Mullen Group Stock

Thank you for standing by. This is the conference operator. Welcome to the Mullen Group Limited 2026 Second Quarter Earnings Conference Call and Webcast. [Operator Instructions] The conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Murray Mullen, Chair and Senior Executive Officer. Please go ahead, Mr. Mullen.

Well, welcome, everyone, to Mullen Group's quarterly conference call. This morning, we released our second quarter interim report. It's a nice 60-page document full of detailed numbers and analysis prepared by our team headed up by Carson Urlacher and Nick Woodworth. So this document contains updated information is available on SEDAR+ and on our website, www.mullengroup.com.

So I'll remind everyone this morning that today's presentation and commentary contain forward-looking statements, and they're based upon current expectations and are subject to a number of risks and uncertainties. As such, actual results may differ materially.

Further information identifying the risks, uncertainties and assumptions can be found in the disclosure documents. With me this morning, I'm joined here in Okotoks by the majority of the senior executive team. Richard Maloney is out traveling this morning, so he's not available. But I have Carson Urlacher, he's our Senior Financial Officer; Joanna Scott, who's our Senior Corporate Officer; and Lee Hellyer, who's our Senior Commercial Officer.

For today's call, we'll follow a similar format as the last few conference calls, all in an effort to make sure that this call is as meaningful and productive for everyone as possible. All prepared remarks by Carson and myself can be found in the second quarter interim report, the financial report and the press release documents, which were released earlier this morning.

We have nothing further to add. So we will head straight to the Q&A session as I suspect that you will have some interesting questions.

Now not only was last quarter one of the very best ever for our organization, it appears that there are several major projects, all that have a significant logistics component to them. These are actively being contemplated at this time. This bodes very well for the economy, and I think it bodes very well for our organization. So I see some of you have already joined the queue. But before I hand it back to the operator, let me just summarize and give you a few opening comments.

Let's start with the discussion on the state of the Canadian economy. From what the data tells us and what it told us, the demand for freight and related services suggest the economy is doing reasonably well, not robust by any stretch, but there was just enough economic activity to keep the markets in balance and just tight enough that we were able to pass through those credit fuel surcharges that our customers just -- really, they pushed back, but we were able to pass them through. And you saw that was a pretty big number last quarter. But because these surcharges were so high, it just wasn't feasible to pass through general price increases.

Our customers can only tolerate so much at one time. They'll come another day when we can negotiate higher general rates, but that was not last quarter. This will happen if, and I reiterate if the economy can continue to expand. When it does, we will push through higher rates. Until then, and this is basically what we're doing today is that we will focus on high-grading the freight we handle, demarketing low-paying freight. This in itself helps drive margin improvement.

Moving on to the S&I segment. Results were okay, but they really weren't up last quarter over last year. But this didn't bother me too much because there's a lot of momentum building in terms of major capital projects that will fuel this segment to higher revenues and margins in future years. So all good for now.

Enough said, operator, would you please open the lines?

[Operator Instructions] Our first question is from Konark Gupta with Scotiabank.

Great results, of course, and glad to hear you're calling off the fear of recession here after 3 years. Maybe just first one for me. On the second quarter, I mean the second quarter was the first quarter where we saw a huge volatility in the fuel price in a long time. And we are still seeing some of that volatility continue into July at this point. June was a little bit better. What have you seen from your business perspective? I mean, you have a very diversified portfolio. Some parts of the business might do well in this environment, some may not do as well. What have you noticed how is the fuel price or surcharges impacted demand or pricing discussions in different parts of your business?

I can't quantify exactly how it's impacted demand. I think that will play itself out over the next bit, Konark, to be honest with you. What we've seen thus far is that it really doesn't help spur demand. It just reshifts where the demand goes to. So I think basically, it hurts the general consumer economy because too much of their disposable income has to go to energy related.

But I guess maybe that's the reason why the S&I in our oilfield services business looks so productive because obviously, the world needs more energy if you're going to keep prices in line. So I think that's the beauty of our diversified portfolio. I would suspect the general economy will continue to do okay, but not super good. There's just not enough -- there's just not enough impetus for a huge increase.

So -- but anything to do with capital projects and with the building and these others, I think that we're probably in the right space in terms of that. So the markets are pretty much in balance from our perspective, but not growing. I don't see it. The growth opportunity is, if it's anywhere, it's related to capital projects, as I said, they're required to address this high energy cost environment that we're putting in now. Part of it is risk, there's no doubt with the war and part of it is driven by just increased demand for energy all over the world.

Okay. No, understood. And on your CapEx budget, I guess, you guys are increasing it by $50 million, and that happens this year, but sounds like that will support your volume or demand growth in 2027. Where is that CapEx -- incremental CapEx going? And is that in anticipation of some of the contracts that you were bidding on like Alaska LNG or even a new pipeline that's being contemplated between Alberta and Ontario or something else?

Yes. I think the majority of it. Lee is on top of this file as much as anybody is that the majority of it that we're allocating is for major projects. And the reason is, let's just assume that all the projects that are being planned that some of them start to go, well, the industry is short of capital equipment, particularly, let's take the Alaska LNG project. There is no capacity in the system right now to be able to execute on that project, excess capacity in the truck industry. It has to be new additional assets. And we said, look, just to make sure we can execute that contract, we've got to make sure we got the equipment. So I asked Lee to take a look at it and make sure that we could -- make sure we were prepared. And low and behold, the Class 8 truck market got very tight. So Lee, you might just want to comment on that, just how much it's changed and why we had to move quickly on that front?

Yes, Konark, it's Lee. Certainly, the Class 8 truck order board tightened very, very quickly. A lot of discussion around prebuys for 2027, of course, with the new emissions change coming. So it is our full intention to fully deploy the $85 million that we had initially budgeted for. And then to Murray's point, the $50 million directed more towards nation building projects, whether that's here in Canada or as he stated, possibly the Alaska LNG project.

The order board did tighten. And as Murray said, we wanted to make sure that we're in a good position that when those projects hit the ground running, that we are in a position to hit the ground running with it. So if you wait, we were fearful that the trucks would not be here in time. So we're in a good position.

Konark, these projects are extremely large. I got lots of Bs involved with them. By that, I mean billions. And -- but they're extremely complex. There's lots of parties at the table and lots of things. So there's been nothing formally announced, but we're -- we have to make a call. Do we get prepared for them or do we sit and not be prepared. But if you're not prepared and it comes your way, you can't execute.

So we're taking a measured approach to this. And that's on the assumption that we think they're going to go because the world needs energy. So that's our thesis. And I think the majority of our shareholders will buy that will buy into that strategy that we've employed here. We're going to make sure we're prepared. So we can say to the customer, we can do it. Don't worry. We got you covered. We can execute when it goes.

Konark, I'll just add that they've been spec so that they can be deployed across many of our business units, not just any one in particular. So we make sure that if one project does or does not go, we can redeploy assets.

Yes, we've hedged our bets on that to make sure that it's not all in. We've got options. But primarily, we're getting ready for the Alaska LNG project. And then if that goes, we're ready. If it doesn't go, we'll redeploy in the rest of our business. That's a good hedge in my book.

The next question is from Benoit Poirier with Desjardins Securities.

Congratulations for the quarter. Just to come back on the previous question about the $50 million increase in CapEx and those nation building projects. Could you maybe, Murray, give us more color about the timing and the potential revenue contribution that could be coming from this increase in CapEx that we see?

The timing is we're deploying the capital, it will be later this year, right, Lee, that the trucks come in?

That's correct.

So what we had to do already, you had to get ahead to get the build slots. So we're committing the capital this year. Any of the revenue that will be generated, Benoit, I think what we'll do is we'll wait to see if we get the contract. If we do, we'll press release that and we'll say, here's the quantum and here's what we've signed and whatever.

So it's premature to talk about how much we're going to do and whatever. All I can tell you is folks, shareholders, investors, we're planning. And that's -- I think we should -- that's what we're doing. So as soon as we know, Benoit, we will press release that out and say, here's what we've signed, either we got it or we didn't get it. If we didn't get it, we'll redeploy those assets in the rest of our business, and that will be our 2027 CapEx.

Okay. And looking at the margin performance, LTL segment was quite strong, and you call out the greater lane density demarketing, lower margin freight, but also cost recovery efforts. So is it fair to believe that this is a sustainable margin going forward for LTL? Or could we even see greater benefits and more upside from the LTL segment?

Yes, that's a good comment, Benoit, is that, yes, LTL, I think we hit pretty good stride last quarter, and that's a function of, as we say, really, it's 3 things. I think our business units are generally doing a great job on the cost side.

We did get full cost recovery on fuel surcharge. That was -- that helped bring the margin up. And then the third is there's just enough freight in the system, Benoit, that we don't have to take some of that other low-paying freight to fill the trucks. We're demarketing that because it costs -- it's just not adding any value. So even though revenues didn't really go that much higher, the quality of the revenue improved, and that's what helped drive our margin improvement.

Now if you get any growth in the Canadian economy, any, as the market has tightened, that will give us the go sign to maybe raise some prices. We're already seeing that happen in the United States. We haven't quite seen that happen up here in Canada yet. But hopefully, that happens, but that will probably be a '27 situation. I don't think that's going to happen later this year. There's too many headwinds with trade issues and with people just not investing the capital in the general economy at this moment. So it's in pretty good balance. So I think we can maintain that margin. That's our expectation for the balance of the year.

Okay. And maybe last one for me. In terms of M&A, you mentioned some words in the press release around the interest to look at tuck-ins and confidence that you could close some by the end of the year. So could you maybe provide some details about the size of those tuck-ins that you're looking at these days, the business segments also that you're looking at and whether valuation is still reasonable given the seller expectation and the more favorable trucking market?

Yes. I think on the expectation side, it's kind of a tale of 2 worlds here. clearly, every seller wants to get the best price and every buyer wants to get the lowest price. I mean that's the game that has played. It's kind of a tale of 2 worlds here. Eastern Canada -- it's a little bit better, Benoit, but it hasn't proved -- improved substantially. So expectations are still reasonable. And truthfully, there's a lot of people of our peers that have got their balance sheet stretched. So they're not -- we'll take a look at whether we think that those business units fit into our network where we can find synergy.

Those are really the only ones that we're really contemplating at this time because we don't think the economy is strong enough to justify just getting a bigger entity. Where we might kind of stretch out is in the S&I segment because we expect that in future years, that there could be a lot of activity. That's what we're telegraphing. So we'll continue to look on the S&I side. And that will give us -- you got to invest for the next cycle, not for the next week or quarter.

So we'll be -- if we do them, you know that we're optimistic about the future for S&I. The rest of it has got to be tuck-in so we can find synergy. Without synergy, we're really not that interested. I can't give you the size and which ones we're looking at. But I can tell you, we're looking at a number that we do a lot of smaller ones that just are real tuck-ins, Joanna. You're working on a number of files on those. Those individually are not really that significant. But when you layer them in, I expect it's going to help our margin. And that is what I got to keep telling everybody. That's what we're focused on. We're not really focused on the top line. We're focused on how do we improve the margin.

And we've got to make some smart business decisions on that, with capital work so we can get our margin up. We're not comfortable with -- even though we had a good quarter, Carson, we are still focused on how do we keep getting that margin going up. Absolutely -- and that's our primary focus, Benoit. Not so much the top line, how do we drive great acquisitions to improve our margin. That's our focus.

The next question is from Kevin Chiang with CIBC.

Not to beat a dead horse. And again, I'll reiterate the congrats on the good quarter here. Maybe if I -- on the back of Benoit's question on LTL margins, just over 20% in Q2. If I look back even before the pandemic, when you started disclosing this as a stand-alone segment, I think the only other time we saw margins as high ex CEWS was back in 2022 when we're kind of a year into that freight upcycle. It feels like we're in the early innings of this current freight upcycle.

I mean looking at that trend, it seemed like you're able to expand margins, let's call it, 200, 300 basis points as we kind of work through these -- the innings of that ball game. Is there any reason why we shouldn't be able to think of Mullen doing something similar just at a higher base? Like could this not be a, let's say, a low 20s or maybe low to even mid-20 EBITDA margin segment, just given where you're starting from here at 20.2% in Q2?

Carson, I think that Kevin has -- I've been sitting in some of our executive meetings where we talk about our call. So...

I've got the...

I would say to you, this is -- that is a topic that we talk about around our senior executive table is the market just getting tight enough that will help support that thesis to get back up to 20%. And are we doing the right things to get it to 20%. And of course, I think it's -- we're pretty close on saying we should be able to just meet those targets, right?

Yes, yes, for sure. I would say that you've done your homework, Kevin, when you look back the last 10 years, once we start getting into that 20% margin range on LTL, that's kind of a top end that we would have seen over our last decade. I would say that we budgeted at the beginning of the year to come in around 17% for fiscal 2026. And I'd say that we're ahead of that. And I think kind of the trend that we saw in Q2 is kind of consistent in the early innings, what we've seen in July so far. Nothing's really changed from that perspective. So I would say that by the end of the year, we're looking at being able to beat what we originally budgeted for back in January.

Yes. Once again, not so much because there's huge growth, Kevin. It's just that we are -- we've got all the business units focused. Take the business that is higher value freight, higher margin, that's how we're going to drive margin. Less lower margin, a little bit higher margin doesn't mean that we're really increasing the revenue significantly. Once again, focus on margin and our business units, we're high-fiving them. We're saying folks, not only do they listen, they actually executed.

