Titanium Transportation : Q2 2021

Management's Discussion and Analysis

For the second quarter ended

June 30, 2021

Dated August 10, 2021

Titanium Transportation Group Inc.

Management's Discussion and Analysis for the second quarter ended June 30, 2021

GENERAL INFORMATION

The following is Titanium Transportation Group Inc.'s management discussion and analysis dated August 10, 2021 ("MD&A"), which provides a comparative overview of the Company's performance for its three month and six month periods ended June 30, 2021 with the corresponding three month and six month periods ended June 30, 2020, and it reviews the Company's financial position as at June 30, 2021. Throughout this MD&A, any reference to "Company", "we", "us", "our" or "Titanium" shall mean Titanium Transportation Group Inc. and all of its direct and indirect wholly-owned subsidiaries. This discussion should be read in conjunction with the Company's MD&A, audited consolidated financial statements and accompanying notes as at and for the year ended December 31, 2020 as well as the unaudited condensed consolidated interim financial statements of the Company for the second quarter ended June 30, 2021 ("consolidated interim financial statements").

The consolidated interim financial statements of the Company and extracts from those consolidated interim financial statements contained in this MD&A were prepared in accordance with International Financial Reporting Standards ("IFRS"). The consolidated interim financial statements comply with IAS 34, Interim Financial Reporting, and do not include all of the information required for annual financial statements. The Company's presentation currency is the Canadian dollar. All financial information presented has been rounded to the nearest dollar, except per share amounts and where otherwise indicated. The Company's consolidated interim financial statements for the second quarter ended June 30, 2021 were approved by its Board of Directors on August 10, 2021. Readers are cautioned that certain information included herein is forward- looking and based upon assumptions and anticipated results that are subject to uncertainties. Should one or more of these uncertainties materialize or should the underlying assumption prove incorrect, actual results may vary significantly from those expected. See "Forward Looking Statements" and "Risks and Uncertainties".

Unless otherwise indicated, the information in this report is dated as of August 10, 2021. Additional information relating to the Company is available on SEDAR at www.sedar.com.

OVERVIEW

The Company is an asset-based transportation and logistics company servicing Canada and the United States with terminals in Bolton, Bracebridge, Napanee, North Bay, Windsor Belleville, Cornwall, and Brantford, ON, with additional parking/switch yards in Sudbury, Brockville and Trenton, ON and freight brokerage offices in Charlotte, NC, Nashville, TN and Chicago, IL. The Company has over 1,000 customers across various industries, including large multinational corporations. The Company has approximately 800 power units, 3,000 trailers, and 1,100 independent owner operators and full-time employees.

The Truck Transportation segment provides transport of general merchandise by long-haul, dedicated and local trucking services throughout Canada and the U.S. with a variety of trailer types, including dry vans and flatbeds that support both heated and multi-axle services. Through the use of a modern fleet, the Truck Transportation segment provides reliable and high quality service to various customers, attains a high asset utilization through its network of terminals and yards across Ontario, and creates a platform for revenue growth and cost efficiencies through the integration of acquisitions.

The Logistics segment is a non-asset-basedthird-party logistics provider of ancillary transportation services, such as freight brokerage, North American and international freight forwarding, intermodal, special and expedited services. The Logistics segment succeeds due to the extensive experience and expertise of the Company's dedicated personnel, up to date and innovative information technology and systems, as well as strong strategic relationships with third-party providers.

1.

Titanium Transportation Group Inc.

Management's Discussion and Analysis for the second quarter ended June 30, 2021

The Company's operational results are influenced by industry-wide economic factors and by capital allocation including operating and spending decisions. Industry-wide economic factors which impact operational results include freight demand, truck capacity, fuel prices, driver availability, overall economic conditions, exchange rates, government regulation and weather. The Company makes key decisions when allocating capital between its Truck Transportation and Logistics segments, hiring employees or contract for services of independent contractors and determining sustainable compensation structures, investing in new equipment and technology, and considering business acquisitions. Operating and spending decisions are made after the analysis of numerous important financial and operational metrics including EBITDA1 and operating income, revenue generated per truck and per mile, empty miles, driver retention and fuel efficiency.

Q2 2021 Key Highlights

• Completed all virtual and physical integration of International Truckload Services Group ("ITS") existing terminals to our Titanium technological platform during the quarter.
• Consolidated revenue for Q2 2021 was $100.8 million, the fourth consecutive quarter of record quarterly revenue, representing 165.6% increase over Q2 2020. The increase in revenue reflected a combination of rapid organic U.S freight brokerage growth and contribution from our ITS acquisition.
• Operating income was $2.7 million for Q2 2021, representing a 2.9% operating margin1, compared to $1.8 million and a 5.1% operating margin in Q2 2020. Canadian Emergency Wage Subsidy ("CEWS") of $0.2 million was received in the quarter, compared to $2.2 million received in Q2 2020. Without CEWS, adjusted operating margin was 2.7%, a 3.8% point improvement to -1.1% in Q2 2020.
• Truck Transportation segment revenue for Q2 2021 was $44.8 million, representing an 83.8% increase year over year. An adjusted operating loss of $1.2 million was recorded with a corresponding -3.0% margin, decrease from Q2 2020 of $0.1 million. Included in operating expenses was $0.2 million received from CEWS for the segment for the quarter, compared to $1.7 million received in Q2 2020. The segment also incurred $2.5 million of non-recurring integration costs in the quarter related to ITS.

• Logistics segment revenue was $57.7 million for Q2 2021, a 294.2% increase when compared to $14.6 million in the same period in 2020. U.S. freight brokerage segment contributed $39.4 million in revenue in Q2 2021 or 684.6% increase from Q2 2020. Adjusted operating income was $4.7 million, representing an 8.7% adjusted operating margin for the quarter, a point increase of 7.9% compared to adjusted operating income of $0.2 million and a 1.1% adjusted operating margin in Q2 2020. Included in operating expenses of 2020 was $0.5 million received from the CEWS program for the segment.

