Q3 2022 TFI International Inc Earnings Call
Good morning, ladies and gentlemen, thank you for standing by welcome to <unk> International's third quarter 2022 results conference call at.
At this time all participants are in a listen only mode.
Hello in the presentation, we will conduct a question and answer session callers will be limited to one question and a follow up again, that's one question and a follow up so that we can get to as many callers as possible.
Further instructions for entering the key will be will be provided at that time.
Please be advised that this conference call will contain statements that are forward looking in nature and subject to a number of risks and uncertainties that could cause actual results to differ materially.
Also I would like to remind everyone that this conference call is being recorded on Friday October 28 2022.
Now I'll turn the call over to Alain Bedard, Chairman, President and Chief Executive Officer of P. F. I International. Please go ahead Sir.
Well. Thank you so much operator and welcome everyone to this mornings call.
We released our third quarter results yesterday after the market close and we're pleased to again be reporting a strong quarter with relative stability right through September for most of our segments despite ongoing macro volatility.
In two weeks will also will always start our first ever Investor day at the New York Stock Exchange on November 10.
That event will expand on the operating principles that drives T F I international.
And our plan to create additional shareholder value.
Instructions on how to RSVP already in Yesterdays press release.
As a result, I'll keep today's remark more brief than usual, but suffice it to say our continued strong growth and profitability is a direct result of our principal operating philosophies that we stick to regardless of the economy cycles, such as quickly adjusting our capacity to our variable costs to mess to match.
<unk> demand.
In addition, our performance reflect the ongoing self help opportunities we are delivering on that are entirely within our control.
Most importantly, our performance reflects the skill and tireless dedication of everyone at T F I international and at our upcoming Investor day, you'll have the chance to hear.
From many of our talented leaders.
For the third quarter of 2022 we reported a 30% increase in adjusted net income over the prior year, Despite a nonrecurring charge and we produce at 38% increase in adjusted diluted EPS.
We also generated 292 million in quarterly free cash flow that was up 73% and giving the emphasis we place on intelligent capital allocation, we view, our robust free cash flow as a strategically important.
Our strategically important yep.
Also on a consolidated basis, our total quarterly revenue were $2 24 billion up 7% over the prior year quarter.
All four of our business segment produced strong returns on invested capital and if we exclude the nonrecurring charge and logistics all four produce healthy gains in operating income.
Our P&C segment represents 6% of our total revenue before fuel surcharge we.
We saw a 10% decline in revenue before fuel surcharge, mainly related to slower volume associated with e-commerce activity.
But this was partially upset by strengthened our b to B business.
Importantly, due to our network density our sharp focus on cost control and our strong execution adjusting quickly to changing volumes, we produced a 42% year over year increase in operating income to 34 million with our operating margin up more than 1000 basis point to 28 point too.
Our return on invested capital came in at a very strong 37 up an impressive 760 basis point.
Turning to our L. P L, which is 44% of segmented revenue before fuel surcharge, we produced $817 million of revenue before fuel surcharge that was down 5% versus the prior year quarter. However, our operating income of 101 million was up 5% reflect.
And margin of $12 three up 120 basis point.
Yeah.
We then our L. T L business, our Canadian operation saw just a slight decline in revenue before fuel surcharge and produce a very strong operating ratio of 72.8, marking a notable improvement of 750 basis point over the past year.
Oh, So also important our return on invested capital was 23, 1% and that was 600 and 640 basis point improvement.
Turning to our U S. L. T. L business created just last few with the acquisition of UBS rate revenue before fuel surcharge was 687 million with an adjusted or of 98.8, just about flat while our return on invested capital was $25, two which we view as a solid which we view of salt.
We're just entering our second year with this business, but clearly experiencing topline pressure due to lighting lighting volumes.
However, our prep pricing held up and T force rates as meaningful room to improve.
Moving right along to our truckload segment is 27% of our segment revenue before fuel surcharge, our third quarter revenue before fuel surcharge was 510 million up just 4% over the past year as we sold CFR truckload temperature control and the Mexican logistic.
Business about two months into the quarter.
The operating income still surge to 97 million, which was up 73% the past year. Similarly, our operating margin.
18.9 was up a robust 750 basis points.
So let's take a closer look at what drove that shrank by sub segment first I'll mentioned that specialize truckload. Following the sale of CFR now includes our dedicated operation that remains with US and were previously included as part of our U S. T L.
With that in mind specialized truckload performed well growing quarterly revenue before fuel surcharge by 9% to 355 million with our diversity and exposure to the industrial end markets working in our favor.
And given our focus on profitability, we're very pleased to have generated strong improvement in our adjusted or which at 79.9 marks an improvement of more than 10 points from 90, just a year earlier and our specialized direct little return on invested capital at $12 seven was much improved over the prior year period of $8 eight.
H.
Next up.
Canadian base conventional truck all we saw a jump of 34% and revenue before fuel surcharge was $79 million.
This is an example of T. F is the diversity in this case, our exposure to the relatively strong Canadian market working to our advantage.
Similar to specialized truckload, we were able to leverage our network density and market share, while implementing cost control and benefiting from strong end markets.
As a result, our adjusted or at 75.5 improved by 13 percentage points from $88 four and our return on invested capital of 26 was up shortly from $12 four.
A year earlier.
Yeah.
So moving on to our logistics segment it represent 23% of segment before fuel surcharge.
We saw a 4% year over year growth in revenue before fuel surcharge to 424 million, while our operating income of 29 million.
Also reflecting the nonrecurring charge of $11 4 million compares to 33 million one year earlier, our operating margin.
It was 6.8 as compared to 8.2 of the prior year and our return on invested capital for logistics was 21.1 compared to 24 three.
With that summary of our segment, let's move on to the onto T. F EIS international balance sheet, and liquidity, which remain a pillar of our shrank, allowing us to properly invest for future growth, while returning capital to shareholders, both through our share repurchase and our quarterly dividend, which I am pleased to announce today that our board of directors.
Raised by a substantial 30%, reflecting the core strength of our business.
During the quarter as I mentioned, we generated free free cash flow of nearly 300 million up 73%, we've repurchased approximately two 1 million shares for just under 200 million.
Also in terms of strategic capital allocation, we've completed four tuck in acquisitions during the quarter plus a fifth subsequent to quarter end.
At the end of September our funded debt to adjusted EBITDA.
Ratios stood at less than one times and nearly all of our debt was fixed rate.
Finally in terms of our full year outlook, we're maintaining our forecast of $8 or earnings per share with a free cash flow of 900 million.
At our upcoming Investor day will expand on our outlook, including our long term vision and our many strategic initiatives to enhance shareholder value that are within our own control regardless of the economy environment.
Alright, well I, thank everyone for listening and now operator if.
If you could please open the line for Q&A.
Ladies and gentlemen to ask a question you will need to press star one on your telephone keypad.
So with your withdraw your question. Please press star two.
As a reminder, callers will be limited to one question and one follow up in order to get to as many callers as possible.
Again, Thats star one to ask a question. Please standby, while we compile the Q&A roster.
Our first question comes from the line of Jordan Alger with Goldman Sachs. Please proceed with your questions.