And I would -- once we start that trend, they don't want to go back either, Jo. They want to see high margin because we reward our business units based upon performance. And I can tell you, they're liking the performance as much as we are at corporate. So I don't know why we wouldn't keep working towards that. So some of it's going to be market-driven, but a lot of it is going to be because we make some good business decisions.

That's very helpful color. And just my second question, again, maybe following up on some of the previous questions on your M&A pipeline and the increased capital spend here or capital that you budgeted for. Like if I think back to last year, you divested of your hydro -- or maybe a little bit more than a year ago, you divested of your Hydrovac business. And I think the narrative was you're just could not get scale there, so better to redeploy capital into areas that you have a competitive moat or advantage.

When you think of -- like you said, you're preparing for the next cycle, is it spending capital on areas that you currently already have a strong position in? Is it looking at services you don't have a great position in and thinking that the next cycle might give you the opportunity to maybe deepen that expertise? Just trying to get a sense of is this doing more of what you do already? Or is it part of maybe a product or service expansion plan here just given the optimism around a lot of these nation building projects?

Yes. I think our primary focus, we're open to look at everything when we -- if the margins are correct and if we can get the appropriate returns on it. But the best way and our primary focus is building on those verticals that we're already in. So if we can get stronger, bigger, gain market share, put new capital to work in those verticals that we've already got a position in. We know them. That's probably the easiest path towards not only growth but higher margin. So that will be our primary focus on that.

In terms of the CapEx, look, it's really going to be focused on -- the first is probably going to be pipeline business because you've got to build the infrastructure before we build the business behind it. So you got to build the highway before you put the cars on pipelines, that's all you're doing is you're building the highway for the oil and gas business, and that's got to go.

So our first objective and the first leg of this uptick is pipelines. We've got to be prepared. And what we're seeing in the pipeline business around the world is they have to build new pipelines. And it doesn't matter whether it's in Alaska, whether it's in Canada, whether it's in the Middle East, in the United States. There's going to be a build-out of infrastructure over the next bit. That's the first leg of this, and we've got to have the capital for that. And then we'll redeploy that capital once the pipelines are built into filling the lines, and that's the thesis.

So we think we're in a good long-term trend here. It's not a one and done. Pipelines are one and done, but not the behind to fill the pipelines is not one and done. That is where your sustainable business comes in long term.

Our diversity as well, too. We don't want to participate in a large capital project just on one phase of it. We look to be able to participate in every phase of those large capital projects, right, from the construction of them to delivering LTL freight to the support staff that need to build it. And then like Murray's point, after you get it built, that requires drilling activity. So we can move those assets around quite nicely, and that's kind of the way -- why we diversified our business model the way we have.

The next question is from Cameron Doerksen with National Bank.

I guess certainly, a very strong Q2. It sounds like the trends you saw in June have continued into July. So a pretty optimistic outlook for the back half of the year. I guess, what's your level of confidence that the original sort of EBITDA guidance that you put out at the beginning of the year, $365 million that you're going to be able to exceed that? It sort of sounds like you're trending towards that.

Well, I think if you extrapolate out second quarter, you could probably buy into that thesis. But for us, the way that we manage the business and we articulate it, we come out at the first of the year and say, here's what we think the year is shaping up to look like. And so far, it looks like we were pretty close to our thesis, and it looks like it's maybe gaining a little momentum because we did say that our numbers that we said early in the year did not including any nation building projects.

To the extent that they start to accelerate, Cameron, then yes, it's a reasonable conclusion to say that we'll do better than what we originally published. But look, so far, a lot of talk and -- but I haven't seen all the action, but the talk is getting louder, and it looks like it's getting closer. So I suspect that the majority of the real momentum that's building is going to carry into '27. You know what, and we'll build our budgets and talk to everybody in October, November timeframe as once we get through this quarter to make sure that, that trend that we started to see happen in the second quarter is maintainable. Lots of moving parts, as you know, in this economy, but let's make sure [indiscernible] that the trend is well entrenched before we get too ahead of ourselves.

Okay. That's fair enough. Maybe second question, just on the Logistics and Warehousing segment. I mean, it seems to me that maybe that's the segment that would be more positively impacted by some of the regulatory enforcement actions that we're seeing across Canada, which presumably would help pricing. Have you seen any, I guess, evidence that pricing in some of the sort of truckload businesses are starting to improve? And I guess maybe has your level of confidence increased from the last quarter that we're going to see some pricing improvement there just due to some of this enforcement's action?

I would say that it's -- so there's different markets. And I can't just lump it all together, but let's just -- let's start with the U.S. The enforcement action in the United States is very aggressive. That's tightened the U.S. market dramatically, and you've seen all those reports, and you've seen what the public companies are articulating. You've seen a lot of the headlines come out of there.

There has been some enforcement in Canada, but not to the same degree as the United States. The Ontario market, Quebec market, it's a little -- it's okay, but it hasn't tightened enough. And so not much has happened on Ontario. Back West out here where we have a very strong platform, we're seeing it tighten a little bit more because there's more capital going to work out here. And that's tightening the market a little bit quicker, and we have a pretty sizable market share in Western Canada.

Cross-border. When you're doing cross-border, actually, U.S. rules apply. So that market is tight for drivers because not all Canadian drivers can go to the U.S. And so that's tightened the cross-border market, and that's helped. And some of our logistics and warehousing, particularly back West is doing better. Back East, it's okay, but it really hasn't changed a whole much yet, Cameron.

The next question is from Walter Spracklin with RBC Capital Markets.

I also want to go back to large project investment. I understand you can't give us dollar values, but maybe can you give us timing on -- are any of them formal RFPs that have announcement dates associated with them? And what they are? I know you mentioned Alaska as well as Alberta data center. Is that something you're bidding on? Or is that just something that if there's services required and those are -- it's not part of a formal bid. Just curious how that's all going to be -- how your outlook is on each one of those.

Yes. So a lot of -- there's a lot in that, that you just spoke about, and we're on top of it every day. Look, even this -- even the month of July, there were 2 announcements already that pipeline activity are going. And those were in the $1 billion ranges. And so it's starting to happen already, and we're involved in those projects.

The elephant in the room is the Alaska LNG project. We're at the final table. We think we're in an excellent position. We've done everything we can. We know that we're one of the very few that can do that project in conjunction with our partner up in Alaska to be able to execute. But that's a very complex file, and it's hung up in the Alaska legislature right now. I have no idea how that's going to play out. But typical of most political situations has kind of kicked the can down the road, those kind of things.

So not going as fast as what we'd anticipated. The issue that's happening is longer they delay that one, the more it gets closer that we in Canada are getting close to some of the major projects that are on the books in Canada. So those could be doubling up. Nothing formalized, but I can tell you, we know our market position. We know the teams we've got, and we're one of the very few that has the balance sheet to be able to have all the capital committed so we can say the client, we can look after you. So we're doing everything we can to make sure our business units were chosen and we can execute to a high level. So nothing formal. As soon as anything is formalized, we will press release it.

Okay. When I look at your...

Until then Walter, your guess is as good as our guess.

Okay. When I look at your plan, when you published it originally, you had Q1 results that were in line with kind of that plan, I would say. Q2 now is coming ahead of that plan, and you're giving us an outlook now saying that, look, things are looking better in the back half than they did when you made your plan.

I know you're keeping your guidance intact, but I think expectations are that -- I think if you look forward analyst estimates for tomorrow, they're going to be somewhat higher than what you had originally planned. What my question is, to the extent that people don't get ahead of their skis, I think what you'd said is that your revenue guide of $2.3 billion to $2.4 billion is less about growth and more about better business. So maybe that doesn't go much higher because you're replacing perhaps or demarketing, as you mentioned, some of the lower quality business with some better quality business.

But if you're doing that, then your EBITDA must be going higher. And I'm just trying to get a sense of as you look forward on a more optimistic scenario than you did when you first wrote your plan, is this $20 million higher? Again, something that we don't want to get expectations too high and just wanted to get properly sized when we look at how you're trending for the back half of the year.

I can't give you the number because it's -- I can tell you we're on -- it looks positive. But like I said, I think we're -- certainly, we're on target. It looks like the trend is looking more positive. But it really is dependent upon these projects, Walter. If the projects come, then yes, clearly, we're going to be above what the plan was because we didn't include in the plans, the projects, but there's...

I'm talking excluding the projects. So the $2.3 billion is...

Excluding the projects, I don't think any growth, and we've kind of slowed M&A over the last -- last quarter, we did maybe 1 or 2 little insignificant little things. But generally, all we did is evaluate opportunities less. So the growth from acquisitions is nearly over person. So don't count on significant revenue growth unless the big projects come in.

If a big projects come, that's incremental and those are very high margin. And acquisitions, we don't -- we haven't done any for a little bit. So Q3 revenue growth will slow, but our margins is -- we're focused 100% on margin. So reasonable to assume that we are going to continue to focus and maintain that margin. And if all goes as planned, we expect our -- to improve the margin. So -- but it's all focused on margin.

Margin is cash. That's what -- and then I think what we're telegraphing to our investors is that, look, there's opportunity for us to put cash to work, both internal growth, which will be high margin and acquisitions as we find the right fits. Nothing's really changed with us, Walter. We continue to stick with our game plan and a way it goes. But I can tell you the opportunities in Western Canada with some of these big -- where the capital is going, we're probably as well positioned as anybody.

The next question is from Trevor Reynolds with Acumen Capital.

Most of my stuff has been answered, but just on the S&I side of things, can you guys touch on kind of where you're positioned to get to in S&I relative to kind of where you've been at peak historically, just with kind of the demarketing and everything you've done over the past number of years?

That's a tough question.

Yes. I will give all the tough questions to you.

So yes, back in our peak, we would -- we'd be up and around that $900 million revenue mark for the -- annually for the S&I segment. We're budgeting $450 million for 2026, which is a nice little increase that we've seen over the past 5 years. The trend is definitely more positive than it has been over the last decade. We don't see it as a headwind as we would have 5 years ago. I would say it's more of a tailwind now. But I'd be apprehensive to say that we would get back to $900 million anytime soon. You're going to need a lot of these nation building projects to take off.

And further M&A.

And further M&A to get back to those levels for sure. But the trend is definitely more of a tailwind now than a headwind for sure.

What I can say, Trevor, and I'll add to that is that's what we used to do. And it looks like the opportunities are building back towards the way we used to be and not because of pie in the sky. It looks like the capital is coming back into these projects. And capital implies growth. Growth means we've got to be prepared. That will be both on internal CapEx that we've already started. And we can get back to where we were, but we probably have to do some M&A to get back up to that $900 million on an annual basis. But it's on our radar. I would say when we sit around our senior team and we talk to the Board, that's our objective. That's our goal, but we've got a lot of stuff to do to get back to that. But it's a good goal to set. why not? And we've done it before. Just give us the opportunity, I tell you we'll be in as good a position as anybody to get back.

Great. And then just on Alaska and kind of your investment in 100 trucks there, does that satisfy basically what you think your requirement is to participate in that? Or will there be further investments if you guys get the deal?

It depends on the size of the award. And we think the -- we've taken the first initial step to make sure we could meet the minimum threshold, but it depends on the actual size of the award when the formal bid comes out. But it could be significantly higher. It depends on the size of the bid. We've kind of just pegged it at middle of the ground so we can execute. But we will not sign a contract. I've told the team, we'll not sign a contract unless I know and comfortable that we can execute to a high level. Otherwise, it's not worth it. So we've kind of picked the middle of the road on this. And we'll leave it up to the customer to tell us how much they want to give us. That's up to them.

Got it. And then in terms of kind of the overall dollar value of the Alaska project, what does the staging and the transport of the pipe kind of represent in your view of that?

The size of that project is somewhere between -- oh boy, it's between $250 million and $500 million, and that's total. And remember, we've got a partner. So a partnership means 50-50. So it's somewhere between -- over a 2-year period, somewhere between USD 250 million and USD 500 million. That's a pretty big range, but you know -- all you can do is position yourself to be chosen by the customer, but it's up to the customer how they want to -- how they're going to allocate it. But the minimum we will do if that project go is around $250 million. That's the minimum.

Great. And then just on Alaska being included with US 3PL, is that just for simplification of accounting, I'm guessing.

No. I think the rationale behind that, Trevor, is that we want to keep U.S.-based business in the US 3PL segment. So whether we kind of rebrand that a little bit because right now, we call it asset-light. Obviously, the Alaska LNG project would not be asset-light. But I think our main focus and our original thought is U.S.-based business stays in the US 3PL segment.

[Operator Instructions] The next question is from Tim James with TD Cowen.

First question is returning to LTL. And I think you as much as said that business is running ahead of budget for the year. And then we were talking about kind of the margin potential. Looking beyond 2026, whatever we end up -- wherever you end up for '26 in terms of EBITDA margin, would it be unreasonable to assume that there is more upside then to that number as the economy improves, major projects pick up that I assume could kind of incrementally help LTL. So we don't want to sort of take 2026 and if this replicates your historically high margin for LTL, say, okay, that's it. Is it reasonable to assume there's more upside beyond that? Or are there some headwinds maybe that will prevent that from happening?

I 100% agree with that thesis is to the extent that the Canadian economy grows from its current level, we'll continue to have the opportunity to grow expansion both through execution and through pricing leverage. So you get any pricing leverage whatsoever, I'd tell you the margin goes up, and it would go up nicely. So we've got excellent, excellent companies. We continue to build out and help them with their capacity on facilities, Lee to make sure that they can handle increased business as smaller competitors have a difficult time keeping up with us because we have such a coverage. And honestly, our business units are just really working hard on the technology front. Those are tough to replicate. Yes, others can drive a truck. But boy, it's technology, process improvement, making sure they get the right facilities, that gives you a really good opportunity. And then if you get pricing leverage on top, easy to see how margin could go up.

