Andlauer Healthcare Group Inc
TSX:AND
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Good morning. My name is Michelle, and I will be your conference operator today. At this time, I would like to welcome everyone to the Andlauer Healthcare 2023 Second Quarter Results Conference Call. [Operator Instructions]Please be aware that certain information discussed today may be forward-looking in nature. Such forward-looking information reflects the company's current views with respect to future events. Any such information and is subject to risks, uncertainties and assumptions that could [Technical Difficulty] the risks, uncertainties, and assumptions related to forward-looking information, please refer to the company's latest MD&A and Annual Information Form, which are found on SEDAR.Management may also refer to certain non-IFRS financial measures. Although the company believes that these measures provide useful supplemental information about financial performance, they are not recognized measures and do not have standardized meetings under IFRS. Please see the company's latest MD&A for additional information regarding non-IFRS financial measures, including for reconciliation to the nearest IFRS measures.Please note that, unless otherwise stated, all references to any financial figures are in Canadian dollars.Following management's remarks, there will be a question-and-answer session.This call has been recorded on August 2, 2023. And I would now like to turn the conference over to Michael Andlauer. Please go ahead, sir.
Good morning. Thank you, Michelle, and good day everybody. Thank you for joining us today. With me on the call today is Peter Bromley, our Chief Financial Officer. Following my opening remarks, Peter will follow with a more detailed discussion of our financial results for the quarter. I'll then provide closing comments and open the lines to questions.Well, we generated solid results in our second quarter this year, though, not as strong as our record quarterly results of Q2 a year ago, and we benefited from superior U.S. truckload rate premiums, higher revenue related to COVID-19 vaccines, ancillary products, and an unusually high airfreight forwarding volumes. Our Q2 this year also reflects much lower fuel surcharges than Q2 last year in line with a similar reduction in expenses. Despite the lack of these operating tailwinds in Q2 this year, our consolidated revenue for the first half of this year is higher than the same period a year ago and our EBITDA margins for the quarter and year-to-date remain within our historical range of 24% to 26%. As expected, our revenue related to COVID vaccines and ancillary products comprised of less than 1% of our revenue in Q2 this year compared to 2.6% of higher revenue in Q2 a year ago.Our margins and net earnings for the quarter also reflect a year-over-year decline in contribution from our U.S. truckload operations, as the rate premiums we were able to capture in fiscal 2022 related to equipment and driver shortages have now diminished. Our U.S.-based ground transportation revenue and related margins have returned to pre-pandemic levels, and we do not foresee a return to the premiums we achieved in fiscal 2022. These margins are attractive and in line with our initial projections at the time of our acquisitions of Boyle and Skelton USA, and we look forward to driving growth in our U.S. operations going forward.Despite the year-over-year decline in operating performance in the quarter, we continue to expect long-term consolidated organic revenue growth in the mid- to high-single digits. We also continue to pursue acquisitions to further strengthen our platform and drive incremental profitable growth.I'll turn it over to Peter to review our financial performance in more detail. Peter?
Thank you, Michael, and good morning, everyone. Our consolidated revenue for Q2 totaled $157.4 million, a decline of 7.1% from our record quarterly revenue in Q2 last year. Revenue for our healthcare logistics segment was $43.7 million, down 9% from Q2 last year, reflecting a 5.8% year-over-year decrease in our logistics and distribution product line revenue and a 31.3% decline in packaging revenue. The decrease in logistics and distribution revenue was due to lower outbound handling activities for Accuristix and reduced transportation billings impacted by fuel surcharge programs from carriers. The decrease also is partially attributable to $2.1 million of revenue recognized in Q2 last year related to certain pass-through expenses, which were reclassified to logistics and distribution revenue for LSU in accordance with IRS 15 (sic) [ IFRS 15 ] during Q4 2022. This net revenue treatment has been consistently applied during year-to-date 2023. The decline in packaging revenue was due to the loss of one of our packaging customers previously disclosed in Q1 and lower volume from our remaining base of packaging customers related or compared to Q2 a year ago.Revenue in our specialized transportation segment totaled $113.7 million, a decline of 6.4% compared with Q2 last year. The year-over-year decline in segment revenue reflects a 2.7% decrease in ground transportation revenue, a 33.4% decline in air freight forwarding revenue and a 4.5% decrease in revenue from our dedicated and last mile delivery product line. The decrease in ground transportation revenue is primarily attributable to lower fuel costs passed on to customers as a component of pricing. Our ground transportation revenue, excluding fuel, in our Canadian network increased by approximately 3%, but downward pressure on our U.S.