Q2 2020 TFI International Inc Earnings Call
We're standing by.
Welcome to T. S. I internationals second quarter Twentytwenty results conference call.
At this time, all participants are in listen only mode.
Following the presentation, we will conduct a question and answer session.
Oh, it will be limited to one question and I'll follow up in order to get to as many college as possible.
Further instructions for entry into Q will be provided at that time.
Before turning the call them to management. Please be advised at this conference call will contain several state Miss it all forward looking in nature and are subject to a number of risks and uncertainties that could cause actual results could differ materially from those anticipated.
Oh dollar amounts are in Canadian dollars.
Lastly, I will like to remind everyone that this conference call is being recorded on Tuesday July 20, Eightth Twentytwenty.
I will now turn the call over to building the dollar Chairman President and Chief Executive Officer, Most T. if I International. Please go ahead Sir.
Well, thank you very much operator, and I appreciate everyone joining our call. This morning.
Yesterday after market close we released our second quarter results.
If you need a copy of the release please visit our website.
Do you find international performed well during the second quarter generating solid financial results, while continuing to prioritize the health and wellbeing of our employees and customers.
Indeed, we performed better than expected.
Despite incurring and absorbing various corporate related costs of doing business and so several positive developments.
During the quarter that bodes well for Tia flies performance going forward.
As you May recall, we acted decisively went covert 19 begin to spread.
And in recent months I've continued to focus on the details of our business, while maintaining our emphasis on the fundamentals.
You've heard me say it before this involves involves optimizing our free cash flow.
And the earnings per share, which we then used to expand our business and create long term shareholder value.
We pursue an asset light business model, we seek opportunities to enhance efficiencies and we maintained a strong financial foundation.
We do this regardless of macro business condition.
And the second quarter was no different in other words.
The same operating culture that has facility to your Fies rapid growth over the years is also the key to helping us navigate the ongoing pandemic.
One core element of this approaches that we also are there to.
During the quarter two idea <unk> two during the quarter is the expansion of our platform through disciplined accretive acquisition.
In June we further expanded our specialized truckload operation.
Well the acquisition of Costco transport enhancing our container transported in storage capabilities, well, adding density geographic reach and new customers.
Also during June we had a compelling opportunity to acquire a selected assets of boats C.T. transportation and MCT transportation further adding to our specialized truckload capabilities.
Both our excellent strategic fits with strong customer overlap.
And network synergies throughout an expanded geographic reach in the U.S.
Let's now turn to our second quarter results.
As I mentioned, a moment ago, we incurred and absorb all of covert 19 related cost related to the more challenging operating environment.
The need for extra sanitation and personal protective equipment, the payment of special bonuses to furloughed workers retiring to work and certain inefficiencies related to doing business. In this type of environment are fully reflected in our resolves that I will review.
No what you.
Starting with a high level performance total revenue of $1.1 billion was down 17% compared to the prior years second quarter.
Our operating income decreased 12% to 131 million, while our adjusted EPS on a diluted basis of one or for.
Compares to $1.18 a year earlier.
Given our emphasis on generating strong cash flow that weekend, they used to invest and expand our business. We're pleased to have reduced net cash from continuing operating activity of 228 million and that's up a very strong 61% over the prior year figure.
Well, our financial performance was through certainly impacted by the global pandemic. The month of June was by far the stronger so the quarter.
We're pleased to see everybody on the rebound in parts of our business as the quarter progresses.
After the inch initial pull back in April due to the covert 19.
In addition back in April I mentioned, our objective of emerging even stronger when economy conditions return to normal during the second quarter, we saw signs of this becoming reality.
For more detail on this let's now review the performance of our four business segments, starting with PNC.
This segment represents 14% of total segment revenue and saw revenue before fuel surcharge declined 12% year over year in June quarter.
Operating income of 23 million compared to 30 million in the prior year and the segment operating margin of 16.2 compared to 18.9 the prior year.
Our package and core your segment saw a rapid decline in business during April when economy condition deteriorated due to the covert 19, and b to b activity slowed significantly.
Hi, there we shouldn't saw a rapid pick up in B to C thinking to place of much of the beach would be business that has slowed.
We were able to profitably stake on this new beat to see activity.
As so much of the of it came on quickly, allowing us to achieve immediate density in the region, we choose to service.
Due to the rapid replacement of business, our overall activity improved and in a bunch of June represented approximately one half of our full quarter package inquiry operating income.
Looking ahead, we expect this segment to permanently benefit.
From the shift that dr. occurred during the quarter as we expect to keep portion of this new beat to see business, while beat to be eventually recovers.
In addition, we believe that we can quickly scale, our acute door capacity in terms of both drivers and trucks to meet the increase the men.
Turning to LTL segment represents 16% of our tools segment revenue and saw revenue before fuel surcharge declined 28% year over year.
However, our operating income of 33 million was up 10% compared to the prior year finally due to the Canadian wage subsidy of 17 million in our operating margin expanded seven on 30 basis point to 21% for.
For those who are not familiar that can any way subsidy was designed to help Canadian business affected by covert 19, <unk> rehire workers and prevent further job loss, providing subsidies of 75% of employee wage subject to a per employee cap.
Looking back.
On the quarter.
Our LTL segment experienced sharp revenue pressure in April due to the covert 19 and its impact on traditional brick and mortars retail.
Helping to offset that pressure, we improve efficiency by merging or can be in freight weight and T.S.T. over then express operating companies in may.
This provided a meaningful margin benefit during the second half a quarter and we expect that benefit to continue going forward.
Moving along to our on to our next business truckload is our largest segment representing 46% of total revenue truckload saw revenue before fuel surcharge declined 17% year over year.
Ever.
Operating income of 70 million was up 3%, partially due to the Kenny wage subsidy of 15 million in our specialized operation.
<unk> operating margin was 14.8% was up 300 basis points compared to the prior year.
Taking a look at our truckload performance art Canadian business held a fairly well and after initial drop or U.S. business began to come back strong again with approximately one half of our operating income in the of the for the quarter produce in the month of June.
Our specialize operation also performed well despite the several important customers completely shutting down due to go but 19.
Our adjusted operating ratio was 86.5 for the Canadian truckload.
An improvement relative to 87 one.
In the prior year.
78.6 for the specialized truckload and improvement relative to 87.
Percent, the probably a year and 91.8 for U S T L relative to the point to the prior year.
Similar to the LTL part of our improvement during the quarter goes beyond market condition, reflecting our longstanding focus on profitable growth.
Finally logistics he's our second largest segment at 24% of total segment revenue and saw revenue before fuel surcharge grew 8% year over year in the June quarter.
Operating income of 23 million was up a very solid 27%, excluding the year earlier bargain purchase gain there would be 11 million, reflecting a 130 basis point increase in our margin to 8.6.
Ecommerce and demand for parcel delivery were strong throughout the quarter with traditional retail all that's close and more people working from home due to the Corinna virus pandemic.
Our balance sheet remains.
A source of strength for T., a fine to national benefiting during the quarter from our strong cash from operation the focus on driving working capital improvements. We ended the month of June with financial leverage at the multi year low and the $1.1 billion of liquidity.
Last quarter.
It was early in the covert 19 prices when I provided an overview of our rapid response, so I want to provide you an update you will recall that among the many strategic these strategies, we quickly implemented in March to reduce operating costs and capex, we reduce executive wage and reduce the work we.
For more than a thousand full time employees. We also implemented a reduction in force designed to support these individuals during awfully temporary unemployment and we suspended all capex to which we are not committed to.
As I mentioned at the time, we approach all decision strategically we deny towards helping to you if I quickly emerge even stronger.
