Mullen Group Aktie

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.

Welcome to the Mullen Group Limited 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 K. Mullen, Chair, Senior Executive Officer and President. Please go ahead.

Thank you, and welcome to Mullen Group's quarterly conference call. The format for today's call will be similar to previous investor update calls. And this morning, we will once again cover 3 main subject matters before turning the call over to you for the Q&A session. Now I'll provide a review of the macro environment, that's a recap of Q2. Carson Urlacher will provide an overview of the second quarter financial highlights. And for those interested in all the details, the Q2 interim report has been posted on our website at www.mullen-group.com as well as filed on SEDAR+. And now this 60-page-plus document contains all of the information you need as it relates to our Q2 financial results and balance sheet. Then I will close with our expectations and plans for Q3 and the balance of '25.

Now before I commence today's review, I'll remind everyone that our 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. Further information identifying the risks, the uncertainties and assumptions can be found in the disclosure documents.

With me this morning, I'm enjoined in Okotoks with the entire senior executive team. That's Richard Maloney, Senior Operating Officer; Carson Urlacher, Senior Financial Officer; and Joanna Scott, who's the Senior Corporate Officer.

First item is the overview of the macro environment. So kind of in preparation for today's presentation, I referred to my previous conference calls notes and no AI for me on this one, I read the transcripts. And in summary, there are 2 major themes that have been repeatedly articulated to investors since the start of the year. The first was that we expected the overall 2025 economy to be generally in line with '24. No growth, but significant decline -- no significant declines either, just let's call it more of the same. In other words, we were not planning on our independently managed business units to generate any internally driven growth.

Now the problem you have under this scenario is that when demand is not growing, the competition reverts to survival mode, which from my experience is not a healthy long-term strategy, but it is a short-term reality. Furthermore, the longer the economy remains in a no growth territory, the more competitors succumb to lowering rates just to maintain some level of cash flow. This is precisely why we asked our business units to buckle up heading into 2025.

Simply put, in the absence of any meaningful growth in the economy, the consumer gains the leverage advantage and one must adopt a lower cost structure as painful as it is to implement. The alternative is to chase internal growth by offering price concessions, which is a flawed strategy that Mullen Group does not embark upon because honestly, this would require that we ask employees to take less or investors to make nothing. So we prefer to protect margins rather than attempting to gain market share when pricing is under attack.

The second theme we highlighted was that acquisitions would drive growth. Here, at Mullen, we're a countercyclical thinker. We prefer to pursue acquisitions when internal growth is difficult, and this strategy allows our organization to grow regardless of the economy. When the economic growth is abundant, we grow with our customers. When the economy struggles, like it has been for a couple of years now, we acquire good companies in verticals of the economy where we believe there is long-term potential. Now to be clear, this is not a grow-just-to-grow strategy. It is based upon expanding where we see long-term opportunity in a solid customer base. It just so happens that great opportunities are presented more frequently during times of stress. When others do not or cannot take a longer-term view, we can, and we do, at Mullen Group.

Now with this as a backdrop, let me turn to a few highlights in the second quarter. How does 9% growth in top line revenue sound? In this market, I'd say that is fantastic. Our business generated over $540 million in consolidated revenues and this during a time of economic stagnation. In the second quarter, we reported headline GDP -- we didn't report, it was reported that headline Canadian GDP came in very soft for April and May, and that corresponds directly to what we saw in our sales channels.

Despite the economic headwinds, however, we grew revenues impressively. And the main reason is acquisitions, which added $52.6 million in incremental revenues. But I don't want to discount the hard work of all of the teams at our 41 business units. Collectively, they did a really nice job managing in the current economy. I know it was not easy. And the discussions that many of our business units had with their customers were challenging as they, too, were dealing with their own set of issues. So to generate same-store sales of $440.8 million, which is after adjusting for fuel surcharge revenues, it came in virtually flat year-over-year, which is impressive from my perspective. I got to say well done team.

Another highlight I got to -- I have to point out is the issuance of the new long-term bonds, approximately CAD 400 million, which was finalized and closed in July. Now I'll let Carson talk to the specifics, but let's just say, I'm pretty dang proud of the fact that we could close this bond deal at a time when there's so much uncertainty. Not only did we put this organization in a great spot for the next decade, but we've also -- we've now got over $100 million in available cash to continue growing our business. Quite simply, there's so much to like about this transaction. And I'd be remiss if I did not thank the investors who made such a meaningful investment in Mullen Group.

In terms of profitability, yes, we did okay, but given especially within the context of the market and the circumstances, there was a lot of noise associated with the big swing in the Canadian dollar versus the U.S. dollar, which negatively impacted corporate costs associated with our U.S. dollar holdings. In addition, as I mentioned earlier, pricing remains under pressure. That's never good for profitability. Our cost-saving initiatives at the business unit level mitigated some of these pressures, but not all. And lastly, the last 2 acquisitions of size that we completed, they're asset-light businesses, and they don't generate the same OIBDA margins as our heavy asset business units do, but here's the number I really focus on. Cash from operations remained a healthy $117 million, virtually the same as 2024.

In terms of a little bit of segment discussion, I'm not going to repeat what's presented in the MD&A and the press release, documents that conclude a very detailed analysis, but I'll offer some key highlights for each segment. Let's start with the most stable and once again, our largest, and that's LTL. Revenues were up $11 million over the same quarters last year, climbing to $200 million mark, impressive within the context of a no-growth economy and the fact that fuel surcharge revenues were down by nearly $3.2 million. OIBDA, however, was declined slightly due to cost pressures and higher purchase transportation, but still came in at a very respectable $35.7 million in the quarter.

