Titanium Transportation Group Inc.

Good morning and welcome to Titanium Transportation Group's first quarter 2023 earnings conference call. On today's call, we have Ted Daniel, President and Chief Executive Officer, Alex Fu, Chief Financial Officer, and Marilyn Daniel, Chief Operating Officer. Before we begin, I would like to remind everyone that certain statements made on this call today may be forward-looking. In that regard, Please refer to the risk factors and cautionary provisions outlined in the press release issued by the company yesterday, as well as the filings made by Titanium on Cedar. Please note that this call is being recorded today, May 16th, 2023. A replay of this call will be made available until midnight on May 30th, 2023. The details of the replay can be found on Titanium's website under the investor section. I would now like to turn the call over to Titanium's President and CEO, Ted Daniel. Please go ahead, sir.

Good morning. Thank you, Operator, and thank you all for joining us. Despite challenging economic conditions, I'm pleased to share that Titanium delivered another profitable quarter, generating $106 million in revenue and $12.6 million in consolidated EBITDA. The market trends we saw in the latter half of 2022, including increased levels of inflation, supply chain challenges, rising interest rates, and geopolitical turmoil, continued in the first quarter of 2023. These trends also impacted the transportation industry. We observed a softening demand for freight services stemming from changes in consumer spending habits and some balancing of overstocked inventory from the prior year. At Titanium, We have always believed that during difficult times we should be opportunistic and continue to pave the road for future growth. I believe the success we achieved in 2022 and the first quarter of 2023 is a direct result of the opportunistic investments in assets, technology, and people that we made in prior cycles. Although 2023 may not be a year of rapid growth, We believe the economic environment will present disciplined and experienced operators, such as ourselves, opportunities to make prudent investments, which will translate into sustainable long-term growth for our shareholders. On a consolidated basis, we generated revenue of $106 million, EBITDA of $12.6 million, and EBITDA margin of 13.8%. an increase of 230 basis points from Q1 of 2022. This demonstrates our continued ability to execute on our growth strategy and commitment to improved efficiency, delivering strong and consistent margin growth. Looking at our trucking segment, we delivered revenue of 51.6 million, up 4.5% year over year, and 52% EBITDA growth. We were able to utilize our technology-driven navigation tools to optimize our pricing strategy, which resulted in a year-over-year increase in segmented revenue. We do not expect the growth trend to continue into the remainder of the year, but anticipate continued control of our operating costs to maintain high levels of profitability in this segment. The results in the trucking segment also demonstrate the benefits of the investments we've made in our technology and our team as we continue to leverage our newest best in class customer and supplier digital solutions. Our newly developed supplier solution tools and vetting systems allow us to add thousands of partner carriers to our logistics database and service network. Our logistics segment, which tends to be more sensitive to market conditions, face substantial pricing pressure and demand normalization during quarter one of 2023. We generate a revenue of 56.2 million and EBITDA of 4.6 million. While we do not expect the quality of revenue to return to the elevated levels in early 2022, we're comfortable with the margin performance that we're currently able to achieve. We continue to see significant opportunity for our growth in the U.S. marketplace. During Q1, we announced our sixth U.S. location in Fayetteville, Arkansas, as part of our goal of building Titanium's business offerings in the U.S. market. We expect to continue to secure additional U.S. locations, allowing us to grow our footprint and customer base with the addition of another two locations in 2023. Seven years ago, we outlined a bold strategy to achieve $500 million in revenue. Over the past few years, we scaled our trucking and the logistics business in Canada and expanded into U.S. markets. While continuing to execute on strategic acquisitions. We ended 2022 with $496 million in revenue, achieving the goal we set in 2016. As we look forward, we are confident that titanium can become a billion-dollar business and we're focused on executing on our strategy while navigating the current economic environment. Our technology-intensive platform is empowering us to deliver efficiencies in optimizing pricing, routing and load volumes in an environment of emerging pricing pressure and softening volume demand. For the second quarter of this year, we cautiously expect a more tempered marketplace. Against this backdrop, we expect to continue to leverage technology to navigate evolving market conditions, and with a strong balance sheet and cash position, we remain prepared for opportunities resulting from this economic situation. We maintain our 2023 full-year revenue guidance range of $500 million to $520 million, an EBITDA margin of 9.5% to 11.5%. With that, I'll turn it over to Alex for a more detailed discussion of our financial results for the quarter. Alex? Thanks, Ted.

