Mullen Group Ltd. (MTL) Earnings Call Transcript & Summary

Good afternoon all. My name is Murray Mullen. I'm the Chair, Chief Executive Officer and President of Mullen Group Ltd. On behalf of your Board of Directors, I want to welcome you to our 27th annual meeting. And I am speaking to you this afternoon from our corporate office located in Okotoks, Alberta. And although we're disappointed that we can't see each of you today, our thoughts are with you, your families and the communities you serve. We want to thank you for attending our very first virtual meeting and hope that you agree we did the right thing by moving to an electronic platform in light of these very unprecedented circumstances. Instructions on how to ask questions as well as the voting procedure will appear on your screens. As with any new technology, unexpected glitches may occur. But our service providers for this platform at Lumi are very experienced at running this type of meeting and will help us out as and if required. The meeting will now come to order. In accordance with the company's bylaws, I will act as the Chair of the meeting. Before proceeding with the agenda, I will ask Joanna Scott, Corporate Secretary of Mullen Group, to act as a secretary of the meeting; and Kyle Gould, representing Computershare Trust Company of Canada, to act as a scrutineer. I have received confirmation from Computershare as to the due mailing on the Notice of Meeting, information circular and instrument of proxy on March 31, 2020, to shareholders of record as of March 11, 2020. I direct with this confirmation, together with copies of the documents mailed to the shareholders, be kept by the secretary with the minutes of this meeting. Now business may be transacted at this meeting if we have at least 2 shareholders present who hold or present by proxy in the aggregate at least 5% of the shares entitled to vote at this meeting. A shareholder is present if the individual representing the shares in-person or by proxy has logged into Lumi. According to registrations confirmed to me by the scrutineer, there are 61 shareholders present, representing 78.68% of the shares entitled to vote at this meeting. As a result, a quorum exists. Now shareholders and any other person attending the meeting of shareholders may address the meeting when there is a call to discuss any of the motions that are made today at the meeting. Should you wish to address the Chair on any motion, please type in your question or comment in the message section of your screen once it open ups during the discussion period. If there's any discussion or question, the secretary will read the question aloud. I now declare this meeting to be regularly called and properly constituted for the transaction of business. The business at today's meeting is: first, to receive the audited financial statements for the year ended December 31, 2019; two, to fix the number of directors to be elected; three, to elect directors; and four, to appoint auditors. This business is further described in the Notice of Meeting and management information circular and proxy statement dated March 11, 2020, that was delivered and filed in advance of this meeting as required by law. So the first item of business is to receive the 2019 annual financial statements and auditor's report thereon. The document includes the consolidated financial statements of Mullen Group Ltd. for the fiscal year ended December 31, 2019, together with management's discussion and analysis thereon, which was mailed to each registered shareholder. As such, this item does not require a vote. The remaining items of business will require a vote, and we will conduct the votes on the matters before us by a poll conducted using the Lumi platform. On a poll, and in accordance with the company's articles, every shareholder is invited, entitled to vote on the matter, has 1 vote in respect of each share held by that shareholder. The poll will be open for all resolutions at the same time, and we will be making all motions at once. However, should you have any questions or nominations, we ask that you use the communication platform provided. We will provide time for voting and questions once the motions have been made. And as a matter of convenience, we have asked certain shareholders to move and second routine matters of business. This is not intended in any way to limit shareholder discussions but only to insist with the progress of the meeting. The next item of business are as follows: number one, we'll set the number of directors of Mullen Group to be elected at the meeting at 6 directors; number two, the nomination and election of directors; and third, the appointment of our auditors. So do I have a motions in this regard?

