Q1 2022 TFI International Inc Earnings Call
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Ladies and gentlemen.
Today's conference is scheduled to begin shortly.
Please continue to standby and thank you for your patience, ladies and gentlemen.
Today's conference is scheduled to begin shortly please continue to standby.
Thank you for your patience.
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Okay.
Hello.
Speakers you are now.
And you can proceed.
Thank you.
Thank you operator.
And I would like to welcome everyone to do their skull, it's been delayed for about 15 minutes I'm really sorry about that but.
Yesterday after the market close we released our first quarter results. We entered 2022 in the strongest position in our company's history.
And the year is off to a very strong start.
The results. We are now reporting reflects the broad diversification of our business. The ongoing successful integration of T force rate and strong execution across our entire company. In fact, all of our four business segment grew operating income again this quarter.
This led to a strong overall performance, including first quarter adjusted diluted earnings per share of $1 68, which is more than double compared to a year earlier and today's we're raising our outlook for the full year first of all we have multiple internal opportunities ahead to further enhance results.
These ongoing opportunities help explain our current strong performance despite macro related headwinds that I'm sure you have earth included high higher inflation elevated with energy prices rising interest rates labor shortage and a global supply chain challenges.
While we continue to drive both revenue and cost synergies following last year's major acquisition. We're also maintaining a relentless focus on what we T. A fine to Nashville, I've always done best.
As you've heard me say many times, we get the fundamentals of the business right by focusing on the details and always looking to maximize efficiencies.
We run our business to produce free cash flow generate strong returns on invested capital and grow our earnings per shares.
This helps us achieve our ultimate goal, which is to create long term shareholder value, including through the identification of strategic acquisition opportunities, while returning excess capital to shareholders whenever possible.
It is it is this consistent operating philosophy that we had due to a long before the pandemic that provides us with confidence that we can continue to successfully navigate the constantly changing macro landscape.
Let's now review our strong first quarter results, which serves as a testament to our guiding principle in our many ongoing internal opportunities to unlock value.
Our total quarterly revenue climbed by more than 90% year over year to $2 2 billion freight volumes were generally saw data across b to b and we kept our lives with appropriate pricing.
More important to us given our focus on profitability. Our operating income reached 220 million during the quarter, that's an increase of 116% over the prior year and as I mentioned, our adjusted fully diluted EPS of $1. Six years was was well above the prior year's 77 cents and that's up 118%.
Our net cash from operating activity was a solid 138 million, although down 11% versus the year ago quarter due to elevated working capital needs associated with how your fuel surcharges.
As I've said before.
Excuse me our value.
We value our ability to convince consistently generate cash flow throughout the cycle. This permits us to strategically and profitably grow the business over time through internal investment and through our disciplined approach to acquisition.
Turning to our four segments, we're very pleased with the results, especially given our emphasis on profitability and the operating income as I mentioned.
All four segment generated operating income growth well into double digits in all four produce stronger results on invested capital than the prior year as I'll now discuss.
Our P&C segment represents 7% of total revenue.
Despite a 5% decline in revenue before fuel surcharge related to reduced Canadian B to C activity. We saw a very strong 42% increase in operating income to $26 1 million with the operating margin up a robust.
700 basis point to 20.9, there's strong profitability reflects our focus on driving yields across both b to C and b to B.
Return on invested capital for our P&C business was also up considerably considerably.
Coming in at a strong 26, 4% during the first quarter, which was 600 basis points above the prior year period.
Moving along to I L. T. O segment is 45% of total revenue generating 835 million of revenue before fuel surcharge during the quarter.
This was relative to 132 million to prior year as the newly acquired T for Street continues to perform well.
Operating income of 95 million was up.
From just 22 million a year earlier. This reflects an operating margin of 11 11.3 and there are lies one of the many internal opportunities we have to optimize operation and grow profits as we approached the one year anniversary of this important acquisition.
Taking a closer look within our L. T. L business. So I can eat operation benefited from strengthening in industrial markets grew revenue before fuel surcharge of about 8% and producing the impressive operating ratio of 79.1.
The other one was Florida, and a 10 basis point better than the prior year.
Return on invested capital was also strong at $18 four up 300 basis points over the prior year.
In the U S. R. L. T. L business was created with the acquisition of U P. S. Freight last year remains right on track in terms of integration.
We generated revenue before fuel surcharge of 696 million and a 97 the war in what has historically been a seasonally weakest quarter for the business.
Our return on invested capital for U S. L. T. L. There's just in just the first 11 months of our ownership was a remarkable 22%.
Next up is truckload, which is 28% of our total segment revenue.
Our truckload revenue before fuel surcharge came at 516 million up 22% year over year.
Operating income declined 42% to 71 million and our operating margin expanded further.
To $13 eight up 200 basis point over the $11 eight a year ago.
We believe that our T force rate Truckload Division acquired last year has now favorably turned a corner.
Within our truckload segment, starting with our U S based conventional operation, we saw strong topline growth with revenue up 23% to $192 million.
The our improved considerably to 89.1 really dipped to 93.4, a year earlier and this is a great example of the self help nature of our opportunities. Similarly, our return on invested capital was six 5% an improvement over the prior year's period five five.
Looking next at Canadian base conventional truckload, we saw revenue before fuel surcharge time, a very strong 37% to $76 million.
This business produced an adjusted the war of $85, six which is which improved by 200 basis 250 basis point and our return on invested capital of 11.9 was up slightly.
Rounding out our truckload segment specialized operation also saw considerable growth with revenue before fuel surcharge up 17% to 250 million benefiting from strength in industrial end markets.
Profitability improve as well with the adjusted Aura of 84.4, representing a 200 basis point improvement with return on invested capital expanding from 10, 9% to 11, 7%.
Our fourth business segment to discuss is logistic, which is now 20% of total segment revenue.
Logistics also saw solid growth over the past year with revenue before fuel surcharge up 15% to $435 million.
Operating income grew to 35 million, representing an 8% margin up 30 basis point rich.
Return on invested capital for logistics remains very strong climbing further to 20% relative to $18 six in last year's first quarter.
Well, let's now turning to our balance sheet, we grew stronger during the quarter, even as we returned capital to shareholders and invested in our fleet and continues to be a pillar of strength towards CFO International.
We generated free cash flow of 92 million after higher equipment purchases relative to last year, given our success in deploying capital to update our fleet and ended March with a debt to adjusted EBITDA ratio of $1 72, an improvement versus 189 at the beginning of the year.
During the quarter, we further strengthened our financial profile with a private placement of 300 million of notes with maturities of 10, 12, and 15 years and cross corresponding fixed interest rates of $3 five $3 55 and $3 eight.
