Q3 2021 TFI International Inc Earnings Call
Good morning, ladies and gentlemen, thank you for standing by welcome to the T. F. I internationals third quarter 2021 results conference call.
At this time all participants are in a listen only mode.
Following their presentation, we will conduct a question and answer session callers will be limited to one question and a follow up in order to get as to as many college as possible.
The instructions for entering the queue will be provided at that time before we turn the call over to management. Please be advised that this conference call will contain several.
Statements that are forward looking in nature, and I said to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated also as a reminder to you if I changed its persons presentation currency at year end 'twenty 'twenty and all dollar amounts are now in U S dollars lastly.
I would like to remind everyone that this conference call is being recorded today Friday October 29th 2021 I will now turn the call over to Alan.
The Dart Chairman, President and Chief Executive Officer of T. F. I International. Please go ahead Sir.
Thank you for the introduction the operator and thank you everyone for joining US. This morning yesterday after the market close we released our third quarter 2021 results.
Do you have high international further built on our solid performance all year by completing another strong quarter.
Each of our businesses segments segment performed well and many are now surpassing their pre pandemic levels of revenue and profitability.
We continued to successfully integrate U P. S right now under the T. F umbrella S. T force freight and we're heading into year end in the strongest position in our company's history.
The past two years I've been like none other but T F I international rose to the challenges.
Those of you who have followed our company for many years know that this means we simply maintain our focus where it's always been.
We get it right on the fundamental details of our business, we look to maximize efficiencies and we seek strategic acquisition opportunities.
Ultimately, we're looking to drive strong returns on invested capital optimize our free cash flow and grow our earnings per share in order to create long term shareholder value and then we return excess capital to shareholders whenever possible.
Yeah.
This is our focus regardless of operating conditions. So even now with North America facing supply chain disruptions labor shortages and of course ongoing pandemic related disruption we are tier five international feel very confident in our ability to navigate the road ahead.
Yeah.
On a more granular basis right now we remained focus on details such as optimal pricing driver retention and what we call freight and network that's fits.
Another important current focus of ours is on the integration and fine tuning of T Force rate following the largest and most strategic acquisition in our company's history.
While already having a positive impact on our positioning as a as we've improved quality of freight we still have much work to do especially with regards to cost.
This also means that we therefore have significant remaining upside from this recent acquisition and yet we were still able to produce a strong quarterly resolve that I'll now review.
During the third quarter, our total revenue climbed to 2.1 billion up nearly 125% over the prior year with most of the expansion from M&A, but with some positive organic growth as well.
This organic growth was driven by rebound in freight volumes and our strong positioning, allowing us to price appropriately and benefit from ongoing strength in b to B and E Commerce.
Yeah.
A T F. I, we've always been more focused on profitability than simply growth and therefore pleased to report operating income of 193 million up 65% and adjusted fully diluted EPS of $1 46 up 55%.
One of the key financials areas of strategic focus for US is net cash from continuing operating activities because of the flexibility. It provides to invest in our business to seek attractive acquisition opportunities in a disciplined manner and returning excess cash to shareholders when possible. So we generated 200 and.
7 million of net cash from continuing operating activities during the quarter, which was up 50% over year over year.
We also increased our return invested capital across all of our four business segments, a metric that we consider a high priority.
Similar to last quarter, we're not adjusting these strong results for the $5 $5 million or four cents per share mark to market loss on our cash settled D. S. You due to the rise in our stock our share price during the quarter.
In the prior year third quarter. Our results include a smaller loss from the issue of $2 7 million or two cents per share.
Next let's take a look at each of our four business segments, starting with P&C.
This segment represents 7% of our total segment revenue and saw a 9% increase in revenue before fuel surcharge versus a year ago quarter.
Operating income of 23.9 million was up 12% with the operating margin up 40 basis point to 70.9.
Results benefited from continued strength thing yields from both B to C and b to B activity.
Four P. N C. A return invested capital was a very L. D 23.2 up 210 basis points from the 21.1 a year ago.
Our L. T O saw segment, our largest which is 47% of total.
Total segment revenue generated revenue before fuel surcharge of 861 million as compared to 133 million a year earlier, which with the increase mainly due to the acquisition of T Force right.
Our L. T L operating income was 85.1 million.
It was up 224% in the operating margin was 9.9 with significant upside potential as we further integrate and optimize T force right.
This operating income was reduced by a nonrecurring $10.8 million purchase accounting adjustment and further last year's third quarter includes $6 million from the Canadian emergency wage wage subsidy, but we received none this quarter.
Yeah.
Our Canadian LDL business grew revenue before fuel surcharge, 2% and produce at very impressive adjusted operating ratio of 80.3.
Ascent, while our recently formed U S. L. P. L business generated revenue before fuel surcharge of 727 million with an or of 90.7.
Our return on invested capital in the U S. L. T O was exceptional but we believe it makes sense to wait for a full year's worth of resolved from T Force right before considering this measure.
Our return on invested capital and Darchinyan L. T. L was 16.7 up 370 basis point from 13% last year.
Turning to our truckload segment, which represent 26% of total revenue are.
Our revenue before fuel surcharge of 499 million was up 19% over the prior year third quarter. Our operating income was 56 million was essentially flat and our operating margin was 11.4 relative to 13.7 a year earlier. These results include a drop in the Canadian emergency wage subsidy from 8 million.
8.1 million a year earlier to only 200000 this quarter as well as a 4.6 million operating loss <unk>.
N rated by T Force rate Truckload Division.
Digging in on truckload U S base Conventual operation grew revenue before fuel surcharge, 21% with an or of 90 991.9, while absorbing lingering operating loss from the acquired T Force right.
Primarily as a result of these losses return on invested capital in U S struggle only improved 40 basis point to 5.6.
Our Canadian conventional operation grew revenue before fuel surcharge, 15% with Anoro of 88.4 again, reflecting the loss of $1 million of Canada emergency wage subsidy versus the prior year period.
Here, our return on invested capital improved 80 basis point to 12 point for our specialized truckload operation grew revenue before fuel surcharge, 19% with anoro of $85 eight despite the loss of nearly $7 million of Canada emergency wage subsidy.
The prior year period, and specialized truckload our return on invested capital improved 130 basis point to 10.8.
Our fourth business segment to discuss is logistics, where.
Which represent 20% of total segment revenue and saw revenue before fuel surcharge nearly doubled to 408 million.
Our logistics operating income more than doubled to 45.3 million. Although this included a $12 million bargain purchase gain related to certain logistics asset at T Force right.
This ranked in our logistic business was mainly driven by our same day package delivery business in U S and Encana and by the addition of T F Ww, which continues to perform really well.
Our logistic.
Return on invested capital was 24.3 up a robust 630 basis point over the prior year.
We continue to maintain a strong balance sheet that T F I international, which we view as a pillar of our strength.
Facilitating our ability to grow over time, both organically and through our disciplined acquisition strategy.
We produced free cash flow of 169 million during the third quarter, which was up 38% relative to the prior year period, and we ended September with lever of rate leverage ratio well under the two times in terms of our debt to adjusted EBITDA.
With one quarter to go in the year, we're again, raising our full year guidance, reflecting our confidence in our operational strategy.
Our focus on what matters and the continued opportunities to optimize T force right, where we see significant potential following the recent acquisition.
