Q4 2019 Earnings Call
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Today's conference is scheduled to begin shortly please continue to standby. Thank you for your patience.
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At this time all participants are in listen only mode. Following the presentation. We will conduct a question answer session instructions will for entering the Q will be provided at that time.
Before turning the call over to management. Please be advised this conference call will contain several statements that are forward looking in nature and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated.
Also last year the company adopted the new accounting standards under I F. R. S 16, and as a result certain numbers are not directly comparable with past results. All dollar amounts are in Canadian dollars.
In addition, the company has filed today a prospectus supplement.
Registration statement issue common shares enlist the company's common shares on the New York stock exchange.
This presentation is meant to discuss the company's latest results and is not made in furtherance of the offering or to solicit investors in connection with the offering.
Following the advice of the company's Securities Council. The company will not discuss the offering the prospectus supplement where the registration statement or comment beyond the scope with its publicly filed materials.
Today will be limited to the same scope for this call.
Lastly, I would like to remind everyone did this conference call is being recorded on Monday February 10th 2020.
I'll now turn the call overtime, but all chairman President and Chief Executive Officer of T.F.I. International. Please go ahead Sir.
Well. Thank you for that operate in I appreciate everyone. Joining us this afternoon within the past out where we released our fourth quarter and full year 2019 results.
If you need a copy of the release please visit our website.
Our fourth quarter performance kept the very strong year for T., a fine to national driven by a continued attention to the basic fundamentals of the business regardless of capacity concerns across the industry and other fluctuating business conditions.
[laughter] consistent focus allows us to produce strong and consistent free cash flow and everything's per share, which we then used to optimize the operation grow our business and create long term shareholder value.
We employed this consistent approach to the business during the fourth quarter and in fact, we hope to all of 2019.
Specifically, we pursued an asset light business model, we capitalize on the opportunity to and then Sufficiencies, we maintained a strong balance sheet and that in a highly disciplined manner. We competed eight accretive acquisition during the year at CIT find to national it's our ultimate goal to create and unlock shareholder value and whenever possible.
Returning excess capital to our shareholders.
Before as we've often said we look to generate not just.
Gross but profitable growth and you'll see a that philosophy of work with our fourth quarter results, which I will cover it now so.
Total revenue was down 1% compared to the prior years fourth quarter at 1.3 billion. However.
Operating income increased a robust, 20% 224 million, while our adjusted EPS on a diluted basis was 95 cents operating results are a strong example of our primary focus on profitability.
Another priority of our of ours is cash flow performance and during the quarter. We generated net cash from a continuing operating activities of 176 million similar to the year ago figure.
For the full year 2019, we produced net cash from continuing.
Operating activity of 665 million up 22% over the previous prior year period.
Let's turn to are up for business segment, each of which we believe as performed well, especially given the freight environment I mean, the soft freight environment in 2019.
Starting with our P. and see this segment represents 15% of total revenue and in the year ago and end the year go quarter experience, a onetime benefit related to the kinda both strike, making for a more challenging year over year comparison revenue before fuel surcharge was down 5% one there.
Probably a year fourth quarter.
Operating income was 30 million compared to 34 million in the current corresponding prior year quarter and the segment operating margin was 17.8 relative to 19.4, given the weaker business condition versus a year earlier in the prior year benefit from kind of the Bose we believe.
What we outperformed the industry and we will continue to deploy cutting edge technology optimize our been business mix.
And asset utilization and leverage our strong network to capitalize on E commerce growth up it shouldn't be regardless of macro factors.
[noise] lessen the LTL less than truckload, okay represent 18% of total segment revenue and generated revenue before fuel surcharge of 200 million relative to 232 million to prior year period. Our operating income. However was 25 million, which was up a healthy 9% versus a year.
You earlier, and our operating margin climbed to a robust 270 basis point to 12.8.
This improved profitability. Despite a 4.4% decrease in our revenue per hundredweight reflects strong cost management and our continued focus on the quality of our freight our truckload segment represents 47% of total segment revenue and generated revenue before fuel surcharge of 545 million.