The proceeds were used to refinance a maturing term loan and therefore, it was a leverage neutral transaction.
Following this move at the end of March 78% of <unk>. The national debt is fixed rate, excluding equipment financing and with a weighted average interest rates of 3.45, and a weighted average maturity that has grown to eight years.
Lastly, I'm going to provide an update on our full year outlook, which assumes reason reasonably stable macro condition and benefits from our own ability to execute on what I've mentioned, which is what we control internally.
We have numerous opportunities to earn has to enhance efficiencies by simply adhering to our operating principle that emphasize strong execution and our prioritization of profitability and cash flow over a simple growth.
More specifically in addition to continuing to optimize T force rates following last year's acquisition.
We plan to especially focus on improving density.
Increasing our service level, optimizing our pricing increasing driver retention and the concept that we call afraid that fits.
The words, we strive to take on only the right trade for our valuable network.
For a full year 2022 we're raising our outlook for earnings per share to a new range of $6 50 to $6 75 up from 625 to 650 previously.
We continue to see net capital expenditure in the range of 325 million to $350 million and we continue to forecast free cash flow in excess of $700 million.
Alright ill wrap it up with a summary of our first quarter performance. We entered 2022 in the best position in our company's history.
And the year is off to a very strong start.
I find most encouraging is that despite the many macro disruption over the past two years. Our team has the focus we've executed in accordance to our guiding principle and we have significant opportunities ahead to create shareholder value first of all so many of these opportunities are within reach regardless of economic condition.
Because they involve internal execution and doing what we do best in our quest to create and unlock shareholder value and return excess capital.
Two shareholders whenever possible.
So would that that operator, if you could please open the lines. We can now begin the Q&A session.
Thank you, ladies and gentlemen, if you would like to ask a question you will need to press star one on your telephone.
Please limit yourself to one question and a follow up.
Your first question is from <unk> question.
Morgan Stanley Your line is open.
Thanks, Good morning.
As you know we're kind of there is a bunch of concerned about end of cycle and kind of where things are going and such.
Your stock was one of the best performing the last couple of years. So congrats there, but it has sold off with peers in recent days and your stock is now at a very attractive multiple especially on your on your valuation.
Some of your peers have kind of help us understand what trough EPS might be.
To kind of put a floor on the multiple and where do you think the stock would be so long way of asking kind of how cyclical do you think the business is and what do you see right now and where do you see the cycle, where do you think trough EPS might be for EFI in the light of your new guidance.
Well you see Ravi. Thanks for your question you know if you look at <unk>.
Hello.
If you look at 45% of our revenue is LTE all about 7% of this P&C and I would say about 20% as our logistics I mean, this is not very cyclical as compare let's say to a truckload operation so to say that T. F. I I would say that T. F. I E is more any non cyclical event.
At that let's say a normal truckload operation.
But that being said Ravi one thing that is important and when you look at EFI is that you know what this UBS freight acquisition last year, we're just starting to scratch the surface. We got so much to do over there I mean, we.
We said, okay, we're going to bring this company to a 90 or within a year or two and finally I could say that the team. There has been really doing a fantastic job and we brown. We brought this company to a boat and 90 you are within a year, but you know theres still a lot for us to do because I believe that this could be a need EUR company within the let's see.
Two to three years, we have to drive less miles we have to pick up more freight we have to pick up more every freight so globally to answer your question I mean us a T. F. I, we've got so much to do in improving our U S. L. T L network.
In the next year or two that even if there is because a lot of people are talking about this freight recession, but let me tell you that when I look at our results in April we don't see a freight recession at all what we see is shortage of drivers shortage of power cuts.
Customers are asking us can you. Please help me in servicing by customer and Thats, what were seeing now well maybe in six months a year, a year and a half that could be different but what we're seeing now is that and in us with our T Force right. We got so much to do and don't forget that with this kind of an.
And it helps us with our M&A right. So we've not been too busy M&A wise in Q1, but you should see us a little bit more active in Q2 and in Q3 and the most important thing of M&A is buying back our own stock like you you raised the question.
About our stock price our stock price as the ship is terrible right. So but that is the beauty is that help.
It creates an opportunity for us to do M&A in our own stock, which is the in CIB.
So all in all we feel really good about what happened in Q1, when we look at the Q2, what we can see so far is that we're gonna be really really busy.
And we have lots of faith in our team and you know when I look at my peers in the U S. I mean, everybody in our industry has done really really well so far what I've seen.
Great. Thanks for the color there and then maybe as a follow up.
What's your smallest segment, but b and C wells, a little bit of an outlier versus the other segments in terms of the euro but your revenue change I know there's been some.
Large customer shifts than recent quarters, but can you just help us understand what the near term trajectory of that business. Thank you.
So what's happening Ravi there is that our b to C is as slowed down okay. Because you know I'm the largest e-commerce player in North America is not one of our customer and our customers I've been slowed down, but our b to b as improved since Canada is.
Reopening more and more of the brick and mortar guys stores, the malls and all of that and this is why when you look at our Prof. That'd be just went through the roof. Okay because of that I mean for sure. If you look at our density.
B to B has always been we better. Okay. Then then b to C.
Now what do we see in the next nine months for 'twenty two in terms of volume.
Can we see us, losing a little bit of volume on B to C and trying to replace that with more profitable b to B business now who can run at 90%.
You know, a 20 point or OE division like that in Canada, well Nobody I mean, we're the only one I mean, it's our team there the Canadian team on our P&C are doing a fantastic job.
Yes R. R. Loomis operation, which is one of our most significant operation that was lost tremendous volume because of the beat to see thing there.
We anticipate that luminous will lose more volume during the course of the year, but that will be you know the our Ics and the R. A T F. I S, which is mostly beat to be are going to fill up that so we anticipate.
<unk> 22 for a P and see to see some drop in volume again for the rest of the year, but profitability is going to go up again year over year, Q2, Q3 and Q4.
Very helpful. Thank you Allen.
Pleasure Robbie.
Your next question is from John Jordan <unk> with Goldman Sachs. Your line is open.
Yes, hi.
Touching briefly in a prior question about where you'd like to.
Take the LTM margin over time, but can you give an update perhaps on the timing and trajectory as you've done in the past on U S LCL and and the improvement timing. Thanks.
Yeah. Thank you Jordan for the question, let me tell you I mean, when we talked to our team there. The the goal is to get to an 80 you are within the next two years I mean now if you ask me where are you going to be at the end of 'twenty two it's difficult because now we are having to touch the operation Okay.
We're having to replace our equipment, our trucks, which we did about 500, so far but we have to do another eight 802 <unk> thousand in 'twenty two and this is based on on supply coming from the truck manufacturers, which is always a question mark.
So I would say that we know what to do we have to execute it.