No problem. In the first quarter of 2023, on a consolidated basis, titanium generated a revenue of $106 million, compared to $136 million in Q1 2022. We delivered EBITDA of $12.6 million compared to $13.9 million in Q1 2022, with EBITDA margin of 13.8% and increase of 230 basis points. Diving deeper into the segment performances, the truck transportation segment saw revenues of $51.6 million, an increase of 4.5%, and EBITDA of $8.7 million, an increase of 52.4%. with an EBITDA margin of 20.3%. The continued improvement in operating margins in the truck transportation segment is consistent with our expectations, following the integration of a sizeable acquisition as we continue to deliver operating improvements and synergies. The logistics segment generated revenues of 56.2 million, compared to 87.9 million in the comparable period. EBITDA was 4.6 million, compared to $9.2 million in the comparative period, with an EBITDA margin of 9.3% compared to 11.5% in the same period. Titanium's balance sheet and solid capital position continue to provide a strong foundation for our operations and allow us to consider potential acquisition opportunities. During Q1, we bought back $72 billion 1,275 common shares under our NCIB and we're actively evaluating potential acquisitions opportunities. Given the strength of our capital position and our confidence in the earnings outlook, we maintain our dividend, declaring a dividend of 2 cents per common share. I would now like to turn the call back over to Ted.

Thank you, Alex. To reiterate, for the remainder of 2023, It is likely that the North American economy will continue to face strong headwinds, which will undoubtedly cause turmoil within the transportation industry as well. During times like these, we are pleased to have delivered a profitable quarter. Titanium's technology-based systems and experienced team delivered quality service to our customers and executed against our financial and strategic objectives for our shareholders. Titanium is poised to not only navigate our core business through these challenges, but we expect to capitalize on potential accretive opportunities should they arise. Our investment in our proprietary technology and people allow us to approach difficult times with cautious optimism. With that, I'll turn it over to the operator to open the line for questions.

Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the number one on your touchstone phone. Again, that's star followed by the number one on your touchstone phone. If you would like to withdraw your request, please press star followed by the number two. Your first question comes from the line of Matthew Lee from Canaccord. Please go ahead.

Hi, guys. Thanks for taking my question. I'd like to maybe start on the margin side. You know, year over year, you're up to 690 basis points despite revenue coming down. Can you maybe help put in perspective the drivers of improved profitability between price optimization, fusion, and internal initiatives?

Of course. So for sure, and Marilyn's going to jump in later with some of the operations side. In terms of the margin improvement, one of the biggest factors that we have, our technology allows us to navigate the current environment and really it's last year's environment too. optimize our pricing strategy to our customers and to our suppliers so that we are able to realize that difference in the margins. With regards to that, Maryland would be more in tune with the operations side.

So on the logistics side, basically doing more with less, I guess, is the message that we've been able to do. And part of that comes from the technology we've used in vetting our carriers and getting relationships with the partner carriers that we use to ensure that our margins are where they should be. On the trucking side, obviously, we don't look at the margins as much. And on the trucking side of things, we've been able to leverage our contractual rates with our customers to keep things as stable as possible.

Yeah, and again, we keep pushing our technology, which adds to the efficiency. Obviously, our titanium fusion carrier portal is, you know, one of the, you know, sort of one of our largest innovative components of, you know, our future in terms of growing our margins on the logistics side. So that's also a critical component that we keep investing in.

Great. That's great, Collar. And then in terms of guidance, you know, remains the same, which implies that some studies ramp up at the remainder of the year, particularly for logistics. Are there any particular things you're seeing in the market currently that give you some visibility into that?

Sorry, Matt, can you just clarify that again? Do you mind just rephrasing that, if you don't mind?

Yeah, so you have a $500 million guidance for the year, and revenue for Q1 is obviously lower than that run rate. So, you know, there's a bit of a ramp-up that's being required to hit that. And is there anything that you're seeing in the market that gives you some confidence in the visibility of the ramp?

