Mullen Group’s Q4 revenue edged down less than 1% year over year to $498.6 million, as incremental revenue from acquisitions helped offset lower fuel surcharge revenue and soft freight and logistics demand.

Net income fell 52.2% to $32.1 million, but largely due to a $29.3 million gain on sale of property, plant and equipment that Mullen enjoyed in Q4 2022. It improved its operating margins from 15.4% to 15.9%.

“Results for the fourth quarter were consistent with our previously released Dec. 11 update, although demand was light in all four segments as the year came to a close,” chairman and senior executive officer Murray Mullen said in a release. 

“Basically, we lost a week’s worth of revenue due to the timing of the holiday schedule. In addition, we accelerated the restructuring of the B.&R. Eckel’s group, acquired earlier in 2023, resulting in one-time restructuring charges of approximately $2.9 million in the quarter.”

Looking ahead to 2024, Mullen said he’s more optimistic about business conditions than he was a year ago.

“We enter 2024 with a greater sense of optimism than at this time last year for a couple of reasons,” he explained. “The first is that the North American economy continues to show a resiliency that supports a strong job market, one of the most important factors influencing end consumer demand. Furthermore, if inflationary pressures continue to moderate and interest rates start declining, consumers will have more disposable income, a precursor to increased freight demand.  

“We also believe the inventory rebalancing cycle is basically over, implying that shippers will need to replenish, or at the very least rebuild, inventory levels if they want to capture the ever demanding needs and wants of consumers. And, even though the current over capacity issue in the logistics and trucking industry is limiting growth and profitability, this will change. Many competitors are struggling with high debt levels and shrinking profitability, an unsustainable situation in our view.”

M&A opportunities

He said acquisition opportunities will be abundant this year due to business failures, which will help drive pricing discipline.

“We will look to add strong brands to our network and will continue to pursue tuck-in acquisitions that drive scale and enhance operating margins,” added Mullen.

Speaking to analysts after releasing earnings, Mullen said he doesn’t see strong freight growth this year, but does see opportunities to grow share through acquisition and competitor failures.

“From our perspective, it appears the North American economy is OK. It’s definitely range-bound, but the job market is still strong and consumers are still spending. But, they’re buying fewer items and that in itself is not good for freight demand,” Mullen said.

He added consumers are struggling with inflation and rising interest rates, the latter of which is also affecting capital investment. Mullen also said the company’s inboxes are flooded with acquisition opportunities. “Today’s failures and consolidation will lead to tomorrow’s pricing discipline,” he said, noting Mullen will be on the look out for LTL tuck-in acquisition opportunities.

A 3PL evolution

Mullen Group won’t be looking to buy 3PLs. The company already operates its Haulistic 3PL in the U.S., and Mullen sees an opportunity to expand that on the back of its technology. He sees artificial intelligence replacing the traditional broker model.

“Traditional 3PLs have gotten themselves in a bit of a box right now,” he said. “I think technology is going to be able to connect the content with the shipper. You don’t need to have a broker that does that anymore. It’s all about the technology.”

Mullen foresees rolling out its Haulistic platform to entrepreneurs who will act as “station agents” connecting shippers with carriers using its technology platform.

“It’s an Uber-style business model where they have the customer and we have the technology, that’s our vision,” he said.

On Driver Inc.

Earlier in earnings season TFI International head Alain Bedard expressed his frustration with the Driver Inc. business model that misclassifies company drivers as independent contractors to sidestep certain source deductions.

Asked about that issue, Mullen said his company is less impacted since it has kept its full truckload business small – by design.

“I don’t like it, but it is what it is,” he said of Driver Inc. “We do not have a big footprint in full truckload. I stayed away from it for that very reason…it’s a real issue for anybody in the full truckload business, I can tell you.”

LTL growth

And the prevalence of Driver Inc. in the truckload segment is part of the reason Mullen will be looking to invest its capital in LTL acquisitions, a segment in which Driver Inc. is less pervasive. Mullen sees plenty of opportunities to buy businesses that haven’t kept up with the technology required in today’s environment.

“We’re going to be well situated to continue to add lane density and that’s where you make your money in LTL,” he said.

“Anybody that did acquisitions in 2022, you paid too much, that’s a fact. Anybody that took on debt when interest rates were low, your mortgage is coming due and mortgage rates are a lot higher today than they were back then and that’s really squeezing people in this market. We did not do deals in 2022 because I didn’t think it was sustainable.”