Q2 2023 TFI International Inc Earnings Call
Good afternoon, ladies and gentlemen, thank you for standing by welcome to the T. F. I International's second quarter 2023 results conference call.
All participants are in a listen only mode. Following the presentation, we will conduct a question and that's a question.
Colors will be limited to one question and a follow up.
And then but one question and I felt a lot. So that we can get to as many callers as possible, but to restructure its 14th round Hill will be provided at that time.
Please be advised that this conference call will contain statements that I, probably looking in nature and subject to a number off the risks.
Certainties that could cause actual results to differ materially also I would like to remind everyone that this conference call is being recorded Oh true. They all look for plenty of 'twenty three.
I will now turn the call over to Alan Berger, Chairman, President and Chief Executive Officer. She upright International. Please go ahead Sir.
Well. Thank you very much operator, and thank you everyone for joining us. This morning yesterday after market close we released our second quarter 'twenty to 'twenty three results.
So I mean these are tough times for the freight market with lower volumes industry wide. It was critical that we abide by our long term operating principles and we did just that.
We again demonstrated the quality of our operation and our team's ability to quickly react to changing market conditions by focusing intensely on the fundamentals of the business at all times.
Speaking of our team I'm pleased to announce that just yesterday, alright T force rate unionized employees ratified a new agreement with an 81% vote in favor, which is which we view as favorable outcome for everyone involved.
Throughout our organization, we recognize the importance of profitability and cash flow.
This is what allowed us to produce solid results during a difficult quarter with solid operating ratio across all four of our business segment enters this focus on profitability and cash flow as I've mentioned, many times allows us to steadily steadily invest in the business take a disciplined and strategic.
[noise] approach to M&A and as always return excess capital to shareholders whenever possible.
We produced just over $200 million in net cash from operating activities during the second quarter with free cash flow of 138 million. Despite the industry wide weaker freight environment and other factors I'll outline in a moment.
Our operating income during the second quarter was 192 million, reflecting an operating margin of 24.
This compares to the prior years quarter of three 391 million with a margin of 19 seven.
Our adjusted net income of 139 million compares to 241 million and our adjusted EPS is $1 59 compared to $2 61.
We view these as solid results under the circumstances supported by our team's ability to protect margin by quickly reacting to changing market conditions.
The changing market dynamics.
Our success in this regard.
This is best reflected by the strong returns on invested capital across our organization.
When comparing to prior year I point out that our results reflect not only our sales of Sci Fi last August but last year's sizable gain on the sale of real estate and vote L T O and truckload segments.
In addition, similar to last quarter foreign exchange fluctuation and for the year over year comparison, and similar to last quarter, we incurred costs associated with the transitioning of our I T system from U B S 12, enhance efficiency going forward, while providing better controls and insight and allows.
Gosh to exit that our TSA with UBS.
T F. I reported results are fully burden as we are not adjusting this year nor did we in the second quarter of 2022 for any of these items that worked against our year over year comparison.
Let's turn to the performance of each of our business segment, starting with our P&C, which represent 7% of our segment revenue before fuel surcharge, we saw an 8% decline in both the numbers of package and revenue before fuel surcharge. Our operating income came in at 27 million relative to 37 million.
A year with a margin of 23 relative to 29%.
However, our return invested capital actually improved to 28, 8% from 27.6 a year earlier.
Next up is our L. T L, which is 43% of segment revenue before fuel surcharge.
As were down 18% and our revenue before fuel surcharge was down twenty-three also reflecting the unfavorable FX impact.
Operating income of 81 million compares to 187 million in the year ago period, and again, we do not adjust for the I T system transition, nor our sales of real estate at a gain and a year to go period.
They're getting deeper within the L. T L. Canadian revenue before fuel surcharge was down 14%, but our operating ratio remained strong at 70 $73 seven compared to 69.1 the prior year.
At the same time, our return on invested capital for Canadian L. T O actually improved to 21.1 up 70 basis points versus a year earlier.
So I need to U S. L T O.
Revenue before fuel surcharge of 500 550 million compares to 725 million in the prior year due to volume pressure, however, reflecting our continued progress with our turnaround plan to streamline the operation of T Force right. Our adjusted operating ratio of 91.5 reflects relative stability versus 88 person.
<unk>.
We reported a year earlier and importantly, our work is not done enhancing the efficiency of our quite operation return on invested capital for U S. L. T. L was 16% compared to the prior year's quarter at 24.5.
Alright, let's move on to truckload, which represent 26% of our segment revenue before fuel surcharge.
Revenue before fuel surcharge was down 26%, reflecting not only weaker volumes, but our sales of <unk> last year and unfavorable foreign exchange translation operating income was 66 million relative to 127 million last year, reflecting the same factors plus our sales of real estate in the prior year period, and our emerging of six.
<unk> 0.1 was down from 22.9.
Within truckload revenue before fuel surcharge for a specialized operation, which benefits from our diversity and exposure to niche market performed relatively well at 335 million versus 353 million the year prior despite FX.
Our operating ratio also held under the condition at 83.9 versus 77.1, the year prior and our return on invested capital are actually improved to $12 seven of 150 basis points over the past year. This is yet another business, where T F I as what we refer to as self help opportunity.
D regardless of the macro environment.
Next is a Canadian based conventional truckload, which produced revenue before fuel surcharge of 77 million down from 88 million.
A comparison that would have been stronger on a constant currency basis.
Our 84.3, adjusted operating ratio of which compares to 73 points for a year earlier.
His impressive under the circumstances benefiting from our continued focus on network density and cost control.
Our return on invested capital once again showed improvement despite industry headwinds coming in at 17% up 30 basis points.
Finally, let's discuss our logistics segment, which represents 23% of segment revenue before fuel surcharge. We produced 362 million of revenue before fuel surcharge, reflecting both volume declines and foreign exchange when compared to the year ago 454 million.
<unk> operating income of 33 million compares to 42 million a year earlier and our operating margin actually held nearly flat at just above 9%, reflecting our team's success in reacting to market conditions as well as the relative strength of our same day package delivery operation.
Rounding out our logistics discussion a REIT.
Turning to invested capital was $17 nine versus just one 1.1 a year ago.
Shifting gears.
Free cash flow across our business totaling 138 million I mentioned continues to benefit to your Fi International balance sheet. We ended June okay with a funded debt to EBITDA ratio of 11 point 11 at one point the 11 and as a reminder, our that is almost entirely at fixed rate.
At a weighted average cost of just under 3.5.
This financial strength is an important pillar of our strategy, allowing for smart investment in the business, regardless of the cycle, while continuing to return capital to our shoulder whenever possible.
During 2023 we have now completed seven small tuck in acquisition, including one completed subsequent to the second quarter, our ability to take a disciplined approach to M&A seems directly from our strong balance sheet and the patient it allows.
We also announced on June 15 that our board of directors approve another 35 quarterly dividend, which is 30% higher than the year ago quarter.
Turning to our updated full year outlook, we are updating our guidance provided in April .
Range of $6 to 650 for 'twenty twenty-three E P S.
We maintain our free cash flow at 700 to 800 million, which is based on net capex of between 200 to 225 million.
In terms of capital allocation given the strength of our current M&A pipeline, we expect that for the full year, we will know a little kid locate a total of approximately 500 million to a combination of acquisition and share repurchases.
With that operator, we're now ready to move into Q&A. If you could please open the lines.
