Titanium Transportation Group Inc.

for standing by. Good morning and welcome to Titanium Transportation Group Q1 2025 conference call. On today's call, you have Ted Daniel, President and Chief Executive Officer, Alex Su, 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 page 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 Tidor. Please note that this call is being recorded today, Wednesday, May 14, 2025. A replay of this call will be made available until midnight on May 26, 2025. The details of this place can be found on the Titanium's website under the Investor section. I would now like to turn it over to Titanium's President and CEO, Pat Daniel. Please go ahead, sir.

Good morning.

Thank you, Operator, and thank you all for joining us. Titanium, for Q1 2025, delivered solid momentum and disciplined execution, despite the seemingly never-ending freight recession and chaos of tariffs that were implemented and then retracted or adjusted, creating customer uncertainties. but gaming was able to deliver a 7.5% year-over-year consolidated revenue growth in the first quarter. This performance reflects our continued focus on things we can control, like operating efficiencies, prudent capital management, strong customer value-added service, and tech integrations, as well as the adoption of AI-inspired initiatives. In addition... we continue to see value in our safety and security protocols. On a consolidated basis, the 7.5% growth for Q1 generated $121.4 million in revenue and an $8.8 million EBITDA, a margin of 8.2%. Both our Canadian and U.S. logistics segments were a key driver of this growth, with revenue up more than 17% year over year. The company's accurate light, high ROIC logistics model continues to scale effectively, supported by our continued tech developments and customer integrations, as well as the successful expansion of our U.S. freight brokerage network. The new offices that we announced in 2024 and during the first quarter of 2025 are already demonstrating promising early returns, and we're encouraged by the strong customer uptake in those regions. In Q1, our brokerage asset-light segment now represents over 54% of our top-line revenue, demonstrating our commitment to growing our asset-light high ROIC and high free cash flow conversion division. Another way of looking at titanium is that we have become a transportation company that is now less than half asset-based. As we continue with this focus, I note that today, Only about half our trucks are company-owned, further demonstrating our shift to a more asset-light model in our trucking segment, helping to de-lever our balance sheet. During Q1, we also maintained a disciplined approach to capital allocation, reducing debt by $10.7 million in the quarter and allocating proceeds from redundant asset divestitures to pay down debt and strengthen our balance sheet. As a result, cash flow from operating activities more than doubled to $15 million, and cash on hand increased by $14 million during the quarter, underscoring our focus on difficult execution and strong cash flow generation. While the economic situation remains uncertain and the freight industry remains in a recessive state, we see the company's results against this backdrop as a statement to our resilient team. Now turning our segmented results. The trucking segment delivered revenue of $56.1 million in Q1. EBITDA came in at $6.6 million with an EBITDA margin of 13.3%. Logistics continued to drive growth during the first quarter of the year, generating revenue of $66.1 million, an increase of 17.6% when compared to the same quarter last year. with EBITDA coming in at $3.3 million and EBITDA margins for this segment during the quarter were 5.6%. While profitability over the period was impacted due to competitive contract rates and increased costs, we continue to be pleased with the strong, consistent volume growth in this segment and have been focused on scaling this asset-like segment as we prepare for an inevitable improvement in market conditions with particular focus on the U.S. great brokerage market. During Q1 2025, we added our newest logistics office in the U.S. in Dallas, Texas, further strengthening our footprint in the U.S. market. Growing our U.S.-based brokerage remains a key driver of Hygienium's next stage of growth. Our asset-like model provides the flexibility to navigate potential disruptions while reinforcing our financial position amid challenges such as tariffs, fuel costs, and market uncertainty. Our model allows growth in both domestic USA and Canada as well as cross-border opportunities. While macro uncertainty persists, including tariff-related risks and global trade tensions, titanium rains well insulated approximately two-thirds of our total volume is domestic and not directly exposed to cross-border or tariff-related disruptions. That said, we remain vigilant. Prolonged trade disputes could temporarily increase economic uncertainty, contribute to inflationary pressures, and eventually affect border supply chains. To mitigate these risks, we're closely monitoring global trade developments and remain agile in our operational planning Our team is ready to respond to shifting customer needs and market dynamics to maintain service continuity and operational stability. Our commitment to technology, solutions, and adoption of AI enhancements allows us to progress as market conditions improve and opportunities for growth present themselves. In closing, let me say this with absolute confidence. Titanium's fundamentals are strong, and our team is executing with discipline and purpose. Despite near-term industry challenges, we're confident in titanium's ability to scale effectively, strengthen operational resilience, and seize new opportunities. As the industry stabilizes, our diversified services, operational efficiencies, and strategic growth initiatives will ensure we remain competitive and well-positioned for long-term success. Amid ongoing macroeconomic uncertainty, trade market volatility and an unpredictable tariff backdrop We'll continue to withhold formal guidance at this time. Understandably, during these unpredictable times, we remain focused on fundamentals of the business and prioritizing operational execution, margin preservation, and free cash flow generation. When the cycle turns, TyJane will be in an even better position with a lean, more asset-light cost structure, a strengthened ownership, and a broader, more diversified business model, both within the U.S. in Canada, as well as CROG Border. And with that, I'll turn it over to my trusted CFO sitting next to me here, Alex, for a more detailed discussion of our financial results for the court. Alex, take it away. Thanks, Ted. In the first quarter of 2025, on a consolidated basis, titanium generated revenue of $121.4 million compared to $112.9 million in Q1 of 2024. a growth of 7.5% year-over-year.

