic as are currently early business unit in the U S and <unk>.
Murray Mullen: <unk> International Logistics segment.
Murray Mullen: Well, it's going to continue they're going to continue to struggle until we can get some scale and size most likely we will have to come for the acquisition of a complimentary of our competitor business.
Murray Mullen: No we have a solid senior team there we've got a fantastic technology platform.
Murray Mullen: Just need more more revenue stream.
Murray Mullen: They'll do just well, but our focus right now has been.
Murray Mullen: Folks stay in your lane and keep working on that technology platform because of that is going to be the future of our holistic.
Murray Mullen: In the specialized industrial service segment theres going to be some changes.
Murray Mullen: Some of it is market driven.
Murray Mullen: Might be a little bit softer now that commodity prices.
Murray Mullen: Soft a little bit.
Murray Mullen: But we're also doing some realigning within some of our business units.
Murray Mullen: Particularly those business units are very very capital intensive where we don't think that the returns on future are going to be good enough to justify future capex. So so we're going to we're going to realign and shutter a couple of those business units like the okay and drilling group drilling groups, we just they're so capital intensive and.
Murray Mullen: I just don't think the returns are there to justify new capital and we got to give them new capital will be best in class. So we've kind of decided they're small business units, we're just not going to put more capital into those businesses.
Murray Mullen: And as I say in our world, if we're not prepared to invest them, we will divest.
Murray Mullen: So the core of the segment, though we still expect to meet our investment thresholds and we think that'll be okay.
Murray Mullen: In summary Ah.
Murray Mullen: Before we go to Q&A I'm going to say.
Murray Mullen: Little bit like what course and said we think we're in an enviable position here, especially within the context of the majority of our competitors and our peers.
Murray Mullen: First we have a very large and diversified portfolio of well managed business units.
Murray Mullen: They had been acquired over 30, some years and many are operating in verticals, where the fundamentals remain pretty solid.
Murray Mullen: Secondly, and this is where we have a tremendous advantage we have a well structured balance sheet, we have no bank debt.
Murray Mullen: Although long term debt is interest only at what I believe is pretty attractive rates and Carson, we're still sitting on some cash to be able to we can go to play on some new opportunities. So.
Murray Mullen: With that I know Theres, a number of you wanting to ask some questions. So let's move right into the Q&A session. Operator, I'll turn it over to you and let's go to Q&A. Thank you.
We will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad.
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Speaker Change: The first question comes from David Ocampo with core Mark Securities. Please go ahead.
Speaker Change: Hi, Thanks, Good morning, Mary interest.
Speaker Change: Good morning, David.
David Ocampo: I just wanted to first kick off with a question on the F&I segment that you just touched on it briefly there about the wind down of our T. R E O and O K drilling I was just wondering what the impact is going to be on revenue and EBITDA and then perhaps even the cost of wind down. These businesses. It looks like you guys did incur some costs this quarter for related to that.
Speaker Change: Oh not much on the revenue side. These are really small businesses today I mean, there was a time trio drilling was just one of them.
Speaker Change: Really stars organization when there was a lot of.
Speaker Change: Delineation of oil sands.
Speaker Change: Work and that they just did a fantastic job for us, but you know that's changed there's no growth and Theres no really drilling for a significant drilling for delineation on that so we don't we're not going to put more capital into it we really havent had much revenue from trail for three years or at least that was already there.
Speaker Change: Yeah, So that's not going to impact us Okay is very small.
Speaker Change: They are about four 5 million a year maybe of revenue.
Speaker Change: And.
Speaker Change: The impact on EBITDA will be.
Speaker Change: Virtually nil, because they really weren't that profitable.
Speaker Change: That's why we're saying.
Speaker Change: Okay, we kept them around when we had really good people and those kind of things, but once you need new capital I'm, saying boy, if you don't make money with what the capital. We got you now I don't know, how you're going to make money with more expensive capital. So we just.
Speaker Change: Once our leader there decided he wanted to retire we we also retired along with them.
Speaker Change: But it doesn't it won't impact.
Speaker Change: Typically they are.
Speaker Change: Either topline or bottom line.
Speaker Change: Have some restructuring costs that came in in the quarter, but of course went up about a half a million or something like that but you know you you've got a settle up and those kinds of things, but once we sell the assets we'll recover that.
Speaker Change: Okay. That's helpful. Then just quickly on the on the Capex. It was a little bit light this quarter and it does seem like Theyre running behind me are the $80 million budget, just curious if theres going to be a pretty big catch up here in Q4 or do you have a new number where you guys expect to land for the year well yep.
Speaker Change: Starting to hear it I think our objective was 80 million.
Was it 70 was going to be for.
Speaker Change: Replacement, and then 10 was going to be for our sustainability.
Speaker Change: But you know early on we put everybody on a diet because we said look.
Speaker Change: It's there's two fundamental reasons one as.
Speaker Change: Youre not going to need need new capital to grow I can tell you that because theres no growth and number two is just be patient because.
Speaker Change: Those are the equipment valuations are that they are coming down.
Speaker Change: For new equipment, so yes.
We just waited for prices to come down a little bit.