Yeah, Hi morning.
Curious on the timing.
LCL tonnage front, you mentioned, calling right. It was the primary factor also some softening demand maybe you could give a little more color around those two.
Aspects of the tonnage and on the Collins side can you maybe give a sense for how long.
That will be active and you know what sort of order of magnitude to think about thank you.
Hey, good Jordan and so.
You know when we bought <unk>.
U P S right.
The volume was about 332000 shipments a day and then there there was about.
25% to 30% of that that didn't make any sense for us right. So what we've done. So far is we got rid of a lot of that that doesn't make any sense, but it's not that we're not complete but we have to pause okay, because up to a certain level. Okay week, we were able to get rid of.
Most are.
Afraid that really did not fit well, we still have some freight that don't fit okay, but right now we're in a pause okay. Because we reached a certain level that we said listen I mean, let's do this pause let's work on our cost because it's if you look at our cost per shipment today I mean, we have not done a great job.
If you look at the trend over the last 12 months since we've acquired what we've done a great job was to get rid of freight a lot of that trade that didn't fit but in terms and also adjusting rates to customers to to the market, but where we haven't done really a good job is controlling our costs. So one of our largest cost is labor.
Right.
When we bought this company the tools that these guys have to manage labor costs are very different than the tools that we have within all of the tier five companies.
So these tools that we have in all of our LTE all companies with N T F I accept T force right.
As of 'twenty, three we'll be able to implement that why is that because now at the end of 'twenty. Two we're moving away from okay. The U P. S. Oracle assist in financial Oracle system into the T. F. I Oracle system and at that point, we will be able to provide our managers over their tools.
To be able to adjust costs the reality cost of volume. If you look at what we do in other of the T. F. EIS Division P. N C. Our Canadian L T O.
Our truckload I mean, you see the difference between what we do normally in what our team has done at T Force right. So this volume okay that we dropped by about 17%.
10%, 10%.
You know 17, so there's 10% that is really volume that didnt make any sense.
Organically, we also lost some volume that no maybe made some sense, okay, but the market has slowed down a bit.
And to US if you look at where we're going I think that we'll see some kind of stability in terms of the volume for now unless the market starts to shrink a little bit more but more importantly to us is really to start addressing okay. Our labor cost per shipment that's way too high now I can't.
As the guys to do miracles, because they don't have the right tools. So by twenty-three. Okay. These guys will get slowly, but surely the right tools to manage the business and manage the costs. That's why we said from day one okay to bring this company to a 90 or yeah, we could do that between 12 to 24 months.
The brain this company to an 80 to 85 or it will take US two to three years why because now it's a cost game and they don't have the tools to manage their costs will be providing them those tools in twenty-three as soon as we hook up to the T. F. I a financial system and then we could start you know Ann.
<unk> in a better way than what we're doing today now in terms of that's why two to answer. Your question also Jordon is we see some some kind of stability for now until okay. We move into 'twenty three the other thing that we have to keep in mind is that 'twenty two has been burdened.
Very much so with the TSA the transition agreement, we have with the seller at the same time that we're paying these costs were also I have to spend money, okay to be able to move away from UBS into the T F I network financial network.
<unk>.
So long answer to your question, but.
It is what it is.
Right I appreciate the comments thank you.
Thank you. Our next question is coming from the line of Ravi Shanker with Morgan Stanley . Please proceed with your questions.
Thanks Marty.
But anyway, I mean very much looking forward to the analyst day in a couple of weeks not to steal your thunder event, but would.
Would love your thoughts kind of as you sit here looking out 'twenty three are what do you think the downturn is gonna be like I mean, it sounds like you and all your peers have kind of a maybe maybe lowered expectations a little bit since the last time, we spoke so what does it look like out there right now as we sit here.
You know, we feel pretty good about our Q4, you know what we've seen so far in October I mean, we feel good about Q4, we anticipate that you know things will probably still slow down in 'twenty three.
And then we will definitely have to adjust to that I mean, you know if you exclude T force right, which is special situation for us.
Rest of our business. So we have the tools and we have the management to really adjust and act and react according to the market condition and I think that the proof is in the pudding. If you look at our last 20 years of T. F. I D Force right is a special situation whereby the guys over there are doing a fantastic job with the tools they have.
But the problem is that their toolbox is is very limited in terms of financial information in terms of how fast these guys get the information. So so we will rectify that during the course of 'twenty three.
So I mean us we're ready and don't forget Ravi we yes, we like a storm. Okay. You know what we're going to go to a storm probably in 'twenty three.
Gonna be a slowdown or whatever it is and our our balance sheet is very strong and that opens always M&A for US you know we've been doing small nice tuck ins here and there we did four or five in Q3, we're going to do another two or three in Q4.
We'll probably do four or five in Q1 and two of 'twenty three because we have so much free cash flow. So we couldn't mess maybe also a larger one in 'twenty three because you know the old saying of T. F. I as you buy them Bad news and you're selling good news right. So we feel pretty good about our Q4, so far what we.
We've seen and we anticipate that there's going to be some kind of a slowdown.
If you exclude the force rate T F I S fantastic tools to adjust.
Cost volume and everything to market condition D Force right, where the guys are working day and night, Okay to do this transition from UBS to Oracle as of Jan one of twenty-three from that point now will be in a position to support our team there okay provide them.
With the tools that our managers could move faster I, just faster to volume change and adapt our cost per shipment our labor cost per ship and the other thing also that didn't help us in Q3 is our capex, we didn't get any trucks right. So.
Though we wanted to do a T force right in terms of catch up capex, okay, because the previous owner it Didnt do okay a lot.
We're not able to do so far now we have a new fleet V. D that we just started about a month ago and for sure that's as far as the okay to move in the new equipment as fast as we can because so far our maintenance cost per ship and is the same and even a little bit more because our age is about the same and the only improvement that we saw.
See on our cost there is our a M. P G that improve a little bit okay. Because now we have about 800, new trucks in the fleet.
Got it that's great color, maybe just as a quick follow up you mentioned the top of the call that your cash balance is a strategic asset for you.
Thinking of whether you're thinking about that as an as an.
Offensive as asset and that you can go out there and buy companies and deploy that capital are the defensive asset going into that aren't there yet.
Yeah, Yeah, right now Ravi the best M&A, we could do is buy T F I right.
So that's why we bought 2 million shares of T. F. I know depending on market condition for sure. It will be very aggressive on the buyback. We just renewed O K I N C. A b two 6 million shares or about just about 6 million shares and our you know depending on market, we will be very aggressive in Q4.
In Q1, and maybe in Q2 of 'twenty, three depending on market condition, but.
M&A has always been the source of creating value for our shoulders. So this is not going to stop so we'll do the small nice tuck ins. It just looked at our truckload, Okay, Oh fantastic because last year, we did a lot of M&A in our truckload and you know when you buy a 98 or a company it doesn't turning to you.
85, or a company within a day right. So Brook Shaw and his team have done a fantastic job and this is this is what you see in Q3 now okay. So wilkie with Steve and his team doing some M&A.
Our Canadian team as well our logistics team also in the U S. We bought unit T are in California about a three.