I'm pleased to report that as business conditions improved between April 17, and July 14, we have reinstated full five day work weeks for 594 employees and we hired 793 employees full time why Didnt furlough.
In addition.
We have slowly begun.
To resume some elements of Capex.
So before we open the call for questions.
I want to share.
Our outlook for the full 2020.
We cautiously expect adjusted diluted earnings per share to be in the range of $3.40.
To treat dollars and 75 cents and free cash flow, which is a nano FRS measure.
To be in a range of 425 to 460 million.
Looking even further ahead.
We feel very confident about our earnings power and 21.
Given the investments, we're making this year and the costs, we've permanently taken out business such as the synergies from merging various operating companies.
In addition, weve been careful to keep our team in tech through the pandemic prioritizing furlough rather than layoffs.
As I mentioned earlier, we believe that ecommerce uptick that's driven an uptick in a b to C business is sustainable.
So again.
Feeling very good about 21 and beyond.
In summary, I'll reiterate that tier fives international overall capital allocation approach does not change regardless of the macro environment.
We invest capital, where we see the best risk adjusted return well pay our quarterly dividend and continue our track record of pursuing attractive acquisition opportunity in a very disciplined manner.
As you continue to see in our results.
We look to generate not just growth, but profitable growth and the interest of creating and unlocking shareholder.
That you and returning excess capital to shareholders whenever possible.
I wanted to thank all my colleagues a t. a fine for their hard work and dedication to these unprecedented times and I also want to welcome to many new analyst or now following our company.
It's great to have you want us.
With that operator.
If you could please begin that you any section thank you.
Ladies and gentlemen, do I see question, you'll need to press star one on your telephone keypad to withdraw your question. Please press the pound <unk>.
Oh, it will be limited to one question.
In order to get as many colors as possible.
Again that star one to ask the question.
Please stand by while we compile the kidney roster.
Yeah.
Your first responses from Ravi Shanker. Please go ahead.
Thanks, Good morning, everyone a couple of questions.
But if I can start with you.
Can you just walk us through all of the puts and takes on the cost side related to Kuwait in the quarter.
You know what kind of deal wins did you have in terms of costs coming off that might be.
Be restored into Threeq, you, a and also any specific color coded related costs that you incurred a in to Q that will kind of go away in Threeq you.
Okay. So so if you look at Q2, what we've seen her first of all is no one of our cost is a besides all the sanitation and b to B and also in some instances some workers that don't want to show up for work, because they're scared of or whatever that could happen.
And all that.
Besides that I mean, if you Ron and network like we do in our B to B.
At the PNC sector, if I look at they see us for instance, if I look at T.F.I.S. Those two guys are 95%, 90% b to B. So we had a tremendous pressure okay. When we have to shut down.
Because the malls were close so most of our customers were down. So so if you look at ice, yes, and T.F.I., yes.
April's revenue numbers, we were down 65%, okay and that much.
And you're still stuck with you know the employees that you have to furlough and all that so these costs. Okay. We had to go through all that our camp R. Loomis operation and Rps. She was not affected us badly. So if you look at a you know in April revenue was down about 35%.
If you look at T. A khanfar Loomis today.
The revenue is up year over year right now since June okay, because of a the beat to see no I C. S and T. F is we're not really equipped at the time to two really servers. The BDC and this is something that we are working on right now, okay, because we see more and more demand.
And on the beat to see side. So that's our PNC operation, but it's also the same story with our LTL. If you look at the drop of revenue in RTL, We run the network, it's unbelievable what happened to us because on the Kt inside I mean, weve close fast and we reopened very slowly, Ontario, Quebec well.
A big maybe a little bit faster than a terrible winter or has been really slow to reopen so huge drop so what we've done okay. When I looked at that you know nobody wants to Miss a store when you haven't big storm like this spend that make here. This is the time that you could take action that in normal time, it's difficult to do.
So we went ahead and we combine T.F.I. I ER TST overland, okay with CF.
And we've done that very successfully so now okay with this new combination.
We we were able to take some costs and consolidate some operation.
And that's gonna be huge benefit in the future.
If you if you look also at our logistics in the U.S.
Just free Ur Cobot thing there, we just acquired the the business of Donnelley.
And there again, okay, we were lucky enough to have a lot of.
Work to do in terms of integration, so where you're going to see us again shedding cost. So we got rid of about 26 location. We have acquired from Donnelley just just in in Q2.
So a lot of good stuff on the go a T.F.I. This this pull that thing, okay, which was.
A big headache, when it started because it's just stop and <unk>.
Overnight.
And what are we gonna do about that well what do we got to double down a t. a fight we have experience.
If you look back at 2008, there was a financial crisis.
And to your five performed really really well and thanks to our team. Thanks to our people thanks to the dedication over employees and our management team.
Our focus has always been on on making money it's been a challenge.
But I think that we've performed really well so not going into all the details of what we've done I'm just giving you some.
Some highlights okay of of all the things that we're doing you know if you look at a U.S. The L. for example, so everything that was not committed on the Capex. We stop then about a month ago Greg.
Our E VP in charge of U.S.C.L. called me so they actually [laughter], let me we got to do something about that I mean, we have to get more capex I looked at that Greg send me the business case say Greg.
You're right, Okay, let's do it so weve added all the Capex that we were supposed to do that that was not committed that we put on hold no. We're gonna do those capex in 20.
Because we have full confidence about what's going on and yeah, the or of our U.S. deal that has deteriorated a bit.
This is because we lost so much business, a T.C.A. because of the plants closure.
So we have a customer that to close is automotive plan because they were not getting the parts from Mexico because of what was going on over there. So this plant will shut down for more than the month.
Maybe too much.
But that's why our revenue dropped also not so much okay in our U.S. deal versus our Canadian T L or can even specialty truckload.
But still t., she that's why our war okay.
When I went up a bit in the U.S. steel, but if you look out of specialty T. O. The guys I've done a fantastic job, even if you exclude the subsidy that we got we did better this year than last year as a percentage.
Why is that because we made a lot of acquisition.
19 of companies are we're running a 90 590 698, who are okay and 92 and then.
Steve Brooks and his team did a fantastic job, reducing the cost even through this pandemic. So this is why exclude this the subsidy and you'll see as a percentage of revenue. These guys to so did very well now were down big time on the revenue, but if you look at a month a june were starting to.
Recuperate a lot of this revenue that was lost because of plant closures.
Very helpful. Thanks, and just maybe as a follow up it out I mean, you you're you're clearly laying out a things that have started to normalize some lawton come back to do that thing where they used to be.
How did the M&A environment also normalized to the point, where you guys can get back to looking for a big kind of transformative acquisition. I mean, clearly you guys have been very active on the small tuck inside the CR, but do you think the markets normalize Reagan kind of go off her bigger do you.
Well you know.
And he has been a you know the engine of terrified that said our blood. That's what we do okay. I've got a fantastic thing that runs operation My job working with David and Jason is really M&A. So I mean, we did a few small deals smoking in Q2, I think that no based on what we see today.
Based on our confidence Bain based on the solidity of our team I think that's something important can can.
Yes, Ken can be reality within the next year, absolutely, maybe maybe even shorter well, we'll see I mean, guys are working hard okay, but you know like we always say you got to be cautious when you. When you buy something you do all the do deal in the World, but you know you keep the there's something that maybe.
You don't get so so you can't do 25 deals at the same time, Oh. So you got to do one or the time the small deal in Canada for US it's easy because we have a team that second to none it's easy for us to integrate a 30 or 40 100 million dollar business in Canada, and the U.S. where beefing.
