Andlauer Healthcare Group Inc

TSX:AND

Earnings Call Analysis

Solid Operating Performance and Strategic Outlook

The company concluded the year with substantial operational achievements, highlighted by their impressive fourth quarter performance which showcased positive revenue growth and robust EBITDA margins. During this quarter, the company witnessed its second-best-ever results, chiefly driven by a strong showing in their Canadian specialized transportation network and a bounce-back to positive revenue growth. Although the U.S. truckload rates experienced a period of decline, the company is gearing up to sharpen its U.S. strategy by capitalizing on its specialized competencies, especially within temperature-controlled, security-sensitive, and quality-focused transportation which are less vulnerable to market rate fluctuations.

Revenue and Margin Insights

Revenues in Q4 2023 saw a 2% increase to reach $169.1 million. The healthcare logistics segment contributed $44.1 million to this figure, reflecting a 5.5% increment primarily due to shifts within logistics and distribution revenues. That being said, there was only a marginal revenue uptick in the Specialized Transportation segment by 0.8%, taking it to $124.9 million, with ground transportation revenue reporting a modest rise. EBITDA for the quarter inched slightly up from the previous year, totaling $44.8 million, while the EBITDA margin contracted slightly from 27% to 26.5%. In essence, the company navigated various challenges such as lower U.S.-based truckload rates, a decline related to COVID-19 vaccine products, and lower fuel costs passed on to customers.

Dividend Increase and Financial Positioning

Reflecting confidence derived from solid free cash flow and low debt levels, the company’s Board has endorsed an increase in shareholder dividends by $0.01, announcing a Q1 dividend payout of $0.10 per share. This move attests to the company's strong financial footing and its capacity to seize growth opportunities in the future.

Expansion and Acquisitions on the Horizon

Looking into 2024, the company is steadfast in its commitment to growth through strategic acquisitions in both Canadian and U.S. markets, intensifying its focus on enhancing customer value propositions. With a pipeline of potential acquisition targets identified, the company is preparing to strategically augment its platform, while adhering to strict financial and operational metrics, bolstering its service to customers, and nurturing its unique culture of care.

Margin Sustainability and the U.S. Business Strategy

Management expressed confidence in sustaining their margin levels between 24% and 26%, an achievement they attribute to strategic acquisitions and business growth. For 2024, they expect margins to continue at the upper end of this range, reinforcing their operational stability amidst economic pressures. The company is inclined to pivot its U.S. specialty transportation segment away from commoditized operations, focusing on niches like blood products where stringent temperature control is crucial—a strategy they believe will safeguard margins and enhance overall business resilience.

Earnings Call Transcript 2023-Q4

[Operator]

Good morning. My name is Joel, and I will be your conference operator today. At this time, I would like to welcome everyone to the Andlauer Healthcare Group 2023 Fourth Quarter and Year-end 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 is subject to risks uncertainties and assumptions that could cause actual results to differ materially from those projected in the forward-looking information. For more information on the risks, uncertainties and assumptions relating to forward-looking information, please refer to the company's 2023 MD&A and annual information form, which are available on SEDAR+.

Management may also refer to certain non-IFRS financial measures. Although the company believes these measures provide both supplementation information about financial performance, they are not recognized measures and do not have standardized meanings under IFRS. Please see the company's latest MD&A for additional information regarding non-IFRS financial measures, including for reconciliations 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 is being recorded on March 6, 2024.

I would now like to turn the conference over to Michael Andlauer. Please go ahead, sir.

[Michael Andlauer, executive]

Thank you, Joel. And good day, everybody. Thank you for joining us today. With me on the call is Peter Bromley, our Chief Financial Officer. Following my opening remarks, Peter will follow with a more detailed discussion of our financial results. I'll then provide some closing comments and open the line for questions.

Well, we finished the year with a very solid operating performance. Our results for the fourth quarter was our second best ever and reflect a return to a positive return revenue growth and a strong EBITDA margin of 26.5%. Our Canadian specialized transportation network performed well -- particularly well. While we continue to experience a year-over-year decline in our U.S. truckload rates in the quarter, we believe the prices have now stabilized. Going forward, our strategy in the U.S. will be more focused on leveraging our core specialized competencies and temperature, security and quality control and focusing certain customers on or high-value products that are not as susceptible to fluctuations in the spot rates that we experienced last year.