Speaker Change: And so we were correct. So over the next bit we'll we'll start back into the replacement cycle.
Speaker Change: Primarily because.
Speaker Change: Values are coming down.
Speaker Change: So we can get more bang for the Buck. So why there was no sense buying in the first half of the year, because we thought that prices were coming down.
Speaker Change: Sure enough prices are coming down.
Speaker Change: Yeah, Okay that makes a lot of.
Speaker Change: I wouldn't expect us to hit that target David by the end of the year.
Speaker Change: Okay sounds good and then just last one here just on the growth outlook. It does seem like it's mostly going to come from M&A and you guys have.
Speaker Change: Typically you have always been maintained discipline, there and keep your multiples are quite consistent just just curious what seller expectations are now have they have they come back down to Earth and are you starting to see more files constitute that's just given all the pressure that we're seeing with some of the smaller trucking operators out there in the marketplace.
Speaker Change: Well, you know well first of all David Youre, right, where we've been disciplined and you can probably all of our shareholders and potential investors can probably assume that we will continue to be disciplined I don't think we're going to lose that.
Speaker Change: In terms of sellers' expectations.
Speaker Change: I. Thank you.
Speaker Change: It depends on what denominator, you're using you got to remember most of the industry was really profitable in 'twenty two 'twenty three.
Speaker Change: And.
Speaker Change: You know when we didn't bite.
Speaker Change: And the reason why I say this doesn't make sense, it's too good I've been in the business too long to know that good times don't last for too long So we didn't bite.
Speaker Change: Now you've got the you know the rebound of those really good times, which is really difficult times. So you know the sellers' expectations have come down from the highs, obviously, but they're not making any money.
Speaker Change: So.
Speaker Change: You know I say to my shareholders well do you want us to go buy companies that don't make any money.
Speaker Change: Well that doesn't seem to make much sense. So we got to find ones.
Speaker Change: That are tuck ins.
Speaker Change: Where we can get rid of cost that makes I think that makes eminent sense, David and then secondly, we will take a look at opportunities, where we think that the future is long and bright and then we can work through and help streamline those businesses and get their cost structures in line I E container World, we know that the bed.
Speaker Change: Average and the alcohol vertical is going to be around for a long time.
Speaker Change: So all we have to do is work with that company to implement technology.
Speaker Change: Streamline business processes and become more profitable and so we'll look at those opportunities for sure.
Speaker Change: And Murray the phone and the other final point, but are there lots of.
Speaker Change: I mean, David as daily.
Speaker Change: The opportunities coming from all angles and sizes and shapes, but at the end of the day, it's great that we will pick the ones that work for us.
Murray Mullen: I can tell you David I'd, rather be sitting in our chair with cash.
Speaker Change: And the opportunity to do deals and then having to sell my business right now.
Speaker Change: That's all the questions that yeah. Okay. Thanks, a lot that's what the commentary I always appreciate it. Thanks.
Speaker Change: Okay.
Speaker Change: The next question comes from alternate Spracklen with RBC capital markets. Please go ahead.
Speaker Change: Thanks very much.
Speaker Change: Hi, everyone.
Speaker Change: Maybe a few rapid fire questions here.
Speaker Change: No.
Speaker Change: How how deep you want to die, but really interested to see if you're seeing any signs of.
Speaker Change: Any signs of life here in the overall macro I know you said it was a fairly neutral environment in your in your statement.
Speaker Change: Could you touch on what Youre seeing at any inflection in trucking rates any.
Speaker Change: Conversations with customers that might signal changes either direction in in demand.
Speaker Change: Any of those factors getting you more or less optimistic with regards to the kind of the outlook for the next three to six months.
Speaker Change: Yeah Boy, that's one Walter that all of our struggle with.
Speaker Change:
Speaker Change: We think there's some structural things that have happened in the market. So you've got to be careful and in most verticals.
Speaker Change:
Speaker Change: Demand as you know.
Speaker Change: Walter I think demand is okay.
Speaker Change: It's not you can see from our revenue number like it's not a disaster in most of the rails and everybody else.
Speaker Change: The demand is okay to flat, it's solid I think is the word that we use and many many other people.
Speaker Change: It's solid I'd call it okay.
Speaker Change: No growth, we don't see that.
Speaker Change:
Speaker Change: Well low interest rates and other <unk>.
Speaker Change: Factors lead to more growth.
Speaker Change: Well, you've got a whole group of economists.
Speaker Change: Pick that you don't need to hear from me on that.
Speaker Change: But in terms of pricing.
Speaker Change: I kind of be honestly I kind of think we're in a.
Speaker Change: And Ah.
Speaker Change: A really complicated market in terms of pricing and my primary thesis behind that is I, just don't think the average consumer.
Speaker Change: Can tolerate high prices today, they're strapped and so I think there's been a compression of that and I think that could stick around for a while.
Speaker Change: Walter and so we're being very very cautious on on that side I don't see I don't see a big rebound in the right side now.
Speaker Change: Now if you said to me, we're going to have a big reduction in supply.
Speaker Change: That the competition folds.
Speaker Change: There are huge consolidation blah blah blah than I can say yeah.
Speaker Change: That's where it is otherwise you've got to rely on the thesis that they come to their census that you've got a price to make a profit not to gain market share.