-based truckload rates compared to fiscal 2022, as Michael noted previously, offset this growth. The decline in air freight revenue -- air freight forwarding revenue was attributable to lower fuel surcharge revenue and lower weight shipped by customers compared to Q2 last year. Our air freight forwarding customers shipped an unusually high volume during Q2 last year due to supply chain issues during the period. The volume shipped during Q2 this year were more typical and resulted in revenue slightly higher than our revenue for the Q1 this year of $7.5 million. Approximately 25% of the $3.9 million year-over-year decline in air freight forwarding revenue was attributable to lower fuel surcharge revenue. The $0.8 million year-over-year decline in our dedicated and last mile delivery product line reflects lower fuel surcharge revenue compared to Q2 last year, partially offset by continued organic growth.Cost of transportation and services was $78.9 million, or 50.1% of revenue, compared to $82.8 million, or 48.9% of revenue for Q2 a year ago. The lower cost of transportation and services this quarter was primarily attributable to lower fuel costs in line with the decreases in revenue related to fuel prices. The increased operating ratio reflects lower pricing in our U.S. truckload operations.Direct operating expenses were $26.4 million, or 16.8% of revenue, compared with $28.3 million, or 16.7% of revenue for Q2 last year. Our direct operating expenses in the quarter reflect a reduction in outbound volume of our Accuristix logistics and distribution operations.SG&A expenses were 8.1% of revenue for the quarter, which is in line with our expectations and compares to 7.2% of revenue for Q2 a year ago. The increase was due to investments in supporting our business growth.Operating income totaled $22.6 million compared to $30.2 million for Q2 last year. The decrease is primarily attributable to reduced contributions from Boyle Transportation and Skelton USA, lower air freight forwarding revenue and the decline in revenue related to COVID-19 vaccines and ancillary products.Net income was $15.7 million or $0.37 per share on a diluted basis compared with $21 million or $0.49 per share on a diluted basis in Q2 a year ago. Total comprehensive income was $10.7 million compared to $27.6 million in Q2 last year. Total comprehensive income differs from net income due to our foreign operations, Boyle Transportation and Skelton USA, which resulted in a negative foreign currency translation adjustment of $5 million this quarter compared to a positive foreign currency translation adjustment of $6.6 million in Q2 2022.EBITDA totaled $39.5 million compared with $46.3 million for Q2 last year. The decrease is due to the factors already discussed. Our EBITDA margin was 25.1% for the quarter, which is within our historical range of 24% to 26% and compares to our margin of 27.3% in Q2 last year.If I look at our balance sheet. At quarter end, we had cash and cash equivalents of $84.3 million and working capital of $117.3 million. This compares to cash and cash equivalents of $65.9 million and working capital of $85 million at the 2022 year-end. At quarter end, the amount outstanding under our credit facilities was $50 million under our term facility and 0 under our revolving credit facility. We remain well positioned financially to pursue growth opportunities.I'd now like to turn the call back over to Michael for closing comments. Michael?
Okay. Thanks, Peter. As Peter said, supported by our strong and growing free cash flow and low debt levels, our Board approved a $0.01 increase to our shareholder dividend yesterday, bringing our quarterly payout to $0.09 per share.Looking ahead, we will continue to remain focused on opportunities to strengthen our clients' connection to our platform by broadening our service offerings, increasing our capacity to attract both new clients and new business and pursuing strategic acquisitions to further strengthen our platform in both Canada and in the United States. We have an attractive pipeline and potential acquisition targets and we're well positioned financially to pursue value-enhancing growth opportunities. As we continue to expand on our platform, we'll maintain our discipline and focused approach with respect to both financial and operating metrics and our constant focus on better serving our customers and our employees in the future.I'd like to open the line to questions. Michelle, please commence the Q&A.
[Operator Instructions] And gentlemen, the first question comes from Kevin Chiang with CIBC.
Maybe just a clarification question, just given all the moving parts as you lap the record 2022. When you talk about the 2.6% of revenue that was associated with COVID last year, is that only inclusive of products you would have moved related to the pandemic? Or would that be inclusive of some of the other benefits you saw from some of the broader disruptions in the supply chain, such as the higher, we'll call it, non-recurring rates within U.S. ground transportation, some of the air freight opportunities in Q2 last year? Just trying to level set like how much of this revenue you view as being, especially non-recurring and kind of reflective of a lot of the disruption we saw last year, which aren't occurring this year, thankfully.