The team we have a much better team today than two years ago. Okay. So that's why we're able to add a C.T. and M.C.T. and probably a we'll see we'll see some more stuff in the U.S. down the road absolutely. It's I think that the environment for M&A, Okay with a about a billion dollars in available funds.
You know I think it's it's the way to go for US it's in our blood that's what we do for 20 years and more.
Very helpful. Thank you.
It's a pleasure. Thank you next responses from Jack Steven by Jack Atkins of Stephens.
Good morning, and congratulations on a great core.
Thank you Jack.
Let's let's maybe start with with what you're seeing more specifically within the U.S. truckload market, we certainly I've seen it feels like a fairly sharp recovery in activity here over the last 60 75 days.
Could you maybe talking about the opportunity within your U.S. truckload operations to begin to reprice some of the lower yielding freight within your within your customer last and how you're thinking about that business over the course of the next the next three.
Three to four quarters, given what could be an upcoming rate cycle here.
Yeah, well very good question Jack So so you know our guys I've done a fantastic job to the pandemic a you know our average revenue per mile dropped Q2. This year versus last year, just a few pennies, let's see if I just a few pennies and now you're gonna say well if you on 200 million 300 million miles just a few pennies as lot of money, but.
You know for sure there that we saw some pressure in April may but now if you if I talk to Greg is going to tell me I mean I'm over book now.
It's it's like what's going on okay. So this is why going back to my comments for the first call or is that I said, okay. Greg So, let's let's bring back the new trucks in Okay are you know a Greg was telling me that weve never seen so many good drivers show up at Cfive T C. Okay, because they see the fuel.
Sure I mean, this see if I used to be a diamond okay and now people are in the trucking world are starting to see well see if I well, it's it's a fantastic company now and see tea is gonna be manage now by our friend, Greg and his team as he kind of specialty carrier within within.
ER, let's see if I group of companies. So we see some some.
Very good quarters ahead of us I mean, when we talk about customers and the economy in general in the U.S. and and also maybe a little bit of this onshoring, that's been going on maybe more freight coming out of Mexico and as you know Cfive is a.
Very important carrier in Mexico every day, we got about what I don't know 2000 2500 trailers in Mexico. So that no Mexico is going through some difficulties with the with the covert thing there yeah, Okay, but you know slowly there like reopening and is doing better. So you know Jack I see some.
Good stuff a this is why CF I saw well position to two or two.
To grow into the next the three four or five quarters.
Both organically I think and through M&A.
Okay. That's that's great that's great to hear and then I guess my follow up question could you talk about what you're seeing in your business in July specifically with regard to the B to b versus B to C. Trends are you starting to see you know your b to B customers come back online began maybe shipping.
Catching up.
Given the the shutdown in and how you know how are you thinking about the right mix of B to B versus B to C for the business as we look out here.
The next several quarters.
Yeah.
You know if I look at our B to B versus B to C business in Canada. As an example, so if you look at my logistics and last mile or you know in the covert very like April May and June our revenue was up like 35% year over year, Okay, and then and now we're starting to.
I see a little bit of a drop but now instead of being a 35 now where 20 to 25 and I think that this is where this is all going to stabilities, okay, because b to b starting to reopen in Canada slowly. Okay. Fine now if you look at my Kemper Loomis operation whereby those guys used to be you know maybe 10, 15% okay.
A or b to C and you know our approach has always been we don't want to service the B to C guys and not provide the rights service because if you look at their service failure in Canada have a lot of those companies. So I'm just gonna give the example, kinda posts I mean, it's been a terrible or PURELL.
So our focus on US has always been we grow but we grow in making money and also we grow in providing the right service, so not being all upside down and not being able to or service or deliver good. After a week. So your weight behind no no no. We don't do that us. So so we're seeing.
<unk> a shift in our Loomis Khanfar operation into if you look at Qanbar today, a you know beaches, she is getting closer to 35% or global revenue. The revenue in July I mean is up there.
I don't want to say too much but it is up significantly over last year luminous can't bar because of this growth in b to C. And we were able to grow at the smart way, Okay. Instead of just saying to customer well give me give me freight.
I want to deliver a freight me no no no give me freight and this Zip code.
Why because I can't create density in those Zip code.
So I don't want freight all over the place I want freight and there's a code. So we've been talking to the retailers to all these guys say hey, So we're really focus laser focus and you know at the end it today.
B to B has always been more profitable than beat to see but if you do it the right way and you price it the right way.
Yeah, there's still a little bit of a difference, okay, but not that much.
And for sure T., a fight is part of that E commerce future.
And you know if you can't beat them join them. This kind of mentality. So we see that the beat to be the malls and the brick and mortar guys.
[laughter] they've suffered a permanent kind of impairment I mean this this cobot thing has been a catalyst for E commerce and people will come back to be to be a little bit but never the way. It was pre colvin and ecommerce keeps on growing I mean, the largest ecommerce guy keeps on doing whatever.
He has to do to grow as business and it's working.
And and some retailers are following okay behind that.
And just if I were adjusting ourselves. So so you'll see probably our PNC down the road that was pretty cold bid, maybe at best 15% B to C. A you'll see US probably you know, we then the year year and a half closer to 35% 30 to 35 per se.
Now, we're doing all that and protecting our margin because we're not stupid. Okay. Yes, you look at my margin the P. N C. In Q2, it yourself that you dropped your Mark no no no.
My margin went down because of April.
If you look at June if you look at July my margin is not though.
Right. So that's our approach we're in business the big money servicing customer to the benefit of our shareholder that's our motto.
Thank you your next responses from Scott Group of Wolfe Research. Please go ahead.
Hey, Thanks morning, guys.
Morning.
I mean can you tell us how much of the wage subsidies or are you assuming in the second half of the here in the guidance.
Oh, very small very small I mean, they've adjusted the program because if there was no adjustment in the program probably it would be like very close to maybe just a few million no Oh, you know in our forecast it's very minimal.
It's not even after what it was in Q2.
So it is small and I'm not really significant that this at this time.
So when I look at the guidance for the back half that's that's lower than the second quarter is is that in the per quarter is the big change there just the wage subsidies going away or is there anything else that's.
Causing Walter core yeah.
Yeah, Yeah, you're right the subsidies like like kind of going away number one and also it is we're very cautious about though when you give guidance I mean.
You got to be very cautious and you got to be very conservative you know if we look at the other model and a you know what we always.
Our top guidance is always what we believe is our kind of up.
Hopefully doesn't happen.
We do better than that.
Okay and then just on that last question about the B to B and B to C. I I guess I heard that the update on B to C trends, maybe just if you can give us a more specific update on b to b trends and how bad they knew they were in April and May and maybe what you're seeing right now in July.
I just want to understand how much shown to be as picking yeah. Yeah. Yeah. So so if you look at our P. and see that are really focused on b to b, which is I see us and TIFIA. Those guys were down in April about 65% of revenue. If you look at those guys today, there's still down about 15% of revenue why because Ontario, which is our biggest market has been.
Really slow in terms of reopened the they've been very very careful in Ontario, travato, okay, even more and throws being the largest market in Canada. So this is why those beat to be guys are still like 10, 15% down year over year in July.
Okay. So that's the trend know what we think it's going to happen is that there is a permanent impairment and beat to be now we don't know how much is that is that 5% is that 10% because of the shift to E. Commerce. The stores that are closing and not reopening okay. So may be okay b to b.
He will be permanently down five or 10%.
In the in the coming years, we don't know yet what I can tell you is that we are now getting closer okay and even at minus 15 or minus then we're doing better this year than last year bottom line.
Because you know a storm like that a pandemic yeah financial crisis like we've lived through 2008.