And the team like we would say they're drinking the Kool aid they know what needs to be done and and slowly our focus is drive less miles pick up more freight and reduce reduce.
The.
Claims reduce all of these different things that are you know in the past we were not really focused on two is to try to create this a lean and mean operation in our U S. L. P. L. Operation you know when you look at our Canadian operation, which as you know.
Unionized as well not 100%, but we were able to come up with the lesson and then you are in Q1 on the Canadian environment, which is if you look at our MD&A, you'll look at the quality of revenue of Canada versus U S is like day and night.
So to me. This is why I feel pretty good that we will obtain this goal over the next 24 months.
Because we know what to do it's just a matter of executing it and the team.
Gets it they know what to do and we have a very very great team there.
I'm convinced that we'll make it happen.
Thank you and then just on Canada, LCL I mean, whats the volume outlook, there life and a few negative quarters. Thank you.
Volume was about flat Jordan I mean, if you look at our volume in Q1, we were down about 1%.
What we anticipate for the rest of the year is about flat.
Maybe plus one so we got some some of our division that are up some of our division are down a bit.
So this is why to me you got to think about our Canadian operation with about flat volume for 'twenty two but.
That being said I mean, we're going to run. This this Canadian L. P. A with a fantastic O E. I'm, telling you I was just looking at the month of April I mean, we're just running on all cylinders.
And reducing costs and being more efficient.
Thank you.
Youre welcome.
Our next question is from corner of Scotiabank. Your line is open.
Thanks, operator, and good morning, Atlanta How're you.
Good morning, I'm good I'm good how about you.
Yeah, Thanks, Bill and thanks, So maybe just wanted to kind of dig in there.
Our guidance range.
So congrats on a great quarter and great guidance.
How much healthier new guidance is dependent on continued pricing power.
When demand buyback then your M&A.
Theres no how many are there clear no no M&A, except what we've done in Q1, okay. So for sure that May change based on all M&A that we could do in Q2 and in Q3 or in Q4. So there's no way, meaning this guidance in terms of pricing power and nothing more than what we're doing now.
All right. So it's just a cost we believe that we could shed some costs again, okay. In Q2, and Q3 to get to a you know a $6 50 to 675 and maybe you know what maybe we will get to $7 by the end of the year, who knows right. So us as I've always said we're very.
We're very conservative and we want to stick to our mission and that's always been under promise but over deliver.
Okay. Thanks.
Follow up.
I think to the earlier question with respect to how.
How and where it can be an extra et cetera.
What what changes are you seeing in your key land, especially in the U S. As you know, especially when lock rates driving broccoli are coming down obviously, that's creating a lot of panic.
Yeah, but you know I understand what youre, saying, but the contract rates is where our business is right. So we're not a spot rate company. So we are more like a so if you look at our business.
We run about AR 13500 trucks in our U S. Van Division 1300 trucks that are dedicated which is medium to long term contract, which we've been working on okay. Because some of these contract didn't make any sense and that's why we were losing so much money with T Force right, which is the UBS truck.
Division that we bought a year ago. So this is starting to you know to do well and if you look at our temperature controlled there again or our over the road.
We're not big fan of of spot. So this is not affecting us I think that what we have to look at is contracted rate. Okay and those rates are are great right now and.
You know when.
When I talked to Greg He says I'm I'm always always even now a 115 110.
Overbooked, I mean, I've got 10 10, 15% of my load that I cannot service right now right. The big issue is that you know there's a lot of.
Issues, finding drivers, okay, and finding trucks and that whats create a little bit of this okay. So yes, but went down okay big deal, but it's still way ahead of what it was.
And let's see what happened in Q2 and Q3, because if you look at based on what I'm reading the level of inventory of most of the shippers and the users in the U S are the inventory are really really low.
So I mean, we feel good us about the rest of 'twenty two absolutely a really really good.
Thanks Ben.
Kip.
Your next question is from Brian Aten backlog of Jpmorgan. Your line is open.
Hey, good morning, Thanks for taking the question.
So I just wanted to.
Dig into the some of the self help youre talking about there, especially.
On the excuse me improving the density improving.
Moving to pick up.
Can you can you still feel like you can do that even if we do get a bit of a slower environment.
Volume perspective.
How comfortable or confident rather are you that you can still improve those things.
When we might be facing a bit of a deceleration.
When it comes to the demand side, you said, we would accomplish that and then maybe a softer market.
Yeah, I think so Brian because you know when we look at the number of miles that we have to travel in the U S between each and every pickup.
It doesn't make any sense.
Its way too much right. So this is us this is us okay organizing the work in servicing the right customer. So let's say that you take one of your hub, Okay and you have to deliver about 70 miles away from your hub. So why are you doing that.
Right, So let's focus on <unk>.
From from your terminal, let's try to service within the next five miles within the next 10 miles within the next 15 months, but why would you grew 17 five miles away.
I mean, us and Canada with Sochi, a lower density than in the U S. Because if you exclude Toronto, Montreal and Vancouver. I mean, then the density is terrible right U S is very different but if I compare the number of miles I'm doing in the U S between each and every stop versus just the example of <unk>.
Uh huh.
It's just crazy, we drive more than 6 billion miles a month to deliver afraid us excluding the lineup.
And to me, we Shouldnt do no more than three maybe three and a half so.
This is us this is us the management team and the sales team and working and trying to understand that guys. We want drivers to pick up freight not to drive a truck.
They have to drive that truck between each and every sub I get that but we have to pick up more freight per stop and we have to drive less miles and guys. This is what we need to do but that takes time, because it's a change it's a change in culture and mentality.
That we don't want to be you know Jakob old trade master of none we don't want to travel 75 miles to deliver two skids a freight.
Et cetera et cetera. So so this is this is how we're going to do that Bryan is slowly terminal by terminal. Okay. Looking at the footprint looking at the ZIP code that you're servicing and trying to get more freight closer to your terminal versus running 75 miles away to liver two skids afraid. So this is us just got none.
I think to do with recession or no recession is guys. We have to be way more efficient create better density. If you look at our P&C why are we so good.
Because we get more money from the customer know.
A matter of fact, our revenue is down and our revenue per shipment is also down but.
Well, we made more money why because we improve our density.
So it's the same story, Brian that we have to work with our team there as a matter of fact, we're having another meeting.
Early in May with Paul and the rest of the team and this is what we need to address is pick up more freight heavier freight okay more freight per stop and drive less miles.
This is not like a trying to go to Mars.
This is.
This is just normal LDL business.
Understood and just a quick follow up there what do you think.
Any loss of volume that might not fit in the network in terms of pickup and delivery.
Catchments, there would that be more than offset by profitability in terms of reduced miles assuring better operations.