Yes, that's a good question. And that's one of those areas that was kind of hard to quantify, but we felt it was important to quantify as best as we could. And how we did that is, we looked at the truly related vaccine product. So if it was a Pfizer vaccine that we were moving, we were identifying that as such. If there were test kits from Abbott, we would be identifying those items. So those were directly related. There's no doubt, that's why the question is so good is that, there are related revenues. We talked about the premium rates. We had vaccinated. It's interesting, I was speaking to somebody with respect to the border issues and, obviously, the outcome in Ottawa and anyway, at dinner last night, and one of the things that we were able to do is, we actually paid our drivers a premium to be vaccinated, and we were able to get our drivers across the border, and we were actually getting a higher premium. So those premiums are there that aren't going to be back in the -- those weren't necessarily related to it.I feel that we've hit the trough when it comes to U.S. truckload. No doubt that the FDA is not nearly as stringent -- Kevin, we talked about our learnings, right, from the U.S., the U.S. market is definitely different than the Canadian market when it comes to distribution of health care products, both through the distribution channel, wholesalers, et cetera, but also in terms of standards and requirements when it comes to temperature control. So we've recognized that. We feel that I think all truckload companies have been punished in the U.S. with big rate reductions or rate pressures. I hear some of them have been affected by as much as 40%. We are probably somewhere in the middle at the 20% mark, same customers. So we're not losing business. We've just had to maintain that business at lower rates. But I think we've hit the trough of this. We see that behind us after this quarter.
That's helpful. And actually, it leads me to my second question, just given, I guess, the volatility we've seen in the U.S. freight sector, you talked about what's happening with rates there. Is the underlying cyclicality of the assets you acquired aligned with what you would have thought when you made these acquisitions? As you noted, you expected it would see more volatility just because the regulatory environment is different in the U.S. than in Canada. Or is it performing worse, as it may be holding -- maybe better? Just any commentary there.
No. I would be lying if I told you, you didn't catch me by surprise. So, I mean, I think it's a -- as I said, it's a learning process for me. We're treading cautiously. I still love our acquisitions, even the way where we are today, our performance is still strong and it's -- more importantly, it's sustainable going forward. We continue to grow. The irony of this is that, we actually have more trucks on the road today than we did a year ago to even compound the situation, but our trucks are busy, and we continue to see more -- a lot in the pipeline with opportunities in the U.S., but it's a matter of making sure we manage properly and continue to learn and grow. The truckload market is definitely the most volatile of all as witnessed in the transportation industry. Certainly, with -- I think we announced last quarter the Graham Cromb just started as Strategy Officer. We're focusing our energies more on the areas of logistics in the U.S. right now, and which is a little bit more stable.
Okay. That makes sense. And maybe just last one for me. The $84 plus million cash and cash equivalents you have in your balance sheet, at least when I look at my model, it's as high as it's ever been in what has been just a relatively short period since going public for your company. I know you talk about or you've talked about a deep M&A pipeline. Just how you think about deploying that excess cash? And we talked a little bit about the U.S., the learning curve here. Just wondering if you're seeing any benefits from just the Yellow bankruptcy. I'm not sure if that at all helps you and maybe that's an area of opportunity for you, just given all that's happening in the U.S. less than truckload market.
Yes. Unfortunately, we're not in the less than truckload market in the U.S., and -- but interestingly enough was warehouse last, I guess, a couple of days ago, Monday. And speaking to one of our employees walking through and he -- I said, how's your day going, and he mentioned that he was out to see one of our med-surge clients, and he suggested to me that the Yellow was -- they were having all kinds of issues because they couldn't get their product that were in the Yellow warehouses and there was product that was destined for their Edmonton Distribution Center in Mississauga. And basically, could we help in any way and get this product, bring it in and create a kind of truckload console and redistribution here in Canada. So he was working on that, and that's directly related to this Yellow issue. So I don't know if that spill out is from our perspective, but it was kind of interesting, and I figure there would be 0 fallout out of this from our standpoint. But obviously there might be an opportunity here or there. So, okay, that's from that standpoint.
And then just on your cash balance, just anything you would highlight in terms of just sitting at such a high level.
Yes, I'm sorry, Kevin. It's an opportunity as I see it right now. It's great. I mean, it is disappointing. I'm just -- how competitive I am, both [ on and off ]. But I certainly look at the -- we've got a strong foundation and strong results, our margins are strong, our customers are with us. So, we're going to continue to expand organically with some opportunities continuing to do that. We're very focused right now. And the M&A pipeline, I'd really like to be able to announce something, we're working hard on that area. We're going to do what's right and it's nice to be in this position. And depending how the analysts react today and we'll see where -- but we'll put that money at work, I guarantee you that.
Next question in the queue comes from Konark Gupta with Scotiabank.
I just wanted to confirm the ground transportation segment. Organic growth 3% was just in Canada, right, ex-fuel, but I don't think I heard you disclosing a comparable number for the U.S.