Now the LTL market is steady, but as I noted earlier, price is what matters most today for shippers. So there were no price increases and some modest givebacks in the quarter, and that led to lower margin. Logistics and warehousing is where we really saw a nice boost, primarily due to acquisitions, of course, rising by a healthy 15% to $173.6 million. What is most impressive about the quarter, in my view, was that the segment business units held revenues close to last year despite no growth in the economy and issues associated with the trade tariffs still made. Customers, it seemed were reacting to market conditions rather than forward planning.

So OIBDA, it grew, albeit margins fell by nearly 1%, but that's primarily due to the cost structures we inherit with acquisitions. But there's no doubt that we have some work to do with these new business units to tighten up on the cost side. And I was mentioning this, I'll go off script a little bit now. When you invest, no different than moving in -- if you build a house, it takes a little bit of time before you can move in and house. You got to put the investment up first. Acquisitions are exactly the same way. You got to make the acquisition and just like all the other ones that we've done since we've acquired them, then you improve it over time, which is exactly what our focus will be here at the corporate office.

Now a similar story in the U.S. & International Logistics segment. We grew -- the acquisition of Cole USA boosted revenues by 36.7% to $64 million. And for the first time in a few quarters, OIBDA increased in the segment. Margins are not where we wanted, but this segment is characterized as -- it has no fixed assets other than technology. Margins on gross revenues will be smaller due to the nature of the business. What we will be looking at with these U.S.-based teams is improved margins on invested capital.

Our Specialized Industrial Service segment, we know we struggled, declined by $3.7 million to $105.5 million. Drilling activity in Western Canada slowed as producers cut drilling programs due to declines in crude oil and natural gas prices during the quarter. We also took the very necessary step of de-marketing some project work when pricing fell below acceptable levels. Our response was to give up the business rather than invest new capital at unacceptable terms. We leave this to our undisciplined competition.

One of the business units that did overachieve was our Canadian Dewatering group, and they opened a new facility in Northwest Ontario, let's call that mining country, where activity levels are accelerating. The overall decline in business was primarily the reason OIBDA fell in the quarter by $2.9 million. But our diversity of service offerings and strong performance by Canadian Dewatering definitely helped. So all-in-all, boy, we were busy at corporate office, an exciting group. It was an exciting time for our group.

And I would say it's probably a decent quarter given the circumstances. And along with -- when you do acquisitions, you have onetime costs associated with acquisitions, as I highlighted a little bit earlier. Most importantly, we've positioned our company for better days. We've expanded into a new vertical within the economy. We are positioned to capitalize once the economy starts growing. That's for sure. Now when this happens, I don't know, but history tells us it will happen again, just as it has in the past, and the Mullen Group will be prepared.

I'll turn the call over to Carson for more of the second quarter quarterly financial performance and the impact of the new bond deal on our balance sheet.

Carson, take it away.

Perfect. Thank you, Murray, and welcome, everyone. I'll provide some of the additional highlights from the second quarter, the details of which are fully explained in our second quarter interim report. Overall, despite a stagnant Canadian economy, we generated record revenues compared to any previous quarter at just over $540 million, an increase of $45.3 million or 9.1% from the same period last year. So acquisitions is what drove this revenue growth by adding $52.6 million of incremental revenue and consisted mainly from including 1 month of the results of Cole Group, one final month from the results of ContainerWorld and a full quarter from Pacific Northwest. Somewhat offsetting this growth was a $7.7 million decline in fuel surcharge revenue on lower diesel fuel prices.

Collectively, though, revenue from our existing business units, excluding acquisitions and fuel surcharge, increased slightly year-over-year. Revenue per working day in the quarter averaged out at $8.6 million. The best month in the quarter in terms of revenue was the month of June, where we generated almost $200 million worth of revenue or $9.4 million of revenue per working day, largely from adding the financial results of Cole Group. So we finished the second quarter with solid results as we head into Q3, which in terms of seasonality over the past couple of years has typically been our strongest quarter of the year.

We generated OIBDA of $76.6 million, a decrease of $9.1 million compared to the prior year. However, most of this decrease was associated with the impact of foreign exchange. Excluding the impact of foreign exchange gains and losses on U.S. dollar-denominated debt held within our corporate segment, a term we've now called OIBDA adjusted was $83.8 million, down slightly by $1.8 million compared to last year. We experienced lower OIBDA from our existing business units and higher corporate costs as we expanded our team in anticipation of future growth. Somewhat offsetting these declines was $6.7 million of incremental OIBDA from acquisitions.

Operating margin on acquisitions was 12.7% due to the non-asset-based nature of the operations and from how IFRS accounting standards require us to recognize revenue on a gross basis. OIBDA adjusted as a percentage of consolidated revenues was 15.5%, down from 17.3% due to cost escalation, foreign exchange losses experienced at the segment level, competitive pricing conditions and a reduction in higher-margin specialized business. Despite lower operating margins generated by our recent acquisitions, they still generate free cash. In terms of cash, we continue to generate strong free cash in excess of our needs as evidenced by the $77.8 million of net cash generated from operating activities in the quarter.

Now let's take a look at how we performed by segment. First, our largest segment, revenues in the LTL segment were just over $200 million, an increase of $11.3 million from last year due to $11.8 million of incremental revenue from acquisitions, being somewhat offset by a $3.2 million decline in fuel surcharge revenue. Revenue from our existing business units, excluding acquisitions and fuel surcharge, increased by $2.7 million due to steady customer demand and from some market share gains.

