Q1 2025 Mullen Group Ltd Earnings Call

Conference Operator: Thank you for standing by. This is the conference operator. Welcome to the Mullen Group Ltd. first quarter earnings conference call and webcast. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions.

Conference Operator: To join the question queue, you may press star than one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star than zero.

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: Good morning all, and welcome to Mullen Group's quarterly conference call.

Speaker Change: The format for today's call is similar to previous investor calls and we will cover three main subject matters before I'll be turning the call over to you for a Q&A session.

Speaker Change: So I will provide a review of the macro environment, the recap of Q1, if you will.

Speaker Change: Carson Urlacher will provide an overview of the first quarter financial highlights, and for those interested in the details, the Q1 interim report has been posted on our website at www.mullen.com

Speaker Change: Huyford.com as well as on Cedar Plus. Now this 47-page document contains all of the information you need as it relates to our Q1 financial results and balance sheet.

Speaker Change: Then, I will close with our very best guests of what we expect in June 2 and beyond.

Speaker Change: Before I commence today's review, I'll remind everyone that our presentation contains forward-looking statements.

Speaker Change: That are based upon 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, the uncertainties and assumptions can be found in the disclosure documents. Thank you very much.

Speaker Change: So, with me this morning, I'm joining Okotokes with the entire senior executive team, Richard Maloney, senior operating officer. Carson Urlacher, he's our senior financial officer, and Joanna Scott is our senior corporate officer.

Speaker Change: In terms of Q1 financial operating performance, let's have an overview of the MacRoman, that's well stored, and it was really only two short months ago that I provided an overview of our expectations for 25.

Speaker Change: I said at the time that we were maintaining our 25 Outlook and Business Plan.

Speaker Change: As articulated in December 2024, but at the same time I acknowledge that the risks of the economy were heightened under President Trump's make America great agenda.

Speaker Change: Now, Rathesis was that parts of the Canadian economy would be directly impacted by that imposition.

Speaker Change: Of tariffs on Canadian goods, but that our business would not necessarily feel the same negative impact because, truthfully, we've been de-emphasizing cross-border shipments for a number of years. Now, what I also said in February was that I was concerned about how Canadian politicians would react. [inaudible]

Speaker Change: and the reciprocal tariffs would cause more harm to our business and to Canadians in general. I hope that the commerce heads would prevail and a negotiated deal would mitigate a lot of the potential damage.

Well, I'm still waiting, as is everyone else. [inaudible]

Speaker Change: And until these tariffs and trade issues get resolved, it is logical to assume that future business activity and freight demand will suffer. By how much, or a little, I have no idea, we will simply adapt as required.

Speaker Change: So for 2025, we expected the economy to be generally in line with 2024.

Speaker Change: Any growth that we had planned would be attributed to acquisition and, truthfully, not much has changed over two months. The economy is flat at best.

Speaker Change: and we are actively pursuing acquisitions, for example, like the recent announcement regarding the Coal Group of Companies, which is an absolute jam of a company. And I want to thank Mr. Dawn Lucky.

Speaker Change: Who unfortunately is not with us any longer. For entrusting the Mullen Group to be the custodians of the Great Band brand that he built.

And it will be a great company and organization. [inaudible]

Speaker Change: Despite all of the chatter, any decline we experience was because we demarcated certain customers that had unreasonable rate requests.

Speaker Change: Sogram Trucking comes to mind here. It was it was impact when we gave up a $10 million plus revenue.

Winner-Eyswell Project that was...

Speaker Change: servicing the mines in northwest territories. And that was all due to pricing and risk.

Speaker Change: We just said, if it's not worth it to take the risk...

Speaker Change: based upon what the customer is asking. So at the end of the day, we just simply do not compromise when customers are unreasonable.

Speaker Change: Or they put our people at risk. So overall, or other 38 business units held revenue is very close to the first quarter of 2024, which in itself is an accomplishment given that the competitive nature of the business these days.

Speaker Change: So our quarterly revenues were up nicely year over year, all because of those previously announced acquisitions. Which you recall is the only viable means of growing the business today in our view.

So, on balance, a decent quarter from an operating perspective.

Speaker Change: Now looking at it, the business by a segment basis, our best performance segment, once again, is LTL.

Speaker Change: with revenues of $9 million year over year. And that's despite that $10 million decline in Grimshaw. So the other business unit's

Speaker Change: and we did a nice couple of tuck install acquisitions that we did last year that supported the business. This is really the steadiest part of our business. And primarily because our 12 business units provide an essential service.

Speaker Change: to well over 5,000 communities, Richard Delnington, over 500 and 55 hundred. And people still...

Speaker Change: Now, people still can need what we deliver regardless of the state of the economy, tariffs or trade issues. So at Mullen Group, I can honestly say we love hotels. Now, in terms of logistics and warehouse, the container world added all of the incremental revenue growth, which was nearly 26 million in the quarter. [inaudible]

Speaker Change: And while we think we've turned the corner in terms of profitability, we fully appreciate that we still have work to do.

Speaker Change: The previous owner has just exited the business at the end of the year, so it'll take a little bit of time to get the margins where we expect, but I tell you, once we get there the...

Speaker Change: Get the team focused on measurement and process improvement, I honestly believe that the returns will be there. Overall freight demand was similar to 24.

Speaker Change: But it was here that I have to be a little pragmatic because I'm not sure.

Speaker Change: If that was due to shippers pre-ordering to front-end any terror issues, we're not exactly sure on that and I've got to be honest with you. I think the second quarter will tell the rest of the story in our view on this issue.

In Specialized Industrial Service, we saw a modest...

Speaker Change: The increase in revenues on the segment and it's all due to Cascade Energy Services team. They had an excellent quarter. The team is winning market share by investing in new technology like robotics to support plant turn-arounds and take cleanings.