Excuse me, ladies and gentlemen.
Question.
But quite a while now.
On the telephone keypad.
Your question. Please press the star to color.
So one question and one follow up.
So as many callers as possible.
But I want to ask a question.
And by while we compile the Q&A.
Yeah.
Our first question comes from <unk> with Morgan Stanley .
Morning, Alan Thanks, so much.
Thanks for the update on the numbers would love to get your thoughts on some of the strategic changes taking place in the U S. LPL industry, obviously, one of your large peers.
Has kind of temporarily stopped taking on new business.
What do you think the near term implications are for T. F. I kind of are you seeing that seeing some of the benefits of that already how do you think this industry evolves in the coming days and also the coming years.
Well. Thank you were ready for the question I mean I think this is a very good question and you know the first thing that was important to us is to get a long term agreement with our employees, Okay, which we did very successfully.
You know the just ended voting on the weekend and we got the result, and it was very well accepted okay. This this plan for the next five years now in terms of what's going on in the industry. You know we're looking at Oh, you know, it's a very special situation you know a few of them.
Months ago, we were looking at it and they're saying.
Don't know don't know, what's going to happen there and over the weekend. We were updated now what I could say is that for sure. If I look at the average volume of T. F. I S. T Force right Division, Okay in the U S. L. T L. Prior to all of these are.
Things going on right. Now are you know we were doing about 23000 shipments a day very steady since January of 'twenty, three and then whoops now were running more like a 26000 shipments a day lately right and also more importantly.
Is the quality of revenue Okay. If we look at the improvement of quality of revenue.
We're doing better and better. So if you look at my Q2 year over year my quality of revenue is down a little bit like two points, 5% down and now if I'm looking at let's say the last shipments of July versus the earlier shipments in July My average revenue per shipment was up about three 5%. So I think that this is gonna be.
Really really good for the industry in general but for sure like our team is really looking into deep into this we need the freight that fits our system now the good thing as T Force right is that I've got 4000 doors to many high so we could run.
At 40 to 45000 shipments a day operation with N T force rate real estate is not an issue.
The other thing also that's not an issue is our drivers and our dock workers because a year ago. Okay. We're running about 28 to 30000 shipments a day now before all this changes in the industry.
We were down to 23000, and so we had a lot of people on layoff and now we're calling back these people slowly. Okay. So we have the capital we have the equipment. We have the employees we have the real estate to benefit whenever we can get from from this major changes in the market.
Now if you also look at our you know our Q2 numbers in terms of all our year over year last year was our best quarter ever at 88 or no in a very difficult environment with 18% less volume with price pressure a little bit like a minus 2.5, we were able with our.
Team, Okay that are doing a fantastic job slowly, okay and to get to a 91.5 war, which is not great. Okay, but under the circumstances I think that the guys did a fantastic job. The other very important point to notice on that is that slowly.
For the first time, we're gonna be moving with P&L by terminal before year end. Okay. So our terminal managers now will be able to manage dollars, which they've never done in their life.
Right and this is the key if you compare that with our Canadian L. T L and in a very difficult market.
If you look at our Canadian LDL or last year, we were a sub seven years, whereas 69 now this year with $73 seven not great.
But I mean, it's a very difficult market in Canada, and and you know the the reason the main reason okay. Why are we doing so well in Canada is because our guys out of the financial information they can't sit on their hands. Okay. Do you have the tools, the info and and they take action in the U S.
Okay slowly now and that's where we've moved away from the U B S financial system now it's on the T. F. I financial system now slowly we're gonna be moving financial information to those managers those are the OS those regional directors of operations. So that they can take action and reduce cost and do more with less.
So to me very helpful I'll pass it.
It is fantastic what's going on right now.
Wonderful thank you Sir.
Thank you Ravi.
Our next question comes from Walter <unk> with RBC. Please go ahead.
Thanks, very much good morning Ali.
Good morning.
Congratulations on the on the Union deal certainly that's a that's a that's an important milestone given everything going on I was wondering if you might be able to give us any any any terms of the deal. So we can look at how that figures into our or forecast for a four year old steel division going forward.
Yeah. So so in general our Walter this is about a 3% increase to our costs on every year. Okay. So on on this global deal. So if you look at year, one of our contract which starts August six right. So August six our employees in.
Oh, Okay, we'll get $1.70 and now we're more okay and that was difficult to explain to our employees because if you remember one of our peers just sign a contract with them with the Teamsters and their employees.
A month ago and and.
They won the employees got $3 50.
Now, while we had to explain to our employees is that yeah. Yeah, guys. Okay. $3 50 is not the same as 170, but don't forget that at the peers. These guys are getting on average about $4 less an hour versus us.
So our peers is catching up to us at the end of our contract the Delta salary base salary between US and appears we will still be about a $1 75 to $2 and hours difference, we are paying more space than our peers five years from now but on average okay wall.
True.
In your model I mean, the inflation of salaries going to be about 3% on average for five years every year for five years. That's great. That's that's great color and I appreciate that.
Next question's on just on M&A in General I know, you said 500 million combined M&A buyback I don't know if you have any in is that something that you just are holding on to see how M&A develops and you'll adjust as you go through the year and perhaps any commentary on the Earth's best divestiture of that store.
And what it means for them in any large deal a timeline into next year. Yeah. Yeah. Yeah, very good question and I won't tell you that you know what let's start with the divestiture of our best I mean, we've looked at the situation. Okay are we have to go through a contract and then we saw what it was.
Going on with some of our one of our peers, though was going through a very difficult period.
So we said if this happens I mean, we're gonna be too busy we're gonna be way too busy us and them. Okay to go through all these changes in the industry. So the timing is wrong. So that's why we sold our position right and then we'll see in 'twenty four now in terms of M&A for sure Walter I mean, I think that.
Pretty soon we will be announcing a fantastic transaction and that's the reason why we sold our position. Okay. So that we don't leverage our balance sheet more than because right now we're at one point 11, Oh, we think that by the end of next quarter Q3.
With a transaction that we think that's going to happen very soon our leverage is going to go all the way up to 125, right. So nothing major but thanks to the due to the sale of our investment in our in our best I mean, we are able to get this leverage.
Leverage keep really really low and now this.
This is not going to be a major year for M&A, okay in 'twenty three.
But we're getting ready for 'twenty four.
Got it okay.
Last question here on on coming back to the yellow.
Do you think that the opportunities might present themselves for you.
To go into new markets through the purchase of of terminals or assets or or is densification and repricing. Your your main objective and a little bit more of a longer term question investors are starting to change their view on L. T. L. In an end to the positive and you know okay.
Many compare even even to the railroad pricing is that something that you think is going to develop in and would you look at L. T. L longer term is something that we can price sewers, we haven't in the past in our models, but we can with with good comfort put in some some notional.
Pricing increases because of the added.
The added quality and fundamentals of that of that sector.
Hey, you're right Walter I mean us our Golden rule, one okay with everything that's going on right now is to increase our density not to grow our and that's work I mean like I said I mean, we got four 4002 too many doors to today right. So so we could all a lot more freight, but really what we're gonna be really strategic in what we.
Take on those customers that has to fit our network and increase our density because that's the name of the game. If you want to reduce your costs or keep her shipping I mean, you can't drive 10 miles between each and every stop I mean in Canada, We drive about five miles between each and every step and in the U S. We drive time 10, it doesn't make any sense right. So.