Always good for T. Five because you know yes. We question every day, what we do how can we do better but this crisis, what's even more pressure on on doing things that sometimes yeah, Matt maybe then up let's let's do it and tell we've been very successful in terms of permanently doing more with less.
Yes.
Thank you your next responses from Konark Gupta with Scotia Bank. Please go ahead.
Thanks, and good morning to learn how are you.
I'm, good I'm going to how would you.
Pretty good in the land. Thanks, a hope you're keeping you see if you just wanted to dig into the free cash flow guidance.
Provided so I'm looking at the first half of this year well done almost a 400 million dollar teekay or something like I think let say give or take you have another $50 million coming in second half.
Is that decline in Threeq assay crush them like Scott do you do the tax payments that might have been deficit from just must after the second Uh huh.
Yeah, that's part of that Okay, and it's also the additional capex that we're gonna do okay. Like I, just talked about because were resuming our normal capex.
Which is in a normal year for T.F.I. is a net net of disposal is about a 200 million. Okay. So we're we're gonna be very close to that a if you add the additional capex that we ought to be doing in our U.S.P.L. operation in some of the acquisition that we've made so this is why this is again I mean, what we're saying.
Here is that you know guys take this no range and think about this is a cautious or.
Thing that we're saying I mean, we don't want to.
Over promise and on their deliver us we're trying to do the opposite.
Right No makes sense and then on the on the Beach see side, you said that this says something about some of that business that you have picked up in Q2 during dependent makes you expect that to sustain guineas shared some more light on that what kind of business is that in the whether it's in the U.S. or Canada.
He does invoice.
Yeah, what we've seen so far guys is for us on the because in Canada were way more involved in the b to C than in the U.S. for now Okay. Yes, U.S., we're doing a lot, but in Canada, we're doing even more in this much smaller market. So a what we've seen as is the fact that.
Because of the consumer because of the locked down and because of that the consumer at two or two you know due to buy in a different matter. So ecommerce was the solution and the US you know where we're not there would raise that don't make any sense. Okay. So that's that's always been our focus and you know.
Where they're also to deliver on time, where we're not gonna say, okay. We're gonna take 100 partial and take a week to deliver so we have a capacity that we've been growing we've been adding okay. So this is why we're going to step by step into right direction.
No you will see in Q3 and in Q4, I think that what we're seeing so far in July okay, because now be to be starting to reopen okay. We're seeing that are khanfar Loomis operation are still running 10% to 15% over last year in July revenue wise.
No that's because beat to be still not back up 100%.
But b to C has done a fantastic job for us.
Hello.
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Your next just wanted some Allison Landry of credit Suisse.
Hi, good morning, Thanks, and a great job on the quarter. So I. Thank you just follow up on and a question with respect to that the beat us eat shaft and.
Are they the portion that you plan to keep maybe if if I guess radically different way and how you think that the when you consider that the portion that you're keeping how you think that built the long term mix at the segment. What you think that will look like and and particularly as beat up be recovered.
But what sort of that the long term trajectory. There if you could just remind us but it has been historically.
<unk> yeah, yeah. So so we've always been careful about b to C. You know we've always said you know a beat you see you got to be careful because the coincidence of deliveries not the same I mean, a b to C is one step one package. So we've always been careful about that so pretty cold, but if you look at T.F.I., our Canadian PNC.
Operation for example.
It was you know maybe at best 10%, a b to C combined.
And we've always been careful about a you know, bringing new business, a with a b to C environment no our last mile operation. Okay. Both U.S. Encana, that's a different story, because that's the bread and butter I mean, those guys. They don't run a network. Okay. They run okay, very lean and mean.
And so for them. It's it's a solution that's similar to the Amazon solution.
Now that being said if you go back to our P. and see what we're seeing is slowly. Okay. We are we know that the b to b.
Will suffer a permanent impairment because stores won't reopen or because of whatever reason the brick and mortar guys are suffering we don't know if is gonna be minus five or minus then so our approach that has been guys. We have to replace and we have to grow because if you're not pause.
Solution you gonna be part of the problem. So this covert thing has been a catalyst for us to really refocus ourselves and do the b to C. In a very efficient.
And profitable way.
Okay. So if I look at my can't Bar Loomis operation today combine okay. My B to C runs probably like in the 20% to 25% today.
Well before I was maybe 10 to 15, so we're growing and Kent bar Loomis year over year right now they're about 15%.
I had a last year in July.
So what we're doing is we're replacing some of the b to B that is probably going to be permanently lost maybe five or 10% by more the b to C but profitable.
Right now also the B to C that we're focusing on like I said earlier, we're focusing on high density area.
Okay like the Toronto like the Montreal like the Vancouver.
We're not really big into I would say like Sudbury for instance, I mean is small town up north in Ontario.
Right. So that's been our focus now if you look at our logistics our T Force logistics I mean, those guys are doing a fantastic job through our a last mile operation.
Which is similar to what Amazon logistics is doing it it's exactly the same model.
So you'll see us.
Okay. If you look at our trailing 12 months.
Six six months ago.
Ecommerce was about $400 million Canadian for defy.
And you'll see that moving.
Moving along pretty well in the in the future because we've been able to find a way to do it efficiently even to our.
PNC business.
Okay. That's that's really helpful. Thank you for that you know I just wanted to ask about the three acquisition that you did during the quarter and maybe if you can't just.
You know speak to strategically how they fold into the platform and then any comments that you can get on the broader M&A landscape that'd be great. Thank you.
Yeah. So so if you look at Costco for instance, I mean, we are running what we called control a companion Scorpion W. So the acquisition of Gaskell, Okay, and the combination of Findable you I mean is gonna be a fantastic transaction. So we we are looking right now into consolidated the two sites and try.
Oh, Okay. So it was a strategic move to beef up what we do in this sector in a in Ontario.
The C.T. and MCT was more like an opportunity for us to to grow into the specialty truckload. So we've said okay that if you look at our van operation in the U.S.. Okay. We feel good about what we have today, yeah, maybe a small acquisition is fine, but we feel pretty good we want to build.
Specialty truckload, because if you look at a Canadian operation.
Our specialty truckload is second to none.
We're doing so well so slowly I mean, we're we're building this specialty truckload operation in the U.S.. So we started with a holic in Chile bought a year and a half ago.
And now we're adding city NMC dee.
And you know you may see.
More of this in the coming quarters into tier five growing is U.S. specialty truckload operation.
It's a focus of ours.
Now in terms of Emoney, what we see in the future like I said specialty tea all in the U.S. for US is is really very important that we grow that okay. Because we see a lot of opportunity in that sector.
We love a you know all the chemicals the food. The you know all these businesses that you know if you look at the U.S., there's not really if you exclude the flatbed operation there's not that many public company that runs a into this world in in the U.S.
And that's that's one of our strength if you look at our or in our specialty truckload pre covert.
We've always run these operation between 82, and 85 and a drag to our or has always been all this M&A that we've done because we don't buy an 82 or a company. We by 92 are 95 warring we bring slowly those guys back down to 80 85, something like that.
So specialty tea out for sure.
Our last mile and logistics in the U.S., absolutely focus of ours I mean, we've done the Dalai deal we've done to be VIX deal a cow and his team slowly are bringing our logistics operation in the U.S. closer to what we do in Canada for sure. It today our profit.
Really t. level in Canada is way better than the U.S., okay, but slowly cow and his team okay, they're going to start moving the profitability to the closer to that Kenny level. So M&A in logistics.
And the U.S.
I mean.
Absolutely.
It's a focus of ours. The other thing also there were really focused like I said LTL in Canada, you see our revenue dropped like 25% it's terrible.