Keep in mind, the usual seasonality should also be expected during the next two quarters.
That said, we expect full year earnings per share to be in the range of $4.75 to $4.85 up from our prior range of $4 50 to $4 60.
We expect net capex in Q4 to be in the range of 75 to 100 million and we're also increasing our outlook for free cash flow from 550 to $5 75 billion to a new range of 675 to 700 again, reflecting our ongoing strong performance and confidence in our ability to navigate what's.
Head.
We expect our leverage defined as funded debt to EBITDA ratio as calculated in accordance with our debt covenants to remain below two times.
Before I conclude I'd like to take a moment to highlight some recent personal moves at T. F. I international starting with two well deserved retirement from retirements from the industry.
Well first we got you know why.
We had a long and productive carrier and join our team more than 10 years ago announced his retirement this summer.
Louis joined US in 2009, as our VP of business development and was promoted to EVP in 2016.
He took on even more responsibility in your recent years overseeing several of our division and subsidiaries.
Also.
Brian Cot, who has been with us for more than 20 years has announced his intention to retire at the end of December.
Over the past two decades, a T F I, Brian worked his way up to become one of our.
The steam E V. P. Most recently overseeing our package and Courier segment across Canada.
We wish both Louis and Brian highly fulfilling retirement and on my behalf and everyone at T. F. I, we think that bodes for the countless contribution and for playing such an important role in our success over the years.
I'm also very pleased to announce several promotions across our organization.
First our EVP, Bob Mcgonigal will be assuming Brian's responsibilities upon Brian's retirement at the end of the year.
Bob as you know I've been with T. F. I for many years since 2004 and currently oversee several of our L. T. L business units, we congratulate Bob on his new role.
Next to take on many of Baas freighters responsibility umbrella to announce that Chris Tragus, one of our operating managers and currently president of <unk> has been promoted to executive V. P F.
Effective Jan one Twenty-twenty too Chris has been with T. F. I since 2017 brings a wealth of experience to his new role and we congratulate him on his growing responsibilities.
Lastly, I'm equally pleased to announce the promotion of Shunyata why do.
Two EVP junior has been with T. F. I for 23 years during which time. He has led several business unit within specialized transportation and logistics services.
He has an in depth understanding of our business and the transportation industry and it will now be responsible for various TFR division in the province of Quebec.
We congratulate junior and look forward to his many contributions and they use ahead.
In summary, Deify International continues to generate record performance and we expect to finish the year strong.
Importantly, the strategic.
<unk> acquisition of U P. S. Freight earlier this year should have an even more favorable impact on our growth and profitability as we move forward.
You can rest assured we will continue to focus on what we got us here at.
Including our attention to the fundamentals of the business.
In order to optimize profitability and enhance our cash flow.
And as you heard me say many times, our ultimate aim is to create and unlock shareholder value returning excess capital to our shareholders whenever possible with that operator.
If you could now open the lines, we can begin the Q&A.
Ladies and gentlemen to ask a question you will need to press star one on your telephone keypad to withdraw your question. Please press the pound or hash key.
Colleagues will be limited to one question and a follow up in order to get to as many colleges possible again that star one to ask a question. Please standby, while we compile the Q&A roster.
Our first question will come from the line of Jordan Aligarh with Goldman Sachs. Please go ahead with your question.
Yeah, Hi, I'm curious on the L. T. L side, I know you've been discussing yield initiatives and price initiatives can you talk about I don't know in terms of proportion of the business. Perhaps that you still have left to go in terms of reoriented, the reorienting, the pricing where the freight mix. Thanks.
Very good question, Jordan and good morning, So I would say that if you look at the free Doug We're holding right now T force rate, we're pleased to say that probably 50% to 60% of what we do today fits the network and if also fit the freight profile that we want a T force right. So.
The team there has done a fantastic job over the last I would say.
Over the last nine to 12 months because this process has already started when we bought a T U P S right.
Hey, so the guys have done a fantastic job, but there's still more to come more.
More to come in terms of making sure that our what we're hauling. Okay is is always a freight that makes money for the company and fits the network and that there is also a lot of discussion right. Now you know we've inform our people that are will be shutting down a few terminals are early in December okay.
Because there is a very low volume and too much fixed cost right. So it's an ongoing process and working on the freight that fits will take time.
As we as we're coming out with Q3 with a 91 O R.
It's acceptable because we've owned this company only for a few months.
But this is not the goal to be a 90 or company right. So we are still a lot of work to do on the cost but on the freight fakes, saying you know something that makes sense in terms of rate something you know.
All of the or sorry old that needs to be applied to freight.
You know.
It's it's it's as well on the goal, although we still have some to do.
Great. Thank you very much.
Sure.
Your next question will come from the line of Scott Group with Wolfe Research. Please go ahead with your question.
Hey, Thanks morning Lane, and so what I wanted to stay on I want to stay on <unk> can you talk about sort of the underlying tonnage trends and revenue retention and then on the operating ratio maybe just your expectations for fourth quarter, and then where ultimately you think the operating ratio here can go.
Yeah, Yeah. That's a very good question Scott in terms of fourth quarter. I mean, this is really the unknown for us. If we look historically are those are they at a U P. S. Ray did not perform to well in the month of December in the month of January and in the month of February. This is something that we are addressing right now getting ready for this.
Difficult season, Okay. Historically Ah, we're addressing that with the team there with Paul and his team to see what can we do okay to make sure that we're not in a position where oh ours going to go from a 91 in Q3, let's say to a 90 495 in Q4, so still lots to do historically.
Are those guys were not doing well in Q4 because of December and they were not doing well in Q1 because of the first two months right. So we're working hard with the team to make sure that we adjust our our our people. We are we also try to change a little bit more of our mix of freight we're very dependent on retail and.
As you know retail is not doing well in in December or in January and February we need more of this industrial L. T L that still exist in the U S.
Right. So so this is really what we believe it you know it's going to be important and like I said, we came out with two quarters with some kind of like a 1991 war, but it's still not a 90 or company until we get through Q4 and in Q1, and and where we think that this company could go it will take us some time.
Like I said within the next few quarters, we will be able to confirm that this is a 90 or company, but this is not the goal. If we can get the 90 O Our company in Canada.
In a very difficult market compared to the U S. One.
To us the goal of being closer to 80 has to be you know.
The goal the target so now are.
Are we going to do that in 'twenty, two probably not are we gonna be ending in the right direction in 'twenty I think so now can we get to a sub 85 war with this this market I believe it can be done, but it will take us. Some time you know addressing the cost adjusting the network are getting.
In the equipment in because already we have an issue with the equipment because of the supply chain issue instead of getting 1100 trucks. We're just going to get 500, you know into the Q1 of 'twenty two so with that in mind I would say that ill probably too sometimes in 'twenty three we should be flying closer to an 85 and 90.
Okay, but the first goal is to really confirm that this is today, a 90 of our company L. E. In the summer of 'twenty, two and then from there. Our next school is going to be to bring that to an 85 who are.
And what was the first part of your question there Scott.
If a guy was asking about just the tonnage in trends in revenue options Kate Yeah, Yes, yes, yes, yes, absolutely I mean in order to correct. The situation about freight that fits absolutely. So we are now for the last I would say 18 months at UBS right now T force rate revenue shipments count has been dropping.