Which was 2% higher than the prior year period, our truckload operating income was 61 million up 17% relative to 52 million a year earlier and operating margin of 11.2 was up a solid 203 basis points compared to the prior year fourth quarter.
Our adjusted operating ratio was 85.9 for Canadian truckload 89.34, especially truckload both similar to the prior year period, while the adjusted operating ratio of 92.44, U.S. Rectal was was a 90 basis point improvement.
We're probably to the growth improve efficiency and operating margin expansion and in our overall truckload segment, especially in light of continuing continued challenge in the freight market.
Logistics, which we previously referred to as logistic and last mile represent 20% of total segment revenue and generated revenue before fuel surcharge of 263 million, reflecting double digit growth over the 236 million in the prior year fourth quarter and our operating income was 19 million we didn't.
Logistics as I mentioned last year, we implemented we are implementing a margin improvement plan and are beginning to see some positive results shifting gears our approach to capital location remains mallinson discipline. During 2019, we meet eight <unk> accretive that business acquisition, all of which works.
Pleaded with in the first nine months or the years also during the fourth quarter over quarter, we returned $50 million to shareholder, including $20 million, a dividend and 30 million in the form of the share repurchase as we mentioned in October after expanding the size of our buyback buyback authorization twice during 2000.
And team in late September we received approval from the TSX to repurchase for cancellation, an additional 7 million common shares through October Oh 2020.
After a fourth quarter repurchase there remains 6.3 million shares authorized for repurchase I want to wrap it up with our capital allocation plan, which are unchanged. We plan to continue investing capital, where we see the best risk adjusted return be our quarterly dividend and extend our track record of identifying.
Attractive acquisition opportunity and executing on them in a highly disciplined matter in other words, it's business as usual here at <unk> International now operator.
I'd like to take questions from the audience. If you could please open the lines [noise].
Absolutely and this time in order to ask a question you will need to press star one on your telephone to withdraw your question press the pound.
Well first question will come from line of Jason Seidl of Cowen. Please go ahead. Your line is open.
Yeah. Thank you operator, a lean team good afternoon.
Couple quick questions, one I guess I'll start on and logistics you talked about how you're starting to see some early benefits from that margin improvement story I'm, assuming mostly in the U.S. here can you give us a little more meat on the bones to the to understand what's going on especially in the U.S.
Yeah, well wait and see GE said I mean, our U.S. operation don't forget when we bought dynamics.
In 2011, those guys, where 1% to 2% bottom line guys.
What we were able to do over time is really our Canadian operation is really running like you know.
It's it's it's unbelievable whether team in Canada has done now the U.S., that's always been a laggard and a you know that delta between U.S. and Canada is like eight 910 points at one point. So we said you know what in the summer with all these acquisition also that we've done like dike.
And be bags.
The team there was like <unk> no. The team was not no. Good that's why they were losing money. So we said you don't let Chuck let's have I can eat in team help the U.S. team to perform better and you you're starting to see some improvement in Q4 and you know if you look at our plans for 2020 I'm sure that the team now with the support that.
The Canadian guys, well definitely do we better in 20 versus 19, but it's it's always the planet T. If I. It's more the same trying to do more with less trying to do better.
Beat the plan. So I mean, we're really this is probably one of the diamond that we have that's gonna be shine shiny more at the end of 20 versus 19 now the team is led by Scott leverage and ER and cow now as a knee VP.
We have some super regional Rvps their bowl and Mike.
I I'm convinced that though this is gonna be is a huge success for us in 2020.
Well, you mentioned that used to pinpoint delta how how quickly do you think you could sort of have the gap between the tool.
Yeah. It will take some time, okay, but if you look at the what we've done would see if I I mean with with the 18 now that we have a cfive we were able to turn that quite fast. They took us about 18 to 24 months and if you even know if you look at our Q4 numbers.
In a very soft freight environment you know if you look at our appears in Q4 in the U.S. Yeah. Most of them are down okay versus the previous year 18 us were up a bit not much but were up a bit. So I think that our last month group there.