We are determined to drive incremental margin growth in the U.S. from where we are today but we do not expect to return to the levels we experienced during the pandemic. While we have experienced lower outbound order handling activities for accuracies in the past few quarters, we expect our LSU facility expansion in Montreal, which was completed in January this year to improve our logistics and distribution product line performance in 2024.

As you know, we benefited from significant operating tailwinds in 2022, including temporarily inflated U.S. truckload premiums and significant COVID vaccine-related contributions. Despite the lack of these operating tailwinds this year and reduced fuel surcharge revenue, our consolidated revenue for 2023 ended up just $0.5 million below 2022, and our EBITDA margin for the year was about 25%. Our acquisitions to date are fully integrated, and we have a very strong balance sheet, which positions us favorably to further expand our platform through acquisitions.

I'll turn over the call to Peter to review our financial performance in more detail.

[Peter Bromley, executive]

Thanks, Michael, and good morning, everyone. Our consolidated revenue for Q4 2023 increased by 2% to $169.1 million. Revenue for our healthcare logistics segment totaled $44.1 million, an increase of 5.5% or $2.3 million from Q4 last year, reflecting 7.8% year-on-year growth in our logistics and distribution product line, partially offset by 16.7% decline in our packaging revenue. The increase in logistics and distribution revenue was primarily attributable to a reclassification of approximately $5.1 million of certain pass-through expenses to logistics and distribution revenue for LSU in accordance with IFRS during Q4 last year. This net revenue treatment was consistently applied throughout 2023.

The increase was partially offset by lower outbound handling revenue and transportation activities for Accuristix and a decline in revenue related to COVID-19 vaccines and ancillary products. The year-over-year decline in packaging revenue primarily reflects the loss of one of our packaging customers in Q1 this year and lower volume from our remaining base of packaging customers.

Revenue in our Specialized Transportation segment totaled $124.9 million, an increase of 0.8% or $1 million compared with Q4 last year. Ground transportation revenue for the quarter was $113.6 million, an increase of 0.5% compared with Q4 a year ago. The increase is primarily attributable to organic growth in our Canadian network, partially offset by a decline in U.S.-based truckload rates, reduced revenue related to COVID-19 vaccines and ancillary products and lower fuel cost passed on through to customers as a component of our pricing. Ground transportation revenue, excluding fuel in our Canadian network increased by approximately 6.3%.

We continue to experience a year-over-year decline in our U.S.-based truckload rates as the opportunities to obtain rate premiums like we did in fiscal 2022 due to the pandemic-related equipment and driver shortages have diminished. The 6.1% increase in our air freight forwarding revenue in Q4 this year reflects a year-over-year increase in weight shipped, partially offset by lower volume of shipments. Our $1 million increase in dedicated and last-mile delivery revenue in the quarter reflects continued organic growth, partially offset by a reduction in fuel surcharge revenue.

Cost of transportation and services was $85.8 million or 50.7% of revenue compared with $86.3 million or 52.1% of revenue for Q4 last year. Lower fuel costs in line with decreases in revenue related to fuel prices were largely offset by increased cost of transportation and services attributable to organic growth in our Canadian ground transportation network.

Direct operating expenses were $25.1 million or 14.8% of revenue compared with $21 million or 12.7% of revenue for Q4 a year ago. The increase is primarily attributable to the reclassification of certain pass-through expenses in Q4 related to logistics and distribution revenue -- sorry, as discussed previously, partially offset by a reduction in outbound order handling activities for Accuristix in line with lower revenue.

SG&A expenses were 7.6% of revenue for the quarter, which is in line with our expectations and compares to 8.3% of revenue in Q4 a year ago. Operating income totaled $28.0 million, a decrease of 0.4% from Q4 last year, reflecting reduced contributions from Boyle Transportation and Skelton USA, and the decline in revenue related to COVID-19 vaccines and ancillary products.

Net income was $18.6 million or $0.44 per share diluted compared with $19.8 million or $0.46 per share diluted in Q4 a year ago, reflecting lower segment net income before eliminations from our Specialized Transportation segment due to reduced contributions from Boyle Transportation and Skelton USA and lower segment revenue from our Healthcare Logistics segment due to reduced order handling activity.