In you know 10, 12% year over year now. This is to me I think that we are now at a floor Oh, what are now our our sales leadership and our sales team. Okay. Because the market is drawing right. I mean, if you look at our peers. Most of the guys are up 10, 15 20 years.
That year over year, right and we're not we're not like that T force rate at all because we had lots of they used to correct I too to build a stable base our base, where we can solid base, where we can start building on it right. So I would say that right now we are running like a dirty.
To 31000 barrels a day when we took over the company we were running about the same 32 33000 bills at a right. So we've dropped a little bit on the volume, but we've improve if you look at the revenue.
Revenue per ship and ex fuel I mean, you could see some major improvement what you don't see as major improvement on the average weight of our shipment. Okay. The average weight of shipment of T Force, where it is way too low we all too too much of this light freight right. So this is also part of afraid that fits our approach.
Now that we have to change that you know like I said earlier, we need to have less of this retail freight and more of this industrial freight.
But that takes time, but at least the message is there. The mission is there everybody knows what they need to do and if you look at our average weight of shipping in Canada is day and night. It's just what we do in the U S right.
Yeah, and then if I can if can you just clarify on the guidance.
For the for the air and what it implies for the fourth quarter. Obviously, there is a seasonality is there the typical conservatism that we typically think with you guys and yeah.
And maybe just some thoughts on Scott and Scott.
It's part of our religion us, we always try to over deliver on the promise, but over the liver right. So we're conservative we feel that 475 to 45, although I know consensus has about that at 45, but we're just saying guys. I mean, it's it's too much of the unknown to me Tivo.
That's right December when I look at that.
I said what are we doing right, but this has been going on for years and years and years, Okay December and January and February so.
This is why we're we're we're prudent we're cautious that's why we're saying hey, guys. We think that 475 to 45 for sure we'll try to do better than that.
I would like to be a five dollar guy for 'twenty, one, but I'm, not saying that because because of T force rate Q4, we have no experience, we don't know, but when I look at the historical numbers I say guys. We have to be very cautious for sure. We made a lot of changes that should help.
Okay, but it's still you know the first time that we go through Q4 right.
Makes sense. Thank you Elaine.
It's a pleasure.
Your next question will come from the line of Brian as impact with J P. Morgan. Please go ahead with your question.
Hey, good morning, Alain Thanks for taking the question Brian.
Yeah, just wanted to go back to the L. T O side, and just maybe get your thoughts on the on our costs. As you mentioned that was the biggest lever here in the future I know you worked on some of the fueling stations and Youre talking about terminals being closed. So yes, maybe you can put some context around that in terms of.
What type of impact do you think that can help to to get to the.
To get to the sub 90 mid <unk> mid.
Mid next year, and then beyond yeah, Yeah, Yeah, I think you know Brian I think that cost is really to keep our cost takes time you know you can't so yes on the equipment side, we're a little bit behind why because of the supply chain. Mr. We're going through right now so our maintenance cost is still creeping up why because I mean.
The biggest thing that we have to work on is when do we also work on the freight that fits we have to work also on the network that fits.
So as an example, okay right now we are operating a terminal with 40 builds a day okay.
And you know guys does it makes sense if youre at 30000 bills at the company to be running a terminal in the 60000 people city does that makes sense well, we've always done it well, let's start asking ourselves. So so yes, Brian we are shutting down a few terminals because it makes sense.
Hence like in Chicago, we're shutting down one we got way too. Many we don't need that it has a huge fixed cost and so part of the course, okay is going to be to make sure that the freight fits the network. Okay, but also the network fits our mission. So if you go back to when we bought CF I, we were running at.
All the way up to the West coast with CMI, and we said while this doesn't make any sense I mean, if we have 20000 trucks in the U S. It makes sense, but if you have only 3000 you need more density right.
So it's the same story with L. T L. We.
We need to operate terminals, where we have density of population and density of customers.
And we're not going to run that terminal with.
Three drivers because how who's going to manage three drivers it's way too expensive so costs will take us some time as Stan can happen overnight. So this is where we're cautious we're saying guys. This should be a 91 company within the next few quarters right. That's step one and then step two is that hey, guys. We think that this could be a need.
85 Company then it's more of cost that's going to bring us from a 92 or let's say to a closer to 80. If you look at what we do in Canada, I mean, our costs are way better than our costs of what we're running in the U S.
Why is that because we're so dense because we're so use we even in Canada, we would never operate a terminal with 40 builds a day.
And this is Canada, it's not the U S. Right. So we will have to adjust that getting rid of all these fixed costs and change. This network. So to have a proper networks. That's fits the customer that we want to service or we service today.
Okay. Great. Thanks, that's all very helpful. Just want to ask you about the the vaccine mandate in the U S. Here.
<unk> are carved out for for trucking and I, hopefully well see something somewhere around the U S side, but obviously you have a big operation in the U S. As well so yeah. If you could just give your impression on <unk>.
Contingency plans or what else are you hearing in terms of potential carve out because it sounds like we might see some headlines here on that front in the next perhaps weaker so yeah.
Yeah, Yeah. So so Brian us what we've been doing is to try to entice our people to get vaccinated, but as you know I mean on the Canadian side, we're doing really well I mean on the Canadian side I was just reading this morning that air Canada, and West yet I think it's I would say that they're probably like 19.
<unk> 90, 599%.
Of there are people who had been vaccinated.
So the key insight is not such an issue. It's it's as you say the U S is right. So step one what we've done US is trying to explain that this vaccine is safe in and tried to educate our people, but you know in the U S. It's it's a people are free to do whatever they want right.
So you got two major states in the U S, where you know their D C things differently and yeah vaccine is good but you can't really are asking employees to get vaccinated. So what we're doing as a first step as we're trying to pull our employees to know and this is what we've done in Canada. So.
Far as boy employees to know if they want answered the question because you can't force them to answer the question either that are.
You know a free speech all these theory, so that is what we've been doing and trying to educating okay are people that we promote the vaccine, but we can't force no. One so it's going to be again.
Part of the unknown of twenty-two Brian Xul, what's gonna be the reaction of the customer what's gonna be the reaction of our employees, it's already difficult right to find employees.
Drivers, Okay dock workers, it's not an easy thing to do because of all this COVID-19 thing that happen right. So now mandated vaccine. This is going to be another rock in our shoe now.
We'll be addressing the situation when we also know the rules Ryan because right now it's still the unknown right it's not clear.
Alright, Thank you very much helane.
Pleasure Brian.
Your next question will come from the line Ken Huckster with Bank of America. Please go ahead with your question Hey, Good morning Alain.
But again you are can you just clarify real quick before I get the question of how many service centers are you at and how many are you closing.
Okay. So in the U S right now in our L. T L Division because Ken. That's your question right. Now is a is the U S. L. T O right Yeah, yeah, Okay U S. L. T O. So we're shutting down before year end about four centers small two in West Virginia.
One in.
The Chicago area, and another one which I forgot.
Small centers, Okay with now do.
Do we know how many are we going to still be running all key at the end, let's say of 22 or 23, if I can't get the answer that I can't I can't answer that but one thing I could tell you is that Ken is that we're not going to run a terminal with 50 bills. A day I mean, this is doesn't make any sense H too expensive and like.
I said earlier I mean, even in Canada, we don't run our 15th the shipment terminal because you know you have two or three drivers are you going to manage two or three drivers in a union environment right because don't forget our R. L. T cell division in the U S is his union and its employee model. So you need a supervisor and you need Manny.