Well, we'll definitely improve that and get to a point, where we could be very proud of you know a double digit EBIT to me, it's doable in U.S. and we'll get there.
No I don't want to Jason.
Wise, you know [laughter], hey, if it's not going to be done within six months, but Ah well, you'll see a overtime very important name for it you know improvement I'll tell you also another story if you go back when we bought you know a.
Luminous or DHL CAD up that was in 2011, our EBIT went from 13% down to about six or 7% at that time.
And we said to the investors that guys will be back double digit EBIT.
It will take us sometime.
So in 2012, we were about six 7% EBIT well today, Okay, you're going to see I think it's eight years ago, well now with 17% EBIT.
So all in including you know DHL CAD.
Well you brought up the U.S. and some of the improvement that we've seen.
It's going on at Cfive, and that's obviously welcomes improvement.
The U.S.
Last year compared to the rest of the truckload operations you have kinda. Then also specialties can you talk a little bit about you know where you guys think you can take that along.
2020, and also what sort of an impact.
That fleet refreshes gonna have on the numbers.
Yeah. That's a very good question I mean, you know when we talk to Greg and we were so proud of what in and his team have done there I think that we still have some improvement that needs to be done at TCT and you know there's no reason why we cannot run on average on average you know a truckload operation in the.
You asked with.
Over 10 years period, [laughter] lease it 10% to 12% EBIT contribution to the company I mean, if you look at what we do in Canada.
At year end year out we were were producing on our van Division you know between 12% to 16% EBIT or our specialty truckload, even with all the M&A that we're doing buying companies with 4% EBIT, 3% EBIT, 6% EBIT I mean were coming in with.
812% to 18% EBIT now in the east softly the environment. So I mean, our team is I'm, telling you in Canada for sure were second to none and then the U.S. I mean were beefing up the team, we're adding to our team. We just started and you a new kind of a up sky that will help us.
Our team in the U.S. to beef up the team. So it's it's all good we have the recipe now we have the people and we'll we'll deliver because there were forget Jason us when business for the shoulder, we're not business to be big and just being spinning our wheels.
Well I have always know that at Layne appreciate the time as always I'll talk or somebody else.
Thank you Jason.
Your next question will come from line of Jack Atkins of Stephens, Inc. Please go ahead.
Hey Lane good evening, thanks, very much for taking my questions.
Yeah.
Let me start off on on the truckload business for a moment and you know there's definitely the expectation.
You know when the market that we're going to see a turn in the U.S. truckload market at some point in 2020, some are more bullish about it being towards the middle of the year than others, but I guess I would just be curious to get to get your take on how you see the market developing it 2020 from your perspective within the truckload within your truckload operations.
And sort of how do you have positioned.
If I in your various subsidiaries to to capitalize on that.
You know what do I guess I'm in a tough position because of what we're doing with the a you know with the equity offering.
What I could tell you, though is I concur, okay with it or with the guys that says probably the freight environment will be softer than the first six months and is it will probably get better because don't forget last time I looked at it there was about 60 to 70000 trucks to.
Many okay on the road in the U.S. too much supply.
Versus the the demand now every week. Okay. This is this a oversupply is being reduced. So this is why thing that the U.S. economies doing well.
We look at the unemployment we look at every every thing that you look things should get better now. The problem is we created this overcapacity were stupid. We created this overcapacity ourselves in 18, because you know we listen to customer Oh I'd trucks do this by trucks lease drugs and then we oversupply the mark.
And then we're stuck went up hands down like it happened a in 19, so I think that Ah I tend to agree I don't want to talk too much about five years I'm not really allowed to do that but I concur with the the feeling of what you just explain.
Okay got you are totally understand about being a little bit constrain there just with regards to the to the fourth quarter.
You know was there any impact in the fourth quarter from the real strike in Canada anything worth calling out there in terms of the impact that may have had on on results.
Well you know the problem that we face all the time US is that we use array of for a for LTL and you know when we have a strike with CN or C. B. It's it's always to our detriment. Because then we're stuck with the customers, saying well Where's my freight well, then we say well [laughter].
