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, you may signal an operator by pressing star then 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 and welcome all to Mullen Group's quarterly conference call. This morning, I'll provide a brief overview of the quarter, then I'll turn the call over to Carson for a more in-depth look at the results. But for those of you that are interested in all of the numbers, the team headed by Carson and by Nick Woodward, they prepared the MD&A for the period ending September 30, 2025. This 42-page document contains all of the details, which can be found on our website also at www.mullen-group.com or on CDAR+. So our intent this morning is to provide the highlights. I will close with some outlook commentary before turning the call over to you for the Q&A session. So before I commence today's review, I shall remind you once again that the presentation contains forward-looking statements that are based upon current expectations and are subject to a number of risks and uncertainties. And as such, actual results may differ materially. So further information identifying the risks, the uncertainties, and assumptions can be found in the disclosure documents. Once again, with me this morning, I'm in Okotoks with the entire senior executive team. I've got Richard Maloney as the senior operating officer, Carson Erlacher, senior financial officer, and Joanna Scott, who's our senior corporate officer. Moving right into, let's start by talking about the impact of acquisitions are having on our results, and why I believe that shareholders should be pleased with how this well-thought-out acquisition strategy sets our organization apart from many of our industry peers. So acquisitions are really a critical component of our growth strategy. However, this is not the only means. So what do I mean by that? Well, basically, we look at growth this way. It is derived from two sources, internal, some call that same store sales, growth, and external, which is clearly acquisitions. So when we take a view that the economy is strong, when economic activity is robust, when capital is in being invested, We work with our business units to take advantage of these trends to expand service offerings. We aggressively deploy capital and we raise rates. In other words, this is when we rely upon internal growth. Now, I suspect that you're all well aware that we do not believe that Canada's economy is currently in a growth mode. Actually, I don't know of anyone that believes this other than a few misinformed politicians. But this does not imply that the economy is in decline either. because I do not believe it is. In other words, it is okay. There is work to do. There's freight to haul. However, in the absence of growth in the economy, the balance of negotiating power shifts to the customer. And I will tell you that customers are demanding these days. Why? Because they can. So this forces us to focus on managing costs as well as limit capital investment because the returns just cannot be justified when rates are too low. I'd also add that new capital is very expensive to acquire these days. New trucks, new trailers, new everything. So given the current market conditions, we cannot rely upon increased rates to mitigate cost pressures. This is why we must manage the cost. We strive for productivity gains in order to maintain margin. And on this front, I'm telling you, I'm very pleased with how the vast majority of our business units are handling the difficult market conditions. They are staying focused. with a standing hand on the wheel, as I like to say. So let me turn to the other source of growth, the one that Mullen has relied upon for over 30 years, Svea Acquisitions. These are the quickest ways to grow. However, once again, if not done carefully, with a well thought out as to how the investment will work out in the future, the early wins can fade away very, very quickly. So this is why we refer to our well thought out acquisition strategy. We stay focused and invest only in opportunities and in verticals in the economy that we believe have strong fundamentals. And hopefully future growth potential and market conditions turn more favorable. Okay, with this short strategy overview, how did we do last quarter? As predicted, we grew the top line nicely with acquisitions being the main reason. But so too was that steady performance of our existing business units. The lone exception being those business units that provide service to the oil and natural gas business in Western Canada. So I will lay the blame squarely on low commodity prices, not the good folks that operate these business units we have, because customers either delayed spending or they pivoted to playing the lowest price game. And that is a game we do not partake in, especially if the business is very capital intensive like it is on the oil and gas service side. So we took a few loans and we moved on. And I'll just tell you this, folks, sometimes things aren't fair, but at Mullen, it's not a reason to complain or vent. We simply go about our business and fix what needs to be fixed. So, Carson, we'll now provide some color and discuss the reasons behind our record revenues and cash from operations. Don't forget that. Record cash, right, Carson? So, Carson, you're up.

Okay, well, thank you, Murray, and welcome, everyone. I'll provide some additional highlights from the third quarter. the details of which are fully explained in our third quarter interim report. Our third quarter financial results were impacted mainly by acquisitions as we continue to grow and build out our network by adding additional logistics service offerings to our customers. This quarter is the first in which we recognized a full three months of financial results from the Cole Group. We generated record revenues compared to any previous quarter at just over $560 million. an increase of $29.8 million or 5.6% from the same period last year. Acquisitions drove revenue growth by adding $66.4 million of incremental revenue and consisted mainly from the results from the coal group and from Pacific Northwest. Revenues from our existing business units, excluding acquisitions and fuel surcharge, decreased by $30.5 million and was primarily due to a reduction in the S&I segment. Not only did we generate record revenues, but more importantly, we also generated a record amount of cash as cash from operating activities increased over $100 million or $1.18 per common share in the quarter, well above our cash requirements. This strong cash generation creates value for our long-term shareholders and along with our well-structured balance sheet provides us with optionality regarding capital allocation. This enviable financial position enabled us to announce our intention to redeem in full, prior to maturity, the $125 million of convertible debentures that are outstanding. Conversion of the debentures into Mullen Group common shares is permitted at the discretion of the holders of the debentures until November the 21st of 2025. Any debentures not converted into Mullen Group common shares will be settled in cash. We generated OIBDA of $97.6 million, a slight