Q4 2023 TFI International Inc Earnings Call

Good afternoon, ladies and gentlemen, thank you for standing and welcome to T. F. I International fourth quarter 2023 results conference call. At this time all participants are in a listen only mode. Following the presentation, we will conduct a question and answer session.

Operator: Good afternoon, ladies and gentlemen. Thank you for standing.

Operator: Welcome to TFI International's fourth quarter 2023 results conference. At this time, all participants are on a listen-only basis. Following the presentation, we will conduct a question and answer session. Callers will be limited to one question and one follow-up. Again, that's one question and a follow-up so that we can get to as many callers as possible. Further instructions for entering the queue will be provided at that time. Please be advised that this conference call will contain statements that are forward-looking and... I'm subject to a number of risks and uncertainties that could cause actual results to differ. Also, I would like to remind everyone that this call is being recorded on Friday, February 9th, 2020. I will now turn the call over to Elaine Bedard, Chairman, President, and Chief Executive Officer of TFI International. Please go ahead.

It will be limited to one question and one follow again, that's one question and a follow up so that we can get to as many callers as possible further instructions for entering the care 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.

Paul I would like to remind everyone that this call is being recorded on Friday February 19 2024.

I will now turn the call over to Alain Bedard, Chairman, President and Chief Executive Officer and P. F. I International. Please go ahead Sir.

Benoit Poirier: Well, thank you operator, and thank you everyone for joining us today.

Elaine Bedard: Well, thank you, Operator, and thank you, everyone, for joining us today. Our results released yesterday after the close reflect strong performance by our talented team, beating our expectations, and once again, we're entering a new year in the strongest position in our company's history. This comes despite weaker market demand throughout much of the year and is a testament to our adherence to long-standing operating principles regardless of cyclical freight demand. In particular, I've referred many times to our overarching focus on profitability and cash flow, which is apparent in the fourth-quarter results that I'll walk us through.

Our results released yesterday after the close reflect strong performance by our talented team B V. Our expectation and once again, we're entering a new year in the strongest position in our company's history. This gum, despite weaker market demand throughout much of the year.

Benoit Poirier: And he is a testament to our adherence to long standing operating principle, regardless of cyclical freight demand.

Benoit Poirier: In particular, I referred many times to our overarching focus on profitability and cash flow, which is apparent in the fourth quarter results they'll walk us through.

Benoit Poirier: It's this profitability and cash flow that permits us to execute on overarching principles of our growth strategy, which involve investing in the business pursuing attractive M&A opportunities and consistently returning capital to shareholders and doing all of this even when the market is.

Elaine Bedard: It's this profitability and cash flow that permits us to execute on the overarching principles of our growth strategy, which involve investing in the business, pursuing attractive M&A opportunities, and consistently returning capital to shareholders, and doing all of this even when the market is weak. This approach to the business is apparent in our four-quarter results and indeed our performance throughout 2023. In fact, we were able to allocate roughly $2 billion of capital to announce acquisitions and share repurchases during the year.

Benoit Poirier: Weak.

Benoit Poirier: This approach to the business is apparent in our fourth quarter results and indeed, our performance throughout 'twenty 'twenty. Three in fact, we were able to allocate roughly $2 billion of capital to announce the acquisition and share repurchase during the year.

Elaine Bedard: Let's turn to the fourth quarter results, which include operating income of just under $200 million, compared to $217 million in the year-ago quarter. Our operating margin of $11.8 million compares to $13.4 million a year earlier, and I should mention that these results include a $23 million reduction in the contribution from Asset Health for Sales. Our adjusted income of $147 million was down only slightly from $152 million in the fourth quarter of 2022, and adjusted EPS came in at $1.71, down a penny.

Benoit Poirier: Let's turn to fourth quarter results, which include the operating income of just under 200 million compete.

Benoit Poirier: Compared to 217 million in the year ago quarter, our operating margin of 11.8 compares to $13 four a year earlier and I should mention that these results include a 23 million dollar reduction.

Benoit Poirier: The contribution from assets held for sale.

Benoit Poirier: Our adjusted then he come 147 million was down only slightly from 152 million in the fourth quarter of 2022 and then adjusted EPS came in at $8 71 down a penny.

Benoit Poirier: Given our intense focus on generating L. T cash flow. We're most pleased with our net cash from operating activity, which was 303 million up sharply from a year ago 248 million and bringing our full year total to just over a billion again up over the prior year despite market conditions.

Elaine Bedard: Given our intense focus on generating LT cash flow, we're most pleased with our net cash from operating activity, which was $303 million, up sharply from a year ago, $248 million, and bringing our four-year total to just over $1 billion, again, up over the prior year despite market conditions. Equally important from a strategic standpoint, our free cash flow of $244 million was up significantly over $188 million in the prior year's For the full year 2023, we produced more than $9 per share of free cash flow, which is remarkable given our company's size, and which is again a reflection of the hard work of our team throughout the year. Now let's dig in and... deeper into our four business segments, starting with PNC, which represents 7% of our segment revenue before fuel surcharge. The number of packages was down 4%, and pricing was a little softer as well, resulting in a 5% decline in revenue before the fuel surcharge.

Benoit Poirier: Yeah.

Benoit Poirier: Equally important from a strategic standpoint, our free cash flow of 244 million was up significantly over 188 million in the prior year fourth quarter.

Benoit Poirier: For the full year 2023 we produced more than $9 per share of free cash flow, which is remarkable giving our company size, which.

Benoit Poirier: Which is again a reflection of the hard work of our team throughout the year.

Benoit Poirier: Now, let's dig any.

Benoit Poirier: Deeper into our four business segments.

Benoit Poirier: Starting with T N C, which represents 7% of our segment revenue before fuel surcharge.

Benoit Poirier: The number of package was down 4% with pricing a little softer as well, resulting in a 5% decline in our revenue before fuel surcharge.

Elaine Bedard: Similarly, our operating income of $35 million was down just slightly from $38 million the prior year, and our margins fell by 70 basis points to 28%. Return on invested capital for PNC was $28.1. We believe this solid performance by our PNC business in spite of the weaker demand environment reflects unique market exposure and, as always, our close attention to cost controls. Next, let's discuss LTL, now 41% of segment revenue before fuel surcharge. Our top line revenue before fuel surcharge was down 3%, while our operating income of $71 million compares to $88 million a year earlier. This includes $7 million net loss on asset health for sale.

Similarly, our operating income of 35 million was down just slightly from 38 million in the prior year and our margins fell by 70 basis point to 28%.

Benoit Poirier: Return on invested capital for PNC was 28 one.

We believe this solid performance by our P&C business in spite of the weaker demand environment reflects unique market exposure and as always our close attention to cost controls.

Benoit Poirier: Yeah.

Benoit Poirier: Next let's discuss L. T O now 41% of segment revenue before fuel surcharge.

Benoit Poirier: Our topline revenue before fuel surcharge was down 3%, while our operating income of 71 million compares to 88 million a year earlier.

Benoit Poirier: This includes $7 million net loss on an asset held for sale.

Benoit Poirier: Digging deeper within L. T L.

Elaine Bedard: Digging Deeper Within LTL. Canadian Revenue Before the Feudal Surcharge grew 12% year over year, and a 12% increase in shipment benefiting from the STG acquisition in 2020. Internal Investment Capital for Canadian LTL was 20.1 relative to 24% a year earlier.

Benoit Poirier: Canadian revenue before fuel surcharge grew us grew 12% year over year.

Benoit Poirier: And a 12% increase of ship and benefiting from the S. C G acquisition.

Benoit Poirier: In 'twenty to 'twenty three.

Benoit Poirier: Return on invested capital for kidney and L. T. L was 21, one relative to 24% a year earlier.

Elaine Bedard: Regarding our ongoing turnaround at USLTL, the name of the game for us, in addition to all the costs and efficiencies we have discussed over time, is quality of revenue through improved service. This is evidenced by our last quarter claim ratio of 0.5% for US LTL, 0.5% of revenue okay for US LTL down from 1.5% a year earlier, and our second to non-Canadian LTL claims ratio of just 0.1% of revenue. Our revenue before fuel surcharge of $563 million was down from $601 million in the fourth quarter of 2022, and while volumes were down 5%, we were able to increase revenue per shipment as weight increased by 10%. Our operating ratio of 91% compares to 90.4 in the year ago period, and our return on invested capital for USLTL was 15.1 compared to the prior year at 23.8. Next,

Benoit Poirier: Regarding our ongoing turnaround at U S. L. T out the name of the game for US. In addition to all the costs and inefficiencies as we have discussed over time.

Benoit Poirier: Quality of revenue through improved service.

Benoit Poirier: This is evidenced by the last quarter claim ratio of points five per cent for U S. L. T L plus 5% of revenue Okay for U S. L T L down from 1.5% a year earlier.

Benoit Poirier: Our second to none Canadian L. T O claims ratio of just 0.1% of revenue.

Benoit Poirier: Our revenue before fuel surcharge of 563 million was down from 601 million in the fourth quarter of 2022 and while volumes were down 5%, we were able to increase revenue per shipping as weight increase like 10%.

Benoit Poirier: Operating ratio of 91% compares to 90.4 in a year ago period and that return on invested capital for U S. L. T O was $15 one compared to <unk>.

Benoit Poirier: The prior year at 23.8.

Benoit Poirier: Yeah.

Benoit Poirier: Next.

Benoit Poirier: Let's discuss truckload, which is 24% of segment revenue before fuel surcharge.

Elaine Bedard: Let's discuss truckload, which is 24% of segment revenue before fuel surcharge. Benefiting from acquisition or volume were slightly higher than a year ago, while rates were weaker. Truckload revenue before fuel surcharges was just under $400 million, virtually flat with the year-ago period, down just a percent, while operating income of $51 million was down relative to $72 million last year, and our operating ratio of 87.3 compares to 86.1.

Benoit Poirier: And if you think from acquisition or volume were slightly higher than a year ago, while rates were weaker.

Benoit Poirier: Truckload revenue before fuel surcharge or just under 400 million was virtually flat with the year ago period down just 2% while operating income of 51 million was down relative to 72 million last year and our own and our operating ratio of 87.3 compares to 86.1.

Benoit Poirier: Okay.

Elaine Bedard: Taking a look within truckload, our specialized exposure remains a plus. We were able to capitalize on self-help opportunities and increase revenue per truck. Benefiting from this... revenue before fuel surcharge was almost entirely flat at $324 million. Our specialized truckload operating ratio was 87. Relative to 87.4 in the prior year period, and our return on invested capital was 10.3 compared to 13.4. Turning to our Canadian-based conventional truckload business, revenue before fuel surcharge also held almost entirely flat at $78 million.

Benoit Poirier: They came to look within truckload, our specialized exposure remains at plus we were able to capitalize on self help opportunities and increase revenue per truck.

Benoit Poirier: Benefiting from this.

Benoit Poirier: Revenue before fuel surcharge, all almost entirely flat at 224 million.

Benoit Poirier: Our specialized truckload operating ratio was 87 relative.

Benoit Poirier: Well it dipped to 87.4 in the prior year period, and our return on invested capital was $10 three compared to 13.4.

Benoit Poirier: Turning to our Canadian based conventional truckload business revenue before fuel surcharge of hold more also held almost entirely flat at 78 million miles driven were up slightly while rates were off about 7%.

Elaine Bedard: Miles driven were up slightly, while rates were up about 7%. Our adjusted operating ratio of 89 compares with 81.1 a year ago, and our return on invested capital was 12.6, down from 21.3. Let's finish up our business segment review with Logistics, which was 28% of segmented revenue before fuel surcharge and turned in remarkably strong performance during. Revenue before fuel surcharge climbed 24% year over year while operating income jumped 60% to $55 million.