Three four months ago, so M&A as in T. F. EIS blood, we've done that for 25 years, we're not going to stop that maybe in 'twenty three because market condition will help us doing a larger deal a significant transaction you know at a fair price, but are you know that could be interesting.
Very good thanks, Alan and see you in a couple of weeks.
Yes, Thank you Ravi.
Thank you. Our next question is come from the line of Ryan <unk> with J P. Morgan. Please proceed with your questions.
Yeah.
Hey, good morning, Thanks for taking the question.
So just going back to.
The T Force for you can you talk about the <unk>.
The broader competitive dynamic there was one of your peers, you announced a large contract win at least at least for them.
Did that have anything to do with the with the tonnage trends in the volume.
Throughout the quarter and maybe you could also give us a little context of how that trended throughout the quarter or was it a decline or was it a significant drop.
No I would say I would say Brian that if you look at our Q3 you know June was great. In Q2, Okay, and then as things started to soften a little bit in July and August and we see the same thing in September okay, but I had a chat in a meeting with our team there.
Last week at T Force right and you know I lead the sales either we have there is come up with some some nice features that we're doing.
What we're trying to do on the sales side that T force rate is to be smart in the sense that try to grow volume with existing customer that we already service to reduce their cost per pick up right because instead of picking up one chip in if you pick up do well your costs are picking up is divided by two instead of being just on on one.
Chip and so that's that's the focus of <unk> and his team focus number one focus number two is guys try to grow our business around our service Center you know well.
We don't like to really do pickups at 80 miles away from our service Center. This is very expensive or deliver afraid 80 miles from our service centre. So refocused guys on this so so this is a major change in our in the approach of T Force freight Okay that was.
Not the same kind of focus as the T. F. I focus because if you look at why Steve for a T. F. I. So profitable you know they can email T. L. On our P&C because we are a density maniacs. Okay. That's that's US okay, we're not going to service our customer.
That's 150 miles away from our service centre ourselves, we could do it with a third party. That's got a lots of volume in that area, maybe if the price is reasonable and we can make money on it. So this is not something that was in the blood of T Force right. So this is on the sales side. Okay. This is really what they're trying to do.
At the same time as okay. We're unloading okay. We did a lot of that okay. The first U freight that does not fit so as an example freight that we have to deliver 150 miles away from the terminal.
It's not for us, that's where someone else not not us right.
What we've seen in Q3 is a little bit of softening. We anticipate four is going to be probably the same in into 'twenty. Three. So this is why it's been urging that we walk away from the financial system of you know.
The old company and move into the tier five financial system. So that we can provide them information not a month after but the same day, so what's going on so that they could act and adjust.
And any comments on the competitive dynamic has that affected you.
Your your tonnage trends at all.
No so far so far what we're seeing is that it seemed like the industry in the U S is very aggressive in and adjusting raised with three P. L. Okay. So like the CH and guys like that but.
But so far with the competition our peers.
I don't see that okay, we don't see any pressure on quality of revenue revenue per shipment.
If you look at our revenue per ship and it was up a little bit ex fuel about 6% year over year.
So so far so good it's it's really Brian we're going to win this war T force weight within the next.
To us by reducing our costs by doing more with less and this is this is something that us we have to do it's got nothing to do with the market. It's us I mean, but when I say, it's US is we got to give the guys. The tools right now [laughter] you know they don't have the right tools.
And just one quick follow up on the cost side with the tools. You mentioned is there anything from a labor flexibility perspective that would be limiting or is the vast majority of what you're looking to do here really based on information and tools. Just curious because obviously you have a union work for.
For us, it's yes, fade and wanted to see how that would play into that.
No Ryan the contract we have today, if we are smart.
We could do wonders is just that right now we don't have the tools to be acting smart. So you cannot blame okay. A driver if you don't manage his work properly right you can't blame the costs on the shipment. If you if your service an account that's a 100 miles away from your survey.
Center, it's us we have to do their job, it's got nothing to do with the contract we have with our employees contract, we have where our employees is okay, we're going to be working with them.
And for sure in terms of flexibility, it's a little bit different than the non union carrier, but look at our U P. S. I mean, they are the king and they are Teamsters right Union Teamsters look at what we do us and Canada, our P&C is 90% Union.
Uh huh.
And look at the results we have so so that job is us it's not the union is no no. It's us we have to do their job at T Force right and we will do that job. It's not a question can we or can we not we will do that job. Its just that the team there wants to do better but.
They don't have the right tools that you don't need the attitudes of 1965.
And we're in 2020 two.
So we'll change that.
Alright, thanks for the time.
Pleasure.
Thank you. Our next question is come from the line of <unk> Gupta with Scotiabank. Please proceed with your questions.
Good morning, how are you.
I'm good how about you going on.
Yeah. Thanks, Thanks, and look forward to seeing you.
So yeah I just wanted to understand.
Understand Lily.
Packaging courtyard.
<unk> had a kind of still very sticky 'twenty eight 'twenty, 9% operating margin.
Listen I think that's it.
Best ever doesn't change here so good to see that trend continue in the third quarter.
Absolute margin as well improved quite a lot I'm not sure I'll leave it there.
Just one month of Nokia bottom makes that defense or not but just wanted to grab the parts on like how sticky are the margins in those two segments truckload.
Yeah on the P&C side, I think that our it's not really a question I think that is sticky you know and I think I said it on on Q2 call that you know to run at 28% or are we in in our P&C is exceptional and I would say that if you look at the margin that we do.
Believe it T I find that we can accomplish on average okay. On average over 10 years is between with today's technology with today's tools that we have because when I talk about T force right tools that they don't have I mean, the guys at the P. N C. They have tools right. The P&L by state by terminals now that you know.
554 years ago, we didn't have so that really help our management team to deliver these kinds of resolved. So so if you say I mean could you do 28 for the over the next 510 years I cannot say that but what I can say is on average I think that between 20 to 25, okay ish.
Should be the average so we will have peak like we have maybe now at 28, we could have trough that 22, okay, depending on market condition, but on average I think that 25 is what we could deliver with that P&C division in terms of our truckload, that's a little bit more tricky because right now.
Okay, we're getting a lot of of action. Okay that our guys are doing in Canada, Okay with our truckload division whereby you know with again our tools our management tool that we have there. The guys are able okay to really do a better job of matching you know they're like the head.
All with the backhaul and also because now we have more unification of our Canadian operation under one management team.
You'll see that this is going to be even better for us in the future now if you say well I mean could you do a I know we have 2020, 25% in Canadian truckload over an average of 10 years I would say.
25, I think it's it's a little hard to accomplish on the on 10 years, but can we do a 15 to 20 I think this is doable and most importantly is our return on invested capital I think it's it's the key is we should be able to play in that 15% Mark on that 10 year average.
<unk>.
That's great color Alain Thanks, So much and my quick follow up is just on the M&A front I'm sure that you'll probably get close to that at the Investor day, but in terms of competition from private equity do you see that lessening at all given the interest rates are rising theater or no change.
No I think that where the interest rates I mean, it is P. Those guys. They love when interest rates are low because their cost of funding has really changed so they could do all kinds of things right now with interest rates moving up and up and up I mean are they were getting a little bit more skittish and that's really helping us because you know.