Speaker Change: This technology is safe, it is efficient, and the customers benefit from really quick response time. So once again, I'll highlight the power of diversification. Cascade, for example, wins market share. Why? Because we invested a new technology.

Speaker Change: But when we don't see the returns there, we close a business like we did with the OK drilling group, we shut it down.

Speaker Change: This year we didn't have the revenue issue, we just don't see how we were getting paid appropriately for the capital, we didn't get any business, we didn't want to invest anymore, so we shut that business down and we sold those assets. We keep looking at how we can win market share and make except for return for our shareholders. [inaudible]

Speaker Change: In the US-3PL segment, so this one is up to this point of time has been holistic.

Speaker Change: We held revenues flat with corporate costs and technology, continued to hurt margins, and we either have to grow this business by adding new revenue flows or downsizing it to ensure an appropriate margin is generated. We love this team.

Speaker Change: and then the second thing I will say is it's starting in two two.

Speaker Change: We're going to see some real growth in this segment, Carson, because we're going to be adding our co-group into this segment. So you're going to start to see some real growth in the US repeal, and in fact, one of the real synergies we see from the co-group is a cross selling of services with Elisdick.

Speaker Change: So we now have more options available to both teams to expand the respective businesses throughout North America. And you've got to have a bit of a secret sauce to get business today because it is ultra competitive.

In summary?

Speaker Change: We were able to accomplish revenue growth primarily due to acquisitions.

Speaker Change: But it also needs to be noted that our existing business units are a pretty darn good job of managing a lot of moving parts in Q1.

Speaker Change: So, from a profitability perspective, we have some work to do with our new business units. As I said, however, I'm pretty confident that we can get them in a better spot before the end of the year. And that is our goal. Corporate costs. Let us talk about that a bit. We were higher.

Speaker Change: But this was primarily mostly by design. We had a depth to our corporate team and in our technology department because we were anticipating that we were going to be growing vague acquisition, for example, like the coal group. [inaudible]

Speaker Change: We kind of anticipated what we knew was going to happen. So now turn the call over to Carson for more of the first quarter financial performance Carson, take it away.

Carson Urlacher: Perfect, thank you, Murray, and welcome everyone. I'll provide some additional highlights from the first quarter, the details of which are fully explained in our first quarter interim report.

Carson Urlacher: Our 39 business units operate in many different verticals of the economy, allowing us to consistent generate steady revenues and free cash, and yet another competitive operating environment. Revenues were nearly a first quarter record, and only $700,000 shy of our first quarter of 2023.

Carson Urlacher: Revenue's increased in all four of our segments, and we're approximately $500 million. An increase of $34.5 million compared to the prior year.

Carson Urlacher: In terms of cash, which is what we focus on, we generated net cash low from operating activities of 39.9 million in the first quarter, a 3.4% increase from the prior year.

Carson Urlacher: This cast generation continues to be in excess of our requirements, including our interest payments, cast taxes, capex, and our lease commitments. I will go through the results by segment shortly, but the overall theme is this.

Carson Urlacher: Top line revenues increased due to 37.7 million of incremental revenue from acquisitions, while revenues from our legacy business units were essentially flat compared to the prior year.

Carson Urlacher: Within our legacy business units, we demarcated the Winter Ice Road project that Murray referred to earlier, which is a first quarter project. However, we offset this decline in revenue with market share gains at certain other legacy business units. [inaudible]

Carson Urlacher: Operating margins as a percentage of net revenue decreased to 14.9% from 15.7% as we continue to work with our newly acquired businesses on margin improvement.

Carson Urlacher: But as we know, this takes time and is not achieved in one single quarter.

Carson Urlacher: In the first quarter, revenue per working day increased compared to the prior year to $8 million. We generated OIBDA of $68 million, an increase of $1.8 million compared to the prior year period, with acquisitions adding $4 million of incremental OIBDA. [inaudible]

Carson Urlacher: Operating margin, decrease due to our acquisitions generating lower margins, along with a reduction in certain higher margin business.

Carson Urlacher: Direct operating expenses as a percentage of consolidated revenues were generally flat year over year, as our business units did a great job adapting to the current market conditions and controlling costs.

Carson Urlacher: S&A expenses as a percentage of consolidated revenues increased by half a point due to a combination of higher corporate costs.

Carson Urlacher: which resulted from a negative variance in foreign exchange, professional fees associated with new acquisitions, and from adding staff to facilitate our future growth initiatives.

Carson Urlacher: Our newly acquired business units also experience tire SMA costs as a percentage of revenue.

Carson Urlacher: Now let's take a look at how we perform by segment.

Carson Urlacher: First, our largest segment, revenues in the LTL segment were 191.5 million, an increase of 9 million from last year due to 11.6 million of incremental revenue from acquisitions.

Carson Urlacher: being somewhat offset by a 10.2 million decline at Grinchaw trucking that resulted from demarketing the Winter Ice Road project.

Carson Urlacher: Revenue growth from our legacy business units almost offset the decline experienced at Grimshot Trucking to market share gains as some competitors exit his certain lanes.

Carson Urlacher: OIBDA was 29.3 million, down slightly by 1.5 million from last year, and this decline was due to a 3.2 million dollar decrease at Grimshaw Trucking, again from demarketing the winter ice

Carson Urlacher: being somewhat offset by 1.3 million of incremental OIPDA from acquisitions.

Carson Urlacher: Operating margin decreased by 1.6% to 15.3% primarily due to demarketing the Winter Ice

Carson Urlacher: Our second largest segment is our L&W segment. Revenues in the L&W segment were 151.8 million, up 25.5 million from last year. This increase resulted from adding 26.1 million of incremental revenue from acquisitions.

Carson Urlacher: OIBDA was 25.4 million, again up 2.9 million from the prior year with acquisitions, adding to 2.7 million of incremental OIBDA.

