Reports Record 2022 Third Quarter Financial Results

OKOTOKS, AB, Oct. 20, 2022 /PRNewswire/ - (TSX: MTL) Mullen Group Ltd. ("Mullen Group", "We", "Our" and/or the "Corporation"), one of North America's largest logistics providers today reported its financial and operating results for the period ended September 30, 2022, with comparisons to the same period last year. Full details of our results may be found within our Third Quarter Interim Report, which is available on the Corporation's issuer profile on SEDAR at www.sedar.com or on our website at www.mullen-group.com.

"Shareholders should be pleased with our latest results. Consolidated revenues exceeded $500.0 million for the second consecutive quarter reflecting strong customer demand across all operating segments, increased pricing year over year, along with new revenues from a couple of small acquisitions. These are some of the better results our company has ever achieved in what is perhaps the best operating environment I have seen in my career. The strong economy provides our business with the lane and load density our Business Units need to be profitable. And inflation translates into higher pricing, which is very consistent with an economy operating near peak capacity. Our entire team worked long hours to achieve these excellent results and meet customer expectations," commented Mr. Murray K. Mullen, Chair and Senior Executive Officer.

"Markets are constantly changing and I expect that our future results will moderate as central bankers, worldwide, try and slow economic activity and tame inflationary pressures. At least this is what the experts are predicting. But this may be a next year event because all of the data points I follow, of which employment statistics is the most critical, indicate that the balance of this year should remain steady. There are some soft spots for sure; however, consumers have not stopped spending, governments continue to hand out money and investment in capital projects is still required. So, I still see the demand for freight, logistics and warehousing services remaining strong through year end. Of course, no one knows for sure which direction the economy will take, so if business activity slows, we will simply adjust, just as we have in the past," added Mr. Mullen.

Key financial highlights for the third quarter of 2022 with comparison to 2021 are as follows:

Third Quarter Summary
*(unaudited)* *($ millions, except per share amounts)*	Three month periods ended September 30			Nine month periods ended September 30
	2022	2021	Change	2022	2021	Change
	$	$	%	$	$	%
Revenue	518.4	432.5	19.9	1,496.8	1,035.5	44.5

Operating income before depreciation and amortization⁽¹⁾	98.1	64.5	52.1	252.3	170.6	47.9
Adjusted operating income before depreciation and amortization⁽²⁾	98.1	64.4	52.3	252.3	158.1	59.6
Net foreign exchange loss (gain)	8.4	(0.2)	(4,300.0)	12.9	(1.5)	(960.0)
Decrease (increase) in fair value of investments	0.4	0.3	33.3	0.3	(0.8)	(137.5)
Net income	38.0	17.5	117.1	97.1	52.2	86.0
Net Income - adjusted⁽³⁾	47.0	17.8	164.0	110.6	49.5	123.4
Earnings per share - basic⁽⁴⁾	0.41	0.18	127.8	1.04	0.54	92.6
Earnings per share - diluted⁽⁵⁾	0.39	0.18	116.7	1.00	0.54	85.2
Earnings per share - adjusted⁽³⁾	0.51	0.19	168.4	1.18	0.51	131.4
Net cash from operating activities	95.7	37.3	156.6	162.5	132.2	22.9
Net cash from operating activities per share⁽⁴⁾	1.03	0.39	164.1	1.74	1.37	27.0
Cash dividends declared per Common Share	0.18	0.12	50.0	0.50	0.36	38.9

Notes:
(1)	Operating income before depreciation and amortization ("OIBDA") is defined as net income before depreciation of right-of-use assets and of property, plant and equipment, amortization of intangible assets, finance costs, net foreign exchange gains and losses, other (income) expense and income taxes.
(2)	Adjusted OIBDA is calculated by subtracting the Canada Emergency Wage Subsidy from OIBDA.
(3)	Net income - adjusted and earnings per share - adjusted are calculated by adjusting net income and basic earnings per share by the amount of any net foreign exchange gains and losses, the change in fair value of investments, and the gain on contingent consideration.
(4)	Earnings per share - basic and net cash from operating activities per share are calculated based on the weighted average number of Common Shares outstanding for the period.
(5)	Earnings per share - diluted is calculated based on the diluted weighted average number of Common Shares outstanding for the period.