Jews to manage a terminal.
No because theyre not owner operators right you have to manage the employees. So when you have only two or three drivers youre not going to have a supervisor in a manager to manage two three employees it doesn't make any sense.
And how many terminals are you at now and I just want understand the scale of the four versus what you. All it's about 200 that we are about two two to 225 to 25 perfect Alright, and then you noted earlier that the 99% are at at the T Force freight part of of the truckload that was added.
Maybe you can talk about I mean, you've talked a lot about cutting costs and focusing on the L. P. L side, what what's left to do is is that still strategic in terms of the truckload is it blending it with other assets that you've got maybe talk a bit about what you can do on the shale side.
Yeah, the UBS, our truckload division that we that we got with the acquisition of a U P. S rate was was a disaster or a division because it's a dedicated division and the pricing with customer didn't make any sense to commitment didnt make any sense. So for instance, the committed to two all afraid, but they didn't have the power or.
And then add the driver so when we took over I mean, the first thing that Greg or which runs our truckload operation in the U S said to me says I think I mean, what are we going to do I mean, we're stuck with these contracts we're stuck with all these deals that were done previously so I mean.
Option. One is we just give 30 days notice all of these guys. In you know our reputation is going to go to the toilet.
Or you know it will take us some time, okay, we will lose money because of the poor management that was there previously.
But you know that's my recommendation Ali So I said, you know what Greg I hate to lose money, but it's even worse, if we lose our reputation right. So let's work hard at correcting the situation and.
And this is what Greg has done over there. So when you look at T. F. I truckload U S Division in 'twenty, two you will see over the road Division and a dedicated division. So the dedicated division is the old T. A transport America and the U T S truckload operation, there's going to be combining two one.
That's what we're doing now and then you're going to have the C. F. I over the road, Okay, where the old T. A over the road drivers are moving to CF I as we speak Okay. And then we're going to have the CFO of temperature control, which is doing really well, okay and that will be the model for us to operate in 'twenty two.
We anticipate that the.
Profitability of this division will improve big time in 22 by correcting the situation coming from the U P. S transaction.
With customers addressing also the fleet because if you look at my average age of my fleet and my U S. T. O. I went from two years average to three why is that well because the U P. S. Truckload division was running trucks, though average about seven years right. So we are.
Also correcting that although it's difficult because right now as you know, it's not easy to get the equipment, but you know we're working on it.
So it's a it's a little bit disappointing when we look at this U B S truckload division, but we know what to do we're fixing it now okay and I would say that probably early in 'twenty two.
All of this should be behind us.
I appreciate that.
If I could sneak one more in on a different segment that the P&C. Your margins were just about flat year over year after year kind of showing some nice gains last quarter is there. Yes is there anything in there that you'd want to highlight in terms of costs or or anything going on yeah. The P&C yeah. Yeah, Yeah, we're starting to see can some inflation in there okay.
And and this is you know this is also part of Mr. Mcgonigle mandate, Okay with Brian retiree.
<unk> takes over working with Jim over there at can't part Loomis to address this situation because you're absolutely right. We're really happy to report that all our OE is close to 18 points second to none but still.
I believe we could do better than that okay. So ah, but we have pressure we have salary pressure as everybody knows about that right and with that I mean, what can you do you have to adjust your salaries to the market, which is fine, but Dan you have to turn around and discuss that with your customers and this.
This is probably where you know, although if you look at our average revenue per shipment I mean, we're a big time, but maybe not enough right.
So Bob and his team his new team working with Brian as a transition I mean, they'll get the guys are working on a plan.
We've done Okay, I will not say that we've done really well, but we've done okay. If you look at my peers. Okay. The two big peers that are we can compare ourselves to I mean, it's it's a little bit of an issue there, but we're working on it.
Great appreciate that thoughtfully. Thank you.
I'll go again.
Our next question will come from the line.
C C will come from the line of Ravi Shanker with Morgan Stanley. Please go ahead with your question.
Ravi Shanker. Your line is open. Please go ahead with your question sorry. It was a near <unk> morning. So you had the vaccine mandated situation earlier, but can you just talk about the overall labor shortages that seem to be a kind of widespread.
Q are you running into that as well and kind of what are some of the mitigating actions you're taking there.
Difficult diff area difficult in the U S are Ravi I mean, not so much in Canada, yet okay. We're adding some small issues in Canada are but nothing nothing major but in the U S. Absolutely our truckload division in the U S are not so much the L. T. L. I mean, the L. P L I.
Think that our crew is is okay are the way we pay our people is is really a very impressive for them. So but the truckload absolutely. It's a big big issue, it's a real big problem and this is why if you look at our revenue.
It's it's tough it's it's really difficult. So what are we trying to do I mean, we're trying to convince drivers to join the C. F. I team and we're also trying to reduce our average overhead costs. Because if you look at our management salary for C. F. I I mean, we are lean and mean as lean and mean as our Canadian operation, but in <unk>.
Our dedicated okay, which is the old T E N U P S truck load.
There's lots that we could do that but in terms of people, it's very difficult to find quality drivers as we speak everybody's looking for that now the freight is there okay. Our revenue per mile is improving every day, but the problem is to find the people right and it's a big issue in this vaccine thing.
There I don't know if it's going to help.
So if it's another issue that.
It creates a more of a headwind to bring people in it.
It's going to be difficult for the industry.
Got it so maybe as a follow up given everything you've told us so far in this call clarity you looked at a bunch of at a margin momentum in both the LPL and the T. L business are the top line is growing as well you said in your prepared remarks that you still have a pretty active in M&A.
Maybe a sneak peek into 2022 and kind of you know you said you would like to be a five daughters I in 'twenty, one where do you like to be at $6 22.
You Gotta be there golar Ravi it's gotta be the goal.
Now Ravi I have to tell you that I'm in the budget season, right now so I'm, starting a meeting with our where our executives. So I'm a little bit ahead of the game. So I hope those guys don't want to kill me with that but you know to me is it's got to be a nice target for us a six.
A could be a little bit of a stretch, but you know we're always conservative. So I mean, I think that we have the crew I think that we have that potential.
And for sure a T force right is the diamond in the rough of the company. We have a great executive team. There has been supported also by some of our Canadian executives and we're just starting like I said earlier, we bought this company five months ago. It's a huge company is vague right. So it takes time.
And and you know, it's a change of culture too I mean, the T. F. I culture is different than the culture. The previous owner I mean, we're we're not the same so we have to we have to bring down okay. The responsibility to the terminal level. If you look at T. F. I R. R. N office is small I mean may be less than 100 people.
Why because we have our operation responsible from everything from a to Z right and US. We're just there to make sure that everything is working well.
At office.
Got it.
No no no pressure on those guys for 'twenty two thanks, so much for the thoughts.
No.
Your next question will come from the line of Walter.
Back then with RBC capital markets. Please go ahead with your question. Thanks, very much good morning Ali.
Hey, good morning Walter.
So one of the labor shortage issue can you give us some insight as to whether we.
What aspect of your business is it hurting or you are you are you losing volume that you that you had previously and just can't service are you just not able to grow it.
At what level and to what degree is the labor shortage hitting you, particularly in the U S. U S operations.