That's our focus and you know we're lucky I mean, you know, sometimes you need to be lucky and with the demise of one of our peers. I mean, this is really a lucky events for us.
US build density and and that's going to be great in terms of the industry I think that the U S. L. T L. Its day and night versus the Canadian ones I mean in Canada, we have lots of competition okay.
And Oh, we have one smart competitor, yes, okay, but you know we just acquire a Nokia a copy in Saskatchewan and let me tell you those guys are not running at a 75 O R or a 90 war right. Okay. So what will change that but in the U S. It's a very different story because one of the we.
Weakest player.
And now is gone right. So that's going to change and already you can see over the last 10 years. You know if you look at the superstar of LTE in the U S. Okay. I was looking at the results their volumes were down more than 10%, but their pricing year over year was up 7%.
So what that tells you that these guys are really smart right.
And and the industry in General also if you look at another of our peers in the U S. They're they're they're volume was down like three or 4%, okay, but they did well.
Just a few guys, sometimes you know chasing volume for volume's up 4%, but always done 40% well that's not us right. So so I think that the U S. L. T. L industry is really getting closer and closer okay to what you could compare to the rail.
Absolutely I mean, we have one player that's the best L. T L Guy in the U S. He he's running a 70 or in that neighborhood right. So.
No I think that the industry will benefit from all of that and you know so.
It's the place to be this is why you know.
Everything that's going on right now we think that from 23000 shipments we get to 'twenty five 'twenty six 'twenty seven hopefully by the end of the year. This is going to be great, but more importantly, like I said to my guys guys. We got to work on the costs, we have to be closer to the tiger and the jungle not the big Fat elephant right.
Got it okay leave it there thank you very much alike.
That's your water.
Excuse me as a reminder, please.
So one question and a follow up in order to get to as many callers as possible.
And our next question comes from Jordan <unk> with Goldman Sachs.
Yeah, Hi morning, So it was a really good.
Morning, the the fairly rapid I guess pick up in volumes here in the near term.
With yellow in the U S. L. P. L business is that enough to.
To mitigate the cost of your new contract in and perhaps doing now are better than I think the 92, you talked about in our last call.
Well I think so Jordan I think that are you know what what's going to help for sure I mean running at 23000 shipments a day when you have a network that could do 40000 shipments a day right. So I mean 26 is better than 'twenty three but at the end of the day with the new contract, Okay, where it provides us inflation too.
Cos are we have to be more strategic and work with our employees in a in a way that reduces our cost per shipment when I could tell you is that our right now our average cost per shipment year over year, Okay versus 'twenty two.
A year ago, I mean, our average cost per shipment is down about 15%. Okay. So we did really well in Q2 last year with an 88 O R. But okay with less volume. Okay. We have a less cost pressure labor costs per shipment this year versus last year now for sure. We have all of these.
Other costs, okay, but really the main costs in an L. T. L. Operation is your labor and your food in your fuel. Okay. So, yes, I think that even with this inflation in our labor costs are or will keep improving and don't forget that you know slowly we built.
At 23000 shipment base, Okay that is quite solid and now we're building on top of that so you know at 26, we're not at 30 and we're not at 35.
Slowly we will get there and in the meantime, and like I said on the first.
And this question is that by moving financial information to our terminal manager. This is gonna be you know a fantastic tool for those guys to do more with less and that is the key success for T. F. I N and its Canadian L. T. L Division, we have managers that manage people manage call.
<unk> managed service not just managed service.
Great and then just just as a follow up you know the new earnings Guide I think six to 650 is.
It was less than the other one.
This guide obviously yeah.
I'm just trying to understand is it is it the non L. T. L businesses I'm, just trying to get a sense for what sort of.
Directionally is why the new ranges, where it's at thank you.
Well, you know a year ago, our friends that phrase waves said, Oh, there's a freight recession in April of 'twenty. Two I mean, I think these guys were right, but not 22, who was really 'twenty three.
And and you know if you look at all of our sectors right our Canadian L. T O.
<unk> revenue is down big time, our specialty truckload down 5%, our Canadian truckload down 12%, our logistics down 20% on the revenue side I'm talking about.
Our P&C down about six 7% on the revenue so we never anticipated such a major major disruption in the market in Q2. So this is why we're going ahead and reducing again because this is the second time, we do that right.
So we're reducing that again, okay, but we feel pretty good that this is attainable and and this is a major disruption in this market in Q2, if you look at all of our peers that came out okay.
In the U S or in Canada.
Everybody is going to is a very tough soft patch in the freight environment now when we look at the summer of 'twenty three it's still quite soft okay, but when we talk to our customers and they say you know what our inventories are starting to get low we're starting to get you know some some issues here and there, but then we.
Got a stupid strike in the port of Vancouver that affects our Canadian operation Big time, Oh, Theres always something that happens you know the flood that does that so I don't want to give any excuse but you know 23 was really a year of a lot of things that were a lot of the headwinds are Canadian dollars being.
You know you know two two by U S dollar and now a cost of $1 32, Canadian that affects our profitability as well. So to me I think six to 650 is now attainable. Okay sad to say that we were doing $8. Okay. In 22 down to six to $6 50, so huge drop.
But this is reflecting the market condition and don't forget that at <unk>. The country's we protect the margin. Okay. So you've got two options. When you have a soft market you can chase volume.
To us this is a chase to the bottom and some some of my peers are doing that.
No I've seen that so revenue is up but profit is down 40, 50% would not that I mean us. We're we're more like okay guys. Okay. Well will you know we'll have less revenue, but we protect the margin because you know every dollar of revenue there's a risk.
Or is that you can get involved into an accident or is that your employees can get hurt or is that are you know you're not being paid because discuss them or it could be having some tough times too. So we don't like taking stupid risks like that so this is why our revenue is down okay, but you know when market condition changes will be there.
They're in our base rate is solid and we're not gonna have to be chasing customers all over the place now I mean, we're we're ready.
Thank you so much.
Thank you.
Our next question comes from Kanno Dark pool match on all day. So please go ahead.
Thanks, very much good morning.
Good morning, Karen.
So just a question on Canadian L. T L. Like I know yellow had some operations in Canada I don't think there were that large but I just wonder if there's any impact you think positively on the on the Canadian LDL operations.
Yes, I mean, the yellow operation in Canada was mostly transported afraid from U S, Canada, or Canada to the U S or so for sure our older shippers that we're using yellow from U S to Canada now they have to find a different provider. So if you look at.
That's our trans border, Okay business between TST and Saia, what can you say as our U S partner with DST I mean, the volumes are up like 15% to 20%. So so that's freight that used to be serviced by yellow, Canada, no yellow being owed okay has to go to some of my.
Peers or some of my partners and that's the way, it's gonna be fed into the.
The Canadian market now they were also doing a little bit of domestic freight okay. In Canada. So that will probably go to us or to some of our peers.
Okay. That's helpful.
Second question, I guess sort of related to the to the LDL C. I mean, it's just on the ground with freight pricing at midnight.
Pretty significant drop year over year in our in that business can you just talk a bit about that are you know.
Why was it so.
Down so much and whats the future of that of that product.
Yeah, Yeah, you know what Cameron that's a that's a very good question, Yeah, we're down big time on that so so there was an issue with some customers okay that.
We're cheating the system at UBS right. So so this is why U P. S took action.