Speaker Change: Marine doesn't that way out on that for us in the short term yeah and that's my second question actually it doesn't really seem that that's happening right. You look at probably they go bankrupt, but theres still business as usual you know operating.
Speaker Change: Under restructuring and it just seems that theres more.
Speaker Change: Leniency or or or or opportunity for for those you know kind of.
Speaker Change: So those those type of situations prevail and remain and continue to kind of keep this excess trucking supply issue.
Speaker Change: Out there for longer and does that then if if you I know you said in your prepared remarks, as well you're going to kind of be patient.
Speaker Change: And wait for those to happen you just mentioned, maybe theres going to be failures in consolidation, but it doesn't seem like that's happening and if that's not happening does that adjust your strategy of waiting.
Speaker Change: Do you start to get a little bit more aggressive in terms of what you do with it failures just aren't happening.
Speaker Change: Well, we will only invest in verticals.
Speaker Change: Where we don't compete with the likes of Pride.
Speaker Change: I will not compete there's no sense and you just explained why theres no common sense.
Speaker Change: You know I don't see them going away anytime soon.
Speaker Change: So we try and stay away from that type of market, Walter we try and stay away from that type of market. We tried to stay away from having to compete or do business with Amazon. For example, so that's when you hear me talk about verticals that have some competitive edge. That's what we search for here is is this senior team we're out there.
Speaker Change: We know which ones we want to go after and which ones we think.
Speaker Change: Have.
Speaker Change: You don't have to.
Speaker Change: But up against that competition every day, so L T O.
Speaker Change: As.
Speaker Change: Our primary one and then we look at verticals like we did with containerboard, where we go you know what we got a really strong position, we've just got to improve their margins.
Speaker Change: That's what this team is are we know what we're doing we know what to look for we know what to measure.
Speaker Change: And then we will improve their performance.
Gonna be a ultra I'm going to continue to be picky, because you know why it's it's served us well for 30 years as a public company.
Speaker Change: Yeah, I'd actually dovetails exactly into my next question is the type of acquisition.
Speaker Change: Our larger deals in this space you're going after.
Speaker Change: I did.
Speaker Change: Do they exist or is it just really just tough to do these larger deals that exist Walter.
Speaker Change: Absolutely in Canada, yes.
Speaker Change: Yes <unk>.
Speaker Change: Got it okay and.
Speaker Change: Of course, those larger deals that would be strategic.
Speaker Change: And then but and remember what I said no market is going to stay down forever no market stays up forever no market stays down forever eventually youre going to have a rationalization that happens in the industry.
Speaker Change: The one thing I'm not I'm not looking for common sense from our industry.
Speaker Change: But I am saying to you one of these days they may not be able to get insurance.
Speaker Change: Because if you don't have a balance sheet the insurance companies aren't going to.
Speaker Change: That risk.
Speaker Change: And if you can't get charged youre not in the business that may be the rationalize or of this business.
Speaker Change: And.
Speaker Change: And if that happens.
Speaker Change: We'll have a very quick.
Speaker Change: Recovery in terms of rates because then all of a sudden customers are saying well I need you to all because there is demand.
Speaker Change: It's just currently Theres, just a little bit too.
Speaker Change: Too much on disciplined pricing Yep yep.
Speaker Change: Question now as we go into 2025.
Speaker Change: Can you give us some indication either.
Speaker Change: You know preliminary or indications, if youre going to be coming out with your business plan as you have in the in the past that you know when you look out to 'twenty five you've been just broad revenue and EBITDA metrics you know.
Speaker Change: Consensus are you comfortable with it and if anything I think consensus is around the $3 50 level.
Speaker Change: Next year, yes.
Speaker Change: I hear what you're saying I think we've got early December set as are the <unk>.
Speaker Change: Time that will we're in budget season, right now with our business.
Our process here is we give guidelines to the boat to our business units, but we tell them what's your budget.
Speaker Change: Could you better.
Speaker Change: So go through it and then you go to present it to us the us being the senior team and we then go through each budget in question there their rationale and all those kinds of things, but it's their budgets and then we will aggregate them together.
Speaker Change: Early December and then we'll come out with what we think will happen next year, but for.
Speaker Change: On a macro side, let's start with that.
Speaker Change: Is there going to be a lot of growth on the Canadian economy next year.
Speaker Change:
Speaker Change: But let's be honest I mean, we're running a $50 billion deficit in Canada, right now to get no growth.
Speaker Change: If we weren't running a $50 billion deficit, we might have negative growth can we go to a $100 billion deficit next year I doubt it to get.
Speaker Change: So I think it's gonna be okay, but I don't see a huge rebound in the economy unless you said.
Speaker Change: You know theres, a lot of capital coming into Canada, and we've got a we've got a grand New scheme that says you know what invest in Canada, I'm not feeling that right now I think we scared away capital out of Canada, and we're really just a.
Speaker Change: Consumption economy, right now and.
Speaker Change: I think that consumption economy will remain about where it is right now maybe up a little bit maybe down a little bit but.
Speaker Change: Early indications suggest is more of the same next year. That's why we got to stay focused on cost process improvement marine or maintain our discipline.