We delivered EBITDA of $8.8 million, with an EBITDA margin of 8.2%.

Diving deeper into segment performances, the Truck Transportation segment generated revenue of $56.1 million in Q1 2025, with EBITDA of $6.6 million and an EBITDA margin of 13.3%. Our focus on operating efficiencies

led to some revenue trade-offs, but delivered improvements in our overall cost management.

Turning to logistics, as had not noticed, the segment continued to face pricing headwinds, but delivered strong performance with a solid volume growth of 9% year-over-year. During Q1, logistics generated a revenue of $66.1 million, up 17.6% compared to Q1 2024, with EBITDA mark with EBITDA coming in at 3.3 million, a growth of 8.1% year-over-year, with EBITDA margins of 5.6%. We are encouraged by the continued organic growth of this segment and remain focused on our asset-light business model. In addition to navigating the challenging economic environment, we continue to prioritize strengthening our balance sheet. As part of our shift to a more asset-light model, which strategically digested non-core assets, including older equipment and underutilized properties, generating $1.7 million in proceeds. These proceeds were applied towards debt reduction. Subsequent to quartering, we have conditionally sold our North Bay property, and we expect sales to be completed prior to the end of the Q2. This liquidity, in addition to our ongoing operational efficiency, enabled us to pay down $10.7 million in company debt and acquisition loans during the quarter, contributing to an improvement in our net debt-to-equity ratio to 1.86 from 2 at year-end 2024.

These leveraging efforts remain a cornerstone of our

financial strategy, enhancing both resilience and optionality as markets begin to recover.

Building on Ted's comments earlier, a disciplined capital allocation approach is yielding results.

Cash flow from operating activities more than doubled to $15 million compared to $6.2 million in Q1 2024, and cash flow on hand increased to $14 million during the quarter. Combining strong cash flow from operations With limited traffic during 2025 and 2026, we expect to generate substantial free cash flow. Prioritizing debt reduction and focusing on cash flow generation not only lowers our interest burden, but also positions us well to a re-impact in high-growth logistics opportunities that demand strengthening. Early in the quarter, we announced the coverage suspension of our dividend to maintain financial discipline. and prioritize prudent capital allocation. We will continue to review the company's budget, capital forecast, growth opportunities, and market conditions on a quarterly basis to determine when dividends can be declared in future quarters. As we navigate the remainder of 2025, we remain committed to continuing our disciplined capital allocation strategy, ensuring our financial position is strengthened and poised for long-term success.