I I don't want to go into the all the technical details, but this was a few customers four or five customers that were reseller, okay that we're cheating the system.
And you know yeah UBS reaction was no we can't deal with those guys right. So so that's why our revenue dropped like Iraq, Okay in that sector. Absolutely now okay. We are rebuilding that as we speak okay, but that that is really one of our diamond got cut in half.
Jeff.
Okay. So you still have a belief that is going to be a good long term business for Ya Oh, yeah absolutely.
Okay. That's great I appreciate the color thanks very much.
Thank you thank you Cameron.
Our next question comes from Paul Waverly with UBS.
Oh, yes, good morning.
Alain I wanted to ask you.
A little bit about the guidance I know you talked about it before I'm wondering if you're factoring into that six to 650 improvement in U S. L T L or if.
If that guidance reflects more what the run rate was in two key for U S. L. T. L. It does sound like the recent kind of end of end of July trend in both shipments in and price is pretty favorable. So just wanted to get a sense of what your assumption is for that.
That business in the guide.
No no no and all the changes in the last week of July are not reflecting in the guidance because it's so it's so new right.
So that's why we we went very conservative so it's not included so whatever benefit we get from the 23000 shipment if 26 or 27 States 25, 26, 27 sticks with US okay over the long term, it's not in there.
Right, Okay, so that that would be upside to what you've said for the yes, well yeah, yeah yeah.
Great. Thank you for that I wanted to ask a little bit about.
'twenty 'twenty four view on U S. L. T. L. So you know when the I guess using your words when the elephant becomes a tiger.
You now can run a lot faster. So I think that was referenced to the cost side and you've got a number of cost drivers, but obviously it looks like the revenue side is is you know really stepping up nicely too. So how do you think about where the U S. L. T. L operating ratio it could potentially go in 2024, I mean, I think the obvious macro assumption, but it soon.
That you get some modest improvement in the freight backdrop, you know can we see a really big change three or 400 basis points or would you keep it more moderate at 100 to 200.
Yeah, Yeah, well you know what time it would be very very disappointed if in 'twenty four we're not running a sub 90 of our operation and our U S. L. T O.
Now one thing that's also very important to mention is I was talking to our board yesterday about a little bit of a change in our structure and in our in our ex Eddie executive team. So what are the changes that are that will be happening for 'twenty. Four is that a one of our E V. P. Bob Mcgonigal, Okay that takes care of.
Today of the package a package business in Canada, which is only 7% of our revenue.
My friend, Bob now will take over.
The responsibility of the U S. L. T L working with Keith Keith is the President of T Force rate I'm still gonna be involved okay, but to.
To a lesser degree and is package business will be taken over by another one of our E. D. P. Christopher acres and there's other changes also that's going on so we're gonna be putting even more effort. Okay from some of our Canadian team players supporting our U S team, but you know at the end of the day Tom Mi.
My philosophy has always been if you can't measure it you can't manage it and by providing financial information too to our terminal managers I think that that's been the success of our of our business in Canada and those poor guys right now T force rate or terminal managers. They have no clue they have no.
Financial information, we're just providing them for the last few months, okay. Their average labor cost per shipment, okay, and that's how we were able to improve that by about 15% year over year and this is not over I mean, we got a lot of work to do on fuel management. Okay. M. P. G. On their trucks are idling time on the trucks.
Theres. So many leverage that we could you know tweak and reduce this cost.
So I'm very confident okay, and I would be very disappointed if that are 24, we're not a sub 90 or now I mean, if you look at the some of my peers. Okay nonunion, Okay, theyre running at 85 or in a tough environment. Okay. Like we are now are these guys will probably do better than that and all.
Also we should be doing better than 91 or 92 are in in like we have now in Q2, So I think that with a little bit of a weak player gone okay.
Market, probably will start to recover I think that the pricing also will improve with everything that's going on.
I would be so [laughter] will fell off my chair, if we're not running it like something like an $85 88 or in 'twenty four.
Okay, great Yeah, that's very helpful. Thank you Elaine.
Pleasure Tim.
Our next question comes from James Monaghan with Wells Fargo. Please go ahead.
Hey, good morning, just like James follow up on some of the U S. L. T. L questions I guess, what's the right amount of capacity that actually release out into the market I understand you have a lot available but.
What's the right sort of amount that you can release without sort of disrupting the or plans that you have just.
So I guess I was just you know that.
We have the team we have the equipment, we have the infrastructure to do easily 3000 shipments sedan and like I said over the last few days, we're running 25 26000 shipments. So when we bought the company gene as we can.
Any at the time he was doing 32000 shipments a day right.
The network that we have okay could support easily 40000 shipments a day.
40% to 45000.
But that's real estate in terms of people, we could easily do 30000 shipments at 830 to 32000 and this is what the company was doing two years ago.
But then we went from 32 down to 23 like I said now we're back up to 25, maybe 'twenty five 'twenty six 'twenty seven Okay, we'll see where we end up and you know well, we still have lots of capacity within our system and we have also the people to do their job because you know when we started to.
Reduce the volume we also lay off a lot of people right. So we also what we did in Q1. We retired also about 150 people.
Were ill.
Good for retirement.
So I think that we could do very well, but we're gonna be smart in terms of the volume that we're going to get from our customer because our rule number one is to increase our density not to enlarge our network or out of the routes and this and that no no. That's increase our density because I've said it many times, we can't run a P.
N D operation in the U S with 10 miles between each and every stop I mean is it doesn't make any sense, but that is what we're doing now and.
And I use the Canadian comparison in our business, we do five miles between each and every stop in Canada, and Canada, It's not U S. I mean, the density is not the same if you know the dense areas, we have Vancouver, Toronto Montreal. That's it the rest is theres no theres no density in Canada.
Got it and then.
Well I understand that like the year over year on year over year basis, everything is down quite substantially in USL deal does have a catalyst in front of it but some of your peers did call out some sort of green shoots there.
Cross sort of freight generally just wanted to see if you were seeing any sort of similar trends in the business like part from U S. L. T O of positive trends sequentially.
Well, absolutely I think that Ah I think that what we're seeing now is the fact that yellow is not gonna be there tomorrow right. So I think that this is a huge benefits for the industry in terms of I think yellow was doing 40000 shipments a day, maybe not last week.
Weak, but you know normally a two to three months ago. So this is really a huge benefit for the industry.
And I think that everybody knows that a yellow was a very low cost not low cost with lower revenue.
You know provider of service right. So it was like Oh, very cheap pricing compared to the average compared to the market.
Those guys now being gone that's going to help the industry overall.
Thank you.
Youre welcome.
Our next question comes from Ken <unk> Bank of America. Please go ahead.
Hey, great good morning Alain.
Well I can.
Hey, good morning, if can you talk a bit about the patent process to remove some of the U P. S costs. So the timing and scale of those duplicate costs I just want understand your goal of 85 to 88 or next year. How much of that is is the yellow benefit of scaling up your network from twenty-three up to 26 or wherever it settles in and then how much of it is self.
And then are you done getting rid of the lower profit based.
Obviously that gets pause now as you take on a lot of business and the syndrome was was that process complete.
Yeah, Okay. So in terms of the low the afraid that don't fit the network I mean, Ken we've done everything except rule you know, we still deliver freight that is way too far from our terminal our terminal okay and that is still an issue. So we still have that okay. We don't.