Speaker Change: But we will be able to still outperform the overall market because of acquisitions why because we got the dam balance sheet.
Speaker Change: We're one of the elite few that have got the balance sheet to execute and then it's just up to the senior team here to pick the ones that are going to add value to shareholders.
Speaker Change: Correct.
Speaker Change: And just as a kind of a person who could you I think the last official guide for this year was $3 $45 million for 24. It looks like you are going to come in nicely ahead of that if we take the kind of youre running at about <unk>.
Speaker Change: 7 million above Q3, this year versus last year, and if we assume kind of the same run rate of of seasonal low.
Speaker Change: Oh performance there than you.
Speaker Change: You're kind of coming into the <unk>.
Speaker Change: <unk> 333 35 Mark.
Speaker Change: Is that a is that.
Speaker Change: After that.
Speaker Change: We came out with $3 25, and 24, and we're not going to be far off that we might be a little bit above it.
We think that our if you look at Q4 Q4 of last year I think we're at $88 million Yeah, Yeah, right course, yeah, we did both.
Speaker Change: About $500 million in revenue in Q4 of last year and call it $80 million of EBITDA and and if you kind of look at the trend line right now.
Speaker Change: Got container World that we've got now that we didn't have last year. So.
Speaker Change: And let's just call it let's just call it a little bit better than last year, Walter Okay. Yeah, Okay, and that's great. It's likely in the third quarter, we were a little bit better than last year and that's what.
Speaker Change: That's what we think right now is will be a little bit better than last year.
Speaker Change: And then of course the.
Speaker Change: Sure.
Speaker Change: We're feeling much more comfortable that we will have some be able to take advantage of some acquisition opportunities next year and that'll add us another growth curve in 'twenty five.
Speaker Change: Okay I appreciate the time, thanks, guys. Thanks, Walter Thanks Walter.
Speaker Change: The next question comes from Cameron direction with National Bank Financial. Please go ahead.
Cameron: Yeah. Thanks. Good morning, just a question on the the L. N W segment.
Cameron: Just looking at the margins like a pretty solid.
Speaker Change: Number in the quarter and you know my original thought was that you maybe you've done some good work at the container world.
Speaker Change: Two to cut some costs here, but just based on your comments it doesn't sound like that was necessarily a contributor to the margin and in this quarter. So I'm just wondering what what did drive that that nice are you what kind of margin improvement in El N W year over year and sequentially.
Speaker Change: Well I'd say, it's probably a combination a cameron.
Speaker Change: Container World does generate good EBITDA.
Speaker Change: However, the majority of their costs fall below that EBITDA line with respect to leases.
Speaker Change: So that's.
Speaker Change: That's and I FRS number kind of a play.
Speaker Change: So the good news about the good news about container World is that number that you see that theyre generating that pays all of their bills.
Speaker Change: Okay.
Speaker Change: Under <unk> rules correct.
Speaker Change: Our job is to improve that above there so that we make money on our investment.
Speaker Change: And I can guarantee you we're going to improve it.
Speaker Change: But there but that didn't they.
Speaker Change: Container World didn't hurt our numbers.
Speaker Change: And are you know we've got some really good solid business units and they are like lease in advanced or we highlight them. They continue they did that they they're in good market segments, they're in good verticals.
Speaker Change: Some of our business units didn't perform very well.
Speaker Change: If you're involved in competing in the full truckload side like some of them like 10 headwind pain, Oh, my goodness and even can either.
Speaker Change: You know being the <unk>.
They're in a tough market for a little bit.
Speaker Change: It won't see that wait forever, but it's that way for right now, but I'd say, it's really container world then.
Speaker Change: Real good ones and a faster faster than it.
Speaker Change: It had continue to.
Speaker Change: Perform at the highest level of any business units we got.
Speaker Change: Okay.
Speaker Change: Helpful. And then just second question for me around capital allocation, obviously, M&A is a priority, but it sounds like it's it's probably more focused on tuck in acquisitions and you've got.
Speaker Change: Very significant your cash on the balance sheet now and lots of available credit and free cash flow generation is still really positive. So just wondering how youre thinking about.
Speaker Change: The other aspects of our capital allocation, specifically around N. CIB I mean, there's been some activity, but just wondering if that's something that you expect to do more of in the absence of a bigger ticket M&A or is that something you're just comfortable kind of at the same pace that we've seen for this year. So.
Speaker Change: So we talk about that at the board level.
Speaker Change: Really.
Speaker Change: A board discussion but.
Our thoughts on that or this is that.
Speaker Change:
Speaker Change: Yep.
Speaker Change: Given the opportunities that we see on the on the acquisition front.
Speaker Change: We think that if we buy back if we do share buyback, we are allocating capital to that that's not helping our business grow for the next 10 years.
Speaker Change: But if we do a good acquisition and use those funds that we got that that sets us up for the next 10 years or plus so I think our priority is go out and get some really good acquisitions and grow.
Speaker Change: Rather than.
Speaker Change: Share buyback we will.
Speaker Change: Still probably do song, but it won't be the highest priority I think our highest priority is going to be growth.
Speaker Change: Okay no that does.