OIBDA was $35.7 million, down slightly by $1.8 million last year. This decline was due to the combination of both competitive pricing and cost pressures, which resulted in lower OIBDA at our existing business units, which somewhat was offset by $2.5 million of incremental OIBDA from acquisitions. Operating margin decreased by 2% to 17.8%, primarily due to the tight market conditions, whereby additional cost pressures could not be passed along through customer rate increases.

Our second largest segment is our L&W segment. Revenues in the L&W segment were $173.6 million, up $22.7 million or 15% from last year. Acquisitions added $24.3 million of incremental revenue, reflecting the 1 month of results from ContainerWorld and 1 month from Cole Group's Canadian operations. which was somewhat offset by a slight $3.4 million decline in fuel surcharge revenue. Revenues from our existing business units, excluding acquisitions and fuel surcharge, increased modestly by $1.8 million and was mainly due to certain project work associated with an oil processing facility in Alaska that led to higher revenues at Mullen Trucking.

OIBDA was $31.9 million, up $2.9 million or 10% from the prior year, with acquisitions adding $3.2 million of incremental OIBDA, while our business units, excluding acquisitions, generated relatively consistent results compared to last year. Operating margins decreased by 0.8% to 18.4%, primarily due to the acquisitions and the resulting change in our revenue mix. Cole Group is a non-asset-based business that generates free cash but at a lower margin. Excluding the impact of acquisitions, operating margins would have been 19.2%, which is virtually flat compared to prior year's results. So our existing business units, excluding acquisitions, did a great job in protecting margin.

Moving to our S&I segment. Revenues were $105.5 million, down $4.1 million or 3.7% due to a lack of large capital projects being sanctioned in Canada, depressed commodity prices and wildfires that negatively impacted our customers' drilling and production plans. These factors led to a decline in revenue from our production services and drilling-related services business units. We also demarketed certain customers due to pricing as we will not compromise the safety of our people or put expensive equipment to work at unprofitable rates. Fuel surcharge also decreased by $1.2 million compared to the prior year.

Somewhat offsetting these declines were revenue gains made by our Specialized Services business units tied to infrastructure and mining as Canadian Dewatering experienced greater demand for their services. OIBDA was $20.6 million, down $2.9 million from prior year as our production services business units experienced a decrease in OIBDA due to a reduction in facility maintenance and turnaround projects. The Specialized Services business units experienced a decrease in OIBDA, mainly due to lower demand for civil construction services at some contractors, while our drilling-related services business units recognized a decline due to lower customer demand. Operating margins decreased by 1.9% to 19.5%, which was mainly due to a reduction in higher margin business.

Within our non-asset U.S.-based 3PL segment, revenues were $64.1 million, up nicely by $17.2 million or 36.7% from last year as Cole Group's U.S. operations added $16.5 million of incremental revenue in the month of June. Holistic also experienced slightly higher revenues compared to last year. OIBDA was $1.2 million, up $0.4 million from the prior year, with Cole Group's U.S. operations adding $1 million of incremental OIBDA, while Holistic's results were impacted by a $0.5 million negative variance in foreign exchange. Operating margin, on a net revenue basis, was 20.3%, which was slightly higher than last year due to higher margins experienced at Cole USA.

Now moving to the balance sheet. On July 10, we announced the closing of a $400 million private placement debt transaction. There was strong demand from the bond markets and the offering was significantly oversubscribed, mainly due to our disciplined approach to acquisitions, our large real estate portfolio and our ability to generate free cash through all business cycles. These 12-year long-term notes match our long-term investment strategy and once again provides us with a well-structured balance sheet for the next decade. We used some of these funds to prepay approximately $237 million of private 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 derived from funds that we used to acquire the Cole Group.

Today, we now have over $80 million of cash on hand, a derivative with a cash value of close to $30 million and access to $525 million of undrawn bank lines, and we continue to generate free cash. The blended interest rate on our new private placement debt going forward is now approximately 6.1% per annum. In terms of our debt covenants, total net debt to operating cash flow would have been 2.57:1 had the July debt refinancing and the repayments occurred in the month of June. In summary, our balance sheet is well structured with long-term financing. We have ample short-term liquidity and debt covenant ratios that are acceptable and within management's comfort range, allowing us to be opportunistic going forward when the right opportunities come along.

So with that, Murray, I will pass the conference back to you.

Thanks, Cars. Well done again. Just before the Q&A session, I'm going to provide some thoughts on how the balance of '25 is looking. I'm not going to refer to this as guidance because there are so many unknowns today, but let me start with a few of the issues that I watch really closely and intently. Number one, and this is what I tell all of our people, there's no reason to worry. It doesn't help anything. Just tighten up. And why? Because the Canadian economy is not in a bad pace place. It just happens that any significant growth is sometime somewhere into the future.

Now I know there are Canadian politicians that are of the view that Canada is an economic superpower. But from my perspective, this is at odds with the current no-growth economic statistics or what we see in terms of freight demand. If, however, they can lead Canada into a high-growth economy, clearly, Mullen Group, our employees, our shareholders, like so many others would be a major beneficiary. I want to emphasize, many Canadians would benefit if Canada becomes a high-growth economy. We, like most businesses, don't believe the nation-building projects should be delayed by endless talks. Action is what is required. The main issue, of course, is that in Canada, these types of economic decisions are often debated for years by those with different views and agendas. In the meantime, other countries capitalize as we debate.