EBITDA for the quarter totaled $44.8 million, up slightly from $44.7 million in Q4 last year, reflecting organic growth in our Canadian transportation network, partially offset by lower contributions from our U.S.-based truckload operations, reduced order -- reduced outbound order handling activities for Accuristix and lower revenue related to COVID-19 vaccines and ancillary products. EBITDA margin was 26.5% for the quarter compared to 27% in Q4 last year.

For fiscal '23, revenue totaled $648 million, a 0.1% decrease from 2022. Operating income was $96.1 million, a 13% decrease from 2022. Net income totaled $66.1 million or $1.55 per share diluted compared to $76.3 million or $1.79 per share diluted last year. EBITDA totaled $163.8 million, a decline of 6.1% from 2022 and EBITDA margin was 25.3%, in line with our historical range of 24% to 26% and compares with 26.9% for 2022.

As Michael noted earlier, our results for 2023 reflect a return to more normalized operating environment as we are no longer benefiting from the pandemic-related tailwinds we experienced throughout 2022. We finished the year with a very strong balance sheet. Following the repayment of $25 million on our term facility in Q3, we finished the year with $25 million outstanding under our term facility and il under our revolving facility. This provided us with enhanced flexibility to be active in our normal course issuer bid announced last March as at year-end, we had purchased and canceled approximately 475,000 subordinate voting shares for a total of approximately $18.8 million pursuant to the NCIB.

Despite our debt repayment and NCIB expenditures at year-end, we had cash and cash equivalents of $59.7 million and working capital of $105.6 million. This compares to cash of $65.9 million and working capital of $86.3 million at 2022 year-end. This underlines the continued strong cash generation of our business. Supported by our strong free cash flow, our low debt levels, our Board approved a $0.01 increase to our shareholder dividend yesterday, effective for our Q1 dividend this year, bringing our quarterly payout to $0.10 per share. We remain well positioned financially to pursue growth opportunities.

I'll now turn the call back to Michael for closing comments.

[Michael Andlauer, executive]

Thank you, Peter for the great news. Looking ahead, we're confident that we can continue to leverage our unique platform and competencies to drive increased value for our shareholders, supported by the positive industry growth fundamentals that characterize the healthcare, transportation and logics markets, both in Canada and in the U.S. Our strong leadership position in Canada's healthcare, transportation and logistics market, and established presence in the U.S. are supported by our long-standing relationship with major industry customers.

We remain focused on opportunities to strategically extend our platform and further enhance our customer value proposition. We have an attractive pipeline of potential acquisition targets in both Canada and the U.S., which we feel very strongly about moving forward into 2024. As we continue to expand our platform, we'll maintain our disciplined approach with respect to both financial and operating metrics and our constant focus on better serving our customers, our employees, our drivers and supporting our unique culture of caring more.

We'll now open the line of questions. You can -- Joel, please commence the Q&A.

[Operator]

[Operator Instructions] Your first question comes from Kevin Chiang with CIBC.

[Kevin Chiang, analyst]

Michael, Peter, maybe I'll start with margins, a strong showing at 26.5%, almost in line with some of the quarters you were seeing during the pandemic. It also sounds like U.S. truckload is still a headwind here even if things are [ starting to ] offload. Just wondering how you think about, I guess, the margin profile in 2024. Is this kind of the new normal versus maybe what we thought in the first 3 quarters of 2023, when you were kind of hovering on 25%? Is this kind of north of 26% the right way to think about the profitability of this business as we look ahead?

[Michael Andlauer, executive]

Kevin, yes, I mean, I think we've always maintained the margin levels between 24% and 26%. I think when we went IPO-ed, we were on the lower end of that spectrum and through acquisitions, strategic acquisitions and growing the business, we were able to expand that. Last year, I'm not going to say it was an anomaly. I think there's a lot of -- well, no, I would say that 2 years -- 2022 was the anomaly. And probably accentuated with the difference in margins in our U.S. business. One of the things I noted, looking at year-over-year and some of the things we don't recognize as maybe differentiate our Specialized Transportation in U.S. and Canadian and -- but you can see that as well.