I would now like to turn the call back over to Pat. Thank you, Alex.

Although market visibility remains limited, we are starting to see some signs of stabilization and opportunities in selected regional markets, particularly within our logistics operations. Further substantiated by the recent announcement of the de-escalation of tariffs between the two largest economies in the world. Industry trends suggest that freight may have reached a cyclical trough, but any recovery will likely be gradual and a little uneven. In this environment, maintaining focus, operational agility, and financial discipline is essential. Titanium continues to execute with its mindset. Our asset-light model, supported by disciplined capital allocation and a strong U.S. logistics presence, continues to differentiate us in a tough market. We remain committed to leveraging our cash flow to reduce debt, while selectively investing in high return opportunities aligned with our long-term strategy. As I outlined in our last call, the broader macroeconomic environment remains fluid, particularly on the trade front, but the essential role the trucking plays in North American supply chains remains unchanged. Should customers begin to pivot towards domestic freight or temporarily onshoring in response to evolving trade dynamics, both our truck transportation and logistics divisions are well-positioned to respond. We believe these conditions will ultimately create opportunity for agile, well-capitalized operators like Titanium. By staying focused on customer service productivity and cash flow generation, We are positioning the business to emerge stronger as market conditions normalize, driving long-term value for our shareholders. With that, I'll turn it over to the operator to open the line for Q&A.

Thank you. And ladies and gentlemen, we will now begin the question and answer session. To ask a question, you may press the star followed by the number one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press the star followed by the number two.

One moment, please, for your first question. And your first question comes from the line of David Ocampo with Cormark Securities. Please go ahead. Thanks. Good morning, everyone. Good morning, David.

It's nice to see an increase in both volumes in pricing and logistics. But it did surprise me that margins compressed and it's sitting kind of well below the 8% margins on an easy-to-get basis that the divisions more or less used to. I was hoping either Ted or Alex, if you can walk us through some of the thoughts that may be elevated at this stage and what your expectation is for margins for at least the balance of the year as it's kind of stuck in status quo here at these current levels. Well, typically Q1 is a weaker quarter than the rest. We're starting to see a little more normal seasonality in 2025. Hopefully for a longer time. It's been crazy the last few years. And for Q1 especially, we have had some really weird and severe weather conditions that have driven the market to some extremes. So in both January and February, we saw margin compression that's beyond what anyone expected. So that's where the majority of the margin compression comes from. We saw better in March, and we expect that the rest of the year will demonstrate normal seasonality. So We expect that to improve for the balance of the year. Is it going to get to the 9%? I think in terms of the logistics market, we're not quite there. Maybe with the recovery, if it does come, then we'll see the 9%. But we do expect to see improvement over the next three quarters.

And I'll pass it off to Marilyn for additional comments. Thanks, Alex.

I think you covered most of the thoughts that I was going to add to it. Weather did have a big impact in the first quarter, along with the noise of the recent U.S. election and the effects of the noise of the tariffs even before they hit. So there was a lot of up and down in the months of January and February as the quarter started. So I think coupled together, that was a big impact on margins that may be a little bit more unique to the first quarter.