No, we didn't.
No, I was just thinking like I think, I know you mentioned like the U.S. truckload comparables were tough and all that, right? So I'm like, I'm guessing the U.S. organic growth, if I just strip out ex-fuel with the truckload pricing down, it seems like the organic growth could be down as well in the U.S.
So, here it depends on what the growth -- what's your measure on growth? Is it revenue or is it volume? And...
Yes. It is right. I'm like -- yes, if you can give me some perspective on volume and pricing.
Yes. I mean, I think from a revenue standpoint, we're pretty close to last year, almost bang on. But from a volume standpoint, it was up. So, I mean, we really got, not hammered, but punished or we really did not get the same rates as we were previously having. We were -- everyone, our big customers getting the pressures all the way around the wholesalers, distributors, third-party, obviously, these -- the Kuehne+Nagels of the world who represent some of the transportation services were very aggressive, and there were people out there looking for business. And while their trucks may not have been validated, they were able to handle that business, which was another surprise for us. But at the end of the day, that's what happened and we're persevering. But we actually increased our volumes.On the -- just for -- on the domestic side, we had good organic growth. Interestingly enough, our volume by weight was down year-over-year, but our shipment count was up year-over-year. So just a matter of reference.
That's great color, Mike. I just want to kind of follow-up on that. I know you mentioned to Kevin about the yellow anecdote. Are you seeing any change in the volume or rate patterns now in July or heading into August? You mentioned the truckload rates in the U.S. might have troughed. Obviously, the Yellow has happened and maybe there is little bit of demand there. Can you share any perspectives between the U.S. and Canadian businesses you have in terms of volume and pricing? What are you seeing right now in July and August?
It's kind of too early to tell, but I certainly think it's not going down, put it that way. I think like I said earlier on, I think we've hit the trough. Certainly, that's what we're getting from our customer base. And when I think of that, I think more of the U.S. than Canada when I say the trough. Canada is more disciplined in our approach, and it's more transparent. And we certainly have a market advantage based on our history and network. I'll leave it at that.
Yes, that's great color, Mike. And then just on the cash question that Kevin asked. I just want to kind of ask it differently. What do you think is the best use of your cash in the next 6 months? So like do you have any organic growth demand or any CapEx demand or requirements here? Or do you kind of balance between the M&A and something else? Like any thoughts on the best use in the next 6 months?
That's -- and I don't want to sound political, but it's all of the above. Now, we just finished having our 2 days of Board meetings, and that was obviously a topic of conversation. We're very confident in our performance and stayed the track of an increase, felt comfortable with that. And -- but we are looking at all our options. All those are options we had Graham, Strategic Officer, present to the Board what we had in our pipeline. We -- from other divisions in terms of some of new product offerings that we're trying to do from our QA Officer. So we're -- we've got a lot of options, and it's a matter of what the low-hanging fruits are well capitalized, but I'd certainly like to make that cash work in some form of matter.
The next question in the queue comes from Walter Spracklin with RBC Capital.
I just want to start just from modeling on packaging. I know the loss of customers has led to quite a decline in that segment. Is the 4 point -- call it, $4.2 million, $4.3 million quarterly run rate now one we should now go with going forward? Or is there seasonality here in the Q2 that made it particularly more extreme, the downturn and that maybe we see some seasonality lead to a pickup in that? Or should we just model kind of in that $4.3 million-ish range going forward plus any organic?
Yes, Walter. No. This is a one-time client that left for lower rates, co-packaging is definitely the most commodity type, lowest margin business that we have in our portfolio. We've never really put that much focus on it, even though we try to service it. We always felt that it was complementary to the business since we already had the product in-house, but the decision-making process is a little different in that field. We learned that over the years. Having said that, we maintain what we had. We did lose a large consumer goods client, a consumer health goods client. I think it was identified in Q1. But yes, and the type of product is actually seasonal to the summer. So we were -- we had -- so it was big in Q2 last year. So what you see is probably what you're going to get going forward in the packaging is the Credo business and that continues to grow. But the co-packaging business, part of the business is -- will stay. We have long-term contracts with what we have. And it's really nothing much more to comment on that.
Okay. And then same kind of -- type of question for your dedicated and last mile. That's an area that was really growing and we're seeing step function growth. I mean, it was up 50% in 2020, 20% in '21, 28% in '22. And now we're seeing it down year-over-year for the first time ever. Is -- are we now level setting now at this rate and it's going to go more in line with your historical or your overall company growth rate? Or was there something in particular again going on in the second quarter here?