I see that as being status quo going forward, we certainly do have pressures, economic pressures, which are driving procurement and as much as we have -- the percentage of cost of goods for our customers is much smaller than other industries. There's still that pressure from procurement and working with our customers to making sure that. But I feel very confident, we'll continue to maintain those margins going forward. And all -- everything lands then will be a little higher and sometimes some quarters will be a little -- but I feel very confident in maintaining those margins.

As for the U.S. truckload part, it's -- it was a lot more commoditized than I had anticipated when we bought these companies and great learnings. But we have some really great employees at Boyle and Skelton USA, who care. One of the things that really differentiated them was their -- was the way they care. They care for the customers and management cares for the employees and the drivers. And you see it on the road, whether it's the type of equipment that's there and the safety -- the focus on safety and all. So to me, it's just pivoting our business to focus more on customers that are less looking at commodity. The -- some of the customers that we have here in Canada we can leverage in the U.S. that really are where temperature really matters.

I'll give you an example. We do the business for Canadian Blood Services here in Canada. There's zero tolerance in that business. So focusing on blood products, for example, in the United States, and so those are some of the initiatives for strategic focus for this year for the U.S. business.

[Kevin Chiang, analyst]

That's helpful. And maybe just my second question, and actually a good segue, it was on U.S. truckload. Just wonder if you can give us a sense of maybe how volumes and pricing trended in Q4? I believe in the third quarter call, you had noted volumes are actually up but pricing is where you're seeing the pressure that was going on revenues. So I'm just wondering how that might have shaped out in Q4? And then just as you think about trying to maybe decommoditize the U.S. truckload business, it sounds like you have some organic levers. But just inorganically or through M&A, are there things you think you would need to buy or assets you need to acquire in order to maybe accelerate maybe that decommoditization as you kind of grow that U.S. platform?

[Michael Andlauer, executive]

Yes, that's exactly the strategy we're looking at is decommoditizing the U.S. and doing more of the things that we do in Canada and particularly on the logistics side of things, looking at opportunities there versus on the transportation. People kind of sometimes confuse us as being a transportation company. We're more focused on healthcare, the healthcare challenges and looking at the healthcare logistics challenges and truly quality-driven solutions for either for government or for our customers and focusing on those areas.

And -- so I think in the third quarter, I used the word trough with respect to the rates in the U.S. And I think they kind of extended into the fourth quarter. We're starting to see a little bit more of that. But I don't want to be -- I don't want to be subject to that. I'd rather have that equipment focus on more specialized areas. It's a bit of a longer sale because it's more strategic with -- working with these customers. But once we -- it's more QA driven, for example, it's a little harder work for our drivers but it's -- definitely it's something that we can rely on moving forward.

[Kevin Chiang, analyst]

And just any comments on just pricing volume trends in Q4 and I'll pass along.

[Michael Andlauer, executive]

I'm sorry, say that again.

[Kevin Chiang, analyst]

Any comments on kind of the pricing volume trends in U.S. truckload in Q4?

[Michael Andlauer, executive]

Yes. Now Q4, I mean, I think it was -- put it this way, we're not going the other way. I think we're just trying to understand where we need to position ourselves. So the worst is behind us. Let's put it that way. And I think as the economy starts to strengthen, I think I did see some of your -- the analyst reports on LTL volumes and the likes, and year-over-year growth and -- so that's more volume going, which means that there's less capacity for the healthcare truckload where the FDA hasn't had an opportunity to focus on temperature control in the U.S. like they have elsewhere in the world. That's why it's commoditized. But now all of a sudden, if there's less trucks with reefers available then that kind of changes the pricing model a bit.

[Operator]

Next question comes from Konark Gupta with Scotiabank.

[Konark Gupta, analyst]

If I can follow up on Kevin's questions on margins in a different way, perhaps. If we look at this segment, the transportation and healthcare logistics, we saw the transportation margins were at the high end of the typical range you would see over the past few years, whereas the logistics margins were kind of at the bottom end. Is this something one-off sort of in nature in Q4 that would explain this kind of divergence in those margin profiles? First of all, and then I could follow up on a few more questions.

[Michael Andlauer, executive]

Yes. Konark, I guess it's a really good question on area of focus. On the transportation side, it's particularly more on the Canadian side of things. I mean the network is getting stronger every year. We open in places like Prince George this year and in Northern Ontario expanded our network as well. So as we continue to expand our network, we will become more efficient. And it's very robust. It's a first mover advantage in a country of the demographics of our size, and we're -- and we really there was nothing -- not much growth. So we really focus on efficiency.