Yeah, Yeah, you see Walter to me my approach to that when I talk to the operational guys, let's try to hire okay. As many people as we can train them educate them et cetera et cetera, but then when everybody is looking okay for drivers okay. It's a V.
<unk> difficult job to do so you've been.
You know looking at T F I for a long long time, Walter and you know our approach has always been when this push comes to shop, what do you do well you know you do what we're doing now as you're buying a.
A truckload company like we just did in Quebec, Okay, and pretty soon you may see us buying a small truckload company in the U S. Just to beef up the team, Okay, and and you get the asset you get the trucks you get the people in <unk>.
Sometimes those small companies their mix of customer he's not where it should be so and the rates are not where it should be because of market intelligence is not reaching those guys and we do have market intelligence now us. So that's always been our approach its like a neighborhood model is you try to get as many drivers because it's an <unk>.
Issue, it's not just us it's everybody has got the issue.
And also you don't do the M&A. The other thing also that we're looking at doing in the U S is that you know there's some some different.
Different visa permit okayed that some of my peers are using two of our drivers from outside of the U S from let's say, Mexico, okay to be able to to driving the U S. So some of our peers. When you look at the fact that they're adding drivers one of the key for them is.
Been too to look at this possibility.
We're doing also something similar to a certain degree in Canada as well from drivers from Eastern Europe.
Right.
Not big but it's it's it's happening right. So in terms of the U S. The drivers from outside the US This is something that is really important now are cool in the U S was always saying well you know what are the previous president is going to change the immigration, but it never happened right.
So right now if you can't beat them join them. So that's another aspect that we're looking at right now are Walter to add more human resources into our are driving fleet.
And to also eliminate the fact that we're losing is because some of them are retiring some of them are just saying you know what with Covid.
All right and now if we bring the vaccine the mandate on the vaccine is just going to get worse.
That makes sense.
Staying on the M&A theme.
Obviously, you've been following the the CN.
<unk>.
Proxy contest and part of that they provided was the possibility of divesting of their non rail assets in intermodal asset.
Do you feel that or are you too large to be able to be in the running for those if they do come out from.
From a regulatory standpoint, or do you see that asset group and I'm, referring to transact H&R, possibly even the bird John says.
That you would you'd be you'd be able to be in the running for.
Well you know what Walter we always looked at everything that so that's possible for us to do and for sure. Like you said we are so huge in Canada that are you know we're not in the same position as some of our peers in Canada.
But absolutely if you know something that makes sense. It fits a T. F. EIS mission comes out from the rail guys are absolutely we're going to look at it now they'll forget.
The Moto of T F I with the C O. The actual CEO as you make your money in the buying never in the selling.
Right. So you got to buy at the right price if you overpay it affects U E. P. S. It affects your your future right.
It's always been the story so we'll look at it.
But again.
You know, we got to buy at the right price for our shareholder.
It makes sense and just what I wanted to Brian and everyone retiring and and best of luck and congratulations to the promotions looking for it to be estimated.
Thank you Walter.
Those guys have done a fantastic job I'm, telling you Bryan and Louie.
Sad T L. But it's it's life I mean like Brian has been with me for more than 20 years.
So I mean, but Brian the decision is I'm I'm going to turn 62 N L. A I want to I wanted to do something different and I say, okay, Brian Fine Fine with me, it's too bad, but he's done a fantastic job with the P&C and same thing with Louis you know with his background at G.
He really up to us with our real estate Department and other small division yeah, but like you said Walter it's those guys are nice, but again it opens up the potential for the younger kids like a junior and Chris and to a certain degree also a bomb.
Your next question will come from the line of Tom White of width.
Please go ahead with your question.
Yeah good morning.
Tom.
Yeah, Good morning Lynn.
I guess when we look at the commentary on repricing I think in within U S. L. T L I.
I think you said something like 50 or 60% of the book has been repriced.
How long do you think it takes to.
Reprice. The other you know 50, 40% to 50% is that something that you accomplish in the next quarter or two or is that something you'd get to a kind of you know year end 'twenty two.
No next quarter or two because like I said earlier, Tom I mean, before we bought U P. S. Freight I mean already U P. S. Any plan in place that are whats called Phoenix to address the situations. So it didn't start in May when we bought the company. It really started you know sometimes a late Q1.
Okay. This this process. So this is why I feel pretty good that they'll.
By the summer of 'twenty two this all of this should be behind us in terms of.
Making sure that what we're getting from the customer is what we're looking for in terms of freight and in terms of Cogs and in terms of rates.
Right Okay.
That's that's helpful. I appreciate that and then you know I think when you've done so well just quick out of the gates and O U.
Barely had your hands on a new P. S freight for very long, but it's been it's been so good that I think here is a you know a lot of enthusiasm.
Z Azzam about what you could do next.
You know.
Apologize for a question, it's kind of looking further out or May I don't know maybe like that but.
What can you do L. Can you do L. T L. In the U S. That's a mix of union and nonunion or if you didn't know if granted would.
Would it have.
Absolutely I mean, we could do union, we could do nonunion, because if you look at our track record in Canada. I mean, if you look at for instance, Cavalier, although it's small it's non union. If you look at west freight although its small its nonunion. If you look at TST, it's baked in it's union, but if you look.
Look at Quake acts, it's also big but its non union. So in Canada, we run a union shop or a nonunion shop has got nothing to do I mean US is it's union, though no union. It's it for sure it's still a little bit of a change because you don't manage that may be the same way because with our union you got a contract and you expect it.
But a nonunion also you don't have a contract that's been written okay with a third party, which is the union, but you you also live by by the same kind of rules that you have and then in a union shop, I mean, basically maybe a little bit less flexibility, but that's not a big deal so for us to to be a you know growing in.
The U S. Once we have stability.
Once because right now might.
My biggest problem is I have no issue of Q4.
Under T F. I the only thing I know is Q4 under the old management I mean, the old ownership right in the same thing with Q1. So this is why we're very cautious okay about okay. What may happen in four and in one well once we're done with a year and we have a solid plan any.
<unk> track record.
If we do some M&A in the L T O.
For us at Union or no Union doesn't change anything.
Okay and it sounds like that's something you would be interested in doing more of.
Absolutely I mean are you know.
If we can find another diamond like like U P. S freight.
U P. S. Right is a great diamond, it's just a little bit rough, okay, and we're going to spend next year or two to Polish this diamond and I'm I'm I'm, telling you is going to be a very bright diamond once we're done.
It's got the potential it's got the size.
And we have the crew there we have the people so it's going to be a very shiny diamond down the road now.
I mean, we like the L. T L business I mean, we are the most important in the L. T L player in Canada.
In the U S. We're small I mean, we're probably and number five or number six so lots of potential for us to grow and it could be union shop, but it also can be a nonunion shop.
Great. Okay. Thanks, so much for the insight.
Very good Tom.
Your next question will come from the line of Kevin Chiang with CIBC. Please go ahead with your question.
Good morning, Thanks for taking my question here.
Point Kevin.
Maybe I could just ask on the P&C front sequentially.
Revenues were down quarter over quarter, and I guess I'm, a little bit surprised by that just given the.
The reopening trends we saw in the third quarter in Canada. Just wondering if there's anything you would call out as to maybe what drove that sequential sequential decline. Yes. That's a very good question, Kevin and Youre absolutely right. So in the summer. Okay. We we made a decision to Ah.