Speaker Change: Pretty clear that that was all for me. Thank you very much the tuck in acquisitions will help you drive margin in the short term if you do a bigger acquisition you've got to be a little patient just like container off because it takes a while for the market to come back in for you to get.
Speaker Change: Get the disciplines in place that we think you have to have to.
Speaker Change: It will be a free cash generator.
Speaker Change: Right no absolutely makes sense, thanks very much.
Ken: Thanks, Ken.
Speaker Change: The next question comes from Qunar Gupta with Scotiabank. Please go ahead.
Speaker Change: Thanks, operator, good morning.
Speaker Change: And team.
Speaker Change: And just one question to begin with you talked about a Q4 to Walter's question.
Speaker Change: Stan you are running a little bit ahead of your initial expectation for full year EBITDA.
Speaker Change: And you know container was certainly is a big contributor there.
Speaker Change: Think about the other.
Speaker Change: Segments like LPL that F&I in Q4, do we see any signs of growth what since last year in Q4.
Speaker Change: Idle.
Speaker Change: I think.
Speaker Change: If I look at the <unk> segment.
Speaker Change: There really was no growth.
Speaker Change: What there was was some.
We met our objective of course, which we said, let's go out and improve the margin this year.
Speaker Change: <unk> growth correct, and we said we could get 1% that was our target and we've we've met that so you know what.
Speaker Change: That's tough work right.
Speaker Change: You know you don't get margin improvement.
Speaker Change: Without being doing some pull in some pretty good strength, there, particularly when there's no growth in the market and you really can't get pricing leverage from customers today. So we.
Speaker Change: We did some good rationalization I think Carson highlighted that it was we took an underperformer in being articles and we put it in with FOP performance, which is grimshaw and highway not so we we put that from a negative to a positive and that's where we saw a 1% growth.
Speaker Change: But really not a lot of growth in that segment.
Speaker Change: Specialized industrial and a lot of growth right now.
Speaker Change: We had a couple of good wins, a couple of loss, we lost the pipeline business that projects over.
Speaker Change: Okay, but the rest of <unk>.
Speaker Change: <unk> then we had other business units picked it up and those kind of things. So I don't see a lot of growth.
Speaker Change: Car, unless we do acquisition and.
Speaker Change: No.
Speaker Change: We could we could go give you growth tomorrow.
Speaker Change: But as I said to you what the Hell goodness growth if you don't bring margin with it.
Speaker Change: That to them.
Speaker Change: So that to us that's a fool's game. So we don't play that game, it's never been our DNA.
And we're not changing.
Speaker Change: But what we're going to like what we're doing on that.
Speaker Change: As I said to you just fine we will do acquisition, we always have done acquisition.
Speaker Change: Since 1993.
Speaker Change: How many we've done.
Speaker Change: 80, plus 80, plus 80 plus.
Speaker Change: I think we'll probably do some more.
Speaker Change: Particularly with we got that nice balance sheet, Italy, let.
Speaker Change: Let us choose where we think we can drive margin.
Speaker Change: I'd love to be able to hit your home run and say, Hey, I've got high margin high revenue everything yeah.
Speaker Change: There's only a few of them out there.
Speaker Change: Right that makes sense, thanks for that color, but.
Speaker Change: Just following up maybe on M&A and then.
I think you guys had obviously a little bit more.
Speaker Change: Careful and disciplined I would say in terms of choosing acquisitions and pursuing the right fit and all that which is great. But obviously you know you can see clearly the market loves to pay for.
Speaker Change: It's like here so.
Speaker Change: There could be opportunities, which could be small medium or big for you guys right in terms of your appetite I wanted to ask you.
Speaker Change: Have a good cash you got good lines and all of that your stock's actually not doing bad considering obviously the last many years, it's sitting at decent level here, what's the what's your strongest currency right now is it a debt or equity.
Speaker Change: Like in a 500 million plus bill comes through.
Speaker Change: Well I would say.
Speaker Change: Obviously right now called arc.
Speaker Change: You know the debt markets have been pretty favorable for us and Thats just a function of.
Speaker Change: The board deciding that it was prudent to own our own real estate.
Speaker Change: There's value in that that the debtholders C. But it doesn't show up in earnings per share because you don't fair market. It every quarter. So.
Speaker Change: The other thing is is that.
Speaker Change: That sets us apart as we generate free cash every year and have done so for.
Speaker Change: For the last 30 years.
Speaker Change: So that consistency.
Speaker Change: Just leads lead you to to that debt market, where they loved that consistency they love that balance sheet.
Speaker Change: You know there is a hidden gem there that doesn't show up.
Speaker Change: In the stock price or or in your earnings. So I would say if we had a really good idea that.
Speaker Change: Came up that.
Speaker Change: I think we've shown the history is that the debt markets would support it. We would also go to our equity holders and say Hey, now.
Speaker Change: Do you support us in this great idea.
Speaker Change: Good ideas will be supported by the market.
Speaker Change: Whatever that market is that the debt markets or the capital markets in general are you know that.
Speaker Change: Those would be transformational acquisitions, what youre talking about.
Speaker Change: If youre talking about just growing it at our standard what since 1990, 311%.
