Mr. Murray Mullen reports

MULLEN GROUP LTD. REPORTS STRONG 2023 THIRD QUARTER FINANCIAL RESULTS

Mullen Group Ltd. has released its financial and operating results for the period ended Sept. 30, 2023, with comparisons with the same period last year. Full details of the results may be found within Mullen's third quarter interim report, which is available on the corporation's issuer profile on SEDAR+ or on its website.

"Throughout the first nine months of 2023 the economy has endured a period of adjustment due to the rapid rise in interest rates and tighter monetary policy, a deliberate attempt by central bank authorities to reign in inflationary pressures. These measures have been somewhat successful, but they have also directly impacted economic growth and the demand for freight services. In addition to these macro events, the transportation and logistics market in North America is also experiencing a period of adjustment as retailers, shippers and manufacturers have embarked upon an inventory rebalancing strategy, after two years of excessive ordering. Consumers have also changed their spending patterns this year towards services and leisure. Despite these headwinds, our business generated very strong results, differentiating the Mullen Group from many of our peers. Most impressively, in the recent quarter ended Sept. 30, 2023, revenues reached the half-a-billion mark once again, which I attribute to the diversification of service offerings our 40 business units provide, accompanied by a well-thought-out acquisition strategy. I can say with confidence, that we have built a business that can deliver growth regardless of the market conditions," commented Murray K. Mullen, chair and senior executive officer.

"There is a growing consensus that the economy may avoid tipping into recession territory, implying that consumer demand can remain at or near current levels for the balance of 2023. There are also a few green shoots suggesting that inventory levels are back in balance, a strong indicator that freight demand may be on the verge of stabilizing. These are positives for the transportation and logistics industry, and more importantly for our organization. In addition, we forecast another solid quarter for the specialized and industrial services segment given the outlook for the Canadian energy and mining industries, verticals in which we have a meaningful presence. And lastly, we continue to evaluate a number of quality acquisition opportunities. Based upon these positive fundamentals, our full-year 2023 results are now expected to exceed earlier projections, setting us up nicely for future years," added Mr. Mullen.

Key highlights for third quarter:

• Net income of $39.1-million, up 2.9 per cent, and earnings per share up 7.3 per cent to 44 cents;
• Return on equity was 16.3 per cent in the quarter and 14.7 per cent on a year-to-date basis;
• Third quarter revenue of $504-million, down slightly compared with the prior year due to lower fuel surcharge revenue, declines in overall general freight demand in three of Mullen's operating segments amid changes in consumer buying trends along with manufacturers and retailers adjusting inventory levels, and from the sale of the company's hydrovac assets and business in December, 2022;
• Operating income before depreciation and amortization (OIBDA) of $88.6-million, down 9.7 per cent, primarily due to a decrease in the LTL (less-than-truckload) segment and the L&W (logistics and warehousing) segment;
• Repurchased and cancelled 114,524 common shares for $1.5-million, representing an average price of $13.57.

Revenue: third quarter consolidated revenues decreased by $14.4-million, or 2.8 per cent, to $504-million:

• LTL segment down $7.4-million, or 3.7 per cent, to $194.2-million -- revenue declined by $7.4-million due to a $12.3-million decrease in fuel surcharge revenue and from a $6.4-million reduction in revenue resulting from lower freight volumes, particularly in Eastern Canada, along with a more normalized pricing environment in 2023 compared with last year. These decreases were somewhat offset by $11.3-million of incremental revenue from acquisitions.
• L&W segment down $19.2-million, or 12.3 per cent, to $137.1-million -- revenue was down by $19.2-million due to the continuation of the inventory rebalancing cycle and softer freight demand as consumers shift their spend toward leisure and travel versus buying goods. Other factors contributing to the decrease in revenue were a $5.7-million decline in fuel surcharge revenue and from a $1.1-million decrease in revenue resulting from the sale of the company's hydrovac assets and business in the fourth quarter of 2022.
• S&I segment up $16.6-million, or 15.3 per cent, to $125.4-million -- revenue increased by $16.6-million on $16.3-million of incremental revenue from acquisitions and from greater demand for drilling related services and from those business units involved in the transportation of fluids and servicing of wells. Fuel surcharge revenue decreased by $2.3-million while the sale of the company's hydrovac assets and business in the fourth quarter of 2022 accounted for a $1.6-million reduction in revenue.
• U.S. 3PL (United States and international logistics) segment down $5.9-million to $48.8-million -- revenue decreased by $5.9-million due to lower freight demand for full truckload shipments, which resulted from the impact of higher interest rates on economic growth in the U.S. market.