Yes. That's a good observation, Walter. So, it's down year-over-year because of -- strictly because of fuel. It actually did grow. The dedicated and last mile is really driven, not for the home delivery part, but more from a network to the pharmacy, direct to pharmacy, to clinics and hospital network. And that last mile network, we emphasized in the rural areas of Canada, and focus that energy and obviously we're -- there's only so much geography that we can do in Canada, where there is people anyway and pharmacies and we've grown that to a point. To us, it was strategic to our whole -- the whole network to ensure that we go to every pharmacy and every hospital in this country every day. And so, through the dedicated last mile network is how we approached it and we've grown it successfully. We will continue to grow it into Q4. We have some upcoming initiatives, but we're -- like, for example, we're just open at Prince George, B.C., an area that we didn't have before, and we will continue to do that. But nothing to the extent that wasn't history, and I would conservatively put what we have today as mid- to high-single digits as long as fuel prices stay stable. It was only a year ago I think it was $2 a liter at the pumps a year ago today.
Yes. Okay. And then lastly on -- or second last question here, one on the margins. And Peter, you had pointed to a margin today that was within the historical range, but you gave a very wide range. And you were running at an EBITDA margin of 27% the last couple of years. Going now down to 25% has a fairly significant impact on your EBITDA 200 basis points is a decent move. But it looks like it's leveled in at this. So the 27% that you had over the last 2 years clearly driven by some of the factors Michael have been pointing to before. So as we look at a normalization back to some run rate, it looks to be 25%, is that rate, judging by your results so far to date, is that fair to say? I mean, if we model 25% going forward and then growing that on a modest basis as you build a new business, is that the right approach? Or was there again something in the first and second quarter results that would make them a little less representative of your margin run rate going forward?
No. I think it's pretty good -- first of all, I don't think we've been running at 27% for the last 2 years. I think 27% was high points in some quarters and I think we were more around the 26% area. But -- and I think when we went public, it was -- might have been even south of 25%. I feel very comfortable with the 25% point, I think we've talked about the tailwinds of last year. Like I said I was disappointed with the quarter, but when I look and see what really happened in Q2 last year, late Q1 and Q2 and the beginning of Q3, I realize that there is truly an anomaly and that was, like I said, when your truckload to the Canada because we have vaccinated driver commanded $15,000 a load today -- Q2 of last year and today, he's commanding about $7,000, you can see the difference on how it would affect our margins. The same thing with the air freight, some of the air freight of Q2 of last year, whether it was actually supply chain issues, but it was actually because of a system issues that they have a system change error that they had with one particular large pharma customer. So all those things being said, I think there is -- it was a perfect storm in Q2 last year and I think this is more of the norm today and feel comfortable with the trends going forward.
Perfect. And last question now is more a philosophical one for you, Michael. I mean, you look at company you know very well Cargojet, where their expand -- they did a very good thing in Canada, they had a great market and then they announced an expansion of aircraft to target outside of Canada and the market has reacted very negatively to that, rightly or wrongly, we'll debate that another day. But I wonder if with the acquisitions that you're seeing, your push into U.S. and some of the negative trends where we're seeing developing there. Is that -- my question, I guess, is Canada off the -- is that now off the table? Is there nothing more you can do either within directly your line of business in Canada or even adjacent? I know there's some products that are not necessarily pharmaceutical that you do haul that are related to and are sensitive to temperature. And just curious whether you would look to expand more in Canada at all? Or is that option kind of -- is there really viable opportunities in Canada? Or is there just too many in the U.S. that it's really U.S. going to be your focus going forward?
That's a very good question and I think the one area that I will always focus on is not having to grow because the analysts are writing that. I'm going to do what's in the best interest of the sustainability of our company long term. I'm a long-term holder and I'm -- I think that way -- I've always thought that way. It's about sustainability. Canada is an area that we've been very successful in. I consider myself less of a transport carrier, more of a health care service provider. And the business is changing, the health care business is changing in the way it's -- I look at our logistics business and I see how the fridges are filling up and less ambient. Biologics is a bit of a paradigm right now within the health care sector and adapting to that. And some of that includes offering different types of services that are complementary to what our manufacturers and distributors are looking for. I think we will look at that spectrum to expand. I think in Canada, there are some geographic areas that we still are not quite as strong as. And I think it was alluded to, on the dedicated and last mile, I think we're going to focus on those areas a bit stronger. So I think Canada still has some good runway to continue. That's our comfort zone. That's where we have a strong hold and the more we widen that moat, the better it is for an investor long term. And the more we can offer the health care industry as well and make a difference.On the U.S. side, I alluded to earlier on to Kevin, I believe it was, is that, we're continuing to learn and the volatility that we've experienced there is one in talking to the folks in the U.S., FDA is focusing more on sterilization [ than they are ] temperature right now. And so, that's a reality. And that's, to be honest, make sure that we don't pretend that we're in Canada, when we're offering services in the U.S. So we'll take it one small step at a time. We're not -- our capital expenditures aren't going to be as great as Cargojet's are, those are maybe riskier ventures. I'm a slow and steady guy, as you've known me since 2004, Walter.