Have the freight that doesn't fit in the high density areas, but in rural rural freight we still have that okay. So so we are not going to address that right now in 'twenty. Three we may address that in 'twenty four and in terms of.
So what's gonna be the leverage that we're going to use our TSA with UBS, we're gonna be done.
By the end of 'twenty, three so coming into 'twenty four okay. So all of the application we're going through now okay. All the professional fees that we have to pay et cetera et cetera. So what's left okay. As our fleet management today, Okay that is really the big issue and.
And.
Our platform, Okay, we're still running edge onto the U B S.
Platform. So we're going to migrate that before the end of the year. Our fleet is done in the fall. We just finished the HR platform. We went from Workday U P. S. Two.
To Oracle HR TFR Oracle HR.
Just a few weeks ago. So all of this is going so into 'twenty four okay. All these duplicate costs. All these professionals fees was will disappear for sure that's going to help our or absolutely, but more importantly can is I think that the self help that we're going to bring to that business is.
<unk> financial information to our terminal managers I mean, it's this is not the decision the improvement are not going to happen overnight. Once we provide them the information, but over the period of six to 12 to 18 months I mean, we anticipate that these guys will be able to do more with less because you know you can't fix.
Something that you don't know right. So that's always the excuse that we get from from when we talked to those guys that Oh I didn't know well. Okay. You didn't know fine. Okay. So we'll provide you the information now that you know.
Youre not going to sit on your <expletive> right no no no no I'm not going to sit on my hands I'm I'm I'm going to take action. Okay. Good. So what we've done so far okay with our with the external managers as an example can we we said you know what they want when we acquired the company. We said grievances. It's your responsibility no no in the old days, you used to send that to.
Lawyers, then and I know this is over you fix it yourself, we labor relation a T force raise will help you fix the issue with it with the employee with agreements and all that but it's your action. Okay, you have to fix it.
Claims Okay again, Oh claims not meeting I don't claim as you. Okay. So if you look at the dollars claims for a dollar of revenue.
We were at one 5% of the revenue you know and then they say well, we're well because we used to be two well no. I know you guys have to be 0.5% of revenue. So now we're getting very close to the 0.5 and this is the terminal managers because now we're getting them involved they have the information et cetera et cetera. So.
All of the financial system that we've put in place with a T. F. I Oracle, Okay slowly we're moving all this information to them and then we will see because well have managers that will perform really well with all of this information. Some you know maybe not able to perform well because they're used justice service right.
We want them to manage cost manage people you know manage the relationship with customer you know et cetera, et cetera, being a real manager not just a a guy that's making sure that the free gets delivered.
Thanks, Helane and just to clarify you mentioned the M&A before is it is that I presume now not L. T. L. Just given you you were talking about maybe come back revisit our best another point is that.
Different sector, you're focused on.
Well you know what can we as we've said many times in the U S. Okay. Our focus is gonna be L T O and logistics and but in logistics, we have to be very careful because we don't want to logistics at 2%.
If you look at our logistics, so revenue is down big time.
Because of the market liked a T. S. Ww, we're down like Q2, this year versus last year were down like 20% revenue, but our margins is still 9%.
So if we buy a logistics business at 2% that's not us.
Well, we're not in the business to buy logistics company for Big dollars and 2% plus 2% you know what we'll buy shares of Canadian banks are U S Bank and will get 4% dividend.
So so theres two major sector that were focused in the U S. L T L and logistics, but logistics that makes money that logistics is at 2%.
Wonderful thanks for the time line I appreciate that okay.
Our next question comes from diesel.
Colin Please go ahead.
Thank you operator, good morning Alain.
Hey, good morning, Jason.
I wanted to focus a little bit on T Force freight some more here can you talk about the potential for a <unk> in the back half of the year as capacity starts filling up in existing networks.
Yeah very good question. So I could tell you that Keith and Bob are already working on it right now so the discussion that we're at.
Having is that this will probably take place in September okay and.
You know for sure.
We're not leaders in the U S. Okay. So probably we'll have to wait and see what the leaders are doing okay leaders. We know the leaders in the U S is fedex freight than O D. But you know O D and those guys are very smart so I think that Oh, those smart players will address the G I.
Not in January of 'twenty, four, but I think it's going to get addressed right now.
Okay. That's good color and the other thing you know you talked a little bit about some of your customers seeing some low inventories wonder if you could add a little more meat on that bone and then maybe thoughts on peak season. This year.
Yeah well.
You see 22 was it was like a in my mind the party because all of the supply chain mess. I mean, then the supply chain mess was face. It then the Guy has got lots of stuff coming in and you know sometimes the order ones then they order twice they don't get their stuff now everybody got this stuff late 'twenty, two and in 'twenty three where.
Stuck with Oh, nobody's ordering anything because the inventory are too high but when we're talking to our customers right now okay inflation is coming down slowly oh, okay, not that interest rates are going up disposable income okay. It is okay.
Labor situation is okay. The problem is that most of the consumer are saying you know what we've been tied up because of Covid now we want to travel. So this is what we're seeing now is that a lot of people are traveling they're not spending as much on the AUM or buying a T V or patio furniture water.
Whatever so this is why we still believe that 23 is going to be a little bit difficult for us, okay because of but it's slowly getting.
Cleaned up all this excess inventory so it's not going to probably help us in 'twenty three in general, okay, but coming into 'twenty. Four I think we have a better feeling now are the fed say in the U S fed and I was saying you know what the risk of a recession is becoming less and less in the U S.
So okay fine.
Sumer confidence Oh is is okay.
So to me I feel pretty good not so much in 'twenty, three but going into 'twenty for that.
Market slowly for freight will start to come back to normal you know those guys hands free way. He said Ah theres afraid recession, a year ago, we didn't feel it a year ago, we didn't feel it in Q2, we start to feel it a little bit in three and four of 22, one but big into Q2 I mean.
Q2 was was terrible for us.
Every tough.
Helane I appreciate the color as always.
Thank you thank you Jason.
Our next question comes from Jack Atkins with.
Stefan Please go ahead.
Okay, great. Good morning, Thanks, Helane for taking my questions.
Pleasure, Jack if I could maybe kind of start with service.
Obviously that is critically important in the U S. L. T O market as I'm sure. It is another park as well.
How are you protecting the network I know, there's probably plenty of freight to be had but how are you protecting that had worked so that you don't encounter any service issues as you're onboarding. This incremental freight here, that's kind of coming at you pretty quickly.
Yeah, well you know what yeah like I said earlier I mean, we've got capacity. We've got people. We've got equipment. We got everything so it's just a matter of our sales team and our leadership in the operation to really say well. This is afraid that we want this is afrit okayed that are you know we have and we keep because don't forget.
That until just two months ago, we had customers, saying you know what do you get lower you raid because I've got a a carrier here that says I'm I'm I'm I'm going to have to move with this guy and now whoops.
You know what I'm going to stay with you now right. So you've got that going on plus you got the new freight coming in and and for sure. What we're trying to do us is to protect our existing customer by adding new lase laser that were with the competition and now the competition is is gone and.
We're saying instead of going with new customers. All the time, what we're trying to do is increase our volume of business with existing customer that we already have but we were doing only 10% of their business or 15% now okay. So that's our focus so that we provide you know a good level of service now the other thing also.