Benoit Poirier: Our adjusted operating ratio of 89 compares to really compares to relative to 81.1, a year ago and our return on invested capital was 12.6 down from 21.3.

Benoit Poirier: Let's finish up our business segment review with logistics, which was 28% of segmented revenue before fuel surcharge and turned in remarkably strong performers during the quarter.

Benoit Poirier: Yeah.

Benoit Poirier: Revenue before fuel surcharge declined 24% year over year, while operating income jumped 60%.

Benoit Poirier: To 55 million.

Benoit Poirier: These strong results benefited from our very successful GHT acquisition, along with strong execution by our team, including effective cost control in response to market condition.

Elaine Bedard: These strong results benefited from our very successful GHT acquisition along with strong execution by our team, including effective cost control in response to market conditions. Our Operating Ratio was 88.4 while Return Investment Caliber was 18.8 versus 21.9 a year earlier. Let's shift gears and discuss our strong balance sheet and liquidity, which we view as a strategic asset. During the fourth quarter, we drove free cash flow of $244 million, as I mentioned, and also completed the private placement of $500 million of fixed-rate interest-only debt, as I referred to in our last call. As a result, we ended the year with a funded debt-to-bid ratio of 1.49 and a weighted average interest rate of 4.4 that's entirely fixed, with an overall weighted average duration of 8.3 years.

Benoit Poirier: Our operating ratio was 80 844 wall return invested Cowboys 18.8 versus 21.9, a year earlier.

Benoit Poirier: Yeah.

Benoit Poirier: Let's shift gears and discuss our strong balance sheet and liquidity, which we view as a strategic asset.

Benoit Poirier: During the fourth quarter, we drove free cash flow of 244 million as I mentioned and also completed the private placement of 500 million of fixed rate interest only debt as I referred to in our last call.

Benoit Poirier: Yeah.

Benoit Poirier: As a result.

Benoit Poirier: We ended the year with the funded debt to EBITDA ratio of 141 49.

Benoit Poirier: And a weighted average interest rate of 4.4, that's entirely fix.

Benoit Poirier: With an overall weighted average duration of eight three years.

Benoit Poirier: Looking ahead. It's this strong financial foundation that will allow us to continue to make timely and intelligent investments regardless of the cycle.

Elaine Bedard: Looking ahead, it's this strong financial foundation that will allow us to continue to make timely and intelligent investments regardless of the cycle, and especially during times of market weakness. An excellent example of our recently announced acquisition, Abdaski is expected to close during the upcoming second quarter and one of the 12 announced M&A transactions in 2023.

Benoit Poirier: And especially during times of market weaknesses.

Yeah.

Benoit Poirier: An excellent example of our recently announced acquisition of desk. He expect to close during the upcoming second quarter and one of the 12 I know, it's an M&A transaction during 2020 three.

Benoit Poirier: Yeah.

Elaine Bedard: We very much like this highly complementary acquisition as it's scaled our truckload segment into a leading North American provider, while bolstering our capability in the specialized market. Our other major focus this year is the ongoing turnaround of our LTL operation, and longer term, we see the potential opportunity to allow investors to own a separate specialized truckload business. In addition to a very attractive,

Benoit Poirier: We very much like this highly complementary acquisition is it scaled our truckload segment into a leading north American provider.

Benoit Poirier: While bolstering our.

Benoit Poirier: Capability in the specialized market.

Benoit Poirier: Our other major focus this year is the ongoing turnaround of our L. T L operation and longer term, we see the potential opportunity to allow investors to own this separate specialized truckload business.

In addition to a very attractive.

Benoit Poirier: L T L P.

Elaine Bedard: PNC, and Logistics Business. Another advantage afforded us by our strong financial position is the ability to return excess capital to our shareholders whenever possible, and we are pleased that during the fourth quarter, our board of directors raised the quarterly dividend by another 14 percent. So with that, operator, we're ready for Q&A. If you could, please open the line.

Benoit Poirier: P N C and logistics business.

Benoit Poirier: Another advantage afforded us by our strong financial position is the ability to return excess capital to our shoulders whenever possible.

Benoit Poirier: We're pleased that during the fourth quarter, our board of directors raised the quarterly dividend by another 14%.

Speaker Change: So with that operator, we're ready for Q&A if she could please open the line.

Operator: Thank you. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone. The confirmation tone will indicate your line is in the question... You may press star two if you'd like to remove your question.

Speaker Change: Yep.

Speaker Change: Thank you we will now be conducting a question and answer session.

Speaker Change: Like asking a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue you.

Speaker Change: You May press star two if you'd like to remove your question from the queue.

Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button. As a reminder, participants will be limited to one question and one follow-up. One moment, please, while we pull. Our first question is from Scott Group with Wolf Research. Please proceed with your question. Hey, thanks. Good morning, Elaine.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star.

As a reminder, our systems will be limited to one question and one follow up.

Speaker Change: One moment, please while we poll for questions.

Speaker Change: Thank you. Our first question is from Scott Group with Wolfe Research. Please proceed with your question.

Speaker Change: Hey, Thanks, Good morning, I'm wondering.

Scott Group: Morning Scott. It's Friday morning, so I may have missed it. Did you guys provide any earnings guidance? I know you typically do. No, Scott. We have not provided any guidance.

Speaker Change: Morning, Scott, It's Friday morning.

Speaker Change: Friday morning, So I may have missed it did you guys.

Scott Group: Provide any did you provide any earnings guidance I know you typically do.

Scott Group: No Scott we have not provided any guidance. Okay. So what we'll do is we'll do that after Q1.

Elaine Bedard: We'll do that after Q1. As you know, we're looking at this Dasky acquisition, so this is why we're very cautious in terms of talking about 2024 with this major acquisition. But what I could say is that for sure, when we come up with our guidance, let's say sometime in April, you know, this year we did about $6.18 EPS, diluted EPS in 2024. We could say that our EPS guidance will not start with a six; it will probably start with something like a seven somewhere.

Scott Group: As you know we're looking at this desk. He acquisition. So this is why we were very cautious in terms of you know talking about 'twenty 'twenty four with this major acquisition, but what I could say is that for sure when we come up with our guidance of let's say sometimes in April.

Scott Group: You know this year, we did about $6, an 18 said C. P. S. Diluted a you know a T S. In 'twenty for what we could say that a word our E. P. S guidance will not starwood. It takes we will probably start with something like a seven somewhere.

Scott Group: But because of our we're very cautious about our you know Q1 and the Das ski Oki acquisition. So this is why we preferred to and like most of our peers. Okay. Just stay silent on it right now for 'twenty 'twenty four guidance.

Elaine Bedard: But because we're very cautious about Q1 and the Dasky acquisition, this is why we prefer to, and like most of our peers, just stay silent right now about 2024 guidance. We'll happily give more guidance for 2024 after we come out with Q1. Okay. Fair enough.

Speaker Change: Well happily give more guidance okay for 24 after after we came out with our Q1.

Speaker Change: Okay Fair enough and then I'm guessing there's me a bunch of questions on an L. T L. But we haven't heard from us since.

Elaine Bedard: And then, I'm guessing there's going to be a bunch of questions on LTL, but we haven't heard from you since... Since the Dasky acquisition, maybe just sort of talk through the rationale of that deal. Sort of what you see in terms of the margin potential and, you know, how that fits in with some of the stuff you talked about in the release regarding potential. You know what, Scott, we're very happy with this transaction at Dasky. I mean, when I look at all the different business units that these guys are operating today, I mean, we're very happy. I mean, these guys run a pretty, pretty good operation. You know, I'm talking about the operation.

Speaker Change: Since the Dallas Ski acquisition, maybe just sort of talk through the rationale of that deal.

Speaker Change:

Speaker Change: What you see in terms of the market potential and you know how that fits in with some of the stuff you talked about in the release regarding a potential spin.

Speaker Change: You know what Scott, we're very happy with this transaction that that's key I mean, when I looked at all the different business you need that these guys are operating today I mean, we're very happy I mean, these guys run a pretty pretty good operation I'm talking the operation. If you exclude the head office costs, Okay, which is really a.

Elaine Bedard: If you exclude the head office cost, okay, which is a very high burden for the Dasky numbers, if you exclude that, I mean, these guys are running a pretty good operation in 23 when you look at the market conditions. I mean, if you look at our global specialty truckload OR in Q4, we're running an 87 OR, us, okay, in a very difficult environment, right? Okay? You know, our Canadian van business is running an 89 OR in Q4, again, in a very difficult market environment. Just look at our peers in the U.S., and you will understand that.

Speaker Change: Very high burden for the Das key numbers, if you exclude that I mean, these guys are running a pretty good operation in 'twenty three when you look at market condition. I mean, if you look at our global our specialty truckload or in Q4, we were running at 87 the war US okay in a very difficult environment right.

Speaker Change: Okay, you know our Canadian van business is running at 89 or in Q4 again in a very difficult market environment, just look at our peers in the U S and you wouldn't understand that.

Elaine Bedard: I would say that these guys running the show with their business units, the guy that runs the operation, like the Lone Star, the Boyd, and, you know, the RMG, and all these guys, they run pretty close to what we do. Now, it doesn't show because, you know, head office is a big burden on the results of the company. I'm very, very happy with this acquisition that's going to close in Q2, and these guys will even help us with our own U.S. operation because now it gives us size. And like we said publicly, you know, Scott... We believe, okay, that down the road, this conglomerate discount at TFI that we see today, if we do, okay, like we were just talking about trying to have, you know, TFI into two business I think that this will also create some... some very interesting issues for our shoulders, you know, down the road. So, Dasky helps us create size, okay, in our U.S. truckload operation, specialized truckload. We don't wanna be in the van world.

Speaker Change: I would say that these guys running the show over there business unit the Guy that runs the operation like the Lone Star. The Boy then and are you know they are M. G and all these guys you know they they run pretty close to what we do know it doesn't show because you know at office is a big burden on the results of the company.

Speaker Change: I'm very very happy with this acquisition, that's going to close in Q2, and these guys will all even out us.

Speaker Change: All U S operation because now it's giving our size.

Speaker Change: And like we said publicly you know Scott.

Speaker Change: We believe okay that down the road. Okay. This conglomerate discount at a T F I that we see today.

Speaker Change: If we do okay like where we were just talking about trying to have a you know a T F I into two business units instead of one.

Speaker Change: I think that this will also create some some.

Speaker Change: Some very interesting.

Speaker Change: [laughter] issues for our shoulders, you know down the road. So dusky helps us create size, okay in our U S. Truckload operation specialized truckload, we don't Wanna be Nevada World.

Elaine Bedard: A year and a half ago, we sold CFI to Heartland, okay, because, you know, we didn't wanna be in the van. But we really like specialty truckload, the flatbed operation, the tank, and all that. We do really well, and we believe that the U.S. and Canada down the road, 24, 25, 26, a lot of investment will be made in infrastructure, roads, buildings, schools, etc., etc.

Speaker Change: A year in Africa, we sold C F I to Heartland.

Speaker Change: Because you know we didn't want to be in the van.

Speaker Change: But we really like specialty truckload, that's how I'd bet operation that tank and all that we do really well and and we believe that our the U S and Canada.

Down the road 'twenty four 'twenty five 'twenty six a lot of investment will be done in infrastructure Road building schools et cetera et cetera.

Elaine Bedard: And for sure, that will help the Dasky operation and our own Canadian specialty truckload. So I think our timing is really good. Like our timing of selling CFR was really opportunistic. Okay, I think that this one is also in the same league.

Speaker Change: And it's for sure that will help at the desk operation and our own Canadians specialty truckload.