Speaker Change: 11, 7%.
Speaker Change: We can do that without.
Any more debt and without anymore, we generate enough free cash and what we got now we continue to grow at 11% for quite some time, we don't need to go to the markets because we got if we saw a transformational acquisition, okay, well, that's a different discussion.
Speaker Change: Yeah makes sense, okay perfect. Thank you and thanks for the time Thanks Connor.
Speaker Change: The next question comes from Tim James with TD Cowen. Please go ahead.
Tim James: Thanks, very much thanks for the time.
Tim James: To drill down further into two previous questions actually one.
Speaker Change: The margin performance that really good margins in our logistics business, you called up answering Gleason.
Tim James: Like is there anything specific there.
Tim James: Accounts for why.
Tim James: They're performing so well whether you can is this a pricing dynamic is it cost initiatives that had been undertaken.
Tim James: I'm just trying to understand better why it's performing so so admirably.
Speaker Change: Well, it's the business models they have so.
Speaker Change: Both of them are in verticals or end markets or have assets that are really really difficult to replicate. So you don't have the same pricing pressures as you're experiencing in most other verticals. So that's number one.
Speaker Change: I guess the other is.
Speaker Change: Quite simply they don't have the same competitive pressures.
Speaker Change: They're kind of.
Speaker Change: They're unicorn so good I would love to have you.
Speaker Change: A whole bunch more of them to be honest with you and we look for them and we wait for them and when we see them, we buy them and we invest in them.
Speaker Change: So there are two really solid business units and we got we don't have better management teams at <unk> and faster than we do on a month over others.
Speaker Change: Our business units.
Speaker Change: But they are a really solid verticals at the moment for sure and we think that there are verticals that are in are pretty sustainable so.
Speaker Change: That's probably the number one reason.
Speaker Change: Sure.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: The U S.
Speaker Change: And international logistics business.
Speaker Change: Marine some of your earlier comments you were talking about that you need to grow the scale. They are generally take advantage of a holistic.
Speaker Change: Is this environment and I want to specifically think about the U S. I'm, assuming you kind of have your eyes in the landscape. There for opportunities is this environment that we're talking about with this kind of.
Speaker Change: Supplier capacity imbalanced. This excess is this not a good.
Speaker Change: Market relative to a year ago or a couple of years ago for finding a transaction to build scale in the U S.
Speaker Change: Sort of incrementally positive on the opportunity set that you're seeing down there.
Speaker Change: Yeah, we've spoken with the team there is that are we.
Speaker Change: We all have our eyes and ears open and we're listening and we're watching the.
Speaker Change: I'll see if something fits quite nicely with them until we find that.
Speaker Change: Yeah.
Speaker Change: You know I've told the senior team there I said look just keep working on your game plan.
Speaker Change: Make sure the customers are looked after and make sure you keep advancing that silver express platform that we've got it's really difficult to replicate so when we find the right. One we're just going to be able to plop in level. The revenue sources and that's when we'll get the margin improvement so.
Speaker Change: Either that or maybe the economy improves down there I don't you know what.
Speaker Change: But for the right model for the moment right now what Youre seeing.
Speaker Change: Across most transportation companies both sides of the border.
Speaker Change: Very competitive markets.
Speaker Change: Even though demand is reasonably it's not bad but.
Speaker Change: If you have a small reduction in demand.
Tim James: But no corresponding reduction in supply what happens to price, Tim I don't care what market you're in.
Tim James: Until they find a new equilibrium price will be low.
Tim James: Not everybody is going to survive. This low price environment, you can take that to the TD bank or any bank.
Speaker Change: Hey, Matt if I may add as well within that.
Speaker Change: Within that business model, we know it's more of a little bit of a volume issue right now because of his Carson has articulated we have kind of a fixed nature of our SG&A. We do know, though right now that a lot of the victory sales down in the state have been kind of laying people off and we did that at the last part of last year. So our focus in addition to silver expressed.
Speaker Change: Building that out as to we enhanced our recruiting efforts on independent patient agents. So they are independent.
Speaker Change: That's not going to double the size, but that will certainly help us backfill and get a little bit more more volume until that moment in time. When there is that acquisition. So that is a major focus of our team down there and I know, they're listening in right now as well and will continue to be so we'll kind of add things along as we go people like the platform.
Speaker Change: And we know because people are coming on we've added four or five additional station agents. Our agency models and will continue to do that.
Speaker Change: Yes, I think Tim on that side.
Speaker Change: By having a holistic and that team as part of our big Big diversified network, we give them the time in the space to kind of work through these very difficult markets and we don't have to put.
Speaker Change: Put too much pressure on them. So just work on the long term fundamentals and everything will take care of itself.
Speaker Change: Longer term, but work on the fundamentals make sure that we're the best one of the best employers in that business Best places for people to want to apply their skills because it's a people business. It's on a freight business. It's a people business and work on that damn technology, because that's that's going to be your secret sauce of the future. So we've set.
Speaker Change: <unk> to stay in your game eventually if we do the fundamentals right. We think it'll take care of itself because we.
Speaker Change: We got the patience when many others are single source, the precious too hard on them. So.
