Q3 2023 TFI International Inc Earnings Call

Good afternoon, ladies and gentlemen, thank you for standing by welcome to <unk>.

T F I International's third quarter 2023 results conference call.

At this time, all participants are in listen only mode.

Following the presentation.

Probably be following 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.

For instructions for entering the queue 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.

So I would like to remind everyone that this conference call is being recorded on Tuesday, So by 'twenty four 'twenty to 'twenty three.

I'll now turn the call over to Alan Bedard, Chairman, President and Chief Executive Officer of GSI International Please.

Go ahead Sir.

Alright, Thank you operator, and thank you everyone for joining us this morning.

Yesterday after market close we released our third quarter 2023 results.

With weaker demand conditions persisting throughout the quarter.

We're proud of our solid execution with reflects continue that DRAM store operating principles.

As I've mentioned before our talented team understands the importance of Crawford of profitability and cash flow.

Acting quickly to market shifts.

And focusing even more intensely on the fundamentals when trade volume week.

We view this underlying focus on profitability and cash flow as strategically important to the T. F by international growth story, allowing us to consistently invest in the business pursue M&A always in a disciplined manner and return excess capital to our shoulders whenever possible, which as you know is.

One of our guiding principle.

Taking a look at our third quarter results, we generated operating income of just over 200 billion, reflecting an operating margin of 12, 3%.

This compares to the prior year's 318 million with a 17, 1% margin.

Adjusted net income of 136 million compares to 181 million to prior year adjusted EPS of $1 57 was down from two one.

Regarding net cash from operating activities, we generated 279 million during the second quarter and in terms of free cash flow, which we view as strategically important we produced nearly 200 billion.

Given the softer market condition. These with these solid results along with strong returns on invested capital across all of our business segments.

Well on the hard working people at T F I and the importance we place on protecting margins, especially when the freight demand weakens.

It's also important to why note that when comparing to the prior year our results reflect not only our sales of shift by livestock as well the associated with $76 million gain on sales along with cost incurred to transition our I T system from UBS, Michelle will provide long term, which will provide long term efficiency event.

Cheers.

In addition, we continue to face modestly unfavorable moves in foreign exchange Hello emphasize the results are reporting higher fully burden not adjusted for any of these items that affect the year over year comparison.

All right. So let's review each of our business segments or four P. N C, which represent 7% of our segment revenue before fuel surcharge saw a 7% decline in revenue before fuel surcharge with the number of package also down 7% operating income of 25 million compared to 34 million.

The prior year with a margin of 23 relative to 28% the previous year.

Our return on invested capital while down from 31% a year earlier it came in it still solid at 27 six.

Overall, our P&C business is operating well given the weaker demand environment and with less contribution from fuel surcharge benefiting from our unique.

Market exposure and the ability to control costs.

Moving onto L. P L, which is 44%.

Segment revenue before fuel surcharge, our revenue before fuel surcharge was down 12% on a 4% decline in shipments.

Operating income of just over 100 million was virtually flat year over year.

Within the L. T O Canadian revenue before fuel surcharge increased 5% on a five 3% and shipments. In addition, the quality and profitability of our business is happened given difficult market condition with our operating ratio a solid 70, 77, 2% compared to 72.8 the prior year.

Similarly, our return invested capital we can email T. L was 19, 6% relative to $23 one a year earlier.

Yeah.

Within the U S. L. T. L results clearly reflect our margin resilience, especially given an important.

5% wage increase to our labor force during the quarter.

Revenue per shipment before fuel surcharge remains flat year over year, well there are a number of shipments were down 7.5%.

Our revenue before fuel surcharge of 500 and save me at 581 million was down from 687, a year earlier and we were able to keep our operating ratio flat at 98 year over year and improve it sequentially.

Return on invested capital for U S. L. T. L was 52 compared to the prior year twenty-five too.

Now, let's turn to truckload, which is 24% of segment revenue before fuel surcharge I Miss amidst a very weak market condition with lower demand and weaker rates. We believe that we were able to outperform the broader market benefiting from a specialized that gideon exposure.

Our truckload revenue before fuel surcharge was down 21%, reflecting not only the weaker demand, but also the sale of CSI in August 22.

And to a lesser extent unfavorable foreign exchange.

Truckload operating income was 50 million relative to 97 million last year and our operating ratio came in at 87.5 versus 81.1, a year earlier.

So taking a closer look within truckload, although our specialized operation continued to benefit from self help opportunities along with our diversity and exposure to better performing niche market, where were still impacted during the quarter by volume and pricing pressure.

This is reflected in our new disclosure of weekly revenue per truck, which declined year over year as a result of this as well as a slight FX headwind revenue before fuel surcharge declined 8% year over year to 325 million operating ratio was 87.8 relative to $79 nine.

And our return on invested capital was 10, one down from 12 seven.

So taking a look at our Canadian based conventional truckload business, we generated revenue before fuel surcharge of 79 million almost entirely flat year over year and actually up on a consistent currency basis. However, our adjusted operating ratio was 87.8 relative to seven five points five.

And our return on invested capital, which was 26 a year earlier it came in at 13.8.

This reflects a decline in both revenue per mile as well as well as number of miles partially upset by our ongoing focus on network density and cost control.

Wrapping up the business segment discussion logistics represents 25% of segment revenue before fuel surcharge, our solid results this quarter reflect our operational strength and ability to control cost we.

We generated 416 million of revenue before fuel surcharge, which was down only 2% year over year benefiting from our recent acquisition of Ghd, while also facing modest FX headwinds.

However on this relatively flat revenue, we were able to drive a greater than 40% increase in operating income to $41 million on a much stronger operating ratio of $99 eight up a full 300 basis points.

Our logistics return invested capital was $15 five down from 21.1 the prior year.

Overall solid performance of our logistics segment benefited from better cost control the strength of our same day package delivery operation the GHT acquisition, and our team's ability to successfully navigate charge of changing market conditions.

Yeah.

Turning to our solid balance sheet and liquidity, which is always a focus at Tia flying to Nashville, we were able to further enhance our financial position during both during and subsequent to the quarter.

First we generated a free cash flow of nearly 200 million as I mentioned.

And we ended up September .

With a funded debt to EBITDA ratio of only 131 39.

Second subsequent to the quarter, we were able to further strengthen our balance sheet with a private placement of 500 billion of fixed rate interest only debt, bringing our overall weighted average interest rate to four 5% entirely fixed.

With an overall weighted average duration of nine and a half year.

As I've mentioned many times this financial strength your score to Tee up our international strategy, giving us the flexibility to make smart and smart investments regardless of the cycle, while pursuing strategic M&A and returning excess capital to our shareholder whenever possible.

Speaking of M&A.

During the quarter, we completed four additional tuck in acquisition, bringing our year to date total to 11 I'm also pleased to announce that our board of directors raised the quarterly dividend by 14%.

And that the share repurchase program our N CIB has been renewed for an additional year.

I'll now conclude with our updated full year outlook before opening up to Q&A.

Today, we are reaffirming our 2023 EPS guidance provided in July all of our age.

$6 to $6.50.

We're also maintaining our full year free cash flow outlook at 700 million to 800 million, including Capex of 200 million to charge and 25.

In addition, we have already exceeded the combined total of 500 million this year of capital.

And share repurchase given our very strong financial position.

And with that operator, if you could please open up the line. So we can move to the Q&A portion of the call.

Thank you.

Ladies and gentlemen to ask a question you will need to press star one on your telephone keypad.

Draw. Your question, please press the pound or hash key.

Callers will be limited to one question and a 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.

The first question comes from Ravi Shanker of Morgan Stanley . Please go ahead.

Thanks, Good morning.

I would love to get your thoughts around where you think we are in the cycle right. Now obviously, a very interesting time kind of bouncing around the bottom, but maybe some signs of life.

When do you think the upside when it comes in is that late 'twenty three 'twenty four how powerful they are going to be just your overall thoughts would be very helpful.

Yeah, you know Ravi.

We're starting to see in Q4 as is improvement okay versus our Q3 numbers in terms of activity.

But you know small.

Excuse me small.

We anticipate the 24, it's probably still going to be a transition year. Okay. There's a lot of things that are you know in terms of the politics, there's an election in the U S.

There's issues in Europe with war and things like that so I think that Oh I mean, that's what we're doing now we're just going through our budget.

And I think that I'm convinced that 24 will be a better year than twenty-three for us okay, but it's hard to have a good feel about all good as this is gonna be is that are we going back to normal 24, or its still going to be more towards kind of a transition to towards better days, if you want to call it like that.

Got it that's helpful and for my follow up kind of just.

Given some of the structural changes in the IPO market in the U S and some of the.

Just with the benefit of three months of hindsight and settling down kind of how do you think the whole pool with yellow situation has played out so far versus your expectations. What do you think happens in the near term and the medium term do you think it can get upset you up pretty well with a 24.

Yeah.

You know the fact that you know theres been some major changes in our industry and and I think that the U S. L. T O industries very well disciplined okay. So we went to some.

Tough times in 'twenty three the fact that a significant player. Okay that was probably a very low margin player has gone from the market I think this bodes well for the L. T L industry, but not withstanding that Ravi.

Focus us at T F I with T Force rate is really it's a it's on cost I mean, yes, you know our market share could increase our volume will increase slowly quite a major major focus as we need to be leaner and meaner over there.

And that's what we're doing so we're providing the team over there with better information financial information.

During the course.

Q4 and into <unk>.

24.

We will be providing what we have in Canada with all of our L. T L operation and package financial information by terminal so that the manager could start doing a better job of managing costs because right now the excuses well I don't know I don't have the information so I can't do anything about it right.

So the excuse will be gone now okay. The training and the education about all this financial information at the terminal level will it be top priority for a R. E V P. Bob Mcgonigal and keep the president of T Force right. So just to make a long story short about that our focus for us is really.

We have to be more efficient we have to do better we have to do more with less.

Operator: Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to TFI International's third quarter, 2020 Results Conference call. At this time, all participants are in listen only mode. Following the presentation. Following the presentation, we will conduct a question and answer session. College 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 colors as possible. For the instructions for entering the queue, we'll be provided at that time. If we advise that this conference call will contain statements that are forward looking in nature and subject to a number of risks and uncertainties that cause actual results to different materially.

Very helpful in Atlanta.

Pleasure.

The next question comes from Tom <unk> of UBS.

Go ahead.

Yeah. Good morning, Alain wanted to see if you could talk a little bit more.

Yeah, I wanted to see if you could talk a little bit more about.

Kind of how yellow the business from yellow coming over affected performance in the quarter.

I think we were interesting up and.

Dissipating maybe.

Sequential lift in price, but I don't know if there's like a significant mix effect within that and then also just you know when you have kind of a disruptive step up in activity that can cause some inefficiencies. So wanted to just see if you could provide a bit more perspective.

Operator: Also, I would like to remind everyone that this conference call is being recorded on Tuesday, October 24, 2023.

Oh, yeah that affected your results in <unk>.

Operator: I'll now turn the call over to Alan Bedard.

Alain Bedard: Chairman, President and Chief Executive Officer of TFI International, please go ahead, sir. All right. Thank you, operator, and thank you, everyone, for joining us this morning. Yes, so the aftermarket close, we release our third quarter, 2023 Results. With weaker demand conditions persisting throughout the quarter, we're proud of our solid execution, would reflect, continue that the events are operating principles. As I mentioned before, our talent team understands the importance and profit of profitability in cash low, reacting quickly to market shifts and focusing even more intensely on the fundamentals when trade volume weakened.

Yeah, Yeah very good question. So you know what what you could see is that if you look at our average weight per shipment I mean, it's up I think 7%. Okay. So this is thanks to a little bit of change and our ship. It. Okay. So for sure. The fact that the display rest the spirit helped us.

Improve our weight per shipment in terms of pricing.

Our pricing our pricing and revenue per shipment ex fuel is about flat year over year. So we were not really help with that now don't forget we used to run 23000 shipments before what happened to wire Sea. We went all the way to 26, but now we're back down to more like 24, and a half to 25 and during the quarter we had.