On larger deals our competition is not really a strategic is most of the time P and those guys don't view things the same way as we do.
Our philosophy it I've said it many times at T. A vie you make your money in the buying never on the selling so you gotta do M&A very aggressive buy at the right price not overpay because this is gonna burden you for years to come.
That makes sense.
Yes.
Yeah no. Thank you.
Thank you. Our next question is coming from the line of Tom Waterworks with UBS. Please proceed with your questions.
Good morning, ladies.
I wanted to ask you a bit about how you envision that progression on L. T L operating ratio.
You know I think third quarter, you explained that the decline in shipments into the market a bit weaker but I guess the path is a little bit off from where we thought it was going to be so how how do you think about L. T L margin in 2023.
You know is it reasonable to expect a couple of hundred basis points of improvement given the comments on Oracle and kind of managing costs better.
Or is that is that too optimistic given that you've got a maybe weaker freight backdrop.
Yeah, Yeah, that's a very good question I mean.
It's hard for me to answer because you know we don't know all fast. These guys will be able to act based on the new tools that will financial tools that will we be providing them. This is why I'm, writing some of our Canadian folks, helping our U S. A management team, okay to really start moving and addressing situations faster access.
Et cetera, it's it's a it's difficult to say.
What we could deliver in twenty-three well, we could say, though is that within our L. T. O. We have a diamond that's called G. F. B, that's really helping us which is the asset light we believe that our capex in 'twenty three will be way better okay. The new trucks coming in will be way better okay than what we've seen in 'twenty two because now.
All with the leader the new leader of our fleet. The T Force right that should help US okay. Because don't forget until we sold C. F. I E. It was our <unk> team that was there to help us get the new equipment in even with all of the supply chain issues and and then don't forget that in 23 also our TSA.
Cos, Okay, that's costing us a fortunate because it's normal U P. S. I mean, they're there to support us, but they want us out so they charges an arm and a leg of fortunate to support us and as of Jan One we believe that once we have the financial system away from UBS.
Saving in 'twenty, three is going to be maybe a basis point, okay of or just that right. So we have a some tailwind okay in to 'twenty. Three we have also some headwinds like you just said maybe volume is going to you know keep ill under.
Sure Budd.
On the other side like I said earlier on the call we have Eileen and their sales team focus on shipment and afraid that makes more sense for us. Okay. So we should also see some improvement into the average miles per stop why because you know where we're at.
Try to pick off rate closer to our service center not chase rate 100 miles away from our terminals because that was not an area of focus in the past right. So it's very difficult to answer you know black and white on that but I could tell you that our team is very motivated.
I understand the challenge Okay. They look at their sister company in Canada, and they say Hey, I mean these guys are running at 72 are in Canada.
Gideon market.
Quality of the revenue as the ship cerebral compared to the U S and those guys can run at 70 72 are staying there are 73 Wow just fantastic.
But these guys have tools honestly, we have nothing right Oh Whoa, you guys will get the tools next year for sure and then the proof is going to be in the pudding.
So if it's hard to quantify or come up with the right kind of ballpark for what it is are you confident in saying you are will improve or is that may be hard to say too. It's hard to say right now okay. Because we don't have the right tools to drive these guys manage but that doesn't change that.
Thing, Okay like I said, many many times that we buy this company it loses money within a year, we should be a year to two years, we should be at a 90 or which we are basically there now okay now.
Within two years.
We will bring this company to a need to any five O R. Okay, why because we know that with all the financial tools that will provide them. Okay. These guys will do the job now what's going to happen in 'twenty three it's hard to say because you got the tools that these guys don't have number one there's a market condition that is chi.
<unk>, Okay, a little bit more softness in the market, but we also have some tailwind right. So if you look at 'twenty. Two we have lots of cost for that transition that will disappear in 'twenty. Three you'll have also our sales team. That's more focus on freight that is logic intelligent to us versus just chase.
<unk> freight for the sake of freight.
So you got pluses and minuses, we'll see how it turns out right.
Yeah, and then that's great and just a quick follow up what about the timing and the Teamsters contract I think people focus for U P. S. On there's some concern that twos, maybe pent up inflation when the contract expires. So you get a bit of a step up in your cost structure is that something that would be of concern for you as well or how do we think about you know kind of.
Contract changes no no no no no the contract that we're gonna have with with our employees is gonna be fair. So we want to be fair with them and and the salaries will be for everything is gonna be fair and I think it is fair today and were just made sure that the next contract hopefully as five years okay.
It will reflect market condition right now if you just look at what we've done in Canada with Loomis I mean, Loomis, Okay, which is part of our P. N C. We just renewed the contract for five years with these guys and this is the unit for a union again, everybody was saying Oh. These guys are there's these guys.
No no no no I mean unit for you sit down you make a deal and now we have a five year deal with them. We have a five year deal with Canfor with the steelworkers right. So we'll sit down okay with the the group of people that represent our employees and we'll come up with something that is reasonable and fair right and then.
The onus is on US Okay. The management team to organize the work so that is sufficient and profitable for our shareholders delivering afraid that fits right. So we have a huge job to do T force rate on that and like I said with finance.
<unk> tools that we are using in all of our U T. F. I division that will be supportive of it we'll be supporting them next year. These guys will be in a position now to deliver and to delivering and reduce cost now how do you reduce gosh is having the work better organized okay not by redo.
Seeing the salary of the employee.
Right. Okay makes a lot of sense. Thank you for your time.
Got you.
Thank you. Our next question is coming from the line of Jack Atkins with Stephens. Please proceed with your questions.
Hey, Greg Good morning, Alain and thanks for taking my questions.
Sure Jack So let me kind of start I think we'd be getting some questions on this and I'd love to get your take on it and this may be a difficult one to answer just given all the uncertainty out there, but you guys are obviously very very good at managing your business you know it sounds like there's a lack of visibility maybe into 'twenty three at this point within the U S. L T. All.
Big out on some of the systems.
But you know if we were to see a more challenging freight market in 'twenty three kind of materialize you know given all the levers that you've got in the business across the different segments do you think you'd be able to grow or at least.
Hold earnings flat.
How are you thinking about that not asking for 'twenty three guidance at this point, but just trying to think Directionally you know, how we should maybe think about that opportunity.
You know what Jack I mean me I feel pretty good like I said earlier in the call. I mean, we went through storms I've been in this environment Jack for 25 years, and if you look at T. F. I. His track record good times Bad times, I mean, we always perform really really well.
And we take advantage when Theres a storm, it's time to do things that sometimes you know you can't do when it's nice and Sunny right. So you could do things on the cost side that you know when it's nice and Sunny the guys says why it's why you see something that doesn't seem to be broken. So there's a lot of opportunity in a in a storm okay.
He is no small storm you know like we probably will get in 'twenty. Three so me I'm not worried at all I mean, we have a very strong balance sheet. Our debt is fixed at 345, our average tenure of our debt is eight years.
I mean, our leverage is less than one we have a fantastic team and tools.
Only rock in my shoe right now Steve Force right whereby these four guys are trying to do a job that <unk> too bad that they don't have enough tools to have them. You know look at the situation and make some adjustments, but we will provide them the tools. So me I feel.