Yeah, of course. Okay, I totally get what you're saying. So I think, I mean, we'll definitely, we'll split it into a couple of components. You know, currently, right now, you're seeing actually more net cancellations of authorities under FMCSA than you've got issuances. So obviously, there's already a trend of, call it tightening in the marketplace. So we do expect that this year we'll have, I guess, call it traditional seasonality, i.e. first half is typically not as good as second half. I mean, the last few years with COVID, obviously, there was no such thing as seasonality. It was absolute turmoil. But we do believe that second half is going to be better. And the other thing is that if you split our two businesses in half or, well, 60% brokerage, 40% assets, the assets tends to be more sure and steady in terms of revenue predictability. But the brokerage, the revenue is kind of a rough number in the sense that it's more of a cost plus. Right? Revenue is more of the result of the margin, if anything, so it's more of a bottom-up approach. So that's where, you know, I think it's a little bit of an estimation, but, yeah, I think it's definitely there's, you know, some plausibility to it.

Some of our confidence also has to be in the fact that we are continuing to open our logistics offices, and that will add to some of our growth that we expect in the second half, barring any potential acquisition opportunities. But just our organic growth, we expect that to continue to – allow us to grow in the second half of the year. I think it's also important to note that there's some of the tightening in the carrier base, which will help margins as well. Just as a matter of fact, I think it was reported in Freightway to Sonar that 9,000 carriers in the U.S. exited the market between January and March of 2023. So there is some changes from over year over year for sure in terms of where the marketplace is. So, yeah, we continue to grow our offensive strategy in terms of growth that will help us in the second half.

All right. That's great, Colleen. Thanks. Thanks, Matt. Thank you.

Thank you. Your next question comes from the line of David Ocampo from Cormac Securities. Please go ahead.

Thanks. Good morning, everyone.

Good morning, David. Good morning. Good morning.

I just wanted to follow up on Matt's lines of questions as it relates to margins, but maybe ask it from a different angle. If I take a look at your operating margin, so your EBIT margin in logistics, that's a non-asset-based business. If I take a look at the margin, it's actually higher than your trucking business, which requires capital. So if I'm looking further out, do you expect the truck transportation margins to eventually exceed logistics? especially in the context of your larger Canadian peers that are able to get a 10-plus percent EBIT margin?

Well, our current model is we've provided a little bit of an insight previously into our current model. Our logistics side, we anticipate that our EBITDA will be anywhere from 8% to 9%. That's our target until we scale further ahead. And our trucking is anywhere from 18% to 19%. And then, like you said, we have the depreciation, we have a whole lot of after EBITDA. But that's how the business is operating because we have such an asset-heavy side to the trucking side of our business. We don't expect that structure to change too much, especially not this year. But going forward into the future, Because we are a full truckload haul in our trucking side, we don't anticipate that structure to change until we change our product lines either.

If you keep a high proportion of logistics, the proportion of lower EBITDA obviously is going to have an impact on percentages, but as Alex said, logistics is really essentially a zero DAI business. you know, being non-levered, you know, asset light, you're going to get that kind of mix in the, you know, in the calculation, right? If we're virtually 100% trucking, we'd be at 20% margin, but then you'd be, you know, obviously you'd be killing that from a cash flow perspective, you know, once you're done with DAI at that point in time, right?

Yeah, I guess I was talking more from the EBIT perspective, so after depreciation, just trying to understand how you guys are Is there a pathway for you guys to get closer to, say, Transforce's truckload division, which is 17% EBIT margin versus your 5% EBIT margin business?

Yeah, I would say different product mixes. We're straight up truckload. So as far as I'm concerned, I think anywhere from 18% to 20% is a good target for us on a pre-DAI basis. On a post-DAI, I think what's going to happen is that you're going to see an increase in the DA over time because as trucking companies replace equipment, which is now far more expensive, depreciation is going to go up no matter what. And right now, I know that there's still fleets that are out there that are still struggling to get equipment because most of the OEMs right now are basically sold out for 2023.

Yeah, that makes sense. And then, Alex, on the net debt levels, I mean, it's gone up over the last two quarters or so. Maybe you can give an update on your maintenance capex on a go-forward basis because it's been running closer to north of $30 million on an annual basis.