Alain Bedard: We view this underlying focus on profitability in cash low as strategically important to the TFI international role story, allowing us to consistently invest in the business, pursue M and A always in a disciplined manner and return. Access capital to our shoulders whenever possible, which as you know, is one of our guiding principles.

Also we went through increased costs in a SaaS because with pick up in volume we had to bring back people bring back people costs money and Theyre Whoops again, Okay. We went back closer to 20 point at 25000 chip and so there we have to readjust their labor force they get.

And as I said, you know the problem. We have T Force right is when you don't have financial information at the terminal level.

Alain Bedard: Taking a look at our third quarter results, we generate operating income of just over 200 million, reflecting an operating margin of 12.3% this compares to the prior years, 318 million with a 17.1% margin. Adjusted net income of 136 million compares to 181 million the prior year, and adjust the DPS of $1.57 was down from 211. Regarding that cash from operating activities, we generate 279 million during the second quarter and in terms of free cash flow, which we view as strategically important, we produce nearly 200 million.

The reaction time, okay with all of this variation the volume is two law.

And this is what we will be correcting in the future. When we provide those guys with financial information accurate financial information by the day, Okay by the week. So it all in all if you look at our operating ratio okay.

Okay were about flat year over year in Q3 for U S. L. T O. One thing that we have to keep in mind is that our G. P operation.

[laughter] excuse me it was down on the revenue Big time, Okay. So, but we're coming back I mean, our sales team that was working on that so that should improve.

Alain Bedard: Given the softer market condition, these solid results, along with strong returns on invested capital across all of our business segments, reflect well on the hard working people of TFI and the importance we place on protecting margins, especially when the freight demand weakens. It's also important to point out that when comparing to the prior year, our results reflect not only our sales of CFI last August, but the associated $76 million on sales, along with cost incurred to transition RIT system from UPS, which will provide long term efficiency at that. In addition, we continue to face modestly unfavorable move in pouring exchange. I'll emphasize the results are reporting are fully burdened, not adjusted for any of these items that affect the year-to-year comparison.

424.

Yeah.

So should I guess Theres a follow up question do you have any thoughts on how we should you know what we should consider when we're modeling for iron ore and also when we're modeling 2024 U S. L. T L O R.

Yeah.

But you know what Oh excuse me.

I think that the 24.

L. P O U S L T otherwise it should be.

Whereas at 90.

It just losing my voice.

Too bad.

No.

Yeah, So we should be in the neighborhood of.

80, 880 788 to 90.

Okay.

Great. Okay. Thanks for the time line Okay.

Alain Bedard: All right, so let's review out each of our business segment performed, PNC, which represents 7% of our segment revenue before fuel surcharge, saw a 7% declining revenue before fuel surcharge. With the number of package also down 7%, operating income of 25 million compares to 34 million per year with the margin of 23 relative to 28% previous year. Our return invested capital, while down from 31% a year earlier came in at still solid 27.6. Overall, our PNC business operating well given that we hear demand environment and with less contribution from fuel surcharge benefiting from our unique market exposure and ability to control costs.

Thank you dawn.

The next question comes from Ken <unk> of Bank of America.

Please go ahead.

Great. Good morning, Thanks for taking the questions. Good morning, So just maybe a follow up on that for a second you know lots of puts and takes in U S. L. T. L. This quarter. There was a 5 million I guess, you've got the ongoing charge, maybe you could talk a little bit about you know when you start transitioning from the U P. S network in and then you.

You start eliminating those those contractual charges. The the ground freight pricing is that something that continues to fade away I just want to be able to step back and understand kind of how we should think about the U S. L. P. L. N and then your your your near term target of moving sub 90 in your long term target of getting to the you know as much as 80% so yeah.

Alain Bedard: Moving on to LTL, which is 44% of segment revenue before fuel surcharge or revenue before fuel surcharge was down 12% on a 4% decline on shipments. In addition, the quality and profitability of our business is apparent given difficult market condition with our operating ratio of solid 77.2% compared to 72.8% per year. Similarly, our return invested capital for Canadian LTL was 19.6 relative to 23.1 a year earlier. Within the USLTL, results clearly reflect our margin resilience, especially given an important 5% wage increase to our labor force during the quarter.

Just thoughts about what what's in the number what's the clear and then and then what's the go forward.

Okay. So the transition from UBS.

At the latest I mean, we're done by Q1 of 24.

Okay. So what we've done so far is financials, so we move Oracle.

Our own Oracle financial system.

We did a HR as well.

Did they start in the summer.

We also did the fleet in September .

So we move from UBS fleet management to our own sits Iris system.

So the only thing really are reported as that's left is the housing of our edge system.

Excuse me.

So that's the only thing really left with those guys. So to me all these transition to US all of these excess costs.

Should be things of the past.

Probably into 'twenty four but for sure.

Alain Bedard: Revenue for shipping before fuel surcharge remained flat your year while our number of shipments were down 7.5%. Our revenue before fuel surcharge of 5111 billion was down from 687 a year earlier and we were able to keep our operating ratio flat at 90.8 year-over-year and improve it sequentially. We return invested capital for USLTL was 15.2 compared to the prior year 25.2.

You won't see anything like that into after Q1 of 'twenty four.

Now in terms of our G. S P.

So last year, we were just flying with that doing really well.

This year, Okay, starting Q1, I mean, our revenue start to drop I mean, we had some some customers issue. Okay that we have to fix which we have been fixing and working on.

And now we're starting to see revenue of GFP slowly picking up again.

Alain Bedard: Now, let's start to talk low, which is 24% of segment revenue before fuel surcharge amidst a very weak market condition with lower demand and weaker rates. We believe that we were able to outperform the broader market benefiting from our specialized kidney and exposure. Our truckload revenue before fuel surcharge was down 21% reflecting not only the weaker demand but also the sales of CFI in August 22 and to a lesser extent unfavorable foreign exchange.

Our volume at G. F. P is down like I said big time by 40% and this is not normal.

So we had some issues with some certain customers.

No, we're working with them and we're going to fix that and it's it's coming.

Now in terms of the LTI like I was saying to Tom.

I haven't seen the plan I'm going to be with you guys Tomorrow.

And talking about their plan for 'twenty four.

Alain Bedard: Truckload operating income was 50 million relative to 97 million last year and our operating ratio came in at 87.5 versus 81.1 a year earlier. Taking a closer look within truckload although our specialized operations continue to benefit from self-help opportunities along with our diversity and exposure to better performing niche markets. We're still impacted during the quarter by volume and pricing pressure. This is reflected in our new disclosure of weekly revenue per truck which declined year-over-year.

But I can't see us coming out with a plan with an O R.

Of 90 plus.

Okay, I think that the market is still going to be soft.

Okay, but we can't blame the markets for that because we have a lot of work to do with our cost.

So even if the market stays soft like it is now.

I think that the T force right team will definitely improve so this is why to me when we have a targets with 24 to be in this 80 788 range. Okay.

I think its reasonable but this is me talking before meaning those guys do more I hope that's their flag because to me that is a reasonable plan, that's a reasonable target well see.

Alain Bedard: As a result of this, as well as the slight effects and width, revenue before fuel surcharge declined 8% year-over-year to 325 million. Operating ratio was 87.8 relative to 79.9 and a return investor caliber was 10.1, down from 12.7. So taking a look at our Canadian-based conventional truck load business which generated revenue before fuel surcharge of 79 million almost entirely flat year-over-year and actually up on a consistent currency basis. However, our adjusted operating ratio was 87.8 relative to 75.5 and a return on invested capital which was 20.6 a year earlier came in at 13.8. This reflects a decline in both revenue for a mile as well as as well as number of miles partially upset by our ongoing focus on network density and cost control.

But yes. The fact that this market probably will stay soft okay, even with the disappearance of a major player.

Okay.

That's that's the the best that we can read so far.

If I'm wrong and the market improves so even better.

But the focus and are repeating that T force right, we have to be more efficient we have to reduce our costs. We're gonna be provide them, providing them financial information now by terminal, which they had never at which we have in Canada, So thinking about it Ken.

Look at our or in Canada, I mean in a very difficult market in Canada, we're able to come out in Q3 with less volume.

With a sub 80 you are.

Why well because our guys are very disciplined the manage the cost.

Alain Bedard: Rapping up the business segment discussion logistics represents 25% of segment revenue before fuel surcharge. Our solid resolves the scoring reflect our operational strength and ability to control cost. We generated 416 million of revenue before fuel surcharge which was down only 2% year-over-year benefiting from our recent acquisition of GHT while also facing modest effects at wins. However, on this relatively flat revenue we were able to drive a greater than 40% increase in operating income to 41 million on a much stronger operating ratio of 9.8 up a full 300 basis points.

Notwithstanding the market condition.

They do a better job that our U S team, but our U S team you know they don't have the financial information they will have that by terminal and we'll start to see some improvement 24, an odd.

Great and I'll ask a follow up but I'll I'll keep going so you can get a sip of water there, but hum.

Maybe you kind of reiterated your full year target right, so, but yet that's a pretty wide range right. When we're looking just that as we move into the fourth quarter.

Maybe can you talk a little bit about what gets you to the bottom end versus the top end or or is there.

Alain Bedard: Our logistics return invested capital was 15.5 down from 21.1 the prior year. Overall solid performance of our logistics segment benefits it from better cost control, the strength of our same day package delivery operation, the GHT acquisition and our team's abilities to successfully navigate charging changing market conditions.

Is your thoughts still some decent rebound into the fourth quarter. I mean, you look at that Canadian L. T. L. I agree you know staying in the seventies amazing, but yet you know what the duration of 400 basis points. So I don't know if their thoughts you want to throw out there about what gets you bought them and versus top end of the range, given where we're close to that that year end number.

Hmm.

Yeah. Good question, Ken you know.

If you look our logistics in Q3, what you see in there is only six weeks of our Ghd acquisition. So for sure I mean, she is she is going to be there for the full quarter. So that's going to help us I believe that T force rate will do better in Q4 23 than in Q4 22.

Alain Bedard: Starting to our small balance sheet and liquidity which is always a focus at TFI to national we were able to further enhance our financial positions during both during and subsequent to the quarter. First we generate a free cash flow of nearly 200 million as I mentioned and we end up September with a funded debt to a bid ratio of only 1.39. Second subsequent to the quarter we were able to further strengthen our balance sheet with a private placement of 500 million of fixed rate interest only debt bringing our overall weighted average interest rate to 4.5% entirely fixed with an overall weighted average duration of 9.5 year.

Okay.

So that's going to help us to to get to our target now.

Oh.

First we got to work hard.

K to do because we missed consensus two quarters in a row right Q2, and Q3 and you know I don't know 25 years, we missed guidance about five times.

Then involved with trucking.

So I don't like that so this is why believe me we're going to work.

Alain Bedard: As I mentioned many times this financial swing is scored to TFI international strategy giving us the flexibility to make smart and smart investments regardless of the cycle while pursuing strategic and returning staff capital to our shareholder whenever possible.

Very hard to to be closer to 650, then to six Bucks right.

First resolved that I'm seeing from October .

Okay are very encouraging.

So that's why I feel pretty good just reaffirming our six to 650.

Alain Bedard: Speaking of M&A. During the quarter, we completed four additional Taken acquisition, bringing our year-to-date total to 11. I'm also pleased to announce that our board director has raised the quarterly dividend by 14% and that the share repurchase program, our NCIB has been renewed for an additional year.

But we'll probably be closer to 50 than six 656.

Great.

Alright, thanks for the time I appreciate that.

Very good Kevin.

The next question comes from James Monaghan Volts Fargo. Please go ahead.

Alain Bedard: I'll now conclude with our updated 12-year outlook before opening up to Q&A. Today, we are reaffirming our 2023 EPS guidance provided in July of our age. We're also maintaining our four-year free cash flow outlook at $700 million to $800 million, including capex up to $200 million to turn into $25 million. In addition, we have already exceeded the combined total of $500 million this year of capital deployed in M&A and share repurchase given our very strong financial position.

Hey, good morning, actually I just sort.

Sort of follow up what are you doing.