Go away from some freight that we're getting from two specific customers that were outside of our network.
And that came from you know all this big push on.
On e-commerce that happened over the last 12 months.
And in this rate was mostly given to an agent.
And and those agent took advantage of the situation. So we said guys I mean, so let's make sure that the freight that we take from those customers fit the network that we operate.
Sometimes we can have a shipment that we have to give to an agent. Okay. If this agent is fair and as rate. Okay will work with this guy, but last year and this is what happened and and we took a correction but at the same time, Kevin Okay. What we're doing is we're adding trucks, we're adding also do.
Rivers'. So if you look at my M. D N a you'll see that I've got more trucks and you'll see that in my expenses not not labor expense, but the other expense you'll see that is less because we give less rate to an agent. So we are building more and this is going to be.
One of the target of Jimmy the Guy who runs Ken part Loomis and also working with our with Bob is to expand our coverage in Canada. So that we have to we can't service more of ourselves directly.
So I don't know how many ZIP code that we service right now in Canada, I would say, probably 80% does it make sense to cover 100% like you like a pure later, probably not but can we do let's say the we're 80 can we do 82 can we do eat weekend, we do 85, I think so and this is going to be really the goal. So.
That we could go back to growth like you just said a little earlier.
Excellent that's great color.
Their line maybe just another question one of your one of your Canadian peers.
Peers or competitors.
Suggested the Canadian market, we could see an acceleration in pricing next year. The market has lagged the U S. Maybe six to 12 months.
When I look at your Canadian L. T L. A revenue per shipment, let's say, we're tracking about two thirds of what you're getting in the U S. Yeah do you see an opportunity to see elevated pricing growth in Canadian LCL to maybe match, what you're seeing in the U S. Today Yep.
Well, Kevin that's a very very important question and I've been saying that for so long okay. The Canadian L. T O market runs at a discount versus the U S market in terms of quality of revenue and that's why we're showing you the average revenue per shipment the way versus the U S and UK.
To the right conclusion.
Okay is that we are running Canada like a bunch of discounters now.
The difference is the U S is way more organized than the Canadian ones right.
So as long as us and our peers like you just talked about are taking over more and more of these L. T. L company in Canada. They are a nice and they're happy with 2% bottom line. We will always have this problem Kevin because if you look at the U S.
You know you got companies that really focusing with a 70 or an ato ours and those guys are doing great in Canada companies like us with a navy U or an L. T O encana, it's an exception.
I know because I bought a few so.
But you know if if our peers and others are starting to wake up and smell the coffee.
And charge the right price for for the service.
Absolutely we could get there, but that will take time, Kevin it's all going to happen within the six months.
There's too many clouds in Canada too many clones.
That's that's great color Alain Thank you very much have a great weekend.
Thank you likewise.
Your next question will come from the line of Jay.
Jason Seidl with Cowen. Please go ahead with your question.
Thank you operator, good morning Ali.
I want to do.
Wanted to talk about the division that hasn't gotten a lot of air time here on this call are logistics you almost doubled your revenue right.
<unk> were up nearly 50% should we think about growth in that division on the revenue side in 'twenty, two and also how should we think.
About margins going forward.
Yeah.
Very good question I mean, so you got to two big components. In there are adjacent you got our Ww operation that we bought a year ago from Donnelley. Okay. That's finally finally, guys. We were able to move from their S. A P to Oracle. So we did that are.
Late September into October. So so we are completely off donnelley and Tom the leader there is doing a fantastic job eight adding our customers. So we are growing there. Okay nicely. We're also growing the gross margins. So we're getting gross margin Adobe.
W are the goal is to really get to a 20 point gross margin, we're not there yet, but I think that within the next 12 months, we should get closer to 'twenty and then bottom line over there we have to be closer to six and then than that than a four or five right, but the guy.
They have the mission they know what to do and.
This is where we're going to go the other major component is our Canadian and our U S last mile operation. So.
What we've been doing lets say in Canada is like.
Hill, our OE is just through the roof, we're doing really really well and we're adding customers. So the largest E. Taylor. Okay that are that we had as customers I'll give you. An example, we used to do $50 million of business with this guy in 2020, one will do only.
<unk> 25, and in 'twenty do we'll probably do zero because this guy likes to be partner with truckers that don't want to make money and at the same time, we are replacing this guy with newer customers. So if you look at Mike Kinney Indian Operation My revenue, because I'm, losing this big customer or.
Replacing it so you're going to see me more flat, okay in 'twenty two versus 21.
But on the U S side, that's a different story because in the USA. We lost this guy like four years ago.
Right. So the U S side, what we've done is we brought the Canadian team to really move the OE from let's say a mid single digit kind of an operation to a low double digits. So that's where we're at now. So now we are building on that and and what we're going to start growing that so we.
Also split between the normal E Commerce business distribution that we do with our medical so we have a new leader also running our medical division there in the U S.
So I would say make a long story short is we believe that this division is going to keep on growing.
Probably low low double digit like in the 10% to 12%, but more importantly, adjacent is or focus on bottom line and those guys will do really really well in our in 2022.
But more importantly, and this is gonna be stressed out I mean look at our return on invested capital.
24 points.
Trailing 12 months.
This is unbelievable.
Right.
It's a it was an impressive result for sure and I. Appreciate the thorough response on the logistics subtle and wanted to go to get some clarity a little bit I know you mentioned.
And T force freight the failure to be able to get enough trucks from the Oems I think you said 1100 trucks are orders you only got 500 give.
Give us.
I didn't hear if you'd give us an update on when you expect to get the remaining 600 trucks into the number.
Yeah, Yeah, Jason you know so what happened is that the order that we placed with the manufacturer was 11, then about a month ago. They told us after telling us don't worry don't worry the ori. He told US well you know what guys. We have issues with this with US. So they have a long list of issue. So they said guys will be able to.
Provide you only 500 trucks and by the way we're committing to provide you 160 trucks by the end of October.
The other october's now right and so far we didn't get the 160 trucks. So we they get probably 100 trucks by the end of October if we're lucky right. So the first 500 trucks in my mind, Jason won't reach us before probably the end of Q2.
'twenty two.
So our approach has been.
Hi, guys.
We have to bring more supplies in so this is why we have right now the forecast for us in 'twenty. Two is 3000 trucks in the U S. This is L. T L and truckload. So right now we have commitment are talking with Greg for about 65% of all of that which is.
2000 trucks and not 3000, so that's where we're at today for 'twenty, two but with more than one supplier. So so we got burned a little bit by the supplier that it's always been our main supply in the U S. A but you know he gives US a list of 40 pages of excuse okayed that.
You can't deliver.
So so this is why for 'twenty, two we're bringing three more suppliers.
Okay to the truckload division and two R. L. T. L Division. So the truckload division always run two suppliers and we will keep running that the L. T. L. Order was only one supplier so for them, we're adding two more suppliers to make sure that you know we get what we need.
My stuff.
Helane I appreciate the color as always appreciate the time I agree we can pledge.
Sure. Thank you Jason.
Your next question comes from.
The Scotiabank. Please go ahead with your question.
Thanks, and good morning, David.
Hey, good morning.
Alright.
So thanks.
Thanks for sharing all the details.
And I Echo best wishes for retirees.
And thank you on all the promotions.