On the logistics side, there's a little bit more competition in the marketplace in that sector and I referred to earlier on. I think Kevin asked the question and I mentioned about procurement in the U.S. being a little bit more aggressive, certainly on the consumer goods side of the healthcare sector, it's become a little bit more pressing, private equity companies buying some of these consumer goods companies or public company pressures, et cetera. So we've found ourselves kind of on the lower end of the cycle. That business typically goes with 3- to 5-year contracts.

Some of our contracts might have been a little bit less disciplined with respect to inflation, not focusing on we went through such a long period of low inflation. And so you do only a 5-year contract with 1% escalator or a fixed price over the 5 years. And one of the pressures that we are going through in the logistic sector is industrial real estate prices are going through the roof. So having to manage that. So it's more of a cycle thing. I think we will see this year as a bit -- a better margin on the logistics side of things. So as we catch up with some of these contracts.

[Konark Gupta, analyst]

That's great color, Michael. And follow up on ATS and Accuristix. I think one of the points you made in the MD&A was ATS had some new wins in the quarter, perhaps would seem higher margin at this point whereas Accuristix, I think it continued to have volume decline. I'm just curious, like between ATS and Accuristix, obviously, there's some interrelationship but ATS continues to grow and Accuristix has some volume declines here. Perhaps some of that is coming from COVID related ancillary products, et cetera. But is this Accuristix more or less looking like it is stabilizing in terms of volumes? Or do you think it's going to take a little bit more time before maybe LSU expansion kicks in?

[Michael Andlauer, executive]

Yes. I think you heard -- I think I answered that in my last answer to your question. I think it's -- the ATS model is more on a year-to-year contract. There's a little evergreen type of contracts for the most part. But on the logistics, it's a longer cycle in terms of contract renewal. So -- and then obviously, the cost of real estate is a lot. But from a volume standpoint, they're in anticipation of some of the inputs or to the cost inputs that we have we go in with a very disciplined approach. We're about -- we're quality-driven. And I guess the Accuristix did lose, we did lose a consumer goods type of a client that was really price focused and basically took a chance with another player. That was an impact.

There's also a paradigm between the shipments of oral products versus injectables. So you're seeing -- when you're in a prescription that's got -- that has -- when you're taking pills versus being an injectable there's a lot more movement in terms of volume with pills than you do with an injectable. Now the injectables are a lot more expensive, and it's about more difficult to handle. So we have -- so we're seeing a bit of that paradigm right now with some of the movements of a lot of the big pharma are focusing more on specialty. And -- so that's a bit of that. But I wouldn't be alarmed by some of the movements that we've seen with that is very bullish on Accuristix moving forward, especially with the strong balance sheet that we have.

[Operator]

Your next question comes from Walter Spracklin with RBC Capital Markets.

[Walter Spracklin, analyst]

So Michael, your opening remarks really addressed some of the key questions out of emerged on Andlauer as you went into the U.S. and things were very strong and then kind of turn. And I think it's the right strategy and that is to focus on Canada but be tactical in the U.S. and I really like to hear that -- like hearing that. I'm just curious, for now as it stands, what do you think that implies for your organic growth profile going forward? I know before you started going to the U.S. you were looking at high single digit on a fairly consistent basis. Are -- should -- does the U.S. business and perhaps the commoditization of that business detract from that going forward if you weren't to do anything right now. How do we look at your organic growth profile? Is it high single digit with more volatility? Is it high single digit? No big deal because U.S. just isn't big enough now to affect that or how do you think investors should perceive your organic growth profile at this point if you were to do no further acquisitions?

[Michael Andlauer, executive]

Yes. I think the organic growth profile on the U.S. side is more focused on, [ I mean ] we're growing revenue or EBITDA. But I think right now, we've kind of put a freeze on equipment or certainly not grow -- that business grows with the amount of equipment that you put on the road. And right now, we're kind of, I say, refocusing, taking I guess, more commoditized healthcare products packaged consumer good type of product and replacing it with more specialty and focusing our energy on that and making -- doing -- having partnerships in the U.S. that focus on, like I said, blood plasma, blood product type of business or more specialty focused and using that equipment to that. So that by default, will grow revenue organically at a higher rate than what we've experienced.