Carson Urlacher: Operating margins decreased by 1.1% to 16.7% primarily due to lower margins experienced that contain a world.

Carson Urlacher: We continue to work with our very talented leadership team at Container World by implementing new technology and process improvements. However, these changes take time to be reflected in operating margin improvements.

Carson Urlacher: Moving to our S&I segment, revenues rub slightly to 112.2 million, driven by the strong performance of Cascade Energy Services LP, as they continue to gain market share for their advanced specialized robotic technology systems.

Carson Urlacher: Through meticulous planning, skill and seamless execution, they showcase their abilities, and their robotic tool family associated with facility and maintenance turnaround work.

Carson Urlacher: This increase was offset by a $2.4 million decline in revenue for pipeline hauling and stringing services and a $2.8 million decline in revenue from our drilling related service business units due to lower drilling activity in the Northeast British Columbia region tied to natural gas. This increase was offset by a $2.2 million decline in revenue from our drilling service units due to lower drilling activity in the Northeast British Columbia region.

Carson Urlacher: OIBDA, increased by 2.1 million to 18.8 million on higher OIBDA being recognized at Cascade Energy and Canadian dewatering due to the commencement of facility maintenance work and certain dewatering projects respectively.

Carson Urlacher: Operating margins increased by 1.9% to 16.8% on lower direct operating expenses due to the greater proportion of a higher margin project work.

Carson Urlacher: In our non-asset-based US-3PL segment, revenues were up slightly, at $44.9 million.

Carson Urlacher: Compared to last year, due to the impact of a stronger US dollar relative to the Canadian dollar in the first quarter of 2025 compared to the prior year period which was somewhat offset by lower freight demand and pricing for shipment resulting from the ongoing competitive operating environment in the US market. [inaudible]

OI-BDA decrease primarily due to higher direct operating expenses. [inaudible]

Carson Urlacher: So that wraps up our first quarter commentary, but let's have a quick look at the balance sheet before we go.

Carson Urlacher: We ended the first quarter with cash on hand of approximately 131 million.

working capital of $286.7 million.

Carson Urlacher: We also have access to 525 million of bank credit facilities of which only 7.2 million was drawn at the end of the quarter, providing us with ample liquidity. In terms of our debt covenants, we effectively have one main covenant which we focus on, which is total net debt to operating cash flow. [inaudible]

Carson Urlacher: Our total net debt to operating cash will covenant on our new 2024 notes is 2.23 to 1 and 2.47 to 1 under our old 2014 note.

Carson Urlacher: Notes. Our 2014 notes are set to mature in October 2026, with a principal repayment being 207.9 million net of our cross currency swap.

Carson Urlacher: In summary, our balance sheet is once again well-structured and positions us to make long-term strategic investment decisions, like our recently announced acquisition of the coal group of companies.

Opportunities to generate free cash.

Murray: So with that, Murray, I will pass the conference call back to you. Thanks, Curse, well done again.

Murray: So we're now putting Q1 officially to a close and I'll give you my best analysis of what shareholders and investors should expect over the course of the balance of the year.

Murray: Knowing full well that I have no idea how the trade and telephone discussions will ultimately

or what the press in the United States is thinking. So,

Murray: I'll offer you this, a wise person once said during a rather stressful time, never let a good crisis go to waste.

Murray: Well, it certainly appears we have one of those crisis moments to deal with today, and I can tell you...

Murray: We will not be letting the uncertain times deter us from our pursuing our long-term objectives. In fact, I would argue that the current uncertainty may actually turn out to be wonderful times for the Mullen Group. Now, I always hope that I can so boldly make this statement. Thank you very much.

Murray: As others around us enter full on panic mode, we keep a steady hand on the wheel, and we keep our eyes wide open for great opportunities.

Speaker Change: And as Carson said, plus, having the balance sheet is absolutely key to building for the future and taking advantage of opportunity. I'm delighted to highlight.

Speaker Change: That we have an excellent well-structured balance sheet, so we can weather any storm and we can invest for the future. How many can actually say this? I say not many of our fears.

So in the short term, however,

Speaker Change: It is reasonable to expect some disruption in trade flows and cross-border freight demand.

Speaker Change: At least until there's clarity on the terror issues, we all know that the President of the United States started this disruption as such it is reasonable to assume that only he can resolve these issues. So as I mentioned earlier, my hope is that these issues...

Our transitory.

Now there's a word from another time of market destruction. [inaudible]

Speaker Change: Until then, my very best guess is that business activity will underwhelm. I don't think it'll be terrible, but there's no way I see any growth in the economy over off-rate demand until the terror issues are resolved, and the Canadian politicians adopt a more pro-growth agenda.

It's a longer term.

Speaker Change: This is a totally different story, and it is here that we create value for shareholders.

Speaker Change: Because when we exit this current self-induced messy time, we will be bigger and we will be stronger. This is the job of the senior team, and I can tell you we are up to the challenge, pursuing quality acquisitions.

Speaker Change: As we mentioned, like the Coal Group is in our DNA and we will continue to be active secondly.

Speaker Change: We believe the economy will recover and by the time it does, it is very plausible that our existing business units will gain market share as the competition falters under the weight of not pricing appropriately or having too much debt. Thank you very much.

Speaker Change: We are already seeing evidence that this is happening. Competitors are closing shop. We're going bankrupt faster than we've seen in a decade, maybe longer. [inaudible]

and of my thesis is correct.

I expect the trend will accelerate as the Europe progresses.

This one's summary.

Speaker Change: And we will continue to have quality companies into our network. This crisis will not go to waste here at the Mullen Group. So in terms of our 2025 outlook, which we articulated in December of last year. And we will continue to have quality companies into our network.

