Mullen Group Ltd. (MTL) Earnings Call Transcript

The scrutineer has collected and tabulated the votes on each motion and has reported the results to me. As I mentioned before, our majority holding policy requires that we conduct the election of directors on an individual basis. As a result, the decision of the meeting on the election of the directors was conducted individually using the voting functionality on the virtual platform. Having received confirmation from the scrutineer, I declare that each of the motions that was made today passed. Accordingly, each individual that was nominated today to be elected as a Director of Mullen Group was also so elected. And the results of this vote will be disclosed by way of our news release, which will also be available on the company's SEDAR profile and the company's website. Now this concludes the formal matters before the annual meeting. And I'll now entertain a motion that the meeting be terminated.

Mr. Chair, I move this meeting be terminated.

Thank you. Would a shareholder please second the motion?

Mr. Chair, I second the motion.

Thank you. Sharing that, I now declare that we be terminated. Now I think as we finish this, we'd like to take -- provide a brief overview and an update to the company as we finish the formal part of the meeting. Now we got you on the line. I thought, well, let's -- wouldn't this be a wonderful opportunity to share with you how your company is positioned for today's market. And let me be clear, this is a different market than the last previous 2 years. The excesses we saw yesterday were demand related, emulating from the massive infusion of liquidity pumped into the economy by Federal banks, not just in North America but around the world in 2020 and '21, and that insatiable appetite of consumers post-COVID, those were the best of times for the freight industry. In fact, it was a period of record profits. Today, however, we see a new form of access and it's called supply. During the '21, '22 time frame, everyone added capacity to meet the surging demand. Everyone except perhaps us, we never bought into this time as different thesis, and that's where experience does help. So to the unprepared today may be the worst of times, especially for freight carriers, because the consumer is trapped. They've been forced to cut back on expenditures and inflation and 2-decade high interest rates really hurt disposable incomes. So what this suggests to me is that the challenges of today will punish the unprepared, creating the opportunity for the survivors to gain market share, the Mullen Group will be one of tomorrow's winners, this I am sure of. And Richard Maloney is going to present our story. Richard?