For sure for sure Brian Absolutely I'm I'm convinced of that and also Brian don't forget at the same time, we have to improve our service. Our service is not like the best views in the U S. Why is that well when you run an old truck like we do I mean, not so much now than a year ago, but the truck breaks down the service.
<unk> is not there et cetera et cetera. So we have a lot of other things also that we have to fix at the same time. So right now we got 500 trucks well, that's only 10% of the fleet. So this year, we'll get probably between eight and 1000, new trucks, Okay, and we are investing okay and.
Gonna do well, but to me if you look at just our P&C in Canada lost a little bit of volume a little bit on the revenue per shipment and we still did way better than last year right.
And if you look at my LPL in Canada, My shipment count is about flat down a bit.
But we have pricing power there okay versus last year, we're seeing the same thing in the U S. Although you don't see it because we can't compare because we didn't own the company last year right in Q1.
So so that's what I'm, saying is that we have a good 24 months working with the team there to get this operation lean and mean, so that we have drivers picking up more freight driving less miles.
That's the same simple right.
A lot of work when you have 200 terminals.
Great.
One quick follow up on just the or and then 80% in the next couple of years.
We have the teamsters negotiation coming up before too long.
The first one I believe with T force freight involved with that maybe you could just give us some high level comments in terms of how you see that playing out and if theres any sort of initial discussions.
As you go into an event in the back half of next year.
Sure for sure Brian .
Getting ready for that I mean already if you compare the sad the base salary that we have versus the other two unionized carrier I mean T for suite has got the base salary.
The most expensive base salary that we do that but you know.
What what I see though is that in some market our base salaries too, though in other markets our base salaries too high so and this is because it's a kind of a national grid. We have that was done because the last discussion or negotiation.
With the Union was mostly done by the UBS people.
So this is going to be a major change for us because now we're getting our operational people involved in the next discussion with them.
There is no lawyers, we don't want lawyers and that we want operational guys.
We want our labor guys, our HR guys and for sure we're going to have a very good discussion with those guys. You know like we do in Canada. Our goal is to pay our people fairly okay, but most importantly, what we ask of our managers is we have to manage our people in the right.
Wei so if this driver drives 300 miles a day to deliver afraid this doesn't make any sense. It has got nothing to do with the driver. It's got something to do with me. The management team we have to manage people better. So they don't have to drive 300 miles in a day to deliver 15.
<unk> shipments right.
I mean, we feel really good where we're working now.
Okay, how to get ready for the next discussion and we want to start if possible that very early so that you know we have a good discussion with our guys.
Okay. Thank you very much for all the time I appreciate it.
Pleasure Brian .
Your next question is from Walter <unk>.
RBC capital markets. Your line is open yes, thanks very much good morning Ali.
Good morning.
Walter So.
Just focusing on no the current buyer seller market you mentioned M&A.
And I want to come that'll be my second question. My first question, though is is that it seems to be right now a seller's market and if you.
If you're contemplating selling right now is pruning or improving the overall quality of your asset base spike by getting rid of some of the.
Getting with it lower return businesses would you contemplate that as you as you get ready for re entering the market on the on the buying side.
Could you envision a larger event with truckload.
And is that something that you're contemplating in this environment right now.
You'll see Walter me I've always been guided by this principle you buy on venues and you sell in good news right.
Right now.
Well Walter is that it's all bad news about trucking right probably.
In the month of April our stock went down like 20% and and my mistake was before we got to the blackout. Okay. I said to our VP Finance My opinion I said in my thinking Okay. We got another 165000 shows Dubai just by that and we will just wait that was a major mistake I should have told them by 1 million shares.
<unk>.
So you're buying bad news you. Some good news right now its all bad news right about trucking so to me, it's more time to sell.
To buy than to sell but that doesn't mean that you know if someone.
A very strategic smart.
<unk> Transportation company approaches us and say hey.
I mean, maybe.
Maybe this this asset doesn't fit you guys right, maybe would fit me better right.
So for sure we're not going to say no to that right. So there's always Walter discussion with <unk> because that's my job really is M&A right. That's what I do all the time.
Besides.
Making sure that my EVP are are really on the clock right.
So, let's see let's see what happens in 'twenty two.
Yes, that's exactly where I was selling in a sense that people are desperate right now four four for like you said power and people.
Selling selling that right now might might fetch a nice bit if you've got enough maybe yeah. Okay on the M&A side, you mentioned ramping up Q2 Q3.
Is this kind of.
Tuck in ramp up or are you contemplating something a little larger maybe perhaps talk about or is it a L. T L tuck in or.
No no voluntary I mean, what we're working on right now and that will be announced in Q2 and in Q3's, mostly in our logistics sector in the U S or in our specialty truckload.
In the U S or maybe one or two transaction in the in the <unk>.
Nice.
Van Division in Canada, because if you look at what we're doing with our Van Division in Canada. I mean, this is unbelievable what the guys have done in Q1 in the winter don't forget. This is winter. This is M. P. G down 15% to 20% I mean, the guys are doing fantastic. So it may be a little bit of a specialty truckload in the U S. But these.
Our old tuck ins Walter Theres, nothing big nothing Big milk.
Okay perfect. That's all my questions. Thanks, very much alif pleasure Walter.
Once again as a reminder, please limit yourself to one question and a follow up.
Your next question is from Scott Group with Wolfe Research Your line is open.
Hey, Thanks, Good morning, I wanted to just get a couple more things on the <unk> side.
Just maybe how much of the freight how much of the tonnage do you think that you might need to call are there any term or any update on terminals to close or sell in and I think in one of the earlier questions you were.
Talking about 2022 or expectation around that you actually gave a number so I don't know if you have any thoughts there.
Yeah in terms of our terminal Okay, Scott what we've done so far as we.
Closed down a leased terminal in Chicago that was taken over by another trucking company as of I think it was April 1st.
We've also have two small terminals in west Virginia that will be sold to.
On the other trucking company.
We are in the midst of buying a terminal in California. That's owned by another trucking terminal because we are right now we own one but we're also leasing one in that city in California. So we're buying another one so there's nothing major so far in the ER.
Real estate side of the business Okay.
But I mean, we're working on it I mean these things takes time I mean, we're looking at buying another terminal right now that we're leasing because we hate to lease terminals, if we can't to own it.
Right.
So yeah real estate nothing so far major except this this lease in Chicago that we got away from which was $1 million a year.
We didn't really need it.
Okay.
The or question.
Your question Scott.
Yeah like I said earlier, we strongly believe that this company in the U S. L. T O could could be an AUR company within the next two years now can we be running a quarter in Q4 at 87.
Hope so right.