Good afternoon, Mr. Chairman. My name is Kim Derbecker, and I'm a shareholder of Mullen Group. I make the following 3 motions: first, that the number of directors to be elected to the Board of Mullen Group Ltd. at today's meeting be fixed at 6 directors; second, that each of Christine McGinley, Stephen H. Lockwood, David E. Mullen., Murray K. Mullen, Philip J. Scherman and Sonia Tibbatts be nominated each as a Director of Mullen Group Ltd. to hold office until the next annual meeting of shareholders or until a successor is elected or appointed, subject to the provisions of the Alberta Business Corporations Act and articles and bylaws of Mullen Group Ltd., and that the nominees presented to this meeting be elected as Directors of Mullen Group Ltd.; third, that PricewaterhouseCoopers LLP, chartered professional accountants, be reappointed as the auditors of Mullen Group Ltd. until the next annual meeting or until their successors are appointed and the Board be authorized to fix the remuneration.

Thank you. Would a shareholder please second the motion?

Mr. Chairman, my name is Stephen Clark, and I am a shareholder of Mullen Group. I second each of the motions.

Thank you. Is there any discussion of any of these 3 motions or any further nominations for directors?

There are no further nominations or questions at this time, Mr. Chairman.

As there is no discussion, I'll now call a vote on the 3 motions before the meeting. And would all shareholders please enter your votes on Lumi. In accordance with our majority voting policy, shareholders will vote for each director individually. And I will now pause for 1 minute to allow for any shareholder that wishes to cast a vote using the Lumi platform. [Voting]

The scrutineer has collected and tabulated the votes on each motion and reported the results to me. As I mentioned before, a majority of voting policy requires that we conduct the election of directors on an individual basis. As a result, the decision of the meeting of the election of directors conducted individually using the voting functionality of Lumi. Having received confirmation from the scrutineer, I declare that each of the motions that was made today pass. Accordingly, each individual that was nominated today to be elected as a director of Mullen Group Ltd. was so elected. The final results of this vote will be disclosed by way of a news release tomorrow, which will also be available in the company's SEDAR profile and the company's website. Now this concludes the matters before our annual meeting, and I will now entertain a motion that the meeting be terminated.

Mr. Chairman, I move this meeting be terminated.

Thank you. Would a shareholder please second the motion?

Mr. Chairman, I second the motion.