I have a broader appeal morning follow up on the broader appeal discussion kind of get a better understanding of the volume and pricing trends you're seeing it seems like there was circuit breaker pulled back just kind of want to get some context around that as well.

Yeah.

Okay. Okay. So I mean, the forecast we have us for Q4 and into the new year I mean.

Our forecast is based on about 25 to 26000 shipments a day.

Okay.

Operator: And with that operator, if you could please open up the line so we can move to the Q&A portion of the call. Thank you. Ladies and gentlemen, to ask a question, you will need to press star one on your telephone keypad. To withdraw your question, please press the pound or hash key. Colors will be limited to one question and a follow-up in order to get to as many colors as plausible. Again, that's star one to ask a question. Please stand by. We'll be compiled the Q&A roster.

Is where we are seeing us going into 'twenty four.

So that that to me is is should be normal okay for a company of our size.

For still the next next years to come.

And Tom what was the I mean, what was your next question.

Yeah exactly.

The trends Youre seeing in October and then you mentioned that there was a spike up in volume in the Spike down just what was driving that yeah during the quarter.

Well, it's just the adjustments from shippers right. So you know when the when.

Ravi Shanker: The first question comes from Ravi Shanker of Morgan Stanley. Please go ahead. Thanks. Good morning, Alan. We'd love to get your thought on where you think we are in the cycle right now. Obviously a very interesting time kind of bouncing on the bottom, but maybe some signs of life. When do you think the cycle comes in? Is that late 23 or 24? How powerful is it going to be just your overall thoughts would be very helpful? Yeah, you know, Ravi, what we're starting to see in Q4 is improvement. Okay, versus our Q3 numbers in terms of activity. But, you know, small, excuse me, small.

And why I see who close their doors I mean for sure customers call you and then Theres a action and reaction and there's been an adjustment. So this is why we went from 23 to close to 26 and back down to 24 25, as we speak now so but there again the story of T Force right, it's not about volume.

For now its about costs, okay. So what we're saying to our sales team guys, okay try to get better better freight.

Okay 26000 shipments is normal for us in 24, that's our goal okay fine get better shipment, because we keep improving that.

And.

Alain Bedard: We anticipate that 24 is probably still going to be a transition year. Okay, there's a lot of things that are, you know, in terms of the politics, there's an election in the US. There's issues in Europe with war and things like that. So I think that, I mean, that's what we're doing now. We're just going through our budget. And I think that I'm convinced that 24 will be a better year than 23 for us.

The ops guys have to work on the costs. So that's all we're going to bring okay. We're not focusing on getting more money from the customer. If we if we can do that fine if the market allows us to do it fine, but our focus is not that our focus is really bring the cost out.

Okay be more efficient and do more with less.

Got it.

And then on Canadian L. T O youre doing much better and better than sort of the long term.

Alain Bedard: Okay, but it's hard to have a good feel about how good is this going to be? Is that are we going back to normal 24 or is still going to be more towards kind of a transition towards better days if you want to call it like that?

She had given at the Investor day, and it sounds like.

Peter in terms of it so like how should we think about like essentially what is that number conservative or is that actually sort of how you're still thinking about the business and if not like what do you actually do you think the long term margin can be in a Canadian L deal. Thanks.

Alain Bedard: Carter, that's helpful. And from a follow-up kind of just given some of these structural changes in the LTL market and the US and some of the, I mean, just with the benefit of three months of hindsight and settling down kind of, how do you think the whole political situation has laid out so far versus your expectations? What do you think happens in the near term and the medium term? Do you think it can kind of set you up pretty well for 24?

But I I think Canadian Nokia all if you look at that a Q3 with volume and pressure on the Canadian market, we were able to come up with a sub 80 or and and don't forget that we also made an acquisition in the kidney that I'll tee off market.

Alain Bedard: You know, the fact that, you know, there's been some major changes in our industry. And I think that the US LTO industry is very well disciplined. Okay, so we went through some tough times in 23. The fact that a significant player. Okay, that was probably a very low margin player has gone from the market. I think this bodes well for the LTL industry, but notwithstanding that, Ravi, our focus on TFI with T4s rate is really, it's on cost.

The group and these guys are a 2% bottom line guys right, it's going to take US a year to bring those guys closer to 15% bottom line guys right.

So I mean to me, we've always been more focus on bottom line than top line.

So kinder is he's going to help us with the volume. So this is why when you look at our Canadian volume Q3 over last year, our volume is up because of Kinder Z right.

But you know that's good in terms of volume.

Profit margin is really really like a 2% with these guys. So it's going to take us a little bit of time, but I think that the Canadian market.

Alain Bedard: I mean, yes, you know, our market share could increase, our volume will increase slowly, but our major, major focus is we need to be leaner and meaner over there. And that's what we're doing. So we're providing the team over there with better information, financial information, you know, during the course of the Q4 and into We will be providing what we have in Canada with all of our LTL operations and package, financial information by terminal, so that the manager could start doing a better job of managing costs.

Can email TL market is way more difficult than the U S. One in terms of market condition quality of revenue et cetera et cetera. So this is why when you look at it all sort of Canadian L. T. L. A lot of our freight is intermodal, okay. So probably like 40% of our revenue runs on.

Dale.

So to be able to come up with a subsidy you are using the rail this is like a.

Close to a miracle.

Got it but again I'm almost always emphasizing this is that our Canadian team as information, Okay to act and react. Okay. Every day and this is what's lacking in the U S. Those guys have the excuse today of not knowing.

Alain Bedard: Because right now the excuse is, well, I don't know. I don't have the information so I can't do anything about it. Right. So the excuse will be gone now. Okay, the training and the education about all this financial information that the terminal level. We'll be top priority for our EVP Bob McGonagall and Keith, the president of T for trade. So just to make a long story short about that, our focus for us is really we have to be more efficient. We have to do better. We have to do more with less.

Anything about costs, the only thing that now they know is their labor costs per shipment okay. Since.

October of last year.

Thank you.

Welcome.

The next question comes from Jordan Alger of Goldman Sachs. Please go ahead.

Yeah, Hi morning, Hey, you guys made some pretty good color in Georgia are met.

Unknown Executive: Very awful.

Tom Wadewitz: The next question comes from Tom Wadewitz of UBS. He's go ahead. Yeah.

Looking at things like cost per shipment, which is down quite a bit year over year and flat sequentially. Despite the labor increase I'm just curious if you could provide a little more color.

Alain Bedard: Good morning, Alain. I wanted to see if you could talk a little bit more. Yeah. I wanted to see if you could talk a little bit more about kind of how yellow the business from yellow coming over. I think we were anticipating maybe a sequential lift and price, but I don't know if there's like a significant mix effect within that. And then also just, you know, when you have kind of a disruptive step up in activity that can cause some inefficiency.

And where you think you've made some of that progress and how do we think about cost per shipment from here. Thanks.

Yeah, Yeah. So so you know those guys today with the increase in salaries to our to our Union Labor Force Okay.

You know we are a little bit ahead of our targets our target should be you know in in the neighborhood, where we're right now about five or 6%.

More than that but the target for 'twenty four drops again, okay. So the guys will have to do a better job. So how how can you do a better job.

Alain Bedard: So I wanted to see if you could provide a bit more perspective on how that affected your results and trick you. Yeah, yeah, very good question. So you know what what you could see is that if you look at our average weight for shipment. I mean, it's up. I think 7%. Okay. So this is thanks to a little bit of change in our, you know, shipping. Okay. So for sure, the fact that this player has disappeared helped us improve our wheat for shipment in terms of pricing.

As you have to act and react okay in a much faster way we're also.

Providing our team for the line of Avi of a software of the 21st century right.

So this is going to be up and it's it's in the trial, Okay faces right now and based on what the guys are saying is that this is going to be fully implemented.

Alain Bedard: Our pricing, our pricing and revenue for shipment, X fuel is about flat year over year. So we were not really helped with that. Now, don't forget we used to run 23,000 shipments before what happened to RC. We went all the way to 26, but now we're back down to more like 24 and a half to 25. And during the quarter, we had also, we went through increased costs in a sense because with pickup and volume, we had to, you know, bring back people, bring back people cost.

N 224, so there again with better information better tools to our line all guys I mean, they'll be in a position to shave costs. So.

I can't really tell you what our labor cost per shipment is but what I can tell you is that even with more paying our employees more our labor cost shipping today is less than a year ago.

Got it and then just as a follow up I know, we've talked about yield and mix and what have you I don't call you've touched on sort of like core pricing actually affects of fuel and mix and justice contracts have come up what you're saying, especially since the yellow a bankruptcy. Thank you.

Alain Bedard: Money and then whoops. Again, okay, we went back closer to 24 and a half, 25,000 shipping. So then we have to readjust our labor force again. And as I said, you know, the problem we have at T force rate is when you don't have financial information at the thermal level, the reaction time. Okay, with all this variation of volume is too long. Okay, and this is what we will be correcting in the future when we provide those guys with financial information, accurate financial information by the day, okay, by the week.

Well I think that.

For Q1, and Q2 of 'twenty three we were starting to see a little bit of pressure on rates in the U S. L. T L market now.

Now with the fact that this thing happen, okay with what I see are the price the pricing pressure as alleviate I'm not saying that G. R. I and all of this is going to be great in 'twenty three 'twenty four.

Alain Bedard: So all in all, if you look at our offer a new ratio, okay, we're about flat year over year in Q3 for USLTL. One thing that we have to keep in mind is that our GFP operation, excuse me, was down on the revenue big time. Okay, so but we're coming back. I mean our sales team was working on that, so that shouldn't prove. For 24.

Or at least the pricing pressure because of too much capacity in the market start to alleviate in Q3 and I think it's gonna be a thing of the past, okay for Q4 and into 'twenty four.

Thank you.

Okay.

The next question comes from Kevin Chiang CIBC. Please go ahead.

Tom Wadewitz: So, I guess it's a follow-up question. Do you have any thoughts on how we should, you know, what we should consider when we're modeling for the OR and also when we're modeling at 2024 U.S. L.T.L. OR? Because you know what, excuse me. I think that 24 L.T.L., U.S. L.T.L. OR should be less than 90. I'm just losing my voice too bad. Yeah, so we should be in that neighborhood of 88, 87, 88 to 90. Okay. Great. Okay. Thanks for the timeline. Okay.

Eileen Thanks, Thanks for taking my question here.

Maybe just looking at the U S <unk> Division.

I guess off after 2024, it feels like the 80 788 or the that you think you can get next year.

Is burdened with with with a higher wage rate and the.

First you have your new deal I think it's 5% stepping down just as you could have rolled through that way.

It feels like you have good line of sight to get to that 85, maybe its more of a 2025 story is that kind of the right way to think about the or cadence just just as wages as wage growth steps down and you continue to get yield growth.

Yes.

Yeah, Yeah cost declines yeah, yeah, yeah, well, absolutely Kevin because you know it's a huge hit I mean, when you have to get 5% more to your employee right. There, okay and employee costs as is a big big components of our cost right. So you're absolutely right I mean, that's 5%.

Ken Hoexter: The next question comes from Ken Hoaster of Bank of America. He's still ahead. Great.

Alain Bedard: Good morning, Alain. Actually, I'm taking the questions. So just maybe I'll follow up on that for a second. You know, lots of puts and takes in U.S. L.T.L, this quarter. There was the 5 million, I guess you've got the ongoing charge. Maybe you can talk a little bit about, you know, when you start transitioning from the UPS network and then you start eliminating those contractual charges. The ground freight pricing, is that something that continues to fade away?

It was really a big hit for year, one, but then when you get to a new contract with your two or three and four I mean, we're not talking about 5% right.

So I think it's about 2% someday that because overall the contract is just a just under three over five years.

So that's that's a huge headwind for US now okay. Because you know all of these costs, we have to manage that and we got to try to pass on more too in terms of pricing, okay, which we haven't done because if you look at the average revenue per shipment I mean were flat year over year. So really this increased cost.