Okay. That's helpful. My second question, Murray, I'm just interested, you've shown here incremental confidence that nation building projects are going to move forward. Is that additional confidence a function of something that is surprising you? Or is it really just the fact that the government is taking the necessary steps, the steps they said they would, time is passing and they're doing what they said? Or is it because you've been surprised by something?

Well, I think I'm pleasantly surprised that from what we're seeing from our elected officials, and their approach to some very complex issues to get major projects done. So we're taking -- we have a higher level of confidence today than we did at the start of the year. There's still complex files, and they have not been all acted upon yet.

But it sure feels like the powers to be the elected officials understand that to access the world markets for what Canada has a competitive advantage in, which is energy, raw materials, minerals, metals, critical minerals, you have to have the infrastructure to be able to get to the world market. And whether that's bigger ports or whether that's pipelines, LNG facilities, new oil sands plants, that all has to be built to access the markets.

The market is there, Tim, you know what as well as I do. Everybody knows the market is baking for Canadian what we have, get it done, get it to market and Canadians will benefit from that demand. So I think the thesis is correct. But this is Canada. It takes a while to get things approved. You got a lot of people at the table that all want a piece of the action. That may be the biggest thing that's holding up the projects right now. Who gets what of the project. We're not on those files. I can just -- it looks more positive than in the first year. Operator, I think that's it.

Certainly. I'd like to hand the call back over to you, Mr. Mullen, for any closing remarks.

Thanks, folks, for joining us. I hope we addressed a number of the issues there and questions that you had. Really good interactive discussion. And hopefully, that gave everybody a good playbook to go from for the back half of the year. We're 100% focused here as a senior team. Our business units are well positioned, and we're giving them a little bit more capital, and we're telling them, stay on your game plan, margin first, growth second. Take care. Thank you very much. Enjoy your summer.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.

Thank you for standing by. This is the conference operator. Welcome to the Mullen Group Ltd. 2026 First Quarter Earnings Conference Call and Webcast. [Operator Instructions] And the conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Mr. Murray Mullen, Chair and Senior Executive Officer. Please go ahead.

Yes. Welcome, everyone, to Mullen Group's quarterly conference call. And this morning, we released our first quarter interim report. That's a nice 53-page document full of details, numbers and analysis prepared by our team headed up by Carson Urlacher and Nik Woodworth. This document contains updated information is available on SEDAR+ and on our website at www.mullen-group.com.

I'll remind everyone that today's presentation and commentary contain forward-looking statements that are based upon current expectations and are subject to a number of risks and uncertainties. As such, actual results may differ materially. Further information identifying the risks, uncertainties and assumptions can be found in the disclosure documents.

So this morning, I'm joined here in Okotoks by the senior team. It's an expanded senior team. And I want to welcome Lee Hellyer, who's our -- now our Senior Commercial Officer and has joined the executive team at Mullen Group. In addition, I have Richard Maloney, in his expanded role as now President and Senior Operating Officer.

So Richard, Carson Urlacher, Senior Financial Officer; and Joanna Scott, Senior Corporate Officer. So that's the senior executive that we have here at Mullen Group. And my name is Murray Mullen, and I am the Chair and the Senior Executive Officer. So this morning, we're going to follow the similar format as last conference call we held.

And that's all in an effort to make this call as meaningful and productive for everyone as possible. So Carson and I do not have prepared remarks for today's call. These can be found in the MD&A, the press release and the financial statements. And anyone that's on the line today can use any of their AI tools to query anything.

So we'll head straight to the Q&A session. There are probably going to be lots of questions about the quarter, most likely about where we see the economy, the state of the consumer, fuel prices, the freight markets and of course, those often talked about nation-building projects. So I like the fact that we generated record revenues and solid profitability even during a period of basically no economic growth.

I'd suggest you this bodes well very well when the economic conditions improve. Until then, we will keep a keen eye on costs. We're going to focus on margin over market share, and we're going to look for quality companies to join our network of 44 independently managed business units.

Now I have seen many of you already joined the queue, so I will now ask the operator to open the lines. Operator?

[Operator Instructions] The first question comes from Kevin Chiang from CIBC.

Congratulations, Richard, on the expanded responsibilities here. Maybe just well deserved. Maybe if I can just focus on the L&W segment. It looks like you put up the best organic growth that we've seen in quite some time. And I know there's some optimism south of the border in terms of what we're seeing in the broader freight economy.

Just wondering what you're seeing in the L&W space here, just given the organic growth rate you printed in the first quarter and if there's anything you'd point to in terms of driving that tailwind and maybe stuff that could have been transient in the quarter or maybe stuff that might be more structural that you would expect as we get through the remainder of 2026 here.

Yes. That's a good observation, Kevin, is that -- I think the majority of it was probably driven the performance in the month of March, Carson, we had -- it was a decently strong March. And I can't tell you, Kev, whether that was because of the -- everybody was at quarter end and those kind of things. But March was a pretty good month for L&W.

Everybody performed reasonably well, had a couple of real stars that continue to do well. Gleason Group comes to mind and some others. But that -- I think what that reiterates, Kevin, is that's a general economy is our L&W side. And if the economy gets a little bit of a momentum to it, I think our business and our L&W segment is nicely positioned to capitalize on that.

That's a little bit different than the LTL side. It still seems to be -- still seems to be stuck in neutral. We did okay. But as you could see, if you're not doing acquisitions, really, it's still very difficult to grow. That's what we see.

And maybe just on the LTL side, maybe if I could follow-up on your answer there. Just the momentum you saw in March in L&W, has that carried on through the first few weeks here in April? And then just on LTL, I guess some of that organic growth rate that you saw a negative organic growth rate you saw, it seems like you were demarketing some businesses. Is there a way to quantify maybe how much that weighed on the first quarter growth rate?

Carson?

Yes. I would say that, Kevin, with respect to the same-store sales being down in LTL a large portion of that would be with respect to demarketing some customers. The other issue that we also saw in LTL in the first quarter, and this was really in the month of January was some very inclement weather, especially in East, which virtually, we had a couple of operating days where we had trucks that barely left the yard. So that was kind of a headwind early on in the quarter that kind of righted itself in March.

That impacts 2 of our larger business units, our Gardewine Group and APPS Group, which have pretty significant footprint back in the East. So they got in January, February. Decent Marches, but we could hit it with weather. We don't like to make excuses too often, but that's a reality is that we just didn't have any work days, so you can't move freight if the trucks are stopped and people can't get to work.

No, it seems like it was winter everywhere by my observation. And just on L&W, just the April trends, has that momentum carried forward from what you saw in March there?

Not to the same degree, Kevin. I think what we're watching very carefully is was March strong because of quarter end and everybody tries to get their inventories moving quarter end. What we're unsure of is whether it was that or whether there's no doubt that the situation in Iran and the spike in fuel prices has just caused people to take a little bit of a pause, I would suggest.

So we have to watch that, and I've commented on that. Let's watch that carefully. I think it's going to take a little bit of time for people to adjust to that. We're fortunate in Canada that we have our own energy supply. So maybe price went up a bit, but we have it. Many parts of the world do not have it. So I think let's just see how it plays out. April is not as strong as March, and we didn't expect that. because it's the end of the quarter. But let's see what happens here is whether that momentum builds up through the quarter. I think it will, but that's just -- that's a personal observation.

That's helpful. And then just last one for me, maybe a bigger picture question. I'm sure you've seen all the headlines around AI disruption potentially hitting the brokerage business. Just wondering from where you're sitting, what implications do you think this might have for your U.S. operations, whether it's holistics or the recently acquired Cole Group, opportunity threat? Maybe what you're seeing on the ground as we see some of the headlines here.

[ Rick Richard ] oversees both Cole and HAUListic. But we're building all the AI tools into our SilverExpress platform at HAUListic which is. HAUListic is a -- it's a bit of a software tech play and a freight forwarding because we provide the technology to a bunch of agents, right? So I haven't seen -- we haven't seen any disruption. In fact, what we think will be the AI tools that our team is implementing into this, I think, is going to help them gain market share, Rich, that's just.

Yes, absolutely. Kevin, it's Richard. So maybe I'll talk quickly about the U.S. and what we're doing there, maybe more broadly on AI for Mullen Group. But down in the States, we have 2 business units. They have their own separate operating systems with teams that are working and supporting that from an IT infrastructure perspective. But I can tell you that both of them are working at on how AI is going to help and support and build out the technology specifically to HAUListic.

We are working diligently on that with our Director of IT on that met with them earlier this week and discussed that with them. And just on the helping of coding and doing things like that. And we're not like others are a hyperscaler. Every time we have an idea about AI, we do a press release.

But I can tell you they're very diligently working on many fronts, both at HAUListic in Cole U.S. Up here in Canada, we have a very similar initiative underway within our LTL space, looking at how LTL will make us better and having some -- and having -- it's like everybody else. You have some wins and some losses, but you learn along the way and you make it better.

And the real focus is how to enhance load factor. And we have a team. We did a presentation to our Board yesterday, and we are certainly moving in the right direction on that. But it's not an event. It's a journey, and it takes time to do, and you'll have to stay with it. So we are working full frontal on that one as well on AI.

Yes. I would say this too, Kevin. I think if you haven't built your the AI tools into your technology platform and your service offerings to your customer, I think you -- anybody will be at risk, whether you're a 3PL or an asset-based carrier. So we're just embracing it, and we're building all of that intellectual capital and know-how into our businesses, including specifically in the U.S. I don't think it's going to hurt them. We hope it's an enabler, but we're going all in. And we have to change. We have to adapt. We have to make sure we're ready for the future. And that's what we do in our business here as we make sure our business units are prepared for the next 5 years, not the last 5, the last 5 [ for all ].

The next question comes from Konark Gupta from Scotiabank.

Maybe just first question in the absence of prepared remarks. Murray, I think in the press release and the documents that you guys talked about the capacity is coming out of the system gradually. I think it's more of a U.S. trend than Canada seems, correct me if I'm wrong. And the demand seems stable, but the rates have yet to move up. I'm just wondering like when you talk about March being strong, and I think everybody is kind of talking about how the spot rates are continuing to move up.

Just curious, what are you seeing in the pricing environment for you guys? I mean, organically, obviously, your margins were not expanding in Q1 yet. But I'm wondering if there's expansion opportunity down the road. So curious your thoughts on pricing and margin.

Yes. I think once again, that's a pretty good observation is that, Konark, the U.S. market, I think everybody needs to differentiate the U.S. market from the Canadian marketplace, and you're spot on. They're tightening quite rapidly as they implement English proficiency rules and remove certain carriers drivers off of the -- from having a CDO, which takes capacity out of the system because you don't have the drivers.

So U.S. is tightening. That also translates into the cross-border market tightening. So any freight that's moving cross-border, that's tightening. But the Canadian market is -- it's not tightening, but the regulations and the safety standards and the government is really enforcing things a little more diligently than what they did -- that they've done for quite some time.

So that's not getting rid of capacity, but it's forcing some discipline in those that didn't follow the rules quite as much. So that will help pricing and take the pressure off [indiscernible] in the Canadian market. So if you get any demand push, any like we saw in March, it will be okay. If you get demand push in the U.S. with a reduction in supply, boy, that could be an outsized in terms of the rates. That's how we see it.

Okay. That makes sense. And the other side of the coin, I guess, is if the U.S. administration keeps pushing out these drivers from the pool, and I think the numbers are quite staggering if you look in some of the studies. Would you expect or would you see some sort of wage inflation or maybe not so much given your drivers are still sticky. I mean, you don't have any retention issues. Like what do you think about the wage inflation potential here?

Well, that will not impact our U.S. operations because we don't have our business really isn't company truck fleet operations. It's all 3PL and the use of owner operators on cross-border. So the owner -- that will -- they will benefit if the rates go up because generally, they get paid a percentage of the transaction.

So I don't think it will impact us from that standpoint, and we don't see any wage inflation in Canada right now at all until you see a demand push. If you see a demand push, which may or may not come, I'll let you opine about that. But I'm not too worried about the wage thing, to be honest.

Now if I'm a U.S. carrier that you're going to see some stress points there, but those costs are going to be passed on into the rates. But I think the rates have to go up before anybody moves on wages. And the spot markets moved, but the contract market has been a bit stubborn. I challenge anybody to go ask Amazon or Walmart or Costco for a rate increase. Like they're just not embracing that at the moment.

Okay. And maybe last one for me before I turn over. On M&A, I think you made a note in the MD&A talking about your increased reliance, I guess, on M&A until you see structural organic tailwind. When you're looking into M&A, I know you guys have done recently some tuck-ins in the S&I segment.

Are you pivoting to S&I now given structurally maybe higher oil price at least for some time or the -- Canada Nation Building focus in Western Canada? Any thoughts on where would you like to spend the incremental dollars here with respect to your segments?

Well, I think it's evident. We did 2 acquisitions in the first quarter, and both of them were in the S&I segment and specifically tied to energy. And I would tell you our basic thesis here as a senior group is that I doubt if you're going to get any -- we doubt that you're going to get much economic stimulus going on in Canada unless we really get on these nation building projects and get -- start creating great jobs and get capital flowing again.