Speaker Change: We're in a good space, we're just wait for the right opportunity that fits in with them because I'll tell you. We've got the team they've got more horsepower down there then.
Speaker Change: No.
Speaker Change: So where we can grow.
Speaker Change: We need the right opportunity to fit with that with that with those horses down there.
Speaker Change: Well they know what they're doing.
Speaker Change: If I could just squeeze one more in quickly we talked about.
Speaker Change: On a number of occasions. The fact that supply has not yet responded or capacity has not yet responded accordingly too.
Speaker Change: The demand the pricing environment, and you mentioned sort of there's a bit of a structural issue here.
Speaker Change: Can you I'm curious Marie to your thoughts on why it Hasnt responded like specifically is it changes in the <unk> process is it.
Speaker Change: Something to do with creditors in Canada are the holders of capital are prepared to accept lower returns or is there anything you can point to as to why there hasnt been a supply side response yet.
Speaker Change: Yeah, they're damn tough.
Speaker Change: And what are they going to do.
Speaker Change: They folder tend to they just work harder.
Speaker Change:
Speaker Change: My history tells me when times got tough.
Speaker Change: And I saw this even with our business when we were when.
Speaker Change: When we were a small company when times get tough we worked harder.
Speaker Change: We work leaner than we were tough damn competitors to big companies.
Speaker Change: Theres, just a lot of them out there and Theyre, just damn tough right now but.
Speaker Change: Eventually.
Speaker Change: You can only be tough for so long eventually you have to be profitable.
Speaker Change: I explained what I think the major issue will be youre going to have to show a profit one day or the insurance companies are not going to ensure we take the risk on your and then if you can't get insurance you can't you can't all the freight.
Speaker Change: So I think it resolves itself.
Speaker Change: But not quickly it could take a little bit of time, but I.
Speaker Change: I think the insurance companies may be the.
Speaker Change: Ones that bring discipline to the market customers are not going to do it customers are going to take advantage of low rate whenever they can that's just the way. The game is played and right now they're doing a hell of a good job of it.
Speaker Change: But.
Speaker Change: The tide will turn.
Speaker Change: And come back in and.
Speaker Change: We will be positioned.
Speaker Change: Positioned to take advantage of that others may not last through it.
Speaker Change: You've got to you've got stand tough times.
Speaker Change: Be successful over the long time, how long we've been in business, which at 70 75 every economic cycle everyone through so Tim I think in addition to that Mary talked about the insurance part of this but those whomever you talked <unk>.
Sure. It would've led credit two roofs that have kind of bumped that system. If you will if you want to call. It that can be interesting going forward, if there'll be able to get fuel you've got to pay that bill every seven days.
Speaker Change: Who said told them equipment on credit it'll be interesting to be able to do that so.
Speaker Change: It'll it could take time, but.
Speaker Change: They got salvage but can they afford to operate going forward will they be able to get fuel tires.
Speaker Change: It's just going to take time, Tim, but it will work itself out.
Speaker Change: Just I mean, I can't tell you, which quarter will be the inflection point I can't tell you that yet I haven't seen it yet, but I know one one or two quarters closer to when it's going to happen.
Speaker Change: Yeah.
Tim James: So so I know you guys can't reflect on 75 years of history, but in your experience is this supply response is taking longer than what you witnessed in other comparable times in the cycle or is this just normal do you think.
Speaker Change: The cycle hasn't played out yet so give it time, well I mean the upturn.
Tim James: And how long it ecosystem.
Speaker Change: More question, we're going to move on to but I think its I don't think were I don't think we are in the ninth inning too.
I'll leave it at that.
Speaker Change: Okay Super Thanks for the time thank.
Speaker Change: Thank you very much.
Speaker Change: Again once again, if you have a question. Please press Star then one.
Speaker Change: The next question comes from Kevin Chiang with CIBC. Please go ahead.
Kevin Chiang: Hey, good morning, Kevin Good morning, everyone, Hey, good morning, Murray and team. Thanks for squeezing me in here.
Kevin Chiang: Maybe just two quick ones.
Kevin Chiang: One.
Kevin Chiang: Talked about demand demand is okay, obviously excess supply.
Kevin Chiang: A lot of comments on this call about that just wondering when you look at <unk> volumes do you have a sense of maybe what percentage or.
Kevin Chiang: What amount of revenue.
Kevin Chiang: Temporarily ship it to the full truckload market just because rates are unsustainably low end.
Kevin Chiang: Maybe those are bonds that come back at the freight cycle starts to hopefully inflect.
Kevin Chiang: At some point in 2025.
Kevin Chiang: I've seen some of that commentary.
I haven't I.
Kevin Chiang: It had been unbilled to reconcile that with our network. We most of our LTE network is in the smaller communities and whatever so I don't we're not going to lose it to the full truckload.
Kevin Chiang: And <unk> space.
Kevin Chiang: I don't think theres been a lot of that yet.
Has there been have we lost some out of California, and some long haul yeah, we've lost a little bit but.
Kevin Chiang: Honestly I don't think Thats the issue from our perspective.
Kevin Chiang: We just think that you know.
Kevin Chiang: You've got to be really really careful.
Kevin Chiang: The impact that Amazon has on LTE L D.