Good to see some changes there for sure.
Like my question is really kind of a big picture here.
Kind of thinking like Youre being even in this program. Many years you have seen many cycles.
I don't know if this cycle.
We'll be able to defend a lot of people would suggest that than the prior cycle clearly.
How do you how do you see the cycle of all.
Going into 2022, and maybe coming out of 2022 like where do we see this and and how does it and are we going to see.
The pricing power in the industry, because there is cost inflation because capacity is tight fabrics archrock.
And supply need is short on supply.
Do we see because of the inflationary pressures do you guys Wanna be incrementally focusing on the cost structure. Because you know pricing is good today, but it may not come back tomorrow like how do we see the whole picture with your Crystal ball.
Yeah very good question you know I think that this this what we're going through now it's unprecedented I mean, if you look at the cycle over the last 25 years. So market was great. So they're truckers being stupid, we were adding trucks, we're adding drivers and then at one.
Point the demand starts to slow down then the price just went to the shares and then the truckers are didn't make enough money et cetera, et cetera, and then whoops. After a few years market comes back the economy and it's been going on like that for that S. What 30 40 years since the market was their regulated in Canada or in the U S.
The big change that I see is that with you know our people just retiring okay, and we see more and more of that early retirement and the fact that this COVID-19 thing that really affected a lot of the way people think about working now.
And everybody is looking for people I mean, not just our industry.
Every one of our you're talking auspice roles, you're talking transportation you every sector of the economy in North America, everybody is looking for people and it's an issue.
So I think that I don't have a crystal ball, but I think that we're going to have a lot of pressure on wages and we're going to have a lot of pressure on recruitment and and at retaining our people is going to be the key and to reduce this turnover and this is where you know some of that.
T O five division because their union they've got some some tools.
Because of the the Bernese a fringe benefits are so interesting like pension fund and medicals and all of that so we see less turnover and these are in the sector then than others right.
So I think it's a it's going to be.
A big story over the next probably five years that.
It's going to be hard to find people.
Now technology will help us probably to do more with less down the road. Okay. So for sure there's going to be a solution. Okay down the road when I don't know, but there's this this situation, though we're going through right now to me is absolutely sure we're going to live through.
That probably till the end of 'twenty three.
Yeah.
Pennsylvania.
Can you suggest ligand conserve what you are seeing right now in terms of pricing dynamics SUV.
Correct sort of head into some discussions with new customers what kind of pricing are we looking at in 2022, I'm like I'm right now in 'twenty, one I think lots of U S guys would say.
<unk>.
It's double digit possible 22, or it's more like Oh, Yeah, Oh, yeah Chic when art right now okay. When the customer calls you don't talk about price.
Talk about can you provide the service. Please can you help me.
See the dynamics has changed so much the last two years.
It's it's unbelievable I mean, when you talk and in US we don't want to be you know aggressive and to have the customer we feel that we're taking advantage of them. So this is why you know we're going one step at a time, where we're trying to explain to the customer that this is a situation that is completely out of our control.
Okay.
You know we have to pay our people more but the pricing pressure on shippers is not going to end in 'twenty, two and probably not in 'twenty three I mean, because right now the shippers you know the first question is not price is.
His service can you provide the service.
Police and.
And just look at the mess.
At the Port of L. A.
This is a real mess.
Right if the supply chain is all messed up and and they're now working what 24 hours a day seven days a week, okay and the question is please get this right in.
Right. So the price of a container is just going through the roof.
If you try to ship something air I mean used to be $2. A kilo now is $5 a kilo its at the pressure is all over so this is why we're starting to see inflation right.
And if you listen to the guys that are no about that they say well it should be short term we'll see.
That's great color. Thanks, so much.
He's on a plane struck shortly thank you.
Thank you Connor.
Your next question will come from the line.
And North Korea.
Okay.
Okay.
<unk> capital.
That's okay. Good morning, congrats for the quarter.
<unk> been way.
So my question is on the U S.
Dressed elisa.
With transport costs.
Yes, yes, yes.
Yes, 22, yes, I would be curious to get more color about objectives in terms of improving you are improving also their return on invested capital and at one point in time.
Is there a fortunate to maybe divest the same way you did with.
A while ago just wondering if you had received some inbound calls.
Yeah.
Your U S.
No no to answer your question easy I mean in terms of selling the division nobody called us yet, but that being said you know what we're trying to do there is C. F. I overrode business as always perform really really well right and we're still running in the low eighties or at CF.
If I'm the problem, we always had was.
T E. Okay always been an issue and now our U P. S. Truckload is even the worst N T.
Because of the way this company was manage with.
With the previous management.
Management team.
So what we're doing right now is that from T. A the over the road guys are moving to C. F. I. So C. F. I is growing in terms of okay drivers with their over the road Division and T is getting smaller so let's say by the end of 'twenty, one T. A will be a five.
<unk> truck company with dedicated freight only okay and this will also be combined with okay. U P. S truckload, which is about 700 to 750 dedicated truck, okay and that will become into one so into 'twenty two.
You're going to look at our our truckload division you're going to have C. F. I over the road, you're going to have CFR dedicate it and you're going to have C. F. I temperature control and CFR logistics. So this is all going on as we speak so Greg and his team are doing a fantastic job. Because this is not easy to do I mean move a driver from T. H.
Two C. F. I you know its different environment, it's not the same T. M S et cetera et cetera. So we're doing that now and once this is all done so by Q1 of 'twenty. Two this is all done.
Now, we're gonna be moving onto the Macleod software the T. M. S. Okay that has been chosen okay too to be unified with our dedicated and over the road Division.
Now by doing that Okay, where are we going to be more efficient is we're going to have we're going to be doing more with less people. Okay. So for sure.
In terms of the overhead in terms of their staff by combining and doing all of that and then also into one only T. M S.
By the end of 'twenty two.
Then we'll be in a position to probably shave globally, two or three points on the or not affecting the customer, but just by shedding costs within our own operation. The other issues. We have is U P. S. Truckload fleet was really really old piece.
Piece of <expletive>.
Oh running 2014 2015, no safety in the truck no cameras on the truck I mean, nothing was like a a rag tag fleet.
So we also are working on that now to reduce the maintenance gods because it is just killing US right now the equipment that we have over there.
Coming from the acquisition of U P S right.
So all of these actions should help us with also some tailwind from the customer okay in terms of pricing to bring the global U S. TL operation closer to you know a mid 80, a mid 80 80 586, something like that in 'twenty two.
Now in terms of return on invested capital.
Yeah, absolutely been where it's been a concern of ours I mean, we're running about five points five six points.
For sure once we fix that will probably be closer to six maybe seven.
It's too low so so what we are trying to do is to build our logistics division so to help us bring more profit to the bottom line with less capital right.
We're trying also to face the issue with one Rob but that takes time so for sure I mean, it's it's a this is why we're showing these return on invested capital. So within the stable of T. F. I, you've got guys that twenty-three R. P. N C N. Our logistics, but you go to our L. T L. Okay at.
15 to 16, the Canadian one and you'll see probably the U S is in the same ballpark be more than 15 right.
And then you get the truckload guys, which is you know the U S. T. L. At five six and you got the Canadian guys at let's see 12, 10, 12 13 right. So for sure. If you are less than our capital cost. It's a problem right. So we're working on trying to fix it and then let's see what happens.
