Titanium Transportation Group Inc.

Good morning and welcome to Titanium Transportation Group's Q4 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, Tuesday, March 19, 2024. A replay of this call will be made available until midnight on April 2, 2024. The details of the replay can be found on Titanium's website under the Investors section. I would now like to turn the call over 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. Throughout 2023, the transportation and logistics industry experienced unfavorable market conditions, which resulted in industry-wide reductions in volumes and transactional freight rates. Against this backdrop, Titanium demonstrated strong operational and financial performance while executing a strategic U.S. asset-based acquisition. The Oakwood, Georgia purchase provides a foothold for our continued U.S. expansion. In the fourth quarter of 2023, we generated $119.3 million in revenue and 7.6% increase over Q4 of 2022. and $14.9 million in consolidated EBITDA, flat on a year-over-year basis. This is a testament to the company's structure of being almost equally asset and asset-light based, resilient, discipline management focused on operational excellence. On an annual basis, we delivered consolidated revenue of $438.7 million and EBITDA of $52.9 million and cash flow from operations of $40.7 million. making 2023 the second best year in company history. We accomplished this strong financial performance while also returning $3.6 million to shareholders via dividends and buying back $2.6 million in stock. As a company, we continue to prove our ability to navigate challenging economic environments and the strength of the titanium business tools. When comparing financial results on a year-over-year basis, it is easy to discount our performance, especially since 2022 was a record year. However, it is crucial to consider the significant headwinds that the transportation sector faced during 2023. While we're not immune to these challenges, I am proud of how the team proactively navigated through this environment to achieve stable results with a slight volume decrease. Our financial performance and prudent allocation of capital throughout the cycle supports and demonstrates our ability to execute on the growth strategy. As I've outlined on previous conference calls, our commitment to scale our business in the U.S. market will be the major driver for our next stage of growth. In 2023, we laid the foundation for this growth with the acquisition of Crane Transport Inc. in Oakwood, Georgia. With approximately 200 trucks in its fleet, generating about $60 million USD in annual revenue, the addition of Crane expanded Titanium's service offerings to current and new U.S. customers while complementing our existing freight brokerage services. We expect Crane to be a core asset in our business and enable customers to access a comprehensive freight management offering, driving growth in Titanium's U.S.-based logistics business. Our team has worked diligently on the new brand integration since the closing of the acquisition on July 31, 2023. We're pleased with the pace of the integration of Crane's operations as it migrated onto Titanium's technological and financial platforms effective January 1, 2024. As highlighted during our Q3 conference call, we anticipate a temporary adverse effect on margins during the period of integration. This was reflected in the results of our truck transportation segment during Q4. EBITDA margins for the segment decreased by 3.5% compared to the same quarter in 2022 as a result of the ongoing integration and the negative impact from overall macroeconomic factors. Despite these temporary headwinds, our medium and long-term outlook remains positive. Furthermore, we continue to strategically invest in people and technology. We consistently innovated and added new features to our best-in-class customer and carrier web-based portals, Titanium Vision and Titanium Fusion. Our team of freight transportation experts and data analysts developed new ways to augment our operations, which allowed us to control operating costs, pressures, and mitigate the macroeconomic impact to our business. All of these enhancements allow for scalable future growth while exercising prudent financial management, especially highlighted during periodic times of economic uncertainty. Now turning to our segmented results. Our trucking business continued to drive growth. We delivered revenue of $67.8 million in Q4 2023, a 32% increase as compared to the fourth quarter of 2022. EBITDA margin came in at 19.1%, a decline from Q4 2022. As I mentioned previously, this was mainly due to the segment absorbing the majority of the integration costs from the acquisition of Crane, as well as soft economic conditions. Annually, this segment generated $231 million in revenue, a 7.8% increase over fiscal year 2022. EBITDA for fiscal year 2023 came in at $38.9 million, an increase of 12.7% over 2022, with an EBITDA margin of 19.7%. Consistent with our commentary last quarter, the