The next question in the queue comes from Ty Collin with Eight Capital.
Michael, in the data we are looking at, it seems like freight volumes continue to be quite sluggish industry-wide into the summer here. I appreciate that the dynamic is a little different for you guys given the health care focus. But are you seeing any signs of destocking, particularly in your non-pharma business that could be a headwind heading into the second half of the year here?
That's a good question, Ty, because we looked at our -- I think I mentioned earlier on that our volumes, our shipment counts are higher, but our weights are lower. And I think we're seeing a bit of that trend on the consumer health side of things. So it's not necessarily for the pharma or [ ATC ] -- kind of OTC product larger. So I think there's maybe a little bit of tightening on the consumer health goods products. But interestingly enough, our warehouse are full. It's just -- we're just -- but our handling isn't quite as -- so I don't know, I think maybe the turns aren't as great. So I don't know if it's much a destocking. But, I mean, I think one quarter doesn't -- and I'm talking about Canada here. I'm in a better position, Ty, to talk about Canada trends. In the U.S., we're dealing with manufacturers, but more on the truckload side, we're dealing with distributors, wholesale distributors, they'd be in a better position to answer those questions than I could. I don't have enough...
Got it. Okay. Yes. No, that's very helpful. And then, I guess, sticking on the U.S. business, just a question on the cost structure there. As you continue to build that business out organically and maybe look to add to it through M&A, I'm wondering if you could kind of speak to the longer-term SG&A structure there, maybe how much cost can ultimately be shared with the Canadian side of the business? And is it as efficient as it can be right now from an overhead perspective? Or is there maybe a little more to squeeze out of that?
Yes. I don't buy businesses to try to squeeze SG&A. To me, I look at companies like Boyle and Skelton or whether it'd be LSU and Accuristix. So they have unique areas of differentiation. That is why the customers use them, not necessarily rates and shedding costs. What I do focus on is best practice. And sometimes that creates cost efficiencies because of better productivity, better product outcome, on the insurance side of things, equipment. But ultimately, from an SG&A standpoint, we're in the people business and we are focused on customer service. And this is a business that's not as commodity like, and it's all about service. We were looking at our company that Graham presented yesterday, and he -- the suggestion was that every package that went out had a $6,000 value to it. So you can just imagine that that's -- obviously, you're not going to talk about rates here, you're going to talk about service and ensuring that product gets delivered 100% of the time.
Okay. Great. And then maybe last one from me. I know a couple of questions have been asked about the wind down of Yellow in the U.S., and I know you kind of spoke to the potential opportunities or lack thereof coming from that. I'm more curious to just hear if you have any sort of learnings or takeaways from that situation there in terms of M&A, competition, operations, labor. I know obviously the U.S. is still a learning process for you, and this is a company that's kind of been around for a long time. So, more just high level if you kind of took anything away from that situation?
Gosh, nothing that some of these analysts can talk to better than I could. I mean, from my standpoint, certainly, it's -- obviously, it was a tired company with labor issues. And for me, it's all about people and good communication and understanding and focus. I don't know. I really can't -- I'm not here to -- I think there is, obviously, going to be less capacity in United States, which is obviously going to lead to hopefully some better price disciplines and maybe a bit more real estate. I know we'd like to see Boyle and Skelton being another strategic area in the U.S. So maybe there's some real estate opportunities there. But ultimately, there's not really much more I can say on this call.
The next question in the queue comes from Tim James with TD Securities.
I'm just wondering if we could explore a little bit further the volume improvement that you've seen in the U.S. specifically. If you could just kind of characterize, you mentioned earlier, Michael, about how you've got more -- even though your revenue was roughly flat year-over-year, you've got more trucks on the road, and therefore, more volume. I'm just wondering if you could kind of characterize how that additional volume comes about? Is it from existing customers that you're just doing a bigger share of their business? Is it new customers? And what types of products are sort of contributing to that higher volume?