Alain Bedard: I just want to be able to step back and understand kind of how we should think about the U.S. L.T.L, and then your near-term target of moving some 90 and your long-term target of getting to the, you know, as much as 80%. So maybe just thoughts about what's in the number, what's the clear and then what's the go forward? Okay. So the transition from UPS at the latest. I mean, we're done by Q1 of 24.

For our we have to see.

Swallow it well within our operation. So again is by being more efficient that we're able to come up with a door that's about stable year over year with 5% more money to our employees right. So.

Alain Bedard: Okay. So what we've done so far is financial. So we move Oracle to our own Oracle financial system. We did HR as well. We did HR in the summer. We also did the fleet in September. So we move from UPS fleet management to our own satire system. So the only thing really of importance that's left is the housing of our edge system. Excuse me. So that's the only thing really left with those guys.

So time is on our side, okay for sure because down the road, we will not raise the salaries by much as 23, and we're still going to be working on reducing.

Reducing the miles reducing the hours.

Having a better planning.

Talking about my line haul operation, that's gonna help big time.

I mean, it's it's.

It's new tools with with AI.

Alain Bedard: So to me, all these transition to us, all these access costs should be things of the past probably into 24. But for sure, you won't see anything like that into after Q1 of 24. Now, in terms of our GFP. So last year, we were just flying with that, doing really well. This year, okay, starting Q1. I mean, our revenue start to drop. I mean, we had some, some customers issue. Okay, that we had to fix, which we have been fixing and working on.

That's really going to help our Lino division to be in a better position to forecast because every day, it's a different story right.

So I'm not convinced.

Okay that 24, we'll see major improvement versus 23 in the U S. L. T. L operation. Okay. So that's why I'm convinced that we could get to the 80 788 O arm and and then we're on track to be closer to 85 in 25, our goal has always been.

Alain Bedard: And now we're starting to see revenue of GFP slowly picking up again. Our volume at GFP is down, like I said, big time, like 40%. And this is not normal. So we had some issues with some certain customers, but you know we're working with them and we're going to fix that. And it's coming. Now in terms of the LTO, like I was saying to Tom, I haven't seen the plan. I'm going to be with the guys tomorrow.

To be clear.

Oh sure to 80, but we Gotta go step by step.

That's that's helpful and maybe just.

Maybe just my last question here.

You've talked about normalized earnings for your company and I think you mentioned this on the Q2 call kind of between eight to 10.

I know you're looking at 24 being a transitional year, but does that get you within that range did you do you think you can get to the bottom end of that eight to 10 normalized earnings in 'twenty four even if it's a transition year or or or or is it still a pretty challenging market out there.

Alain Bedard: Okay, and talking about their plan for 24, but I can't see us coming out with a plan with an OR of 90 plus. Okay. I think that the market is still going to be soft. Okay, but we can't blame the markets for that because us, we have a lot of work to do in our cost. So even if the market stays soft, like it is now, I think that T4's free team will definitely improve.

Our truckload is really killing US right. If you look at the star in the U S. Okay. The best Trussell Company and U S had a very difficult Q3 us where the same.

Really really for us in 'twenty four is how is our truckload. Okay specialty truckload is going to come back to me if our truckload is coming back slowly okay to a more normal environment I think that 24.

We should be in a position to get closer to eight.

Alain Bedard: So this is why to me, when we have a target for 24 to be in this 87 88 range. Okay. I think it's reasonable. But this is me talking before meeting those things. Guys, tomorrow, I hope that's their plan because to me, that is a reasonable plan. That's a reasonable target. We'll see. But the fact that this market probably will stay soft. Okay, even with the disappearance of a major player. Okay, that's, that's the, the best that we can read so far.

$6 50, right. So truckload is you know.

The Big story for Us this year.

[noise] L. P. L U S. L T L volumes in Canada, if if we could start to see a little bit of growth there.

And M&A too I mean, it's for sure a G. H D will help us big time to get closer to eight right and and we have other things Hill.

In the pipeline.

It could be also interesting for 'twenty four.

No I mean, that's let's talk about twenty-three get to 650 in 'twenty three and then guys. We gotta get closer to eight in 'twenty four.

Alain Bedard: If I'm wrong in the market improves. Now, even better. But the focus. And I'm repeating that at T4's rate. We have to be more efficient. We have to reduce our cost. We're going to be providing, providing them financial information now, by terminal, which they never had, which we have in Canada. So think about it. Look at our war in Canada. I mean, in a very difficult market in Canada, we able to come out in Q3 with less volume with a sub ADR.

No we didn't.

Too but.

But okay. So I mean.

That's that's a nice target to be at an eight.

In 'twenty four.

I agree that's it from me only and thank you for taking my questions.

Pleasure.

Yeah.

The next question comes from Brian <unk> of Jpmorgan. Please go ahead.

Alain Bedard: Why? Well, because our guys are very disciplined. They manage the cost, notwithstanding the market condition. They do a better job than a US team. But a US team, you know, they don't have the financial information. They will have that by terminal and we'll start to see some improvement 24 and on.

Hey, good morning, Thanks for taking question.

Or are you Brian .

Hey, So I just wanted to follow up on the M&A and maybe get your thoughts on capital deployment and sort of the rationale and timing behind the private placements you know what are some of the best opportunities to deploy capital.

You see right now there's some bigger deals maybe getting a little more interesting is the freight recession lingers and then if you go first yeah.

Alain Bedard: Great. I'll ask a follow-up, but I'll keep going so you get a simple water there. But, you know, maybe you kind of reiterated your full year target, right? So, but yet, and that's a pretty wide range right when we're looking just as we move into fourth quarter. Maybe can you talk a little bit about what gets you to the bottom end versus the top end, or is your thought still some decent rebound into the fourth quarter?

I mentioned last time, you said you had enough doors.

And of course now in yourself. He also maybe yeah yellows Occidental interest you but.

<unk> commented that'd be helpful.

Yeah, Yeah, you know what Brian I mean, the reason we did that 500 million placement is because.

Is that because we don't know what to do right is just we're just getting ready to do something right.

Alain Bedard: I mean, you look at that Canadian LTL, I agree, you know, Spain in the 70s. Amazing, but yet, you know, deterioration of 400 basis points. So, I don't know if there's thoughts you want to throw out there about what gets you bottom end versus top end of the range given where we're close to that, that you're a number. Yeah, good question. Can you know, if you look at logistics in Q3, what you see in there is only six weeks of our GHD acquisition.

So as you look at what we've done this year.

Wow.

All right.

I mean, we've done about $200 million.

Right.

The investment Okay in terms of M&A.

Yeah.

Yeah.

I think that we're going to do more than that in 'twenty. Four. So this is why we.

Alain Bedard: So, for sure, I mean, GHD is going to be there for the full quarter. So, that's going to help us. I believe that T4's rate will do better in Q4, 23 and Q4, 22. Okay? So, that's going to help us to get through our target. Now, we're going to work hard because we miss consensus two quarters in a row, Q2 and Q3. And, you know, out of 25 years, we miss guidance about five times.

We got setup.

With this private placement just in order to get a little bit more dry powder for us too.

To be in a position to do the good things that we wanted to do into 'twenty four.

In terms of our pipeline.

Your line is really strong in terms of M&A.

Yeah.

Hello, Andrew.

Any sort of as a quick follow up any thoughts on the yellow.

Bankruptcy auction anything it seems like you have enough doors in the U S now, but wanted to see if there's any.

Alain Bedard: I've been involved with trucking. So, I don't like that. So, this is why, believe me, we're going to work very hard to be closer to 650 than to six bucks, right? First result that I'm seeing from October, okay, are very encouraging. So, that's why I feel pretty good of just reaffirming our six to 650, but we'll probably be closer to 50 than six, 650 than six. Right. Alain, thanks for time. Appreciate thoughts. Very good, Ted.

Particular assets that lift.

Of interest to you and then maybe it's just a quick follow up at the same time do you can you just give us a sense of how it mhm density is tracking and T force rates always a big.

Part of the story here.

Some comments on young and stops per truck or miles between stops now that you have a step up in volume.

In the third quarter.

Thank you yeah, Yeah, you don't Woodbine, we we've said it many times I mean, our focus in the U S. Okay has always been logistics Center L. T O and to a certain degree specialty truckload, if there's something that makes a lot of sense for us to do.

James Monigan: The next question comes from James Monigan, a little fargo. Please, go ahead. Hey, good morning. Actually, it's sort of follow up on the broader LTO. Morning, follow up on the broader LTO discussion, kind of get a better understanding of the volume and pricing trends you're seeing. It seems like there was surgery for you to pull back. Just kind of want to get some contact around that as well. Okay. So, I mean, the forecast we have us for Q4 and into the new year.

In terms of improvement Okay at the T Force right.

Our miles per stop between each and every stop as improved.

Okay. This is helping us to reduce the costs, okay, but we're still a far cry from what we do in Canada.

So as an example, if we do let's say the Canadian stories, we do about five miles between each and every song.

In the U S. We'd be doing double digit miles over 10, right. So now with with less volume than two years ago. When we bought the company.

James Monigan: I mean, our forecast is based on about 25 to 26,000 shipments a day. Okay. That is where we are seeing us going into 24. So, that to me is should be normal, okay, for the company of our size, for the next next years to come. And Tom, what was the, I mean, what was your next question? Yeah, but essentially, the trends you're seeing in October and then you mentioned that there was spike up and volume and the spike down just what was driving that during the quarter.

Our average mile per sub is not five in the U S. But it's not 10 anymore. So it's single digits now.

Slowly okay, we're doing more in terms of having drivers picking up rate and driving less and when they drive less well they cost less money less money because they don't spend on fuel.

There's less risk of accident, because they they're not driving their picking up rate right. So we are on the right track, okay, but we're so far from the efficiency that we have in Canada, but this is work that needs to be done between our sales team and our ops team. So that the sales team really under.

James Monigan: Well, it's just adjustments from shippers, right? So, you know, when, when YRC closed their doors, I mean, for sure, customer called you and then there's an action and reaction and there's been an adjustment. So, this is why we went from 23 to close to 26 and back down to 24.25 as we speak now. So, but there again, the story of T-force rate, it's not about volume. For now, it's about cost. Okay.

What we're looking for.

So T force rate used to be a sales oriented company.

It was owned by U P S.

Well it is owned by T F I, it's not a sales oriented company.

It's an operational oriented company so the operation dogs to sales about what they want what they need to improve density.

James Monigan: So, what we're saying to our sales team guys, okay, try to get better, better freight. Okay. 26,000 shipments is normal for us in 24. That's our goal. Okay. Fine. Get better shipment because we keep improving that. And the ops guys have to work on the cost. So, that's how we're going to bring, okay, we're not focusing on getting more money from the customer. If we, if we can do that, fine. If the market allows us to do it, fine. But our focus is not that. Our focus is really bring the cost out. Okay. Be more efficient. Do more or less. Got it.

It's not the other way around where it says Oh. This is a customer. This is a shipping and now you've got to take care of that no no no no no no no.

This company is moving into a knobs driven okay environment and it's the operation that works with sales.

And say Hey, this is what we want this is the area. This is the kind of freight we need okay and don't bring me something that I don't want.

Right, because I'm not jack-of-all-trades master of none anymore.

Yeah.

I appreciate it thank you.

Very good Brian .

The next question comes from Scott Group of Wolfe Research. Please go ahead.

Alain Bedard: Then on Canadian LTL, you're doing much better than sort of the long-term guarantee you've given at the investor day, and it seems like we're trotsy in terms of it. So like how should we think about, like essentially was that number conservative, or is that actually sort of how you still think about the business? And if not, what do you actually do think the long-term margin can be in Canadian LTL? Thanks. But I think Canadian LTL, if you look at that, Q3 with volume and pressure on the Canadian market, we're able to come up with a sub 80 OR.

Hey, thanks.

Morning Ali.

Just wanted to follow up on the M&A I just want to follow up on the M&A discussion. So it sounds like more M&A next year should we be thinking about a sort of a larger more transformational deal is this more just more of the tuck in deals and how do you balance M&A with the potential for a big buyback just like that.

The stock's now basically back to pre yellow.

Levels, Yeah, So how do you balance versus buyback yeah.