Speaker Change: So I think our timing is really good like our timing of selling CFR was really opportunistic. Okay. I think that this one is also in the same league.

Speaker Change: Our next question is from James Monaghan with Wells Fargo. Please proceed with your question.

James Monigan: Our next question is from James Monigan with Wells Fargo. Please proceed with your question. Hey guys, I just wanted to ask one of the questions that will be on USLPL today. Can we get a sense of what you're expecting in terms of like OR improvement over the coming year? And just given the sense that there is some uncertainty, understanding what you might be able to get in a more flattish volume environment versus a place where maybe volumes improve more significantly. Yeah, well, you know what, James, we reset it.

Hey, guys.

James Monaghan: Just wanted to ask one of the questions on coffee on.

James Monaghan: You have helped me out today.

James Monaghan: Can we just get a sense of what you're expecting in terms of like Oh, our improvement across the coming in.

Speaker Change: Given the sense that there is some uncertainty.

Speaker Change: Understanding what you might be able to get in like more flattish volume environment for us to a place where maybe volumes improved more significantly.

Speaker Change: Yeah.

Speaker Change: Well you know what genes. We we we said it I mean, the 24 plan for US is to deliver a D. D. A door right. We're in 91 in the World right now in Q4.

Elaine Bedard: I mean, the 24 plan for us is to deliver at 88 OR, right? We're 91 OR right now, Q4. This is not acceptable, for sure. I mean, the guys have worked hard because you have to understand where we were three years ago, two years ago. Okay, 91, okay, is acceptable.

Speaker Change: This is not acceptable.

Speaker Change: Fisher I mean, the guys have worked hard because you have to understand where we were three years ago two years ago.

Speaker Change: Okay and 91, Okay is acceptable okay, but 24 91 is not acceptable and and our plan is to be a knee in a war for 'twenty four.

Elaine Bedard: Okay, but 24, 91 is not acceptable, and our plan is to be an 88 OR for 24. Also, part of our plan, okay, is to stop shedding volume, right? So, if you look at our Q4, volume is down, again, 4%, right? Year-to-date, we're down 13%, and in Q4, we're down 4%.

Speaker Change: Also a part of our plan. Okay is is stop shedding volume right. So if you look at our Q4 volumes down again, 4% right year to date, we're down 13% in Q4 were down 4%. So we took action in terms of improving our service okay like I've mentioned on.

Elaine Bedard: So, we took action in terms of improving our service, okay, like I mentioned in the script there. Our claim ratio is down, like there's no tomorrow, we're at 0.5% of revenue, so that helps the customer experience with us. We've made a major improvement in our asset base, our fleet, in terms of training, our drivers, etc., etc. So, we believe that we can deliver in 24, something like an 88 OR and stop losing volume. Okay, the market has been under pressure for 23, yes, YRC is gone, okay, that helped the market, but still. And us, we are working on improving our service, reducing our costs, and being more efficient. And our goal, like I said many, many times, for 24, is to run an 88 OR globally for US LB. Got it.

Speaker Change: The script there.

Speaker Change: You know our claim ratio is down like there's no tomorrow, I, where I, 0.5% of revenue so that helps a lot.

Speaker Change: Customer experience with US we made major improvements in our asset base. Our fleet are in terms of training, our drivers et cetera et cetera. So we believe that Oh, we can deliver in 24, something like that and 88 or <unk> and stopped losing.

Speaker Change: Volume Okay. The market has been under pressure are in 'twenty three yes.

Speaker Change: She's gone, okay that helped the market, but still.

Speaker Change: In the US we are working on improving our service, reducing our cost and being more efficient and our goal like I said, many many times before 'twenty four is to is to run an 88 or globally for our U S. L. T O.

Speaker Change: Got it that at this point do you think you'll be growing shipments in 'twenty 'twenty four based off of where you are now.

Elaine Bedard: At this point, do you think you'll be growing shipments in 2024 based off of where you are now? Well, I don't think that this will come in Q1, Q2. I think that, you know, we have had a change in leadership. Okay, on our sales team. We have refocused our people there. So, you know, we believe that this company should be running by the end of 24, 24,000 shipments a day, right up to 25,000 shipments a day, which is, which is very low compared to when we bought the company when we bought UPS Freight. They were doing about 32,000 to 32,000 shipments a day now.

Speaker Change: Well I don't think that this will come in Q1 Q2, I think that you know are we we have a change in leadership, Okay. All of our sales team we have refocused our people there.

Speaker Change: So you know we believe that this company should be running by the end of 'twenty four 'twenty 4000 shipments a day right to 25000 shipments a day, which is which is very low compared to when we bought the company. When we bought that you'd be afraid they were doing about 32000.

Speaker Change: 232000 shipments a day.

Speaker Change: No.

Elaine Bedard: Like we said before, a third of those shipments didn't make any sense, right? So we had to do a lot of clean up over the years, afraid that it didn't fit, afraid that it was not right for us.

Speaker Change: We said before.

Speaker Change: A third of those shippers didn't make any sense right. So we had to do a lot of Cleveland clean up over the years afraid that don't fit trade that was not for us.

Speaker Change: That that is mostly done 99% done now so now it's time for us to start growing again with the market by improving our service.

Elaine Bedard: But that is mostly done, 99% done now. So now it's time for us to start growing again with the market by improving our service. We have more liners now on the road than ever, right?

So we we have more light oil is now on the road than ever right. So we use less rail.

Elaine Bedard: So we use less rail. So our road service is way better than rail. So that's gonna slowly help us improve because when we bought the company, a lot of the lane haul was done on rail, so now, slowly, we're moving less on rail and more on road. That will help improve our service because the fact that our equipment is in much better shape. Our average age is about a little over four years down compared to seven and a half, eight years average when we bought the company.

Speaker Change: So our own service is way better than rail.

Speaker Change: So that that's going to slowly help us improve because when we bought the company.

Speaker Change: A lot of the lane all was done on rail. So now slowly we're moving less on rail and more on rote I will help improve our service. The fact that our equipment is in much better shape.

Speaker Change: Our average age is about a little over four years down compared to seven and a half eight years average when we bought the company we have to make some major investment there.

Elaine Bedard: We had to make some major investments there. Same thing also with our terminals, same thing with our training of our people. So, and don't forget that for two and a half years, we were also very focused on our TSA moving away from UPS. Now this is done.

Same thing also with our terminals and same thing with our training of our of our people.

Speaker Change: And don't forget that for two and a half years. We were also very focused on our TSA moving away from U P. S.

Speaker Change: This is done I mean in April of 24. This is gonna be the three year anniversary of our acquisition of U P. S. Right. So we're done.

Elaine Bedard: I mean, on April 24, this is going to be the three-year anniversary of our acquisition of UPS Freight. So we're done. Okay, with our TSA, with UPS. So that helps us, okay, focus more of our IT resources on building the IT of the future instead of the IT of the 1960s. Thank you very much.

Speaker Change: Okay with that our TSA with U B S.

Speaker Change: So that helps us all keep focus more of our I T resources into building the I T or the future instead of the idea of that 19 sixties.

Ravi Shanker: You're welcome. Our next question is from Ravi Shanker with Morgan Stanley. Please proceed with your question. Good, thanks. Morning, Alain.

Speaker Change: Thank you very much.

Speaker Change: Youre welcome.

Speaker Change: Our next question is from Ravi Shanker with Morgan Stanley. Please proceed with your question.

Elaine Bedard: If I can just push you a little bit on the guidance commentary, or lack thereof. I completely understand that there's very little visibility on macro, but at the same time, you have been able to give us several kinds of moving parts and targets on the guide for 2024, and you don't have a large USTL business. So, what exactly are you, kind of, what are the moving parts, or kind of, what are you waiting for more clarity on before we know what the 2024 number is? And I also wanted to confirm that the 7 handle that you said is an organic number.

Ravi Shanker: Great. Thanks, good morning.

Ravi Shanker: If I can just push you a little bit on the guidance.

Ravi Shanker: Commentary, our or lack thereof.

Ravi Shanker: I completely understand that the there's very little visibility on macro but at the same time, you have been able to give us a several kind of moving parts and targets on the guide for 'twenty 'twenty four and you don't have a large U S. D. L business. So what exactly are you kind of Oh, what are the moving parts. So kind of what are you waiting for more clarity.

D: D for before we know what the number is and also wanted to confirm that that's seven handle that you say it is an organic number.

Elaine Bedard: Yeah, yeah. Yeah. So really, Ravi, the big thing for us is what we said when we acquired Dasky is that it's going to be neutral to our EPS in 2024, right? So I just want to make sure, okay, that that's gonna be the case.

Speaker Change: Yeah, Yeah, yeah. So so really Ravi the big thing for US is what we said when we acquired <unk> that is gonna be neutral to our EPS in 'twenty 'twenty four right.

Speaker Change: So I just want to make sure. Okay that this is going to be the case. So let's say we take over April 1st we come out after two or three weeks, we'll be in a better position to know exactly okay. It's there's going to be EPS neutral, okay or is this going to be like maybe 10 15 cents for 'twenty 'twenty.

Elaine Bedard: So let's say we take over April 1st. We come out after two or three weeks. We'll be in a better position to know exactly, okay, is this gonna be EPS neutral, okay, or is this gonna be like maybe 10, 15 cents for 2024? We said that it was gonna be about 50 cents. So what I'm saying is that our EPS probably will start with a 7. This is an organic product.

Speaker Change: Four we said that it's going to be about 50 cents minimum for 'twenty 'twenty five the desk acquisition. So so what I'm, saying that this is like a a R. E. P. S. Probably will start with a seven this is organic this has got nothing to do with dusky because like we said that ski is neutral.

Elaine Bedard: This has got nothing to do with Dasky because, like we said, Dasky is neutral in 2024. The reason is we're looking at market conditions. We're looking at our truckload operation that is really suffering, not so much on the OR but on the volume, the top line. If you look at my OR, my specialty truckload, my truckload, my specialty truckload even more, it's the top line that's killing me.

All right so in 'twenty 'twenty four right.

So the reason is we're looking at you know market conditions were looking at our truckload operation that is really suffering not so much on the O R. Okay, but on the volume that topline because if you look at my or in my specialty truckload of my truckload Okay.

Speaker Change: My specialty truckload, even more I mean, it's a tough line that's killing me right. Because why are is very close to what it was in 'twenty two but we lose so much top line. So this is why to give.

Elaine Bedard: My OR is very close to what it was in 2022, but we lose so much top line. This is why to give, you know, guidance right now for 24, when we look at what we've seen in January, it's, it's, it's a tough January. I mean, weather-wise, it's been terrible.

Speaker Change: You know our guidance right now for 24, when we look at our you know so far what we've seen in January. It's it's it's a tough January I mean weather wise, it's been terrible. Okay. So that's why we want to be cautious like most of our peers right and but what we can say.

Elaine Bedard: Okay, so that's why we want to be cautious like most of our peers, right? But, what we can say is that we believe that 24 ZPS, diluted ZPS, It's not going to be a $6 thing; it's going to be a minimum of $7 now. Now, I mean, we'll quantify that after Q1, because we want to know also if we are still in a very depressed volume environment, because don't forget, if you look at our PNC, again, we have a 71 or 72 R in our Q4, but we lose the top line.

Speaker Change: We believe that 24 Z P S diluted the P. S O.

It's not going to be a six dollar thing it's gonna be a minimum of seven now.

Speaker Change: I mean, well well well quantify that.

Speaker Change: After Q1.

Because we wanted to know also if if we are still in a very depressed volume environment because don't forget if you look at our P. N. C. Again, we have a wider 70 172 are in our Q and our Q4.