Of course. So we have kind of substantially replaced our truck fleet. So we are kind of done with that side of the replacement cycle. Unfortunately, trailers, we're still facing supply chain issues, so we have not caught up quite yet with our trailer replacement. We are getting a lot more trailers this year, so fortunately, we are most likely going to be caught up by the end of the year. And going forward, our maintenance capex, we've disclosed before, is about anywhere from $20 million to $30 million, depending on... asset prices and also if we need to expand our fleet and such.

Our fleet, sorry, is rather refreshed at this moment with an average age of our tractors now below 1.5 years on our tractor and our trailer ratios are coming right down to 3.5, 4, something like that.

So we're actually in really great shape in terms of the fact that pretty much every single one of our trucks is quite new.

Yeah.

And so from that perspective, you know, we're in really good shape to continue to service the market.

Yeah. So increased capex would be, I guess, for growth.

Okay. That makes a lot of sense. And then my last one here is, you know, we've seen some of your Canadian counterparts get a little bit more active on M&A. What are you guys seeing out there in the marketplace? And then balance to move out against, you know, where your stock is trading at today. How do you compare that, like, getting active on M&A versus being more active on your NCIB or even issuing a substantial assurer bid?

Yeah. So, I mean, to some degree, capital allocation question, right? Are we buying or are we going to do, you know, are we going to keep hitting the max on our NCIB? Our NCIB is, I mean, we might as well get that out of the way. It's not a lot of money because our limit is quite low, quite frankly, on a daily basis. So it's, it's really, you know, practically a rounding error, but I mean, we're doing, we might as well max out, you know, it's like maxing out your RSP. So at this point in time, you know, obviously that's, that's one little thing, but in terms of sort of the M&A environment, let's just kind of hit the big one that really excites me. What's really interesting right now, David, is that I think that the mathematics is starting to really, you know, embed itself in the reality of what's happening. And that's the fact that, you know, let's say everybody out there can assume a five, 6% cost of borrowing. I mean, you know, you go buy a house today, it's going to cost you five, you know, somewhere in the range of four or five, 6% depending. So that's just your cost of capital. On top of that, I'd like to make my shareholders a little bit of profit from a cost of investing. So you're really looking at at least a 10, 11, 12%, you know, minimum rate of return. And so using, Now, a year ago, you were into the mid single digits. Today, you're into the low to mid double digit requirements. And that's just because the cost of capital has gone up. So we know that that is going to impact multiples. And there is obviously no other result that's going to happen, but the fact that multiples are going to have to come down as a result of the mathematics of the borrowing environment. And so I'm actually pretty excited about the fact that I do believe that there's going to be opportunities. And that, you know, as always, we've been looking, we continue to look, we continue to, you know, deep dive. We've been acquirers and, you know, not volume acquirers, but we're strategic acquirers. So, you know, we continue to execute on that, you know, on that strategy.

And can you tease what kind of multiples you're seeing out there? Is it, you know, closer to... Were you bought ITS at five times or multiples even below that now?

Yeah, I mean, I think, again, it depends on the circumstance. But yeah, generally speaking, we are back into the normal ranges of, you know, where we've traditionally seen, you know, multiples can be anywhere. I mean, it can be as low as four, but that's a little unusual and it's really more dependent on the circumstance. But you're kind of averaging into the, you know, into that four to six range, depending. Okay, that's perfect. Thanks a lot, guys.

I'll hand the call over for sure.

Thank you. Thanks, David.

Thank you. Your next question comes from the line of Gianluca Ducci from Hayward. Please go ahead.

Hi, good morning, guys. Good morning, Gianluca. I'm just curious on the trucking side, was there anything that stood out here

um on the performance of the margins in your trucking division um that like you know that division in particular i think impressed us all here um i think that to some degree what we've been doing over the years is trying to diversify our customer base have really strong navigation and also make sure that we've got because it is asset based i like to think of it as kind of like a real estate on wheels type business Um, and so you need to fill the real estate all the time, but, you know, we'd rather be filling it with contracted rates. That's far more predictable than, you know, having, you know, basically, you know, the, the highs and lows of the spot market, um, that's more conducive to margin based business, obviously, which is our logistics division. Um, so that's why I think all of those different components, obviously, including everything driven by heavy investments in technology, um, is something that I believe drives its ability to be extremely resilient. And so I think that the customer base, the contracts, the technology, et cetera, et cetera, all these investments give it that tremendous amount of resilience and continuity that almost combats the ups and downs of the market. You don't have extremes in the way in which we run that business.