But don't forget that LTL Encana is suffering also from the ecommerce.
So if we can find the right company in Canada.
Or maybe down the road in the U.S.
We'll see but if we can find the right company cannot today.
Okay, absolutely like we've done we bought NFF, maybe two years ago.
That's going to be another focus of ours.
So we are really going back to the mission of typify.
After you know two three months of not knowing exactly where where the future was where this pandemic thing there.
I mean, we're back to.
Our mission of growing this business slowly smart and the smart way.
Through M&A.
Thank you your next responses from Walter Spracklin of RBC capital markets. Please go ahead.
Yeah, Thanks, very much good morning away.
Walter.
So I guess my first question is on me your ears. Your guidance for earnings I was wondering if you could give us your revenue thought that underpin that earnings I'm, just trying to understand as they say earnings guidance that assumes lower volume within certain merging or higher volume.
As things rebound just curious your your overload overall topline outlook that underpins our dps guidance.
Yeah. So so if you look at the backend of the year, Oh, we don't see right now where or what minus 17 in the quarter, we don't see us being at par. Okay. So there's no M&A in there except what that's been done okay. So we're not back to where we were.
For the last six months or the year in terms of revenue.
We still see a slow recovery, okay in the back half a year in terms of revenue.
So I would have to get back to you all talked to tell you exactly where route but I think it's about minus five.
Versus year over year.
Okay that makes sense.
And then for my follow up it's on a it's on acquisition I know a mall and group has signaled their interest in an expanding now a out east and and a little and obviously, they're focused on LTL. How do you view that is that I mean, obviously Murray is a good competitor rational player if.
He's in also consolidating does that make it more.
Difficult for you or is this an area that you're not focused in is there any kind of a other angle that could could occur between those two companies with regards to the LTL marketing and kind of trying to build the density that you mentioned, that's so important to not not market here in eastern Canada.
Well I don't know with Murray's fun is I mean.
[music].
You know.
I don't mind competition Us we love competition, so listen I mean, if you look at our track record I think it speaks for itself.
No.
I can tell you Walter that OS for sure we walk the talk.
So no just watch of what's what's going to happen in the next six months and.
And we'll see no.
We've been doing that for 20 years.
My friend Murray runs a great company.
You know so fine.
But us we have our own plan a were really focus.
On what we've done for the last 20 years as you know I was a with this little family in M&A sector before that that's what I've done on my life. So we're really focus a we've got over a billion dollars and liquidity.
Our debt to EBITDA now runs about 1.61 0.7 based on.
The way, we do it with the banks.
We got lots of potential our team is second to none.
I mean, we we've got a team that is fully fully focus and dedicated.
They understand the mission.
And Oh, you know there's not that many companies that you can buy in Canada in LTL, it's not that many.
And the Canadian market for LTL, it's it's difficult I mean, where it can be with lots of family company that.
You know for them to points bottom line.
It's acceptable Oh gosh, we you know we shed some business that because.
We said to the guys listen.
If we're in business to make two points.
Well, we'll just take the capital and bye.
Oh RBC stock because RBC gives you today, and maybe four or 5% dividends.
So why would you take risk.
And make two points.
Stupid.
So.
Well see a water, but also our focus is really like I said earlier.
Canadian LTL, if we could find the right company perfect.
And the logistics and the U.S. absolutely.
I mean, it our T force logistics is growing.
ER and growing top and bottom line through the acquisition of Donnelly and others.
Specialty tea absolutely.
Yeah.
So that's the few areas that M&A is really really focus.
And as you remember on Q1, we said M&A is on hold.
Okay.
And when we restart M&A, we're going to start with small tuck ins like we did with Costco and others.
And as soon as we see the environment Okay.
That is acceptable.
Maybe we'll bring back their big whale.
So.
Only time will tell but we're focused.
Thank you I like.
Measure.
Thank you your next responses from Brian Ossenbeck of JP Morgan. Please go ahead.
Hey, good morning, Olin. Thanks for taking my question my.
My problem right, it's one of the.
I wanted to come back to the the BDC and ecommerce one more time just to get your your thoughts is insane. This a permanent repricing of the value of a b to C delivery or now that demand is going up so much and.
Maybe won't change at least won't go back to the weight was before or do you believe this was really driven by density and being able to be selective I know most of your comments were focused and camp arguments in Canada, but also wanted to see if any of those dynamics applied to the last mile logistics I considering there.
Certainly even more focused.
Within E Commerce.
Yeah.
Yeah. That's a very good question you say you right, we got to split our logistics last mile operation U.S. Encana, Okay versus our PNC in Canada, So our logistics and last mile. Both U.S. in Canada, we are.
Second to none in terms of the solution that's comparable to an Amazon. Okay. So so we are growing more in Canada today than we are growing in the U.S., okay, but that's you'll see a change over the next six months to 12 months and what we've done. Okay. For example is that part of the Canadian sales team.
Okay.
Run by Dean, Okay, Dean has done a fantastic job in Canada, Okay, selling this ecommerce solution.
Our U.S. theme was lagging behind so what a catalyst done.
Okay said Eylea, what my plan is I'm going to have dean okay involve both in U.S. in Canada, because we have similar customers.
So this is something that took effect about six months ago.
So now we are selling in North American solution, there are logistics and last mile. Okay through cow as being our E V P and dean being our sales VP for North America, and this is where I'm, saying that our U.S. salesforce that was not.
Doing 100% a good job, Okay, now would deans as being the new leader of the U.S. Salesforce, you'll see some some improvement in our approach to to the E. Commerce, Okay more focus I trying to be Jack Jack of all traded massive none okay, let's be laser focus.
So that's our logistics and last mile. So it's really one no more and more okay. This Canadian U.S. operation is being more like a north American operation. The PNC operation, we have is only cana.
Okay.
And our approach there has always been yeah, well look at our margin.
18th points on average.
Who can be done no one why because you know the beat to see that is a little bit less profitable and it could be a big headache. If you tried to do it no not the smart way. So our approach until discovered thing has been yeah, 10%, it's okay grow but draw slow and.
Don't take risk.
Because you know we have to protect our margin. This call that thing has been like a catalyst for us to say you know what we've lost if you look at ice yes. The if I ask we lost 65% of our business just overnight boom just like that well.
Why don't we gonna do about that how long is there's gonna take.
So Brian caught interesting came back with Lee we have to reopen okay and look at this ecommerce business, that's growing big time, Okay, and how can we do it any reasonable profitable way, okay, that's not going to kill our margin.
And and the Guy came to a solution, which we believe density is really the solution for us. So we focus laser focus on ZIP code areas, where it makes sense for us.
And now if you look at camp R. Loomis like I said earlier.
The revenue is up year over year in July.
Even in June.
[noise] are more beat to be guys I C S.
If I guess, we're working with the management team there.
More of an ecommerce solution.
Right. So for example, our website.
At the ice yesterday, if I asked.
Our focus more on the beat to be account.
So within the next month or two.
We're making some changes to our web sites, so that a consumer a customer okay for him is gonna be easy to track and get the answer where his packages.
So we don't need an army of people on the phone answering customer service calls.
Hi, because this is shooting ourselves and the foot.
So so you'll see even might to be to be guys that are today, 96% beat to be those guys over time, maybe over a year year and a half will be maybe no 80, 515, R. Loomis Gan power will probably be 70 525.
Or 73.
But still growing top line, but more importantly, growing the bottom line.
Alright. Thank you for all that detailing maybe just one quick follow up on July.
And market perspective, it sounds like gene really was strong in the one that's continued in Japan are there any markets in particular that you're excited about or more concerned about are there any do you think had been pull forward there yeah, a little bit more of a catch up I'm trying to shut down versus something that was sustainable so any thoughts on how you would delineate that a.