But what I would say today, because it's a huge job to change all of this okay within a quarter or two quarters right. So you need the sales team to be focused on the right thing you need the ops guys to change the approach and we're not Jakob old trade and master of none so.
We gotta be focus on driving less miles and all of that so this is you know you start with the CEO and then you go to the V. P. And then you Gotta go down to the terminal managers and and that's where we're at now okay. We're at the terminal managers. So so there's 150 to 200 and these guys. So that's why it takes time.
So I cannot commit okay.
But one thing Scott that you got to keep in mind is that we said that within a year or two this should be a nine year old company and and we've done that the team has done they've delivered we were always worried about Q1, because Q1 in the old days was a disaster or a quarter.
The guys did pretty well compared to you know what what was done prior years. So we feel good but I mean, it takes time to readjust and correct.
We've built our Canadian L. T L over years. So yeah, but this is this is not the U S. U S is much bigger it takes more time.
Okay, and then just one more on the M&A side when you it sounds like tuck in deals in the near term as you think about larger deals over time any thoughts on where you want that to be what types of businesses.
Well I can't say too much about what type of Scott what I could say that everything is going to be big.
For the U S. I mean, we can't do anything big in Canada, right. So something of size has to come from the U S.
It may happen in 'twenty two.
Maybe.
But probably more like in 'twenty three.
And we're getting ready for that that means for sure. We know what we're gonna do we have a plan, but like everything else. There's never only one target is always more than one.
Okay. Thank you guys.
Scott, It's a pleasure.
Your next question is from Kevin Chiang CIBC. Your line is open.
Hi, Thanks for taking my question good morning Aleem.
Good morning, Kevin I was wondering if I was wondering if you could maybe breakdown within your P&C, you pointed to packages being being down roughly 6%.
Year on year.
What amount you would say was from purposeful to marketing as you kind of improve the revenue versus.
Maybe just a slowdown in B to C. And then you did mention you're BW is helping offset that from a weight perspective. So we will have all kind of just flat is that kind of a trend you expect that that from a weight from a tonnage perspective.
It will offset the BDC EBIT as we progress through the rest of this year.
Yeah, So Kevin our plans really started in the summer of 'twenty one okay. So in the summer of 'twenty one the team our team said you know what.
We're coming into Q4 last year, which is 'twenty, we were overwhelmed with volume I mean, we didn't know what to do.
We had to get the freight with agents and all of that we don't want to repeat that because these guys. We can't control the surveys and sometimes okay. Because we were stuck yet to pay more than what the customer is giving you. Okay. Because you are just and now with volume. So we said guys, let's get ready okay for Q.
For which the Guy who did a fantastic job by saying to some shippers [laughter].
No. We don't want this right we don't want to read into this ZIP code. Okay. Because we have to deal with an agent and that Guy is a crook you wants to charge us more than what you guys are paying US right. So we said no. We don't want that so this was Q4 is also boiled over into Q1. So if you look at our.
The ability improving okay.
Some of that loss volume.
We didn't want it. Okay. Some also is because of the largest E. Taylor is gaining market share in Canada and our customers are losing so we are losing also a little bit of E. Commerce freight that you know we didn't plan on losing but at the same time, okay because.
Canada is reopening in Q4 and in Q1 and probably it's it's all complete in Q2 now Okay is that we're getting more of our b to b because consumer are they like e-commerce , but now that they can go to the malls and some of our more customers are getting busier.
So we get more b to B and.
B to C b to B as shifted right. So if you look at a little bit scan bar for instance.
These guys went from 56 or 58% beat to be okay, a year ago.
<unk>, 70% beat to be in Q1 of this year.
Right.
So that's the change so we are losing a little bit of e-commerce , Okay to competition I would say.
And some of it also is because we didn't want that volume.
We're focus on profitability now when we talk to our guys in in Canada, Our P&C guys about Q2 and in Q3. It will probably look the same as our Q1, okay. So a little bit less volume, but way more profitable okay and.
The b to C b to B improvement growing b to B and less upbeat to see will continue probably in Q2 and in Q3.
That's where we're standing today I would say when I look at the month of April our volume again.
Is down.
But the profitability is.
Similar to what you've seen in Q1.
Improvement right.
That makes sense.
Maybe maybe my second question and I know you do like to be conservative on your outlook, but if I just take your Q1, EPS and annualize that.
You're already at the top end of the revised EPS guidance in Q1 historically.
A seasonally weaker quarter for you I guess it was different than what it looked like pre pandemic, but I guess, what do you think some of the conservatism might be when.
When you think of.
Maybe getting an EPS above 674, just based on what you printed in the first quarter here.
Well see Kevin is the guiding principle of CFR I mean, we're in business to deliver freight, but we also have to deliver results to our shareholder, but I believe that we should always under promise and over deliver because you know everything I'm reading okay.
Oh, it's a big freight recession everything is gonna be bad my Blah Blah Blah blah. So this is why we are very conservative on our guidance right. We don't want people to invest in <unk> thinking that we're going to do 750, okay. Even if we believe that we could do $7 50 a share.
So let's be conservative, let's be you know very conservative because of all these different clouds, because I don't want to say something like a 750 as an example, and we come in at $6 75, and then the guys say, Hey, I think.
You, whether you're talking about right.
So we are conservative and let's see you know when Q2 comes out Okay. Maybe then we again, we will revise our guidance depending on what what happened in Q2.
Right.
It makes sense given all the uncertainty out there today that's it for me. Thank you very much in line.
Great.
And as a result.
Wise.
Your next question is from Ken.
Bank of America. Your line is open.
Good morning.
I wanted to ask just just wanted to follow up on exactly what you're talking about there about the signals of the market right. So you mentioned early on that debt.
Now contract is still strong and it seemed like contracts really kind of started ramping up maybe at the end of peak season last year, when our spot ran up kind of after peak season. So I guess, how do we not read into the fact that spot.
<unk> earlier about spot rolling is a precursor of contracts coming over I guess I just want to understand when you think about the truckload business and what that could mean on the contract side I know right now its good but is that a signal or is there something different here that you see that the spot market is not telling you the signal about the future market.
You see Kent.
If you look at history, you are absolutely right that you know when spot start to come down contract rates would fall, Oh et cetera, et cetera, and that history is based on one thing that does not exist today, which is availability of power and the ability availability of people.
Right. So so for us truckload in the U S is a very small portion of our business and when we look at that we say, Greg listen I mean, we're not gun too.
Keep running this operation with a 6% return on invested capital. So so we're going to do more logistics were going to do this we're going to do that we're going to sell the equipment make a fortune in selling equipment to the other guys. So to US we believe okay and when I listen to our peers I think they are the same as we believed that somethings.
Is different than the last 40 years is that because of all the supply chain issue you cant get the power you can't get the people. So yes, the spot rates are down a bit okay.