Speaker Change: We lose topline we lose 4% volume now one of my peers came out in North America with 7% loss of top line volume wise right. So it is the market is soft.

Elaine Bedard: We lost 4% of volume. Now, one of my peers came out in North America with a 7% loss of top line volume-wise, right? So it's the market they saw. And before giving guidance, I don't want to make the mistake that I made in 23, where we were probably a little bit too optimistic about volume, and we missed two quarters in a row.

Speaker Change: And before giving a guidance Oh I don't know.

Speaker Change: Want to make the mistake that I made in twenty-three, while we were probably a little bit too optimistic at both volume and and we missed two quarters in a row.

Elaine Bedard: The Consensus. Very helpful, Alain, that is understandable. And maybe a quick follow-up. You mentioned the conglomerate discount earlier in your remarks. Can you just elaborate a little bit more? You're thinking there, what does "in due course" mean? Is that a 2024 event or 2025 event? And kind of how are you looking at the separate businesses, kind of together or apart? Yeah, you know what, Ravi? It's not 24, that's for sure.

Speaker Change: The consensus.

Very helpful and that is understandable and maybe as a quick follow up you mentioned the conglomerate discount earlier in your remarks can you just elaborate a little bit more on your thinking there what does in due course mean is that a 'twenty 'twenty four 'twenty five event.

Speaker Change: How are you looking at the separate businesses, it's kind of together or apart.

Speaker Change: Yeah, you know what Ravi it's not 24 it that's for sure I mean 24 for US is really the U we take over their ski and and we deliver on our promise of T force rate running at 88 or right. So that's really the focus but by the fall of 'twenty four we start to get ready for 'twenty five.

Elaine Bedard: I mean, 24 for us is really the year we take over Dasky and deliver on our promise of T-Force Raid running at 88 OR, right? So that's really the focus. But by the fall of 24, we start to get ready for 25, okay?

Speaker Change: Five okay in terms of maybe other deals okay significant deals for us.

Elaine Bedard: In terms of maybe other deals, okay, significant deals for us. And at the same time, this thing that we call, you know, that project SFI, okay, which is separating the truckload from the rest. We believe that this will create a lot of value. We also believe that this project may not be just for TFI. Maybe some other specialty truckload may join this project to create size. So it's an open discussion that we're going to have with other parties probably late in the fall of 2024 to be ready to do something in 2025. Thanks a lot.

Speaker Change: And at the same time. This this thing that we call. The you know that that project is sat Fi, okay, which is separating the truckload from the rest.

Speaker Change: We believe that this will create a lot of value. We also believe that our you know this project may not be just with T. F. I, maybe you know some some other specialty truckload me join this project.

Speaker Change: To create size right. So it's it's an open discussion that we're gonna have with other parties are probably late in the fall 'twenty four to be ready to do something of into twenty-five Bobby.

Elaine Bedard: Short term, I mean, when you look at, I would say between the end of 25, we should be fixed on that. Understandable. Thank you, sir.

Thanks, a lot, but short term I mean, what when you look at our I would say between the end of 'twenty five I mean, we should be fixed on that.

Speaker Change: Understood. Thank you Sir.

Speaker Change: Yeah.

Welcome.

Speaker Change: Our next question is from Jordan Alger with Goldman Sachs. Please proceed with your question.

Jordan Alliger: Our next question is from Jordan Alliger with Goldman Sachs. Please proceed with your question. Good morning.

Jordan Alger: Yeah, Hi, good morning can you maybe talk a little bad morning to the factors that are you know continue to impact our U S. L tail profitability on an adjusted basis year over year had that 50 million or so in EBIT.

Elaine Bedard: Can you maybe talk a little bit this morning about the factors that, you know, continue to impact US LTL profitability on an adjusted basis year over year, that $50 million or so in EBIT, which was down versus a year ago? And then when you think about the shape of 2024 and all the stuff you're working on in US LTL, you know, when can we return to positive year over year EBIT growth in that division? I think that positive growth year-over-year in the US LPL will happen in 2024. In 2023, we had to go through this negotiation with the Teamster contract, which increased our costs per hour by about 7%. We made a lot of progress on the cost side, but we kept losing volume year-over-year. I think that this is going to be a thing of the past.

Jordan Alger: Which is down versus a year ago, and then when you think about the shape of 'twenty 'twenty four and all the stuff you're working on in the U S. L. T. L. One can reserve return to positive year over year EBIT growth in that division.

Speaker Change: Yeah, I think that ER positive growth year over year in the U S. L. T O will happen in 'twenty four right.

Speaker Change: Oh in 'twenty three.

Speaker Change: We had you know a we had to go through this negotiation with the teamster contract, which increased our cost per hour of by about 7% are you know we made a lot of progress on the cost side, but we we kept losing volume year over year. So I think that this is gonna be a thing of a pass.

Elaine Bedard: Sometimes, in 2024, maybe not Q1-Q2, but down the road in Q3-Q4, we believe that, finally, by improving our service, we'll be able to be in a position where we start growing again. And growing the top line will help us grow the bottom line at the same time. The other thing also that is important to notice is that our GFP operation in 2023 was affected badly as of Q2 by an issue with some customers that were not really, you know, doing what they were supposed to do. So we addressed that late in 23.

Speaker Change: Is sometimes in 'twenty four maybe not Q1 Q2, but down the road and then Q3 Q4, we believe that our findings by improving our service, Okay, we'll be able to be in a position, where we start growing again and growing top line will help us grow the bottom line at the same time. The other thing also that is important to.

Speaker Change: Notice is our G. F P operation in twenty-three was affected badly as of Q2 by an issue with some customers okay that.

Not really no doing what they were supposed to do.

Speaker Change: So we we address that late in 'twenty three so we should be in a better position to start growing our G. F. P franchise in 24 that will help also our R. L. T O our operation in the U S. L T L operation.

Elaine Bedard: So we should be in a better position to start growing our GFP franchise in 24. That will also help our LTL operation, US LTL operation. So, it's a question of service, okay?

Speaker Change: So it's a it's a question of service. Okay. One also of issues. We have that we're working on fixing is the.

Elaine Bedard: One of the issues we have that we're working on fixing is the customer experience with us when it comes to billing and building customers. So, for years and years, we were going through a system that was not really probably the best in the world.

Speaker Change: The customer experience with us when it comes to billing and.

Speaker Change: Billing customers. So you know for years and years, Okay, we were going through.

Speaker Change: A system that was not really probably the best in the world and we have lots of issues that hinders. The relationship we have with customers. So this is a solar project that we have for 'twenty 'twenty four to finally come up with something that is fair.

Elaine Bedard: And we have lots of issues that hinder the relationship we have with customers. So this is also a project that we have for 2024 to finally come up with something that is fair and reasonable for our customers. I mean, this is not something that we encounter in Canada.

Speaker Change: Fair and reasonable for a customer I mean this is this is not something that we encounter in Canada, I don't think that our peers in the U S out of the same issues as we do with billing customers and for sure our churn because of that churn of customers is way too high compared to probably our U S peers or what we're doing.

Elaine Bedard: I don't think that our peers in the U.S. have the same issues that we do with building customers. And for sure, because of that, our churn of customers is way too high compared to probably our U.S. peers or what we do in Canada. So this is another thing that the guys are working on. The churn over there at T-Force rate, in the mind of the previous management team, was normal. For us, it's not normal.

Speaker Change: So this is another thing that the guys are working on you know that sharing over there at T Force right in the mine the previous management team was normal for US it's not normal I mean, our train is way too high compared to what we do us and Canada or I.

Elaine Bedard: I mean, our churn is way too high compared to what we do in Canada or, I think, what our peers are doing in the U.S. Okay. And just a quick follow-up along all those lines. Can you maybe talk a little bit about, again, on the US LTL, I know revenue per hundredweight, probably due to mix, has been down, but can you talk a little bit about core pricing, contractual renewals, and what sort of magnitude you're getting? I think pricing is pretty good, guys. What's killing us is the volume.

Speaker Change: What our peers are doing in the U S.

Speaker Change: Got it and then just just a quick follow up along along all those lines can you maybe talk a little bit too.

Speaker Change: Again on the U S. L. T L. Yeah, I know revenue per hundred weight, probably due to mix has been down but can you talk a little bit about our core pricing contractual renewals and what sort of magnitude you're getting.

Speaker Change: I think pricing is pretty good guys are the what's the killing us as the volume I think our pricing power.

Elaine Bedard: I think our pricing, our revenue per shipment is up, and our weight per shipment is finally up. Because if you look at our weight per shipment, we're still way behind my peers. I mean, us, we're like hauling feathers compared to what we do in Canada or what my peers are doing in the US.

Speaker Change: Revenue per shipment is up our weight per shipments finally is up okay. Because if you look at our weight per shipment, we're still way behind my peers.

Speaker Change: Yes, we're like hauling feathers compare to what we do in Canada or what my peers are doing in the U S. But our weight per shipment is up 10%. Finally, okay, we're able to do that and but we're still way way way below the my peers average right beers averages probably like 1500 thousand me I'm still.

Elaine Bedard: But our weight per shipment is up 10%. Finally, okay, we're able to do that. But we're still way, way, way below my peers' average, right? My peers' average is probably like 1500 pounds, and me, I'm still stuck at 11.

Speaker Change: 11, something.

Speaker Change: So I mean, where we're heading in the right direction, but again you are paid by the hundred pounds on a shipment. So the lighter ship in that U haul less money and you get so this is you don't have to be a rocket scientist to understand that.

Elaine Bedard: So, I mean, we're heading in the right direction. But again, you're paid by the 100 pounds for a shipment. So, the lighter the shipment that you haul, the less money you get. So, you don't have to be a rocket scientist to understand that.

Elaine Bedard: And this is why we've changed the focus of our sales team to try to change the mix. And we're heading in the right direction there. Our revenue per shipment, XFUEL, is up. And that's the way to go.

Speaker Change: And this is why we've changed the focus of our sales team.

Speaker Change: To to try to change the mix and we're heading in the right direction. There our revenue per shipment ex fuel is up and that's the way to go in terms of pricing.

Jason Seidl: In terms of pricing, I think our peers are very smart, okay? They understand that, you know, everybody is in this business to make money. And that's just all freight, just for the pleasure of hauling freight. So that's the beauty of the US LTO is that, you know, our peers are smart. So we like to compete with peers that are smart. https://www.youtube.com. Thank you, www.globalonenessproject.org. Our next question is from Jason Seidl with TD Cowan. Please proceed with your question. Thank you, Alper. Good morning. Morning, Jason!

Speaker Change: Our peers are very smart okay are they understand that you know everybody is in this business to make money and that's just all afraid just for the pleasure of hauling freight.

Speaker Change: So that's the beauty of that U S. L. T O is that.

Speaker Change: You know our peers are smart and so we like to compete with people that are smart for us because they are all about making money.

Speaker Change: Thank you.

Speaker Change: Welcome.

Speaker Change: Our next question is from Jason Seidl with TD Cowen. Please proceed with your question.

Speaker Change: Good morning Ali.

Jason Seidl: Good morning, Jason.

Elaine Bedard: I wanted to stay on USLPL for a little bit, you know, really nice job in the quarter with that claims ratio, um... where do you think you can go from there and sort of what you have gotten? You know what Jason, when you look at that, I mean, the culture at T-Force Raid at the time was that 1.5, 2% of revenue was normal. And we said, no, guys, this is not normal. I mean, if you look at our peers in the US, if you look at what we do in Canada, I mean, in Canada, we're a 0.1%, which is accepted. So what we did is we took some of our Canadian folks, and they worked with our U.S. team. And we were able to solve the problem at the source, right?

Jason Seidl: One of the.