Good.
Well I think that though we feel really really good about the the last six months to the year. When we look at July but again, our guidance is always very conservative us I mean, when business or you know in transportation. This is based on what we know today, but I feel really good a boat R. Loomis Khanfar RPM.
See you guys are doing a fantastic job LTL I mean, the market is still depressed absolutely.
So this is why an M&A transaction for LTL would be fantastic. We're working on the costs, we're doing very well on the cost side, we're bringing efficiency, we're bringing new technology in et cetera, et cetera, but at the end of the they were going to need some revenue and we're not going to chase revenue at 2% bottom line so for us.
US on I LTL Encana really the solution is find the right M&A, Okay nice fit so that's going to bring more revenue and do the sorting and the quality of the revenue and then keep whatever.
Makes sense so LTL.
M&A is key to us.
You know.
Maybe partnership or whatever.
Some carriers there with makes a lot of sense truckload, our specialty truckload I think those guys are gonna be booming.
In the U.S. I was looking at the.
B to C or June numbers and July so far.
But those guys are doing there are under a seabrook try and Cameron.
Cameron as our U.S. Guy.
It's really fantastic what Greg is doing on the van side, It's really nice Tcs revenue is picking up.
Because of all the plant closure that killed them.
In April May and June so we feel good about what we see in the U.S.T. cell and the U.S. specialty steel as well so really the only areas of concern is always the same as people are we want our people to be safe or because this virus is still alive is still there.
Yeah. So people is always you know the big big not that you're going to make sure that's not going to crack.
All right.
And in terms of our balance sheet.
I mean.
Very solid.
Thank you you next responses from Jason Silence Cowen. Please go ahead.
Thank you operator, hailing hey team good morning.
Hi, Jason.
Your talk a little bit more on your on on the BDC side, I know, we're sort of beating a dead horse, but you talked a little bit about maybe changes in pricing, but as the shift seems permanent as it continues to ramp how should we think about the didnt need for maybe sort of changing some of the operations or maybe even something.
Investments that you might have to make not say this year, but say five years out.
Yeah, well in our logistics and last mile solution. I mean investment is is not really important I mean is it's not really that much. It's it's really the sales team and and the good people that's going to bring the opportunity also is the sales team that is able to.
I have customer understand what these guys need to do to be more efficient into their their distribution network. So most of the time, if we talk to for instance, I'm going to see the name Amazon those guys. They get it I mean, they understand what we're talking about okay. So yeah, we we cover.
But right now a few markers for them in the U.S. just to block some holes because of this cycle that thing there.
Ah, but what we're trying to do is educate our salespeople to really understand okay. How can we deliver okay efficiently.
Like Amazon is doing okay for them. So so we're talking to a lot of those guys. So it's really the last my logistics, we have the solution. Okay. It works really well in Cana. It's just that we have to get this solution more known into the U.S. market. This is like the T F I saw skincare.
No, it's well known it's not a well known in the U.S. That's what we're trying also to to have people understand better what we do.
In terms or PNC, what we've been doing is as a first step we know that b to b will suffer a permanent impairment because of the E. Commerce because of this covert thing we don't know much. So we said hey, guys. If we don't do anything okay, we will lose five.
Were 10% of our revenue so we have to do something so this is when we question again.
Our approach to beat to see.
And because of this covidien there, okay, guys really worried the night into coming out what is solution.
That is good is good for our customer and it's also good for our shoulders.
So what we've done the step one was to replace the B to B that was gone.
But now we're doing more than that because our b to b still not back up to where it was.
Well I B to C is way more so this is why if you look at my revenue at Camp R. Loomis in July for example.
Up 15%.
18%.
So and we're doing that profitably.
So this is.
Like I said nobody wants to Miss a storm.
When I saw him comes in you have to question everything and that's what we've done.
And our perception.
Oh got to be careful but b to C. We look at a lot of these guys doing b to C. They don't make any money you know that perception I said guys forget about that perception, we got to change that let's go back and less replace this volume in a smart way.
And that's what we've done.
And when when you see our Q3, so far I when I look at July Okay. It's a confirmation.
That are PNC guys.
In Canada are doing a fantastic job our logistics guys in last mile guys under Cal like I said early on the call now we have a sales team that's been unified.
On the Dean.
We've been very successful in Canada, not so much in the U.S., but.
But.
I think we have to solution now okay with the same leadership as we have in Canada.
Okay, working with the sales team in the U.S. with our knowledge of the business selling our solution.
You'll see us growing that business.
Profitably in the U.S. and if you just look at their margin.
Okay, and our logistic slowly it's improving yes, okay. We have acquisition that helps the topline but.
But.
Donnelly was not making any money.
So if you ask out Hey did you get some help from Dundee in Q2, So no I mean I've lost over a million dollar.
And more in Q2 with the the acquisition.
Well, we shed real estate, we shed equipment, we shed customer with.
Gross margin that 2% not profit gross margin.
And that that's affected us in Q2, I'm glad to hear July trends are going well in terms of donnelley <unk> donnelley can be sort of breakeven before the end of the years you should cost [noise].
Jason on these breakeven now Oh, perfect Oh, Yeah no no.
I mean the here.
Well it shifts a little bit to truckload and a one of your larger U.S. competitors mentioned that they're starting to see year over year increases in contractual agreements here.
In <unk>, you just need to see what Youre experience has been in your current contractual environment.
Yeah, Yeah. So so like I said earlier, Jason we saw pressure on the rates, okay into two or average revenue per mile dropped a few pennies and and when Greg tells me a any I'm over book now Okay I've not heard Greg tell me that [laughter] for at least a since 80.
Right. So it's just the notion of offering the Matt So no. The demand is probably more okay. Then the offer.
And that's why other carriers smart carriers like the one you're talking about.
Those guys, they're not stupid, they say oh, okay like the shippers their shippers are not stupid either.
The truckers call Oh too much capacity put pressure on the rates Oh smart truckers phone calls.
The shippers are calling oh, okay. So last capacity that's moves let's move some rates up hey, it's a pendulum. So what these guys are seeing okay OS we're starting to see the same thing, but those guys are much bigger than us more a spread out across the U.S. than us.
But to us I I'm, telling you that we are right now over booked for the first time really since 18.
Thank you next responses from Mona Nazir, Let me Shinhan Bank. Please go ahead.
Good morning, and congrats on the corner.
Thank you Mona.
Well.
So I'm just wondering if I'm looking at your quarterly performance on the response to pullback in order to achieve your targeted Kasper 2020, I'm wondering what do you see if I look like I mean, you spoke about the Canadian wage subsidy expectation for the back half of the here I spoke about the BDC shift.
But if I'm thinking about further right sizing our business combination or anything else is there an aspect that we need to think through that could impact future performance.
Mm if I look at the LTL really no because we've done most of the combination that needs to be done.
The only thing that we're doing right. Now is we are moving quick track. Okay that was part of the quick ex group, which is intermodal okay truckload to the west out of a much all throttle, we're moving that to our intermodal specialist, okay, which is a bomb mcgonigle group okay.
In the this month.
From a rig cashes group, which Rick as she is mostly over the road. So that was this last part of track or rail that was in rake Ashes route. So small it's small but its you know it makes a lot of sense to do that.
In terms of.
Truckload Encana I mean, our specialty truckload under Steve I mean, we're doing a lot of consolidation.
In our footprint real estate, a we just bought a new.
Terminal in the Woodstock, where are we going to be able to consolidated all of Steve's operation There and we bought this one and we're gonna be selling two or three small smaller sites in the Woodstock area. So that we can consolidate the operation.