Yeah.

Alain Bedard: And don't forget that we also mean in acquisition in the Canadian LTL market, the Kindersley Group, and these guys are 2% bottom line guys. It's going to take us a year to bring those guys closer to 15% bottom line guys. So to me, we've always been more focused on bottom line than top line. So Kindersley is going to help us with the volume. So this is why when you look at a Canadian volume, Q3 over last year, our volume is up because of Kindersley, right?

Well you know buyback, we really loved buybacks. So I'll give you. An example, we just renewed I N C I B Scott right.

And we have an order to buy a million shares depending on the place.

So so this is you know this is a focus depending on the price.

When theyre, we renew and in CIB and we're gonna be.

Now if there's a major transaction okay.

And I think that if you look at the history.

Normally you have something of size in 'twenty four we did a lot of nice tuck ins.

Alain Bedard: But you know, that's good in terms of volume. But the profit margin is really, really like 2% with these guys. So it's going to take us a little bit of time. But I think that the Canadian market, Canadian LTL market is way more difficult than the US one in terms of market condition quality of revenue, et cetera, et cetera. So this is why when you look at a whole sort of Canadian LTL, a lot of our freight is intermodal.

In 'twenty four.

We're probably very close to being done for 'twenty.

Twenty-three, we're probably close to being done in 'twenty three.

We got this $500 million placement just to get ready to be in a position. Okay. In a better position our leverage is one point 39 right now.

We should be closer to 1.2.

The end of the year. So we have a lot of dry powder on our.

Alain Bedard: So probably like 40% of our revenue runs on rail. So to be able to come up with a sub ADOR using the rail, this is like close to America. But again, I'm always emphasizing this is that our Canadian team has information to act and react every day. And this is what's lacking in the US. Those guys have the excuse today of not knowing anything about costs. The only thing that now they know is their labor cost per shipment. Okay, since October of last year. Thank you. Welcome.

Line of credit with our bankers that we have cash we got what three or $400 million of cash at the end of the year. Okay. So we are well positioned to do something of size in 'twenty. Four now it's always the same story with T. F. I, there's always one not just one file that we're working on their own.

Raised more than one so I think that the possibility of doing something else.

All of size in 'twenty four.

I would put that at 65% 75%.

Okay, and then Scott the other at times, though you've actually gone the other way and you've sold assets or spun assets is that something you're thinking about right. Now is there are there assets potentially worth.

Alain Bedard: The next question. [inaudible] So providing our team for the Lionel of a software of the 21st century, right? So this is going to be up and it's in the trial, okay, faces right now. And based on what the guys are saying is that this is fully implemented into 24. So there again, with better information, better tools to our Lionel guys. I mean, there'll be in a position to shape costs. So I can't really tell you what our labor cost for shipping is, but what I could tell you is that even with more paying our employees more, our labor cost shipping today is less than a year ago.

Monetizing.

No no not not in 'twenty, three or 'twenty four Scott, maybe maybe that's something that may happen in 'twenty five depending on what happens in 'twenty four.

We'll see.

Yeah.

And then just lastly, I know you made a comment earlier that you're not sure if the.

If it's the right environment for Big L. T. L. G arrives or something like that and you know I.

I know the July you announced earlier this month was a bit lower than the last year's July we just had the site. There G. I. This morning, and it's a it's actually a point bigger than last year. So maybe just I don't understand why why do you think its not an environment more supportive for L. T. L. G R I's and price segment.

Scott you can't compare O D Saia with T O T force rate right. So our reputation is not the same you know so we have to gain reputation we have to improve our service we have to improve our costs, but we also have to improve our shirts.

Because for years and years, we're writing the truth right.

So this is why us we in Canada, we we could do these kinds of things, okay, we could be the leader okay.

Scott I'm, sorry, but in the U S. We have to be followers today, we have to follow O D and saia and can we be in the same league as those guys. No. I mean, we we were not as good as them.

We won't be but we're not today. So this is why when we talked to our teams is guys, let's be cautious on that okay, and you know saia and O D or b, all the big guys do really well fine.

Alain Bedard: Got it. And then just as a follow-up, I know we've talked about yield and mix and what have you. I don't call you touching on sort of like core pricing X, the effects of fuel and mix and just as contracts have come up, what you're saying, especially since we've used the yellow bankruptcy. Thank you. Well, I think that for Q1 and Q2 of 23, we were starting to see a little bit of pressure on race in the USLTL market.

We still have lots of work to do in terms of service in terms of course.

And maybe next year will be in the same league, maybe it's going to take us another year or two but we're not there Scott. So we cannot be as aggressive on pricing. As these guys are honestly, we have to be very aggressive on our cost.

Alain Bedard: Now with the fact that this thing happened, okay, with what I see, the pricing, the pricing pressure as alleviate. I'm not saying that GRI and all this is going to be great in 23 24. But at least the pricing pressure because of too much capacity in the market start to alleviate in Q3. And I think it's going to be a thing on the past, okay, for Q4 and into 24. Thank you.

Makes sense. Thank you Alain for the thoughts.

Pleasure Scott.

The next question comes from Connor <unk> of Scotia Capital. Please go ahead.

Thanks, operator money Atlanta hope you're doing well.

Good morning, when you got it.

Good morning Liam.

To kind of.

Circle back on on people asleep.

Ex fuel.

Third quarter.

It seemed to have come down sequentially and I'm just curious you know.

The yellow bankruptcy situation definitely created a more sort of a balance between demand and supply on the LDL market reality pretty consolidated right and concentrated so I'm just curious like what what would have contributed to that the yield decline in Q3 with the first.

Kevin Chan: The next question comes from Kevin Chan of CIBC. Please go ahead. Hi, Elaine. Thanks for taking my question here. Maybe just looking at the USLTL division after 2024, it feels like the 87-8080 war that you think you can get next year is burdened with a higher wage rate in the first year of your new deal. I think it's 5% then it steps down. Just as you can roll through that wage, it feels like you have good line of sight to get to that 85.

Kevin Chan: Maybe it's more of a 2025 story. Is that kind of the right way to think about the OR cadence just as wages as wage growth steps down and you continue to get yield growth and assume unit costs declines? Yeah, well, absolutely, Kevin, because you know, it's a huge hit. I mean, when you have to give 5% more to your employee right there, okay, an employee cost is a big, big components of our cost, right?

Six months of this year.

Well I think that if you look at the revenue per shipment I mean, it's it's flat the yield is lower because the shipments are heavier so there's a little bit of a trade off okay. So.

Really cornered us what we look at is hey, what's the revenue per shipment and and our goal is always to increase the wait because we are being paid by the way now when you increase the way you got to reduce a little bit the right. Okay. So it's a balancing act, okay and like I said.

With Scott early on I mean, we're not perfect. I mean, we're we're you know, it's it's still need some improvement our pricing team.

Kevin Chan: So you're absolutely right. I mean, that 5% is really a big hit for year one. But then when you get to our new contract with year two, three and four, I mean, we're not talking about 5%. So I think it's about 2% something that because overall the contract is just just on the three over five years, right? So that's a huge headwind for us now, okay, because you know, all these costs we have to manage them.

So it's you know we lack a lot of but disciplined in the past okay that we're trying to correct, but that takes time.

Customers. So we want our customers to have a great experience when they deal with T Force right.

And I know.

We had a lot of issues in the past with the servers are equipping was so bad okay.

That's for the first time in the D. M D N. A we're showing the age of our trucks at seaports right.

Kevin Chan: We've got to try to pass on more to on terms of pricing, okay, which we haven't done because if you look at average revenue for shipping, I mean, we're flat year year. So we're really this increased costs for hour, we have to swallow it within our operation. So, again, it's by being more efficient that we're able to come up with an OR that's about stable year to year with 5% more money to our employees.

Now we're down to about 4.6 average age versus when we bought the company we were closer to eight.

That's that's issues with service for sure I mean with the old trucks.

Slowly I mean, what we're going to get to a better quality of revenue, but we have to improve our service we have to improve our customers' experience with us and this is why you know, it's a little bit of a balancing act okay.

Kevin Chan: So time is on our side, for sure. Because down the road, we will not raise the salaries by much as 23. And we're still going to be working on reducing the miles, reducing the hours. Having a better planning, talking about my Lionel operation, that's going to help big time. I mean, it's new tools with AI that's really going to help our Lionel division to be in a better position to forecast because every day, it's a different story.

Uh huh.

This is like when you when you were trying to buy let's say a car. Okay. So you can't sell a car.

Car that is not a bentley identity space.

Right no it makes sense Atlanta, thanks for all the color.

I can follow up on the operating ratio. So I heard you, saying, 87% to 89 or 90% dish almost right next year for U S. L. P. L U.

You guys are up to 90% today, so that that's a decent improvement clearly.

Kevin Chan: So I'm convinced that 24 will see major improvement. Versus 23 in our USLTL operation. Okay, so that's why I'm convinced that we could get to the 87 88 alarm. And then we're on track to be closer to 85 in 25.

But I think previously you kind of alluded to probably ask Louis 85% I'm just wondering like is it market or so.

So is it market driven.

That that you are not expecting 85 in the next year, maybe or is it something else in that equation doesn't change.

Yes.

Yeah.

Oh no you know what Cologuard is it's really it's a soft patch for the volume right now right. So for sure that the fact that the wires. He is gone as improved okay, but the market is still there.

Kevin Chan: Our goal has always been to be closer to 80, but we got to go step by step. That's helpful.

Kevin Chan: Maybe just my last question here. You talked about normalized earnings for your company. And I think you mentioned this on the Q2 call kind of between 8 to 10. I know you're looking at 24 being a transitionary year, but does that get you within that range? Do you think you can get to the bottom end of that 8 to 10 normalized earnings in 24, even if it's a transition year or is it still a pretty challenging market out there?

And in the overcapacity, okay situation in the U S not big but still is right. So this is why we have to be careful we say 90 for us in 'twenty four should not be our target. It's got to be closer to 80 788, okay keep improving that.

And as I said, it with minimal improvement on volume because.

Our targeted volume has to be closer in the 25 to 26 range shipments per day, right. So a little bit of improvement in volume.

Kevin Chan: Our truckload is really killing us, right? If you look at the star in the US, okay, the best truckload company in US had a very difficult Q3 us were the same. Really, really for us in 24 is how is our truckload? Okay, specialty truckloads going to come back to me. If our truckload is coming back slowly to a more normal environment. I think that 24 we should be in a position to get closer to 8 than 650, right?

Bit of improvement maybe on the pricing, okay with the G. R I fine, but the big improvement has to come from the operation in terms of the liner cost in terms of our PND cost in terms of our you know that's how we're going to get to 88, and 85 and hopefully one day get closer to 80.

Now we also have to live with the environment right. So what we've seen so far is in Q3, one of my peers came out nonunion with an 85 war.

Kevin Chan: So truckload is, you know, a big story for us this year. LTL, USLTL, volumes in Canada, if we could start to see a little bit of growth there. And M&A too. I mean, for sure, GHD will help us big time to get closer to 8, right? And we have other things, you know, in the pipeline that could be also interesting for 24. So, I mean, let's talk about 23, get to 650 in 23. And then guys, we got to get closer to 8 in 24. And we did 8 in 22, but okay, so I mean, that's a nice target to be an 8 in 24. I agree.

Okay.

O us.

You know unionized in a difficult environment, because T force right Theres been abandoned okay.

Not really invested a lot by the previous owner because that was not their focus so.

So we're going through a lot of improvement and changes so to me when you look at the U S.

90, something or for us in Q3 in a soft market. Yes, why does she has gone okay that helps.

But still I mean, my G. S. P. A logistics operation is down big time.

Okay, that's going to come back in 'twenty, four but still I mean I'm really.

Proud of what the guys have done so far a T force right now we bought this company two years ago.

Unknown Executive: That's it for me only. Thank you for taking my question. Thank you, thank you.

Okay at the time it was losing money.