So we're buying the thesis that is being messaged by the governments that nation building projects are going to go ahead. So we're positioning as if it's going to. The timing of it is a little less certain to us. But Canada needs to get its act together in the world seen and start making our vast resources available to the world that need it.

We can't just hog the puck and say, no, you can't have access to it. They need it. So we're buying that thesis. The timing is Canada, you got a lot of issues. You got to work through. But I think longer term, that's a real growth potential. So we want to make sure we're well positioned. We haven't invested in the energy sector for -- basically, we really deinvested for 10 years. But over the last bit, we've just been adding really good companies into our network that do okay in this market. But if the capital flows back into that sector, they will do outstanding.

Konark, I think it's important to point out those acquisitions we did, one was Lac La Biche Transport, right in the [Clearwater play]. The other one is water management tied to upstream fracking and so on. Now those are all done and closed prior to the war starting and the spike in commodity prices, and that would suggest or should suggest to everybody that, again, we're looking at where the puck will be going.

So these were done prior to all these elevation in commodity prices. Whether they stick or not, who knows, I'm not smart enough to figure that out. But Murray just said it, at some point, Canada is going to have to say we got to do something here. And I think these puts us in a -- solidifies ourselves in some key plays.

Yes. So these are really good acquisitions that are doing well in this current market. And if there's any growth in the capital that goes into the energy space, they'll do better than just good. They'll do very good. So that's our thesis. We've derisked it because they're great companies. And so we'll continue to look at those kind of opportunities, Konark, when we see them come up.

I think that's what we do. There's acquisitions available everywhere. Like we're one of the few companies that can do them. But as I say, we've got to look through the rock pile and look to find these gems. But we don't need to just grow to grow. We need to grow by adding value, whether that's a consolidation play and market and so we can reduce costs or just get great quality companies. And that really hasn't changed in our acquisition strategy and our -- it's in our DNA in this organization.

The next question comes from Cameron Doerksen from National Bank.

Just kind of following up on, I guess, sort of the commentary around the nation building opportunities that might be out there. I'm just wondering if you're actually having any specific discussions with some customers on potential opportunities? Or is it all still sort of more theoretical at this point? Just trying to gauge, I guess, maybe the timing of when some of these things might move forward? And are we at that stage yet where some of your customers might be actually doing some planning?

Cameron, I would love to be able to say that in Canada, we're having constructive discussions and everybody is excited. But everybody is still sitting on their hand and waiting for, I guess, the governments to say, let's go rather than let's talk. In fact, I was going to open this call with a song about what we need is a little more, a lot more. A lot less cost, a lot more action. And I think Canadians are begging for it, but it still seems to be in the consultation phase.

I don't know how much longer we have to consult, but that's outside of our pay zone, and we're not in-charge of that file. I can tell you that we're having active discussions on a major energy project in Alaska. Alaska LNG, Richard is the project in the game. So we're -- there's -- we're actively engaged with the customers on that, and we're at the bidding table, and it appears that, that project may go before the projects in Canada. And we will participate if we're fortunate to get the bid full process.

But we're having active discussions with the customer out there on that. But not -- in Canada, we all sit around and we say, when are we going to go? When is it going to happen? How much talk are we going to have? That's a frustrating part for Canadians and for good jobs in Canada.

And what can I tell you? We're waiting.

And we're waiting for the capital. And you've heard of the meeting that's being convened 4 or 5 months from now in Toronto. And I'm not sure what they're intending to do there, but a lot of these projects that kind of are in play have been approved at some point or other. I don't know, Joanna, at one point, you worked for the law firm that actually went through an oil pipeline that was going to get approved to the West Coast, it's been done.

So when that money starts coming back, private capital, which we have not heard, and we're waiting to see what happens on that. And as it stands today, it's kind of a hurry up and wait. We're not -- we've been accused of being pessimistic. We're not optimistic. I think we're realistic. And we'll go to where the nations are building for now. And that's the commentary on the LNG in Alaska. We're looking hard at that.

Okay. No, that's great. At least there's some projects moving forward, whether they're in Canada or not. So that's good to hear. Maybe just a second question, just on, I guess, sort of the financial targets that you put out earlier this year, the $2.3 billion to $2.4 billion in revenue and $365 million in EBITDA. Are you still, I guess, comfortable with that? And is there -- I guess, any changes on how you're going to get there if you are still comfortable at least by segment from what you originally expected?

I'll refer that to you and I'll make a final comment.

Sure. No change to the guide right now, Cameron. As we're coming out of the first quarter, I would say, by segment, everything is largely in line with what we articulated back at the beginning of the year. So I would say no material changes to the guide that we kicked out in January. If March holds and we continue on that trend, I don't see any.

Yes. I mean the March trend was sustained, we'd be above. So -- and I think the other thing is, Cam, is that we didn't plan any Nation Building Projects in our plan and our budget for this year. So if those start to go, that's on top of what we said we would do.

And that doesn't include any acquisitions?

And no additional acquisitions. So we've got a couple of things that we're going to maybe go ahead and beat that, but that's not built in the plan that we put forward. We said look. This is what we think our existing business will do. And so far, we're on track for it.

The next question comes from Benoit Poirier from Desjardins.

Congrats, Richard, for your new role. Yes. Talking about the opportunity in Alaska, the LNG project, could you maybe provide more color about the potential size of this opportunity? And is it your understanding that there is a limited number of companies that could handle such a project?

The project itself, Benoit, is that project in Alaska, probably bigger than all the nation building projects that have been announced in Canada. It's upwards of USD 40 billion. So how much are we going to carve out of that? We will be specifically -- right now, we're at the table on the hauling of pipe for the 800 -- I think it's 800 miles from [ Prudhoe Bay ] and that will be a big LNG project. So it's pretty sizable. I can't -- we're going to be in the final bidding phase here in the next couple of days. It appears that it's got all of the presidential support, and I think they're waiting for the Governor of Alaska and a couple of other things, but that one has probably got the best chance of going in the short term.

And if we get past and we get chosen as a bidder with our partner, then we'll come out with more firm numbers. But just suffice to say, this is not just a couple of million dollars. This is pretty big. I think we just need to -- it's kind of sensitive right now. So we'll just -- I don't know. But we've -- I can tell you, we've got a great partner up in Alaska. We've done business with them for 20 years. And there's a short deck of how many suppliers can do this project, and we're one of them.

That's really great color, Murray. And regarding the S&I segment with the increase in oil prices, have you already started to see a pickup in drilling and other activity from customers? And are customers beginning to try and lock up capacity for the months ahead?

No. I think what everybody is sitting -- it's so new, right? And everybody sees the price increase, but most of our customers, the oil and gas companies are just saying, look, we don't know if it's going to be for how long. So they haven't made capital commitments yet, Benoit. I haven't seen it yet. We channel check, we talk, but we haven't seen that translate into any increased demand for drilling or for other services.

And by the way, you still need to have the pipelines built, whether it's for LNG or if it's crude oil, otherwise, there's no sense adding capacity. There's no -- we don't need any more natural gas unless we get an export customer. So I think we're just -- we just got to be -- it hasn't changed yet.

One data point, Benoit, that the active rig count is still below what it was last year.

Okay. Okay. Great color. And on the M&A, you made some comments before, but any thoughts on the current landscape? And what about the deals that are crossing your desk these days? What segments are seeing the most seller activity? And have you seen any change in seller expectations given the encouraging signs we see across the industry?

Yes, that one is all over the map. There's -- I can tell you that the industry is -- and our peers are everybody is waiting for that inflection point. And we talked about whether March is going to be sustained or not. And if it is, then I think that would be really supportive for the whole industry. There's no doubt about it.

But on the M&A front, once again, we're just being very, very selective as to which ones fit into our self -- you've got to be a self-managed business unit. You've got to be profitable. You've got to be well run to be added into our group. And so we're being very selective. But that hasn't changed, Benoit. We've never changed that. But there will continue to do M&A. Which ones will we do it in? It depends on what segment. We're happy to do it in any one of the segments. but it has to be the right opportunity. And we love all 4 segments the same. If we can find a great LTL company, we're going to put it in. And S&I, we -- our door is open, and we talk to a lot of people all the time.

Okay. And just on the CapEx side, it seems it came pretty -- a little bit lighter in Q1 at $12 million, but Class 8 orders in the U.S. are starting to inflect. So any thoughts on the need or timing to replenish your fleet?

We don't think so. We think we're on target for that. That was that was a steady as you go kind of a capital CapEx budget. I think what we're -- what the senior team is talking about here is that I think we're going to know this next quarter, we'll see how whether the Canadian economy continues to build momentum. And if it does, I wouldn't be surprised if we don't up our CapEx for the last half of the year. But that was -- I need to see the Canadian economy being sustainable. And so we're just on standby.

But so far, we're -- that was a little bit of timing as to when we order and those kind of things. But we're still on target for our CapEx for this year. No reason -- we'll have more to say on that in our next quarterly call because we will know whether the Canadian economy is really caught -- is catching a little bit of a bid here in the second quarter.

Okay. And maybe last one for me, very quickly. You mentioned, Murray, that the LTL is still stuck in neutral. What are kind of the key indicators that you're looking at? We've seen capacity tightening in the LTL. So is it kind of the signs that you're looking at expecting that the natural LTL volume will flow back to the LTL market that could provide some help?

Look, I think the LTL is -- we tell all our business units is that, look, you can't wait. We'd love to see a nice demand push to come. But realistically there, Benoit, we're really working hard on operational efficiency being the best in the markets that our business units are at and trying to gain market share through efficiency and as we say, new AI tools. That's one.

We're working really hard with our business units to make sure that they're gaining market share. If they gain market share because they're the best in the market, we can't rely that the marketplace is going to get significantly better in the short term in our view. So it's still a good business, Benoit. Like LTL is one of our core businesses. But we -- I don't see huge growth, but there's huge opportunity to run more efficient businesses, and that's what we're focused on.

The next question comes from Tim James from TD Securities.

My first question, we touched earlier on the demarketing of customers noted in a couple of segments. I'm just wondering if it's unusually significant, the demarketing that's sort of been going on since the start of the new year? Or is this kind of normal conditions that we would have seen last year or would see on a normal run rate basis?

I think most of the demarketing really happened last year, Tim, and it just showed up in the quarter. Like last year, in the energy space, in the production services, we had some big oil companies that wanted us to do it for free, and we said the...

Capital market in the quarter 4 of last year didn't show up.

That capital is too expensive to replace. Like you're asking us to do it for nothing, like give it to somebody else. So really, it just showed up on a year-over-year comparison basis. We did -- I don't think we really demarketed too much in the quarter per se.

Correct. But we had done prior year.

Yes, prior year demarketing. It was maybe one, I think our Hi-Way 9, we demarketed truckload.

Little bit -- a couple in the LTL space, we did -- again, it's unrealistic expectations and then a couple in the oil patch, but you backfill it and isn't interesting along the way, maybe your margins improve a little bit, too. And yes, so it wasn't significant.

We did do a little bit in Canadian ContainerWorld where anything to do with freight forwarding coming across the ocean, some of -- the beverage business has got very competitive and some of the product that's coming in from overseas, they wanted you to do it for nothing. Well, we're not doing it for nothing. I mean -- so we demarketed a little bit there with -- we're happy to give all of the underperforming customers and nobody pays to our competitor, go for. We don't care.

Okay. So the pace of demarketing then really has slowed down this year. This is primarily a '25 issue. Okay. Okay. That's helpful. And then I was actually going to ask you, you touched on it, the ContainerWorld, there was some weakness called out in the quarter. Is that primarily what we're talking about is some of the ocean freight? Like I'm just wondering what...

Yes. And there's been a buy -- I think it's a combination of -- really, there's been this buy Canadian push, which has been really helpful for Canadian producers of wines, of spirits, of beer at the expense of foreign buyers, whether it's U.S. or international buyers. So we're busier with some other -- some of our local customers, but not so much with the foreign customers.

Just consumers have really gone to buy Canadian and they're very price sensitive today. So -- and it's expensive to bring stuff in from -- across the ocean. So I think the foreign -- it's working overall, not bad, but it changes your supply chain, and we have to adapt to that.

Okay. Okay. That's helpful. Just returning to the strength that you saw in March, and I don't want to beat this one up too much. And I know it's difficult for you to have a lot of confidence in sort of what the implications are from the March strength. But is it -- is one possibility that it was kind of catch-up from earlier in the quarter? And so by the time we get to Q2, we might think of Q1 overall as a bit of a better indicator? Or do you feel fairly confident that March strength was more of an indicator of an actual step-up in business conditions overall?

I would have said it probably would have been a better indicator. But once the things happened over in the Middle East and kind of the disruption in the energy markets that could have an impact around on economic activity, I think people are sitting on their hands a little bit.

People just don't know how it's going to play out and uncertainty is not good for capital allocation and for people getting aggressive. So we're just going to wait and see to see how that plays itself out. It might push off that economic growth a little bit as people just take a pause here to see what's going on.

So that's what we sense, but we were very optimistic going in, but this fuel thing scares people. And I don't know if it's headlines or if it's whatever, but people are quite concerned about it. That's what we're hearing.

My last question...

I can't tell you -- I'll be honest with you, Tim. I cannot tell you whether what we're hearing is the excuse or the reason. I think there's 2 different outcomes here. But at the end of the day, it doesn't matter if they cut back either as a consumption or in being aggressive on bringing in inventories or in capital deployment, you're going to have the same result.