Yeah, I... I want to comment, I remember getting pictures in January and February of snow that literally shut down Georgia. So it was absolutely unbelievable to see snow in the southeast, which was kind of funny because they don't have any snow plow equipment, so they just shut down everything. Right. Yeah, I guess that makes a lot of sense, water conditions, but that's absolutely right on margins. Ted, I think I heard correctly that 50% of your trucks right now are company-owned, 50% are operated. Is that in the truck transportation division? And then what do you guys think the right level is going forward? Should we still continue to see a shift towards more output light on the truckload side? Yeah, so right now we're approximately 50-50 on our call it asset division. So again, top line, we are 54% a broker and only 46% a heavy asset medium division. But on the 50-50 side, yeah, so... Because of the leveraging and the fact that the rating and the trucking industry tends to be a very low ROIC division, obviously it's a lot easier to have a more owner-operator-centric model. It doesn't mean that we're going to shrink the company truck side necessarily at this point in time. In fact, most of our trucks at this point in time are seated and are rather busy. So we're kind of happy about that. But growth on the trucking side, be it probably somewhat limited because it's real estate on wheels, it's a very, very slow growth process, would be better to do owner-operator because it's not on your balance sheet, right? So it's just a better financial model. Yeah, that's helpful there. And then maybe Alex, I just wanted to dive into the free cash flow. for the quarter. It seems like there's a pretty sizable reduction in working capital and it was mostly on the AP side. I was wondering if we should expect a reversal throughout the year or are you just getting better terms from some of your customers? I would expect a reversal throughout the year. We do work closely with our vendors but we don't plan on pushing our vendors because we believe ourselves to be in good solid capital position already. This is more a reflection of timing and whatnot. Gotcha. And then, Larson, just on CapEx, because he called it out, minimal spending for 25 and 26, do you guys have a number for 25 and 26? I imagine you guys are causing all track and error and orders of deferring and dismissing spam. So in 25, we're looking at really a, call it almost an immaterial number. You know, I mean, if we need you know, five trucks for a particular circumstance that, you know, perhaps we're working on a certain customer contract or something along those lines, you know, that, I mean, it may or may not be necessary, you know, but let's just say 25 is for all intents and purposes zero, and 26 would be a minimal amount depending on growth opportunities. So really, you know, I would consider both 25 and 26, given how young our fleet is, would be immaterial. I wouldn't want to say zero, but I would definitely call it virtually an immaterial amount. Bigger question there. What's the true maintenance level for your current level of fleet, whether it's tracking, trailers, in a more normal year? You're talking maintenance, CapEx? Alex is going to take most of this question. I'm going to say that we're kind of working through some adjustments at this point in time in terms of the type of split that we want between our asset light, asset medium, and asset heavy divisions. So I'll let him dive deeper into that. So with that qualifier, at this current moment, our replacement traffic is about $20 to $25 million per year. Replacing some of our trucks on schedule and replacing our trailers. Of course, with the COVID and post-COVID craziness, we have pushed that schedule ahead of time. That's why in 25 and 26, we don't have any. But going into maybe the tail end of 26 and maybe 27, we'll probably start to see some replacement back to normal.

Okay. That's helpful. I'll hop back in and see if it takes forever. Thank you.

Thank you. Once again, if you would like to ask a question, please press the star 1. Your next question comes from the line of Gianluca Tuturid. He would security cease to ask.

Hey, guys. Good morning. Good morning. Just at a high level, Deb, with this 90-day high that's on reciprocal tariffs, do you expect inventory restocking cycle to be accelerated in this window? Just wondering how your customers are thinking about this opportunity over the next 90 days. I'm going to kind of back into that answer, if you don't mind. I'm going to say that titanium has a lot of So I think cleverly you've also asked what does Q2 look like? So I think that because we're more of a rather CPG, consumables, necessities type, and during the recession, or not recession, during the pandemic, I was saying, we're pandemic proof. You know, people need a lot of what we share just to live day to day, which kind of makes us resilient. And then, you know, after that, it was more, you know, recession-proof and so on. So, I mean, yeah, there's fluctuations within that. But I'm going to say that our customer base and the diversification that we have in particular, we're not going to see as much of a fluctuation. Perhaps there might be certain circumstances where, yeah, but I can't speak for the rest of the industry. I just know that titanium in this particular case is rather resilient and you know, other than the fact that the weather was so severe and so horrible in January and February and was so impactful, you know, we're not really seeing a huge difference between March and April. So, I don't know if what's happening right now geopolitically is really going to have as much of an impact on us either. So, just so that you know, actually, I'm going to just deliberately send this over to Marilyn right now to add some comments because she's actually in Chicago. So, Yeah. The weather's better there right now, I hear.