And all depends on what base you use in the U.S. you use this year that it's a lot going to be more high single digits. So to me, it's about focus. But from the last year, Walter, just because we didn't do any acquisitions, it doesn't mean that there wasn't a lot of work done behind the scenes. And I think the expectations last year were probably based on expectations from the previous year in terms of what sellers wanted to sell for in terms of multiples and the like. So we've taken a very disciplined approach. And it's just like in Hockey, there's a trade deadline right now and the people are -- it's how much you're going to want for this asset. And are you willing to pay that much? And sometimes you just don't, you got to be patient.

[Walter Spracklin, analyst]

Yes. And then moving on in terms of your M&A strategy now that, that organic growth question is kind of addressed more tactical in the U.S., more focused on less commoditized business. And then in Canada, perhaps not as many opportunities given your established your established presence in temperature controlled. I want to ask a question about the LifeLabs. I mean it's obviously that you're -- you've been named as a bidder on that asset. Can you talk a bit about the strategy there? Because it seems at first glance to be a bit off strategy and perhaps you could give us a little bit more color on, if you can't speak to the transaction in itself but perhaps what would prompt you to go that direction, which seems optically to be a little bit off your core competency? Any color there would be appreciated.

[Michael Andlauer, executive]

Yes, absolutely. First of all, I'm not going to comment on rumors or speculation. So I mean, I was that came out of that field. But at the end of the day, that's neither here or there. But since we're on the topic, certainly, our business is specialized healthcare, transportation, logistics, that's how people book -- put us in that spectrum. But we've been successful by meeting healthcare's probably most complex logistics challenges with end-to-end quality-driven solution. And I'll take to the COVID vaccine. It was new for government for everybody, and we feel very proud in terms of providing the solutions where government weren't prepared and creating flawless execution, particularly in Ontario and Alberta, where we're closer with those governments and giving them the solutions.

Sometimes Walter, you and the other analysts like to [indiscernible] into transportation and the likes. And I -- to me, I look at myself today as I've evolved as a service business that supports the healthcare industry in Canada. I'm very proud of what we do. We're able to leverage or complement our national network and our people who care, who understand more and more what the healthcare needs in Canada are, as a CEO of this company and largest shareholder of this company, I love the fact that we can make a positive difference with the healthcare needs in Canada. And for the healthcare analysts that are out there that they'll suggest that this -- the healthcare industry has broken in this country.

And so the more -- I like the fact that we can make a difference and we'll look at any opportunity in the healthcare sector that we feel that we can couple and make a difference. That's how we've been successful in the first place. And so with that said, I'll leave it at that. Hopefully, that answers your question.

[Walter Spracklin, analyst]

Yes. I don't think you need to be a healthcare analyst to know that the healthcare system is broken in Canada but thanks very much, Michael, I'll leave there.

[Operator]

Your next question comes from Cameron Doerksen with National Bank Financial.

[Cameron Doerksen, analyst]

I wonder if you can comment a little bit more on what you're seeing kind of in the consumer healthcare space. I mean you mentioned that maybe there was a customer loss there that impacted the revenue. I think if we go back in the last few quarters, there have been some, I guess, broader-based kind of weakness in consumer spending on things. So just wondering if you could comment on what you're seeing kind of broadly in your existing customers there? Are you seeing any kind of stabilization? Is it starting to rebound so much? Just any thoughts there.

[Michael Andlauer, executive]

Yes, Cameron. I will look at that and just I went to pick up my daughter a couple of nights ago and the airport was packed. I couldn't find a parking spot in terminals in [indiscernible] what the heck is going on. I think people have focused more on their energy as a disposable income, even though they're paying higher mortgage rates and like on travel, the consumer goods and I think it's certainly become reflective. Interestingly enough, I'm seeing a lot more sublet space in the GTA, the industrial space than ever before or for the first time in a long time. So certainly consumer spending is [indiscernible] consumers spend that's just those indicators that seem to prove that. And -- but we just came off, as I said earlier on, the second-best quarter in the history of Andlauer Healthcare Group, which to me is an indicator of things are stabilized and normalized, as I think Peter mentioned in his dissertation. So I think when people stop traveling, they're going to start focusing on their own healthcare. Certainly, our LSU business, which is focused on travel vaccines and the like has been the beneficiary of that in the last 3 to 6 months. But yes. So I think we're back to a normal state when it comes to healthcare spending from consumer healthcare standpoint.