Speaker Change: We are maintaining our goal of 2.25 billion in revenue, and 350 million of all IPDA, and despite all the potential for a choppy second quarter, but if we look beyond the short-term.

Speaker Change: We believe the path to meeting our goals gets easier. This optimism is because of our recent announcement, announced acquisition of Coal Group.

Speaker Change: So today we're awaiting approval from the competition girl. We anticipate this to happen sooner rather than later, but we're on hold until the competition board provides further rolling. We're on hold until the competition board provides further rolling.

Speaker Change: This acquisition on its own will drive our growth in 2025, along with what we expect as steady performance for our 1639 business units.

Speaker Change: And this includes that we think we can start improving the margin of our acquisitions that we completed last year, it just takes a little bit of time. We know we still have work to do, but I'm optimistic we can start moving in needle later this year. So let's now turn the call over to the operator for the Q&A session, and thanks for everything, folks.

Conference Operator: We will now begin the question and answer session to join the question queue you may press star than 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 start and two. Thank you.

Conference Operator: The first question comes from Konark Gupta with Scotiabank. Please go ahead.

Thanks operator. Good morning, Marie and Tim.

Konark Gupta: It's fun to ask you maybe first on the near-term outlook, Murray. What are you hearing from your customers? I mean, you don't seem...

Konark Gupta: Constructive on Q2 and expect some sharpness here, and it's pretty obvious given.

Speaker Change: You know, all the kind of tariff noise that we are seeing right now. But what's the reality? Like, what exactly are our customers telling you? Are they shying away from moving? Thanks.

Konark Gupta: and Goods are they expecting impact of tariffs that's been implemented so far or they're just waiting. What's really the deal here in the second quarter that makes you a little bit more cautious? [inaudible]

Konark Gupta: Yeah, I think that's a, you know, that's a good question. That's insightful. Konark Gupta.

Konark Gupta: Everything that we're saying is kind of anecdotal evidence, because what we saw on the Q1, you've heard lots of noise and there was lots of this but we didn't really see...

Any significant drop in freight demand?

Konark Gupta: What I don't know, Clark, and this is what I was trying to highlight is I don't know how much that demand in the first quarter was pulled forward because of people trying to front end the tear of situation. I don't know that for sure. We've heard anecdotal evidence about that.

We've worked from our shippers, and remember now. [inaudible]

Konark Gupta: You know, we don't do a lot of cross-border anymore, like that we used to it, Mullen Group, but today we don't do it as much as we anymore what we used to.

Konark Gupta: So, what we are hearing though is that, you know, there's been some disruption and everybody's sitting on their hands.

Konark Gupta: In fact, we're kind of doing a little bit about that ourselves where we're going to just slow cap-backs until we hear, well, what's the cost going to be? Are they going to put tariffs on trucks that we, in equipment we buy, are they not? So, all that uncertainty just-

Konark Gupta: Leads me to believe that people are just going to sit on their hands until they get some more clarity as to how the bureaucrats and the politicians are going to deal with all these terrified issues and stuff like that. Personally, I think it's just short term noise, but...

The short term.

Ron.

Konark Gupta: The imports coming in the United States, we do know that the sailings from China have really deteriorated and that's going to impact...

Konark Gupta: Fried coming in from China. That's got to get resolved pretty quick. In my view, I think that's a major issue for North America. And I think there's already been some pullback on that. So, I think it's just reasonable to assume to be cautious for this quarter. Although I don't have any evidence right now to say...

Konark Gupta: You know, we've heard, you know, nobody's doing anything, that's not the case.

Konark Gupta: And I don't think it's going to impact LTO, Clark. If it does, it's going to impact our logistics

Speaker Change: You know, makes sense. That's great. I got a Murray. Thanks. Just to follow up on the co-lacquisitions, going up on the announcement, it seems like a big acquisition, actually, and I won't be going to like, you know, parse out some of the numbers there because...

Speaker Change: Set out the budget in December , you were expecting about $150 million of M&A's spend, and I think your disclosure is suggesting the coal acquisition could be $190, so you're already exceeding that. Are you baking in any more acquisitions in your unchanged targets with $25?

No, not for the current.

We anticipate women's or a budget we were optimistic.

Speaker Change: When we put the budget together in December and our business plan in December 24, so that included coal. But anything else we do is not included.

in our 2025 business plan.

Okay, and two.

How does, like, how does it call business?

Thank you.

Speaker Change: creates strategic value for you guys. They sound like logistics to me but at the same time they don't seem like same as. [inaudible]

Speaker Change: Quartex Press, you know, that you got years ago in the US, and they have some trade consultancy work as well, which could be meaningful, I guess, and the light of what's happening right now. So Tim, you explain, like, what excited you about this person on the same, how do you expect a creation from this?

Speaker Change: Well, we've always liked the customs brokerage business. Now, remember, we're in the logistics business. Most of the business that we have facilitates the movement of the freight.

Speaker Change: So, we move freight, that's what our trucks do, that's what our through T.L. does, etc.

Speaker Change: In this case, by investing with coal, we're now helping with the transaction of any cross-border or importation or export of any goods. So that's what the Customsboro Courage business is all about. It's just facilitating that cross-border transaction.

Speaker Change: In fact, in 2009, we were a very, very large shareholder of the Livingston Group, which was the largest customs brokerage at the time, but we were unsuccessful in that bit. Richard went to...

Speaker Change: I went to Sterling Capital and the CPPIB at the time. So we've already had our eye on this business, but Konark, these businesses only come up once in a while. These companies like Cole and some of the others have seen their 100-year-old companies. [inaudible]

Speaker Change: So, this came up to us last year, with Mr. Lucky was looking at.

at doing some restructuring for us.

Speaker Change: for his planning purposes, and he chose us to be the custodians of that really good business. So, we love the customer's brokerage business, it's a trans-assian-based business. You know we like the asset-like business, Konark, because we don't think that you get paid.