Really good so you know our guidance for 'twenty two is $8 I haven't seen a plan or budget for 'twenty three.
But you know when when when we have the board approve a 30% Jack in our dividend I think that this sends a message that guys.
The CEO and his board really our feeling good even if there's a storm coming into 'twenty three because we have the tools, we have the team and and we will take advantage. If there's a storm of all the M&A that we could do.
And and look at our track record I mean, it's it is it is what it is no absolutely absolutely and I appreciate that that comment Ali and I guess for my follow up.
Just on T Force freight you know maybe looking at it a little bit differently. The Mascio survey results came out a couple of weeks ago. You know T force freight was sort of in the bottom quartile there of national carriers, you know I know kind of improving the freight mix. It is important.
The strategy moving forward, how do you how do you improve the service level, they're to be so attractive that you want yes, yes, yes, you're absolutely right Jack I mean, our service is not we're not like the top tier of the L. P. L company in U S. No way, it's impossible you know theres many reasons to that okay.
Reason number one is that you know we have so much equipment. Okay that is not proper to do a good job. So if you look at the best in class in the U S do they run trucks like.
On average that are eight to 10 years old they don't why because you've got all kinds of issues. So the guy breaks down on the road. The service is not there et cetera et cetera, our customer service our pricing, Okay was not under our control right now the Richmond team has.
Customer service and pricing Master file now finally under our control it will take time, okay, but you know if we you don't build a customer properly because youre. So disorganized that youre much safire is been upkeep by a bunch of guys that don't know what they're doing okay in the Philippines.
As an example, well for sure the customer is not going to be happy because you can't build a guy properly and then you got he's got another issue with you because then youre trying to collect something that don't make sense right. So we're going through all of this as we speak in 'twenty two and into 'twenty. Three so this will improve there's lots of action.
I've been taken to improve our you know the satisfaction of the customer dealing with us not just delivering the afraid but also on the admin side right. So.
It's also a.
Our pride thing right. So you know if you have drivers that for years and years are running into a terminal that is is terrible. Okay. Because you know that everything is falling apart and the Guy has got a 2008 truck and it's like a piece of <expletive> excuse the expression I mean that doesn't help.
No the pride of your employee and that reflects also to their customer to a certain degree. So we're also correcting that and that will take time, okay. The fleet and the also the facility. So we just started talking with Eylea sales either to a customer in some of our terminal the nice one.
Bring customers in to see you know what we do our claim ratio for a dollar of revenue. Okay. It's it's a major improvement you know we used to be at 1% of revenue, which is a disaster. Okay. But you know the guys told me well we used to be at to now we're at one one is terrible okay, you gotta be a point to 0.25.
So now we're under five after a year where under five so that also improve the customer you know experienced with US right. So we don't break as stuff, we don't lose it.
As much as we used to do so all of that Jack is action that Paul and his team are taking to improve the customer satisfaction. It will take time okay.
But we'll keep working on it and improving it because like you said I mean, its hard for our sales team to get more freight quality freight quality customer if the service is not there.
Okay.
Thank you I really appreciate the time.
Pleasure Jack.
Thank you. Our next question is come from the line of Scott Group with Wolfe Research. Please proceed with your questions.
Thanks, Good morning, Alain I want.
I won't help you set a guinness record for saying tools, so I'm going to ask a follow up there.
[laughter] yeah.
The equipment's been delayed what's the risk that this new system gets delayed and then maybe just bigger picture you said at the call at the beginning of the call. It one of the pillars of the model is we're an asset light asset light model. It can be really flexible is just a lack of tools or is it just that hey, this is an asset base.
Business that has more operating leverage when when things slow.
You know what to answer your question on the financial tools that the hook up to T. O Fi Oracle I think that are you know we're testing.
Right now and when I talked to David and all of our team our I T team I mean, we've we feel really good I mean, that's not going to be an issue I mean equipment. It's out of our control we place the order and those guys have so many issues with her.
The supply chain that they can't deliver so that is out of our control, but I T is us it's our control and so far you know what the guys are telling me is we're gonna be there no question about that.
<unk>.
So what was the second part of your question Scott I just wanted to like is this is this ultimately just this is a more asset based business. The rest of your business to a more asset light is that just a more difficult business to manage in a downturn.
No I don't think so Scott I think that you know once we provide the tools to the guys. You know and just look at our Canadian L. T O five years ago, seven years ago, and what we do know I mean, it's the same it's the same companies the same asset intensity, but the resolve sorry, Dan night right why is that well.
Cause we overtime over the years, we've built tools, we've got P&L by terminals, we got all kinds of tools that helps those guys too to do the job right.
So we believe that a once we provide those guys with the right information that that's not a question at the job will get done we believe that two years is long, but it's also short I mean are you know.
Well, we'll get there.
Okay, and then just quick follow up the the revenue per hundredweight X fuel is up about 4%, which is good but you know maybe others are gonna be are trending a little bit better how do you think there's more pricing opportunity for you.
Bit more but don't forget we are we don't have the same reputation as the peers the best beers right.
So as the number one peer in the U S. I mean, we're not there at all right. We you know in Canada, It's a different story in the U S. Yeah. So so we did okay on that.
To do a great. It will take us some time to improve like I was discussing what Jack is we have to improve service you know we have to bring a lot of different cultural things over there I mean.
T Force right, it's not the T F. I culture, yet you know, we're going to get there, but it's not there you know the culture of doing more with less is not there right. It will get there. So all of this and I don't want to say tools again, Scott because I said it so many times, but to me. This is.
You know the guys are not going to sit on their ads once they have the info when the they have the proper information exact fast they're not going to sit on their <expletive>, they're going to start moving enacting.
Thanks, Helane seeing a couple of weeks I appreciate it yeah very good thank you Scott.
Thank you. Our next question is come from the line of Walter <unk> with RBC capital markets. Please proceed with your questions.
Yes, thanks, very much operator, good morning Ali.
Good morning Walter.
So I'd like to go back to the LTR Division, particularly on the the revenue per shipment Europe , six 5% on down 17% in shipments and I know you were shedding a lot of no you know underperforming business. So was the six 5% increase mainly the average going up as opposed to price increase in.
And and to make sure.
Hey, Walter it's a mix right because if you shed you know low revenue shipments I mean, it helps your average right. So it's also it makes because we've been correcting rates, okay adjusting rates. So as an example.
The largest E tailers a year ago that we were dealing with them about 14 1500 shipments are they losing 25%.
That was a year ago when it today, we do about 150 shipments with him.
So we've lost 1300 shipments.
Volume wise with them per day.
But instead of losing 25 now we make maybe five or six.
Okay.
So what I'm looking to get here and kind of unpacking, the mix and really drill down on the price environment. If if we do go into a weakening environment.
Do you still have room, because your price below you know kind of below market to bring prices up if we do go into a weakening environment in the first half of the year oriented.
Yes, yes for sure Walter we are not priced at the market.
At all okay, so, but that you know it's easier to fix when the market is solid like it was last year, okay, but we could not fix everything at the same day.