We don't control the line all it stuck with this real company. It's on strike. So then we probably have to do something to help our customers. So we have to put it on the road. So we don't see anything as matter of fact gets its a negative in the sense to us because what we're there we have to protect the relationship we avoid the customer so.
I mean, it's not been huge for us I mean, we're not in the business of excuse. So we never really talk about that but it's not been a positive. The only positive we had okay versus 18 versus 19 in Q4 is that postal strike in Canada. So that was a little bit of a tailwind for our luminous qanbar operation.
Okay, and that's why you know we did not as good in Q4 this year versus last year.
Okay.
Good.
A couple of quick questions about the LTL segment, if I could then I'll turn it over but you know your your cross border partner in the U.S.
You know is is going through a significant expansion of its you know footprint within these and I've got to think that that will help or has helped maybe if we want to focus on 2019, you know some some some cross border activity. There could you maybe maybe that's something we should be thinking about as.
As a tailwind into 2019 and beyond maybe if if.
If they continue to get traction with their wayfair initiatives in the northeast.
Well, absolutely I mean, we've been really happy with the relationship that we have with our partner in the U.S.
I mean don't forget we used to deal with one carrier for 20 years. After 20 years. It just said 85 things, but no. Thanks, we're going to deal with a with a different guy in Twaddle, Oh Cartage Guy.
And then that we went with the site or I can say a we went with saw you at that time and those guys were not big enough transformer business, but we work with them. Okay. Like we did 20 years ago with the other guy So and we're really proud because these guys. The volume has been growing in and out every ever.
We mine.
And you're absolutely right there expansion in new England, being so close to Ontario, Quebec, It should be a positive down the road.
Okay. I think I think that's got caught me taking care of thanks very much for the time.
Thank you Jack.
Your next question will come from a line of Walter Spracklin of RBC capital. Please go ahead, thanks very much a good afternoon alley.
Hey, I used to show a water [laughter] yeah. So just I don't know what do what you can kind of what you can share for us here in terms of 2020, but typically it's around this time for the year you give us some indication in terms of what you're expecting in terms of excess free cash flow and Capex are you.
Are you able to provide some insights there a top level on that but those are those items are.
No no I see that's the from Walter I can't I can't see anything right now because of what's going on so let's you know maybe I don't know me being a few weeks when we're allowed to explain a little bit where were going up you know I saw that is I can Walter will provide indication.
What I can say, though is that our team is really focus.
And you know when these guys are focus and they know the mission and the mission is when business for the shareholders. We have to be more efficient we have to do more with less and we have to consolidate the real estate how can we do well if we do an acquisition Allfast can we turn these guys around.
Et cetera et cetera. So it's the same kind of religion, because you know it's like a religion at <unk> five.
Yeah that same religion, Walter is still there okay. So as soon as I can okay, we will be providing guidance, okay, but right now I cannot say anything understood, okay and and in terms of the a you know you you mentioned in your prepared remarks that you've been a active on the acquisition front when you look at the ERP.
Hi pipeline right now what areas would you say either geographically or.
By segment would look the most appealing to you right now.
Well there again on pipeline I cannot see anything right now Walter but is just look at issue, we whatever was saying before okay.
I can't say that really well is there anything change probably not.
You know like we kept on saying, it's it's always the same religion that typify as soon as I can Walter will be able to talk more about a 2020 and 2021, Okay. I'll. Let me go to a strictly 2019 question and.
Perhaps you can give me some color a a that I understand you're you're fairly limited. So I was at a conference last weekend and there was some discussion in some of the centers that that insurance rates have really spike for truckers, particularly cross border truckers, and that's leading to some movement of volume or.
Over onto the rail is it sounds like capacity tightens up there are you seeing those those rates for you I know you do a lot of self insurance there or is that an opportunity is it a is it a cost item for you or are you even seeing that or just any color on kind of the cross border insurance costs that you're seeing recently.