Jason Seidl: Stay on a U S. L T O for a little bit a really nice job in the quarter with that claims ratio.

Jason Seidl: Where do you think it can go from there and sort of what has gotten us to drop a whole point off that number.

Speaker Change: You know what Jason one way to look at that I mean.

Speaker Change: The culture at T Force right at the time was this 1.52% of revenue was normal at least said that no guys. This is not normal I mean, if you look at our peers in the U S. If you look at what do we do in Canada, I mean in Canada, we're appointing 1% of revenue.

Speaker Change: Which is acceptable.

Speaker Change: So so what we did is we took some of our Canadian folks, okay, and they work with our U S team.

Speaker Change: And we were able to solve the problem at the source right.

Elaine Bedard: So this is an experience where our customers' experience dealing with us, at least on the claim side, the experience is way better than it was a year ago. So we're trying to do the same thing also. Like I said earlier on the call, the billing, the way we bill customers, I mean, there's way too many. We make way too many corrections.

Speaker Change: So this is this is a an experience where our customers experience dealing with us on at least on the claims side. The experience is way better than it was a year ago. So so we're trying to do the same thing also like I said earlier in the call ill the billing the way, we bill customers I mean this.

Speaker Change: Way too many mistakes.

Speaker Change: We make way too many correction.

Elaine Bedard: And this is something that, you know, in the past, in the mind of the management then, it was acceptable. Okay, we just, you know, we just make mistakes, and we just correct them, okay. But us, we say, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no,

Speaker Change: And this is something that you know in the past in the mind of the management then it was acceptable. Okay. We just you know we just make mistake and we just correct that okay, but as we say no no no no no no no that's not the way to do it so now software that.

Elaine Bedard: That's not the way to do it. So, now, the software that we use, the tools that we have, the people, because there have been a lot of moving parts with people. We lost people that were there, I'm talking 10 years ago.

That we use the tools that we have the people because there's been a lot of moving parts with people. We lost the people that were there I'm talking 10 years ago.

Elaine Bedard: So, this is where we are investing big time in 24 to improve the experience, okay? customers with us on the billing, customer service, and all that. We should see some major improvements during the course of 24. That will help us grow our business, grow our volume because if you're a shipper and you say, well, okay, I could deal with ABC, and then I deal with T-Force Freight, and it's a nightmare because those guys bill me wrong, they send me a credit, et cetera. I mean, this is not professional, right?

Speaker Change: So this is why we are investing big time in 24 to improve.

Speaker Change: The experience okay.

Speaker Change: Customers with us on the billing customer service and all of that and we see we should see some major improvement during the course of 'twenty four and that will help us grow our business grow our volume because if you're a shipper and you say well, okay I could deal with the a B C. And then idea with T Force right and it's a nightmare.

Speaker Change: Because those guys. They build me wrong. They send me a credit etcetera. I mean this is not this is not professional right. So this is another aspect of improving service with customers that we're working on over and above the delivering of the freight.

Elaine Bedard: So this is another aspect of improving service with customers that we're working on over and above the delivery of the freight. I think if you guys improve, he's... Absolutely. I want to jump on a little bit in the near-term here and then give some clarification. So how should we think about the US LTL OR on a sequential basis from 4Q to 1Q, given that a lot of your peers have called out bad weather in January, and then you mentioned an 88 OR for LTL. Is that an exit rate for the year, or is that a full year? No, that's a full year, Jason.

Speaker Change: Well I think if you guys improve ease of use and also your claims ratio that should also help you with the pricing department going forward as well absolutely.

Speaker Change: I wanted to jump on a little bit of near term here and then a clarification. So how should we think about the U S. L T L or on a sequential basis from <unk> given that a lot of your peers have called out bad weather in January and then you mentioned.

Speaker Change: Or for L. T. L is that an exit rate for the year was that full year total.

Speaker Change: No that's full year Jason.

Elaine Bedard: You know, for sure, Q1 is going to be a tough quarter for us. I mean, we're not going to be a sub-90 OR in Q1. I don't think so.

Speaker Change: You know for sure Q1 is gonna be a tough quarter for us I mean, we're not gonna be a sub 90 or in Q1, I don't think so but I think that for the year. Okay. That's the plan that's the commitment of our team to deliver an 88 or for the year.

Elaine Bedard: But I think that for a year, OK, that's the plan. That's the commitment of our team to deliver an 88 OR for the year, but not in Q1. Q1, for sure, it's been terrible. I appreciate the color.

Speaker Change: But not in Q1 Q1 for sure it's been terrible.

Speaker Change: Got you I appreciate the color on that.

Ken Hoexter: Pleasure, Jim. Our next question is from Ken Hoexter with Bank of America. Please proceed with your question. Hey, great. Good morning, Alain.

Speaker Change: Pleasure Jason.

Speaker Change: Our next question is from Kenn Hoekstra with Bank of America. Please proceed.

Ken Hoexter: With your question.

Ken Hoexter: Hey, great good morning Alain.

Elaine Bedard: So obviously, significant strides, as you've mentioned, on the 0.5% claims, but noted costs are still too high. So how much is still from the legacy UPS expense that rolls off? And what is still under your control?

Ken Hoexter: So obviously when you can drive that you've mentioned on the AR on the 25% claims but noted costs are still too high. So how much is still from the legacy U P. S expense that that rolls off and what is still under your control and then just you throw out the 10% increase in weight per shipment you mentioned last quarter that was something you were very focused on what.

Elaine Bedard: And then you threw out the 10% increase in weight per shipment. You mentioned last quarter that was something you were very focused on. What do you focus on? And how do you change that?

Ken Hoexter: Do you focus on and how do you how do you change that.

Speaker Change: [laughter] Yeah, that's a very good question, Ken I like like like we said I mean in terms of the claim I mean, we have nothing to do with you know, let's see what happened two three years ago. So all of this is behind US I mean, when we took over the company I mean, we serve or the pass and so so our claim today.

Elaine Bedard: Yeah, that's a very good question, Ken. I mean, like we said, in terms of the claim, I mean, we have nothing to do with, you know, let's say what happened two, three years ago. So all of this is behind us. I mean, when we took over the company, we severed the past. And so our claim today is whatever our claims are based on what the operation is today. Now in terms of the future, you know where we could be and all that. The company is very well positioned to start growing in terms of volume. I forgot, what was your second question? Oh no, just the first one was just how much of the legacy UPS expenses are still there, like what do you still control and what goes off. So when you talk about going from $91.88, this has nothing to do with the cost rolling off in April. This is just your own internal cost.

Speaker Change: He is whatever our claim or based on what the operation is today.

Speaker Change: Now in terms of.

Speaker Change: Oh future, you know, where we could be and all of that I mean, the company is very well positioned to start growing in terms of volume.

Speaker Change: I forgot what was your second question Ken.

Ken Hoexter: The first one was just how much of the legacy U P. S expenses like what what do you feel control what's that goes off.

Speaker Change: So when you see it going from 90 188. This has nothing to do with the cost rolling off in April. This is just no no your own internal cost okay.

Speaker Change: And then the second one part of that was was the weight per shipment focus what what yes, excuse me yeah, yeah, the weight per shipment and it's something that we've been working at <unk>.

Elaine Bedard: And then the second part of that was the weight per shipment focus. The weight per shipment is something that we've been working on since day one because we said, look at our peers. Nobody is hauling a 1,000-pound shipment on average.

Speaker Change: For day one.

Speaker Change: Because we said look at our peers.

Speaker Change: Nobody is all in 8000 pound shipment on average nobody so why are we doing that.

Elaine Bedard: Nobody wants to do that, so why are we doing it? Well, because our focus with the previous owner was on retail only, right? So this is what we're trying to change with our sales team and say, guys, retail is good, but let's try to move more industrial freight, like most of our peers are doing. So the target is to slowly get closer to the average.. uh... wait for shipment that appears because you're paid by the power. So that's number one. And we've said it many, many times also, what we're trying to do is to reduce the time that our drivers are driving between each and every stop because they have to drive an average of about 10 miles between each and every stop, which is nonsense. We drive less than five miles in Canada between each and every stop.

Speaker Change: Well, because our focus has been with the previous owner on a retail only right. So this is what we're trying to change what our sales team and say guys I.

Speaker Change: I mean retail is good.

Speaker Change: But let's try to move more industrial freight like like most of our peers are doing so the target is to slowly get closer to the average.

Speaker Change: Our weight per shipment that our peers are because you are paid by the patent right.

Speaker Change: So that's number one and we've said it many many times also what we're trying to do is to reduce the time that our drivers are driving between each and every sub because they have to drive an average of about 10 miles between each and every stuff, which is nonsense. We do we drive less than five miles in Canada between each and every step in the density in Canada.

Elaine Bedard: And the density in Canada is not the same as the density in the US. So, that's another focus in terms of... Reducing the cost of our labor shipment costs, right? So reduce the miles, focus closer to your terminal, and stop delivering, let's say, a shipment 70 miles away from your terminal because this doesn't make any sense. Now, all this takes time, right? So, you know, we bought the company about two and a half years ago. We went in there, there was a sales team, and the sales leadership had changed, right? A year ago, we started making some changes to the sales leadership. We're beefing up the team now with some members of the TFI team in other sectors. So, we should start to see some improvement in 2024 in terms of growth.

Speaker Change: It's not the same as the density in the U S.

Speaker Change: So that's another focus in terms of.

Speaker Change: Reducing the costs.

Speaker Change: <unk> of our of our shipping labor shipment costs right. So reduced demise focus closer to your terminal and stopped delivering a let's say a ship in 70 miles away from your terminal because this doesn't make any says now all of this is it takes time.

Speaker Change: Right.

So you know we bought the company about two and a half years ago. We came in there there was a sales team. The sales leadership has changed right a year ago, we started making some changes to the sales leadership.

Speaker Change: We're beefing up the team now with some members of of the T F I team in other sectors.

Speaker Change: So we should start to see some E improvement in in 'twenty four in terms of growth.

Elaine Bedard: We should also start to see improvement in our service. We're moving more freight on the road, line of road versus rail, okay, than in 23 to improve service. At the same time, our costs are also under control because we have better equipment. Our MPG is comparable to our peers now because our fleet is, you know, it's got a normal age versus two years ago. We had a fleet that was way too old with an MPG that was way too low. So all this is Alper here's an improved service. Great. And from a quick follow-up on the spin, just want to understand why you chose to spin the truckload as opposed to the LTL into an independent, given the strides, given the pure, pure plays. Just wondering your thoughts on why not that way.

Speaker Change: We should also start to see improvement in our service, we're moving more freight on the road Lino road versus rail.

Speaker Change: Okay, then in 'twenty three to improve service at the same time our costs also are under control because we have better equipping our M. P. G is comparable to our peers now because our fleet is you can always this is Scott normal age versus two years ago. We had that fleet that was way too old with an M. P. G.

Speaker Change: There was way too low.

Speaker Change: So all this is helping us improve service.

Speaker Change: Right and for my quick follow up on on the spin I'm just want to understand why you're jealous.

Speaker Change: Spend the truckload as opposed to the L. T L into an independent given the strides given the peer pure plays just wondering your thoughts on why not that yeah yeah.

Elaine Bedard: Yeah, yeah, because, you know, at the end of the day, I mean, if you look at what we have, PNC is very small, right? It's only five, six hundred million dollars U.S. in revenue X fuel. So it's really small.

Speaker Change: Yeah, Yeah, because you know at the end of the day I mean, if you look at.

Speaker Change: Yeah.

Speaker Change: What we have.

Speaker Change: PNC is very small right, it's only five $600 million U S of revenue ex fuel. So its really small so after truckload has gone well what are we left with it's really a nokia in the logistics company.