It slows down a little bit. So I see a little bit of a pause, but I don't -- I think the long-term trend is going to be more March like. And boy, I'll tell you, we -- if we get a bunch of Marches for the rest of this year, we're going to do very...

Okay. That's helpful. My last question, just around fuel and fuel surcharge revenue. Is it reasonable to assume that when we get into Q2, just because of the timing of the increase in fuel prices that there's a bit more weight there on earnings or drag because of the time lag between fuel surcharge revenue and the expenses? Would it be a bit more of a headwind in Q2 even relative to Q1?

We talk about that here all the time because fuel is our second biggest expense after labor. And so we're on top of it. And I think our business units did a pretty good job of mitigating that rapid rise. It wasn't that fuel went up. It spiked up and then you're behind the curve on that. But Carson, you did some really deep analysis on this. What are we finding?

Yes. So you kind of have to take a look at what the fuel surcharge program is, and it's been going on for obviously decades. And really, the program is set up to reimburse transport companies for the excess cost. So really, it's a cost recovery program. The most recent guide that I can give to you is to kind of look back at our 2022 results. So in 2022, obviously, we knew that fuel prices spiked due to the conflict in Ukraine with Russia. So normally, our fuel surcharge revenue hovers around $50 million a quarter.

Well, back in 2022, that jumped, that spiked up to about $70 million in fuel surcharge revenue per quarter. So up quite significantly. And if you look at the timing, it was almost identical. Both conflicts happened in the month of February. So we saw this little bit of a lag because of fuel surcharge lagging, and it didn't really impact our first quarter results significantly.

But then as you look towards the remainder of the year, our fuel as a percentage of revenue went from about 7% at the beginning of the year, which is where it is right now, 7% as a percentage of revenue is what I'm referring to. And by the end of the year, it was up at about 10%. So it would not surprise us if that trend holds because in a cost recovery mode, if you're increasing the numerator, which is fuel expense, at the same time, you're increasing the denominator, which is fuel surcharge revenue, those -- you're recovering the absolute dollar. But as a percentage of revenue, it goes up. So that's kind of the trend that we're seeing. And just to kind of put some numbers here, in March of 2022, we did about $19 million of fuel surcharge revenue in that month.

And in March of this year, we did about $22 million. So we're a bigger company now than we were 4 years ago. So I would suspect that our new trend is not $50 million a quarter in fuel surcharge revenue. It's going to be north of that, all things considered if the conflict continues in the Middle East.

I think the other thing about that I'll comment about fuel surcharge, Tim, is that fuel surcharge is in response to a fuel price increase. It's not in anticipation of a fuel price increase. So we're always behind the curve on that. And -- but we'll -- unless the fuel price continues to go up in March, it should be neutral in the second quarter.

Correct.

[Operator Instructions] The next question comes from Walter Spracklin from RBC.

Just focusing on your outlook for this year and coming back to that question you got there. And just comparing it to where we were 3 months ago when you set your outlook, I guess I can understand you don't put in the Nation Building, you don't put in the acquisitions, you don't put in Alaska.

But just looking at your commentary, I think clearly, you're saying that the outlook is better now than it was then. You're in your press release, you pointed to market conditions showing signs of improvement, demand holding steady, supply tightening. So it seems that we're hearing all of the same things from your counterparts north and south of the border. So if there is a better top line emerging here, I'm just curious why you wouldn't see that coming through in the bottom line.

I don't know if you're suggesting it might be a structural capacity issue? Or is it just caution right now at this point? But again, looking back 3 months ago, I think things seem a lot better now than they were then and just pressing a little bit on why you wouldn't change your guidance here for the full year.

Probably because of the spike in fuel and the impact that it might have on the economy and business and consumer psyche -- that's probably the #1 reason, Walter, that we're just -- let's just wait and see. We don't want to get ahead of our skis on that. And that's something that we hadn't anticipated 3 months ago. I don't think anybody did.

So nobody knows how -- what that ultimate outcome will end up being in terms of the -- I think structurally, it was getting a little bit better. But now it's -- I think people are taking a bit of a pause. Let's see what happens in the second quarter, then we can talk about the last half of the year. But so far, we came out of the first quarter spot on with what we anticipated. And March was very nice. And let's see if March continues on. I hope it does, but I have to hedge it by being upfront on the spike in fuel could impact consumer psyche.

Okay. And then when you look at your M&A strategy and you kind of peek over to the truckload sector, you see a lot more -- certainly a bigger rebound going on there, some of the demand characteristics look a bit better as well. And I know when you focus and zero in on Canada only, there's not as many -- certainly not as many opportunities, specifically in LTL out there? Or are there enough that you don't need to go to truckload? Or when you peek over there and you see what you're seeing in truckload, does that entice you at all, Murray, to go into that segment at all in Canada? Just curious on how you're looking at that.

Zero chance that will go into truckload in Canada. It's not an investable business. It's a job Walter, but it's not an investable business from a capital -- from a return on capital basis. So we'll focus on where it's a little more difficult, where it's these gems that we talk about. We don't go after the rock pile. We go after the gems.

We look at where there's opportunity to generate free cash. So you've got to be very thoughtful. And I can just tell you truckload is not where it's at. Now you might consider the cross-border as a little different animal now. And I -- we've got to think that one through because that market is going to tighten significantly. Any demand push when the U.S. drivers are not going to be readily available to come to Canada, that one could be interesting. We'll watch that one carefully, the cross-border movement. On the long haul, Walter, we love intermodal long term. Yes.

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Mullen for closing remarks.

Thanks for joining us, folks. It's been a full morning already. Everybody is busy. Thanks for everything. We had a pretty good quarter. We were working hard to make sure that we continue to produce results, great results, and we look forward to chat with you in -- at the end of the second quarter. So thank you for having us.

This concludes today's conference call. You may now disconnect your lines. Thank you for participating, and have a pleasant day.

Thank you for standing by. This is the conference operator. Welcome to the Mullen Group Limited Year-End and Fourth Quarter Earnings Conference Call and Webcast. [Operator Instructions] the conference is being recorded. [Operator Instructions]

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 the year-end 2025 conference call. Now this morning, we released our results for 2025, along with the annual financial review and audited financial statements, which is a nice 120-page condensed document that's full of detailed numbers and analysis prepared by our team headed up by Carson Urlacher and Nik Woodworth. So we also uploaded the annual information form. It's a 60-page detailed document relating to Mullen Group. Now these documents contain updated information and are available on SEDAR+ and on our website, www.mullen-group.com.

So this morning, I'm going to remind everyone that today's presentation and commentary contain 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. Further information identifying the risks, uncertainties and assumptions can be found in the disclosure documents.

This morning, I'm joined here in Okotoks with the entire senior executive team. I've got Richard Maloney, who is the Senior Operating Officer; Carson Urlacher, Senior Financial Officer; and Joanna Scott, who's our Senior Corporate Officer; and my name is Murray Mullen, I'm the senior Executive Officer.

On today's call, I'm going to change things up in an effort to make this call as relevant to you as possible. We are going to head straight to the Q&A session because there's nothing new that we can add about 2025 that you haven't already heard, we haven't discussed or we haven't disclosed. So why repeat what we pre-released on January 19, 2026. Nothing has changed.

2025 was challenging across all four segments, no growth, basically -- which basically meant pricing came under pressure. So what did we do? Well, our business units had no choice but to tighten up. A measure that mitigated the downward pressures that we felt in the market.

And at corporate, we completed two acquisitions. The net result was record revenues. And when the economy rebounds, when Canada and the U.S. come together again as friends and business partners and when Canada finally lives up to the nation building commitments, we will achieve record earnings.

Okay, enough about '25. Some of you have joined the queue, and I don't want to keep anybody waiting. And besides, I do not like to waste people's time, especially this morning. So operator, let's open the Q&A session, please.

[Operator Instructions] The first question comes from Cameron Doerksen with National Bank Financial.

I guess I wanted to ask about the industry dynamics. One of the things you've kind of highlighted both in your 2026 outlook a few weeks ago, but also today is some industry capacity tightening. I wonder if you could talk a little bit more about what you're actually seeing out there in the market? Are you seeing some actual tangible evidence of this happening with the increased enforcement and maybe some financial difficulties with other players? Just any color you can provide on what you're seeing in the marketplace?

Yes. Cameron, when we were preparing for this meeting, we thought that might be the question. One of the questions that would come from the analyst community is what is really happening out on the ground today -- and we highlighted that these things have to happen for supply and demand fundamentals to change.

So January is really difficult to provide a full measure on, Cameron. First of all, you're coming out of the starting the year and everybody is on a diet of spending diet after spending everything in December. And so January is always a difficult month to judge. Secondly, you had some nasty weather back east that really impacted a lot of business. And so not a good judge.

But I don't think we've seen anything up north that would tell us that capacity has tightened in a meaningful way. And we're waiting to see what will happen later. I think March is more of a telling quarter, Cameron, to be honest with you. January is a difficult, difficult month. February is a short month. We would need to see some meaningful recovery in demand in March. I think everybody is saying the same thing.

Now let me just pivot for a second because we were down with our holistic folks down in the U.S. and it's a different story down there, Cameron, than up in Canada. There's no doubt capacity is tightening in the U.S. And there's no doubt that they have a stronger demand fundamentals. So we've heard evidence already that there's been some quite a significant change in the spot market pricing, not on contract pricing yet, but on spot market pricing down in the U.S. I haven't seen that in Canada yet. Hopefully, that helps.

No, that does. I'm just wondering about maybe on the pricing front in Canada. I mean, obviously, still under pressure in fourth quarter, and it sounds like you're not seeing any major change yet. But I mean, I guess, any conversations you're having with some of your customers about what their expectation is for pricing in 2026? I mean, does it feel like it's potentially going to get better? Or are we at this point, sort of thinking that's going to be more flattish?

Cameron, I honestly think that everybody is still kind of like the gear and the headlight scenario. We just don't know what to do because there's no clarity. So I'm concerned about that. We can't get anything from our customers.

Yes, everybody is just sitting and waiting. We're waiting for something to happen rather than making things happen in this country, and I can understand why. I think everybody knows the -- all the dynamics that are going on. We don't have to beat that one to death. But I can say to you in discussions with our peers and with our customers and whatever, there's more optimism that's going to change. And maybe that's hope by midyear that, that changes.

But for right now, it hasn't changed yet. Everybody is still sitting on their hands. So that's in Canada. It is significantly different down in the U.S. market. And of course, most of the data that you -- that we all look at, all of this comes from the U.S. market, all the and everything. But up here, it's still pretty loose up in Canada, Cameron.

[Operator Instructions] The next question comes from Konark Gupta with Scotiabank.

You mentioned, Murray, about the capacity situation in Canada and U.S. I mean, I understand, obviously, U.S. had moved a little bit faster maybe because they also saw the big surgence in capacity over the last few years. So it's a bigger peak and a deeper trough in that sense. But for Canada, like the driving situation seems like the government is trying to address that. I don't know how far they got there. But what's really the stick point in Canada on the capacity side? I mean, like did we not increase capacity so much that we don't have to decrease a lot? Or is it something else?

I would think that the U.S. system is it's more geared toward animalistic instincts. I mean they -- if you're not surviving, there's been a lot more bankruptcies down in the U.S. than there has been in Canada. Now I mean, it's a bigger market. So you would expect that there would be more bankruptcies and more consolidation. But it's happening quite regularly and quite frequently in the U.S. that tightening the capacity just because it has been very, very competitive.

And there have been a lot of failures down in the U.S. that tightens capacity. At the same time, they're addressing the English proficiency test and some other things that we're not doing -- we're not going to do that in Canada. That's not the way we do it. So I suspect the capacity won't tighten quite as fast in Canada as it will in the U.S. That's my expectation. But you need capacity to tighten to get rates up, Konark. That's just the reality.

So is capacity going to tighten because we have a really strong economic growth in Canada? I don't think your firm or any firm that I've seen is predicting huge economic and growth in Canada in 2026. So is it going to tighten on the supply side? We've seen some failure.

Not many, but a few, but not like you got in the state. -- they come in and see us and they talk to us when they get into trouble. But we haven't seen enough. I think that capacity -- we need to see a lot of tightening. And if we're waiting for the federal government and the governments to tighten the capacity, I'm not holding my breath on that. from that. But it's going to tighten this year. There's no doubt about it. I can't predict exactly when, but it is going to tighten because it is tough as nails out there on a lot of our competitors.

Makes sense. And then on your 2026 outlook that you guys put out last month, I just want to understand how you're parsing out the top line growth drivers there. So I mean, I think you're assuming about, call it, 10% top line growth, give or take, in '26, and I think a good chunk of that, maybe 400 basis points or so is coming from the acquisitions that you have done last year, right? So the remainder, about 6 points of growth this year. Is it more dependent on new M&A or it's a market recovery that you're betting on?

Well, Carson, I think, yes. It's -- we've got to do some M&A and on that note, we've already started with that. There's no -- Cameron or Konark, we've said for the last little bit, the only viable way to grow when the economy is not growing until capacity tightens as you got to do acquisitions, which we did last year, I suspect we'll have to do some more in 2026. And guess what, we put the balance sheet in a really good position, Carson, to make sure that we could grow at the corporate level, even though the economy is not giving us anything. And we did a couple already this year. Carson?