Thank you very much, Murray. As in past AGMs, I've had the great fortune to be asked to present some of the things that we are doing here at Mullen and give a quick update here. And I'm just going to advance the slide or my colleagues are going to work with me on this to get that done. So we will be talking about the Mule Group. We think about tomorrow and keeping the economy moving, is what we're looking at here. So I want to start with where we are. There's a little bit of a delay here, so I'll be working with that as well. In the room here, what you'll see in the next slide is our executive team. And I got to admit, in person, we look as good as we do on the TV or on the screen here as well. So a little bit of a delay on our presentation native cast of characters, Murray, Joanna, Richard and Carson. We are the executive team here at the Mullen Group. So what are we going to talk about Mullen Group really what we do and where we do, it is really what I want to be talking about. And we will be -- we have a presentation that we're going to talk, just the overview of the Mullen Group. Again, we have been around, we are one of the largest logistics providers in North America. We offer 3 operating segments. I'm going to get to more of this as we move forward in the presentation. But again, very 4 distinct segments. We have roughly 7,200 people as part of our organization now with the closing of ContainerWorld we have, which just happened earlier this month. We have 40 self-managed business units. And one of the biggest things that we -- one of the things we're really proud of is the real property that we have, and we talk here about -- we have roughly $652 million of real property of assets that we have land and buildings that help us position ourselves for the future. Now this is a slide I'm going to spend a little bit of time on. It's a time line. As Murray said, 31st Annual General Meeting. In 1993, we went public. And we did that, because Murray had a vision about growing the organization. And if you look at the time line on the very bottom, the pie charts, they reflect the amount of business we did at the time. In 1993, roughly $72 million of business was done. And that was a break between trucking, Mullen Trucking and Mullen Oilfield Services. And as you go to the right and you look at the pie charts that are there, you will look at how we have strategically and fundamentally shifted our business to where we are today, where we're roughly $2 billion for operating segments. If you look up to the time line, one of the -- a couple of areas I want to point out, what we are providing you is where we have gone to the market to raise capital for the group to grow over time as the line indicates 31 years, we've had roughly just about 12% compound annual growth in revenue since going public in 1993. A couple of areas that I want to point out, and it's kind of reflective of what we've done over the last couple of years, 2012. There's really nothing on that screen there. But those who remember, long-term shareholders, we talked about a lack of pipeline takeaway capacity. Murray sounded the alarm about the energy industry will be constrained. It was at that moment in time where we, Mullen, started saying we better pivot away from this because without pipelines, the energy industry will be constrained. 2014, you will note on the slide, we have pivoted. We did a debt deal that year 2014. The oil patch was still relatively strong later that year at [indiscernible], but we made a fundamental shift to the LTL, the less than truckload shipped that year as well. And that was in anticipation of what as we know now, were difficult times for the last part of the second decade of the 2000s here as well. In 2020, and again, we see where we've raised equity and we've raised debentures over time. I want to point to 2020. 2020, we talked about we created 3 operating segments. It just so happened when COVID hit at that time as well. But the 3 operating segments that we created provided and you'll see that under the kind of more in the 2012 time frame and what we have gone back and backdated. We have distinctively grown the focus of that business. 2021 was a very big year for us in terms of acquisitions, positioning for the future. A lot of things that we bought that your virtually everything was tied to LTL and freight. Now I want to point you to '22. What did we do there? When everybody else, and it seems like everybody else, were buying everything that was going out in the market in terms of acquisitions and such, we remained silent. We remained patient. We knew that at peak earnings in 2022 that buying was probably, because things don't stay up forever even though the investment banker suggested that it would, they did not let go forever. So we were patient. In fact, what we did is we disposed of certain assets. We sold a Hydrovac business, and we disposed of a piece of property that helped position us for the future. I got a few more slides on that here in a bit as well. In 2024, our CFO did a masterful job of coordinating and adding some additional operating lines to us with the PNC group here as well, which takes us now to $375 million. So that is just an indication of some of the stuff that we have done here within the Mullen Group. This slide, really what I want to point out is that numbers on the bottom. I'm going to get to more into some of the segments. But last year or a couple of years ago, Murray's Chair letter talked about the asset nature of our business. LTL asset-based, the logistics and warehousing is an asset-light and an asset-based business. And then we also have the specialized, which was the former Oilfield Services, which is asset based. And then our fourth operating segment, HAUListic, which is a non-asset-based business as well. As I go through the next slides to talk about these. I'm going to talk briefly about each of the segment. A new long-term shareholders are well aware of our less-than-truckload capabilities. We service just about 6,000 communities from Ontario to BC to the Northwest territories. And in a given day, we are moving upwards of 15,000 shipments to our combined 11 business units that operate there. We have 1,500 cross docks owned and leased within our LTL network in there, and we work and we know with a lot of the major interliners down from the states and -- as well. Our Logistics & Warehousing operation, an important point I want to make here is look at the asset mix, and you'll see just roughly a 50-50 split here. In our Logistics & Warehousing, We have both asset-based businesses, and we have owner-operator model, we use subcontractors in the logistics model. This helps us when we manage the ebbs and flows of the economy as well with an owner operator, we're paying a percentage of the bill. So this is why we call it kind of an asset-light or a mixed asset class. But with the operations within this group with our 10 or so business units, you'll find what we call multi-mode capabilities. Intermodal transload working with the rail as well. And we have a lot of warehousing space here as well. And that -- and the recent addition of ContainerWorld was going into this segment. That business unit alone will add over 1 million square feet of storage and warehousing to our operation. We're very excited to get that one moving forward. Specialized & Industrial Services. This is, again, the former Oilfield Services, but we have a very distinct and specialized niche group. To the extent that you believe the world still continues to need natural resources for the foreseeable future, we are well positioned in Canada in the resource plays where all the resources that will need to be developed and brought to market, and we will be well positioned to take advantage of that market as well. We wanted -- that is probably the newest segment to us is the U.S. and International Logistics group. This is the Chicago-based group that we acquired a couple of years ago. They are a pure 3PL asset operations. And you will see that they have -- one of the beauties of this is the technology they have. They have a proprietary technology that we're enhancing. We write about it every quarter. They're enhancing. We have a great team down there that's enhancing that. What we also like about this model is a station agent model. And that is where we have independently owned companies that have a sales force that goes out and gets to work and then not dissimilar to our owner-operator model within Logistics & Warehousing. They will -- they are our sales force, but they get a percentage of the bill, whether the prices are high, with the trucking operations are getting out -- looking for or whether they're lower. So it's a great business model and one we continue to