So we still have a lot of adjustment to rates to get to market of our peers, but like we were talking earlier, okay. There's all sorts of service issue right. So so you want to sell your service as good as the best in class well. It's your service is not as good so for sure you always be a dish.
Counting kind of Guy right.
So it is a it's a two phased kind of approach so Paul and his team are working hard to improve the quality of our service et cetera et cetera, but at the same time, we're also moving slowly into getting closer to market because if you compare okay. What we do we still have some room to go the other thing that.
We are not there at all is the weight per shipment right. So that's another aspect that we're talking to our sales team is that us we like to carry very low weight shipping that is not what we should be doing why because you know if you look at my peers. They haul shipments that are 15 years.
Pounds on average 13, 14, 15 and 16 in the US we're stuck at a 10 75.
If you look at our Canadian Division were heavier why because we focus on heavy freight because theres more money right over there you know because of the past focus than we're not focusing on that they were focusing more on retail okay. L. T L, which is lighter than.
<unk> L. T O. So we are the same thing as I was explaining about trying to get more freight per shippers. Okay. When you pick it up try get more shipment for Sop tried to now get more freight around a 30 mile radius of your service center. So it's cheaper to two.
Operate and get more heavier shipment because you get more dollars per shipment.
So it's a combination of all of this Walter that's going to help US move the average revenue per shipment because you know you're you're paid by the weight by a per hundred weight. So why would your whole 10 75 versus still my appears my best periods. All in 13 under the 500.
So they get more money per shipment.
That's that's great. Good color my follow up question here is on acquisitions I hear you on a weakening environment in windows stormed out there.
You can buy a small tuck ins because of kind of desperate sellers that kind of thing.
I'm with you on that my question is really on the larger transactions does does a weakening environment.
Bush back negotiations because of the base on which the EBIT does being negotiated or do you worry at all that some of the larger deals that you are contemplating might not get done because of a weakening environment or or you're kind of settling in or.
Are you are you you look at more of a normalized EBITDA and kind of the weakness will be will not be as big of a factor in negotiating with the larger.
It'll acquisition.
Yeah. So so if you look at what we've done with C. F. I Walter you know a discussion they had with the buyer is that you know, let's do a reasonable deal for both parties and we were able to come to an agreement any and then an environment that was not may be the best for the seller.
Which is to me right.
We apply the same kind of reason the ability once we get to a you know in an environment that is to the buyers' advantage, but it takes two to dance. So if you try to to squeeze the seller because market conditions are in your favor so much.
Like you just said, there's not going to be a deal right, but but it's also a philosophy there that we want to have a fair deal, but my experience Walter is that we normally get a better deal. Okay. When the market is difficult because there's less.
Buyers showing up with stupid pricing that doesn't change the reasonable price what it changes like if I'm just thinking about the housing market in Toronto right. So so now it's way more reasonable it was like six months ago. So.
The same story could be true of a company. When you have 15 buyers of our company well then the price goes up right.
So when the market is stuff you have less buyer. So the reasonable price gets more in line with what I like to do.
It makes a lot of sense, thanks, very much I N C. In a few weeks.
Yep. Thank you Walter.
Thank you. Our next question is coming from the line of Jason sat out with Cowen. Please proceed with your questions.
You operator, good morning, Glenn.
Hey, good morning, Jason.
I want to focus on sort of through the storm here, if we will because I think it's pretty obvious to anyone that's been following the markets that we're heading into a little bit of a downturn here how long it will take I have no idea, but I wanted to look at your LTM business, because it sounds like right now you're sort of running.
A six cylinder car without three cylinders firing right. You you have your fleet that you wanted to re fleet, but you can't because the Oems you haven't suddenly footprint, which is probably not right sized to your liking and you're a little bit time and the technology. So can.
Can you talk to me about the opportunities that exist for forget about 'twenty, three but 24 and beyond and that where would that put you in terms of sort of the rankings in your head for some of the national carriers once you get right sized.
Once we get right size or Jason and this is what why I see within two years I think that will be in the needed to an 85 or a company, which is normal in the U S. I mean, you know the exceptional guys are at 70 or okay, I'm, not saying I'm not talking about that this is a company has been built.
Then a great management team over years and years of success, I mean, I'm, not saying that both our company and what this is this is what we do in Canada, but this is not attainable for us within the next two to three years, what we're just saying that by providing okay. Everything that these guys need okay.
In 24, and 25, I think that we should be in a normal environment of an 80 to 85 or I think that 80 85 O R. In the U S. L. T. O is just normal its not exceptional 70 O. R is exceptional but 80 to 85 or is it just normal.
No no that makes sense and can you get a little bit of an update on the fleet. Obviously you mentioned you know you're not there yet where you wanted to be that was sort of wondering.
You called out when you when you purchased keep worse right.
Where do you think youre going to be where you know in other words, where do you think you're going to be in terms of your original target by the end of 'twenty three.
Yeah, So you'll know that the store you always put the oil on the wheel that squeaks and the wheel that squeaks did not happen that T force right why because it was C. F. I R. Truckload division that was in charge of making sure that we get the capex in as fast as we can but you know those guys had been gone for three or four months because as they.
None that we were making a deal with another company well they focus more on <unk> than on T Force right. So this is why we just hired a month about a month ago, a leader and now this guy is making calls okay. He is now the wheel that squeaks, and calling those supplier and making sure that.
You know, we're going to get the equipment a S. A P. So far okay. One supplier is probably laid by maybe a month or month and a half, but we've diversified in 'twenty two okay because of the failure of 'twenty, one, but the second supplier.
He just started giving us the equipment about a month ago right. So this guy he's three months behind the schedule. The third supplier that we have you know he hasn't he hasn't delivered anything so so far what we're seeing is that the delivery is supposed to start.
End of October which is now into November so he's already about three or four months behind the schedule.
In the fourth supplier, which was supposed to start in the fall now it was in Q1 of 'twenty three so I mean, we're still behind awfully. Okay. With this new leader that we have which is really important to them that we get the equipment in awfully if supply chains.
Issues with the Oems start to improve okay, we could get the stuff now the price of the equipment. Okay. Ah is creeping up for the last eight nine months Big time, so maybe the demand okay. It will start to shrink not ours, okay like I said to the TFR The T Force.
Team I said, there's no way, we're going to reduce our Capex us at all T force rate in 'twenty, two or in 'twenty. Three it went 24, because we need a lot of capex catch up right to bring this age of the fleet. So if something happens in our Capex in 'twenty three 'twenty four it's never going to be T force right. So.
If the other carriers are buying less maybe that's going to help us expedite okay get our equipment faster we'll see.
Well I wish you wish you guys. Good luck there it sounds like you're about three to six months. Thank you and we need that we need to have I mean, it's going to improve our driver satisfaction. I mean, it's such an important thing for a transportation company to have a fleet of normal age.
Well listen it will improve your cost as well fingers crossed for you and I appreciate the time thank.
Thank you.
Thank you. Our next question is coming from the line of Ken hopes there with Banc of America.
Erica. Please proceed with your questions.
Hey, great good morning Helane.
Maybe talk a bit about your your review on truckload, obviously now that post <unk> what else needs to be done on the truckload side, you've made continued acquisitions on the specialized side.