Yes, we did. And both of those being in the S&I segment, whereas we were not aggressive with doing acquisitions in the S&I segment in 2025. I think with respect to the guide that we came out with, Konark, that was really based on same-store sales. And if you kind of go division by division or segment by segment, LTLs, we're projecting relatively flat year 2026 versus 2025. Logistics and warehousing is going to be up, and that's really due to the timing of when we acquired Cole and the Cole Group. Specialized, we're showing a little bit of growth going into 2026 versus 2025 for a couple of reasons.

You'll see there's a lot of CapEx that we put into that segment in the latter part of 2025 with our Envolve Energy Group to increase the capacity of our disposal facility. In 2026, we're projecting that there's going to be some additional turnaround work that was nonexistent in 2025 that producers basically pushed off our Canadian Dewatering group within the S&I segment, we're also positive with them on mining projects and the like that going into 2026.

So those are types of the differences that we're seeing our U.S. 3PL segment, obviously, some growth in there as well, too. And that, again, is due to the timing of the acquisition of Coles. So most of it is growth that we're not seeing from new acquisitions. We've done a couple. We've done some tuck-ins that we -- in verticals that we like with fluid management with our Thrive group and a nice tuck-in in an area that we see is conducive to greater drilling activity going forward.

On Thrive, I think investors and shareholders will recall that we we're an investor in thrive. And we completed the rest of that transaction with Brian, Eric and rest of the team and the shareholder group, and they joined our group. So we're now 100% owner of that business. And then in the water management business, primarily tied to some industrial but to the oil and gas sector.

More upstream related.

Yes. So we really like -- these folks did a fantastic job of growing that business. That was one of our better private investments that we've ever done. just a great team. In fact, on that note, Brian is going to join our corporate team, and he's going to head up all of our water and fluid initiatives that we've got going on because that is a vertical that we think is investable and has good fundamentals to it. So we want to accelerate our investments in that sector.

So we welcome the Thrive team, and we welcome Brian head up those initiatives on behalf of our organization. He's a pure -- he's an entrepreneur because he built it from nothing. So we like -- he joined us, so we're really happy with that. And if you look back at last year, we said, okay, you got to -- the segments that we have, we held our own in LTL. I think we'll hold our own again this year in LTL. L&W acquisitions drove that growth. U.S. 3PL acquisitions drove that growth.

In the S&I segment, we didn't do any acquisitions. And guess what? It was tough as nails and it was down. Well, this year, we've already done two acquisitions in S&I. So we know that acquisitions is the way to position for the future. The key to acquisitions is it backfills revenue, as I said. It gives us revenue growth, but you're positioning for the future when it does tighten, when it does turn, when capital nation building projects go to working capital. That's when our shareholders will really benefit and they'll see the wisdom of why we did the acquisitions that we did. So that's coming, but you've got to get ahead of the curve, and we have.

And thankfully, we have the balance sheet to do it. So we'll continue to do really thoughtful acquisitions this year, and that will drive our growth. And our business units that we've got our existing 42 up to 44 now. They will be out there, and they're going to grind it out. The -- we're in contact with them all the time. They know what the game plan is for this year until the market gives us a little bit of a better lift. Until then, you just got to grind it out, Konark.

This concludes the question-and-answer session. I would like to turn the conference back over to Mr. Mullen for any closing remarks. Please go ahead.

Okay. Thanks, folks for joining us. It was a quick meeting today. But as I said, everybody is -- we've debated the issues for too long. Everybody knows what's going on. We're 100% focused on what we have to do this year, and we look forward to chatting with everybody and giving an update in April as to how the first quarter worked out and how the rest of the year does. Until then, thank you very much for joining us.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.

Thank you for standing by. This is the conference operator. Welcome to the Mullen Group Limited Third Quarter Earnings Conference Call and Webcast.

[Operator Instructions]

The conference is being recorded.

[Operator Instructions]

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, and then I'll turn the call over to Carson for 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 Nik Woodworth, 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 SEDAR+. 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, who is the Senior Operating Officer; Carson Urlacher, 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. And so what do I mean by that? Well, basically, we look at growth this way. It is derived from 2 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 isn't 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. And 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 steady hand on the wheel, as I like to say.

So let me turn to the other source of growth, one that Mullen has relied upon for over 30 years via 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 when 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 in the oil and gas service side.

So we took a few lumps and we moved on. And I'll just tell you the folks, sometimes things aren't fair, but at Mullen, it's not a reason to complain or bend. We simply go about our business and fix what needs to be fixed. So Carson will now provide some color and discuss the reasons behind our record revenues and cash from operations. Don't forget that, record cash, right, Cars? So Carson, you're up.

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 the full 3 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 Cole 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 to 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 21, 2025. Any debentures not converted into Mullen Group common shares will be settled with cash. We generated OBIDA 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 Cole 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 Cole 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, while our business units, excluding acquisitions, generated lower OIBDA 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 Cole Group's Canadian operations. Now if you exclude Cole, 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 Smook and Canadian Dewatering, which was somewhat offset by a decline in demand for services at Premay 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 2 new disposal wells for Envolve 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 Cole Group's U.S. operations added $9.8 million of incremental revenue in the quarter. In transitioning Cole Group's U.S. operations to IFRS accounting standards, we determined that duties and taxes collected on Cole USA -- by Cole USA 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 remain cautious on ramping up manufacturing and ordering inventory. OIBDA was $4 million, up $3.7 million from the prior year, with Cole Group's U.S. operations adding $3.4 million of incremental OIBDA, while HAUListic'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 Cole 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 Cole Group acquisition. At September 30, 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 USD 112 million in 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 30 was 2.6:1. 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 2.25:1. 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.

Yes. Thanks, Cars. Well done again. And you provided our listeners with a really nice detailed report. So there's a lot of information there, but let me just -- there's a couple of highlights I'd like to reiterate because I believe these will impact how we can take advantage of opportunities that I personally believe are just inevitable to arise in this market.

So the first is record revenues from acquisitions. Which really means is that we've entered new verticals to expand in as and when the economy improves, and we believe that eventually it does. So we're going to be larger and bigger in more verticals that we can sell to customers in the future. with our acquisition strategy. The second is, and Carson alluded to this at the end, is the record cash from operations, funds that along with our strong -- current strong balance sheet, we can use to pursue acquisitions that meet our investment criteria. So we're going to continue to grow the acquisition strategy. We just have to pick where should we put that money to work, and that's what the senior executive team is highly focused on.

So in other words, I should like the way that we position this organization. So let me just give you my best take on what I think the near term might look like. As evidenced by our results last quarter, it appears the general economy found what appears to be stable ground. Economic activity is in a better spot than we've seen for quite some time. That is good for freight demand. We see it in our results. There's freight to move, and it's reasonably active. Yes, there are still remaining issues like tariffs and trade concerns that have impacted the cross-border traffic. But I believe these things will subside over time.

In fact, if you get beyond all the headlines, really, there's not much tariffs on trade between Canada and the United States. Nearly everything has been exempted. So we got to be careful on what we listen to all the time. But it definitely has impacted the psyche of people that invest capital.

We also think that the primary reason why Canada will continue to underperform is the lack of private investment capital. So this is our view. But the reality is, in the meantime, the Canadian government will deficit finance to sustain the current economy. So from my perspective, the Canadian economy is in a balanced spot, not the deficit, I said the economy. It's not growing rapidly, but it's not declining either. So it's okay. And that's -- from within this perspective, that's what we have to manage the business within.

And on that front, pricing is -- still remains a challenge. But here, too, I'm starting to see some emerging signals that could impact supply, especially as it relates to the availability of certified drivers. For example, in the United States, if the United States Department of Transportation is accurate in their analysis, and they remove over 190,000 CDL authorized drivers from the market, there will be a shortage of professional drivers in the United States. So we're watching this very carefully because once the market tightens in the U.S., it will also tighten in Canada. In addition, there appears to be a shift happening in Canada, where there's more of a focus by the regulatory authorities and the government on ensuring that safety standards are enforced across all carriers. So we also know that industry capacity is really not growing as evidenced by the lack of Class 8 truck orders sales.

So based upon these factors, it appears that there's a new demand supply balance forming, which will be good for margins eventually, perhaps even as early as next year. I suspect we will know in early '26 if the market tightens enough for our business units to start having a little more leverage with customers and having some thoughtful discussion about what the rate should be. But this is not the case today. As such, we continue to ask our business units to focus on controlling costs and look at ways to improve productivity. Now here's an example of what I mean by improving productivity. We're investing in new technologies. We're investing in robotics for our warehouse operations, initiatives that will reduce cost and improve efficiencies and safety. So we're not stopping because we think the future will eventually come around our way.

Now one vertical that we think will continue to struggle in the short term, I don't think long term, but in the short term, that's the reality, is the oil and natural gas service sector, which is included in our S&I segment. Now commodity prices have been under pressure all year, and this has impacted the cash flow for the E&P industry. And in response, our customers have curtailed capital investment, they delayed major turnarounds and aggressively pursued lower costs throughout their supply chain. And as I suggested, I don't think this is a long-term scenario, but it is a reality in the short term, and we expect this portion of our business to underperform until commodity prices improve.

We are, however, still, as I think Carson alluded to, investing in this segment. And invested $8.1 million in 2 new disposal wells at our Envolve Energy Services Group facility in Grande Prairie. It's a first-class facility, and we drilled 2 new wells that will give us additional capacity to handle customers' fluids. So this investment will undoubtedly double our capacity. And one day, there will be a day when new pipelines are built to feed natural gas to LNG facilities on the West Coast, and we'll be ready to handle our customers' fluid disposal requirements. So this is another example of how we think about deploying capital and we think about tomorrow.

So lastly, before I turn it over to you, what about future acquisitions? Well, as Carson highlighted, the balance sheet is structured in a manner that we can pursue opportunities. We really like the tuck-in model because this is how we can improve margins quickly. We just roll them into one of our best-in-class business units and my God, 41. So we've got lots of really good talent out there that we can roll in tuck-in acquisitions. And when you do that, you can reduce overall cost and improve density quickly.

And lastly, if the right platform company comes available and a platform company, let's say, like a Cole did, this is a company that's in the right vertical with lots of future potential, we'll consider it.

So folks now it's short term. I'll turn the call over to the operator, and we can go straight to the Q&A session.

The first question comes from Walter Spracklin with RBC.

Murray, this one is for you. Let's start with the guidance. You've got $350 million out there of which $30 million has come from acquisitions. You mentioned that in your release that's going to be -- or it's uncertain as achieving that and that it should be achievable on a 12-month forward basis. Now I might -- is that suggestive then that this is now going to be your '26 -- are you saying that this is now the '26 guidance of $350 million for 2026? Am I reading that correctly?

That's a pretty good observation, Walter. We did guide to, I think, $2.25 billion and $350 million for this year. 2 things that I missed, I'll be blunt. I missed that the commodity prices were going to be as soft as they were, and that's really impacted our S&I segment. I didn't think that, that was going to occur. So you saw how last quarter, our S&I was down like $25 million. So I missed that part. There's no doubt. Do I think it's permanent? No, I don't believe that. And then I think second one we missed is that when we had originally evaluated our Cole Group on the revenue side, we had thought that the revenues were up around $300 million. But when we did our final purchase price equation, we did not like the way they accounted for revenue in terms of tariff and taxes and tariffs. So we just consider that a flow-through. So we just netted those out.

So on those 2 fronts, that's where we missed the revenue side. On the EBITDA side or OIBDA side, whatever you want to call it. Well, Cole, we didn't get done as fast as we thought it was going to be. Early, we thought we had this in the bag. We had a deal and Mr. Lucky, unfortunately passed away if we went to sign the night before we went to sign. So that delayed the deal, had to go to the courts to get. So that delayed it.

And then the Competition Bureau delayed us by about 2 months. So we probably lost a quarter, Walter, that we were counting on when we gave the guidance early on. So I think that's why we missed. We might -- we're going to be off by a little bit, but it's not going to be off by significant. I think if you pro forma really what you're saying is 2026, you're taking away our thunder for the December 3 budget meeting. But you can see the business we've got. We've made all the right steps to get us to that $225 million and $350 million. And then we'll articulate in December what we really think is happening in the market. Is the market changing for 2026? I gave a couple of suggestions that said, maybe the market tightens a little bit next year.

And if that does, then we got a bigger book of business that you maybe get a margin improvement of 1%. Just a 1% margin improvement is pretty significant, Walter. So we'll give our best analysis on that in December when we -- after we've collated and talk with all of our business units. But for right now, I think our pro forma 12 months, we would have been pretty close to the 2025 guidance, but we'll be off a little bit for calendar '25, yes.

Right. Okay. That makes sense. On the -- you made reference to the U.S. clamp down, and that's certainly creating an effect, and that's good. I mean I'd prefer a demand solution rather than a supply solution to this, but we'll take the supply solution if it is. Is it as big a problem in Canada? And second, is there any avenue where regulators or authorities are seeing what the success it's having in the U.S.? And is there any view that perhaps it will happen in Canada? If -- your answer to the first question is, yes, it is as big an issue in Canada, then is there any avenue that seeing the success they're having in the U.S. that they might do it in Canada in short order?

I think the systemic problem is the same on both sides of the border. We had too many new entrants come into the business that were not properly trained and certified, and there was some gamesmanship going on, on some of the certification, i.e., CDLs. And as a result, that you just had inexperienced people out driving on the highways, and that led to a number of high-profile, very serious incidents on the road by participants of our industry. But from our perspective, those the people were not properly trained. So we've had them in Canada. They've got them in the U.S.