But when we talk to customers.
We don't really talk too much about price right now we talk more about can you provide the service.
Now that May change, Okay that may change maybe in Q4, although that's the busy season or maybe in Q1 next year, who knows but for US I mean, our focus is really the day to day thing there Ain't too shaving our Cogs because if you look at our U S. TL operation I mean.
We're doing.
Later, well, we're not doing great right. So we still have a lot of work to do there okay in terms of shedding cost and being more efficient.
And this is mostly because of the T Force freight truckload acquisition that we did that these guys were just losing a fortune on and it took us a year to get rid of all the stupidity there.
Now the future of our truckload U S base May you know, maybe maybe contracted rate will follow spot who knows but I think that there's something different today versus historically is that you can't get that where you can get people.
So, yes, and the small truckers also is in a very difficult position.
You know when I listened to my peers on that I agree with them.
So it's not probably the same story well, we'll have to see time will tell but I can.
Okay.
And your thoughts on logistics for my follow up the logistics thanks for that.
Logistics and last mile.
That's where you would see.
Presumably on some of the managed service and logistics side, the peaking out are you still seeing acceleration it seemed like maybe sequentially.
Obviously, no one like fourth quarter to first quarter, you get the deceleration, but is that something where youre still seeing the acceleration in <unk> Oh.
Oh, yeah, absolutely I mean, our logistics guys, but don't forget we don't do much logistics or brokerage in truckload, we do some but very little known all over in logistics and last mile. Yeah. Yeah. Yeah. So it's mostly our our last mile operation. So we are doing really really well I mean in the U.
We just acquired a small company in California, Unity Korea, and that's going to do really well or.
Our medical Division is also doing really well in the U S. So no we feel really good about our logistics sector.
It's 20% of our revenue and you know early on someone asked me. The question about M&A and I said, it I mean logistics in the U S or in Canada, Okay. In what we do in our last mile absolutely something that we're looking at right now.
Two girls.
Wonderful alright, thank you very much I appreciate it.
Pleasure pleasure Ken.
Your next question is from Tom Roberts of UBS. Your line is open.
Yes, good morning.
Tom.
Let's see Elaine you've had a lot of questions on <unk> and I think you're pretty clear in your framework I think one thing you haven't touched on really is the pricing lever.
And I'm wondering do you think is there you know the progression from 90 to 80.
<unk>, how important is the pricing lever.
Or is it really predominantly the operating side in new equipment and fewer miles and all the things you focused on and I guess I asked that because if freight cools down then maybe you get less price than you know.
What we've been getting.
Yeah.
You see we still have some issues to solve on the pricing side I mean, we still have customers that we're servicing today with an ore that superior to 100 right.
We have less of that but we still do right. So during the course of the next two years. Our goal US is Ben is going to be way more focus on what I've described on the Cogs and afraid in this and that.
But for sure we'll try also to correct mistakes of the past in terms of pricing with customers right.
So to run from a 90 or like we are today to Anita you are during the course of the next two years I would say that 90% of that in my mind has to be on cost. Okay. We have to be way more efficient we have to do more with less we have to pick up more freight per stop which is just north.
I mean.
We're not asking to get to tomorrow, we're just saying guys. I mean, if you look at our P&C every stuff, we get a ton of freight if you look at our L. T. L. In Canada every stuff, we get you know a lot of freight if I look at my LDL operation in the U S. Every stop I get maybe two shipments on average which is.
Incredible.
We've never focused on that so to me, it's more like a cost over the next two years efficiency productivity like like you said the equipment. The N P. G on the equipment. The cameras are forward facing cameras on the truck that's going to help us if ever our guys get involved into an accident, which right now.
Now we have 500 trucks with those cameras, maybe a little bit more maybe 800.
So we've got 5000 trucks.
All of this okay is going to help us during the course of the next two year maintenance.
Hill.
Maintenance of our equipment maintenance also of our real estate portfolio. So so we all know that we have to spend way more on maintenance. Okay. In terms of improving the quality of our site, but also we have to control the expense way better than it was done in the past. So we are gonna be spur.
<unk> about the same money well, we get way more results right. So go ahead.
To be Oh.
Long answer to your question I believe that from 90 to 80, mostly of that has to come from cost and not pricing with customers.
Right and just to.
I guess make sure I understand if you had a do you sell it you know if you went to low single digit LTM market pricing it sounds like that wouldn't really be an issue.
Still be on track.
Right Yeah.
Okay.
No.
One other question for you I guess the high class problem you have when you may not be doing big deals in the near term and you are generating a lot of cash is that the balance sheet leverage tends to come down right.
Is there a floor, where you say you know at this lever instead of buying back a little stock all buyback chunkier amounts of stock is that the right kind of logic, we should think about or do you. Just say hey, you know if we get to one turn or half a turn that's okay. Because then we can just do an even bigger deal.
When the time is right.
Yeah, Yeah, you know what the plan is for US is really simple I mean N. CIB is the safest thing for us to do because every time you do M&A, there's always risk, but when we're buying back some of our <unk> stock I mean, we know what we're doing right now we know the company inside out. So this is why to me.
'twenty two is the year of the NCI before TFR why because the prices to the floor $80 U S. I mean, hey, let's jump on it and that's what we're going to do.
So is there also we've been offered by some banks guys will give you a $500 million credit U S to buyback stocks. So no. We don't need that I mean, we're going to generate way more than $700 million of cash.
Again this year.
And for sure I mean, not an issue.
In Q2 will probably buyback a million a million and half shares to get ready for Q3.
Alright.
Okay, Yeah, great that that seems to make a ton of sense.
Thanks for the time line.
Pleasure.
Your next question is from Jason Seidl of Cowen. Your line is open. Thank you operator, good morning wanted to Jason.
I wanted to jump back a little bit about a comment you made on the truckload side I believe you said, they're running at about 10% to 15% over book right now can you compare that to.
Maybe where it was last year and then what's the trend that Youre seeing is that has that come down or come up in the recent month or so it came down Jason It came down if you look back let's say in Q4 instead of being 110 115, you were maybe 121 25, so for sure it came down.
Okay. That's good and you mentioned a little bit about the inability to get equipment can you sort of tell us where you're at in terms of your fleet replacement and how much of that whether it be on.
On truckload or LTR right now it's more important in your own til division and sort of what you're expecting for the remainder of the year and then will some of the stuff get even pushed into 'twenty three.
Yeah. So truckload, we're fine if you look at our MD&A, you'll see that our truckload is running about trucks are about 2.2 0.1 to two and we will get the the product delivered in 'twenty. Two that's not an issue. The problem. We have is our LDL for sure our average age is way too.