Brian Ossenbeck: The next question comes from Brian Ossenbeck of J.P. Morgan. Please go ahead. Hey, good morning, Lane. Thanks for that question. Morning, Brian. Hey, so this one to follow up on the M&A and maybe get your thoughts on capital deployment. And, you know, it's sort of the rationale and timing behind the private places. What are some of the best opportunities to deploy capital you see right now? There's some bigger deals, maybe getting a little more interesting as the friction session lingers, and then you can offer comments and laughs.

Today it's.

Those who are making 10 points.

In a softer market versus a year ago.

That's great. Thanks, so much for the color and all the best sort of 'twenty 'twenty four.

Brian Ossenbeck: You said, you had enough doors. Yeah, the doors now and you have to help you out. So maybe you have those talks and don't interest you, but comment on that be helpful. Yeah, you know what Brian? I mean, the reason we did that 500 million placement is because. It's not because we don't know what to do, right? It's just we're just getting ready to do something, right? So if you look at what we've done this year. I mean, we've done about 300 million, right? Of investment, okay, in terms of M&A. I think that we're going to do more than that in 24.

Yeah. Thank you called out we were going to need that for sure.

The next question comes from Baskin majors Susquehanna.

Please go ahead.

Yeah. Thanks for taking my questions here Theres been a lot of talk on U S. L. T. L. Understandably, given how much you've improved and driven value from that business, but if you go back to the truckload segment, a little more in detail.

Comfortable are you that this kind of 100 million adjusted EBITA level as close to the bottom.

Should we see some negative seasonality into the fourth quarter in Europe .

Or are.

Are we at a floor, there where we feel pretty good about where we are bottoming and it's really just a question of how long it takes us to get better and how quickly that can happen. Thank you.

Yeah very good question I think that if we're not at the floor, we're very close to the floor. Okay.

Alain Bedard: So this is why, you know, we got set up with this private placement just in order to get a little bit more dry powder for us to to be in a position to do the good things that we want to do into 24. In terms of our pipeline, our pipeline is really strong in terms of M&A. Hello, and any says a quick follow up any thoughts on the yellow bankruptcy option anything seems like given up doors in the US now, but wanted to see if there's any particular assets that looked of interest to you.

You know that.

The truckload world are specialized truckload, okay is very disappointed in a sense because you know we're coming out with a knee the 788 of the war.

But then we take comfort when we look at the van World in the U S where most of the guys are coming out with a 95 war.

Okay in Q3.

So what we've seen so far.

So it's it's very disappointing when I've talked to Steve Okay Brook, Charlotte Guy our leader over there and and the feel is that I don't think it's we're going to see some major improvement in Q4.

Alain Bedard: And then maybe this is the quick follow up the same time you can just give us a sense of how density is is tracking in T4 streets. I was a big part of the story here. Some comments on yeah, stops for trucker miles between stops now that you have a step up in volume in a third quarter. Thank you. Yeah, you know what Brian, we said many times, I mean our focus in the US.

And it's probably going to take us all the way to somewhere in 24 before we start to see improvement okay. In our specialty truckload, but again I haven't talked to the team there I'm I'm going to be with the truckload team next week.

To see what the plan is for 24, but I would my my feeling right. Now is that 23 has been difficult okay for truckload.

Alain Bedard: Okay, is always been logistics and LTO and to a certain degree special T truck load if there's something that makes a lot of sense for us to do. In terms of improvement, okay, at T4 straight, our miles per stop between each and every stop as improved. Okay, this is helping us reduce the cost. Okay, but we're still a far cry from what we do in Canada. So as an example, if we do, let's say the Canadian story is we do about five miles between each and every stop.

And we're probably at the floor.

But we're gonna stay on the floor probably for at least the next six to 12 months.

Maybe I'm wrong, maybe things will improve faster than that but to us we're always very conservative.

Hey.

And.

Fuel is an issue fuel surcharges is an issue when you have a soft market. Okay shippers to get advantage of you. Okay by trying to squeeze you on fuel surcharge as well as rates.

All right. So this is what we're going through now.

Alain Bedard: In the US, we'll be doing double digit miles over 10, right? So now with less volume than two years ago when we bought the company, okay, our average mile per stop is not five in the US, but it's not 10 anymore. So a single digit. Now, so slowly, okay, we're doing more in terms of having drivers picking up freight and driving less. And when they drive less, well, they cost less money because they don't spend on fuel.

It's not so much the rate okay is the activity level, that's down for us in our truckload revenue per truck per week is down.

Miles are down okay, because the activities down the rate is not so bad but it's the fuel surcharge squeezed that we're getting from shippers that is affecting us more than.

The rate the base rate.

So there's two things activity, Okay number one revenue per truck lower and number two the squeeze on fuel surcharge.

Alain Bedard: There's less risk of accident because they're not driving, they're picking up freight, right? So we are on the right track, okay? But we're so far from the efficiency that we haven't counted. But this is work that needs to be done. We're working between our sales team and our ops team so that the sales team really understand what we're looking for. So T-force rate used to be a sales oriented company. Where was owned by UPS?

So higher fuel is helpful. Next year and you know its profit improvement is not purely a function of the bid season for you. It really can involve utilization as well is that fair.

It's a it's fair yeah, absolutely so utilization is too low okay. So that's number one and number two rates are about okay. Not so bad because you know we hold onto the right. Okay.

Alain Bedard: When it's owned by TFI, it's not a sales oriented company. It's an operational oriented company. So the operation talks to sales about what they want, what they need to improve density. All right, Elaine, appreciate it. Thank you.

And we are less we get less volume because we hold onto our rate. But then we'll also get squeezed on fuel surcharge. So instead of getting a fair fuel surcharge because the market is soft we get a discounted fuel surcharge from the ships today right. So before things start to get better for us we need more volume.

Brian Ossenbeck: Very good, Brian.

You said that the market condition starts to change with the shipper, Okay and it's it's a kind of a cycle thing right. So some people are dropping from the market right now because you know they come to the shippers with fuel and price and then oops they lose their fuel card because they can't pay their fuel bill.

No I mean, the demand is still.

Weak and the offer is still more than the demand, but you you're going to see some truckers slowly getting out of the business okay because.

Scott Group: The next question comes from Scott group of wool research. Please go ahead. Hey, thanks.

You know they get with with the shippers with stupid pricing.

Scott Group: Good morning, Elaine. Just want to follow up on the M&A. Just want to follow up on the M&A discussion. So it sounds like more M&A next year should we be thinking about a sort of a larger, more transformational deal? Is this more, just more of the tuck-in deals? And how do you balance M&A with the potential for a big buyback? Just like the stocks now basically back to like pre yellow levels right now.

That's why I'm, saying, we're on the floor. Okay are we going to stay on the floor for for three months, absolutely is that going to last for nine months Hum I don't know, but one thing is for sure I don't think that we're gonna see worse condition than what we have today and then I'll also let.

And to what the way our peers are looking at the market.

L. A and I think it's basically the same message is that we're in the floor and it's just said Oh faster can we get up from the floor.

Scott Group: So how do you balance out the neighbors by back? Yeah. Well, you know, buyback, we really love buyback. So I'll give you an example. We just renewed our NCIB, Scott, right? And we have an order to buy a million shares depending on the price. So, so this is, you know, this is the focus depending on the price. When there we renew our NCIB and we're going to be, you know, now if there's a major transaction, okay?

It's hard to say.

Thank you.

The next question comes from Elliot Alper of TD code. Please go ahead.

Great. Thank you. This is on for Jason Seidl Ah maybe over on the logistics side and the GHT acquisition, I guess how's the integration going so far how does their margin profile, maybe compare to your core logistics margin, maybe how we should think about that in Q4 I know there are pretty niche player in the auto space.

Scott Group: And I think that if you look at history, normally you have something of size in 24. We did a lot of nice tuck-ins in 24. We're probably very close to being done for 20, I mean, 23. We're probably close to being done in 23. We got this $500 million placement just to get ready to be in a position, okay, in a better position. Our leverage is 1.39 right now. We should be closer to 1.2 at the end of the year.

I'm curious if they are being affected by the auto strikes I was wrong.

Yeah, Yeah very good question, so no they're not affected by the auto strikes at all Okay number one number two is there a profile of margin is similar to ours right. So they're not in the business of two 3% bottom line, because we were not a big fan of that.

You know, we're not big fan of three 3%, so they're close to ours and as you know I think that the G. H T. We'll we'll do better than the average T. F. I, Okay logistics earnings in 'twenty four 'twenty five we see probably in 'twenty for a little bit of it.

Scott Group: So we have a lot of dry powder on our line of credit with our bankers. Now we have cash. We have what three, $400 million cash at the end of the year. Okay, so we're well positioned to do something of size in 24. Now, it's always the same story with TFI. There's always one, not just one file that we're working on. There's always more than one file. 2001. So, I think that the possibility of doing something of size in 24, I would put that at 65%, 75% Okay.

Dip in volume, Okay at G H T versus twenty-three well, we see a major improvement for 24. According to the forecast that I've seen so far in terms of the integration I mean this is so new to us I mean, we're just learning.

With the team there are I mean G. H T is a fantastic company, it's a great acquisition for T F I.

A group of companies.

Scott Group: And then Scott, at times though, you've actually got the other way and you've sold assets or spun assets, is that something you're thinking about right now, are there assets potentially worth monetizing? No, not in 23 or 24 Scott, maybe that's something that may happen in 25, depending on what happens in 24. We'll see. And then just lastly, you made a comment earlier that you're not sure if the, if it's the right environment for, you know, big LPL, GRIs or something like that.

Matter of fact after this call I'm going to be with the management team of Ghd to talk about their planning for 'twenty four.

And you know I think that even with less volume.

I think that she will do is as well in 'twenty for US is as they did in 'twenty three.

So very happy with this transaction and this is the kind of deal that's going to help us create value for our shareholders.

Long term.

Got it and then maybe separately on the logistics.

Scott Group: And, you know, I know the GRI you announced earlier this month was, you know, a bit lower than last year's GRI. We just had SIA announced their GRI this morning and it's a, it's actually a point bigger than, than last year. So, maybe just, I want to understand why, why you think it's not an environment more supportive for LPL, GRIs and pricing. Scott, you can't compare O.D. SIA with T4s rate, right?

Do you know as a whole I mean, you had some organic operating income growth I believe in the quarter I think you called out some strength in the same day package business any other color there on that yeah that'd be helpful. Thanks.

Yeah, you know what our logistics to arm our last mile operation in the U S is doing really well I mean, our volumes about stable year over year.

Any any more difficult market were down a bit in Canada, because one of our customer.

Or are we just cut them off because of the issues with credit. So this is why in Canada, our volumes are down a bit okay year over year in Q3, but.

Scott Group: So, our reputation is not the same, you know, so we have to gain reputation, we have to improve our service, we have to improve our cost, but we also have to improve our service because for years and years we're writing the truth, right? So, this is why us, we, in Canada, we, we could do these kinds of things, okay? We could be the leader, okay? But Scott, I'm sorry, but in the US, we have to be followers today.

But we have a new business coming on stream for Q4, So probably Q4, we're going to be flat year over year in terms of volume again any in a softer market. Okay in 'twenty one 'twenty two.

So we're doing well on the medical side.

Things are the e-commerce for sure I mean e-commerce is not as good today as it was two years ago. So it's a little bit of a fight, but we have a fantastic team over there.

Scott Group: We have to follow O.D, and SIA. And can we be in the same league as those guys? No, I mean, we, we were not as good as them. We'll be, but we're not today. So, this is why when we talk to our teams as guys, let's be cautious on that, okay? And, you know, SIA and O.D, are, you know, the big guys, they do really well, fine. Us, we still have lots of work to do in terms of service, in terms of cost.

That's doing a great job so volume is about stable.

But profit is up.

You look at our year over year.

G H T is helping you.

U S logistics is also helping.

Our volume is down that Ww, a quite considerable okay because of market condition.

But the bottom line is down just a few points so I mean.

Scott Group: And maybe next year, we'll be in the same league. Maybe it's going to take us another year or two, but we're not there, Scott. So, we cannot be as aggressive on pricing as these guys are. Us, we have to be very aggressive on our cost. Makes sense. Thank you, Elaine, for the thoughts. Glad you're Scott.