Well one thing is first of all water you're absolutely right. The insurance World is really tight right now. So if you talk to the U.S. domestic truckers, they're feeling the pinch and the pressure Oh. It's like you just said I mean in Canada, where mostly self insured.
Not in the U.S. so in the U.S., we have retention.
That are fairly high, but we have coverage from insurance company and what we've done a since we are involved in the U.S. is we spend a lot of money first of all in in the aging of our fleet. So we replace a lot of trucks. So right now if you look at the average age of our truck were just under two years over 1.7 years in the U.
Wes years old so with that so we have all the safety features of lane changes since collision avoidance. We also have all the fourth facing camera. So really if you look our loss ratio.
We're probably one of the best customer for the insurance company because a loss ratio is maybe like 10 15, Max 20% in the U.S.. So I agree with you and probably a lot of these truckers that their loss ratio is 100 150, new we'll have to pay more but for us I don't.
He gets going to be an event or because of our loss ratio and because of the audience equipment that we've invested in safety because we believe us. It's not just the claim is the safety of the citizen that are on the road, where we're there to protect that no does this affect more the trans border world of off truck.
King <unk> I think it's it's all across since you as domestic is Canadian domestic and it's also transporting a they'll forget that us in Canada.
Were slow I mean, you LDS we're still talking about that it's still not in place and that should help in the safety. Because then the guys don't change you don't run hours and they get tired and that that's when they could become a problem.
That was my last question is on the Aneel do you says this is it starts to come into force in Canada or you are mentioning it it will have a positive impact on safety or do you think it'll it'll affect capacity either way did in the U.S. or is that really already kind of played itself out here in Canada.
Hi, sorry to say well do you know us we believe safety it will be will be much better. Because then the cheaters will be gone now will that affect capacity.
Maybe maybe a little bit but us.
Like I said earlier, Walter our focus is really how can we be more efficient we don't really Cambodia, if there's a shortage of capacity for six months or 12 months I mean, just look at what happened in the U.S. I mean 18 was fantastic Yale. They came in you know the demand was high supply was last and then were stupid.
We just add trucks us.
Hey, guys ill just add trucks, and then were short in 19, and if you look at Q4, all the U.S. trucking company I mean, they're all down 20% to 40%, but most of them beat consensus how about that.
Yes.
Some bad they.
Thanks for the colors always anyway.
Pleasure.
Your next question will come from the line of mode Nine Zero Laurentian Bank. Please go ahead.
Congratulations and thank you for taking my questions.
Hi, Jim on.
I understand that you're limited and the scope of what you can speak about and I do appreciate your perspective with that it's easy for us to read comp results would vary across the board indicate softness war and industrial recession I'm. Just wondering if you could speak a bit more about your asset light model and your mix of business, particularly this.
Specialization and how much your model has shielded deal from seemed a significant trend down in your business versus peers.
Yeah, you know Mona that's a very good question because you know if you look at what we do us and our capital intensity is is really know why is because our focus.
If you look a Canadian operation, our truckload Canadian operation both on the specialized side or on the van side is we're focusing us on return on invested capital. So we talk to our executive saying.
Can you can you.
Get more revenue.
Okay without the ashes. So can you guys hire more independent contractors can you guys do more okay in trying to sell okay to the small truckers that has a truck and likes to have a truck me if I could do more without trucks will do it. She that's our focus tried to do.
More with other trucks. So this shields us because I still remember about 2008 2009. When we had this you know recession big recession, our revenue went down 20% or EBITDA went down 20% my debt at the time was 800 million went down to 675, but my stock was in that when all the way down to three.
Bucks, Yes people thought that we would goal.
Bankrupt or whatever.
So that's that's where it comes from his dad guys, let's do more with less so that's why if you looked at a PNC the capital intensity of PNC cheap. It's unbelievable. If you look at a you know.
Oh, it's versus our peers.
Okay, which are the big guys.
And our free cash conversion is like 80% something that 80, 85, maybe 90% and yours is maybe 20% to 30% why is that well because all the lydalls. Okay that we do either areas with Cargojet. If it's rolled is gonna be a third party trucker.