Speaker Change: The two make capital investment today. So we like the asset light. We like dealing with the transaction. I suspect. [inaudible]

Speaker Change: The trade issues are getting more complex, not less complex, and governments will want to know everything that's coming in and leaving their country.

So, we think this is a sustainable business.

Speaker Change: And we love it. In addition, the Coal Group also had a pretty large 3-P all business that will marry quite nicely with our elastic group.

Speaker Change: And, you know, we hope to leverage that once we get in and find out how we can really identify some synergies and those kind of things, but really good company, asset light.

Speaker Change: and Carson in January . So we'll identify more once we get competition, we'll outline more and then once we get it approved, Konark. But until then, everyone can just assume that the core group,

Speaker Change: As we all line in 2024, we'll help achieve our objectives for this year.

Speaker Change: That's a great color. I appreciate the time I saw. Thank you. Thank you.

Tim James, David Ocampo, David Ocampo, David Ocampo,

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

Kevin Chang: Hey, Hey Mullen, Tim. Thanks for taking my questions here. I was just wondering, you know, when you look at the, you know, obviously in the middle of federal election, there seems to be a focus on, I guess leveraging Canada's position as a, as a. Yeah, yeah, yeah, yeah, yeah.

Kevin Chang: As an energy-based economy, and there's a lot of proposals around pipeline projects and energy infrastructures. As you look at the various...

Speaker Change: Plans performed by the parties. How do you see that impacting SNI or the opportunities you see that?

Kevin Chang: You're pretty optimistic on, and the effect change your M&A strategy are the things you'd want to add to your arsenal to take more advantage of some of the opportunities you might see in the pipeline as we move past the federal election. Thank you very much.

Well, that's a very...

Topical Discussion

Kevin Chang: And I think, you know, the politicians are declining that all of them, this is, well, how do we...

Kevin Chang: How do we actually provide good jobs and growth in Canada and how do we diversify our our... [inaudible]

Kevin Chang: Away from being towed and relying upon the U.S. for our exports of our energy.

So...

Finally the politicians are talking about that. Um, um,

So it is, from our perspective, we're encouraged by those discussions.

Kevin Chang: But we've got to take discussions into policy action and capital investment, which we think is what politicians should say and what politicians do. We're not making investment. [inaudible]

Speaker Change: Quite yet, Kevin, because I think they talk a lot and don't do a lot, so we'll just wait until they actually do something, and then we'll put our shareholders capital work at that time. But suffice to say.

Kevin Chang: Mark S&I segment, which is our old old field, that used to be a very large segment of our company. We lost.

Kevin Chang: It's not 6.6 million of annual revenue in that segment. So, would we be supportive of pipelines in Canada? Which is the only way to access?

Kevin Chang: Export Markets. You have to get at the market and you have to have pipelines.

Kevin Chang: political words into action. When we see that action, I tell you, we will be very aggressive putting in cowboy to work because that is a great business when that comes back. But until then...

Kevin Chang: And Kevin, on that note, we, as you know, we are well positioned to take advantage of any new pipeline development when it happens. And it's not like we need to go out and buy...

And we have been there forever. Forever.

We will wait and we'll just...

Speaker Change: Would we like to see those, you know, those words turned into policy actions and then into, yeah, you know why? Because that's big capital and capital swear where we would shine a good chunk of our business and the SNI side, including our logistics warehousing. I mean, that...

Speaker Change: Those would be massive job creators for this country. But let's see, Kevin.

Speaker Change: But now you know why we never get out of the S&I segment. We downsize, but never get out because you

Speaker Change: We still sit on one of the best asset faces in the world in Canada.

Speaker Change: Michael Turner, can't you? And I guess we'll find out in five days or so. Yeah, you just can't sit on it. You have to do something with it if you want to create great jobs for Canadians and...

And lots of tax revenues for...

Can I help out? So, let's see.

Speaker Change: That's a helpful color. Maybe just two quick ones for me. Maybe for Carson, 14 million of CapEx and Q1, you're guiding to about 100 million for the year. Just wondering how comfortable you are on that full year target. Just give it.

Speaker Change: What you invested in the first quarter, and it's just, secondly, within container world, I mean, a lot of headlines I'll say at a minimum around.

Speaker Change: Shifting consumer preferences around, you know, whether sourcing alcohol beverages from, I know container will, you know, that the key and market for them in terms of, you know, I guess I'll call a logistics provider for the alcohol industry. Any, any pluses or minuses, just, just given the changes and consumer habits. [inaudible]

as a potential container ward.

Speaker Change: We've purposely delayed some cat-backs here just with respect to ordering.

Speaker Change: So, on an annualized run rate, hitting that 100 million for 2025 is probably not going to happen.

Speaker Change: I think Rich, we've got orders in for approximately 50 million right now, so for approved orders coming in. And once we hit that, we kind of hit the pause button.

Speaker Change: because of tariffs. What's your land? It's cost going to look like we don't know.

Speaker Change: So on an annualized run rate, you're probably still around that 100 million but as for right now we've delayed a lot of it so I would say that we will be under that 100 million dollar guidance for 2025.

Speaker Change: That's very helpful. Thank you. On container world, I think that, you know, you've heard a lot of the tip for tap that's going back and, you know, we're going to.

Speaker Change: We're going to buy Canadian and buy American and we're going to do this so that. So there's been a shift that we've seen, but you just can't ramp up production.

You know, short-term kind of thing.

But, uh...

Speaker Change: We have seen some reduction, like there's no imports really coming in from the U.S. right now, of Mollick Beverages, Rich and Rich.

It's still coming in from overseas?