That's very important to mention is the atmosphere at T Force right. Okay. If you think about our labor force accepting a new deal at 81%. The fact that we've invested in equipment. The fact that we are investing millions of dollars in the real estate that was abandoned okay. I mean so.
Our employees are how would you say that I mean, there their morale. Okay. He is great I mean, they're seeing that okay. So the order of the company's investing so now okay. We have a better deal for them and for the next five years everybody is happy about that so I would tell you that if you.
Look at the morale of our team two years ago, a year ago today and a year from now okay that morale that that no pride of being part of T Force rate is like changing like there's no tomorrow.
If you look at our the pride of our guys in Canada is second to none.
In the U S. We went out there okay. So if you look at some of my peers. Okay. The best the best of my peers, you see a lot of Pride you know, they're a terminal is SPIC and span okay. There.
We're just abandon terminals right our trucks were terrible so the morale of our guys and we're saying guys. We got to do more we got to pick up more freight you know we get a stop driving all the way around okay and spend money driving a truck we have to pick up more freight. So all of this culture is taking place. So this is why going back to your.
<unk>, that's our focus and our focus for sure is not to go up to 26 27000, right now and then back down to 24, because you know all the afraid that we picked up didn't make any sense didn't fit or we didn't provide the right service to the customer.
Now that that makes a lot of sense and that's helpful. I guess for my follow up question I'd like to just go back to your comments on the improvement in revenue per shipment that you.
I have observed in the U S. <unk> business from the beginning of July to the end of July I think you said, it's three 5%.
Could you talk about is that from the higher weight per shipment is that from improved sort of core pricing, what's driving that and I just love some more detail around that if possible yeah.
Yeah, you're absolutely right our weight per shipment is up absolutely wafer shipment is up and the quality of revenue has also improved a little bit right and I haven't seen my cost per shipment of because today's Tuesday, I get that on the Wednesday of last week, but I'm anticipating that my.
Our cost per shipment, okay. Because you know my salary increases August six so I'm still with this the old salary scale.
For the last week of July so I'm anticipating that my you know my labor cost for shipping is gonna be down okay. I haven't seen it yet so it's a combination of more weight a little bit of improving the quality of our per hundred weight. So it's a combination of all of this and the fact that I think that now moving from 'twenty.
Three to 26 25, 26, I think my labor cost per ship and it is going to come down too. So it's gonna be a double whammy, if you want to say.
Okay, absolutely that's great to hear thanks again.
Thank you Jack.
Our next question comes from Kevin Yeah.
T I D.
Please go ahead.
Thanks for taking my question Helane.
Okay.
If I go back to your last call I think you've talked about normalized earnings for your portfolio of businesses around eight to $9 and I'm just wondering.
As you look at the M&A, you've done I know a lot of them are tuck ins, but you've done quite a few.
<unk> already this year.
More to do later this year plus maybe the accelerated.
<unk> fits within your U S. L T L from from the demise of yellow just just wondering how you think about that eight to $9 mm.
Moving forward should we think of that being a higher number just because given some of these <unk> and recent acquisition activity.
And buyback activity.
I think it's a little bit too early Kevin to talk about that now because when I say eight to nine and I think that this is the capacity of T. T F. I in a normal environment right now we're not in a normal environment all day small tuck ins that we've done so far are really really small right.
But we anticipate that between now and the end of the year, we'll do at least two of you know our normal size, you know with revenue up more than $150 million. Each right. So that that really is going to help us okay into the end of 'twenty three in into two.
For the other ones that we've done so far is just some small tuck ins that we've done a small truckload guys in Ontario, and Quebec I mean, this is not going to move the needle. Okay. It's good when the market gets better absolutely, but in a depressed environment like we're going through right. Now you know, it's it's not really a big help.
So I'm still convinced you know with by the end of 'twenty three Okay. We'll have a clearer picture of where we're at 424.
But I still believe that <unk> got the capacity, okay to be between that and $8 EPS, okay minimum to $10 with what were going what we're doing right now for sure the demise of one of my peers.
He's going to help us absolutely is going to help us if we could you know get this volume steady at 26 to 27000 and by providing financial information through our guys they'll be in a position to make better decisions reduce costs being more efficient et cetera, et cetera. I think that this is really going to help us into <unk>.
24.
All right I'll.
I'll leave it there. Thank you very much for taking my question.
Pleasure Karen.
Our next question comes from Collyn that go with that.
Gotcha capital. Please go ahead.
Good morning Ali how are you.
Hey, I'm good how about you correct.
Great. Thanks, So just wanted to understand the way.
Good margin progression at T Force and you know given the situation in the U S. L. T. L markets certainly things like it seems like you know the volume and rate environment is getting better for you guys here in the second half.
Can you talk about how you are ensuring the pricing discipline and on an on boarding this new LTE volume. So that you know youre that puts on a diluted to get to the 20% margin that you have sort of aim for the next two years.
Yeah, Yeah, Yeah very good question I mean, that's for sure and this is why you know like I said earlier in the call I mean, we're moving one of our E V. P. Mr. Mcgonigle, Okay working day day in day L with Keith and the rest of the team. There is a you know we're not in the business of practicing delivery freight.
And and not make any money so no absolutely you're right that we're taking.
No very important measures and every week, we also get the I get the reporting on on the pricing and what's going on with the average revenue per shipment right. So it's very important to us that we're not just taking freight just to match. The other guys right because the other guys right the guy with.
The belly up I mean, why would we use the same same rate now right is 30% less than the market. So Mister customer sorry to say, but we have to adjust the rate to the market right. So that's what that is what we're doing are correct.
Okay, that's great Atlanta, good to hear and then if I can just follow up you like I think the industry you're in in the U S. It's very concentrated very few unionized players and like with yellows exit you'll be one of the few companies. There is there any main lessons to learn for you guys from.
Yellows repeated bankruptcy process considering their exit would leave you asked one of the only few you and a nice players and then hopefully you'll see more sort of employees, adding up there right. So what do you learn from that process, you know like how how's the unionized business.
You know doing in the U S is a good business to be and is that something that concerns you you know like any thoughts there.
Hey, listen I mean, the benefit of our unionized environment as you have a contract that you have to abide by okay, but it also could be an excuse okay for poor results by the management or the executive team.
So if you look at what we're doing in Canada, and a unionized environment, we're doing really really well because we have managers that are managing everything.
You know a car service et cetera et cetera.
So I think that the perception, okay in the U S has always been Oh, it's a unionized operation is it must be bad right. So I think that a we're trying to work us S. T F. I N T force right to change that perception. Okay that you know if you manage the business.
For sure I mean, the base salary of a union and nonunion environment are about the same okay. Maybe 15 years ago. It was different but today the base salary of a guy that works at let's say on the West coast of the U S Union and Nonunion base salaries of about the same where the big differences is on the fringe benefits okay.
So pension for example, which is a huge cost for us. So if we're competing with a non union guy and he's got no pension for sure. There is that that is a disadvantage okay for a unionized environment now. The fact also that the turnover normally is less any.
He unionized environment, because you know those guys understand that they are very well cared for okay. Now if you look at T Force rate. It was partly true because the trucks were bad the environment was bad the terminals were bad so that was not the case, but you were changing that so.
At the end of the day, there could be a few points of war that could explain okay. If you got the superstar in the U S. At a 70 or 75 war well if you're a union guys. You can say well you know because of our pension and because it is because of that but by veeva I cannot be as good.