Number two, technology and the rapid ascent of AI or deflationary tools and we need to be mindful and on a high alert as to how AI will change the economy. Everyone knows that AI is powerful. The question left unanswered at this moment is, can AI actually improve our own financial performance? We're not sure.

Number three, how will countries and economies adapt to the new protectionist policies being spearheaded by the United States? There's a massive change occurring in terms of trade. No longer will the low-cost nations provider automatically win market share. Buy-local appears to be the new theme.

Number four, and this one is really specific to the trucking industry. It's this. Will the labor laws and safety standards, established by the governments, be applied equally to all carriers or will they continue to turn a blind eye to what is really happening? There's no doubt that shippers are more than willing to take advantage of this inequity as they chase the lowest rate. Competition is not equal or fair when the rules are not applied consistently.

Now with these issues front and center, we still have a job to do to ensure that shareholders are compensated investing in our company. Here's a summary of what shareholders can expect. Firstly, the investments we've made in acquisitions over the last year, they're going to drive revenue growth for at least the next year. Few in our industry can make such a bold statement. Secondly, we took every prudent step we could to ensure the balance sheet is well structured for the next decade. Take risk off the table was our guiding principle. Third, our current focus is margins, regardless of market dynamics. Today, we're working on protecting margins. And as soon as economic growth returns, we will pivot to improving margins. Margins over market share is how we believe shareholders ultimately win.

These 3 initiatives are designed to ensure that the dividend, coveted by so many of our loyal shareholders, is safe and sound and that we remain an excellent company for employees to apply their skills. Over the course of 3 decades, we've wisely invested in shareholders' capital and business opportunities within the ever-changing logistics and supply chain. Nothing ever stays the same. Today, we have a portfolio of companies in our network that are first class. We have a network that is virtually impossible to replicate in this current market.

So I'll now turn the call over to the Q&A session. Operator, please open the lines. Thank you.

[Operator Instructions] Our first question is from David Ocampo with Cormark Securities.

I guess when it comes to the supply-demand imbalance that's been going on for quite a bit of time here, and you talked about some help initiatives that could change that equation. I'm just curious, what's going to cause the more shift to a balance or more balanced conditions? Is it going to be an increase in demand or supply exiting the market? Because I think you highlighted that some of your competitors are still in survival mode right now.

Yes. I think, David, that's the real Pandora's box here. We know that demand would be a major help because currently, nobody is adding supply, currently. But in saying that, I'll tell you that the supply has been stubborn and has not really exited the market, even though it's ultra-competitive. But you got to remember those small carriers don't have the same cost structures have been blared into bigger companies by government policies and rules and regulations and trying to do what's fair for people. So we have a different cost structure if you're trying to run a professional business than a very large portion of the market.

And I know that that's been referred to as Driver Inc. or whatever, those are small independent entrepreneurs. And I'll tell you, they are toughest nails. So we need to see demand increase. It appears -- if I listen to the politicians and we do, I mean -- and if you believe that what they're saying, then I think demand is going to improve. I think we saw a decent June, did we not? We did not just because we did acquisitions, but June was not -- was the best month of our quarter for sure. In the absence -- let's just say that demand doesn't improve. We want it to, but if it doesn't, we still have to watch the cost, right, team? And that's what we're focused on here just in case it doesn't. We want it to happen. We're watching it intently, David but from what I've seen in the last little bit, I haven't seen a whole bunch. But hey, the governments, they're spending money. It's got to help demand, eventually, I think. That's our thesis.

Yes, I tend to agree with you on that one. It's just a matter of time.

And until that happens, I think that -- and here's what I said is that the Achilles' heel of our industry right now, you're seeing it across the board. Everybody is saying it is that the issue is pricing. And it's not going to be like this forever, but it's like this for now is that customers, they have the leverage right now.

The last one for me before I turn the call over. You guys have been operating Cole now for the last 2 months and just given all the uncertainty around trade.

One month. We only got it in June on Cole, right? We thought we were going to have it for a quarter, but unfortunately, as we go to sign the deal, Mr. Lucky passed on the night before. So that delayed the deal. And then the Competition Bureau that we did not count on the Competition Bureau would want to oversee this transaction when we didn't have any customs business before, but they chose to delay it for an extended period of time.

I think it took at least 6 weeks, did it not team, and then it just delayed everything. So we only had Cole for 1 month. And that's all that shows up in our numbers is 1 month. Truthful, we were kind of counting on having that done for the whole quarter, but out of our hands. But it's done now, and we're already well under our way to make sure that we put a good structure in place and get the teams focused on what we have to do as a public company.

I guess you're wrapping up month 2 now with that under your portfolio. I'm just curious how that business is performing just given all the trade uncertainty versus your initial expectations when you contemplated the acquisition and maybe how that compares to previous year performance?

Richard?

Yes. So David -- Richard Maloney guys. So when we bought the organization, as we articulated in our press release, we were of the view, and this holds back for many years actually that trade is not an easy thing to do. And there's a lot of complexities to trade and certain rules of engagement need to be done. And as we were going down the road buying Cole, things got a little more complicated as we all know.

And as we've seen first look 1 month as we reported and like you say, another half a month or so into it as well, we're seeing and we're -- on the custom side, there's still the activity and the work that they do is still kind of on the fairway as we thought it would be. There's going to be complexities to this. The rules are changing regularly and shippers need people with this expertise. And we're early innings, but yes, we're pleased with what we've got certainly on the custom side, and we'll be continuing to work with them to improve our operating results.

Yes. I think that we -- when we talk with the leaders of the custom side of that business, they're swamped because the rules are so complex and they're changing and they're trying to help and provide consulting services and to their customers. So their results have not disappointed from what we had anticipated.