No. Our logistic is performing really well and I think that are we going to do even better.

<unk> 24.

Great I appreciate it.

You're welcome.

The next question comes from Cameron direction of National Bank Financial. Please go ahead.

Connor Gupta: The next question comes from Connor, Gupta, that's kosher capital, please go ahead. Thanks operator, and money, Elaine will be available.

Yeah. Thanks, good morning.

Foreign Kamran, so maybe just a quick a couple of questions on the packaging Courier business. Just wanted if you can talk a little bit about the outlook as we head into kind of the peak volume period for that business I mean, what does it look like this year year over year, and then maybe secondly.

Alain Bedard: Morning. Lincoln, just want to do a circle back on on people's rates, yield, exhale into third quarter. It seemed to have come down sequentially. And I'm just curious, you know, the yellow bankruptcy situation definitely created a more sort of balance between demand and supply. On the LTL market, it's already pretty consolidated, right? And concentrated. So I'm just curious like what would have contributed to that yield decline in Q3 with this, you know, the first six months of this year.

Just on the on the margin some some pressure year over year I mean, how much of that is I guess, maybe a little bit lower volume environment.

How much is also perhaps.

Could it benefit from or the lack of a benefit from fuel surcharge revenue.

Right right, absolutely Kevin I mean, the volume is down 7% right. So if you look at a piece count and all of that if I remember correctly I mean, we're down about 7%.

Alain Bedard: Well, I think that if you look at the revenue per shipment, I mean, it's, it's flat. The yield is lower because the shipments are heavier. So there's a little bit of a trade off. Okay. So really, Konark, us, what we look at is, hey, what's the revenue per shipment and and our goal is always to increase the weight because we are being paid by the weight. Now, when you increase the weight, you have to reduce a little bit the rate.

On revenue were down $8 million, and basically were down $8 million on the OE.

Q3 year over year.

And some of that is it attributable to less volume okay.

Causes about stable, okay, but the volume is just killing us and because we're so dense because we're so good okay.

When fuel is expensive.

Alain Bedard: Okay. So it's a balancing act. Okay. And like I said, with Scott earlier on, I mean, we're not perfect. I mean, we're, you know, it's, it still needs some improvement, our pricing team, you know, it's, you know, we lack a lot of discipline in the past. Okay. That we're trying to correct, but that takes time. You know, with customers. So we want our customers to have a great experience when they deal with T for straight.

We make it a little bit of money on fuel when she or he is not expensive like it is now that profit is gone right.

So that is a little bit of a headwind.

For our Canadian L T O.

And our package when Shaw is low I mean, we don't make a we don't have a little bit of profit from Q.

When fuel is high we do we do well on Shaw because of our density.

Which is very different than our U S. L. TL operation because we never make money on fuel in the U S. L T O world right.

Alain Bedard: And, you know, we had a lot of issues in the past with the service, our equipment was so bad. Okay. I think that for the first time in the MDNA, we're showing the age of our trucks at T for straight. So now we're down to about 4.6 average age versus when we bought the company, we're closer to eight. I mean, that's, that's issues with service for sure, I mean, with all trucks.

But today no that's going to also help us because our M. P. G. Because of the new equipment is doing way better okay. There's about 17, 18% saving.

On our new trucks versus the old trucks that we used to run so over time I mean, we weren't sure was going to go back a little bit higher that should help us in the U S as well.

Alain Bedard: So slowly, I mean, we're going to get to better quality of revenue, but we have to improve our service. We have to improve our customers experience with us. And, and this is why, you know, it's a little bit of a balancing act. Okay. This is like when you, when you're trying to buy, let's see a car. Okay. So you can't sell, you know, a car that is not a Bentley, a Bentley Sprice. Right. Now, make sense for land. Thanks for that color.

But that's the story the way, we see Q4 camera and into our the.

The volume for our P&C.

Volume will not improve year over year, the market has to solve and US were focus on bottom line like we've said many many times. So I mean this is why guys, let's protect the margin.

And that's not fight this fight with.

Customers that don't want to pay the fair price.

Bastion Majors: I think I'll follow up on the operating ratio. So I heard you saying 87% to 80 or 90% that's almost right next year for for us out here. You guys are at 90% today, so that's a decent improvement clearly. But I think previously you kind of alluded to, you know, probably as low as 85%. I'm just wondering, like, is it market courses or is it market driven that you are not expecting 85 in the next year?

Okay. That's helpful and maybe just a quick follow up just on I guess, how we should think about capex.

For 2024, obviously, you Havent set your budget, yet, but just kind of a framework is there anything I guess directionally you can tell us about capex as we look into next year.

I would say about the same as this year Cameron so far with it whether I could think of okay.

So he'll for sure.

We did a lot of Capex in T force rate that was well warranted and we will continue to make sure that the average age of our fleet keeps going down closer to four versus $4 seven it is right now.

Bastion Majors: Maybe or is it something else in that equation that has changed? Yeah. Now, no, you know what, Konarn is, it's really, it's a soft patch for the volume right now. Right. So for sure that the fact that wire C is gone as improved, okay. But the market is still in a, in a overcapacity, okay, situation in the US, not big, but still is. Right. So this is why we have to be careful.

Our trailer fleet is you do need some improvement too.

So it's on the way so I would say overall for T F I.

Capex should be in the same league as as what we've seen in 'twenty three.

Okay. That's great I appreciate the time thanks.

Bastion Majors: We say 90 for us in 24 should not be. Our target has got to be closer to 87, 88, okay, keep improving that. And as I said it with minimal improvement on volume because our targeted volume is to be closer in the 25 to 26 range, shipments per day. Right. So a little bit of improvement in volume, a little bit of improvement, maybe on the pricing, okay, with the GRI fine, but the big improvement has to come from the operation in terms of the Lionel cost in terms of our P&D cost in terms of our, you know, that's how we're going to get to 88 and 85 and hopefully one day get closer to 80.

Yeah.

Thank you Cameron.

Okay.

The next question comes from Bruce Chan of Stifel. Please go ahead.

Hi, Good morning, this is Andrew called Com for Bruce.

Okay Boy, Oh, sorry make sure you got me Hey, I, just wanted to get any color on hiring and retention acknowledging that the facility managers are still lacking necessary I T system to react as rapidly as you'd like it didn't kind of want to know if there's been any impact of that you know tens of thousands of teachers, becoming available on the market.

And easier to add post.

Yellow and do you feel you need to add any to manage the targeted 26000 shipments per day next year. Thanks.

Bastion Majors: Now we also have to live with the environment, right. So what we've seen so far is in Q3, one of my peers came out non-union with a 95 wall. Okay? So, us, you know, unionized in a difficult environment, because he forced rate has been abandoned. Okay. Not really invested a lot by the previous owner, because that was not their focus. So, we're going to a lot of improvement and changes. So, to me, when you look at the US at a 90 something war for us in Q3 in a soft market, yes, why is he gone?

Yeah, No. We don't we don't need to add any management that's for sure and your question is really a good question and we can't really answer that so those managers that have not been trained in managing cost right. So that's what we're going to do it.

24, once we provide them the financial information that we got to train them.

Now if you ask me, what's going to be the success ratio of those managers that I've never done that.

Hard to say so we know one thing is for sure is that no it's not going to be 100%. So we have guys that.

Are gonna make it and probably we have guys that are not going to be able to make it and pass the test up being able to manage cost.

Bastion Majors: Okay, that helps. But still, I mean, my GFB logistics operation is down big time. Okay, that's going to come back in 24. But still, I mean, I'm really proud of what the guys have done so far at T4's rate. You know, we bought this company two years ago. Okay. At the time, it was losing money. Today, it's close to making ten points in a softer market versus a year ago. That's great. Thank you so much for the color and all of us. Thank you, Konark. We're going to need that for sure.

It's it's a it's a transition year for these guys over the course of 'twenty four.

And two to tell you what the success ratio is going to be I don't know okay.

One thing we know is that they've never done it before.

So we'll see how good these guys could be.

No.

Listen I mean, if you look at the.

T force rate two years ago.

And T force rate today in terms of the executive.

Paul the president as we start.

The pricing Guy David Myers.

As gone away.

Eileen sales either.

We place okay.

Alain Bedard: The next question comes from Bastion majors in Siskahana. Please go ahead. Yeah, thanks for taking my questions here. There's been a lot of talk on US LPL, understandably given how much even prove and driven value from that business. But if you go back to the truckload segment, a little more in detail, yeah, how comfortable are you that this kind of hundred million.

So the fleet managers, Okay is new.

So at the top level, we have a lot of new blood <unk> Suisse clean right.

And you know if if we need to do the same kind of adjustment.

And the people at the terminal level, that's what we will do.

Alain Bedard: And adjusted even level is close to the bottom, you know, should we see some negative seasonality into the fourth quarter and you know, are we at a floor there where we feel pretty good about where we're bottoming and it's really just a question of how long it takes us to get better and how quickly that can happen. Thank you. That's a very good question. I think that if we're not at the floor, we're very close to the floor.

Okay. That's very helpful. Thank you can I just ask a bit about the the volume churn there was some intra quarter swings throughout the quarter and I just wanted to know if that if you think that was more a function of just normal seasonality or is this more a function of yellow freight are finding a home we've heard from other executive team that theres been kind of waves of yellow.

Great go from one carrier to the next depending on service levels I just wanted to get your sense of.

Whether that functionality of seasonality, yeah, well, it's about finding a home for yellow freight. Thank you.

I think we've said it I mean, they won the shippers okay. They go wherever they can and then they started reacting.

Alain Bedard: Okay. You know, the truckload world, our specialized truckload, okay, is very disappointed in the sense because, you know, we're coming out with an 80, the 788 or but then we take comfort when we look at the van world in the US, where most of the guys are coming out with a 95 more. Okay, thank you three. So what we've seen so far, you know, so it's it's very disappointing when I talk to Steve, okay, Brooke shot a guy are leader over there.

And that is probably I don't think that is seasonality. So much as just shippers trying to find a home where they feel that it's a better deal for them.

Okay.

Yeah.

Thankfully.

Pleasure.

The next question comes from Ben <unk> of Desert debt capital markets. Please go ahead.

Alain Bedard: And and the feel is that I don't think it's we're going to see some major improvement into four. And it's probably going to take us all the way to somewhere in 24 before we start to see improvement, okay, in a specialty truckload. But again, I haven't talked to the team there. I'm going to be with the truckload team next week to to see what the plan is for 24, but I would my my feeling right now is that 23 has been difficult.

Ben why your line is open. Please go ahead.

Okay. So sorry, sorry, I was on mute. So just looking back at U S. L. P. L. A to get toward the 80, 85% or longer term just wondering if you'd need to get rid of a railroad sim.

Alain Bedard: Okay, for truckload and we're probably at the floor, but we're going to see on the floor probably for at least the next 6 to 12 months. Maybe I'm wrong, maybe things will improve faster than that, but us, we're always very conservative, okay? And fuel is an issue, fuel surcharge is an issue. When you have a soft market, okay, shipper to get advantage of you, okay, by trying to squeeze you on fuel surcharge as well as rates, right?

To the best in class players in the U S. Then what about the pricing and the service these days.

Yep.

Good point, but anyway. So for sure. Okay. We will do more with the rail okay. Because their service with Ray was always an issue.

And the customer cannot blame the rail they talk to you.

So there's again I mean, we have to bring our cost of our own fleet down. Okay. So then there's no real benefit to move freight on rail. So this is there's two things that's going to happen the improve okay fleet that now our guys are working better trucks.

Alain Bedard: So this is what we're going through now. It's not so much the rate, okay? Is the activity level that's down for us in our truckload, our revenue per truck per week is down, our miles are down, okay? Because the activity down, the rate is not so bad, but it's the fuel surcharge squeeze that we're getting from shippers, that is affecting us more than the rate, the base rate, right? So there's two things, activity, okay, number one, revenue per truck, lower, and number two, okay?

Okay. That's number one number two better management, okay for our Lino provider.

I mean, our line haul team with this new software that we are implementing now that's going to be fully implemented by the end of 'twenty three.