So we don't do any line allows us in our PNC.
And our PND operation is mostly done okay with third party, okay owner operators, we have some some of the PND lets say Toronto, Montreal, Vancouver, we have old trucks, where the density supports that.
What if the density is not huge then we go with the owner operator model. If you look at our LTL weve diversified over time with the intermodal. So today, we've got about 35% of our revenue in LTL that is intermodal.
And why because this is really an asset light operation.
So again.
Logistics without last mile I mean, it's 99.9 I said light. So if there's just so if there's a recession I mean, the proof is into putting us we're ready we're ready and that's a negative is that okay. There's a recession, but I also creates opportunity for us on the M&A side.
Because of our strong balance sheet and this you know I can we talk about this this offering but for sure. If this is successful okay, that's going to improve our flexibility right now.
If you sum up the flexibility for M&A of T.F.I. Its official flexibility is about $650 million Canadian.
Okay, and maybe with everything that we're doing maybe we'll get all the way up to a billion dollar.
That's very helpful. Thank you.
Your next question will come from the line of corner.
So sure Bank. Please go ahead.
Thank you and a good up internally.
Yeah, no one could argue.
Good good Atlanta, So just so let me start a the with the pricing here.
So looking at a the Q4 B and C LTL and truckload looks like the pricing was weaker in all three segments and it seems like a bit over there were so from what we saw in Q3. So just wanted to understand is it just the or capacity in the market, that's kind of Ah trickling down now.
Or the weaker demand is kind of showing up in pricing from Q4.
Yeah, that's a very good question as well. So so if you look our LTL. Okay are you look at the revenue per hundred weight and its down Okay. Like you said and there again I mean, it's it's always a factor of you know the freight environment that is soft no question about that.
It's also has something to do with the average length of haul, Okay, which is doesn't change much though and then you've got the average weight of the shipment that you've gotta look into it now.
Okay, and you guys with less revenue.
Lower quality of revenue you guys are still doing better than last year right.
Uh-huh.
So it's because we were able to be more efficient.
Hey, so.
It's a it's a the LTL marketing campaign, though.
If you look at that it will keep on shrinking why because most of our customers in LTL or industrial LTL up disappeared in Canada. Most of our LTL now supports the retail industry, the brick and mortar guys the malls and all that.
So we are losing because our customers are losing to the E commerce.
Okay no. The other side of the acquaint because honestly were sold diversified that we're suffering on the LTL absolutely, okay, but we're still more profitable because we can't she'd gaas faster than revenue.
Now the other side of the coin is that our E commerce guys in our last mile Division and.
Those guys are growing.
And the same thing with the PNC NIAGEN say well in your European CE is flat or down a bit because maybe the strike that last year, you guys were doing well, but.
Yes, it's a tradeoff because well even on the PNC I'm, losing to the brick and mortar guys. Because you know if you look at as an example may see shutting down over 100 stores in the U.S.
The brick and mortar guys are suffering in Macy's was you know truckload and LTL in the U.S. to support the store. So that's that's the beauty of this HTI five planes that you know we play on the geography. We play also on the different line of products and.
No. So yes, Oh, we have a little bit of pressure on rates, but we protected the marginal.
Right nobody that makes sense for land for sure I understand obviously the pricing is a creek across the board right Am I think you guys had some stuff up.
Pricing initiatives before right that's kind of held to some degree obviously so that's good so on the on the Canada. Both strike you mentioned right. Obviously somebody if you if I look at a the organic revenue.
Growth or decline before fuel so shocking when it gets quite evident that I'm like it was down 9% in Q4, Sasha and the first nine months was down like 7%. Some liquidity what do you think the organic environment would have been similarly, we compared to last nine months, a if you strip out the Canada, both strike or was there something else in Q4.
No no no no I mean, if you if you remove the because we're never sure about kind of both strike Hey, what was the benefit at all.
So this is is this is difficult to talk about but Ah you know exactly what was the benefit of of the pose a strike there, but I could tell you that.