So in context for this quarter, Yes, our margins are where we want to be. But if we look at the last three quarters in context to this quarter, ever since we have kind of optimized our pricing strategy and put in some cost savings initiatives, our margins have been pretty stable. This quarter is actually slightly lower than the last two quarters. And again, trucking, it's really resilient, like Ted said, but it's not immune to the market conditions as well. So there is a little bit of retraction. Is it where we want to be? Yes, it could be better like last year, but right now we're happy with it, but it's not like we have done anything different. We have done the same thing with the same strategy in terms of cost savings, in terms of maximizing our fleet capacity, and that strategy has paid off in the last year and continues to pay off this year, but we haven't really done anything special per se this quarter to achieve this margin. In fact, our margin is slightly retracted and we would like to see it get better.

Okay. And so on the trucking side, it's principally contract rates. Are those up for like renewal at some point this year or does that extend into next year? The majority of the trucking business today.

So most trucking contracts are between one and three years. I think it's important to note that it is slightly more sticky and complex getting into accounts as a trucking supplier. So we have very good, I mean, our customer list year over year, our core customer list remains the same constantly. So while we work with customers with rates and adjustments as necessary, it's a very sticky component. So most of what we have does run on a calendar year. or it runs summer to summer in some cases. So there's not a lot. I mean, if you're expecting it to say things like the contracts are coming up in the next few months and they're all going to go down in pricing, that's really not the marketplace that we're in. We're still seeing some increases necessarily for costs, just not as robust as it's been in the past. And just to elaborate just a little bit more on that, when Ted mentioned technology that we're always investing in, And it's always cumulative in terms of the effects and the returns on our segments. And in the trucking sector especially, the convenience factors for drivers to keep the retention high, the convenience factor for customers to be able to be transparent with information, quick and accurate. We're able to report on all kinds of things today, even some of the more buzzword-type things in terms of ESG reporting or diversity and things like that and inclusion. We're able to report on all that. And there's a lot of customers that are in that direction. And because of where our tech has taken us, we are able to provide that information, and that's creating an even stickier environment for our customers.

That's good color. Thank you, Marilyn. And I guess a question on the market broadly, like, what are you seeing and hearing from your customers and competitors in terms of a potential, like, you know, normalization of the market? Like, is that a second-half story, or... Or could that push into 24?

Okay, so I think that there's obviously a little bit of a, I would say an economic crystal ball on this one. But, you know, let's face it, right? When we've got more cancellations on a net basis, we know that the number of small transportation companies is shrinking, i.e., we do know, according to the ATA, you've got 86% of trucking companies have six or less trucks. That's a huge number. So if you're slowly shrinking capacity, there will be an impact at a certain stage. There will be an inflection point. I think that there was actually that kind of a discussion using that terminology in a recent article in Freightways, which I kind of you know, enjoyed reading. So at some point, it will inflect. And that's kind of why we feel that with our navigation systems, we'll be able to take advantage of that. You know, when we start to feel it, you know, we'll have the scalability. From that perspective, I think that at this point in time, though, it's definitely just a sure and steady for us and continue to just, you know, look for opportunities.

Okay. Okay. And a question for Alex. I think you did mention this, but can you just update us on your CapEx plans for the rest of 2023?

So the rest of, I would say for the next 12 months, we are planning to spend about $30 million to refresh our fleet. And the majority of it is trailers. We are loading on trailers because we're a little behind on schedule in terms of our replacement cycle. Trucks-wise, we're only really buying 25 trucks, and they're not for replacement. They're for growth. Like we said, we are anticipating second half will be stronger than first half. We're anticipating that we will need a little more capacity. It's a very moderate growth. It's not anything special, but we do expect that we should be able to fill that 25 trucks, and we will need that capacity. The trailer side is the majority, the lion's share of the replacement of $30 million. That could lead all the way to Q1 2024. That's why I say it's more of a 12-month replacement spend.

Okay, great. Thank you, guys. Good quarter. Catch you. Thank you.