Elaine Bedard: So after the truckload is gone, what are we left with? It's really an LPA in the logistics, and very different from our peers. Just look at our logistics, Ken, in Q4, and Akima with an 88 OR. Most of my peers are down like 40, 50%. One of my peers' OR is 100.

Speaker Change: And and very different than our peers.

Speaker Change: Just look at our logistics skin in Q4, we came out with a knee or.

Speaker Change: Most of my peers are down like 40 50 per cent one of my peers or is 100.

Elaine Bedard: That peer's got LTL in logistics. His LTL is great, his logistics is running at 100 OR. We run our logistics very efficiently, and we make a lot of money at it. Our return on investment capital is through the roof. So I think that the combination of LTL and logistics makes a lot of sense if you make money with logistics. Right? But if you return vested capital, it is about the same.

Speaker Change: That peers got L T L and logistics.

Is is L. T O. That's great. There's logistics is running 100 door.

Speaker Change: Oh, so we run our logistics very efficiently and we make a lot of money at it our return invested capital is through the roof.

Speaker Change: So I think that the combination of L. T L and logistics made a lot of sense, if you make money with logistics right.

Speaker Change: If you return invested capital is is about the same.

Elaine Bedard: So if you're running, let's say, your LTL at an 85 OR, okay, with a return vested capital at 25, and your logistics is running a 98 OR with a return vested capital at 4, well, that doesn't make any sense to have the 2. So I would agree with you that then you do the spinoff of only your LTLs. But it's different at TFI because the way we run our logistics, we're about making money. That's just volume. So, if you look at my Q4... excluding DHC acquisitions, I'm flat.

Speaker Change: So if you're running let's see your L. T. L 85 O R. Okay with a return on invested capital of 25, and your logistics is running at 98 or where the return on invested capital at four.

Speaker Change: That doesn't make any sense to have the two so I would agree with you that then you do the spin off of only your L. T O.

Speaker Change: But it's different at T five because the way we run our logistics, we're about making money that's just volume.

Speaker Change: So if you look at my Q4.

Speaker Change: Smoothing GHT acquisition.

Speaker Change: Flat.

Speaker Change: Okay on my own.

Elaine Bedard: Okay, on my OE. So, my peers are down 30, 40, 50%. One of my peers, like I said, is running 100 OR. We're very different, and our logistics will keep growing again. I mean, for sure, but smart.

Speaker Change: So my peers are down 30, 40, 50% and one might be like I said, there is running 100 the war.

Speaker Change: We're very different and let's just say logistics will keep growing I can't I mean for sure, but smart we're not in the business to to do logistics at 2%.

Elaine Bedard: We're not in the business to do logistics at 2%. Wonderful. Elaine, I appreciate the time. Thanks. Pleasure again.

Speaker Change: Yeah.

Speaker Change: Wonderful I appreciate the time thank you.

Speaker Change: Pleasure again.

Speaker Change: Our next.

Walter Spracklin: Our next question is from Walter Spracklin with RVC Capital Markets. Please proceed with your question. Yeah, thanks very much. Good morning, LA. Morning, Walter.

Speaker Change: Question is from Walter <unk> with RBC capital markets. Please proceed with your question. Thanks, very much good morning out there.

Walter: Good morning Walter.

Walter: So coming back to the spin and you mentioned that conglomerate describe discount and I know in the past you've kind of talked about your P&C in Canada is having been you know already consolidated and not a lot of room for you to grow by acquisition.

Elaine Bedard: So, going back to the spin, and you mentioned the conglomerate discount, and I know in the past you've kind of talked about your PNC in Canada as having been, you know, already consolidated, not a lot of room for you to grow by acquisition. It's a really premium asset, and I bet it would fit nicely into a lot of other organizations that would see it as strategic. Is that something in that conglomerate discount kind of avenue that you would, you know, we put something out on that, but I'd love to hear your thoughts on how you see the PNC division in Canada. Well, like you just said, Walter, the problem we have with our PNC is that it's so good. All right, and except organically, we can't grow it.

Walter: It's a really premium asset and I bet would would fit nicely into a lot of other organizations that would see it as strategic.

Walter: Is that something in that conglomerate discount kind of Avenue that you would you know it's obviously you know, we we put something out on that but love to hear your thoughts.

Walter: On on how you see the P&C Division in Canada.

Walter: Yes.

Walter: [laughter].

Speaker Change: Well like you just said Walter the problem, we have with our P. N sees that it's so good.

Speaker Change: Alright.

Speaker Change: And except organically, we can grow it I mean, there's nothing really of size that we could do in Canada.

Elaine Bedard: I mean, there's nothing really of size that we could do in Canada, right? So we can't buy, you know, A, B, C. We could buy, we cannot, there's not much we could do in M&A. So. If you go back to the Waste in 2014-15, you know, we could not grow the Waste at the time.

Speaker Change: [laughter] right. So we can't buy you know a b C. We could buy we cannot there's not much we could do on M&A on P&C.

Speaker Change: So.

Speaker Change: If you go back to the waste in 2014 and 15, you know we could not draw the waste at the time, we had a fantastic business that was called metric.

Elaine Bedard: We had a fantastic business called Matrek, and we couldn't grow it, and people said it was probably worth L.A. 5, 4, 500 million, and then we said no. We were going to sell it, and we sold it to GFL for $800 million at the time. So, if you look at our PNC, it's a diamond. It produces a ton of free cash. It's a gem.

And we couldn't grow it.

Speaker Change: And people said well this is probably where they'll a five four or 500 million and then we said no.

Speaker Change: Are we going to sell it and we sold it to G. F. L 40, 800 million at that time.

Speaker Change: So.

Speaker Change: If you look at our P&C, it's a diamond.

Speaker Change: It it produces a ton of free cash flow.

Speaker Change: It's a gem.

Elaine Bedard: The problem we have is the same as the waste. Our waste business at the time was also a gem, right? Bye!

Speaker Change: The problem. We have is same as the waste or waste business at the time was also a gym.

Speaker Change: <unk>.

Speaker Change: But.

Elaine Bedard: The same story is we can't grow, right, except organically. So for sure right now, Walter, our plan is to keep growing our PNC organically. We're trying to do, you know, we're having some discussions with players right now to try to do more for them, okay, versus, you know, what the situation is. But our real focus is, like I said on the call, for 24 years. Our USLTL team, we have to deliver that famous 88 award.

Speaker Change: Same story is we can't grow.

Speaker Change: Oh, except organically so for sure right now Walter our plan is is to keep growing organically, our pea and see where we're trying to do you know we're having some discussions with players right now to try to do more for them. Okay versus you know what the situation is.

Speaker Change: Our real focus is like I said on the call for 24 years.

Speaker Change: Our U S. L. T out we have to deliver that famous 88 war.

Elaine Bedard: And we have to do this crazy deal and get ready for 25, because we believe that this will create a lot of value for our shareholders if we could strike this deal in 25. And we also believe that, you know, maybe this spinoff is not just going to be about the TFI asset. Maybe other assets will be part of that deal because we have a value proposition that is second to none to other parties if they want to join us. So now, going back to your question about PNC, this is why, you know, at the end of the day, we'll have to make a decision down the road, Walter, but it's not gonna be 24 because I'm too busy at 24 with everything that we're doing and our team the same. But our PNC team, they're really focused. I think that in 24 hours, we will start growing organically. It's not easy, okay?

Speaker Change: And we have to do this desk you deal.

Speaker Change: And get ready for 25, because we we believe that this will create a lot of value for our shareholders. If we could to strike. This deal in 'twenty five and we also believe that you know maybe the spin off is not just going to be about the T. F I assets.

Speaker Change: Maybe other assets will be part of that deal.

Because we have a value proposition that is second to none to other parties.

Speaker Change: If they want to join us.

Speaker Change: Alright, so now going back to your question about P. N. C. This is why you know at the end of the day, we will have to make a decision down the road Walter but it's not going to be it's not going to be 24, because I'm too I'm too busy in 'twenty four with everything that we're doing in our team the same but our P&C team there really.

Speaker Change: Focus I think that in 'twenty four.

Speaker Change: We will start growing organically, it's not easy okay. In 24, if you look at by Q4, My volume is down what three 4% again.

Elaine Bedard: In 24, if you look at my Q4, my volume is down, what, three, 4% again, quarter over quarter. The market is soft. Hopefully, 24, you know, things will start to get better.

Speaker Change: Quarter over quarter, the market is soft hopefully 'twenty for you now.

Speaker Change: Things will start to get better.

Elaine Bedard: And then my follow-up question is on your reference to the next deal. How much of that is when you're ready as opposed to when there's an opportunity? You always mention there's a bunch of larger players that you're always in talks with. Could it be that the timing works and this is a 24-hour deal, or is it possible that this happens in 25? And maybe not at all, depending on if it's things that are outside of your control in terms of timing.

Okay and then my follow up question is on your your your reference to the next deal how much of that is when you're ready as opposed to when there is an opportunity.

Speaker Change: You you always mentioned, there's a bunch of you know.

Speaker Change: Larger players that you're always in talks with them you know.

Speaker Change: Could it be that the timing works and this is a 24 deal or is it possible that this <unk> happen.

Happens and twenty-five but maybe not at all depending on if it's things that are outside of your control and timing just under you know help me understand a little bit how your how that will play out this larger kind of L. T L logistics acquisition and in a in a potentially 25 framework.

Elaine Bedard: Just help me understand a little bit how that will play out, this larger kind of LTL logistics acquisition in a potentially $25 framework. But you know what, Walter, the big difference between when we bought UPS Freight and while we're buying that, UPS rates was a very difficult deal to do because it was a carve-out, and you know the company was not making any money. The OR was about 110, the fleet was a disaster, etc. DASCII is a different story.

Speaker Change: But you know what Walter that the big difference between when we bought UBS freight and worth buying desk E. U P. S. REIT was a very difficult to do because it was a carve out.

Speaker Change: And you know the company was not making any money. The ore was about 110, the fleet was a disaster et cetera et cetera.

<unk> is a different story.

Elaine Bedard: I mean, DASCII will run a sub 90 OR within 6 to 12 months at most. Okay. The operating groups there are very, very, very good. I mean, there's a few things that we'll work with them to fix, but in general, this is an easy transaction for us compared to UPS3, which was very complex. So with that in mind, okay, what I'm saying is that once we do DASCII early in Q2, if something comes along before the end of 24, that makes sense, okay, financially, even before we do the spinoff, we are in a position to do it. Why? Because Dasky is not a big rock in our shoe.

Walter: That's key will run a sub 90 or within within six to 12 months in my mind Okay.

Walter: The operating groups there are very very very good I mean, there's a few things that we'll work with them to fix but in general this is an easy transaction for us.

Walter: There to your P. S rate, which was a very complex one so with that in mind, Okay. What I'm, saying is that once we do desk E. Early in Q2, if something comes along before the end of 'twenty for that makes sense. Okay.

Walter: Financially even before we do the spinoff we are in position to do it.

Walter: Why because that's key is not a big rock in our shoe they run a very very good operation.

Elaine Bedard: They run a very, very good operation, okay? And I think that to bring those guys to a sub-90 OR, it's not gonna take five years. It will be very short, the same market conditions as we have today, right? If market conditions freight changes in 24 late or into 25, that's going to make it much easier even. So, to answer your question, yes, we're doing Dasky, yes, we're working on this spin-off, but if a good opportunity comes along late 24 into the LTL or into the logistics world in the U.S., we're in. Thanks very much for the time. Bless you, Walter.

Okay, and and I think that to bring those guys to a sub 90 or it's not going to take five years.

Speaker Change: Okay. It will be very short.