Speaker Change: Which they do. They contain themselves. Yeah, comes in on containers from Europe and the rest of the world and local. There has been a, you know, kind of a fire strike by Canadians and by certain politicians to not by American alcohol. How long that lasts for? [inaudible]

Speaker Change: Kevin, I have no idea, but I don't think it's going to last forever. I think it's a moment. It's a moment of time and…

Speaker Change: Like I said to you, I think all these little tithful taths are all transitory about timing, I don't know.

Speaker Change: You know, the younger generation clearly is switching to non-alcoholic options.

Speaker Change: However, if you look at the producers of who makes non-alcoholic beverages, it's the folks that make the alcoholic beverages.

which, both of those, cleared through our facility so... [inaudible]

Speaker Change: Whether there's alcohol in it or non-alcohol in it, we're still handling it.

so it's

Speaker Change: We don't see a difference. Consumers are still consuming.

Speaker Change: It may just be a different type of product. Yeah, we haven't seen any reduction in the container world in terms of the revenue flows. It's been pretty stable year over year. It's not growing right at the moment, but I think it's going to shift for a little bit for sure.

Speaker Change: for the two reasons that we talked about, one is US, alcohol, not being quite as dominant as it has been. You won't be able to buy your Jack Daniels up in Canada, and a lot of it is...

Speaker Change: You know, it's a growing proportion now more of non-alcoholic and those kind of things.

Improving the business there.

Speaker Change: Like we're only into it for three four months now since Mr. Christmas.

Speaker Change: Part of the business, so we couldn't make any change when he was there during his earn out period. But the team was well, they're focused. They know what they got to do. And we have to improve the technology to reduce our admin costs. Their admin costs are too high.

Speaker Change: And we've got to invest in technology to be more efficient in the warehouses, which we've already started to make some of those investments to help them gain market share. Do you want to invest in technology to gain market share today?

Speaker Change: We talked about it at Cascade, and we'll talk about it with container world, and we're investing in technology so that we can be more efficient and provide that value add to our customers, and that's our gaining marketer. That's our expectation.

Speaker Change: That's very helpful and should people swap in their Jack Daniels for Canadian Club today. Thank you very much for having me. Good about Crown Royal from Manitoba or CC, yeah.

Speaker Change: The next question comes from David Ocampo with Konark Securities. Please go ahead.

Thanks, good morning, everyone.

David Ocampo: I guess either for Murray or Carson, you know, I respect that you guys aren't going to provide this quality for revenue and you need to doubt for the coal acquisition until the competition

Speaker Change: I'm going to complete their assessment, but I'm curious because I know the share purchase agreement that you had with Coles for 190 million, but I'm just curious if there's any assumed debt from that transaction. I guess I'm trying to figure out what the total enterprise value is. [inaudible]

You destroyed it.

There is no doubt about it.

Speaker Change: Well, we'll disclose the whole breakup. It's generally in line with what we had said. I think we had said we were going to target about 150 million for the year to achieve our objective at 2.25 billion and 350. And it's within the wheelhouse because once we get it all. And it's within the wheelhouse because it's within the wheelhouse. And it's within the wheelhouse. And it's within the wheelhouse.

Carson Urlacher: Correct. That makes sense. So then it does seem like acquisitions could pick up even despite this $190 million transaction, especially as some of these smaller companies might fail or maybe some of the larger ones do. Carson, just curious.

Carson Urlacher: How much are you willing to take up your pro formal leverage for the right transaction? [inaudible]

Carson Urlacher: You know, with this acquisition with Cole coming in, we're still in our comfort zone if I can put it that way.

with respect to...

Carson Urlacher: with respect to our covenants. And in terms of new acquisitions, there's still tons coming to call. So obviously we're quite pecking and...

Carson Urlacher: If it fits within our network, we'll look at it. We'd go up to a little bit higher, we'd go up to say three short time.

Carson Urlacher: David, to get the right acquisition, not to go gambling on top of it, to get the one that is just a game changer, we'd go up to that to three in the short term, with the plan of how we would get that back down to one turn.

Carson Urlacher: Which is down to 2.5 longer term. That's where we're we're comfortable longer term at 2.5 so but in short term if you've got the best opportunity and it's a whenever you've got to [inaudible]

Carson Urlacher: You either got to step up to the plate or go back in the dugout and we'll step up.

Carson Urlacher: Nick Sence, and then last one for me, just on the potential adjustments that you guys could make to your network, if we do, do see us slow down in the economy. Can you guys just remind me what those levers are that you can pull and quickly can implement those strategies?

Carson Urlacher: Well, I think there's a couple of ways, obviously, that we would mitigate a downturn much better than most, one being that we own our own real estate. So that's a natural hedge that we would have versus some of our competitors that are locked into competitive lease rates.

Carson Urlacher: So I would say those are kind of two of the key ways that we would adapt to any short-term fluctuations in customer demand.

You know, we have a very flexible

Business Model, because you know we have company trucks, but...

Carson Urlacher: The company trucks are probably having a very competitive market as you really don't get paid.

Carson Urlacher: I'll probably return on that Capitol right now because the Capitol is very expensive. It might be more expensive with tariffs coming in.

Carson Urlacher: And unless you have higher rates, we're very reluctant to put a whole bunch of work up a new capital work, when there's so much access capacity in the system called honor operas and subcontractors. So our job is to own the customer. We don't need to own the truck. We'll only own the truck when it makes sense. [inaudible]

We just want to own the customer.

Carson Urlacher: Within our LTL segments, so the levers are what? You know what, when we're having, if it's tough, I mean, it's going to be tougher on our competitors. So, we have great lane density going to various areas. We continue to look at how to best utilize and...

Carson Urlacher: And adapt to make sure lane density, load factor are optimized. You're along the way and we have a great one. We're well positioned. We go to 500 communities throughout Montereo to BC.