Basically if you look at a pea and see the focus has been yearend you out about bottom line no you look at the future then we'll we'll talk about that as soon as weekend.
Right, Okay that makes sense and then lastly on the I'm on the share buyback. So I saw you did some 10% off your NC I'd be already and then the first few months of the Unsi I'd be here.
What do you think about the remaining 90% them I guess, that's something that Youre looking to do still here or you want to preserve some capital for M&A.
This is a a question that I can't really answer right now because of what's the what's happening with the offering so I can't really talk about that sorry, no no understood well refer that then thanks, so much <unk>.
Okay. Thank you.
Your next question will come from Cameron Doerksen of National Banks Naturals. Please go ahead.
Hi, good afternoon.
And I feel government.
So just just one question for me I, just wondering if you could talk a bit about the I guess the logistics a last mile segment, I guess, just calling a logistics now.
But you talked a bit about it earlier, but you mentioned that that giving out so you're looking to improve the at the bottom line. There can you just talk a bit about where you are in the process of integrating some of the acquisitions that you've made in the last mile side. When you mentioned the die calm in the be backs where are we in that process. I mean is there still do we see any of that.
Sort of benefit of maybe rationalizing some of the operations in Q4 is as most of that still to come.
Oh, Yeah, you see Cameron I mean, we did those acquisition or just a few months ago. So you're right I mean, there's more to come okay. There's more to come in terms of pricing action. When when you know those guys that didn't like to make money you were not pricing business properly. So we're in discussion right now with customers.
Is that a you know what guys I mean I understand that we had this the you out you guys had a deal sweet deal would be bags, but be VIX is gone VIX is backdrop I mean, we bought that from a bankruptcy court. So it but that you know you get a lot of push back wait wait wait you know it said there so it does lots of negotiation.
So there's still more room for improvement on the quality of Oh. The revenue in terms of the really say you know those guys are signed leases for you to use three years, so you're stuck with the real estate for you know some fear the time, so it doesn't happen overnight hey, so.
To answer your question on the real estate side, there's more to come.
In terms of Ah Ah driver pay or owner operator pay this is more like okay. This isn't in control right now we control that it's fair it makes sense, but overall you know when I said or last quarter I feel good that arc logistics.
Operation in the U.S. will definitely improved by 200 basis points.
Oh, I'm still feeling as good as I was three months ago.
Okay. No. That's that's very helpful. Thank very much.
Pleasure government.
Your next question will come from might have been Wipeout plucky of their shopping capital. Please go ahead.
Good afternoon, and I with respect to women they could you maybe a.
Reiterate your M&A criteria in terms of valuation multiples or maybe a segment that you are looking out and the willingness to to increase the the leverage ratio up to a certain level a away.
No not by the way what the only thing I could say is that it's going to be more the same you know Tia fine. It's always you know you know we spend we invested $200 million last year on M&A. We did the both the same okay in the year before that very accretive.
And just look at our track record of 20 years. So you know if somebody without invested 20 years ago into a t. a five.
Well the return would be above 4800%.
No.
That's why that's quite good.
Okay and looking at 2020, where do you see the the greatest potential for margin improvement among your business segments are they.
That one that by the way I can't really I'm stuck right now I can't really talk about 2020 until this this this thing that's going on right now as soon as I can okay. We will come out with <unk>, how do we see 2020 as soon as I can.
Okay perfect. Thank you very much for the time I like.
But then why you got to look at a cue for we just really good.
Definitely thanks.
Thank you.
You have no further questions at this time now turn the call back over to Miss your Biddulph for closing remarks.
Well. Thank you very much operator in thank you everyone for joining this evening's calls so we at T.F.I. International very much appreciate your interest where it pleased with our results in 2000 in 19 and look forward to delivering continues strong results in the new year by focusing on the business principle I'd <unk> Oh.
Blind specifically.
Strive to find opportunities to create value unlock gets where investors and whenever possible return access capital to our shoulders. Thank you again for your time, we look forward to updating you on our progress throughout the year. The good evening. Thank you [noise].
This concludes today's conference call you may know disconnect.
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