Thank you to all, and I'll now declare the formal part of the meeting terminated. Now on your screen, you're going to see a caption of what our group has put together, which has really captivated all of us over the last bit. And as we've put here, things have changed. Everything has changed, so we have to adapt. And so fellow shareholders, the next part of this afternoon's presentation, I'm going to keep it as brief. It was only a couple of weeks ago that we released our first quarter numbers, and we held a conference call. We released our numbers and everything, so I don't -- I'm not going to go through all of that again. But what I want to do is spend a little bit of time talking about what our company is all about today. Now earlier this year, when life appeared normal, we were on a clear path of growth of our business. We had a number of quality acquisition opportunities as well as some very interesting expansion plans. For obvious reasons, these have been put on hold. For how long, I have no way of knowing. But I can say this in all confidence: the Mullen Group will be just fine. And when a clear picture emerges as to what the new normal will look like, we will invest our shareholders' cash, which, by the way, stands at a very healthy $80 million these days. We will focus on those parts of the economy where we have a strong market presence and where we can leverage our position. But for today, let's just all deal with what we know. Our primary focus these days is supporting our 6,000-plus employees and associates, those that have been deemed essential service providers: the frontline driver, the dockworker, the mechanic, all leave the comfort and confines of their homes to service our communities and our citizens. Ensuring their safety is paramount, and we will do what it takes to work with them and manage the new safety protocols. For those approximately 1,000 employees and associates that have been temporary furloughed or left without work, we have a different set of priorities. We want them back as soon as the economy opens up. And so we're staying in touch with them. We're providing support and financial aid where required. As for our support services teams, we are all practicing the art of remote technology. It has worked remarkably well. We have implemented social distancing techniques, reduced office work schedules and implemented work from home for many. This is what you do when the world changes. Now in the next few slides, I will speak about the 3 operating segments that define our business today. I've called it Mullen's revenue mix by segment. But really, I could call it logistics revenue by mix by segment because everything we do at this company involves supporting our customers' needs, servicing their supply chain. And this is what logistics is all about. Mullen Group has always been a leader in the Canadian transportation sector. And in the early years when the oil and natural gas industry was attracting capital from far and wide, we created tremendous value for shareholders, growing the business from $72 million in revenues to over $1.4 billion at the peak. When we started to see some cracks forming in the Canadian energy space, we pivoted away from oil and natural gas and diversified into sectors of the economy where we saw more stability and greater opportunity. In doing so, we believe we protected our shareholders from absolute Armageddon. It wasn't easy. It wasn't always appreciated by shareholders, especially early on. But we did it, and I am pleased today to be able to talk to you as one of Canada's leading diversified logistics providers. So let me start now with what the LTL segment, the less-than-truckload, the final mile part of what we call the supply chain. What is LTL? Well, LTL, this is the segment that we've invested the majority of our CapEx, the majority of our capital over the last 5 years. Why? Because it is a different business to manage than most. It is difficult, and that's due to the complexity of handling so many shipments, literally thousands of shipments per day through a vast terminal network. So what is LTL? It's virtually everything that you can think of. It's packaged, it's parceled and it's palletized, and that's the product that we move to customers and to ship to suppliers everywhere across our vast network. We're tied to the consumer. We have -- we move everything from temperature control delivery services, ambient transportation, which is really required for health care products. We utilize leading-edge technology, and we have an extensive terminal network. So it's here that our network coverage is outlined. And you can see it right from Toronto, we have a large terminal there that we aggregate shipments in, and then they're moved to the west. And I'm a huge believer in the strong regional brand, but our network that we have today covers Canada right from Toronto, right to Vancouver Island. And we would service some 5,000 communities, not every day, but we service these communities through a huge terminal network that I've outlined here. It's very difficult for any company in Canada to replicate what we've built out over the last number of years. So here's a slide. When I talk about the -- building a network of strong regional brands, this is really what I mean by it. You can see that we have 8 business units. They're right from the West Coast all the way to Winnipeg. And I'm a huge believer that this is how you build -- we build the network at Mullen Group, but it's these business units that provide the service to their local communities. And they -- you hire local drivers. You have local dockworkers, local people all, and they protect their own brands. What we provide is just the network, and we aggregate together with certain things like technology, where you can use best-of-breed tracking and tracing and all those kind of things. But I'm a huge believer in the strong regional brand. LTL is the most important part of our business today, and it's one that will attract the most capital on a go-forward basis from my perspective. Now as I move to the Specialized & Industrial Services segment, this is a statement -- is what I refer to as a collection of businesses that are involved in logistics and transportation. So when I say logistics, when I say warehousing, it's not one or the other, it's a combination of both. And this is what really makes this business so unique. It's what we also think that give us a competitive edge. It's -- because to be successful at 1 or the 2 is easy for some to do, but it's the combination of the 2 that we think gives us the best competitive edge. The key thing to this is, once again, it's all about a technology platform. You've got to have