Whats your thought for the business how should we think about that when you slow 80 sized seventies margins going forward and any impact on what's going on in the market now on price. That's very good question, Ken I mean for sure I mean, we love specialized truckload US we were a big fan of that we are second to none in Canada, where we're so big our approach with the team there.
There is a we're trying to grow east of Mississippi, and all sectors. So so we we did a two two acquisition in the U S. In Q3 on a specialized truckload.
Our team is is is heavily involved in the U S right now to keep growing that.
In our truckload division now, including T. A dedicated now is under one leadership our wishes Mr broke shop right. So this is something that will continue to grow not the van okay, but really the specialty like the flatbed liked the stainless steel like the dump operation all of that.
Absolutely East of Mississippi, we're in.
Yeah.
Okay.
And then just to clarify on the on the truck the LPL discussion a bit more on your setting up the customer maybe I was just trying to parse what is what is the macro deceleration that you've already seen in the quarter. I don't know if you were kind of breaking that up before when you were answering the question or is there a way to say for how fast youre seeing the impact of this decelle.
<unk> economy versus what what you talked about getting rid of a customer.
Oh, I would say that if you look at our 17% year over year drop in volume at least 65% to 60, 70% of that is really freight that we had to get rid of them.
I mean like I was talking this guy that was giving us about 1400 shipments now he's giving US 150, well that's over 1000 shipments a day that just disappear with this guy you know because it didn't make any sense, we were losing 25%. There's another customer that we shed more than 60% of his business. There was also an important shippers are we.
Also lost a lot of volume with three Pls right. Because you know those guys see they will give you afraid but are we all afraid to make money not just all freight right. So so I would say at least 70% of that 17% that we lost is is real.
Related to <unk>.
Just freight that did not fit the system at all.
Okay.
And so that's flowing through on the pricing on the.
In terms of really getting in your answer before yeah Yep.
Okay. Thanks, Mike.
So as you can.
Thank you our next questions come from the line of bass the majors, but Susquehanna. Please proceed with your questions.
So we're two weeks out from the first time that you've done a formal investor day with the investment community.
As we sharpen our pencils and get ready for that if it can you tell us a little bit about what this is and what isn't just what are your objectives and what's the kind of information that you do plan to share and it may be what will will just not be as far as guidance or near term expectations that sort of thing. Thank you.
Yeah, what we're trying to accomplish with that is really to show that.
The team at a T F I O deep of a bench, we've got in our E V piece right. So.
It's a big company and we have a lot of talent and we just want to have in the investors and the analysts really not just be talking to the CEO or the CFO . That's why we want these guys.
R E V P being talking to investors and analysts so that you guys get a better feel of how deep our bench is right the quality of our talent. So really that is goal number one.
And because of the timing okay for sure it will probably be in a position to say hey, guys. This is what we think so far based on our budget.
We've see okay that this is what we think that may happen put T. F. I in 'twenty three in terms of guidance right, but the most important thing for us being the first is that we want to show our team when I showed the culture I mean, how strong these guys are.
Right.
That is really the key of all of this.
Thank you.
Youre welcome.
Thank you. Our next question is coming from the line of James Monaghan with Wells Fargo. Please proceed with your questions.
Hey, guys. Thank you.
Linda.
Good morning, I wanted to follow up on the commentary you had about.
Specialized trucking just sort of understand how you guys are thinking about the REIT.
<unk> going into 2023.
We see strength in the end market.
It would be less economically cyclical going through this like is there still room for rate expansion just trying to understand your thoughts on how you're thinking about sort of rates and specialized.
And into the next year.
Yeah. So our vision on that is that infrastructure, both Canada and the U S. I've I've suffered investment for a long long time, we believe that a bolt on the Canadian and U S side, I mean, you'll see some major investment all over the place on the infrastructure and that helps our specialized division.
Right.
There is still an issue housing in Canada in housing in the U S. I mean, we lack a lot of housing housing is very expensive because of interest right now I understand that but we still need to build a lot of homes in Ontario, and Quebec as an example, and the same in the U S population.
Nation is growing so to me when we look at the specialty truckload that we do for the commodity market for the building material for the chemical for the food. Okay. I mean that is where we want to be position. Okay. In the U S. Not so much of and this is why we made the deal.
Upselling ship I, because there's way more.
Players in that field number one.
And on the specialty side, there's less and less a players. So we see a lot of opportunity. The other thing too is that we're so big in Canada.
That.
A lot of our Canadian customers are coming from the U S. So a lot of these guys, saying Hey, you guys are thinking about moving so and we say, yes, we're coming right. So this is this is really the plan for us on the specialty truckload side, both on the East coast Encana and on the East Coast.
In the U S is we're going to keep growing that through a lot of small nice tuck ins here and there that we do.
Got it that's helpful and just a quick follow up on <unk>.
And Collyn, just any sense of the sort of seasonality of the ore shipments heading into the fourth quarter from here.
You know on the on the U S side, Yes for sure in December and January are not good months for us in terms of volume.
But it is what it is I mean, it's it's it's always been the situation and you.
You know, we've we've asked our team to be even more proactive than than what they were used to do in terms of adjusting okay.
So yeah, Theres cyclicality absolutely.
Okay. Thanks.
Youre welcome.
Thank you. Our next question is come from the line of Brian buying Wap oriented with Desjardin. Please proceed with your questions.
Hey, good morning, Eli.
But anyway, yes.
You mentioned that some softness should be expected in 2023, and obviously the company is quite different versus Oh, eight or nine much less exposure to energy T. L stronger balance sheet. So just looking at 2023, what are the segment that should be the most resilient in the one.
We might see some volatility or softness and how would you prepare for a potential software environment either.
Well you know, it's it's hard to predict but anyway, okay, which one will be affected but we know one thing is that the guys that diminishment team, we have and everything that we have a T F I helps us.
Just so if you just take an example, without a recession what happened in our P. N. C is that E. Commerce started to come down a bit to be start to come up okay, but we're still short of the volume right now if I look at October My P. N C I'm down only 1% in volume okay year over year.
Okay, but I'm more than that in into Q3.
But the guys have done a fantastic job so to say that the volume drops, okay, which means that you're going to get killed well it depends how good your teams are and it depends how fast they can turn around and adjust right. So it's hard to predict but one thing we always do in a downturn is.
We are so active in M&A is that we could lose organically in our base business, but then we complement that with some M&A that we buy at reasonable price okay.
Okay that keeps our revenue okay at something at the same level. If there was no storm I don't know if you understand what I'm, saying or it may explain that correctly is that with a small downturn, we lose revenue, okay fine well with M&A because our balance sheet is so strong because.
We have lots of experience doing M&A, we do that all the time, we could beef up our revenue through M&A to get back to where we were before this this recession that may come.
Perfect that's great color and just quickly on the follow up question in terms of Capex, obviously, you'll be facing a catch up years 'twenty to 'twenty two 'twenty 'twenty three but now that you have.
So what.
What could be kind of the normalized net capex, we might see in 'twenty 'twenty four and beyond once the you'd get.
Get more normalized.