OIBDA: OIBDA decreased by $9.5-million, or 9.7 per cent, to $88.6-million while operating margin decreased by 1.3 per cent to 17.6 per cent:

• LTL segment down $6.6-million, or 16.1 per cent, to $34.5-million -- OIBDA declined by $6.6-million due to a more normalized pricing environment in 2023 and from lower freight volumes, predominately in Eastern Canada. Operating margin decreased by 2.6 per cent to 17.8 per cent as compared with the prior-year period, primarily due to lower margins experienced by the acquisition of B&R Eckel's Transport Ltd. and higher selling and administrative (S&A) expenses as a percentage of revenue, which resulted from lower segment revenue and the fixed nature of S&A expenses.
• L&W segment down $5.9-million, or 18 per cent, to $26.8-million -- OIBDA declined due to lower freight volumes, which resulted from the impact of the freight recession. Operating margin declined by 1.4 per cent to 19.5 per cent due to the combination of lower segment revenue and the fixed nature of S&A expenses.
• S&I segment up $5.1-million to $29.7-million -- OIBDA increased due to stronger demand for drilling related services and for the transportation of fluids and servicing of wells while acquisitions added $3.6-million of incremental OIBDA. These increases were somewhat offset by lower OIBDA resulting from the sale of the corporation's hydrovac assets and business in the fourth quarter of 2022. Operating margin increased by 1.1 per cent to 23.7 per cent as compared with the prior-year period, primarily due to greater activity levels resulting in more efficient operations.
• U.S. 3PL segment down $400,000 to $1.1-million -- OIBDA declined primarily due to the combination of lower segment revenue and higher direct operating expenses as a percentage of segment revenue. Operating margin decreased slightly to 2.3 per cent from 2.7 per cent. Operating margin as a percentage of net revenue was 25 per cent as compared with 28.8 per cent in 2022.

Net income: net income increased by $1.1-million, or 2.9 per cent, to $39.1-million, or 44 cents per common share due to:

• An $8.6-million positive variance in net foreign exchange, a $4-million decrease in income tax expense, a $1.1-million increase in gain on sale of property, plant and equipment, a $1-million decrease in amortization of intangible assets, and a $600,000 change in the fair value of investments.
• These increases to net income were somewhat offset by a $9.5-million decrease in OIBDA, a $2.8-million decrease in earnings from equity investments, a $1.1-million increase in depreciation of right-of-use assets, a $500,000 increase in depreciation of property, plant and equipment, and a $300,000 increase in finance costs.

Financial position

The following summarizes Mullen's financial position as at Sept. 30, 2023, along with some key changes that occurred during the third quarter:

• Working capital of $91.9-million including $114.2-million of amounts drawn on the company's $250-million of bank credit facilities;
• Total net debt ($649.8-million) to operating cash flow ($328.1-million) of 1.98:1 as defined per Mullen's private placement debt agreement (threshold of 3.50:1);
• Private placement debt of $480.4-million (average fixed rate of 3.93 per cent per annum) with principal repayments (net of cross-currency swaps) of $217.2-million and $207.9-million due in October, 2024, and October, 2026, respectively;
• Book value of derivative financial instruments up $6.6-million to $49.2-million, which swaps the company's $229-million of U.S.-dollar debt at an average foreign exchange rate of $1.1096;
• Net book value of property, plant and equipment of $1-billion, which includes $646.1-million of carrying costs of owned real property;
• Repurchased and cancelled 114,524 common shares for $1.5-million, representing an average price of $13.57.

About Mullen Group Ltd.

Mullen Group is one of Canada's largest logistics providers. Its network of independently operated businesses provide a wide range of service offerings including less-than-truckload, truckload, warehousing, logistics, transload, oversized, third party logistics and specialized hauling transportation. In addition, Mullen provides a diverse set of specialized services related to the energy, mining, forestry and construction industries in Western Canada, including water management, fluid hauling and environmental reclamation. The corporate office provides the capital and financial expertise, legal support, technology and systems support, shared services, and strategic planning to its independent businesses.

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