Hi, we got 500 trucks. So far we were supposed to get 11 under trucks in 'twenty. One we got 500, okay. At the end of March 'twenty, two we're starting to get the 22 orders. Okay. In the summer Ah. We started in June okay to get that 'twenty, two order and that's gonna Ray.
Us.
Closer to a normal fleet in our U S. L T L, but not there so it needs another year 'twenty three to bring our power in the U S. L. T L back to where it should be normal right. So it's a two year thing I mean, 22, and 23 truckload not an issue at all.
And that's a big deal right in terms of operational costs, because yeah was older.
Maintenance cost per mile between the differential between a new tractor and an older cracker must be adjacent.
Jason the old tractors that we are taking off right now out of service is 45 cents a mile. The new one is five to six to seven.
So it's just crazy the amount of money that we're spending and the customer service because the trucks breakdown and it's it's a domino effect, okay. The driver satisfaction, where the guy who's driving in 2010, Okay in 2022.
Versus my peers that parked next to him the guys driving in 'twenty or 'twenty or 2021 .
Right. So it's a domino effect on morale on service on.
This is why it's got to be a priority.
Problem. We have is that you know we were not lucky in terms of everything that's going on I mean, the availability of the equipment.
It's not easy.
But that's why we went with the three different supplier in 'twenty. Two so that we don't get involving the same mess of 'twenty, one where the Guy says well I can't provide you all the trucks that you want to cut the order in half.
So in 'twenty two that's why we went with three different suppliers.
That makes sense Alain I appreciate the time as always.
Pleasure Jason.
Your next question is from Vince.
Sure.
Your line is open.
Hi, good morning, and congrats for the good quarter.
Thank you Benoit.
Yeah.
Just coming back on the U S. TL, obviously, you disclosed the 97 person or but.
Look at the there was a gain on the rolling stock of about.
Yes.
Again, so it seems that zohar would be closer to 97%. So yes thoughts about the potential for margin improvements specifically for you with BL and the initiatives that you're putting in place.
Year to drive profitability upward.
Yeah, Yeah, Yeah, that's a very good point.
And Youre, absolutely right I mean, what help us in Q1 to bring this war down to more acceptable level is a huge gain on selling of equipment.
And you'll see the same thing in Q2, but.
What's important is the trend so you'll see us improving in Q2, why because of our dedicated business that's been a rock in our shoe because of the T Force right acquisition. Okay. We're finally.
In April of this year, we finally lost finally stopped losing money right. So if you look at my Q1, my dedicated business at the old U S. Truckload was losing money that should be behind us and this is why this 97 or net of.
Hosel, Okay is going to come down okay slowly to level that is way more acceptable.
So are we going to hit 95 or 94.
That has got to be the goal.
Okay, 90, 594% would be the goal by the end of the year.
I would say that based on what I'm seeing now are dedicated okay U P. S. A business that we bought is finally showing up a small profit but this is early this is just April right. So we believe that it will be.
By the end of the year like you said, we should be running at 90, 495, truckload operation, which is not good.
It's not good because if I look at my appears they do they do way better than that US we were bogged down okay with all his business.
Business that we bought that was really terrible we didnt have the people we had commitment with customers. We had all kinds of issues no where we're starting to get out of that mess, okay, but it's going to take us some time.
Okay, that's great.
For my follow up question, it's more on the P&C you could discuss about market dynamics with the new service that Amazon and also U S. Postal service, reducing its level of service I'm, just wondering about how does it play out or.
Your U S last mile.
Fortunately to eventually close the gap.
Canada last mile or other.
You know our last mile in Canada has been affected this year in terms of volume lost we've lost some volume about nine a year at nine months a year ago to our friends there the largest E. Tailers because we don't serve as them at all now in Canada or in the U S.
So, but we keep growing okay, our last mile operation, both in Canada, and the U S.
Our medical Division also is growing in the U S. Bake time, our bank services in Canada, you should see some growth there.
We just took on we're taking on the new market very soon.
From competition, So e-commerce for our last mile. I mean, it's there's no question that we're growing that and then very favorably.
Our P&C E Commerce will continue in the course of Q2 and Q3 to come down a bit okay because of our choice.
Some of it is because of my competition, but at the same time might be to be is growing and if you look at my opinion Coa in Q1, I mean, we've never been able to get a 20% are we in in the winter months, no no way with 5% less volume and 5% less revenue per shipment.
Okay, and very quick one when I look at the number of owner operators you reach about 6900 people in Q1, so it's down almost 3000 people versus a year ago is it because now they are back working for larger companies or is it.
Yes.
Lord <unk> Taylor EBIT loss.
Yeah, No no no. It's a combination of bandwidth. So if you look at California, I mean, we got rid of all the single owner off a guy that's got one car one truck I mean, so this guys out so now there's guy works probably for a guide that we deal with that's got 10 trucks.
You understand what I'm, saying.
Okay. Okay.
So evolution already okay, right right because of the California situation. The same thing is true with Massachusetts.
We don't want to deal like.
A few years ago. So it's a huge consolidation that have happened in California.
That we don't want to deal with a single owner operator now in California. So we deal with the Guy that has 10 trucks a guy that's got 20 trucks. So that's why if you look at the number of owner ups I mean, usually a they went from nine to six and what happened. There also we've lost some owner operator in our.
U S T L division, Okay. When we did this changes at our CFO dedicated from over the road to just fully dedicated. So this also will have an effect long term. Okay. So the mix of you know over the road versus dedicated.
Good.
Is starting to change so we are going to be running like.
35% dedicated now.
In 65 over the road, including temperature control Division. So it's a it's a major change versus what it was like two years ago and dedicated is more like long term three year deal with customers versus over the road is more like Oh.
Contract rate for six months a year.
That's great that's great color. Thank you very much.
Leisure, but anyway.
Your next question is from Tim James with TD Securities. Your line is open.
Thank you and good morning.
Good morning.
Just wondering I was intrigued by your reference to T force rates, turning the corner I'm just wondering if you could expand on that a little.
Seems like it's been improving really since you acquired it but just what causes you maybe what sort of threats thresholds have you met that causes me to say.
Now turning the corner.
No what I'm, saying T force right truck loading Tim.
Tim It's truckload.
Talk about turning the corner as fee for straight truckload because.
When we took over that division, we were losing between five and $6 million a quarter.
Q2 of last year Q3, Q4, Okay. We kept on reducing these loss and finally in Q1, we still lost money, okay, but when I look at the month of March finally, we're turning the corner, we stopped losing money and when I look at my month of April it's a it should be a confirmation there.
Now we stopped losing money that's why we see T Force truckload dedicated business is finally, turning the corner.
Stop losing money.
Okay.
Helpful. And then my second question, if I could just return to.