Thank you. Your next question comes from the line of Benoit Poirier from Desjardins. Please go ahead.

Hey, good morning, everyone, and congratulations for the strong quarter.

Good morning, Benoit.

Yes, Ted, I'm just curious here, what makes you confident that market will rebound in the second half and be stronger than first half? Is it mostly driven by a reduction in the supply, inventory normalization, or what makes you confident about the rebound in the second half? I'm just curious here.

Yeah, so... I guess a little bit of a natural belief in Adam Smith's invisible hand here to some degree. And that coupled with kind of the next ingredient being the fact that right now, if you take a look at the, there is a sonar chart that they publish on a daily basis that compares the first tender contract rates versus spot rates. And the spot market right now is quite, low in comparison to contract rates. And in fact, it's right now hitting levels that are comparable to 2019. Yet costs now are 20, 30% higher than 2019 and they're not going down. So that is not a mathematical sustainable circumstance. And in addition, I do believe that seasonality will also come into play here to some degree. So as inventories get burned up, you know, you do have right now, you know, lower import volumes. And so eventually inventories will get used up. So I think all of these little ingredients are going to give us definitely a better second half. To what degree? I mean, you know, you and I are guessing to some degree. But having said that, we do believe that, you add up to one kind of, you know, big sort of indicator. And I think last but not least, I mean, from a titanium perspective, we are a lot of CPG. And so from that perspective, we believe that people are going to continue to consume, you know, essentially essential goods.

Yeah. Okay. That's great. Great caller. Looking by industry, were there big changes or, industry that's surprised to the upside or downside when we look at your breakdown between automotive, retail, manufacture, goods, recycling, and all those industries?

Yeah, well, we definitely saw a few less luxury items, but we don't really do a lot of that. We do very, very little of that. We are heavily, heavily vested in CPG. But it's not just CPG, obviously, it's CPG subcomponents, CPG ingredients, et cetera, et cetera. So, you know, people are still going to be, you know, buying products that they consume on a daily basis, you know, and throughout their households.

I mean, Benoit, if you look at our quarter over quarter industry breakdown, your top two really didn't change much. I mean, yes, they flipped, but In terms of percentages, they don't really change much. Your manufactured goods and beverages are about the same. Like Ted mentioned, your luxury goods have come down, but then we're agnostic to shipping luxury goods or common goods. At the end of the day, if it goes on a truck, we're there to ship it. In terms of the rest of the industry breakdown, we haven't really seen anything and there's going to be a shift or whatnot. It's a little different than when COVID started where the automotive dried up and we had to go find other business. Here, it's reduced spending across the board. I mean, there's a lot more spend on services, but at the end of the day, if you purchase services, there is a product in the back somewhere. and we are there to ship the product.

Okay. And Marilyn, you gave us a great color about contractual rates for truck transportation, but I was wondering whether there was any change in the mix between spot and contractual rate for logistic. I know you have some exposure to contractual and logistic. It used to be about 50%. I was just wondering if whether the mix has changed a bit for logistics?

So we're still largely that 50-50 in terms of contract and spot, true spot. The spot market board has come down for sure, less making it to the spot market because there's overcapacity at the truck level, we'll say. So the spot market volume has come down significantly, I think, over... the last couple of quarters, really. So I do see that. It's interesting when we look to the U.S. for a telltale. It seems the U.S. bought market now is getting a little bit better, whereas the Canadian market seems to have gotten a little bit worse in the last little bit, so we always kind of lag. So that's why I also look at that as an indicator for our second half of the year, as we expect it to be just a little bit better as we're looking to our U.S. partners as a telltale.

That's interesting. Okay, great caller. And just with respect to the fuel, when we look at the diesel, it really increased in the Q2 last year. And while if you look right now, the diesel price is coming down, so it seems that there will be a big difference in terms of market sentiment, in terms of fuel surcharge going into the second quarter. How should we be thinking about the – the lag, the fuel surcharge, and maybe the impact margin-wise?