Oh, Okay, I haven't seen I haven't seen our plan, but anyway, yes for 'twenty three but I would suggest that you know you'd take our 'twenty two numbers and you reduce that by about 75 million, which was the share of <unk> net.
Net capex of CFR.
Okay, perfect and I suspect below par.
He's got some up years, the number could even go below that let's say.
Perfect Okay Yep.
Thank you very much for the time and I am looking.
Looking forward, you're seeing you're in the seat.
Okay very good thank you anyway.
Thank you. Our next question is coming from the line of Ari Rosa with Credit Suisse. Please proceed with your questions.
Hey, good morning, Alan.
So I wanted to ask about the sale of the <unk>.
Part of the truckload business I guess, yes. It was it was one of the larger transactions that you've done in some time and certainly pretty rare to see you guys selling assets as opposed to as opposed to buying assets. So I'm. Just curious what your thinking was there and kind of how you were thinking about that truckload business and why why now was the right time to exit.
Yeah. So so key number one for US is that our return on invested capital. Okay. It has always been too low for us. If you look at the average return on invested capital today in Q3 of T. F. EIS 20 points right at 20%.
Which is which is great now our retail average return on invested capital and our regular van Division was about five or 6% maybe seven you know so this is why discussing with the board. It was you know no I mean, we have to do something else.
And and we will we will use this cash to invest into a business that will produce a better return on invested capital and you'll see that probably once we do the next major transaction. Okay. You should see why we switch from let's say a five to a 'twenty right.
No.
I mean.
For the buyer. Okay. This is a great transaction because he's buying eat first of all.
He has a lot of knowledge the buyer of sat Fi. He has a fantastic team and I'm convinced that the buyer will do a better job than me with CFR right. So to me I'm looking at that and it was a win win for the buyer. It was also a win win for us because we got it.
Capital back Okay, and then twenty-three maybe the end of 'twenty, three or 224, well use this huge capital influx 500 million 550 million okay of the sales.
And we'll use that to invest in something that has got a better return.
And you know you got to look at the track record of T. F. I. That's what we've done for 25 years since I've joined this company 25 years ago right. So it's a it's a swap.
So the idea was okay. We sell this asset to a great buyer, it's going to be good for CF team. It's good for the buyer is good for US it's good for our shoulders, Okay and you guys have to wait till we do the next major deal, which May happen next year, it's never going to happen in <unk>.
To what May happen next year, and then you'll understand why we did that.
Yes that makes a lot of sense it'll be exciting to see what you guys do with that capital just for my second question wanted to ask the parcel revenue per shipment was down sequentially.
Sequentially.
Wanted to get a little bit of color on.
What drove that decrease was it FX related and kind of how much of a headwind was FX also but then specifically for parcel was there a mix effect or something else going on there.
You know the Canadian market is very different than U P. S O or what you'd be S or Fedex could do with the U S. I mean, those guys are lucky to be in the U S market, it's really a fantastic market in terms of being able to get pricing power, okay with the with the shippers in Canada our competition.
Is is government owned it's all it's call it pure O N.
And it keeps a tab on what we could do in terms of improving the quality of our revenue. This is why the gain that we have in Canada and it's been like that for US at years, it's never been on trying to get more money from the customer who used to be more efficient and to do more with less and that's all we're able to come up and I mean to me when I was.
Looking at what are Jim and Bob I've done said guys. This is Wow. This is really fantastic I mean, 28 or with no volume growth, Okay, no growth in revenue per piece.
It's all about cost and this is you know the guy that's running our P&C mcgonigle. He's also involved with Paul the Guy that runs three fourths right in the U S. Helping those guys to be more in line with our with our cost right our cost reduction being more efficient. So this is why I feel good that Paul.
Paul and the rest of our U S team with the support of our Canadian team, Okay, well, we'll be in a position to deliver some great resolved within you know.
24 months I think that we'll get to that 80 to 85 War.
Great. Thanks, a lot.
Okay.
Thank you our next questions come from the line of Tim James with TD Securities. Please proceed with your questions.
Great. Thanks, very much good morning.
Good morning.
I'm just wondering if you could talk through the implications for profitability and returns on capital from the.
The good growth that we've seen them in a ground with free pricing in the U S. T L T L business.
Yeah, Yeah, well that that is a diamond that we have.
No Jeff he has grown the revenue 25% year over year so far.
Right.
So this is the goal is to keep growing that by about 20% to 25%.
Into 'twenty. So we haven't seen pulse plan, but you know the last discussion. We had was is there a possibility that we could do that and absolutely. We have a product there that is second to none we have a partnership with UBS. This is one of the greatest asset that we have within our U S. L. T L business today absolutely.
Thank you.
And then my second question, you've done a great job of describing the transition that the peak for street business has gone through from the time you acquired it until today and kind of your strategy there the transition from from culling freight.
And and focusing on free that fits to now thinking about the cost side and getting the tools deployed in that business I just wanted to confirm it may be that this transition was all part of the original plan. This is absolutely with when you bought the business. This is playing out the way you would.
Expected I believe.
We're already absolutely for sure. It's always the same you know what we do is always the same so the easiest thing to fix okay is freight that does not fit because you just have to talk to the customer and say Mister customer I'm, sorry, but we can't do it right adjust rate is not.
That easy to do to market because you know the customer is doesn't like that okay that you move rate up. So this is more difficult. So this is why year one okay to start from a company that was losing money to a company. That's got a let's say a 90 or that one.
Was the easiest thing to do the most difficult thing is to do more with less to organize the work of our drivers or dock workers or align all in a more efficient way okay.
It reduces our cost. So this is why we said listen guys I mean, when we bought it we said hey, I think that within 12 to 24 months.
We will fix that to bring it to attend to a 90 or <unk>, okay, but it will take more time to fix the cost.
Because you've got to change the culture.
Don't want to say it again, because I was going to kill me with the tools, but you've got to provide them. The right information to those guys. So that they're not going to sit in their hands, but they will fix the issue right. It will get the job done in a better way, but also at the same time, you need the support of sales and not to commit to occur.
Customer that we're going to deliver a shipment 100 miles away from a service center, it's not for US right. So it's it's a complete plan. Okay. Now for sure day. One if you ask me are they did you encounter some surprises I would say, yes, I thought that the AR technology.
Oh Gee that was there was better than what it is the problem is that the previous owner you know for them. It was like a not very important so they didn't spend time or energy or money. Okay. So the tools that we have the equipment. The technology. We have there is very old right. So.
This is why we're moving to the financial system to our own which is brand new Okay. And then we'll be in a position to provide the right information. So that the guys can do their job right.
Great. That's very helpful. Thank you I look forward to seeing you in New York.
Very good.
Yeah.
Thank you there are no further questions at this time I would now like to hand, the call back over to Alain Bedard for any closing comments.
Alright, Thank you very much operator, so I appreciate everyone being on the call. This morning, and again I look forward to seeing many of you at our Investor Day on November then when you'll have a chance to meet many senior leaders of T. F. I International we appreciate your interest and hope you enjoy the weekend. Thank you again.
Thank you. This does conclude today's teleconference. We appreciate your participation you may disconnect. Your lines at this time enjoy the rest of your day.