Correct. Yes, I would agree with that.

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

I wonder if I could just maybe follow up on the Cole Group, kind of just looking at the contribution in the 1 month that you owned it, I guess, top line $32 million. If I kind of run rate that for a full year, you get to a full year revenue number, which is higher than what you'd kind of indicated when you closed the business and put out the press release. Obviously, there's seasonality to the business. I'm just wondering if you can maybe talk a little bit about the seasonality and kind of the run rate revenue that we're seeing right now and how that compares to what you had put in the press release, the kind of $300 million back when you announced the deal.

Well, it's difficult to get the seasonality of it right now spot on, Cameron, because we've only had it really in our group for a month, but I got to tell you, we're pleasantly surprised by the revenue side that they've been able to generate at the team. So they've been busy. That's what we hear in our channel checks from other customs brokerage, too, is that they've been pleased with the revenue side. And so, it's probably more likely now that it's going to beat that original $300 million of guidance that we had on revenue side, right, Cars? I don't know -- we don't know yet, Cameron, whether the first 6 months or since the start of the year is indicative of the whole thing. We're just cautioning, but we're just telling you what they did in the first 6 months, and that's in an economy that wasn't growing. So I think you can probably surmise they're probably going to do better than what we'd originally thought.

That's fair enough. Maybe just a second question, just on, I guess, the kind of the financial targets you had put out going back to, I guess, late last year and then kind of reiterated earlier this year. I mean, I guess, how are you feeling about the EBITDA sort of target that you had there, $350 million? I know some of that was predicated on acquisition and maybe the Cole Group, as you mentioned, didn't close quite as soon as you were hoping for. So any commentary on how you're feeling about those original 2025 financial targets for the company?

Yes, that's a question that we actually anticipated, right, Carson. And I think our general is, look, on a run rate, we feel really, really confident of what we had originally said on a 12-month run rate, but we are getting 12 months of full of Cole this year. So I think we're okay on the revenue side. We might be a little bit behind because, as I said, we're -- the Cole wasn't done on time for this year. But on a full 12-year forward-looking basis, I think we're still pretty comfortable with the -- what we had originally articulated.

The general economy continues to do okay. What we don't see, Cam, is we just don't see any pricing leverage. So you've got to really be focused on cost today to make sure you maintain those margins. That is a -- that's a message that we take to every one of our business units now. And I said to you, our business units, I think they've done a pretty good job, but it's evident that the job is not done. We have some work to do. And probably we'll get some corporate costs down now because I mean we were -- we have a lot of lawyers and a lot of people on our payroll here in the last little bit to get this very complex deal done.

So hopefully, those are onetime costs. I reiterate that to the corporate team all day long. But I think on a 12-month run rate, I think we're in really good shape. Are we going to -- I think there's still a chance we could meet it, but I can't say we're going to meet it today because we lost a good chunk of the time that we had originally planned. But the thesis is still intact. We've got a much bigger business. We're in the right vertical, and they're going to do fine.

The next question is from Kevin Chiang with CIBC.

You mentioned maybe some optimism just given some of the initiatives from the current Canadian government to accelerate some of these energy resource projects, which will obviously benefit the broader Canadian economy and yourselves as well. Just when you look at what's in the pipeline or what's being discussed, one, is there anything that you think you need to add to the portfolio if you want to be more competitive in onboarding that revenue stream? Have any of your customers or clients, have they started talking about potentially, I guess, securing contractors or anything along those lines, even if it's early days to ensure they secure enough capacity if they do -- if these projects do move forward or some of these projects move forward?

Boy, that's a loaded question, Kevin, but let me try and break that into this. Number one is we don't really need to add too much more to our portfolio. We really like where we're positioned. What we would need to do, Kev, is ramp up capacity, which is invested capital in assets to -- if these projects do go as they plan. And then you would have to add people because we're not sitting here with people or with the assets if it ramps up as they say. But the words that the politicians are articulating are really -- they're good words, but they're not investable words when we get the discussions. I would say this, there's more discussion from our customers and people are price checking. They're asking for bids. We haven't had that for a long time. We've got to move from debate to action and that's up to the governments and First Nations in our opinion.

That makes sense. And obviously, still very early innings.

If those projects go, our shareholders and our company would be a major beneficiary of that, for sure. We're not factoring any of that into anything we've told you or our numbers or whatever, that would be all internal growth, and that's your highest margin business if you get it.

Right. It seems like very incremental to you. Maybe just a comment you made on the Cole deal maybe taking a little bit longer to close and maybe the Competition Bureau taking a closer look more so than you anticipated because you didn't have a competing business. So I'm not exactly sure to your point, why it would have taken so long. But has the oversight from the Competition Bureau changed at all? And has that impacted how you think about your own M&A pipeline, like maybe potential targets that you thought would be easier to cross the line here, maybe they're taking a little bit longer or maybe the government is saying there's a level of market concentration that they're uncomfortable with?

We're not sure on that. Well, first of all, we're not sure why they had to go to the long-form competition review, Joanna?

Kevin, it's Jo. What we were told is that they had some new people that joined their team, and they were using our files as an education and training file, and that's why they had changed the timeline to a complex. That's what we were told.

I suspect that's crap. I'll be honest with you. Because at the end of the day, the Canadian government through post office through Purolator acquired the largest customs brokerage company in Canada called Livingston. And I suspect they didn't want to have 2 separate rules because that one was put under scrutiny by the Competition Bureau, but we knew it was going to happen because the Canadian government approved the biggest one to go to the Canadian government. So that's our biggest competitor. So I'll just leave it at that. I think I said my piece.