P&C for a minute.
Could you talk about if you think we're seeing any signs that the.
Strong P&L.
P&C market that you've seen really since the start of the pandemic.
If that's resulted in any excess capacity or business EPS in the market and then and then does that capacity potentially create opportunities as the market softens or does it create more desperate competitors and maybe aggressive pricing is it a challenge or is it.
At a risk or maybe it's both yeah. Yeah. That's a very good question, you're absolutely right. Okay E Commerce created transportation company in Canada right.
Why because you know Amazon and then Oh.
You know the consumer.
More no freight delivered to their home.
So now what you're seeing is that for sure consumer because more of reopening and there's just saying you know what.
Oh, I'm going to get to the walk to the mall. So this is why when you look at US and you look at even the big players like UBS Okay.
E Commerce for US is slowing down there is no question about that.
<unk> see a slowing down but at the same time what is the chance we have con.
Contrary to my peers. My small appears in Canada is that we have the next day service with Campfire Loomis TFS in Ics. So we're losing on the E Commerce side in my P&C, Yes, we do what we're getting on B to B now my logistics and last mile.
Operation in Canada were at the same time, we're gaining on E. Commerce, because you know our solution through our last mile is very.
How would I say that is very interesting for customers right.
They have a D C and Toronto Laurie do you have a DC in Montreal last mile solution to serve as these market from the D. C last.
Last mile is a great solution. So we are expanding our networks here in our last mile for instance, we just opened up.
So out of Toronto, a new a new service station in Hamilton.
To cover more e-commerce through our last mile Division and we're also looking at opening up in other sectors to provide a better coverage of the e-commerce through our last mile but through our P&C. Okay were more focus on beat to be we're trying to get more action.
Because of our density is so huge okay with the malls and would there be to be that this is the goal of our P&C is too great great create more of this beat to be within our service.
And keep the e-commerce that makes sense for us and our last mile is guys in U S and in Canada is that guys. We have the network can we improve the network, yes weekend. Okay. So as an example, we opened up in the Hamilton can we do better absolutely. That's why we bought unity in California to improve our coverage.
This huge state that's doing really well.
So it hit all at the end of the day when you look at this Canadian market.
We may have some competition that will say you know what I want out that may happen.
Okay. That's very helpful. Thank you.
Pleasure.
Your next question is from Kamran Boksen of National Bank Financial your line is open.
Yeah. Thanks, good morning.
Kevin.
So just go back to the U S truckload segment I mean, you.
Got it I guess an issue with unseated tractors.
So for a while now does it seem to have really improved much year over year. I guess my question is if we do have some sort of market slowdown.
Is that potentially even a positive from an operational point of view for you because there's more availability of drivers and you can reduce that unseated tractor count and then the utilization.
Maybe maybe Cameron maybe maybe we'll have to see because right now what we're doing is that we.
We have leased truck within our temperature control division. So right now we're buying back these trucks and selling them to the market and transferring so those unseated trucks into my temperature control division right, but youre absolutely right. If this market start to soften we will have to see but we don't believe that Cameron for at <unk>.
Lisa the future. The next six to nine months and then we're going to get to the busy Q4 season.
Maybe could be something of a risk in 'twenty three in our U S. TL operation, we'll have to see if it's a far as far as eight nine months, it's really hard to predict.
What's the focus of our U S. TL is really to continue to improve our dedicated business. Okay that these guys have done really well over the last six months and and over the road like you. Just said we have way too many unseated trucks way too many unseated trucks. So we got to take the bull by the horn so.
We have too many trailers as well so we got probably a thousand too many trailers that were selling at a huge profit right now and this is why.
I'll Miss you Poirier from these are they were saying I mean, you guys made a lot of money selling trucks.
Absolutely selling trucks and trailers and Youll see the same thing in Q2 now.
If we could get more drivers our guys are really active in that and dealing with customers but.
Now, let's see what Q2 is in.
And then we'll have a better understanding of what we could do with that.
Okay makes sense.
Just a quick follow up question just on working capital I mean, it had a big increase in receivables I guess related to the fuel surcharge could you just explain what's going on there and should we expect that to reverse in Q2.
Yeah fuel surcharge is always the same thing is customer pays you in 40 days and the fuel supplier needs a seven day payment.
So that delta between 40 days and seven Okay is killing you because when fuel surcharge is going up I mean, you have to pay more to the to the energy company and you'll have to wait that delta of 30 days.
30, 33 days, Okay to get your money back from the customers. So if the price of oil stays steady.
You won't see that in Q2, right because we're already there if price of oil starts to come down okay in Q2 or in Q3 or by the end of the year, we will recapture of this.
This huge.
Requirement on our working cap, but even with that Cameron, we're going to generate over $700 million of free cash use this year.
Yes, it makes sense perfect. That's all I had thanks very much.
Pleasure.
Your last question is from <unk> <unk> with Susquehanna. Your line is open.
Yes, thanks for taking my questions.
Mr Bedard.
<unk> been the voice of the manager of this business for decades here.
And you've certainly compounded a tremendous amount of growth over that period.
When you look forward I mean, the business certainly seems set up to continue that on the cash we're generating and opportunities ahead is there an opportunity to sit down with investors and talk about longer term targets and and also introduce in some of the SVP and.
And help investors get comfortable with the bench strength just curious how you think of an investor day type format.
Next you know 612 18 months. Thank you.
Very good question and I have to tell you. This is that we were planning an investor day in New York, just before Covid hit US right. So it's a very good point and its a point well taken is that absolutely you are right, we need to show up or the group of our Evep's, Okay too.
Two and then through an Investor day, and it's something that we got in mind, we want to go to after Q2, but for sure in the fall.
We're going to set up that.
It's a very good point, where we're doing that in New York about two and a half years ago, just before Covid and then Covid hit and we said well we can't do it right. The good point and you're absolutely right.
You know the CEO of <unk> has been 25 years with the company.
And I.
I had a chance to build a fantastic team both on the kidney side and on the U S side in Europe to the right we have to show that to the Investor community.
And for sure.
It's not a one man show, it's a group of very highly dedicated people that supports the success of <unk>.
Alright, so potentially sometime in the second half, but yeah, absolutely second half absolutely it's something that's on our radar.
Alright, Thank you for the time.
It's a pleasure.
It appears we have no further questions I will now turn the call back to Brian for closing remarks.
Yeah. Good so well thank you operator for facilitating this morning's call and thank you everyone for joining US today, we're very much appreciate your interest in <unk> International and we will keep you posted on our progress as we move through the year.
As always please feel free to contact us with any remaining questions and hope everyone has a terrific weekend and thank you again and stay safe. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you all for joining you may now disconnect.
Mhm.
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Yeah.
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