Kevin Chiang: The biggest one of the biggest LTE all guys now.
Kevin Chiang: Mhm.
Speaker Change: Right I mean because of e-commerce.
Speaker Change: Right that makes sense.
Speaker Change: So.
Speaker Change: I think there is.
Speaker Change: I am.
Speaker Change: I guarantee you I am way more worried about Amazon.
Speaker Change: I am about the full truckload guys getting a little bit of our freight.
Speaker Change: I guarantee on it.
Speaker Change: Okay.
Speaker Change: I think when you think about the interlining component of LTE Outler traders already full and he's got a global from gear to the other place we're hearing that happening maybe more some of the U S locations, making it almost attractive service, but getting to the final mile how we.
Speaker Change: Our core focus is on <unk>.
Speaker Change: But we don't see that but you can maybe see some of that reaching in and what we're hearing out in the state is not so much here, but want to trade with bullets, There's gotta go from Toronto.
Speaker Change: Edmonton antibody can haul that across the country.
Speaker Change: We don't see as evident right now.
Speaker Change: Right right that makes sense.
Speaker Change: I'll tell you what I see in the U S and.
Speaker Change: On the <unk> side, because I know you follow them as well.
Speaker Change: A lot of there's a lot of tough competitors down there in every one of them I see adding capacity, but I don't see the economy growing.
Speaker Change: So we're in Canada.
Speaker Change: This really only a few of us the markets really spread out vis vis the U S market right.
Speaker Change: So.
Speaker Change: Still a little different space.
Speaker Change: You you see.
Speaker Change: Transports does their Canadian <unk> best in class.
Speaker Change: Fantastic.
Speaker Change: So that's a good that's a good point that's a good point.
Speaker Change: Yeah.
Speaker Change: <unk> is a disciplined pricer I mean, they don't.
Speaker Change: We don't mind, competing with EFI or magnitude.
Speaker Change: These are business people, they like to make money.
Speaker Change: Because they have to invest it.
Speaker Change: And so we can continue to provide the service to customers young so.
Speaker Change: Alain would agree with you he likes to make money.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: Maybe just sticking with LTE all our last question here.
Speaker Change: When you buy these tuck ins.
Speaker Change: I'm, assuming that you are buying a company, where maybe less rational on pricing correct me if I'm wrong. Just wondering as you look to re price their bulk as you integrate those assets into your organization.
Speaker Change: The successful it's been pretty good or have you had to kind of hold the price at a lower level than you would've otherwise like to just because of the freight economy.
Speaker Change: Maybe you'll look to up.
Speaker Change: Reprice when things are better so I'm, just wondering how that repricing cycle works when you acquire some of these companies.
Speaker Change: Well.
Speaker Change: I guess, Kevin I would say.
Speaker Change: The first thing that we look at when we look at layering in L. T. L is lane density that's first and foremost that's where that's what really drives your margin.
Speaker Change: Also on facilities facility costs are as you know quite high and when you can consolidate facilities.
Speaker Change: That's another win.
Speaker Change: So those are really kind of the two arching.
Speaker Change: Aspects when we look at layering in <unk> acquisitions.
Speaker Change: <unk> does come into effect that's for sure as you saw in our MD&A we.
Speaker Change: Marketed some business in that segment.
Speaker Change: Didn't make sense for us to continue servicing those customers at those rates.
Speaker Change: So I'd say that that's where some pricing discipline comes in as well I think when you do an acquisition cap of these smaller companies and these tuck ins.
Speaker Change: Clearly you have synergy on cost because.
Speaker Change: Youre guiding yield and network and utilizing the assets. So we don't need we don't need every truck following each truck that is how we drive margin, but I think the other thing that comes into us more pricing discipline smaller carriers sometimes.
Speaker Change: Very tough.
Speaker Change: So once you.
Speaker Change: Once you take that on disciplined price or out of the market. If we don't raise prices we have more discipline on pricing.
Speaker Change: We think that makes sense.
Speaker Change: What really happened is just more discipline yet.
Speaker Change: Got it.
Speaker Change: Nobody.
Speaker Change: I don't want anybody to think you go in you.
Speaker Change: We do an acquisition and then you can control pricing.
Speaker Change: Market controls pricing not ours, but sometimes.
Speaker Change: Some you know you you have done disciplined process like for example, or being our group the Hollywood just on disciplined prices.
Speaker Change: And as I said to you a customer will always spite on low price.
Changed in my career.
Speaker Change: That's.
Speaker Change: That's a fair point.
Speaker Change: You know definitely executing well in a tough market here so congratulations on that.
Speaker Change: Thank you very much we appreciate it thanks guys.
Speaker Change: This concludes the question and answer session I would like to turn the conference back over to Mr. Mullen for any closing remarks.
Murray Mullen: Not many more folks thanks for joining us we.
Murray Mullen: We've been a little lot longer than our one hour allotment. So we've got a lot of horsepower online I'm going to let you go. Thank you very much and the next communication will be after we do our.
Yes.
Murray Mullen: Two.
Murray Mullen: Q4, which will be in early February until then we've got a lot of hard work to do thank you very much.
Speaker Change: This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
Speaker Change: [music].