build out on. So really, the strategic priorities and diversity of our operations is what you invest in and when you look at Mullen. We maximize the operational performance. We love the self-managed business unit model. We have great teams running our businesses, and we will continue to develop those groups through our quality and leadership development in our BMC. And we're going to prioritize a priority for this year is margin over market share. That has always been a matter since going public and prior to, is that are we doing it and we're not doing it for practice. Are we doing it for, we need to be profitable and successful and, of course, safe on that. And we're right in the middle of maintaining, we maintain a balanced sheet flexibility. That's been a core competency for us since going public as well. And again, when you invest in the Mullen Group, you know your dividend. We're a dividend-paying group and everybody in this room is a dividend recipient, and we take that as sacred and we'll do everything we can to maintain that. A couple of highlights on the investment -- a couple of and additional highlights. Again, we've been around for a long time. Murray alluded to this in his presentation, experience the combined 100-plus years of experience in this room and every cycle that we've seen. And if you go back to enrolling what has started the company, we're 75 years this year when Roland started Mullen Trucking, which is the predecessor to Mullen Group, but that experience and the diversity that he instilled into his family hold today. We are leading and defensible in a growing market. We're resilient it. As we demonstrated in our '23 results, the resiliency of what we have, I have a slide coming up that will demonstrate that. When others were going down, we maintained and, in fact, grew a little bit. We have a great customer group, 10 years of free cash, we're going to jump on that slide here in a minute as well. A large and high-quality unencumbered asset, that is a great position to be in when we're managing the flexibility of our balance sheet. And of course, as mentioned, our dividend. The next slide, again, is really -- I'm just starting to summarize things here. What you see here is, again, is what we do and where we do it. The red lines are the network of our LTL operations in -- and it's coming up here, I see a little bit of a delay on our screen, but as you -- as it will pop up, we will see that our LTL network, again, 6,000 points of service in from Ontario to BC. We cover the entire Western provinces with our Specialized and Industrial Services group. We will cover all of North America with Logistics and Warehousing either with our assets or the assets of subcontractors are working with the rail. And in the United States, where you see the little black dots all over, those are the station agent groups within our U.S. 3PL operation. And in and of itself, that group covers a broad spectrum of services for lots of customers at [ 27,000 to 3,000 ] customers, and we have access to 6,000 different trucking companies. That's different trucking companies that have multiple trucks at their disposal. Really -- and if you look at the bottom, when you show the growth from -- when you go from 2022, we see a 35% growth in our operations. If you go to '22, we're not seeing the same growth. But when you compare us to the case index, where everybody else is down just about 20%, 20% from '22 to '23, we were not. And why is that? Well, we didn't panic and Murray talked about that, in '22 when others were going crazy buying at peak, we exercise great discipline and did not buy at the peak, and we've positioned ourselves to be successful in the future. This next slide that will pop up here as well is maybe a little more of a dive into that. And what it will show is that when you look at Mullen on -- to the end of '22, we've virtually maintained our growth in revenue, compared to the LTL peers that were largely compared to down in the states, you'll see they were down at the end of '23 compared to '22 by 10%. TL, truckload guys were up 2%. But I'll talk about that. You see what their earnings did. They were dropped by 25%. So they're buying revenue and cutting prices. The asset-light providers were down significantly. Mullen, our diversity -- the diversity of Mullen Group kept us virtually on par with our revenue. Again, great decisions that were made, strategic decisions that were made in 2022. This is a slide I can take credit for it is really parsing slide and what you're looking at is a 10-year free cash flow generation. What it will show you and when it pops up here, it's a slight delay again is a record of 10 years of $100 million of free cash flow generation through every economic cycle that you would have seen, including COVID, including the biggest pandemic in 100 years, we've seen that. The one slide, 1 year I want to point out, 2022, you'll see a substantial build of cash to the tune of $200 million, not to overstate it, but when everybody else was spending money like drunken sailors and buying at peak, we stood down, we watched, we were patient, because we knew that the peak earnings that we were -- people were trying to convince us to buy were not sustainable. Things would be coming down. And a final slide here, a couple of slides. Here's just a review of our priorities. We're still on budgeting and planning for $2 billion in revenue $325 million of earnings for 2024, and the dividend, the $0.72 per year, $0.06 per month is a dividend that we all enjoy in our long-term loyal shareholders. We'll deploy $80 million in capital. That is the peak of what we will do, but we will be mindful during this time, and we're watching the cycles, as Murray mentioned. We're prioritizing margin over market share. We're optimizing the operations within our group. We won't be pursuing acquisitions and I can tell you, as we've told our Board, the number of acquisitions that are being presented to us is I have not seen it as long as I've been here in the corporate office in the last 15 years, as many acquisition opportunities being presented to us. And to be clear, we will not do them all, but we will certainly be looking at the ones that are strategic fit to us, precision-based acquisitions is what our metric will be. Finally, I can't go without talking about ESG very quickly. We've been -- as Murray and I have debated in the executive team, we've always been focused on ESG since the beginning of going public. We've always been focused on our people, making sure they have a great work environment and making sure that we're doing the right things in the communities in which we work. We've always done that. We have always reported to the Board since they're going public on that. On the environmental side, to the extent that there are trucks that are capable of -- with these new emissions standards that so many are hoping for us included, we will be -- we'll get them. But right now, they simply not are not viable or available. I mean, in right now, in some jurisdictions, you can't turn your TV, your toaster and play your Playstation without blowing the breaker. So if we think that we're going to be plugging in millions and millions of cars anytime soon. I think we need to be mindful of that. But to be clear, we are committed to the ESG initiatives as well. And final slide, we've got a cool little gear slide. Mullen has been adaptive and innovative since we've been public and prior to that. We've rewarded our shareholders tuned up about $1.5 billion in dividends paid out over the last number of years. We have always been and will always be a people-focused business, because without people, we will not be successful. We're great stewards of capital, as I demonstrated, '22, we stood down while others were going crazy buying things. We industry consolidator. We've been doing that since 1993, and we have no intentions of slowing, but we will be precision based on that. And we do like owning all of our real property. That gives us, we believe, a competitive advantage going forward. So Murray, on a -- those are my comments that I will leave you with, and we're going to have a nice little slide that comes up that you've asked us to put in as it will pop up in a second here. But thank you very much for the time, Murray.

Thanks, Rich. So that just concludes our presentation and actually concludes today's meeting. So I want to thank you for joining us today. And I would say on behalf of the nearly 8,000 employees and associates in our group and their families. I'd like to say thank you for investing in our organization, and we will continue to work hard to preserve your investment. Thank you very much, and stay safe.

This concludes the meeting. You may now disconnect.