Mullen Group Ltd.

Thank you for standing by. This is the conference operator. Welcome to the Mullen Group Limited third 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. To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, You may signal an operator by pressing star and zero. I would now like to turn the conference over to Murray K. Mullen, Chair, Senior Executive Officer, and President. Please go ahead.

Thank you. Welcome, everyone, to Mullen Group's quarterly conference call. We'll provide shareholders' interests and investors with an overview of the third quarter financial results. In addition, we will discuss the main drivers impacting operating performance. our expectations for the balance of the year, and close with a Q&A session. But before I commence today's review, I remind everyone that our presentation contains forward-looking statements that are based on our current expectations and are subject to a number of risks and uncertainties, and as such, actual results may differ materially. Further information identifying the risks, uncertainties, and assumptions can be found in the disclosure documents, which are filed on CDAR and at www.cda.gov. So with me this morning, I have our senior team. We have Richard Maloney, who's a senior operating officer, Joanna Scott, senior corporate officer, and Carson Urlacher, who is our senior accounting officer. So as I start looking at Q3 2022 financial operating performance, I'll start by using my recollection from the July investor call. in that based upon our strong Q2 results that I believe that we were on target to achieve annual revenues of around $2 billion and EBITDA of $300 million. But based upon our Q3 results, it's evident that I was only half right. The revenue number looks to be on target. However, it now appears very likely that EBITDA will be higher than the $300 million that I had talked about in Q2. Carson O'Lecker, we'll dig deeper into our quarter results in a few moments. But what I can say is that Q3 was another great quarter for our organization. Our focus on yield, margin, and profitability shows in results. Strong revenues, great EBITDA, improving margins, and a cash flow that positions MTL for the very sound future. So now for the details. On the quarter, I'll turn it over to Carson O'Lecker. Carson, you're up.

All right. Well, thank you, Murray, and good morning, everyone. I'll provide a bit more detail. However, our third quarter interim report fully explains our financial performance. As such, I will just speak to some of the highlights. This is the second consecutive quarter where we've generated in excess of $500 million in revenue. And now, on a trailing four quarters basis, we've generated over $1.9 billion in revenue, along with $318 million in OIPDA, and $1.25 in earnings per share. In the third quarter, we generated $518 million in revenue, a record compared to any previous third quarter. Revenue increased by approximately $86 million, or 20%, compared to the prior year and was primarily due to three reasons. First, general rate increases along with steady demand resulted in a $40 million increase in revenue. Secondly, fuel surcharge revenue increased by $37 million, due to the 63% year-over-year increase in the price of diesel fuel. And lastly, we recognized $9 million of incremental revenue from acquisitions. In terms of adjusted OIBD-8, we generated approximately $98 million, again, a record compared to any previous third quarter, and second to only one previous quarter being the first quarter of 2012, where we generated $99 million of adjusted OIBD-8. Adjusted OIBDA increased by 33.7 million, or 52%, compared to the third quarter of 2021, with all three of our asset-based segments contributing to the increase. In terms of margin, our adjusted OIBDA margin improved by 4% to 18.9% in 2022, compared to 14.9% in 2021, and was mainly due to rate increases implemented in 2022, which more than offset inflationary costs. Sequentially operating or adjusted operating margin improved by almost a full point from the 18% generated in the second quarter of 2022. Now let's take a quick look at how we perform by segment. Starting with our largest asset based segment, our LTL segment grew by 32.5 million to 201 million. $21 million of the increase was due to higher fuel surcharge. 9 million was due to acquisitions, while general rate increases and steady consumer demand added $2.4 million in segment revenue. Adjusted OIBDA increased by $14 million to $41 million in the quarter, which was largely due to rate increases implemented in the current year, while acquisitions accounted for $1.7 million of the increase. The continued strength in consumer spending held freight volume steady, while rate increases led to higher revenue and adjusted OIBDA. Adjusted operating margin increased by 4.5% to 20.4% as compared to 15.9% in 2021. The adjusted operating margin of 20.4% was relatively flat on a sequential basis. Our second largest asset base segment is our L&W segment, which grew revenues by $34 million to $156 million compared to the prior year and was essentially flat on a sequential basis. Up to $34 million increase in revenue, $22 million was due to general rate increases and strong demand for freight services, while fuel surcharge accounted for the remaining $11.9 million increase in revenue. Adjusted OIBDA increased by $10 million to $32.7 million in the quarter and was mainly due to rate increases that led to the strong performance at virtually all of our business units. Adjusted operating margin increased to 20.9% in 2022 from 18.6% in 2021, as freight rates remained elevated and more than offset inflationary costs. On a sequential basis, adjusted operating margin improved by 1.4%. Our third asset-based segment is our S&I segment. Revenues in this segment were up 23 million to 108.8 million in the quarter, which was mainly due to rate increases and strong demand for specialized services, including dewatering, water management, pipeline hauling, Oil field activity and construction projects in northern Manitoba. Adjusted OIBDA increased by 9 million or 57% in the quarter compared to the prior year. Our adjusted operating margin increased by 4.4% to 22.6% compared to the prior year due to price increases, the strong performance at Canadian Dewatering and greater oil field activity levels. Sequentially, adjusted operating margins improved by 2.2% compared to our most recent quarter. Lastly, our non-asset-based U.S. 3PL segment. Revenue in this segment was down slightly to $54.7 million as freight demand in the United States for full truckload shipments softened in the third quarter and negatively impacted revenue in this segment. Adjusted operating margins were 2.7% on a gross basis, while operating margins on our net revenue basis were 28.8%. Margins were negatively impacted by higher than normal contractor expense and an increase in S&A costs as we continue to add talented IT staff to continue to build out our technology platform. Our net income was $38 million or $0.41 per common share, both up over 100% compared to the prior year. When we look at net income and EPS on an adjusted basis, which really excludes the gain and loss generated from how we account for our U.S. dollar-denominated debt, and our cross currency swaps, which essentially provides a pure economic hedge on the principal repayment on such debt, we generated $47 million of adjusted net income, or $0.51 on an adjusted EPS basis. Our adjusted EPS on a trailing four quarters basis was $1.41 per common share. We continue to buy back our stock. by repurchasing and cancelling just over 206,000 common shares at an average price of $12.11 in the quarter. As a result of our strong performance, our return on equity improved to 16.6% in the quarter and 14.3% on a year-to-date basis. Looking at some other notable items, we continue to generate cash in excess of our operating needs as net cash from our operating activities in the period was $95.7 million compared to $37.3 million in 2021. This increase of $58 million was mainly due to two things, one being the $33.6 million increase in OIBDA, and the other was due to a $24 million year-over-year variance in changes from non-cash working capital items. This strong cash flow generation enabled us to reduce the amount being borrowed on our credit facilities by over $40 million in the third quarter alone. Our balance sheet remains strong. Our debt-to-operating cash flow covenant under our private debt agreement is down to 1.98 to 1, which is the lowest level we've seen since 2014. We have a total of $250 million of bank credit facilities available to us, of which we had $98.7 million drawn at the end of the quarter, leaving us with approximately $150 million of room available. This trend of paying down debt on our credit facility has continued into the fourth quarter. The repayment amounts on our credit facilities over the last half of 2022 we believe is just one of the highlights. of our results so far this year and really provides us with increased flexibility to be able to adapt to market conditions as we head into 2023. So with that, Murray, I will pass the conference back to you.