Well, fuel, the major fuel decrease really come in the early of the year, so your lag isn't really there between FSC and fuel costs anymore. Fuel costs, it's depressed from the 2022 level. It's higher than the 2019 level, but it's lower than your 2022 level for sure. But most market sentiment is that fuel is supposed to be higher on average in 2023 compared to 2022. We don't know where it's going to go. It's always a wild card when it comes to the fuel pricing. But if we go off on those reports, we are expecting fuel costs to jump up. for the remaining year at some point or maybe gradually. At the end of the day, it is a pass-through for us, so in terms of how our margins will be impacted, probably not a whole lot of impact. The top line will be impacted, however, so if field does increase to where the reports are saying, we're most likely going to see that our trucking is going to increase in revenue, but our profitability will remain about the same.

Okay, that's great color, Alex. And just last question on M&A, you removed some commentary surrounding M&A in your press release versus last quarter. How should we read into this at all? Has anything changed from an M&A standpoint?

No, actually. I guess that wasn't necessarily a read between the lines. It's just that we were, I think, efficient in our initial scripted portion of the call, but absolutely not. We are very much so an acquirer and that hasn't changed. We like being an acquirer. We believe that we can continue to acquire opportunistically a good fit. a good win-win for both vendor and purchaser. We're actually really excited for our future opportunities.

Okay, perfect. Thanks for the time and congrats again.

Thank you, Benoit.

Thank you. Your last question comes from the line of Brian Fast from Raymond James. Please go ahead.

Good morning, everyone. Good morning, Brian. Good morning, Brian. Yeah, just in light of the tough freight environment and specifically on your expansion plans on the logistics side, does this change maybe the cadence of your plans to expand at all or maybe even accelerate that expansion to get ahead of an eventual recovery?

So, I guess, are you asking if we're slowing down, so to speak, in terms of our expansion plans?

Yeah, maybe that.

I'm going to split into our two major segments. From a trucking perspective, as I like to think of it, it is a bit of a real estate on wheels. When you've got too much capacity, you don't go build more buildings. In terms of expanding trucking organically, I definitely don't think that we're going to be doing a lot of that. Maybe a tiny little bit, as Alex said. We've got the ability to buy another 20 to 25 trucks later on this year. And, you know, we can easily say, you know, pivot for lack of a better term on that level if we just don't see the need. But in terms, and so we'll run that solid steady, you know, with great customer relations and contract rates. And so we'll keep that real estate full. But in terms of the logistics side, I believe that to some degree logistics, in fact, You don't actually grow logistics in times where it's already tight capacity. And in a way, it's almost like it's too late, like that train's already running at a million miles an hour. So you're not getting on. So this is a really great time for us to actually apply the offense is your best defense strategy. We definitely are very excited about the opportunity to be able to continue to invest in tech and people and keep growing our logistics business aggressively.

Great. That's good color. Yeah. And then just another question on M&A. I mean, how would you categorize the M&A pipeline? I mean, you talked about valuations, maybe right sizing here, but have you seen the number of opportunities accelerate?

I have. I've definitely seen an acceleration. And from our perspective, yeah, I mean, I don't know if it's like we're calling it right sizing, but When the cost of borrowing was 1% or 2%, multiples were reflective to some degree of that, call it denominator. But I'm going to say that right-sizing, I think we can all agree that those were emergency rates. And so the multiples that were a factor of that low borrowing cost were unsustainable. So in terms of right sizing, I believe that the multiples now are just simply reflecting a more realistic long-term cost of borrowing. And I think that from that perspective, there's definitely going to be a lot of opportunity. We like to buy, however, a good fit, one that fits our geography, our product lines, our culture, et cetera. So we also look for You know, also good, call it, you know, like good fits from a cultural perspective as well where, you know, both, you know, the vendor and ourselves are able to mutually benefit from that. Kind of a little bit of a, you know, two plus two will be five, not just four. So we always look for that.

Great. Thanks. I appreciate the color. Except for me, I'll turn it over.

Thanks, Brian. Thank you. There are no further questions at this time. I'd now like to turn the call back over to Mr. Ted Daniel for any closing remarks.

All right. Thank you, operator, for facilitating the call. Regardless of the economic conditions we operate in, undoubtedly with our innovative, hardworking team of people, titanium will continue to grow, succeed, and increase shareholder value. We highly appreciate your interest in titanium. And if there are any further questions, please feel free to contact us Thank you everyone for joining this morning's call.

Thank you, sir. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a lovely day.