[Cameron Doerksen, analyst]

Okay. No, that's helpful. And just thinking about, I guess, sort of organic growth opportunities. I mean the dedicated segment is an area where you've had pretty good growth over the last number of years. I know it is something that you continue to target for growth. Can you just talk a little bit about the Dedicated segment and what prospects there are for growth there? Any kind of new opportunities with new customers?

[Michael Andlauer, executive]

Yes, Cameron, the opportunities aren't as great as it might have shown over the past because I think we're taking a good chunk of the market share. One of the strategies is being able to open up in rural areas, and that's where our growth has happened on the Dedicated side. To complement the Dedicated with the Specialized Transportation segment, have 1 truck going into Prince Rupert instead of having multiple and offering that to the healthcare industry. So the large retail players are -- can benefit from the efficiencies. So that's where we're -- I don't think it's going to be as big a growth. It will be more organic. And obviously, price driven as well with the inflationary cost, cost of trucks going up and the like. So I think it's as long as we keep our discipline in terms of margin, and we'll be fine.

[Operator]

Your next question comes from Tim James with TD.

[Tim James, analyst]

First question, looking at healthcare logistics and the margin percentage there. I'm wondering if it's possible to sort of talk about the impact of the reclassification of some of the pass-through expenses. And I'm just looking at the year-over-year decline in those margins. And part of it, I'm sure, is attributable, Michael, to what you were discussing earlier in the competitive environment and what have you. But I'm just trying to understand if the increased or the greater decline in the fourth quarter if there's anything in particular unrelated to the reclassification that maybe caused some incremental pressure there aside from just market conditions or competitive conditions?

[Michael Andlauer, executive]

I'm going to let Peter qualify because I may not have the right answer to it. My gut says that I think maybe the pickup programs at logistics might have had an impact on that margin. There -- the logistics transportation department and part of the logistics solution services is offering only warehouse distribution order-to-cash services, QA services, among other things, IT services to our healthcare customers, but also transportation services, which is where the eliminations come in. But -- and I think there has been a bit of a shift in some of the large customers in terms of pickup programs versus like. So maybe I'm totally up, Peter. I'll let you answer thins next question.

[Peter Bromley, executive]

I think that definitely impacts the logistics business, more on the transportation revenue side, which is a bit lower growth when we're not doing the direct transportation through the Accuristix business. The good thing about that is that in some cases, ATS still is the beneficiary of that transportation regardless. But just to answer your question on the margin differentials, it's really -- the best way to look at it, Tim, is to go to the full year-to-date numbers. The segmented Note 4 in the statements will give you basically margins from an EBITDA perspective on the healthcare logistics side. It's down a bit year-on-year, roughly 20% versus around 21% and change on the healthcare logistics segment for 2022. But they're both -- both of those margins are in our sort of expected range. And there's nothing. So that adjustment that happened in Q4 2022 really changes the optics for the quarter but not really for the business.

[Tim James, analyst]

Okay. That's helpful. And that's kind of what I'm trying to get at is that Q4 year-over-year decline or change, we shouldn't think about that sort of carried forward or anything. Think about the year in its entirety as a bit better indicator.

[Peter Bromley, executive]

That's right. I wouldn't model the quarter.

[Tim James, analyst]

Okay. Okay. My second question, just on working capital. There was a reasonable amount of usage in Q4 and for the full year relative to prior years. Part of that, I believe, has to do with income taxes. Could you maybe talk through the moving parts there and how we should think about working capital in '24, whether some of that usage in '23 will reverse and '24 could be a more positive year than it's been historically? Or is this sort of a new level and there will be any particular swing or reversal going forward?

[Peter Bromley, executive]

Well, you talked about the -- well, the tax item, that was one of the bigger impactors for working capital for the year in the quarter. The reality is we were essentially paying installments in our U.S. businesses related -- on the basis of 2022. We didn't adjust those and ended up with actually income taxes receivable because we over installed. So there was a big swing there in the tax. I think one of the other items on the working capital, which probably is more systemic is -- and Michael referenced the LSU business, which has a vaccine -- private vaccine distribution business. And there was an investment in inventory there that probably is systemic. That's probably around $2.6 million.

