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

Hello, and welcome to The Watchlist. I'm Korina Robertson. Joining me is Carson Urlacher, Senior Financial Officer of the Mullen Group. He's here with the financial update. Nice to see you, Carson.

Nice to see you, Korina.

Now Mullen released the first quarter results yesterday, which came in below market expectations. Can you give us a summary of the results?

Sure. Sure, Korina. But before I do, I'd start off by saying this, that here at Mullen, we have two rules in business. So rule #1 is always protect the balance sheet and rule #2 is don't forget rule #1. So now we can talk about the quarter. So the overall market in 2024, it's much more competitive than what we had in 2023. So it's really not a surprise to us that our results are down. In fact, we articulated in our outlook at the beginning of the year, that the first half was going to be soft. And we saw the economy facing some serious headwinds. So the first quarter came in as we predicted. But predicting had changes is one thing. The most important thing is how you prepare for it. So we've been in business since 1949, seen all sorts of market cycles. What I can tell you is that the companies that are able to predict and adapt changing market cycles can actually take advantage of the opportunities that arise from them. So in 2022 and in 2023, we saw some of the best market conditions that we've ever seen. And we benefited simply by just letting our business units capitalize on strong demand. So we knew that this wasn't sustainable, and we did one important thing, and that was to not do acquisitions at the peak of the market and overpay. So now we have a strong balance sheet going into a very competitive market. So I can tell you doing acquisitions in a downturn is much less risky than it helps us prepare for the next up cycle. So we're kind of countercyclical in our approach. And we're going to use this downturn to prepare ourselves for the next up cycle. When does that happen? That's anybody's guess. And it's obviously continuing upon many factors outside of our control. But what I can tell you with confidence, though, is that we're going to be ready.

All right. And given the changing market conditions, how stable is the dividend going forward?

Our dividend is rock solid for a couple of reasons. Most importantly, we generate free cash each and every year. Done so over the past 10 years. In fact, we've averaged over $100 million of free cash generation per year while going through many different market cycles. And really, the secret sauce is that we focus on free cash, not EBITDA. EBITDA is going to fluctuate through the different cycles. But one thing that doesn't fluctuate is our ability to generate free cash. And the other main reason is quite simply that we own our own real estate. So it's supports our dividend.

Well, thank you so much, Carson, for the update. For The Watchlist, I'm Korina Robertson.