Speaker Change: Same market condition as we have today right if market condition freight changes in 'twenty four late or into 'twenty five that's gonna make it much easier even that.

Speaker Change: So to answer your question, Yes, we're doing that ski yes, we're working on the spin off but if if a good opportunity comes out it comes along late 'twenty four into the L T L or into the logistics world in the U S. We're in.

Speaker Change: Excellent thanks, very much for the time appreciate it.

Speaker Change: Especially it Walter.

Elaine Bedard: Our next question is from Jason Seidl with TD Cowan. Please proceed with your question. Hey Alper, thanks for taking my follow-up.

Speaker Change: Our next question is from Jason Seidl with TD Cowen. Please proceed with your question.

Hey, Thanks for taking my follow up.

Jason Seidl: Along those lines, you know, you made a comment about potentially growing your specialty truck load a little bit before a potential spin. I guess two questions: geographically where we are, Number one, number two, what types of special... additive to make that a more attractive asset on the PNC business. Would it have to be done before a potential exit from the PNC business, or could you do it? Well, Jason, you know what? First of all, it's got to be the U.S. because in Canada it's not much in terms of size, right?

Jason Seidl: Along those lines you you you made a comment about potentially growing.

Jason Seidl: Your specialty truckload, a little bit before a potential spin I guess two questions geographically, where would you be looking to do that.

Jason Seidl: Number one number two what types of specialty do you think would be.

Jason Seidl: To make that a more attractive asset on the spin and three what it has to be done before a potential exiting of the P&C business or could you do it do you need to do it after.

Well, Jason you know what first of all it.

Jason Seidl: It's gotta be U S.

Jason Seidl: Because in Canada.

Jason Seidl: There's not much in terms of size right. So it's got to be U S. What we like in specialty is we're a big fan of tanks, we're a big fan of flatbed.

Elaine Bedard: So it's got to be U.S. What we like in Specialty is we're a big fan of tanks. We're a big fan of... flatbed and dump operation, right so that is really our focus. We're not a big fan of reefers, okay? So this is really our focus, and if you look at Dasky, I mean, that's a perfect fit, All right. And in terms of, do we have to do PNC? Yes, no, no, no, no, no.

Jason Seidl: And dump operation right. So so that is really our focus we're not big fan of reefer.

Jason Seidl: Okay. So so this is really our focus and if you look at dusky I mean, thats a perfect fit for us.

Jason Seidl: Alright.

Jason Seidl: And in terms of Oh, do we have to do P. N C. Yes, no no no no I mean P. N C. In my mind is maybe something may happen down the road you know, but right now our focus is really like you just explain is let's deliver our U S. L. T O. Let's do the desk you deal and if an opportunity comes along okay.

Elaine Bedard: I mean, PNC, in my mind, maybe something may happen down the road, you know? But right now, our focus is really, like I just explained, let's deliver our U.S. LTL, let's do the Dasky deal. And if an opportunity comes along, okay, late 24 into LTL, or... Logistics in the U.S. We're ready to look at it. Why is that?

Jason Seidl: In late 'twenty four into L. T L R.

Jason Seidl: Logistics in the U S. We're ready to look at it why is that because <unk> is not the same difficulty for us as U P. A U P. S rate was U P. S was a lot of work. It's a carve out it's complex, it's big et cetera et cetera. That's key to me is.

Elaine Bedard: Because Dasky is not... the same difficulty for us as UPS was. UPS was a lot of work, it's a carve-out, it's complex, it's big, etc, etc. Dasky, to me, it's small, it's 1.5 billion dollars in revenue, 1.6, 1.5 in the US, and 100 in Canada. And the operation is very well run. There are a few things that will work with the boys

Jason Seidl: Small it's $1.5 billion revenue 1.61, 0.5 in the U S 100 in Canada.

Jason Seidl: And the operation is very well run and there's a few things that will work with the boys over there but to me I mean, it's it's Dean night versus the U P. S. Right deal in terms of complexity in terms of difficulty to bring the ore under 90.

Elaine Bedard: But to me, I mean, it's day and night versus the UPS rate deal in terms of complexity, in terms of difficulty to bring the award under 90. It makes sense, Elaine. Thank you for your time.

Jason Seidl: It makes sense Helane. Thank you for your time again.

Helane: Sure with pleasure Jason.

Elaine Bedard: Our next question is from Tom Wadewitz with UBS. Please proceed with your question. Yeah, great. Good morning, Elaine. I know you've gotten a bunch on USLTL, but I wanted to ask another one on that.

Thomas Wadewitz: Our next question is from Tom model It with UBS. Please proceed with your question.

Tom Modell: Yeah, great. Good morning, Alain wanted to tell you I know you've got.

Tom Modell: I know you've gotten a bunch on U S. L T L. But wanted to ask another one on that.

Thomas Wadewitz: You've had, I mean, obviously, the yellow situation provided a lift. I think the way that kind of flowed through to you was, you know, initially good, but then maybe a little bit disappointing on the tonnage and keeping to the shipment. Yes. And then, you know, you're showing improvement in service with the cargo claims ratio down a lot. So I guess I just want to get your sense of how much visibility you have to the improvement and to things being on track. You know, the 88 OR is that, you know, 90% cost-driven, and you have a lot of conviction, or is it 50-50 with revenue, and you still could have some kind of volatility around the shipments and the pricing performance? So just, I guess, some more thoughts on the trajectory of US LTL. You know what, Tom?

Tom Modell:

Tom Modell: You've had I mean, obviously the yellow situation provided a lift I think the way that kind of flowed through to you as you know initially good bit, but then maybe a little bit disappointing on the tonnage and in keeping the shipment yes.

Tom Modell: Yes.

Speaker Change: And so and then you know you've you're showing improvement in service for the cargo claims ratio down a lot. So I guess I'm just wanted to get your sense of how much visibility you have to.

Speaker Change: Two the improvement in into things being on track.

Speaker Change: You know the 88 O R is that you know, 90% cost driven and you have a lot of conviction.

Speaker Change: Or is it 50 50 with revenue and you still could have some kind of volatility around the shipments and the pricing performance. There just I guess some more thoughts on the trajectory I know U S. L. P L.

Speaker Change: You know what my experience with revenue roaming revenue of T Force, where it has not been too good right. So if you look at our track record for two and a half years.

Elaine Bedard: Our experience with revenue, growing revenue at T403 has not been too good, right? So if you look at our track record for two and a half years, I mean, we were never able to grow revenue over there. Why?

Speaker Change: We were never able to to grow revenue over there why because our churn is too high because our service was not up to par to our peers et cetera et cetera.

Elaine Bedard: Because our churn is too high, because our service was not up to par with our peers, etc, etc. So this is, well, when we talk about a DDEOR, it's gonna be, you know, like 80% today based on how much can we shrink costs today, right? To get to the 300 basis points versus what we are today at two, four.

Speaker Change: So this is why when we talk about a D to eat or it's gonna be ill like 80% today based on how good can we shrink cost today right to get to the 300 basis point versus where we are today at Q4.

Elaine Bedard: Now, we've made some changes, okay, we've improved our planes, okay, like we said, we are improving our line all, okay, just in time, because we do more on the road than on the rail, versus, let's say, two years ago or a year ago. But still, okay, we have to improve the customer experience dealing with us on billing, okay, where there are too many mistakes, like I said earlier in the So this is an ongoing process at 24. Our sales team also has to be more focused on the freight we need, not the freight that's there, okay, that we don't. So it's, again, a cultural change that, guys, okay, retail freight is good, industrial freight is better, because it's heavier, and we get more money. Close customers to our terminal is better, right? than customers that are 100 miles away from us. All this kind of education for our sales team and focusing on the right thing and also reducing the churn okay with our customers. Our churn is too high.

Speaker Change: Now we've made some changes okay, we've improve.

Speaker Change: Claims okay. Like we said we are improving our line all okay. It just in time, because we do more on the road that on the rail.

Speaker Change: It's just let's say two years ago or a year ago.

But still okay, we have to improve the customer experience dealing with us on billing, okay, where there's too many mistakes like I said earlier in the call. So this is an ongoing process in 'twenty for our sales team also has to be more focus on the freight we need not the freight.

Speaker Change: That's there okay that we don't need so it's again, a cultural change that guys. Okay retail freight is good at.

Speaker Change: Industrial afraid is better because it is heavier we get more money close close customers to our terminal is better right than than customers at 100 miles away from our terminal.

Speaker Change: All of this kind of education of our sales team and focusing on the right thing and also reducing the churn okay with with our customers. Our churn is too high. So this is these are all things that during the course of 'twenty four we have to make some major improvement like we said on the script.

Elaine Bedard: So these are all things that, during the course of 24, we have to make some major improvements. Like we said in the script and in our press release, we were successful on claim, okay? Because that was a major issue of dealing with deforce rate, and claim is a disaster. So that's been fixed, okay?

Speaker Change: Our press release, we were successful on.

Okay, because that was a major issue of dealing with T force rate as claim is is a disaster. So that's been fixed okay, and we're doing well on that.

Elaine Bedard: And we're doing well now. But we have to improve, continuously improve our service, and this has got to be the goal. But if you ask me today, OK, to get to the 808 OR, OK, how are you going to get there?

Speaker Change: Now we have to improve continuously improve our service and this is gonna be the goal, but if you ask me today or key to get that either are okay. How are you going to get to there I would say, 80% of that will be saving money being more efficient doing more with less and hope.

Elaine Bedard: I would say 80% of that will be saving money, being more efficient, doing more with less. And hopefully, our sales team and our sales leadership will start to deliver some growth year over year in terms of shipments. Right, okay. Maybe just a couple more quick ones on that.

Speaker Change: Really our sales team and our sales leadership start to deliver some some growth year over year in terms of the shipment count.

Speaker Change: Yeah.

Speaker Change: Right Okay.

Speaker Change: Maybe just a couple more quick ones on that so if you look at so you're saying volume up I think for shipments in second half is would you use Nokia would you also expect revenue per hundredweight to be up in second half so that.

Elaine Bedard: So if you look at, you're saying volume up, I think for shipments in the second half, would you in US LTL also expect revenue per 100 weight to be up in the second half of Pricing Lever 2? And then just wondered if you could give a little more kind of detail on how much of Line Hall is outsourced to rail, like where you were before and maybe where you are today. Thank you. Yeah, yeah. So right now, what I could say, Tom, is that we're doing our own line-off for about 56 or 57 percent of all miles. So rail is doing probably like 35, and third parties are doing the rest. In terms of trying to be, you know, where are we going to be in 24?

Speaker Change: The pricing lever too and then just wondered if you could give a little more kind of detail on how much of line haul is outsourced to rail like where you were before and maybe where you are today. Thank you.

Speaker Change: Yeah, Yeah. So so right now what I could say Tom is that we're doing our own line off for about 56 or 57% of all miles. So rail is doing probably like 35 and third parties are doing the rest.

Speaker Change: In terms of trying to to be you know where are we gonna be in 'twenty four.

Elaine Bedard: Really, the goal on revenue per hundred weight is to improve that. I mean, our revenue per hundred weight is down a bit. We think that the market conditions will support some growth there. If I look at my peers, those guys are up.

Speaker Change: That's really the goal on the revenue per hundredweight is is to improve that I mean, our revenue per hundredweight is down a bit we think that the market condition will support some growth in there if I look at my peers. Those guys are up US we were down a bit because our weight was also up at the same time our revenue per shipment is.

Elaine Bedard: Us, we're down a bit because our weight was also up at the same time. But our revenue per shipment is up year over year. We believe that market conditions in 2024 for the industry in general in the U.S. will be positive, so we'll be in a position again to improve the quality of our revenue. But again, if the service is there, like my peers, their service is up to par. It's easy to get more money.