	Revenue by Industry
	Manufactured Goods	29.9%
	Food & Beverage	23.8%
	Retail	12.4%
	Logistics/Trucking	9.6%
	Services	6.4%
	Metals & Mining	5.1%
	Automotive	5.0%
	Recycling	3.2%
	Other	4.6%
	Based on Q2 2021 revenue

1 Refer to "Results of Operations" on page 3 and "Non-IFRS Financial Measures" on page 14 for more information about

operating income and EBITDA and for a reconciliation of operating income and EBITDA to net income.

2.

Titanium Transportation Group Inc.

Management's Discussion and Analysis for the second quarter ended June 30, 2021

RESULTS OF OPERATIONS
Financial Highlights (unaudited)
		3 months	3 months	6 months	6 months
		ended	ended	ended	ended
		June 30	June 30	June 30	June 30
		2021	2020	2021	2020
Revenue	92,513,257	35,983,252	172,034,361	76,778,529
Fuel surcharge	8,284,361	1,969,110	14,437,961	5,486,076
		100,797,618	37,952,362	186,472,322	82,264,605
Operating expenses		93,066,302	32,647,148	171,226,125	72,412,496
EBITDA(1)	7,731,316	5,305,214	15,246,197	9,852,109
EBITDA margin(1)	8.4 %	14.7 %	8.9 %	12.8 %
Depreciation	4,917,065	3,429,318	9,709,485	6,589,846
Amortization of customer lists		142,864	57,150	257,157	114,300
Operating income(1)	2,671,387	1,818,746	5,279,555	3,147,963
Operating margin(1)	2.9 %	5.1 %	3.1 %	4.1 %
Gain on sale of property and equipment	(344,228)	(19,023)	(416,078)	(106,881)
Finance costs	986,598	709,084	1,802,684	1,485,901
Finance income	(57,431)	(72,287)	(107,210)	(210,041)
Foreign exchange loss (gain)	235,873	(53,104)	378,394	(200,812)
Transaction costs	-	-	800,000	-
Loss/(Gain) on Sale of
Marketable Securities	486,624	-	(111,120)	-
Income tax expense		425,726	380,300	825,602	662,944
Net income and comprehensive income attributable
to owners of the Company	938,225	873,776	2,107,283	1,516,852
Net income per share - basic	0.02	0.02	0.05	0.04
Net income per share - diluted	0.02	0.02	0.05	0.04

(1) Refer to "Non-IFRS Financial Measures".

3.

Titanium Transportation Group Inc.

Management's Discussion and Analysis for the second quarter ended June 30, 2021

EXECUTIVE SUMMARY

As economic conditions improved, in part reflecting the loosening of some of the restrictions relating to the ongoing COVID-19 pandemic, Titanium's strategic investments in growth opportunities and focused execution by our team resulted in a fourth consecutive quarter of record revenue for the company at $100.8 million.

While operating conditions are improving, progress remains uneven across markets. The pace of improvement is likely to be impacted in large part, by the evolving response to the COVID-19 pandemic across various regions. In the United States, a number of markets have returned to, or exceeded, pre-pandemic levels of activity. While key Canadian markets are also improving, activity levels so far remain softer compared to pre- pandemic conditions.

Titanium will continue to place the highest priority on protecting the safety and well-being of our staff and customers while following Ministry of Health guidelines. Nonetheless, we remain optimistic and maintain a constructive outlook for the balance of 2021.

The record quarterly revenue attained in the second quarter of 2021, reflected significant progress in both of Titanium's operating segments. The Truck Transportation segment reported revenue of $44.5 million, an increase of 82.7% compared to the second quarter of 2020. The Logistics segment also reported strong revenue generation of $57.7 million -a nearly fourfold increase over the second quarter of 2020.

In the first quarter of 2021, Titanium acquired International Truckload Services (ITS) Inc., adding about 330 power units, 1,600 trailers, 470 employees and drivers to the Company, as well as an expected contribution of $80 million in annual revenue to the Company. In the Truck Transportation segment, EBITDA and operating margins have historically temporarily softened following an acquisition as the segment integrates the operations and realizes synergies. This has held true again in the case of Titanium's purchase of ITS. However, we expect margins will normalize in the second half of 2021 as we have made significant headway in the ongoing integration of the operations of ITS.

During the second quarter, we achieved several key integration milestones. For example, at the end of June, we welcomed the last of the ITS's trucking terminals onto the Titanium platform, which allows for a single integrated real-time view across Titanium's entire platform. This integration combined with our proven expertise will increase fleet efficiency and optimization, and ultimately realize incremental cost savings. With the ITS integration and the realization of operating synergies tracking to plan, Titanium expects to deliver improved profitability in the Truck Transportation segment through the second half of the year as we leverage our significantly larger fleet with increased capacity to service our existing and new customers. While the ITS integration contributed $15.9 million in revenue for the quarter, we incurred non-recurring costs of integration totalled $2.5 million for significant upgrades to digital infrastructure, fleet rebranding and necessary rolling stock repairs. The segment's margins would have been consistent with levels prior to acqusition without these additional expenses. We expect that minimal integration costs will be incurred going forward.

Titanium's investment in its U.S. Logistics business, reflected in the Company's strategic decision to add freight brokerage centers in key markets and the ongoing improvement in activity levels in U.S. freight markets, continue to deliver significant results. With three centers now in operation, Titanium plans to add two more centers by the end of fiscal 2021. Canadian Logistics operations continued to thrive and grow despite the relatively soft economic activity levels.

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