And be more efficient cost wise.
So it's the same thing also that we're doing under Steve in our specialty tea, Greg on the U.S.T. O is doing the same thing.
With T C and see a fine.
And now M.C.T.
You know if it's all over I mean.
If you look at the number of size that we shut down in the U.S. through the acquisition of Donnie We I think we shut down 26 site that we've combined.
Okay and this is why those guys were losing money or as I said to Jason now I mean, our acquisition of Dundee is not losing money anymore. Because we did all of this cleanup of you know real estate equip and.
Customer that didn't make any sense.
For us.
Oh, it's always ongoing more there's always project within Tia fight to be better to do more with less.
It's a religion.
That's very helpful. I'm, just lastly in very quickly from last quarter you on the call you provided a snapshot of revenue by division for the first yeah, Paul and if I'm reading from the Mdna for example, PMT volume team to rebound in GI ended June period, after being down, yes, 25% kind of person <unk>.
I appreciate your common for revenue in the back half the year being down I think you said, a 5%, but just generally speaking I can we expect that train the overall trends from Q2 to continue, albeit contraction not as extreme perhaps.
What we're seeing so far I'm wondering when we look at April May and June and then now July is what we're seeing is like.
It's been really difficult for us in April and May in terms of the revenue. Okay. We were down big time and no. If I talk about the the U.S. The reopening of the U.S. has been way faster. So this is why we've not been affected as much.
In the U.S. as we've been affected in Canada.
What we believe is that now the way we are reopening in Canada solely because if you look I've known taro they've been really slow Mr. For has been really slowed reopening.
Hi.
But what we're seeing now is that we feel pretty good about the into the year, Okay Bode us in Canada, but.
You know there was a big question.
When I was talking to the board members yesterday about guidance. So say eylea I mean, these are very difficult time to predict what's going to happen. Because we don't know is there's going to be a second wave is there going to be there's ah. So if you give any guidance you got to be you know based on what you know today, okay and.
And you got to be conservative. So this is why.
You know once you once we get to see Q3, a after let's say in October okay, well, well I've, probably a better feel about is there a second wave or is this thing under control in the U.S. because right now a lot of people are saying Oh, it's it seems like its little bit out of control in a few states.
Florida is important to state for us takes us to.
California as well.
So this is why we have to be careful and we said, okay. We'll give well give a guidance that we think that is achievable. Okay. Just so that people have a a sense of what we think it's doable in 20, but more importantly is 21.
And all these action that we're taking now and all this M&A that we've done and probably will do more in the next six months.
Okay. This is going to bodes very well for us in 21.
And because of our.
[laughter] position with over a billion dollars in liquidity.
And don't forget.
One of the the other mode that a they has is that you make your money in the buying never on the Sally.
So yes, I mean, if competition on the M&A side Encana, it's okay, but that doesn't change anything for me because us we know what we can afford to pay for an asset.
And if somebody.
Can pay more well he.
It's just going to take over the asset.
I mean, we compete with P. in the U.S. all the time all the time.
Thank you that's very helpful.
Thank you next to spot David Raso Stifel. Please go ahead.
Yeah, Good morning Lane and good morning, David.
I wanted to talk a little bit of the truckload segment, specifically the special T. T L. As you're looking to grow that out in the U.S. is there a preference in the.
M&A strategy for company drivers versus owner operators.
Yeah. That's a very good question I mean, if you look at what we're doing in Canada. I mean, we we love a mix of 60% to 65% steel where asset versus 30% to 35% non asset we don't have that okay. In our U S. T L operation right now although our older.
Freighter fleet has grown lately, okay. So what we're trying to do it is in that neighborhood. Okay, but are key to us is really how's the fit. So if you look at a city. Okay. The flatbed operation that we bought I mean, the fifth is fantastic for us because most of the customer city are.
Customer of ours in Canada.
So I mean, we're well known although you know if you're thinking about tier fire in the specialty world are flat bed in the U.S., who are these guys, but when we talk to the city customers see Oh Gee, if I Oh sure. We know those guys we deal with them in Cana.
Okay. So so that one for instance was more focus on Oh customer fit good fit small not too big a good base solid base to grow okay, let's do the deal right.
But we really love.
For sure we love stainless steel. So if you look at our Canadian operation is stainless steel with no subsidy oaky that Robert that runs our contracted stainless steel operation.
Did better than last year into two with no subsidy.
[noise] stainless steel.
So we love stainless steel.
We you know a our.
Dump operation in Canada is the one that suffered the most.
And our flood bid in Canada, we did better this year than last year with no subsidy.
So really our subsidy came in support of our bulk operation.
And our specialty deal in Canada.
And our western Canadian operation as well.
And as you look across the U.S. between he see a and.
Yeah, Hi, mainly what's the breakdown of spot versus contract now how do you how do you want that to be longer term.
Well spot, Greg or is not being found the spot. Okay. So we've been mostly running a now in Q2, we had more spot than ever and because you know some of our customer were in either shut down or you know shipping less so we had.
A little bit more of spot at the time would not fantastic rates as you know.
But no spots are starting to grow but our share us we've been very conservative. So spot is not the nature of <unk> Tcs CFR I mean, it's always has been very small normally.
Thank you next responses from the Tom Wadewitz of yes. Please go ahead.
Yeah good morning.
Well and Tom.
Yeah. Thanks for the the question you're the.
I think you've talked about a couple times on the call Lane, but wanted to ask a little bit further on logistics.
You know in the in the PNC you did see the big step up in BT business, but but it seems like you didn't see that and I know you talked about kind of U.S.U.S. logistic and sales effort.
What's the mix of being beaten the in your.
Overall logistic and you think it's reasonable to see a point.
In the near term when that growth would really step up because it seems like it should be you know very good environment for your last mile business to grow given that big step up in demand for B to C.
Yeah, Yeah, Yeah, you're absolutely right. Tom you know the problem that we have faces that our Canadian team on the B to C. On the E. Commerce site has done a way way way better job than our U.S. team for two reasons number one reason is that in the U.S. we've acquired some.
Companies direct fixer upper so we've acquired Donny we've acquired be Vacs, we've acquired dichotomy. So so the guys really we're focusing on on integration of these companies over the last the yen after two years.
But also their sales force was not really focus doing the right thing growing this ecommerce. So our ups guys were focus in digesting. All these acquisition. Okay and this is one last years summer of last year. Okay. We made a change in the U.S. So that cow is our new E V.
Be responsible for the U.S.
Cows done a fantastic job, where they can in team into growing.
Our E Commerce solution Big time in Canada.
So sick out well get to do the same thing in the U.S. So our first approach was okay, where whereas our problem <unk>. Besides the fact that we have our operational guys really involving two integrating those two or three.
[noise] acquisition that brought us some revenue, okay, and we got to turn that into a profit.
Besides that we set our sales team is really weak in the U.S. They they don't just you just sell something like it was good maybe 15 years ago.
So.
Our approach has been you know what this spring D.
Ourselves a.
Leader in Canada, because we have similar customer is like I was talking about are flat bed operation in Canada, and the U.S. now we have come in customers.
So, let's bring Dean and Dean has been involved in the sales team for last six months rebuilding the sales team having those guys focus on the right thing selling okay, what makes sense not being Jack of all trade and master of none and that's when you know when we talk they can't say hey.
The potential is huge in the U.S. our solution is second to none well same as Amazon.
What is it's just we're not no. So we need to push the sales team to get our solution now.
Right and this is what Dean has done in Canada, Okay very successfully and this is what dean is going to do with the U.S. team in the U.S. It will take some time.