Carson Urlacher: Within the logistics and warehousing segment as well, with things flowing down and you see customers' appetite shift, they can go from...

Carson Urlacher: Long haul Polo Van, which we don't do a lot of, but they can shift to Intermodal and we do a lot of Intermodal to our Clayson and our Apps Group as well which helps adapt and when customers are looking for more economical option as well. So that's a diversity built into our business model.

and the flexibility that we were able to provide. And...

Carson Urlacher: So, I mean, these are the things that we're booking at and the levers that will be able to pull at the right time. So, on point, you know, you look at this, David, and you'll say, how do we, we'll gain market share because...

Carson Urlacher: Our competitors just, you know, they're either stretched or not pricing properly. So there's going to be a lot of failures. We'll pick it up and we'll be able to pick it up and we'll price it properly. And we'll go, so I think we'll do, we'll do well on that as the markets change.

from our competitive landscape side.

Carson Urlacher: Number two is, we've encouraged all of our business units. Take a look at how you can do business more efficiently.

Carson Urlacher: and with technology, and by the way a trucker is not a technology.

Carson Urlacher: Trucker's a tool. But when we can see a technology that will be a game changer, like an LTO, Rich, we put in...

Speaker Change: Cubers and waiters. You don't wait to mention that all of us have connected to our game changers.

Speaker Change: When we're looking at technology with container world for co-packing, so it moves to technology and robotics rather than people, and then we did that also with Cascade Group, if that enhanced that robotics of...

Speaker Change: for Tank Clinic. So we're looking at how to use technology, efficiently, but as I said to you, trucks are not a technology. That's just a tool, but the big thing that we're looking for that I think will be the big game changer outside of our acquisitions. And it's just that they...

Rationalization is going to happen in this industry.

Speaker Change: The tougher it gets over the next quarter or two, the faster it will happen and it will come to our way in market sugar. We're seeing it already. We're seeing tailors there. Yeah, we're seeing it and we're picking up so we think we're in good position. [inaudible]

Speaker Change: You know, our diversity and our balance sheet and ability to grow and plan for the future is something that...

Speaker Change: Very, very, you have that luxury that we have some. That's art. This is model.

Speaker Change: No, I appreciate the color there and hopefully the bankruptcy courts, but some of these larger guys actually fail this time.

You've seen him, you watch it, but it's happening.

Speaker Change: And, you know, you can't go into bankruptcy and go back to the big banks and ask for more money. People get a little bit sensitive or no sensitive.

Speaker Change: So I think it's happening, David, but it doesn't happen as an event, but it does happen.

Speaker Change: Okay, I'll hop back in the queue. Thanks a lot everyone. Appreciate the call.

Speaker Change: The next question comes from Tim James with TD Cowan. Please go ahead.

Tim James: Thanks very much. Good morning everyone. It was mentioned earlier, the lower sailings from China that are showing up now. Does that impact Mullen at all or not really because it's mostly a US port issue? Could that even create any opportunities for Mullen if you just talk more about how that impacts Mullen if at all?

Speaker Change: It's the docking phase that's on tiny ships that Mr. Trump has put a fee on that and-

Speaker Change: that they're just not able to get their goods right now because...

Speaker Change: There's an increased cost and increased cost and how do I pass it on when you fetched your price to your customer? So I don't know how much I just highlighted as an issue that it could impact business in the second quarter for sure.

Speaker Change: I don't know how I can quantify it. It is a risk goal.

Okay.

Speaker Change: Was there anything in the first quarter results that was surprising to you Murray in terms of the way things shook out any particular trends? I mean, I know it was a highly uncertain environment in the first place and you're staying with your full-year guide, but was there anything just any kind of moving parts either positive or negative that were surprised you relative to what you thought two or three months ago? [inaudible]

Nope, not a thing.

Speaker Change: You know, we didn't want to demarket the business, you know, it's a good size of contract that we'd...

Speaker Change: We had done in the past with our Grim Shag Group, but that was all factored into our plan for 25, but it just shows up in the first quarter, because that's when it happens. But there was really no surprises. It just...

If anything, I was... I was... [inaudible]

Speaker Change: What we know is happening is, when there's so much commotion.

You're not having job formation.

Speaker Change: And you're not having a capital put to work. People are sitting on their hands.

Speaker Change: And that's just going to slow things down for a bit. And so we have to be aware of that. But as I said to you, and Richard Ocamp, we think that it impacts our competitors exponentially more than ourselves. We can withstand a couple hits. [inaudible]

Speaker Change: and a couple of soft periods. Some of our people are living on the edge or competitors and they just can't stand a couple months of...

of difficult times.

Speaker Change: So, but nothing, there was nothing really negative about what was really pleased that some of the things that we did too and put the capital work at Cascade worked out as well as it did.

Speaker Change: But if anything, you know, the one area where we were that maybe was the native of our corporate past that crept up, we kind of knew it was going to happen, but I don't think we'd quite planned on it.

Speaker Change: You know, quite as many fees and you can notice those kind of things. So corporate cost is not what we're going to watch. That's about yet.

Yeah. Okay, that's helpful. Hey.

Speaker Change: Just returning to Grimshaw for a moment, was it called out just because it was particularly large? I'm just wondering are there other sort of demarketing opportunities or initiatives underway where there's smaller ones that are just sort of normal course? Is that why this was brought up just because of its size? Yes, it is.

Speaker Change: Yeah, just because of its size. You know, every day we're in a market fist bite for market share. And sometimes you, you know, you have to stand your ground.

Speaker Change: We're not just going to do it because somebody tells us to do it. It's got to make sense. We know our cause.

Speaker Change: and we know the risks. So that was a particularly big one. There's no other, but we are gaining market share. Some of our businesses, Guardwine in particular, is gaining market shares as our competitors exit the market.