current freight environment impacted the logistics segment of our business. Overcapacity in the industry and weak oil prices exerted downward pressure on transactional pricing. Additionally, transactional and contractual volumes decreased due to shifts in consumer behavior. Despite these pressures, logistics generated revenue of $51.9 million and EBITDA of $4.7 million in Q4 2023. EBITDA margins for logistics during the quarter were 9.9% in Q4 2023 compared to 12.2% in Q4 of 2022. In Q4, pricing pressure was the main factor behind the 14.9% decrease in revenue. Despite revenue challenges, we're encouraged by the 9.3% volume growth year over year in Q4. This marks the second consecutive quarter where our team grew volumes organically, notwithstanding sluggish market conditions. On an annual basis, logistics generated revenue of $212.4 million, EBITDA of $17.8 million, with EBITDA margin of 9.4%. Titanium's success is founded on the strength of our people, business processes, and technology. With the acquisition of Crane, as well as our developing freight brokerage offices, we remain focused on maintaining profitability while building toward our future growth. Moreover, we remain strongly committed to our goals of social responsibility through safety. As a testament, this year, for the second year in a row, we were a finalist in the Northbridge Transportation Safety Award and among the top 5% of the nation's safest fleets. In addition to social responsibility, this has real-world applications in terms of titanium's profitability, by driving lower operating rates. The headwinds experienced by the transportation logistics industry in 2023, including overcapacity, the adverse effects of rising interest rates and increased operating costs have persisted in the first two months of 2024. Despite this, we believe that conditions will improve in the second half of 2024 and are beginning to see signs of improvement as excess capacity continues to exit the market. Irrespective of end market conditions, we remain optimistic that by drawing on our proprietary technology systems and experienced team, titanium will continue to execute on our growth plan and deliver profitable organic growth in 2024. With a refreshed fleet and reduced capital expenditures, we expect to generate substantial free cash flow over the next 24 months. We strongly believe, as we always have, that a prudent capital management strategy coupled with good governance is the backbone to current and future long-term sustainable growth. As a result, we're introducing 2024 full-year revenue guidance in the range of $490 to $510 million, and EBITDA range of 10 to 12%. Furthermore, as we have previously stated, we anticipate robust free cash flow for 2024 and 2025. Our capital allocation strategy prioritizes debt reduction while maintaining dividend payments and opportunistic buybacks via our NCIB. Our continued focus remains on scaling for future growth and generating long-term value for our shareholders. With that, I'll turn it over to Alex for a more detailed discussion of our financial results for Q4 and fiscal year 2023. Alex? Thanks, Ted. Take it away.

Thanks. In the fourth quarter of 2023, on a consolidated basis, titanium generated revenue of $119.3 million compared to $110.8 million in Q4 2022, a 7.6% increase. We delivered EBITDA of $14.9 million flat sequentially with EBITDA margin of 14.2%. For the full year, titanium recorded consolidated revenue of $438.7 million with EBITDA of $52.9 million and an EBITDA margin of 13.8%. Diving deeper into segment performances, the truck transportation segment saw revenue of $67.8 million an increase of 32.1% over Q4 2022, and EBITDA of $11.1 million with an EBITDA margin of 19.1%. As Ted mentioned previously, it is important to note that these results are despite this segment having absorbed a significant portion of integration costs, totaling about $446,000, resulting from the acquisition of crane transport. We expect this to last for the next few quarters. On a full year basis, truck transportation generated revenue of $231 million, a 7.8% increase over fiscal year 2022. EBITDA of $38.9 million, an increase of 12.7% over 2022, with an EBITDA margin of 19.7%. The logistics segment generated revenue of 52.0 million compared to 61.1 million in the comparative period. EBITDA was 4.7 million compared to 6.6 million in Q4 2022 with an EBITDA margin of 9.9%. Annually, revenue from logistics was 212.4 million in 2023 with an EBITDA of 17.8 million and EBITDA margin of 9.4%. Titanium's people, processes, and technology provide a solid foundation for our operations and platform for our future growth. Given the strength of our business and our confidence in the earnings outlook, we maintain our dividend, declaring a dividend of $0.02 per common share. To conclude, I would like to highlight that our focus is to deliver and continue to build a strong balance sheet as they will be vital as we navigate these economic headwinds. I would now like to turn the call back over to Ted.