It's pretty warm, but it might be, it looks like it's going to rain. I just wanted to add to that that our customers, like so many, are also uncertain in terms of where the times are, and none of them have halted their business. There are careful with how they're moving their freight at the moment and the volumes of it because, as you know, every day is a little different and every week is drastically different. So everyone's a little uncertain of timing and there's certainly an element of chaos. So we're not seeing – our customers are continuing largely or cautiously, rather, on a version of normal. Hope that helps.

Okay. And I guess, Marilyn, just on the crane side of things, like in your planning for that business, how do you think about expansion plans or adding to the fleet, shrinking the fleet, adding customers, or like, you know, in this crazy environment we have, how do you go about planning for the next few years of crane and expanding that business?

Well, we definitely believe in the asset model we added into the U.S. for allowing us to put boots on the ground or trucks on the road in the U.S. and the effect it will have on our brokerage services and our overall transportation services. We're not looking to shrink that fleet. We are definitely looking to be steady as it goes. And then as the markets turn, we're ready to expand on that program. But, again, we are still focusing on our asset-light model, even within the trucking segment, rather, on more of an asset-light model for growth there. In terms of, you know, how do we navigate through this, that's where sort of our strength in teams, our tech, and our operational and sales strengths that we have. Hard to see it in these times, but it's still there. We continue to be offensive in our sales strategies, and I am happy to say that although these are struggling times and the results aren't where we would like them to be, we're actually growing on our customer bandwidth, adding new business as we go. You know, in this marketplace where you do see some stability or retraction or just uncertainty, our offense is growing business. adding new business, adding new customers, and so on.

That's helpful. Thank you, Marilyn. And then just one final one, perhaps, for Ted and Alex. Good continued growth in asset life. Can you give us an update on the roadmap there near term? And if you think about the company five years from now, how big is the percentage of sales are you aspiring logistics to be? Yeah, so we definitely expect logistics to be a much larger, over the next few years, a much larger division, only as a matter of capital practicality, right? It's a much, much higher ROIC business. And it's a lot more agile. And with our digital capability and our technological platforms, it's very scalable. So from that perspective, we certainly expect it to grow significantly. relatively speaking, on a much, much faster level, you know, trucking is a lot harder to grow because it is very, very taxing on your balance sheet. So, you know, we have to be mindful of that and, you know, and that does cut into shareholder value and so we're obviously going to be, you know, extremely careful and definitely very conservative in the future on, you know, on the amount of leveraging that we've got versus the, you know, what we expect to be exponential growth in our asset-like divisions and locations. And to add to that, we have the last three offices we opened are still relatively young. So while I can't speak to a longer term, near term, these three offices need to get up and running to our target average mark of about $20-25 million per office. So in the near term, you can see at least that growth from our logistics division as also our Canadian offices get to where it needs to be. So there's a couple offices that are not at maturity. And then past that, then we really are looking at the expansion of our current offices. And that depends on our customers. We'll see where we will end up.

Yeah, I mean, it depends on...

We're going to use our tech, right, to keep growing our brokerages. And, of course, continue to execute on all that. Thanks, Ted. So, Nick, I just want to confirm the roadmap for this year. No more offices on the brokerage side for now? No. We're going to get the Virginia and the Texas offices going. They're essentially done. As we speak, we're currently installing our technologies. And we've got the managers, you know, they're actually, they've been at it, chomping at the bit. So, yes, they're ready to go to get going.

All righty. Thanks, guys. Talk soon. Thanks, all of you. Appreciate it. Thanks, Keith. Operator. Sorry.

We have no further questions at this time. I would like to turn it back to Mr. Cardenio for closing remarks.

Okay. Sounds good. Thank you very much. And thank you all for joining us today. We appreciate your interest in our company. I look forward to providing an update on our progress and all of our priorities as discussed today when we record our Q2 results in August. If there are any further questions, please feel free to contact us. Thank you again for joining us today on the call.

Thank you, presenters. And ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.