That's also going to help us for sure I mean, if you look at our Canadian Operation, We run road and rail.

Alain Bedard: Number two, the squeeze on fuel surcharge. So higher fuel is helpful next year, and it's profit improvement is not purely a function of the bid season for you, it really can involve utilization as well, is that fair? It's fair, yeah, absolutely. So utilization is too low, okay? So that's number one, and number two rates are about, okay, not so bad, because, you know, we hold on to the rate, okay? And we less, we get less volume because we hold on to our rate, but then we also get squeeze on fuel surcharge.

And the only reason we want rail is because some customers wanted cheap, but they know that their service is never going to be the same.

And.

We have to fight.

Fight with the rail because the service is not there.

But we sit to Miss a customer you Wanna cheap deal.

Well you got to live with cheap service right.

The U S. It's a little bit different because.

So customers are not really always saying I want it on the rail and then the rail is not successful they don't deliver and then so it's a transition okay and like you said the best of class in the U S. L. T L World don't use too much right.

Alain Bedard: That's from the shippers today, right? So before things start to get better for us, we need more volume so that the market condition starts to change with the shipper, okay? And it's a kind of a cycle thing, right? So some people are dropping from the market right now because, you know, they come to the shippers with fuel in price and then, oops, they lose their fuel card because they can't pay their fuel bill.

So yeah, it's the trend that you're going to see us moving slowly okay away from rail as much as we can.

And to service us through our own team directly.

Great. Thank you very much.

But anyway.

Alain Bedard: So, I mean, the demand is still weak, and the offer is still more than the demand, but you're gonna see some truckers slowly getting out of the business, okay, because, you know, they get with the shippers with stupid pricing. So, that's what I'm saying. We're on the floor, okay? Are we gonna stay on the floor for three months? Absolutely. Is that gonna last for nine months? Hmm, I don't know. But one thing is for sure, I don't think that we're gonna see worse condition than what we have today.

This concludes the question and answer session I would like to turn the conference back over to Alain Bedard for any closing remarks.

Yeah.

Well thank you.

Thank you everyone for being on this morning's call. We appreciate your interest in T. F. I international in there. There's always if you have any follow up questions. Please don't hesitate to reach out. Please enjoy your day and we'll speak soon thank you again.

This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.

Alain Bedard: And I also listening to what the way our peers are looking at the market, you know, and I think it's basically the same message. It's just that we're on the floor, and it's just that all fast. Can we get up from the floor? It's hard to say. Thank you.

Yes.

Yeah.

Okay.

Okay.

Okay.

Yeah.

Hum.

Okay.

Elliott Alper: The next question comes from Elliott Alper, a TV column. Please go ahead. Great. Thank you. This is Elliott Alper, Jason Sidel. Maybe over on the logistics side in the GHD acquisition. I guess, how's the integration going so far? How does their margin profile maybe compare to your core logistics margin? Maybe how we should think about that in Q4? I know they're a pretty niche player in the auto space curious if they're being affected by the auto strikes as well.

[music].

Yes.

Okay.

Okay.

Hum.

Yeah.

Hum.

Hmm.

Hmm.

Hum.

Elliott Alper: Yeah, very good question. So no, they're not affected by the auto strikes at all. Okay, number one. Number two is their profile of margin is similar to ours. Right? So they're not the business of two, three percent bottom line because we were not big fan of that. You know, we're not big fan of three, two, three percent. So they're close to ours. And they, you know, I think that the GHT will do better than that.

Elliott Alper: [inaudible] This is a fantastic company. It's a great acquisition for TFI group of companies. As a matter of fact, after this call, I'm going to be with the management team of GHT to talk about their plan for 24. And, you know, I think that even with less volume, I think that GHT will do as well in 24 as they did in 23. So, very happy with this transaction. And this is the kind of deal that's going to help us create value. Thank you for our shoulders. Long term. Got it.

Alain Bedard: And then maybe separately on the logistics. You know, as a whole, I mean, you had some organic operating income growth, I believe, in the order. I think you called out some strengths in the same day package business. Any other color there on the top of the helpful. Thanks. Yeah, you know what, our logistics arm, our last mile operation in the US is doing really well. I mean, our volume is about stable your year in any, any more difficult market.

Alain Bedard: We're down a bit in Canada, because one of our customers, we just cut them off because of issues with credit. So, this is why in Canada, our volumes are down a bit, okay, year over year in Q3. But we have a new business coming on stream for Q4. So, probably Q4, we're going to be flat year over year in terms of volume. Again, in a, in a software market, okay, in 20 years versus 22.

Alain Bedard: So, we're doing well on the medical side of things. The e-commerce, for sure. I mean, e-commerce is not as good today as it was two years ago. So it's a little bit of a fight, but we have a fantastic team over there that's doing a great job. So volume is about stable. But profit is up. Now, if you look at year over year, I mean, JC is helping us logistics also helping our volume is down at WW, quite considerable, okay, because of market condition, but the bottom line is down just a few points. So, I mean, all in all, our logistics is performing really well. And I think that we're going to do even better in 24. Great, appreciate it. Welcome.

Cameron Doerksen: The next question comes from Cameron Doerksen of National Bank Financial. Please go ahead. Yeah, thanks. Good morning. Good morning, Cameron. So maybe a quick couple of questions on the packaging career business. Just sort of if you can talk a little bit about the outlook as we head into kind of the peak bond. What is the volume period for that business? I mean, what does it look like this year or year over year?

Cameron Doerksen: And maybe secondly, just on the margin, some pressure year over year. I mean, how much of that is maybe a little bit lower volume environment, but how much is also perhaps the benefit from the lack of benefit from fuel surcharge revenue? Right, absolutely, Cameron. I mean, a bargain was down seven percent, right? So if you look at our peace count and all that, if I remember correctly, I mean, we're down about seven percent.

Cameron Doerksen: On revenue, we're down eight million. And basically, we're down eight million dollars on OE, Q three year over year. And some of that is attributable to less volume. Okay. Our cost is about stable. Okay, but the volume is just killing us. And because we're so dense because we're so good. Okay. When fuel is expensive. We make a little bit of money on fuel when fuel is not expensive, like it is now that profit is gone.

Cameron Doerksen: Right. So that is a little bit of a headwind for our Canadian LTL in our package. When fuel is low, I mean, we don't make, we don't have a little bit of profit from fuel. When fuel is high, we do, we do well on fuel because of our density, which is very different than our US LTL operation, because we never make money on fuel in the US LTL world. Right. Today, now that's going to also help us because our MPG because of the new equipment is doing way better.

Cameron Doerksen: Okay. There's about the 17, 18% saving on our new trucks versus the old trucks that we used to. So over time, I mean, when fuel was going to go back a little bit higher, that should help us in the US as well. But that's the story.

Alain Bedard: The way we seek you for Cameron into the volume for our PNC volume will not improve year over year. The market is too soft. And us, we're focused on bottom line, like we've said many, many times. So I mean, this is why guys let's protect the margin. And let's not fight this fight with customers that don't want to pay the fair price. Okay. That's helpful.

Cameron Doerksen: And maybe just a quick follow up just on, I guess, how we should think about CapEx for 2024. Obviously, you haven't set your budget yet, but just this kind of framework, is there anything? I guess, you know, directionally, you can tell us about CapEx as we look into the next year. I would say about the same as this year, Cameron, so far, what I could think of. Okay. So, you know, for sure, we did a lot of CapEx in T for straight, that was well warranted.

Cameron Doerksen: And we will continue to make sure that the average is of our fleet keeps going down closer to four versus 4.7. It is right now. Our trailer fleet is, you know, need some improvement too. So it's on the way. So I would say overall for TFI, CapEx should be in the same league as what we've seen in 2020. Okay, that's great. Appreciate the time.

Alain Bedard: Thanks.

Andrew Cox: Thank you, Cameron. The next question comes from Bruce Chan of Steve. Please go ahead.

Alain Bedard: Hi, good morning. This is Andrew Cox on for Bruce. Okay, morning. Oh, sorry. Make sure you got me. I just wanted to get any color on hiring and retention, acknowledging that the facility managers are still lacking necessary IT and systems to react as rapidly as you'd like. I didn't kind of want to know if there's been any impact of the tens of thousands of teenagers becoming available on the market. It's been easier to add post yellow and you feel you need to add any to manage the target of 26,000 children per day next year.

Alain Bedard: Thanks. No, no, we don't need to add any management. That's for sure. Your question is really a good question and we can't really answer that. So those managers have not been trained in managing costs, right? So that's what we're going to do in 24. Once we provide them the financial information, we're going to train them. Now, if you ask me, what's going to be the success ratio of those managers that I've never done that?

Alain Bedard: Hard to say. So we know one thing for sure is that it's not going to be 100%. So we will have guys that are going to make it and probably we have guys that are not going to be able to make it and pass the test of being able to manage costs. It's a transition year for these guys over the course of 24. And to tell you what the success ratio is going to be, I don't know.

Alain Bedard: One thing we know is that they've never done before. So we'll see how good these guys could be. Now, hey, listen, I mean, if you look at T-Force rate two years ago and T-Force rate today in terms of the executive, Paul, the president, as we tired. The pricing guy, David Myers, has gone away. Eileen, the sales leader, has been replaced. Okay. So the fleet managers, okay, is new. So at the top level, we have a lot of new blood there. Newgoons, sweet, clean, right? And, you know, if we need to do the same kind of adjustment in the people at the terminal level, that's what we'll do.

Unknown Executive: Okay, Eileen, that's very helpful. Thank you.

Benoit Poirier: Can I just ask a bit about the volume turn? There was some intra-quarter swings throughout the quarter. And I just wanted to know if that, if you think that was more a function of just normal seasonality or if this more a function of yellow freight finding a home, we've heard from other executive teams that there's been kind of waves of yellow freight go from one carrier to the next, depending on service level.

Benoit Poirier: Just wanted to get a sense of whether that's functionality of seasonality or finding a home for yellow freight. Thank you. I think that we've said it. I mean, they want the shippers, okay, they go wherever they can. And then this sort of reaction. And that is probably, I don't think that is seasonality so much as just shippers trying to find a home where they feel that it's better deal for them.

Alain Bedard: Next question comes from Benoit Poirier of Desjardins, Capital Markets, please go ahead. Benoit, your line is open, please go ahead. Okay, so sorry, sorry, I was on mute. So just looking back at US LPL to get toward the 80 85% or longer term, just wondering if you need to get rid of railroads similar to the best in class players in the US. Next question, what about the pricing and the service these days?

Alain Bedard: Yeah, good point, Benoit, so for sure, okay, we will do more with the rail, okay, because the service with rail is always an issue. And the customer cannot blame the rail they talked to you, right? So there's again, I mean, we have to bring our cost of our own fleet down, okay. So then there's no real benefit to move freight on rail. So this is, there's two things that's going to happen, the improve, okay, fleet that now our guys are working better trucks, okay.

Alain Bedard: That's number one, number two, better management, okay, for our line all provider, I mean our line all team with this new software that we are implementing now that's going to be fully implemented by the end of 23. That's also going to help us for sure, I mean, if you look at our Canadian operation, we run road and rail and the only reason we want rail is because some customers want to cheap, but they know that their service is never going to be the same.

Alain Bedard: And we have to fight with the rail because the service is not there, but we say to Mr. customer, you want to cheap deal while you're going to live with cheap service, right. The US, it's a little bit different because, you know, customers are not really always saying, I want it on the rail. And then the rail is not successful, they don't deliver. And then so it's a transition, okay. And like you said, the best of class in the US, LTL world, don't use too much rail. So yeah, it's the trend that you're going to see us moving slowly, okay, away from rail as much as we can. And to service us through our own team directly.

Alain Bedard: Great, thank you very much. Thank you very much.

Alain Bedard: This concludes the question and answer session. I would like to turn the conference back over to Alain Bedard for any closing remarks. Well, thank you everyone for being on this morning call. We appreciate your interest in TFI International, and as always, if you have any follow-up questions, please don't hesitate to reach out. Please enjoy your day and we'll speak soon. Thank you again.