Yes, it's a good question. The -- it's -- we were trying -- the extra volume is probably, I would suggest reputation. I think we have what Skelton and Boyle did during the COVID period was quite exceptional for a lot of these customers. And having said that, they say thank you very much, but here's your new rates. We really like to use you. And that's just the reality of the business right now, but we respect that and continue. But one of the areas that Skelton is really strong in Canada is with Canadian Blood Services and plasma and the likes. And we're getting into that market in the United States, and that truly is quality over procurement. I mean, it's not easy to do. We have to have contingencies like dual reefers on trailers. It's more specialized type of business. We're focusing our energies on those areas.Having said that, distributors, like the big 3 are intrigued by our service commitments. So after all the negotiation, if it does make sense, we get some lanes with the Amerisources and the McKessons and the Cardinals. But we're going to focus -- and we had already put orders in for trucks and like. So -- but -- and the ease of getting drivers is a lot easier now and our pipeline is full of drivers and making sure we have the right drivers and those are all team drivers, except for maybe 1 or 2 trucks because of the security component to that business. But -- so that's -- I would say, reputation really is what's driving the growth.
Okay. That's helpful. And then just want to return to the decrease in revenue in logistics and distribution, lower outbound order handling activities for Accuristix being a driver there. Could you talk about -- and maybe this ties into one of your previous comments, I think. But I'm just wondering specifically, what was the reason for the lower handling activities? Is that just sort of products that maybe are a little more economically sensitive? Or how would you characterize the products and services that were in decline year-over-year?
Yes. The decline was in the consumer health part of our business. We have Accuristix and LSU handle everything from narcotics to vaccines to Rx product to OTC to even some cosmetics in some places. The lower-end spectrum are the ones that we saw a decrease. The interesting part is that, that's also the most voluminous part of our business, which from a weight and when you're charging transportation, you're charging by the pound, right, each by the pound, right? So when we're seeing a reduction in weights being shipped out and the logistics part of our business is, not only warehousing and distribution and the likes, but it's also transportation services, where they have a buy and sell with the different carriers, including Boyle and Skelton and ATS and others, and that's a markup on that. So they're adding fuel surcharge and making a markup on that as well. So, I guess, that was the decline on there -- on that side of things.
One just quick follow-up then, do you feel like this -- the decline or the levels you're seeing now, are these sort of lower than historical norms? Or was the year-ago period higher? Like, do you think this is the sort of return to normal in terms of the activity in the handling? Or do you think because of economic conditions or some other factor that maybe they're a little bit more depressed and maybe reflect back sort of pre-COVID?
No, I think at the end of the day, you're a consumer. You'll -- if you're tightening your belt that's indicative, are you going to continue to tighten your belt is really --. So it's not -- I don't know how do I say, it's not a fashion thing. It's a necessity when it comes to health care. So I believe that there is -- I don't see much like I say, it's not sexy. It's demographics, you got a lot of immigration coming in over the next years. You got an older demographics, all the signs should be good from a health care spend standpoint going forward, more people and aging population, so I'm -- yes.
The next question in the queue comes from Justin Keywood with Stifel.
Just on the commentary of the organic growth, the historical and expected range of 4% to 6%. Any indication of when we could see that return to those levels? I realize there are several moving parts. And then also on the COVID-19 related revenue, is there an expectation that we could see a bit of a pickup heading into fall with new boosters?
That's a good question, Justin. I'm not going to speculate. I mean, I'll suggest that I think we've hit the trough in our -- going through Q2 and Q3 because of the COVID-related distractions and extracurricular activity in our business. I don't know, you're a consumer, are you going to go out and get your booster, because I think we'll be warehousing a lot of vaccines. We're in the midst of doing that right now with some of the provinces getting ready for, not only the flu vaccine, but also the COVID vaccine. I would be speculating at this juncture. So I'm not going to comment much more than that. I mean, I'm hoping it's not there because I'm a Canadian, who's once have healthy outcome. So, I said that last quarter, I'm glad it's not -- it was a big windfall, but I'm glad it's not there and I'm hoping it's not going to be there in the fall. So -- but we are going to be warehousing a whole bunch of vaccines whether it's just warehousing revenue or there's handling revenue associated with it and transportation is to be seen.
Understood. And then my other question is, we saw UPS avert to large strike last week with an expectation of rising wages. Do you anticipate any pressure on your wages for your drivers or any increased competition there?
No, I don't think so at all. I think we're -- I keep on saying, I'm a people-first business. I love our drivers. They're our ambassadors for our company. We gave, not because they were asking for it, but I think it was when I was looking at the grocery bills and of our out there and the fuel costs, et cetera, it was important to react. To me, it's important that our frontline employees don't have to moonlight in order to make ends meet for the simple fact that they can focus on the task at hand and taking care of our clients because ultimately, it's our clients are paying their wages. So we have that culture, that mentality, all the way through. I just -- actually, I got an e-mail yesterday saying, which branches do you want me to -- that I'm going to go visit. Our executives are mandated every quarter to go meet with all the employees and have a coffee and donuts or whatever they want. It depends on what branch. But at the end of the day, we're -- it's about good communication and making sure that we're not making money on the backs of our employees and drivers.