I appreciate the candid response there. Maybe a quick one here. You called out wildfires, and I see Smook in Northern Manitoba at slightly lower work and obviously, we've had unfortunate wildfires in that province. Just wondering when those issues -- when those natural disasters occur, is that revenue that gets shifted or is that revenue that's generally lost and you almost have to wait to the next -- I guess, next year to kind of restart some of that civil work. Just wondering, based on your own experience, is that something that might get shifted later this year or is that just something we have to look forward in 2026?

I think that it just pushes it out, to be honest with you. We know they couldn't start the projects that they had going. It wasn't just Smook, it was Gardewine had to evacuate most of those northern facilities. And we had some additional costs that are built into that. We're not these are things that you do. You look after your people and those were additional costs to make sure that they weren't in harm's way in that but that cost us. But for the most part, most of the wildfires are over now. I suspect those projects still have to go, and they'll just push them up by a quarter -- probably 1.5 quarters, I think and those kind of things.

And a lot of it is just kind of freight related, too, like Gardewine, so they're going into the Northern Manitoba, but they also haul all the food stuff and everything. So that got delayed, so they got pushed for week or into the next quarter. So things typically just get pushed.

Yes. I think things just pushes out a bit and those kind of things. And so we don't think anything structurally has happened at Smook or in Gardewine. We understand why, and our business units did a good job of making sure that their people were protected. the assets, I think they did a good job on that. But it was in Northern Manitoba. We lost some business up in Northern Alberta also and British Columbia and Saskatchewan. So it was kind of in the north, really an anomaly in terms of that. In the south, we got too much water and that's helping our Canadian Dewatering group, but those things kind of always happen. But we're not making a big deal out of it, Kev. We're just highlighting is that, hey, it didn't help us. I can tell you that in the quarter.

The next question is from Konark Gupta with Scotiabank.

Just maybe wanted to kind of follow-up on the Cole first. You talked about how these guys are pretty busy on the custom side and maybe they are tracking perhaps a little bit ahead of what you said previously on the revenue outlook for this company. With respect to the tariff on that's going on right now and like nobody knows what's going to happen next, how do you think these guys will see maybe any sort of volatility in the business? I mean, is there a business right now that they are seeing because of these tariffs being super noisy and some of that business might go away or there's stickiness to that? How should we think about sort of the long term here for Cole?

That is the unknown. But I think -- and this is how we're looking at it, Connor, I don't know how anybody else looks at it. And our team at Cole doesn't really know how it's going to -- they pick up the phone, they bid projects, they do whatever. So they're just reactionary to the market. But how do we think at it strategically, we're not afraid of the tariff issues. We know it's going to change. And we think once there's clarity, the market adjusts. How does it adjust? Let the market -- the market is going to change the way it wants to change but there's no way that trade is going to stop. It might shift. I don't see that happening.

So the good news about our Cole business is they're not just North American freight. They do international freight as well. So we think they're well positioned to -- they're going to get the top line because we've got a heck of a team over there on the top line. The one thing that's happened in the freight business, it's ultra-competitive. So they have to work on the cost side and make sure that they're aligning their costs with the revenue. But they're busy on the revenue side on moving freight. And customers have just gone away from planning to reacting.

I think once you get the -- once we get some clarity, I wouldn't be surprised to see some capital start moving again. I know we've cut back on capital, Konark. I mean we said we got to wait and see what happens. So we cut back on capital. So if everybody cuts back on capital investment, that's just a sign of uncertainty. And we just have too much uncertainty right now, but that's not going to last forever, I don't suspect.

Okay, that's fair. With respect to guidance, Cam kind of questioned on EBITDA run rate-wise, you're hitting probably the 350 mark, I would think. But with respect to hitting the guidance potentially this year, what would you need? Like do you need like an M&A because maybe that's how you accelerate things or do you anticipate any significant rebound in one of your organic businesses that might potentially help you hit the 350 mark for the full year?

I'm not personally expecting any significant rebound. I think steady is going to be the rule of the day. And under that, we've got our work to do to make sure that we just are managing the margin, and we'll be highly focused on that, Konark, over this next -- the rest of the year with our business units. I think that's what we're focused on here. We've already taken care of the growth. That's what I'm trying to articulate for sure. We've already taken care of growth. We've already taken care of the balance sheet. Now we just want to focus 100% of our efforts on taking care of the margin on behalf of our shareholders and improve that for them but we've taken all the risk off the table and we've got growth. So we just have to work on margin. That's not too bad.

And I would say for the balance of 2025, Konark, even if we get approval on some of these nation-building projects, those aren't -- we're not going to see the benefit of that and the demand from it until 2026 and beyond. It doesn't happen just we don't get approval and then next week, we start generating revenue from it. So there will be a delay and we're cautiously optimistic that we can get some of these done.

Konark, I think I'll leave you with this. The consumer part of the economy has turned ultracompetitive. And the consumers are very, very cost conscious today. We know you just have to go to the parking lots and you'll see the malls are busy and Walmart is busy and Costco is busy and winners is busy, Dollarama, but that's the consumer side of the economy, and that's very, very competitive. Where you have high margin is when you have capital going to work and you have projects that happen. That's when demand -- that's where we need demand to increase.