increase compared to the prior year period. Excluding the impact of foreign exchange gains and losses on U.S. dollar denominated cash within our corporate segment, a term we've called OIBDA adjusted, was 96.4 million, virtually flat compared to the prior year. OIBDA from our existing business units was down 8.9 million, and corporate costs were up as we expanded our team to accommodate future growth. These declines were offset by 11.2 million of incremental OIBDA from acquisitions. OIBDA adjusted as a percentage of consolidated revenue decreased to 17.2% from 18.2%, mainly due to lower margins generated from the asset-light business model of the coal group and from a lower proportion of higher-margin specialized business. Now let's take a look at some of the highlights by segment. First, in the consumer-driven LTL segment, which remains stable and consistent, Revenues in the LTL segment were 197.8 million, an increase of 9.1 million from last year due to 10.2 million of incremental revenue from acquisitions. This was somewhat offset by a $2.2 million decline in fuel surcharge revenue. Revenues from our existing business units, excluding acquisitions and fuel surcharge, increased by 1.1 million. due to steady customer demand and from some market share gains. OIBDA was $36.4 million, which was up slightly from last year. This increase was due to $2.6 million of incremental OIBDA from acquisitions, while cost pressures and competitive pricing resulted in lower OIBDA from our existing business units. Operating margin, while still very respectable, decreased slightly to 18.4%, due to the inability to implement customer rate increases to offset greater cost pressures. Second is our L&W segment. Revenues in the L&W segment were $208.1 million, up $39 million from last year. Acquisitions added $46.4 million of incremental revenue and was mainly driven by Coal Group's Canadian operations. which was somewhat offset by a $2.8 million decline in fuel surcharge revenue. Revenue from our existing business units, excluding acquisitions and fuel surcharge revenues, decreased by $4.4 million and was mainly due to a decline in freight and logistics demand resulting from a lack of private capital investment in Canada. OIBDA was $38 million, up $2.8 million from prior year, with acquisitions adding $5.2 million of incremental OIBDA revenues. while our business units excluding acquisitions generated lower OIBD8 due to a lack of demand for their services. Operating margins decreased by 2.5% to 18.3%, primarily due to the impact of the lower margins generated by the asset-light acquisition of Coal Group's Canadian operations. Now, if you exclude coal, operating margin would have been virtually flat compared to the prior year period at 20.6%. So really what this says is our existing business units, excluding acquisitions, did a great job in protecting margin under difficult market conditions. Moving to the S&I segment, revenues were $105.1 million, down $26.7 million from last year due to a lack of large capital projects being sanctioned in Canada, from demarketing some customers in certain markets, and from depressed commodity prices that negatively impacted our customers' drilling and production plans. These factors led to a decline in revenue from our production services and drilling-related business units. Somewhat offsetting these declines were revenue gains made within our specialized services business units that were tied to infrastructure and mining. As Canadian dewatering and smoke contractors saw greater demand for their services. OIBDA was $23.6 million, down $4.9 million from the prior year. as our production services business units recorded a decrease in OIBDA due to E&P customers choosing to delay facility maintenance and turnaround projects. The specialized services business units had an increase in OIBDA, primarily due to greater customer demand at SMUC and Canadian Dewatering, which was somewhat offset by a decline in demand for services at Pre-May Pipeline. The drilling-related services business units recognized a $1 million increase in OIBDA, despite that lower revenue that I spoke of. Operating margins increased to 22.5% from 21.6%, which was mainly due to demarketing low-margin business and from cost control measures and more efficient operations. Another highlight was that we deployed over $10 million of CapEx into this segment in the quarter, mainly to drill two new disposal wells for involved energy services to increase capacity at our processing and disposal facility to meet strong customer demand. Our diverse business model enables us to deploy capital where we see acceptable returns. Within our non-asset-based U.S. 3PL segment, revenues were $53.9 million, up $8.2 million from last year, as Coal Group's U.S. operations added $9.8 million of incremental revenue in the quarter. In transitioning Coal Group's U.S. operations to IFRS accounting standards, we determined that duties and taxes collected on CoalUSA by CoalUSA and remitted to government agencies on behalf of customers should be presented on a net basis. Now presenting this revenue on a net basis has no impact on OIBDA cash flow or net income. Holistic generated lower revenues compared to the prior year, as many customers remained cautious on ramping up manufacturing and ordering inventory. OIBDA was $4 million, up $3.7 million from the prior year, with Coal Group's U.S. operations adding 3.4 million of incremental OIBDA, while Holistic's results also improved compared to the same period last year. Operating margins improved to 7.4% from 0.7% due to the higher margins experienced at Coal USA. Now moving to the balance sheet. In July, we closed a private placement debt offering of 12-year long-term notes of approximately $400 million. We used these funds to prepay approximately 237 million of private placement notes that were set to mature in October of 2026, and 207 million of amounts that were drawn on our bank credit facilities, which was mainly used to fund the Kroll Group acquisition. At September 30th, we had working capital of $286 million, which included 151 million of cash on hand. Not included within this working capital is our derivative, that hedges $112 million U.S. dollars into Canadian dollars at a foreign exchange rate of 1.1148. This derivative has an economic cash value of approximately $32 million, and since it matures in November of 2026, it will be included within working capital at year end. We also have access to $525 million of undrawn bank lines. In terms of our debt covenants, total net debt to operating cash flow at September 30th was 2.6 to 1. With the announcement of the redemption of the convertible debentures, our pro forma total net debt to operating cash flow covenant, assuming all other factors remain constant, would have been approximately 2.25 to 1. So in summary, we continue to generate cash in excess of our needs. Our balance sheet is well structured. and we have ample short-term liquidity of over $150 million of cash, providing us with the ability to continue to build out our network and grow when the right opportunities come along. So with that, Murray, I will pass the call back to you.