Non-GAAP Terms - Mullen Group reports on certain financial performance measures that are described and presented in order to provide shareholders and potential investors with additional measures to evaluate Mullen Group's ability to fund its operations and information regarding its liquidity. In addition, these measures are used by management in its evaluation of performance. These financial performance measures ("Non-GAAP Terms") are not recognized financial terms under Canadian generally accepted accounting principles ("Canadian GAAP"). For publicly accountable enterprises, such as Mullen Group, Canadian GAAP is governed by principles based on IFRS and interpretations of IFRIC. Management believes these Non-GAAP Terms are useful supplemental measures. These Non-GAAP Terms do not have standardized meanings and may not be comparable to similar measures presented by other entities. Specifically, Adjusted OIBDA, adjusted operating margin, operating margin, net revenue, net income - adjusted and earnings per share - adjusted are not recognized terms under IFRS and do not have standardized meanings prescribed by IFRS. Management believes these measures are useful supplemental measures. Investors should be cautioned that these indicators should not replace net income and earnings per share as an indicator of performance.

Third Quarter Financial Results

*(unaudited)* *($ millions)*	Three month periods ended September 30
*(unaudited)* *($ millions)*	2022	2021	Change
	$	$	%
Revenue
Less-Than-Truckload	201.6	169.1	19.2
Logistics & Warehousing	156.3	121.9	28.2
Specialized & Industrial Services	108.8	85.7	27.0
U.S. & International Logistics	54.7	57.0	(4.0)
Corporate and intersegment eliminations	(3.0)	(1.2)	-
Total Revenue	518.4	432.5	19.9
Adjusted operating income before depreciation and amortization ⁽¹⁾
Less-Than-Truckload	41.1	26.9	52.8
Logistics & Warehousing	32.7	22.7	44.1
Specialized & Industrial Services	24.6	15.6	57.7
U.S. & International Logistics	1.5	2.9	(48.3)
Corporate	(1.8)	(3.7)	-
Total Adjusted operating income before depreciation and amortization ⁽¹⁾	98.1	64.4	52.3
⁽¹⁾ Refer to notes section of Third Quarter Summary

Revenue increased by $85.9 million, or 19.9 percent, to $518.4 million and is summarized as follows:

LTL segment up $32.5 million, or 19.2 percent, to $201.6 million - revenue improved by $32.5 million due to a $21.1 million increase in fuel surcharge revenue, $9.0 million of incremental revenue from acquisitions and $2.4 million from general rate increases and steady demand as overall freight volumes were consistent compared to the prior year.
L&W segment up $34.4 million, or 28.2 percent, to $156.3 million - revenue improved by $34.4 million as general rate increases and strong demand for freight services at virtually all of our Business Units led to a $22.5 million increase in segment revenue. Fuel surcharge revenue increased by $11.9 million due to the rise in diesel fuel prices.
S&I segment up $23.1 million, or 27.0 percent, to $108.8 million - revenue increased by $23.1 million as general price increases across all Business Units to offset higher costs associated with inflationary pressures led to a $19.7 million increase in segment revenue. The demand for specialized services including dewatering, water management, pipeline hauling, oilfield activity and construction projects in northern Manitoba were the primary reasons this segment grew revenue. Fuel surcharge revenue also increased by $3.4 million.
US 3PL segment down $2.3 million - HAUListic LLC generated $54.7 million of gross freight revenue as freight demand for full truckload shipments softened in the third quarter impacting total revenue and margin per load due to competitive pricing.

Adjusted OIBDA increased by $33.7 million, or 52.3 percent, to $98.1 million and is summarized as follows:

LTL segment up $14.2 million, or 52.8 percent, to $41.1 million - Adjusted OIBDA improved due to general rate increases and steady demand contributing $12.5 million to the increase while acquisitions added $1.7 million of incremental Adjusted OIBDA. Adjusted operating margin increased to 20.4 percent as compared to 15.9 percent in 2021 due to rate increases implemented in 2022.
L&W segment up $10.0 million, or 44.1 percent, to $32.7 million - Adjusted OIBDA improved due to general rate increases at virtually all of our Business Units. Adjusted operating margin increased to 20.9 percent as compared to 18.6 percent in 2021 as freight rates remained elevated and more than offset inflationary costs.
S&I segment up $9.0 million, or 57.7 percent, to $24.6 million - Adjusted OIBDA increased due to price increases implemented at several Business Units, the improved results at Canadian Dewatering L.P. ("Canadian Dewatering"), greater demand from the Business Units involved in the transportation of fluids and servicing of wells and drilling related services as higher commodity prices resulted in increased activity levels in the Western Canadian Sedimentary Basin ("WCSB"). Adjusted operating margin increased by 4.4 percent to 22.6 percent as compared to 18.2 percent in 2021 due to price increases, the strong performance at Canadian Dewatering and greater activity levels in the WCSB.
US 3PL segment generated $1.5 million of Adjusted OIBDA in the quarter, representing a margin of 2.7 percent of gross revenue. Operating margin as a percentage of net revenue was 28.8 percent. Margins were negatively impacted by higher than normal Contractors expense and an increase in S&A expenses as we continue to build out our technology platform.

Net income increased by $20.5 million to $38.0 million, or $0.41 per Common Share due to:

A $33.6 million increase in OIBDA, a $4.7 million decrease in amortization of intangible assets, a $2.4 million increase in earnings from equity investments due to the strong performance from certain investments and a $0.6 million decrease in depreciation of property, plant and equipment.
These increases were somewhat offset by a $9.7 million increase in income tax expense, an $8.6 million negative variance in net foreign exchange, a $1.1 million increase in finance costs, a $0.9 million increase in loss on sale of property, plant and equipment, a $0.4 million increase in depreciation of right-of-use assets and a $0.1 million negative variance in the change in fair value of investments.

Financial Position

The following summarizes our financial position as at September 30, 2022, along with some key changes that occurred during the third quarter of 2022:

Reduced the amount being borrowed on our Credit Facilities by $43.5 million to $98.7 million.
Working capital of $94.6 million, an increase of 62.8 percent or $36.5 million from the second quarter of 2022.
Total net debt ($630.5 million) to operating cash flow ($319.1 million) of 1.98:1 as defined per our Private Placement Debt agreement (threshold of 3.50:1).
Private Placement Debt of $484.4 million with no scheduled maturities until 2024 (average fixed rate of 3.93 percent per annum). Private Placement Debt increased by $18.9 million due to the foreign exchange loss on our U.S. $229.0 million debt.
Book value of Derivative Financial Instruments up $10.5 million to $48.0 million, which swaps our $229.0 million of U.S. dollar debt at an average foreign exchange rate of $1.1096.
Net book value of property, plant and equipment of $978.8 million, which includes $633.8 million of historical cost of owned real property.
Repurchased and cancelled 206,100 Common Shares at an average price of $12.11 per share under our normal course issuer bid during the third quarter of 2022.

About Mullen Group Ltd.

Mullen Group is one of North America's largest logistics providers. Our 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, we provide 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.

Mullen Group is a publicly traded corporation listed on the Toronto Stock Exchange under the symbol "MTL". Additional information is available on our website at www.mullen-group.com or on the Corporation's issuer profile on SEDAR at www.sedar.com.

Contact Information

Mr. Murray K. Mullen - Chair, Senior Executive Officer and President
Mr. Richard J. Maloney - Senior Operating Officer
Mr. Carson P. Urlacher - Senior Accounting Officer
Ms. Joanna K. Scott - Senior Corporate Officer

121A - 31 Southridge Drive
Okotoks, Alberta, Canada T1S 2N3
Telephone: 403-995-5200
Fax: 403-995-5296

Disclaimer

This news release may contain forward-looking statements that are subject to risk factors associated with the overall economy and the oil and natural gas business. Mullen Group believes that the expectations reflected in this news release are reasonable, but results may be affected by a variety of variables. The forward-looking information contained herein is made as of the date of this news release and Mullen Group disclaims any intent or obligation to update publicly any such forward-looking information, whether as a result of new information, future events or results or otherwise, other than as required by applicable Canadian securities laws. Mullen Group relies on litigation protection for "forward-looking" statements. Additional information regarding the forward-looking statements is found on pages 31 and 32 of Mullen Group's Management's Discussion and Analysis.

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