I don't need more business going to Winners or Dollarama. They may need it, but we don't need that. We want to see these what we call shovel-ready projects or nation-building projects, whatever you want to call it. You get that going, those are high margin for our organization, great jobs for Canadians, a lot of people would benefit. And I think the governments are going to need it, to be honest with you, because they need tax revenues, and that only comes from wealth. Tax revenues don't come from modest jobs. So we're optimistic that it's going to come, but we just don't know the timing.

Right. That's a fair comment for sure. And last one before I turn over. In terms of seasonality, if we look at the back half, I mean, the first half has kind of trended relatively in line if I exclude that FX noise in the USD cash you had. But the back half, it sounds like given with the Cole 3 months full contribution and maybe flattish environment, would you not expect the second half to be slightly better than the second half of last year? And is there any role for the S&I segment here in the second half that could swing the needle in one direction?

Not unless we see drilling activity improve. That's high-margin business. It's stabilized. Most of that activity would happen if you get natural gas projects approved and that would improve drilling. So I think it will be similar to last year. I don't know if it's going to -- and we're not predicting -- we're not putting capital to work because it's growth but I think it will be relatively stable to last year. That's our best analysis at the moment, Konark.

One other way you could look at it, Konark, is looking at our revenue per day and kind of projecting that out over the next couple of quarters. You can kind of see within our MD&A and our documents what we've disclosed as to where we're sitting at now. And that would probably get you a reasonable indication of what that back-half might look like, all things being equal.

Just for all the listeners, that would mean I think that we bumped up to revenue per day, we think that's approaching the $10 million per day, is it not?

Yes. In June, we were at 9.4. So that would include Cole's results.

So and then you just take how many revenue per day -- how many days you've got that are revenue-producing days. And you can see some pretty -- we'll be just fine on the top line. And then it's just a matter of making sure that we really watch the costs. I think, Konark, that's the main thing that everybody I'm talking to in our industry, you've got to watch costs very carefully and that's what we're focused on.

The next question is from Benoit Porier with Desjardins.

Murray, we've seen some positive news flow in the recent months. If you look at the potential for new pipelines, the ring of fire railway in Ontario, but also the passing of Bill C-5. I was curious to know more about how do you get prepared for this potential uptick? And what do you foresee in terms of potential, in terms of timeline and the potential demand that could impact Mullen down the road?

Boy, I tell you, we sit waiting patiently for words to turn into action. I would tell you there's been way more positive meetings and questions from our customers coming our way about, okay, what if, what about this, what about that? That never happened for quite some time. So there's lots of chatter about it, Benoit, but I haven't seen anybody until we actually know for sure that we can get this done, then private capital will go to work. I hope these nation-building projects aren't just social programs and socially funded. I'd love to be able to see that the private money has come back in, and that is a real sign that there's confidence that it makes business sense, not nation-building sense. I don't know how to address it any different than that as to whether these are going to be publicly funded, nation building projects or privately funded. I just hope they go.

Benoit, if I can add, it's Richard. So to the extent there's any new pipeline activity, we have pipeline -- we are heavily involved with any large transmission pipeline. So if that goes, we will be well situated. Any drilling activity in Northern BC and Northwest in the Montney, we are well situated to support all aspects of the drilling activity we can support that. To the extent there's mining activity in Ontario, we heard we went into Northern Ontario, Canadian Dewatering and Gardewine, we are well situated there in Northern BC with Bandstra. So to the extent these things become a reality, we are well situated there, and we will ramp it up accordingly. So I think, Benoit, it's optimistic, but not the timeline, we just can't put a pin on it yet.

Okay. That's great color, gentlemen. Moving to some spirits. We've seen some reports that Canadian provinces boycott of U.S. spirits have caused a drop in all spirits sales in Canada. I was just curious whether you've seen some impact at ContainerWorld in the quarter so far this year?

Yes, spot on. Yes, ContainerWorld, we did not plan on them getting hit by -- you can't bring in liquor from the U.S. That was a big part of why we missed on the revenue side with our ContainerWorld Group. So that market's got to adjust in terms of that. I don't think it's going to be -- it's just a 1 quarter thing, Benoit, I think, because I think the consumer is either going to adapt to something else or we've already seen some change in that. Like, for example, in Alberta, the liquor -- U.S. is coming back, U.S. liquor and wine, spirits, that's now back on the shelves again. And it's up to consumers whether they want to buy U.S. liquors. I don't know what this whole prohibition thing that the Canadian government comes up with or the government why they have to do that. It's up to the consumers. If they want to buy it, they'll buy it. If they don't, they're going to buy something else rather than politicians say what you can or you can't buy. That's why I call it prohibition.

Okay. That's great. And last one for me. Carson, when we look at the leverage, it's been sequentially up a bit slightly above your target. Any thoughts on your capital allocation priorities for the balance of the year now that you have closed your notes offering?

Yes. I would say that our current run rate is 2.57, which is slightly above our target of 2.5. But the reality of it is we've got some debentures that we're going to deal with.

That includes the debentures.

That includes the debentures that's sitting in on the debt number right now. But if you factor the debentures out of that equation, now you're down to about 2.23 which is well within our comfort range. So I would say that by the end of the year, we'll be even leveraged less than we are today.

I think the other thing that I'd highlight, too, Benoit, is that, look, those leverages also are leaving us with about $100 million of cash to go either grow business or give it back to shareholders in a different way, i.e., buying debentures or whatever we decide to do, that's up to the Board but we're situated pretty good. We love it. It's all long term. It's all fixed, risk off the table, just run the business now for the next 10, 12 years.