As the superstar okay.
Maybe.
But the delta cannot be 20 points.
Delta cannot be 15, or 10 points, the delta could be four or 5678 points, but no more than that so if the superstar in the U S is a 75 or 70, okay and for sure. The superstar is going to be much closer to 70 now that one of our peers has gone okay. So okay fine.
So our goal is to get closer to the top guys in the U S. Okay, and and we will get there will never be as good as a nonunion superstar, okay, but we could be really really good. If you look at our unionized environment in Canada, which is a depressed market compared to the U S. A depressed market if you look.
At the quality of revenue I mean were runny, mostly unionized operation, whereas 74 or in Q2 in Canada.
So to me Union, it's sad to say that over the last 20 years. They went from 60 or 65% of that market now with the.
Yellow being gone probably the union will be 15% of the market.
So it's it's a I would say it's a it's sad to see it's a reality. It's our goal is to make sure that we can grow in the unionized environment by paying our employees well, but also by making sure that they are efficient at what they do and productive and that are that's our job as management to make sure.
Sure that they don't drive their trucks.
10 miles between each and every stuff. So we have to change okay and that is our job as management.
That's a that's a very good perspective Atlanta. Thanks, so much appreciate the time.
Pleasure Kodak.
Our next question comes so Brian I'll go back with J P. Morgan. Please go ahead.
Hey, good morning, Thanks for taking the questions good morning, Brian .
So just wanted to come back to your comments on cost per shipment trends within T Force freight I know it's.
Robertson fuel impact in there, but you also mentioned unit costs were down pretty notably on the labor side is that something you can expand on that and then also touch on the benefits of the new trucks, you're getting it looks like you actually shed a few trucks sequentially, but I'm, assuming they're all getting numerous maybe you can elaborate on.
Impacting them.
Cost structure there.
Yeah, Yeah. So so on the truck side I mean for sure I mean, we're getting a by the end of October our twenty-three order is going to be completely done. Okay. So the average age of our fleet will come down to about just shy of four years old.
Which is now going to improve our M. P. G. The only thing we haven't really worked on their trucks is a the idling. Okay. The aileen. This is never been manage its still not manage today. Okay. So that's something that we have to work on okay and for sure the fuel management okay.
Could do a little bit better job, we're working on that right now.
In terms of the cost per ship. It. This is labor cost per shipment down I'm talking about Brian So our labor cost per shipment is down year over year, Okay with with volume down like 17, 18% before before what happened last week of July right.
So so what have we done okay is first of all in the fall of 'twenty. Two we provide them the information of Hey, listen this is your labor cost per shipment.
Four P M D and dock.
I said that the first is that is that real we've never saw that yeah. It Israel, Okay, and then we identify the stars and the dogs.
Right now we're working on the dogs. So this is why by improving the dogs.
Our labor cost per shipment now we're able to look at what happened in.
22, Okay, and now I compare that and my labor cost per ship and four P. M D and Doug is down by about 15%.
And and I'm paying my employees, a little bit better this year than last year now for sure when August six hits, Okay, now I'm going to be paying a $1 70 more an hour. Okay. So we're working on what is this going to be the effect. Okay. On my labor cost for shipping. So this is now this is where we have to be very.
Ziv and even more aggressive now with what's happening with yellow, okay that guys, we need to drive less miles and pick up more freight because now our labor cost per hour is even more and it's just normal because inflation. Okay. As we all know got all the way to six to seven or 8%.
Now down to three 4%, okay, but its still so average contract like I said earlier on the call is about 3% a year. Okay average okay. So it's it's reasonable it's fair it was very well received by employees.
As a matter of fact like I said, 81% said, yes to this new contract. So I mean this is an ongoing things, but this is just labor costs per shipment because now we're going to be working on everything else maintenance cost per shipment, okay, everything and now we're because we're gonna be providing all this financial information to our total AUM.
Manager they they're supposed to not just to work on labor you have to work on every every cost that we have in our business to to reduce debt because that's the only way in my mind, yeah, but the market will help US yeah. The volume will help US yes, the improved pricing in the industry will help us but at the end of the day.
US we have to reduce our cost because we're like I would say the elephant right now on the U S. L T a little bit with that okay, but we have to trim down we yeah. We we've done some good stuff so far in two years that we owned the company, but on the cost side, we haven't done enough no way.
But just to follow up on that it sounds like perhaps you get more benefits in later this year and into 'twenty four from the fleet and from fuel efficiency and maintenance and.
Service reliability is that how to think about the <unk>.
That's absolutely right have you seen some of that already.
[laughter] no is the fleet side the M. P. G. We were getting it that's not an issue idling. We're not the other thing too is that we had to shut down about 80 shops don't forget that in the old days. These guys used to manage.
And then 'twenty shops with 300 mechanics. So think about this is a nightmare. This is now by the end of August Okay. We're gonna be down to 16 shops, and 200 mechanics, because the age of our fleet went from seven years old on average down to less than four right now.
Now.
Our our fleet.
Guy the guy in charge of our fleet Eric.
You know he's been tied up for 'twenty two into because he was our in the fall of 'twenty to.
Fall of 'twenty, two all the way to 23 now the guy who's been stuck with shutting down shops, and letting go a staff and people and all of that so we're still not doing a good job on our maintenance cost per shipment. Okay. We're still not doing the job there, but we have the excuse a N a.
We had to do there is we have to do that I'll get fine now at the end of August we're all done by cleaning up the mess of the past we had a ton of spare parts that were obsolete related to the old trucks. Okay. We're cleaning that mess right now as we speak is costing me about $400000 a month to clean up you know all of them.
This obsolete stuff that was there okay fine, but that that's gonna be done okay by let's say September we're done okay. So now fuel economy. Okay. We're not doing bad because we have the new trucks idling, we have to improve that big time, where we're doing about 35 to 40 per cent idling.
Nobody knows exactly how much I mean, so because we don't track it right. So now we're gonna start tracking that maintenance cost per shipment is too high right because the warranty we have new trucks, but you know you have to clean the warranty. If you do the work you have to claim it. So we hired a warranty managers just a month ago right because you know in.
The past warranty on what's that I mean, we buy trucks with no warranty. So we don't have to worry about warranty no no. We buy trucks with warranty we have to claim right. So I mean, you'll see us improving on all aspects of our costs slowly into 'twenty four.
Okay.
Alright, I appreciate all the details thanks Helane.
Right pleasure.
Our next question comes from Daniel.
Please go ahead.
Yeah, Good morning Ali.
One of them anyway, Yeah, you provide great color about 2023 but I was wondering what kind of market condition do you foresee so far in 'twenty 'twenty four is at kind of overall major rebound or slight improvement and is the $8 still achievable given what you foresee.
See the positive impact from yellow and all the actions taken to improve the or be forced rate.
You know what had been a while I think that you know if market in 'twenty four it comes back like normal okay, not not like great 22, Okay. Because we believe that 23 was a terrible very tough year for us okay for the industry in general. So so 22 was the party 20.
Three was the after party. Okay. So you know we had some headaches and all that and I think that 24 will probably be slowly going back to normal now in a normal environment can we do $8. Okay with everything that's going on T force rate everything that's going on with our later M.
<unk> in 'twenty, three I think that going back to eight in 'twenty four I would say, it's very early to say.