But other than that, working capital will ebb and flow as normal. I mean, our receivables are in good shape. We manage our cash flow every day, right? So we're -- there's nothing really systemic there other than the swing in tax potentially that, that should sort itself out but a more systemic investment in inventory for the LSU business.

[Operator]

[Operator Instructions] Your next question comes from Justin Keywood with Stifel.

[Justin Keywood, analyst]

Just want to circle back on the organic growth profile for 2024. I think I heard of enough constructive elements that point to the kind of a long-term growth rate of 4% to 7% organically. And just want to check if that's probable for 2024? And then also if there's any headwinds in Q1 given the lost packaging customer in Q1 of last year and if organic growth is possible.

[Michael Andlauer, executive]

Yes. No, I don't think -- I think the Q4 of '23 is indicative of normalization of our business. Yes. I had mentioned before on various calls that we haven't really put as much focus on packaging or at least taking care of the customers that we have now because of the commodity nature of business, so more emphasis on other areas. That's -- that is not -- that's a longer-term contract, which is stable, which is -- which will be fine going forward. There might be, I think, interestingly enough, we're retooling that part of the business to integrate it with our logistics business facilities, and we're providing a bit of opportunity there. So all that being said, to answer your question, long and short of it, I feel very -- you should feel very comfortable with your assumptions moving forward.

[Justin Keywood, analyst]

Understood. That's clear. And then my second question is on capital allocation. We saw the NCIB quite active around the current stock levels over the last 1.5 quarters. And then also, there is a small dividend increase announced and then the balance sheet remains pretty ripe to deploy for M&A. Just wondering if you have any thoughts on continuing the NCIB maybe potential dividend raises? Or do you want to preserve your capital for potential acquisitions?

[Michael Andlauer, executive]

Yes. I think this -- the NCIB, I think, was opportunistic for us. Obviously, evidenced by how much we had the cash and feel very strong about our company and the future of it. So the focus is not going to be on the NCIB as much as I think I alluded to, Justin, on. We've had quite a bit of M&A activity but we were taking a disciplined approach and where some of these potential acquisitions we're looking for a much higher price, we were all of a sudden now there seems to be a bit of a trend that's just like I look at land prices -- industrial land prices seem to be going down all of a sudden, there seems to be just a patient. And so I'd rather use that capital for that for 2024.

[Operator]

Your next question comes from Ty Collin with Eight Capital.

[Ty Collin, analyst]

Michael, just wanted to follow up on the M&A piece here. You mentioned, I guess, valuations may be running ahead of themselves in the U.S. after kind of the boom in 2022. Were you referring more so to trucking assets? Or would that also apply to some of the more ancillary logistics and specialized businesses you were looking at? And then are you seeing that start to -- those expectations start to come down materially to the point where things are getting a little more actionable now? Or is there still quite a bit of narrowing to do there?

[Michael Andlauer, executive]

Yes, Ty, that goes to just my latest answer, absolutely. And it's not -- no, it's definitely not related to just the transportation. Now industry is changing, too, right? I think we're looking at how specialty pharmacy has big tailwinds and being involved in that sector. I mean, we've -- some of our capital allocation and growth CapEx, the focus on expansion of our fridges and freezers. And I know in Calgary, we just doubled the size of our fridges of the LSU expansion into Laval is 1/3 of is fridge and freezer. So we're focusing on those.

And then the distribution of that business is different than your typical -- your specialty pharma in terms of the range of infusion clinics and just the whole model how that's changed at the price of these drugs how that -- so just understanding how that paradigm is happening right now and where to position ourselves so we can service that growth better. So that could be some ancillary businesses to focus on that as well. So that's why my passion on the Canadian healthcare sector is growing. And we -- I think we feel we can play a part. In the meantime, we will continue to roll.

[Operator]

There are no further questions at this time. Please proceed.

[Michael Andlauer, executive]

Well, thank you very much. It's -- we appreciate all of you joining our call and the great questions. And we'll see you around and have a great day.

[Operator]

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.