Yes, we've got lots of optionality, Benoit, with sitting by end of the year, we'll have over $100 million of cash on the balance sheet. You can either grow the business and your debt covenant comes down or you lower the debt number and the debt covenant comes down. So it will all depend on how the market plays out and what the Board decides with respect to allocating that capital.

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

This is James McGarragle, I'm on for Walter this morning. I just wanted to ask on the June. You mentioned it was your best month in the quarter. I thought that was pretty impressive just given all the data that we looked at kind of pointed to a really tough June, in particular, some RBC cardholder data and some PMI data that we're looking at. So can you just give us some color on what drove that? Was that some share gains, any subsidiaries that were particularly strong? And any color you can give us on how Q3 is trending within that backdrop?

Well, I think the one that was particularly strong that we highlighted was Canadian dewatering. They were strong because of -- they opened a new terminal in facility in Northwest Ontario, let's call that mining country. We also had a pretty strong performance by our Mullen Trucking group that worked on a capital project. And so, unfortunately, that capital project was going to Alaska, not into Canada. But they were -- that's an example. When capital projects go, man, do we do well?

So this economy is okay in terms of the consumer side of the economy. It's still kind of going along okay but there's no there's no high-performance side on capital investment. That might be coming. That's what we're highlighting to people is it just be patient. We think it's got to turn. And when that turns, the consumer part will be just fine, very competitive, but just fine. But most of our margin improvement will come because of capital -- when capital goes to work. That's when you make higher margin.

I think the other impact that we saw in June as well, too, is LTL started to come back and stabilize, and that's probably a function of people getting back into their communities in the northern parts of the provinces and us driving a little bit more lane density as those fires and stuff started to subside. We had issues with respect to getting into town. So you're changing lanes and rerouting trucks and those sorts of things and some communities that just were evacuated. So I think that volume started to come back in the month of June.

I appreciate the color there. I had another question. I made a presentation to the Manitoba Trucking Association a few months back. And some of my conversations with the truckers in the audience surrounded Driver Inc. and how tough it made to compete for truckers like yourself who follow the rules. So do you have any update there with regard to getting this issue fixed? Any color you can share with your conversations with regulators or officials who could potentially help fix this issue going forward?

Well, good comment and now you know why that's my number 4 issue that I watch intently because it is a drag on not just our results, it's a drag on our people because if the rules aren't equal, then it's very difficult on our people because we're not competitive. So I don't personally spend any time talking to the regulators about this because I'm wasting my time. They know what the issues are. It's time for them to do their job, and that's fair for all Canadians, including the people that are being taken advantage of by Driver Inc. model. I'll leave it at that.

The next question is from Tim James with TD Cowen.

Just want to circle back or try and frame the performance of the legacy business here as you think about the year. If we exclude Cole Group and the 2-month delay in closing and the FX impact that you called out as an adjustment in Q2, if we exclude those items, the rest of the business, the Mullen Group business, is it tracking towards that original 350, obviously, it's some component of that, but that original EBITDA guide for 2025?

No. If you back out Cole, we're not tracking to 350. And last year, we were at 330. So we said to get to 350, we needed to do acquisitions. We did the acquisitions, but the timing is off. So we would have been probably not too far off, but then the trail of trade issues accelerated this year and all the drama that's gone with that. So we're probably behind on the 330, 325 on our same-store sales. But I honestly think that's just timing, Tim, is that these are events that are outside your control, and they just push it out. But our core businesses are doing -- as we've disclosed, they're holding their own. They're not -- revenue is flat. Margin is down a little bit because of the cost pressure but really, most of the noise that we had in the quarter was all corporate stuff balance sheet with holding a large U.S. what do we hold? I think we held hundred-and-some-million of US dollars. That's what got us now. The good news is it also -- the Canadian dollar went up in value is that our U.S. debt went down by a similar amount. So one was income statement and one was balance sheet but that's why we just took that noise out. But on same-store sales, we're probably behind flat or a little bit to last year and most of that is due to tariff and trade talk and just kind of uncertainty.

Okay. That's actually a helpful answer to my poorly worded question because you did answer what I was looking for despite my wording. Second and final question, just going back to Cole Group. You were asked about it earlier. There was a reference to the customs business. Can you just remind us how much of Cole Group or approximately of the revenue is from the customs business?

They were about a 60-40 split.

Yes, it's somewhere between 1/3 and 60-40 somewhere in there.

In that ballpark.

As a private company, they've bundled everything together in a bucket. In our world, of which, by the way, we've got a corporate executive that's going to sitting right across from me, Joanna Scott, that's really going to be spearheading that initiative is that we're going to fine-tune them so that they report customs and then freight brokerage as separate buckets. And we're going to get them focused. They're going to go from a private company where they could run it the way they wanted to. That's up to the previous owner. But under us, we're a public company, and we measure everything.

And that's going to be -- Joanna is going to head that initiative up, and she's already chosen a new leader to join with her to help with that initiative. And Richard Maloney is working with the gentleman in the U.S. to accelerate on the custom side. That's our primary focus. We want to focus on customs because that's the margin business. The freight forwarding business, that's a tough business right now. Everybody that reports just freight forwarding and that's not a great business. We'll have to -- we've got our work to do on that side. But it's -- I'd say it's about 1/3 to a little bit more is customs. On the margin side, flip that around, maybe 2/3 on the top side. So you know where our focus will be is grow the custom side.

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

Nothing for me, folks. Thanks very much for joining us. Enjoy the rest of your summer. As I said, we've got lots of work to do on the margin side. We're 100% focused on as a senior team. Thank you very much for joining us. We'll talk to you in the fall. Cheers.

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