Where the U.S. is taking a more aggressive stand, Walter, is they've gone that you've got to be fluent in English. Now what does that mean? I have no idea. But they -- if they are right that they're going to take up 190,000, and that's their prerogative. I have -- they didn't ask me for my opinion. But if you take up 190,000, that's too many at once, and that will really tighten the market in the U.S.

There's already some indication that the enforcement standards on both sides of the border have been accelerated over the last bit to make sure that the regulations that are currently in place are applied equally to all carriers. If that happens, that will force everybody into compliance. and that will tighten the market in our view.

And you mentioned that a tightening in the U.S. will create a bit of a tightening here. Is that just essentially because they're drawing worker -- qualified workers from Canada and lowering them down in the U.S., and that's tightening. Is that the logic there? Is there any other reason that would cause it to tighten in Canada as well?

Well, I just think that it's -- it will -- when the market tightens in terms -- I don't know about the availability of drivers, but when the market tightens and rates go up in the U.S., then if you're -- that's where you benefit from that.

Follow. Yes. Okay. And then last question is on M&A. You mentioned some of the -- you mentioned that your acquisitions have been a good surrogate for offsetting any macro-driven declines. So presumably, they've been modest in terms of covering off what would have been declines in 2025. You indicated that 2026 should be similar. You mentioned -- but you made -- you touched on platform, and that's what I think gets people excited. How much of that is really you waiting for what comes available because I know you have to have a seller in order to buy something. But are you waiting for those sellers to just come to you? Or are there any areas, and I'm talking in terms of platform, not tuck-in, but platform verticals or what have you that you're looking at and you're exploring proactively rather than waiting for kind of sellers to pop up and come to you?

Yes, it's a combination of both, Walter. We have some parts of our business that we really think is investable. You know we like the LTL business that's in our thesis. It's now not the biggest, though, of course. That acquisition with -- because we put Cole in L&W is -- now L&W is now the largest segment. But those are the 2 primary ones for platform companies. Not really interested in the long-haul trucking business. I get a call a day, Rich, Joanna on these. We're not really interested in that part of the business because we don't see what's the long-term strategic advantage that having trucks has. We like warehousing, we like technology. We like LTL where you can drive the margin improvement over time by being smart and employing technology.

So we've got some. There's no doubt. But you got to be careful when you're talking. And most of the time, you're talking about entrepreneurs. Entrepreneurs are different ducks. They decide when they want to sell, not you decide when you want to buy. That's -- you're trying to buy something out of a piece of cement that doesn't work for easy. So we just kind of take the high road. Everybody knows -- I know everybody knows and it's been in our thesis and our strategy plan since day 1, everybody needs liquidity. Just buy your time, make sure you got the balance sheet when the good ones come around, and I think we've done the right thing there.

The next question comes from Cameron Doerksen with National Bank Financial.

Just wanted to ask, I guess, about the outlook in the Specialized and Industrial segment. I mean, you explained the reasons for the revenue decline. Just wondering if some of the, I guess, the deferral of turnaround work and maintenance work that you've seen in 2025 is something that can't be deferred forever and may come back in 2026. So I'm just wondering if you have sort of an early look into next year, how that segment might trend just based on some of the deferrals this year.

I think once again, that's a really good observation is that -- for sure, some of the big turnarounds were delayed because they're very expensive and everybody was really -- everybody was managing cash flow. I mean we were here. We cut off CapEx. We really reduced CapEx quite significantly here. So really, everybody did that. Some of it was uncertainty, some of it was commodity prices. But there's no doubt they delayed them. They can't -- you can delay, but you can't quit. So our thesis is, well, they'll come back. It's just a matter of timing, and we'll be positioned to do it.

But you got to be in business. Once you miss the deal doesn't mean you're guaranteed to get it next time. So I'd rather get it done when it's hot, but we'll make sure that our business units are in the best position to take advantage of that because when those turnarounds go, and this is exactly what we had last year with our Cascade Energy Services Group. They had -- they just blew it out of the park with major projects because why? We invested in technology, in robotics. We went in, aced it, did a great job for the customer. The customer was happy. They got back online faster, and we made a nice profit on that. But they've delayed it this year. So let's see what happens again next year.

I'm hopeful, Cameron, but we'll have more to say on that when we get -- hopefully, it wasn't won and done. It was just delayed. But for this year, definitely been delayed. And then as I said, the other part of this equation was, boy, some of these big oil companies, they really became very, very sensitive on cost, and we will not take a long-term contract at the bottom of the market, forget it. We protect margin rather than market share because when business returns, I'd rather have our price than a low price.

And I think, Cameron, as well, it's Richard. We're going into the typical budgeting planning cycle for the big oil and gas companies. And over the next month or 2, we will get a better idea of what will be happening and what they're projecting for the future, will be subject to commodity prices and everything else. So we follow that and look and see what comes from there. But we are well positioned. Murray said, we've made investments, particularly in turnaround-related equipment, and we're ready to roll whenever it comes. So -- and it will come. It's just a matter of when.

Some parts of our S&I did fantastic, Carson. Our dewatering group is an example, did well. construction up in Northern Manitoba did very well. our Envolve group. We've already made the capital investment. That will help us next year because we've doubled capacity. So we're -- like I said, when things happen, they happen, just move on. We don't whine about it. We don't cry. We just get about our business. Let's go.

Okay. That's super helpful. And just on the -- I guess, in the very interim here in the next couple of quarters, just wondering about the margins in that segment. Obviously, business mix makes a big difference on the margin, and it was pretty strong in the third quarter, just given where the revenue was. I mean, should we expect kind of that strength in margin just based on the business mix in the next couple of quarters?

Yes. The reason the margin stayed strong is some of our businesses did well, and we gave up the low-margin business in which they wanted lower rates. I didn't like that scenario.

Okay. Makes sense. Just one quick final clarification for me. Just on the U.S. International Logistics segment. I mean there's been this accounting change. I guess, it reduces revenue, but has no impact on EBITDA. I'm just wondering about, I guess, the reported EBITDA margin, which is obviously much higher than what we've seen in that segment for throughout its history. Is that kind of the sort of the sustainable kind of go-forward margin? Obviously, there's some seasonality to it, but just wondering if you can provide any context there.

Yes, Cameron, I would say you're pretty spot on there with the U.S. 3PL segment. That's the Q3 numbers kind of give you a good run rate to kind of benchmark going forward in terms of revenue and margin. Now this is all things considered constant, obviously. But yes...

That's our thesis.

That's our thesis. Tariffs are going to impact that, obviously. But we've taken that duties and taxes and tariff noise out of the revenue line. So you can see a true clear indication for Q3 as to what that would look like going forward.

In all honesty, when we did our final purchase price equation on this, Cameron, you go in, really, tariffs are relatively new this year. So I'm not going to blame that, that they gave us the wrong information when we bought the company. Tariffs are relatively new this year. So taxes and duties and all that stuff, that was always embedded within the revenue side. But the tariff thing, I mean, all of a sudden, one day, you had 100% tariffs. Well, that all of a sudden inflated the revenue number up. And when we did our final purchase price equation, well, hold it, that doesn't -- we're not going to add tariffs in as revenue. So that's really where that change came from. But you can see from the margin, that was a very good investment.

The next question comes from Tim James with TD Securities.

I guess a question for Murray here. I'm wondering if this approach out of Washington that we've seen kind of this year and some might say unpredictable or maybe volatile. Does that change -- and obviously, this could last for 4 years. Does that change how you approach your business at all? I mean, hopefully, there'll be some stability and some visibility that improves. But I mean, is there a part of you that says, hey, let's be cautious because we don't know how long this will last. I'm just wondering if it kind of changes any aspect of how you approach, whether it's capital allocation or how you run any of these businesses.

Well, my personal take on it is, Tim, is that I think there's been a lot of noise around tariffs and trade and Canada against U.S., U.S. against Canada and those kind of things. But if you take a look at the detail, there really hasn't been that much tariff put on most of the product under the U.S. free trade, U.S., Mexico, Canada, U.S. free trade agreement is duty-free. So it really hasn't been impacted. But if you talk to the average person, "oh my God, everything has got big tariffs on it." That's not the case.

There's been a couple, and that's for reasons that are -- I don't understand them. But it's not as -- I don't think it's quite as big an issue as what everybody thought it was going to be. So I think that will -- eventually common sense will rule and everybody will back to make the business the best decision they can. So we're a little bit optimistic that the all the big noise is over. I mean, if you read the headlines and they're correct, and Carney is saying we're going to have -- be able to sign an agreement here pretty quick. So the biggest risk that we see to the economy, Tim, is that the U.S. is winning the private capital game. The amount of private capital going to work in the United States, which is good jobs, and I'm assuming long-term jobs is -- the U.S. has won that game hands down. We don't even -- Canada is really not even participating in that side.

So that leaves all the heavy lifting to the Canadian government to publicly fund any project because we haven't seen too many private companies step up yet. I haven't seen them. And we haven't heard from our customers that they are aggressive on that. So that's just -- all the heavy lifting is going to go to the federal government and higher deficits is what we suspect. But from our perspective, just make a decision. Let's quit talking and let's get some things done because that's when you create good jobs, and that's when we can -- there'll be more freight to haul and the economy gets going, but you got to quit talking and get going.

Now there are some major -- I will tell you right now, there are some major, major capital projects that are happening in the United States, and we are looking at particularly through our Premay Pipeline Hauling side as to how we participate in those projects. We've been having serious discussions with the contractors on that, and that happens. To us, our trucks and our -- we're in both countries. So we'll go where the business goes. That's what we'll do. And our capital will go where we think we can get the best return.

Okay. That's a good segue actually to my next question. The Q3 report calls out the nation building projects and some optimism there. Are there any particular projects that you would call out as maybe potentially offering more opportunity to the Mullen Group companies? Any that are kind of noteworthy that we should watch more closely to see progress with positive implications for the businesses?

I think the one that we're seeing the early wins on is probably on the mining side. And for example, our Canadian Dewatering set up in Northwest Ontario, we set up in Thunder Bay and that's why our -- they've grown with -- as the capital has gone into the mining sector. So you hear a lot about rare earth minerals and those kind of things. Well, that's mining. And that's just hard rock. But you still got to have water, you still move water, you need water, you're going to move water. So we'll be involved in those projects.

Lots of talk about big projects, mining projects happening in British Columbia. And of course, that's where Bandstra Group is situated. We will be up in Prince Rupert looking at opportunities up there and scoping up with our Bandster Group here in a couple of weeks, Rich. Myself and Richard and Lee are going to go up to that. So there's opportunities, but it hasn't happened yet, Tim, but there's a lot of chatter. And after chatter, maybe that turns into activity.

On the energy side, oil pipelines, I think that thinks for good headlines, but I don't see it. probably not in the short term for sure. LNG, yes, there's lots of talk about Prince Rupert and the Pacific -- that project of LNG. So that's a big project. That would be -- but what we're really after, what does one project do? One project comes, then it's gone. We need to have a strategy that says it's going to be a decade or 2-decade-long strategy. And then that's what would really get us excited. That's what we're waiting to hear from the federal government.

We better hear it soon because we know, as Murray mentioned, there's major LNG projects going on up in Alaska, and it's coming, and they're planning and thinking.

So there's only so much capacity for the specialty equipment and whoever goes first gets the capacity. And what I'm afraid of is Canada keeps talking and the U.S. says go. And then is it -- okay, we're going to go and then the capacity is already used up. So there's only so much capacity for big-inch pipeline. There's only so many places that's built in the world. Then you got to coat it, you got to move it and then you got to lay it in the ground, and there's only so many people that do that. So that's kind of highly skilled jobs.

We're hopeful that Canada in the business world, if you sit and wait too long, it's over, like somebody else gets the market. So these are big-inch pipelines. We're talking 5 Bcf a day of natural gas that would hit the LNG market. Well, there's only so many countries in the world that are going to take 5 Bcf a day of production. So I didn't -- I don't like the fact when the High Commissioner for India says Canada is not really a stable and secure supplier of energy supply yet. That's a wake-up call, which says get your damn button here and make a decision. Either be a secured supplier or quit talking to us because we got to do what's best for our economy and for our country. So I hope today that the government can make a good business case for LNG. Because we missed it in the last...

3 years...

In the last 10 years. We missed that opportunity. So we're behind the here. Let's get going.

The next question comes from Konark Gupta with Scotiabank.

I have a few questions actually went through here. So hopefully, I'll try to be quick on each here. First on the clarification on the Cole revenue side. So I get it you have to net out the duties and taxes in that 3PL segment. But is there any ripple effect on Cole's other revenue that is reported in the L&W segment?

No, Konark. There's no impact on the revenue that we recorded within the Canadian operation. So there's...

We have CARM.

Yes. We've got CARM here in Canada and you don't in the U.S. So really, it's -- this issue is just related specifically, right, to the U.S. 3PL segment, full stop.

For full disclosure on that, Canada and the U.S. were always the same. The customs broker always collected the duties on behalf of the customer and the intermediary for the government. They collected it from the customer, cleared it and then they sent the money to the government, either the Canada -- Canadian government or the U.S. government. Canada implemented a new program just earlier started this year, did it not, Joanna? It's called CARM. And that really meant that every importer had to register directly with the government, not with the -- go through the intermediary, which is the broker.

So all those duties and taxes and whatever going -- go direct to the government. Now they don't go through our Cole group. But in the U.S., that's not the case. It's still handled by the customs brokerage company. Hopefully, that brings some clarity to that.