Well that's for sure they know and they understand what the mission is all about.
Okay. So it sounds like you got a lot optimism, but it's not like next quarter, it's over kind of multi quarter basis that you expect to see stronger growth a U.S. logistics.
I think so I think so I'd say you know it's a it's a culture change in the U.S.. Okay. It's no guys were not Jackup all trade messaging on this is our focus. This is the area that we have to sell et cetera et cetera. So it's it's a change of culture. It's also a change or culture that you know guys when we.
We bought dynamics it like a 678 years ago.
The culture was old 2% is great.
Oh, well no it's not great. So if you look at the profitability of the U.S. a year ago.
Okay well.
It was better than two well it was not Pat.
Okay. So we've improved cow and his team over a year, even adding revenue of poor profitability that we have to improve.
We've improved the bottom line by about 30% to 35%, but we're still not 10, well we're going to get that then and at the same time, we're gonna grow this ecommerce business, which can be very profitable in our.
T Force logistics model.
Your next question from call comes from the line of Cameron door concerned with National Bank.
Thanks, Good morning.
Flying camera.
So just a one very quick one for me I'm just.
I'm wondering if given the strong free cash flow performance good liquidity leverage ratio a very low you know just how you're feeling about the NC I'd be these days.
Well you can see I'd be we've done a little bit davinci I'd been Q2.
And then she I'd be has always been balanced with M&A and debt and free cash flow. So free cash flow is very strong debt is low.
So normally and see I'd be should be very important for us unless there's some significant.
So the significant transaction on M&A side. So this is why said guys stay tune HM excuse me stay too.
No during the course of the next six months I mean, you'll see if if there's no big well, there's probably going to be more of and see I'd be.
Okay, No that's a great color thanks very much.
Pleasure Cameron.
Your next question comes from the line of some chain Radnets money and bank of America.
Great Alain.
He's talking about your confidence in the earnings power moving to 21.
Maybe you can you just talking about the duration, but you say the U.S. talking cycle can can take for me and maybe how long you said kind tightening.
The company capacity.
Inflection in pricing losses.
Well, what we've seen so far I mean, it's a little bit of a surprise. Okay. What we've seen you know in June and so far in July and when Greg, calling me and say I mean, we we have to get the Capex bag, because we feel really really good about where the market is going.
Now this is a you know when we're talking to some of the guys. In you know in April and May in our PNC.
Even if you look at U.P.S. his comment well this is Christmas in the summer or in the spring I am because they have so much volume or you know on the U.S.T. Rowe side. It seems like there's more demand, but also the offer as that's come down Elizabeth I don't know if it's because people don't have a the capacity.
We need to add trucks is it because.
There's some people that just because it's too they feel it's too dangerous to be a driver. Okay did you said I'm gonna stay home and get the $600 Okay of Oh.
Unemployment additional two unemployment.
There's probably a little bit of frink enough capacity at the same time little bit more demand.
Maybe a little bit of Ah the effect of a more on shoring, okay to Mexico or to the U.S., but.
Our policy is really what's going on okay. It seemed like Wow. It was unforeseen if you ask me six weeks ago. Okay. You think are you guys gonna be booming.
No on the U.S., you always said, Matt No I think that was little sticks, probably like minus five my understand but now really I mean, the pressure is on and the guys are busy.
Great.
That's helpful and maybe just.
Going on from that point that you mentioned you know the effects of onshore and your Mike you mentioned mix don't columns on can you remind us of of what kind of exposure you guys do how to Mexico outside the U.S. in Canada or is that I am rich business not read that 90 comes with it.
Yeah, our exposure to Mexico losses through Cfive, a little bit T.C., but mostly cfive through our logistics company that is a based in Mexico, although very small.
And you know we run also about 20 some percent 20, 25% of our revenue and see if I is with the international trade between the U.S. and Mexico.
Well, we're not heavy into the the automotive business I mean, we do some of that okay, but we're not that heavy in that.
Type of business.
Your next question comes from the line of Michael go Deep with bank of Montreal.
I Atlanta team. Thanks for a thanks for taking my call.
Can you give us a bit more color on LTL demand month by month throughout the quarter and were kind of stands in July in particular to Jim.
Yeah. So we're doing better in July and then in Q2, but it's still down okay, and I think that.
[noise], there's a there's an LTL there's a permanent impairment that comes from our customers that are in them all the brick and mortar guys. So what we're seeing with the b to b in the PNC is less much less than the LTL don't forget that the industrial LTL that exist in the U.S.
Yes.
I mean in Canada industrial LTL is like Wow. It's been 20 years now that we don't have much of that I mean, its most of the plants are closed so it's mostly retail in our LTL world and the retail has been affected badly by E. Commerce. So this is why are the way we see the LTL in Canada.
Is that.
Unless we do some M&A.
Okay. Our revenue is going to shrink organically absolutely because of this E. Commerce is really taking a bite at the brick and mortar guys hi.
So that's why we put a plan a year ago two years ago, We bought NFF. Those guys were 80 million when we bought those guys what they were losing eight.
So today [noise] NFS revenue is about half of what it was.
But they're not losing money, they're making more than 10 points.
On on the revenue. This left so that's what that's what has been the culture. So we have to feed arcane LTL. So we're having discussion okay with a lot of people about how can we beef up our Canadian LTL.
And maybe within the next six months you'll see.
And some part of the news kit boat or the LTL, but one thing is for sure in my mind.
If you don't do anything.
Okay, the LTL market they shrinking in the Canada because of the ecommerce.
Okay, perfect and can you.
Awesome give us some color on the three acquisitions kind of annualized revenue and EBITDA run rate a possible, but you did in June.
Yeah. So so garlasco is a small it's only 30 million, okay and or the U.S. So the two U.S. ones, okay coming out of calm core or both the same it's about 200 trucks each in U.S.D.. So it's very small okay, but.
ER Gasco the beauty of got scores that we see a lot of synergies with our pin P. NW operation that we run today. So mark a has done a fantastic job at Penn W.
But now adding the gosh goal in the family is gonna be a fantastic a combination we show US synergies there is going to take us a little bit time, but a potential there is huge or that you U.S., one or I mean city I said it I mean, it's fantastic because we have common customers bits.
When you S. In Canada, so, although we're not known in the flatbed business in the U.S., but most of the customers within CTG knows us because of the gain operation. So we see a lot of potential. This this was a company that was you know going to bankruptcy court thing there.
The price was very attractive for both assets.
And I think we're going to do well.
M.C.T. was a neighborhood or dry van and read for a the early discussion that we're having with Greg is that the intention is to have more M.C.T. more in a specialty kind of reefer carrier. So we bought in that deal a location in Florida in Sanford, Florida, which is the base of this.
Kind of Reefer operation because a we do green reason there.
So it's going to be a nice addition to simplify a when they sit down with customer to have this kind of specialty division. If you look at a one of the best carrier truckload carriers in the U.S. They offer both dry and refer to their customer me those those guys I've done a fantastic job.
So I mean us we always look at the best Okay and in our U S. T. L. Okay. We believed that the M.C.T. acquisition for shift is gonna be.
Now some kind of a nice a diamond in the rough that Greg and his team will have to Polish.
And at this time there are no further audio question.
Okay, well, thank you very much operator for helping out with a call and thank you everyone for being with US This morning.
We at a t. a fine to national very much appreciate your interest.
And all of US, we'll continue to work hard to create value on luckett for our investors and whenever possible returning excess capital to shareholders.
So I look forward to updating you soon and if you have any questions. Please do not hesitate to reach out. Thank you again and have great day and stay safe. Thank you.
HM.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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