it to be able to intertwine a successful warehousing component with the servicing to the final end consumer, to the customer, which is the logistics part. It's all about value-added warehousing and distribution. In Eastern Canada, we have our diversified warehousing segment. And these folks are using the best-in-class e-commerce platforms to really change the way they're doing business, which is just exploding right now as the whole logistics platform changes. We do some full truckload because to get it to a warehouse, it has to usually come in a full truckload. So we like to say we can combine the whole network for our shippers and for our customers, and we utilize that in our segment. Once again, you'll see in the Logistics & Warehousing segment, you'll see this strong regional brand network that I talk about. We have 9 business units in this section. Everything from Caneda Transport, Kleysen Group, it's -- a lot of them are asset-light, but the whole concept here is you do multiple different service offerings. In each one of them, these cases, we use a warehousing component. And that's the stickiness that we think make -- differentiates us from just another "trucker." That's the key part of this thing. And again, you have to have this technology platform to be able to make the whole thing work. You can see we utilize our integrated management systems. We use Moveitonline and Haulistic very, very extensively all within this group. It's one of the key differentiators we have, and it's one of the things that will drive our business into the future. The last segment that I want to talk about, once again, strong regional brands, is Specialized & Industrial Services segment. Now this is what I refer to as a collection of gems. It's our involvement in many aspects of the Canadian economy. And once again, I want to just reiterate this. In Canada, if you're going to have scale and size, you have to be in multiple different business sections. And that's what we are here. We serve the natural resources and infrastructure sector of our economy. We have -- we deal with pipeline, construction, petrochemical, infrastructure, right through to utility and telecom, and, yes, oil and what I call -- or natural gas today. So that's what this is really involved in this segment. Once again, it's these strong regional brands that I talk about. It's in many sectors, and you'll see that we deal with everything from the Hydrovac business, the hauling of pipe to general construction to production services of hauling fluids. And yes, we do some business in the drilling and drilling-related businesses. And why is that? I'll tell you. The fundamental reason is -- that we're in these is because I never truly know when will one sectors of this economy take off and when will it go bad. Right now, we're seeing some sectors like the oil or gas business, natural gas business, that is being challenged. But I would say to you, you never know when it will come back. For example, I firmly believe that the crude oil business is in for trouble for a bit. And why is that? Because the primary customer for oil is travel, it's airlines, it's trucks, it's cars, it's ships, it's everything to do with moving of people. Those are basically -- a lot of that's tied to our wants as a society. But when I look at natural gas, natural gas is more of a need. You got to heat your home. You're going to have the natural gas feed power plants. And why do you have power plants for, to generate electricity. So while we see the crude oil business running into some problems, I wouldn't be surprised to see the natural gas business actually have a bit of a bid to it here. We're going to have to drill for natural gas so that we can have that available for consumers because that really is part of our needs in society. So that's how we see this playing out. That's why we've structured our whole business over the last little bit. It's -- we're a diversified company. But in each case, when you take a look at this, it all has to do with logistics. It's all about servicing customers with their logistics and their supply chain. So we're -- we have to be a diversified company here in Canada if we're going to have any scale in size, and we've allocated our business into these 3 segments. So folks, that's what our business is about today. It's short and it's sweet, and I want to thank you for listening to this part of it. Then in closing, and on behalf of the Board of Directors, the senior executive team and every single employees, I want to thank all of our shareholders for your support. I know it hasn't been easy these past few months given the market turmoil, but I want to reiterate that I really like how our business is positioned for tomorrow's economy. I fully expect the rest of this decade will be much kinder to all shareholders. Now one last point before I entertain questions. Over the last 15 years, I've had the pleasure of working alongside a fantastic board member. Unfortunately, we are losing a good one because of the rules some referred to as best practices. Greg Bay has served our shareholders in this company with absolute distinction, and I want to recognize his contributions today. Greg, thanks for everything, and we will celebrate as soon as the world lets us do it. So now let's turn it over to the question session, and I'll be glad to entertain some questions and provide the best answers I can to you.

Mr. Chairman, we have no questions in our queue at this time.

Well, Jo, then I'm going to ask you to present a question to me. I don't want our friends at Lumi to get away with something here. We've got -- somebody's got to have a question for me. Even when we're together in -- at the traditional meeting, it takes a little while for the questions to come out, then all of a sudden. So I'll give it a couple seconds here to see if somebody wants to pose a question.

Sounds good.

There's got to be something because if not, this will be the shortest annual meeting in the history of any company, I'm sure of it. Well, Jo, I'm not seeing any questions.

I'm not seeing any either.

Okay. Yes. And I'm not going to have -- I'm not going to sing a song. So I think what we'll do is I'll just -- we'll just end this now. This does conclude our presentation, folks. And I want to thank you for joining us. I want to say safe. And remember this, if you got it, a truck driver brought it, so the next time one of these essential workers, our warriors these days, if you see them, please tip your hat or give them a little wave. It will help ensure that they know we all appreciate everything they do for all of us. Thank you so much, and we look forward to connecting with you again. Thanks again, folks.