And the next question in the queue comes from Endri Leno with National Bank.
I just had a few, but I just wanted to start with the U.S. one. And Michael, you spoke earlier of seeing rate somewhere like down 20% versus last year. But I was wondering if you can talk a little bit about the U.S. business in the sense that you kind of serve different customers in there or different parts of it. I believe some of it is a U.S. government. Some of it might be non-prescription pharmaceuticals, some prescription pharmaceuticals. So I was wondering if you can give a little bit of a breakdown between those segments? And where are you seeing the most impact from the lower truckload rates or is it all over?
Yes. I think the impact is -- it is all over, which one are impacted are -- it would be a good exercise. But certainly, as you go down the line, the pressures -- the price pressure gets harder. So, I'll give an example, a wholesaler who's making, let's say, 2% markup off the manufacturer is going to squeeze as much as they can. A third-party logistics provider squeeze as much as they can, as they represent because they're making smaller piece of that pie. Manufacturer is going to focus a little bit more on quality. The reality in the U.S. is that, there is no provider that can go directly to every pharmacy and hospital unless you're a wholesaler in that market unlike Canada. And so, there's those pressures. For me, it's -- we're at a point where we did have other truck orders -- and we actually -- not that we could not have used the extra business, but I didn't want to do it at a margin. So, I think we're looking at being more selective. And I think I referred to the plasma blood services business as being an area. So, we're going to always focus on specializing where procurement is not as important than quality. So, hopefully, that answers your question.
It does. And as a follow-up for that one, I mean, I have a couple of other ones, but as a follow-up to that, you mentioned the blood plasma services in the U.S. and wholesalers. I mean, is there any opportunity there to work with the manufacturers as well? Or is there a body in the U.S. sort of similar to the Canadian Blood Services or Hema-Quebec that we have here that's you're going to work with?
Yes, interestingly enough, it is with the manufacturers in U.S. unlike Canada. So, the answer is yes. We're actually working with manufacturers. Manufacturers and wholesalers as well, some wholesalers are offering the services. Yes.
Okay. That's great. The other question I had about the U.S. I mean, you referenced to margins and the rates potentially returning to pre-pandemic levels. I just wanted to clarify something because I think you bought this business in 2021 or you got in there and then the margins that were disclosed at the time on the trailing were 23.7%, so 24%-ish of EBITDA, is there where you kind of see that business again? Is that what you're referring to the pre-pandemic? Or is there a different number?
Just for the sake of reference because I don't have any my numbers here with me, I'm just -- one sheet of paper. What do you -- with the 23%, 24% is referring to what?
To the EBITDA margin.
For U.S. or...
For U.S. I think when the Skelton and Boyle acquisition was done, the trailing 12-month EBITDA margin, I think it was 24%.
Yes. I mean, I think we're down -- I mean, we're slightly lower right now. But if it is, it's only slightly lower. I think we're pretty much close to that. And I think at that time, there was a huge driver shortage as well. So I think in light of where we're sitting right now, we're comfortable with where we are and we're pretty close to that -- to those numbers if I'm not mistaken.Peter, you want to add...
Yes. I think that's fair. The margins in U.S. have really normalized to their pre-pandemic levels and we're not seeing a decline further.
That's great. And then as a follow-up a bit -- I mean, a bit in the U.S., but also a bit in Canada too. I mean, you mentioned that there was -- so Q2 and perhaps early Q3 was the trial here. Is it does -- would you think that it picks up a little bit more towards the second half of Q3 and then into Q4? And then sort of related to that question that mid- to high-single digit, is it something we can contemplate for '24 or we can see it as early as late '23?
Yes. And I think, I mean, I'd look at the bottom line before the top line because, I mean, I think the fuel certainly on the transportation side is more of a pass-through, on the logistics side, it's actually a profit maker, but on the fuel, all things being equal, i.e., being fuel surcharge, then we should be expecting that, absolutely.
There are no further questions in the queue at this time. Speakers, please proceed with closing remarks.
No, that's it from me. Thank you for all the questions. Yes, it was -- like I said at the outset, it was a little disappointing because I'm competitive. But I realized when you look at it, it's -- it was -- I feel very comfortable with our quarter. We have -- our customers are happy, our employees are happy and that to me is the most important going forward.Thank you. Have a great day, and see you next quarter.
Thank you, ladies and gentlemen. This will conclude your conference. Please disconnect your lines.