22, a bandwidth but for now to answer your question Nobody has called me to to try to fly our U S Truckload Division.
Theyre, probably busy making money doing something else.
That's great color.
My follow up question is obviously when we look in terms of M&A you ended the quarter with a very strong balance sheet.
Integration also.
Well so.
Are there any particular segments in terms of M&A.
Would pay more attention to in 2022, and you make some comment about the fact that they need.
Market is maybe less organized.
Yes.
Do you see an opportunity maybe to make a bold move bolder move on.
And maybe try to organize.
Yeah.
Yeah for sure L. T O. We love L. P O L. T O is 47% of our revenue today, We love L. T. O. That's 25 years ago, that's what our started without T. L. Right. So for sure both U S and Canada.
U S is different because we need we need to be more stable with T Force free we have two no more okay, but for sure. The U S. L. T. L. If we could find the right fit will be we'll be looking at that on the Canadian inside you know we passed on on one transaction because a we were too busy with T Force right.
Time and has been taken over by one of our peers. It's okay. It's fine if we if there's another one absolutely we're going to look at it then.
Well, we're in the lookout I mean, but you'll see us you've seen us very active on the M&A side in Canada in Q3 a.
You'll see US finished very strong in Q4, we have a lot of good stuff in the pipeline on M&A are there will be a closing in Q4 on the Canadian side and even some on the U S side small transaction, but very very interesting and also creating value for our shoulders, because remember what I said all.
At the time, you make your money in the buying never on the selling.
Yeah, Okay. That's great. Thank you very much for the time rally pleasure.
Pleasure, but anyway.
Your next question will come from the line of Cameron Dorcas in with National Bank Financial. Please go ahead with your question.
Yeah. Thanks, good morning good.
Good morning, Karen.
So I just had two quick questions.
<unk> four one is just with regards to how we should think about the I guess, the the less than truckload or the T Force freight how the revenue in Q4 is sequentially relative to Q3, I mean, there must be some history, there, but I'm just wondering yes.
Obviously seasonally a weaker quarter, but you will have much of a percentage drop would you typically see from Q3 into Q4.
Yes, so what the guys have told us on the Cameron is about 8%.
Okay.
Okay, and the second I can sort of outlook question here is really with regard to the Capex. I mean, you gave us a number for Q4, but with all the I guess the that the truck buying kind of yes.
To the right here what is it what does capex look like for for 2022 now yeah, well you know that's it.
And it's hard to answer that Cameron, because we get commitments from those guys, but they don't deliver right now right. So it's very very difficult to say so what we're saying about Q4 is about 100, we hope that we get 100, that's that's what's supposed to happen, okay, but we never know they can call.
US and say Oh, we have an issue with the thought that that data and finally, the trucks don't come in okay, but that'd be said for 'twenty two so far okay. We know we have commitments for about 2000 trucks okay.
From suppliers different suppliers or the man is three okay.
Okay. So we're still short and the guys are trying to you know to get more but we may end up buying all need 2000. So 2000 trucks are net of disposal you were talking about Oh about 100 then.
90 million U S. REIT net of disposal net capex just for the trucks in the U S right. So.
If you add to that okay. The trailers and if you add to that the Kenyan operation.
Normally in 'twenty, two if everybody says yes, okay to what we are requesting are you going to be talking probably closer to three 325 net of disposal.
Okay.
Okay, no that makes sense. So that's very helpful that that was all I had thanks very much.
Very good Cameron they care.
Your next question comes from Tim James with TD Securities. Please go ahead with your question.
Thank you good morning Atlanta.
Good morning, Tim.
I was wondering if you can you sort of talk about some of the initiatives or actions you've been able to take to deal with.
Labour challenges. The you know M&A is always there you talked about the special visas and you've kind of covered off the opportunities in U S. T. L. I'm wondering if there are any other areas of the business just given how large T. F. I is now and how diversified you are are there other areas, where you're able to kind of take.
Advantage of the scale of the business in helping to offset some of the labor challenges.
Yeah, you see I mean, you're absolutely right because of our scale and also because of a you know a T. F. I has always been a best employer in terms of what we offer our employees. But this is this is on the Canadian side because on the U S side, I mean until just a few years ago.
I mean, we we were not really well known right.
So I mean, that's why if you look at labor if you look at staff on the Canadian side.
We are not in the same position as we are in the U S. So the Canadian operation. If you if we look for people in Canada, and you say well it's T. F. I mean, everybody wants to be part of T. F. I now.
Now on the U S side, if you say T F I E.
Who is T F. I know for sure we have way more notorious T today than two years ago, but it's still not the same cloud as we have in Canada right.
So this is this is what we're trying to build okay now more and more okay with all the invested that our investment that we made in the U S.
The acquisition of U P. S rate was really helpful for us to to have people in the industry in the U S to say Oh Wow, Okay. Well now these guys are becoming a significant player, but we don't have the track record of of some of our peers, Okay like U P S or fair.
Extra of O D or whoever have been in the business for a long long time right. So it's a little bit of a handicap that we have in the U S versus some of the good peers at we're competing with but not an issue at all in Canada.
Okay. That's helpful and then I guess.
One more quick question.
If you look at each of the three.
Four segments independently and we think about on the one side, there's been cost pressures for a number of reasons well documented throughout North America on the other side you know a lot of those seem sort of events or providing pricing power yeah. Some good conversion on that front.
As you look at each of the four segments can you say and maybe it's not possible to do you feel the overall blended environment has been a net benefit or net negative in terms of profitability.
No I would say Tim it's been a net benefit just look at our P&C. Okay. Although we've not been growing in Q3 as much as we were in two and three and last year and all that but E. Commerce is really a huge benefit for T. F. I on the Canadian side, Okay, and also on the U S side.
With our last mile operation, So that being said if you look at our L. T. L. A the same story. The same story, we have fantastic stability in Canada with our people and our L. T. L. A you know U S is still it's still not clear because I mean, we own the company just for five months and on the.
The specialty truckload, our Canadian operation, a really solid I mean, we abbvie a dominant.
Presidency in Ontario, and Quebec, and growing more into Western Canada, now I mean big time.
So I mean, if you asked me go back to 2019, and and now look at 'twenty. One I mean, if you compare the T. F 2019, with the 'twenty one I mean, we've made huge improvement in our costs and the way we service customer and all the.
M&A has been a real real benefit to our shareholders. So I mean 22 is going to be another challenging year for us because there's there's still this vaccine thing there's still this shortage of people there's still a lot of issues that we're going to have to address but this is the fun of being in that business.
Every day, it's a different story, it's never boring.
Great. Thank you very much at home.
Pleasure Tim.
At this time there are no further questions do you have any.
Our remarks.
Yes, operator, so well thank you operator, and thank you everyone for spending time with US. This morning. So we appreciate that very much and as always we thank you for your interest in T F I International.
We're looking forward to sharing our full year's resolved in February and in the meantime, please don't hesitate to reach out with any questions.
Thank you again and I hope that you're all Abbvie wonderful day.
Bye.
Ladies and gentlemen, thank you for participating in today's.
I'll start quite a 2021 results conference call you may now disconnect.
Okay.
Yes.
Yeah.
Yeah.
[music].
Yes.
Hum.
[music].
Hum.
Uh huh.
[music].
Uh huh.
[music].