But you know I would tend to agree that I think $8 for 24 should be attainable with everything that we're doing and if are the guys that T force rate are able with the new volume coming in okay. The focus on reducing their cost with all this financial information.
Asian, and getting closure in 24 to an 85 to 88 or as it first step sub 90, you are okay. I think eight bucks are we should be back on track for eight into 24 now that's very early okay. Because we're just in August right now, okay, but my.
Feeling because my our guys will start working on the budget in September but my feeling is no.
That would be really really really nice because don't forget every part of our business has been affected in 'twenty. Three we were able to protect our margin yes, okay on in general.
But the revenue is down big time, right. So we need the revenue to come back and then our logistics thinking about that our logistics, we're able to protect the margin at nine but the revenue is down like 20% right. So this is tough right. So if revenue is not down 20%, but let's sit down only 5% versus 20.
Two I mean, the bottom line will follow our P&C. The same you know or can email T. O same story, but T force rate is really the key in our specialty truckload as well to get back to $8 and above into 'twenty, four and going into 'twenty five I still say that this company today.
Okay with the M&A that we're going to do between now and the end of the year I mean in a normal environment is between eight and $10 10 be you know a great environment like 22, Okay and aid being a minimum.
Okay and industrial environment.
That's really great color Elaine just in terms of follow up obviously you mentioned the good details about the M&A strategy, obviously, a focus on U S. L deal in logistics, but when looking at valuation multiple even on the logistics side, we've seen an expansion in valuation multiples. So I was curious given your discipline.
You're a disciplined acquirer, what kind of valuation multiples are.
Do you see these days and the weather a transformative deal they're still two or three opportunities up there as you discussed in the past.
Well you know by the way I have.
I've been saying that Oh.
All of that time is you always make your money on the buy never under selling so you got to buy it right you buy it you have to buy at a valuation that makes sense for your shareholders and and and you'll see I mean, hopefully we can announce something in the next few days next few weeks about a transaction that is going to be really really.
A very interesting for all parties involved are really liked this company I like the management team is not a fixer upper I mean, those guys are doing a very good job and.
You know well just work with them and and and you know it's gonna be really fantastic.
So no I mean, we have to be cautious for sure evaluation is always important and when you do a deal and.
And you know, we've always been very cautious with that.
As you know if you overpay.
Stuck with that rock in your shoe for a long time.
Okay. Okay, that's great color and I assume given their robust M&A environment buyback might be less of a priority in the short to medium term given the.
Right.
Yeah, Oh by the way it always depends on the opportunity if our stock goes back down to I don't know $140 $130. I mean, we're gonna be a active Canadian dollars I'm talking here.
So for sure it will be back on the M&A of our stock.
Our leverage is still very low it's at 1.1, you know so I mean, we could do one 2 million shares easily.
If we want if we see the price being at very very low okay. It will be opportunistic and will be again active on the buyback I mean, it's not because you.
You know we're doing some nice M&A in the latter part of 'twenty three that this will.
N P R.
You know our possibility.
Due to do.
Buyback.
I think that by the end of this year you know with all the M&A everything that were looking at doing our leverage is going to be about a one point 26 at the end of Q3 and 1.05 at the end of the year.
So I mean this is chicken <expletive> and have said that we could buy back at least a one or 2 million shares.
If the prices right.
Okay perfect. Thanks, very much for the time on it.
Okay.
Hi.
Our next question comes from Cartwheel with Wolfe Research. Please go ahead.
Hey, Thanks Helane.
So you've said the word fantastic now twice.
With respect to near term M&A I, just I just want to understand are we talking about a major transaction or just something that's you know.
Thank you have a good size.
Okay, no something of good size, because what we've done so far this year Scott is very small transactions small deals and I think the latter part of 'twenty three is going to be more like medium sized deals you know so when I say fantastic is you know the company that we're looking at it.
Wiring to me, it's a fantastic transaction for for many reasons reason number one is is the market that these guys serve is really second to none are there market share is what we like is is really intra.
Interesting, so I say fantastic because the valuation is also very accretive for our shareholders.
Ah I see fantastic because.
With these guys, we're going to learn something that Oh will help us in all of our business segment, I say fantastic because I really like the management team over there and I can see that we could help them on a few aspects of their business saving costs.
So that's why I'm, saying in a difficult environment like that I mean, this is one of a of a jam that we were able to pick up hopefully and that's why I'm, saying fantastic go Scott.
Okay, and then someone asked you earlier about buying terminals from yellow and I'm wondering if if they were trying to sell one of the regional brands or the regional brands in total or maybe even the whole thing or is that something you would ever have interested in interesting.
Well for sure we're having discussion with where the people are in charge of the process. There. There's some areas that are you know as a matter of fact, if you look at Florida. As an example, I mean, we are a tenant in one area is they have their own in one terminal that could make sense for us. So for sure we will have some discussion okay.
With those guys, but to say that anything big will come out of AR on the real estate side or employees or equipment I don't think so.
Okay Alright. Thank you appreciate it helpful call pleasure Scott Yep.
Our next question comes from last call made Oh.
Please go ahead.
Following up on that last question I believe at the Investor Day, you talked about maybe one to two points of long term opportunity for real estate in the U S. L. P L business.
If we if we look to next year, it's pretty clear that there's going to be more real estate available maybe had been anticipated at that point as well as rate available near term I'm. Just curious how your calculus may change, where theres more freight and more supply of industrial real estate and it.
And how that how you play that to best drive value for your shareholders longer term. Thank you yeah. Yeah. That's a very good question. So so what we've done in 'twenty three so far is we've done deals with other carriers. So okay, where it made a lot of sense for them and a lot of sense for us we still have some some deals that are going on into 'twenty three.
Now like I said, we've got lots of capacity within the T Force freight network. So for sure by moving from 23 to 25 of 26000, that's going to take a little bit of capacity, but still we have a lot to do so in terms of shedding this capacity or finding tenants or or doing some.
M&A, that's going to help us okay feel feel those so those terminals that are costing us a fortune and and they are some of our terminals are running F empties right.
No. The fact that Oh Wow, she is gonna be liquidating their assets or something like that I guess, that's going to bring a lot of real estate to the market agreed okay.
But I.
I don't know exactly I mean, some of the real estate, that's where I see was using utilizing was a lot of that was leased. So so we'll see I mean that may affect the market, okay, but really for US is most of the transaction that need to happen within you know what we had to.
To get rid of or cell. Okay. It's ongoing right now so I don't think it's going to affect us in twenty-three could that change in 'twenty four I think that the cleanup of the real estate for us at T Force rate I would say is mostly done okay. And then what's left is our three or four.
Indoors, Okay, we're gonna have to fix that overtime with volume through M&A or through organic growth slow slow organic growth.
Thank you.
Youre welcome.
Excuse me there are no further questions at this time I would like to turn the floor back over to Alan.
Her closing comments. Please go ahead.
Alright, Thank you operator, and I want to thank everyone for being with us.
You have any follow up questions. Please don't hesitate to reach out I hope you enjoy the rest of your day and we very much appreciate your interest in T. F. I International So thank you again and we'll speak soon thank you.
Bye.
This concludes today's conference call.
Your line is that this fine ultra for participation and have a great day.
[music].
Yeah.
Yeah.
Okay.
Yeah.
Yeah.
[music].
Yeah.
[music].
Uh huh.
[music].
Yeah.
[music].
Yeah.
Yeah.
[music].