Speaker Change: Okay. If I could, sorry, just squeeze one more quick one in. Just very quickly. Thank you.

Speaker Change: You've mentioned that the competitors struggling opportunity for you through M&A.

Speaker Change: How should we think about when you do that M&A? Does the environment mean that the margins of the companies you're buying maybe a little bit more depressed and there's a bit of initial dilution or is that not the right way to think about the impact of M&A?

Well, M&E is all about, uh, return on in our cash investment.

Speaker Change: And we look at what is the business generate in terms of cash, not even DAW. You know that. Everybody. Don't talk to me about DAW. DAW is gone. It's all about return on cash. So we make an investment if that business will generate a cash. It's all about return on cash, not even DAW.

Speaker Change: That's it. And in the fact that the companies are failing doesn't mean we're going to buy them and means that some competitors are going away.

Speaker Change: So that we can wait, we'll be patient and we will reinvest at the right time. But it does say that there's a competitor out of the market that may be a price maker. So we'll be patient and as they blow up, as we've seen a few in Canada here do and then...

Tim James: Will this be patient? We're not going to go by there. We're not running out to cover the board, Tim. We do thoughtful strategic acquisitions like the Coal Group. This company was never for sale.

Tim James: So, we were in the right position at the right time with the fallow chief to be able to execute the important business that will be around for another hundred years. That's great. Thank you very much for the time.

Thanks too.

Speaker Change: The next question comes from Walter Spracklin with RBC Capital Markets. Please go ahead.

Walter Spracklin: Yeah, thanks very much. I'll just keep it the one Murray just keep a brief here and just on a kind of larger, bigger picture, M&A.

Walter Spracklin: Strategy, I know you're dipping your toe now back into in a heavier way in the customs brokerage. Just curious as you look at the landscape now, do you continue to go?

Speaker Change: More adjacent businesses with your M&A strategy, or is there still opportunities in Canadian LTL? I think you're going to go US, so Canadian LTL or...

Speaker Change: Do you start looking at Canadian truckload, or like you know, and- I told you it's not-

Speaker Change: Canadian LTL, is there opportunities there or do you really center in on adjacent businesses and is that your real focus, kind of like what you did with Customs Brokerage here?

Speaker Change: Livingston is cross-selling and providing a full package service to your customers that you're using in 3PL and cross-border. So we see some opportunity there. We think that's the future. And boy, that gives us something that very few...

Speaker Change: Quote, truckers or logistics provided. We have that tool in our toolbox.

Speaker Change: But it's a great company. We look forward to working with them. Thank you.

Speaker Change: We're going to pick up market share. That's our best way to gain is to grow as others fail and then we can...

Speaker Change: We don't have to pay for it. I'd love to be able to grow like that. Unfortunately, it's at the expense of somebody else, but that's the only way you can grow in this economy. Yet, unless you and your advisors tell me that the economy is on a big growth spurt.

Speaker Change: If you don't see that, then the only way we can grow is your acquisition or market share gain at the expenses others fail. That's it. It's not that complicated.

Speaker Change: Right. But again, back to the adjacent, how far adjacent are you on the guy? I mean, one of your competitors, you look like a rumor to have looked at life lapse, which was a very significant departure from what we would have considered adjacent, but certainly that was one of the...

Speaker Change: The area is that they look, are you looking further adjacent, you know, when you look at M&A, are you looking, are you widening the lens in which you're using to examine M&A opportunities, are you focused really kind of on 3PL, LTL, and? [inaudible]

Speaker Change: I think, you know, Customs and brokerage and 3PLs are part of that. In fact, I think it was you that maybe asked the question a couple of three quarters ago. Would we be interested in the Customs business?

And guess what?

Speaker Change: Yes, we were, I couldn't tell you it was, but yes, we were looking there. I was covering Livingston when I saw you both went halted and saw that day at the time so much.

Speaker Change: You didn't know the coal was available, because that was a private company, and Mr. Lucky was extremely private man. Yeah, absolutely. Okay, that's all my questions, but I really appreciate the time. Thank you. Okay.

Cameron Dirksen: The next question comes from Cameron Doerksen with National Bank Financial. Please go ahead.

Cameron Dirksen: Yeah, thanks. Good morning. I'll keep it to one as well. Just going back to, I guess, to the election in Canada. There's been a lot of talk about inter-provincial trade barriers being taken down. You know, maybe that changes some of the regulatory environment. Just wondering if there's any materiality to your business from elimination of inter-provincial trade barriers, if that were to happen. I'm sort of thinking from an operational regulatory point of view, or perhaps even domestic trade volumes that potentially could benefit you. Just any thoughts there?

Oh, I don't see it.

Speaker Change: To be honest with you, I don't think it'll make a huge difference.

Speaker Change: The one operational issue, Cameron, is that weights and dimensions, when we all a certain size and weight within the Alberta, when you go to BC, it's different. So we're mindful of that. That's with the bigger stuff, if you will, but not at the end of the day. It's not significant. If they're not going to harmonize that. If you're trying since 1992 for that, to be honest with you. If they're not going to do, once again, politicians talk, but they don't do. So, but. So, if they're not going to harmonize that. They're not going to harmonize that.

Speaker Change: They'll talk like they want to get something done, but I'm not holding my breath on it. [inaudible]

Cameron Dirksen: Okay, fair enough. I'll leave it there. Thanks very much. Thank you.

Conference Operator: This concludes the question and answer session. I would like to turn the conference back over to Mr. Mullen for any closing remarks.

Speaker Change: Thanks for joining us folks. We look forward to our next update, Carson, I think, once we get the approval from, we'll get more color on the call of what to really expect on a pro-form basis. Other than that, thank you for joining us and...

Conference Operator: Let's hope that Comer heads prevail and all these issues are transitory. Take care, thank you.

[music]