No, absolutely. That's really helpful. And I think on the CapEx side, I think I heard you guys saying that you are taking down your CapEx numbers as well. I think the original budget you had when you set out the 2025 was not $100 million, I believe. I think you're tracking much lower. Any sense in terms of how much lower can we see this year? And are you preserving the CapEx -- that CapEx you're not spending this year, maybe to spend next year or it's gone?

Yes. Our original guide, Konark, was $100 million is what we originally came out with. We're sitting at $50 million net here at the end of the third quarter. So obviously, we're going to be well below that. I would say in terms of our maintenance CapEx, what do we need on an annualized run rate, that's pretty close to what our depreciation is, is around $70 million, $75 million, I think, is your kind of maintenance CapEx budget. We deferred and delayed a lot of CapEx, as Murray alluded to earlier. There's many factors. Obviously, the demand isn't there and the rates aren't there from our customers to support expensive equipment.

You're looking at $250,000 a truck now. They're not cheap, and they don't give you better fuel mileage. They don't -- they're a tool. They're not a technology. And we're just looking at that and waiting for some normalization before we put in some big orders.

Yes. On 2 fronts. One is, the customers have to realize is that you can't go invest in new capital and you keep asking for lower rates, like we're not going to invest in new capital. So that's the marketplace trying to figure out what's the right equilibrium there, Konark. But for right now, the customers have been overly aggressive on the rate side and the rates that we're seeing don't justify a $250,000 truck. So the trucks have got a little bit older. We had to run them a little bit longer.

The second part of that equation and what Carson a little bit alluded to is we have been really aggressive with our suppliers to say, quit raising your prices, give us a better product, not just a higher price and a newer pretty looking truck. I don't want a pretty truck. I want an effective, efficient truck. And so we had to put pressure on them. And you can't put pressure on them if you keep buying trucks from them. So we quit buying for a bit until you get your prices in line.

So -- and prices have come down, Richard. Yes, you and Lee are working on that side. And I think they've got the message loud and clear, not just from me, but from other large buyers where we're going, we need a better product. Not just higher price.

And realistically, the entire trucking industry, particularly in Canada, and you see that when you look at the big operators and the OEMs, their sales are down. So people are just -- it's hard to go out and justify a $250,000-plus expenditure. And if you want to have a CNG truck, add another $80,000 to that, it just doesn't make sense at this point. You're not getting the fuel mileage as Murray and Carson alluded to. And it's across the industry.

So Konark, just a summary, part of it was economics, it just didn't make sense, but part of it was messaging.

Great. That makes sense. And yes. And on the convertible debenture side, I think so you guys are redeeming on December 1. I mean given the converts are in the money right now, they're likely to probably convert, I think, to some degree. If they convert to equity, I mean, that does not take away your cash. Do you see the use of cash to maybe incrementally buy back some of your stock in December or after?

Yes, we'll do 1 or 2 things, Konark. If the debenture holders convert to equity in Mullen, that increases our share count, but it sure strengthens our balance sheet. So we go from 2.6 down to 2.2, yes, maybe you net out cash, you net out 2:1 -- 2x right on EBITDA. Then we're going to have -- we've still got all the cash on the balance sheet and lots of room on the credit side. So we'll have -- we'll just make the best decision as the Board as to what we do. Do we buy back stock or what do we do?

But our first objective is, I will tell you right now, we are a growth company. So we would look at adding really good companies into our network. That would be our first priority. We want to be a growth company. If we don't see the right opportunities, we'll go buy them back and invest in a really good company I know of that's called Mullen. Various levers we can pull, right? Yes. So the good news is our balance sheet is probably as well structured and as good a shape as it's been in a long time. And we got lots of potential options for us to do that. The debenture thing actually worked out. I got to tell you because we did it in 2019, $125 million. We more than doubled the company since we took that $125 million. We raised no other equity.

Yes. At the time, our stock price, when we did the debenture deal, was $7, and we had a strike price of $14 on the convert. If you look at our EBITDA in 2019, we were $200 million. We deployed that capital in 2021. And by the end of that year, we were $260 million of EBITDA. Now you're well in excess of $300 million. So the debentures served its purpose for Mullen shareholders back then, and we deployed it quite nicely, but I think it's run its course.

Yes, we're done with the debentures, and we thank those that invested in us back then, but it's time to move on, and we're in a different spot than we were in 2019.

Yes, that's fair. Absolutely. And then perhaps just wrap up. From a high-level perspective, Murray, I guess, what is the right M&A strategy in this current environment? I mean you mentioned a lot of things in terms of like how Canada is probably slow in inviting private capital and U.S. is kind of accelerating on that front perhaps. But obviously, there's a lot of complications in the U.S. and all that, right, like with tariff policies and whatnot. How do you pursue M&A here in this market?

Just -- I think we'll just stick to our knitting, which is we'll be pinpoint accurate of where we see really good companies. The first -- our M&A is really this. I'm a Warren Buffett and Charlie Munger. I look for great companies at a fair price, not at poor companies at a really good price because that's just our strategy. We look for really good companies. We want to be fair, and they have -- in our view, they have much longer run room to them and you can get a better return over time.

So the key thing is just look for really good companies. But you can't go find them every day. But over 30 years, we've acquired a number -- nothing is going to change on our M&A side, Konark. But I'm patient. I don't push just to grow. I push to make sure we get the right deals and the right companies.

Came up earlier on the call, too, Konark, about platform companies and whether we go looking for them, whether they come looking for us. And I can tell you within our space right now that there's not many companies in our space that have the financial position that we do. So platform companies, when they do become available, we're one of few options that they have to go to, to monetize. So we get to see pretty much all of them that become available.

In your coverage space, Konark, which is in the logistics and transit, there's not a lot that can go out and do M&A today. That's why we say we're kind of in a unique position. There's only a couple of us that can do it.

No, makes sense. Patience is worth you, I guess. And yes, timing is important.

There's very -- we don't have a lot of competition when it comes to acquisitions. There's only a few that can do it. And there's only a couple of us that have the balance sheet to do it. So you got to have both of those to be able to get it done. And it's just a matter of what's your disciplined approach to it or what's your strategy. So that's ours. Ours is being pinpoint accurate and waiting until we get really good companies. That's our strategy.

The next question comes from Benoit Poirier with Desjardins Capital Markets.

Just to follow up very quickly on Co Group. You gave a lot of explanation with respect to revenue. So a quick one. Should we expect the $55 million contribution in the quarter? Is it kind of the number we should expect going forward? Is there some seasonality that we should take into account?

I wouldn't say there's a lot of seasonality to that.

Not we know of yet. If it does, that would totally surprise us, Benoit. So everything we've looked at, not just at Cole, but in other companies that we've looked at, we don't see a lot of seasonality with it. So if there is, it will be a -- that would catch us off guard. So our view right now is no, we don't see a lot of seasonality. we've only had it for 1 quarter. So I'm giving you my best advice. We don't think it is, but don't hold my feet to the fire on that until we get it. We'll know more after we've been able -- we've had 1 full year underneath our belt. We're giving you our best estimate right now. Once we've had it for a year, we'll know.

Okay. And perfect. And SG&A was up, obviously, versus a year ago due to some acquisitions. So I'm just wondering how should we look at SG&A expenses going forward? And if you see maybe an opportunity to bring the number a bit lower as you integrate those acquisitions?

Well. Honestly, Benoit, that's going to really be determined, I think, by what happens with the strength of the economy. If the economy strengthens, you'll probably see us pivot away from using capital to go do acquisitions to putting capital to work in the business units. If the economy starts growing, you know more or know better than we do, you have your economists that -- and you do your own analysis. But if you see strong nation building projects come in and strong economic and growth in Canada, then we will have to pivot and add more to CapEx, course and those kind of things. And then M&A will pick a backseat to internal growth.

I'm not quite at that space yet. We still think we would like to add some more use our balance sheet, but we need great quality companies. We're not just going to trade dollars to get growth, Benoit. We want great companies in the verticals that we see long-term potential period.

That's great. And Murray, you're always very rational when looking at the market fundamentals with demand and supply. And obviously, you provided great color on the call about the supply and the regulation enforcement we are seeing in the U.S. that will eventually. And also in Canada. And when you look at the pricing these days, would you say that the slight uptick we see in the pricing is mostly driven by hope that capacity is coming down?

It's kind of a mixed bag right now, Rich. We hear from some of our customers where we've taken a strong stand with some customers, and we lose the contract and then on and behold, they come back. And a couple of weeks later and say, well, we took the low price, but they can't service. Well, we try to tell you that. But you went with low price. So okay, if you want -- we had a very major client come to us and wanted a major rate reduction. And I said, "Well, we'll give you the major rate reduction if we need your load if we need a load from you. Well, yes, but we want the service.

No, no, no, that's the other price. So you've got to pick your poison. What do you want? Do you want service or price? Because if it's just price, it's at our convenience. If it's you want service, it's at your convenience, we need a little higher price, so we can commit our capacity. But we're seeing a mixed bag. But I'm seeing -- I'm hearing more now that customers are coming back and saying, well, maybe the low price wasn't as good as what I thought it was.

We didn't hear that as much last year as we have now.

We're hearing a little bit more of it. It needs to tighten a little bit more so that customers understand, just sit with us and make the right deal. But if you try and game us and go for all low price, we're happy to walk away and say, go try it out. We know this business. Good luck.

That's a great comment. And just on M&A, you mentioned a lot of color about the M&A, the way you approach M&A, obviously, and the leverage also with the converts that is poised to go from 2.6 to 2.2x with the cash. So what is kind of your comfort level? Where do you see the optimal or the willingness to increase the leverage with M&A or kind of the flexibility you would have to pursue the M&A?

2.5.

We'd like to be a full turn away from the covenant.

And if you grow your business, you grow the OBIDA, so it actually increases the amount of debt you could take, right? So it's -- but let's just say 2.5. 2.5, where we're at today running probably 3.25, 3-something, somewhere between 3.25, 3.50. So you can just pick and say what's the number at 3.25, 3.50. And we think our company, the way it's structured right now, once the market returns to some stability where the rates aren't being totally sewered is that we're somewhere around 2.5 and 4.00 that this business unit could do with just a little bit of strengthening in the market and tightening on the supply side.

[Operator Instructions]

The next question comes from Kevin Chiang with CIBC.

Just 2 quick ones maybe. I guess, one, just on the debentures, just maybe from a bigger picture perspective, it sounds like you want to simplify your capital structure. Just looking to see if this is part of that broader strategy where maybe debentures aren't the right source of funding moving forward if you do need to tap the market. Is that kind of the right read as well, too?

Yes. I think what -- I'll tell you what I've learned from the debentures, Kevin, is that the debt guys consider debentures debt and the equity guys consider it equity. So you kind of don't please anybody. And so you go, well, what is it? Is it debt? Well, it's high. Well, it's this or that. And the other thing that you had, you can take a look at the short position in our company. I'm not the one doing the trading, but there's a direct correlation between the number of shorts in our company that have shorted our stock and when we do debentures. So if I was sitting at the table and had to make a guess, I would say they were using the debentures as a form to trade, and that hurt our stock price.

That's a fair point.

When they shorted the stock, they de facto put more stock into the market, right? So, I think -- I say too, I think they serve the purpose for us when we were at $7. We -- I mean we -- let's talk about valuation. Where is our valuation relative to our peers. You know what? We don't worry about what somebody else does or what they're valued at. We worried about what we're doing, and we let the market tell us what they think the value of us is. Let's see what happens once the converts are out and we get rid of that noise and let's see where we come from. But at the end of the day, we're going to continue to grow this business and do the right things for shareholders. I can tell you that.

Yes. That makes sense to me. And maybe this is a difficult question to answer on a call like this. But you did mention earlier, Murray, that full truckload really isn't a strategic interest to you. You do have a minority interest in Crisco. And I guess if I think back almost 10 years or more than 10 years ago, I guess, I had the assumption that, that was something you probably would vend in over time, but maybe that's the wrong assumption moving forward. Just I guess, how you think about strategically that minority investment in the context.

That's a very good point. Yes, we -- so for clarity to everybody, we own a nice position in what I think is a really, really good company in Crisco. Otherwise, why the heck do we invest in them. But they're trapped in the -- they're more full truckload. So the more company trucks you've had, the more truckload business you do, this is a terrible market for them. They could be the best-run company, and they are a first-class organization, but they're in a terrible vertical right now.

Now will that vertical stay terrible forever? Probably not, Kevin. But for today, full truckload ones or it's just awful. So -- but eventually, it will turn. And then at that point in time, we'll work with our Crisco Group and monetize that investment. For right now, we're just working with them to make sure that they just do the same thing as what we're doing here, watch your cost, stay in your lane and just wait, wait for a queue that the market is changing, then we'll go all in. I haven't seen that cue card yet.

This concludes the question-and-answer session. I would like to turn the conference back over to Mr. Mullen for any closing remarks.

Thanks, everyone. Look, we've already started -- I think we mentioned this, we've started work on the budget. The good news is we knew that we were just finishing the Q3, but then everybody was going to be asking our 2026 budget. So we're prepared for that. We're going to be releasing our 2026 budget and business plan before the end of the year. So we're going to meet with our Board on December 4. We'll present as a senior executive team to the Board that will have the business plan, what we're going to focus on, that here's our budget and here's our capital requirements for next year. And then we will press release out to you and then be open to chat with you about then.

Until then, thanks, everybody. Good questions, and thanks for participating today. We'll talk to you soon. Bye-bye.

This brings to a close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.