Speaker Change: Up year over year, and we believe that market condition in 24 for the industry in general in the U S will be positive. So it will be in a position again to improve the quality of our of our revenue, but but again I mean, if the service is there okay like my peers.

This is up to par right.

Speaker Change: It's easy to get more money, it's easier not easy, but it's easier to get you know price increase from customer it's not the situation that T force right.

Elaine Bedard: It's easier, not easy, but it's easier to get, you know, a price increase from customers. But that's not the situation at T force rate. Right. So we are working on improving the service. And once you improve service, then you're in a way better position to, you know, start moving rates up, okay, versus the market. I'm convinced that T-Force freight today versus my peers, same shipment, same destination, etc., etc., same way, etc. We had to give a discount to a customer because our service was not comparable.

Speaker Change: Right. So we are working on improving service and once you improve service. Then you are we better position to you know start moving rates up okay versus market I'm convinced that our T force rate today versus my peers same shipment same destination et cetera et cetera.

Speaker Change: The same way.

Speaker Change: We are we have to give a discount to our customer because our service is not comparable.

Elaine Bedard: We're going to get closer in 24 with everything that we're doing. Right. Makes a lot of sense. Thank you for the timeline. Pleasure.

Speaker Change: But we're gonna get closer in 'twenty four with everything that we're doing.

Speaker Change: Right makes a lot of sense. Thank you for your time line.

Speaker Change: Pleasure.

Speaker Change: Our next question is from Brian.

Brian Ossenbeck: Our next question is from Brian Ossenbeck with J.P. Morgan. Please proceed with your question. Hey Elaine, good morning.

Brian: With J P. Morgan. Please proceed with your question.

Brian: Hey, good morning, Thanks for taking my questions.

Elaine Bedard: Thanks for taking the questions. So, it's all top of that. On that service point, you gave the context of the year-over-year improvements. Can you talk about how that trended through last year and how recent those improvements were? Because it sounds like it might have been a more recent event, because that would probably have some implications on trust in the level of service.

Brian: So it's the only one on the <unk>.

Brian: Service points on you gave us the context of the year here.

Brian: Improvements can you talk about how that trended well through the last year and Oh.

So those improvements works it sounds like the multiple more reasonable dance because that probably hasn't been solutions in terms of.

Brian: So you're going to see how much customers.

Brian: That's the level of service.

Brian: Can you talk a little bit more complex.

Brian: Yeah.

Speaker Change: No. It's what happened Brian is that this is these are improvements that happened during the course of 'twenty. Three if you look at the claim I mean, it's something that we just woke up one morning, and say Hey, I mean, our claims ratio has improved so much. This is something that we should talk about and this is why for the first time, we're talking about it in our in our press release right.

Elaine Bedard: What happened, Brian, is that these are improvements that were made during the course of 2023. If you look at the claim, it's something that we just woke up one morning and said, hey, our claim ratio has improved so much, this is something that we should talk about, and this is why, for the first time, we're talking about it in our press release. But this is something that we started improving about a year and a half ago when we saw that there was really a major need for improvement. In terms of the Lionel, what we're talking about, this is something that we started about three or four months ago when we talked about our union contract and all that. We said, guys, you know what? In order to improve service, we want to drive more miles on the road for sure, that will create some kind of jobs, so that is something that we really started, let's say, in the fall of 2023, and we'll keep doing that to improve service. In terms of the major rock that I've got in my shoe over there, which is billing, etc., this is something we just hired new folks in our pricing and billing department, I would say like six months ago.

Speaker Change: But this is something that we started improving about a year and half ago. When when we saw that there was really a need a major need for improving in terms of the lino what we're talking about okay. This is something that we started about three or four months ago. Okay. When we talk to.

Speaker Change: You know our union contract and all that and we said guys. You know what in order to improve service, we want to drive more miles on the road for sure that will create some kind of jobs et cetera et cetera. So that is something that we really started let's say in the fall of 'twenty three and we will keep doing that to improve service in terms of.

Speaker Change: The major rock that Ive got in my shoe over there, which is billing et cetera et cetera. This is something we've just hired a new folks in our pricing billing department I would say like six months ago.

Elaine Bedard: This guy took it over, and that's going to be part of our improvement for 2024. There We have seen some improvement because of all the measures that we put in place, manual measures to improve the way we build customers, to try to eliminate as much as possible mistakes and all that, and credits and rebilling and all that. But in terms of the system, this is 2024 where we're going to have to move into a much better tool for our people to be able to build customers in an efficient way so that there are no more mistakes. I mean, this is, you know what? This is something I've never seen in my life, how bad of a system that we have, how many mistakes we make. I mean, I think that for 20, let's say 22,000 shipments, we will probably issue around 35,000 invoices because we bill, we credit, we rebuild. I mean, it's just a nightmare.

Speaker Change: This guy took it over.

Speaker Change: And and that's going to be part of our improvement for twenty-four there.

Speaker Change: We have seen some improvement okay because of all of the measures that we've put in place manual measures, okay to improve the way, we bill customers to try to you know.

Speaker Change: Eliminate as much as possible mistakes and all of that and credits and rebuilding and all that but I mean in terms of the system. This is 24, where are we going to have to move into a much better tool for our people to be able to build customer in a in a efficient way so that there's no more mistakes.

Speaker Change: This is you know what the right. This is something I've never seen in my life.

Speaker Change: I'll bet of our system.

Speaker Change: That we have how many mistakes we make I mean, I think that for 'twenty, Let's say 22000 shipments we will probably issue like a 35000 invoices because we bill we credit we rebuild it I mean, it's just a nightmare and and this is not something new this has been going on.

Elaine Bedard: And this is not something new. This has been going on for years and years and years, but it's never been before. Right, so on the other side of USLT. One of the big themes going into this year, I think, was just getting the terminal level information down to the service center managers and everybody on the box and whatnot. So I don't think we've talked about that as much. So maybe you can give us a sense in terms of how that's progressing. And if you're starting to see that, it's going to take a little while to get moving as well. Very good question.

Speaker Change: For years and years and years, but he's never been addressed.

Well so on the other side of it.

Speaker Change: You yourself, so all of the big themes going into this year.

Speaker Change: Inquiries, just putting the terminal level information down to the service center managers.

Yeah, Yeah and whatnot.

Speaker Change: That is most of them yeah.

Speaker Change: A couple of thoughts in terms of how that's progressing.

Speaker Change: Yes. This is starting to see that area is going to take a little while.

Very good question I mean, yes, we have financial information now at the terminal level. Okay. In 24. This is something new okay. So a meeting the guys next week.

Elaine Bedard: Yes, we have financial information now at the terminal level in 2024. This is something new. I'm meeting the guys next week, and I'll know more. I was at one of our terminals in Alabama two weeks ago. I talked to the manager there.

Speaker Change: And I'll know more I was in one of our terminal in Alabama, two weeks ago and talk to the manager there, yes I know.

Elaine Bedard: Yes, we're doing better now. For sure, Ryan, that's something I forgot to talk about, but you're absolutely right. This is also going to help us because now we're providing them with financial information so that they can start making a difference. Much has changed in terms of managing costs better, managing labor costs better, etc. But that's something new, though.

Speaker Change: We're doing better now and then for sure Ryan that's something I forgot to talk about but you're absolutely right. I mean this is also going to help us because now we're providing them the financial information so that they could start making a difference in terms of managing costs better, okay, managing labor costs, better et cetera et cetera.

Speaker Change: But that's something you, though I mean this is were just doing that now okay will take some time some managers will make it maybe some managers will say you know what this is not for me and they will have to replace some of the managers by you know, but our manager at a T Force terminal in 'twenty four and now has got to manage costs.

Elaine Bedard: We are just doing that now. It will take some time. Some managers will make it. Maybe some managers will say, "This is not for me."

Elaine Bedard: Then we'll have to replace some of the managers. But a manager at the T Force Terminal in 2024 is now going to have to manage costs. manage employees, manage the fleet, manage the service, etc., etc. He's got to be a real manager.

Speaker Change: Manage employees.

Speaker Change: Manage the fleet manage the service.

Speaker Change: Et cetera, et cetera, he's gotta be a real manager.

Elaine Bedard: Thanks very much, Elaine. I appreciate it. Pleasure.

Speaker Change:

Got it thanks very much appreciate it.

Speaker Change: Pleasure.

Operator: Our next question is from Konar Gupta with Scotia Capital. Thanks, Alper. Good morning, LA. Good morning, everybody.

Speaker Change: Our next question is from Qunar Gupta with Scotia Capital. Please proceed with your question.

Qunar Gupta: Thanks, operator, good morning Ali.

Qunar Gupta: Good morning, good morning Connor.

Cameron Dorickson: Morning, I just wanted to understand on Q1, I know you're saying it's tracking a little bit soft due to the weather in January, etc. But are you expecting EPS flat or up in Q1 versus last year? And would you say the free cash flow for the full year grows toward $10 per share? Like I said earlier, we don't really want to talk too much about 24 so far, but what I could say is, again, I think our free cash flow for—we did $9 a share this year. What I could say is that we believe that our free cash flow for 24 is going to be very good as well. We'll give more information when we come out with our Q1, but when you think about that, $9 a share is quite an accomplishment. We believe that we'll be more precise when we get into Q1 numbers, but I think our free cash flow is going to be wow again in 24 based on what we can see now. January for sure has been tough.

Qunar Gupta: Good morning, I just wanted to understand on Q1, I know you are saying.

Tracking a little bit soft due to weather in January et cetera, but are you expecting a EPS up flat or up in Q1 versus last year's Q1, and what do you see the free cash flow for the full year.

Qunar Gupta: Gross toward a $10 per share.

Qunar Gupta: Yeah.

Qunar Gupta: Uh huh, okay, so, but like I said earlier, we don't really want to talk too much about you know 24, so far but what I could say is again I mean, I think our free cash flow for we did nine bucks a share this year.

Qunar Gupta: The forecast what I could see that we believe that our free cash flow for 'twenty four is going to be very good as well right, we'll give more information and when we came out with our Q1, but when you think about that I mean 99 Bucks a share I mean this is quite an accomplishment we believe that our you know what.

Qunar Gupta: We'll be more precise when we get into Q1 numbers.

Qunar Gupta: But I think that kind of free cash flow is gonna be Wow again in 'twenty four based on what we can see now yeah January for sure it's been tough.

Elaine Bedard: Are we going to do better in Q1 24 than in Q1 23? I would say— Yes, okay. Will that be better by a lot? Probably not, because January has been quite difficult for us. And if you listen to our peers, I mean, everybody's saying the same thing. I mean, You know, we had snow in Nashville. Our terminal was closed for a few days. I mean, this has never, never seen, never heard that before.

Qunar Gupta: In Q1, you know are we going to do better in Q1 'twenty four than in Q1, 'twenty three I would say.

Speaker Change: Yes, okay, well that'd be better by a lot probably not because January has been quite difficult for us and and if you listen to our peers. I mean, everybody is saying the same I mean.

Speaker Change: You know we had snow in Nashville, or terminal was closed for a few days I mean, this is never never seem to never heard that before so.

Elaine Bedard: So, you know, TFI is all about cash, right? Like we said many, many, many, many times, that helps us do M&A, you know, buy back shares, et cetera, et cetera. The focus at TFI has always been about cash; cash is king, and what I could say is I will come up with something more of a guidance at Q1. But if you try to pull a little bit of information from me, I would say that we believe 24 is going to be as good as 23 and maybe even better. And that's great. And then maybe, with all that cash that you expect to generate this year, are you remarking anything on tuck-ins and buybacks at all? Yes, yes, tuck in for sure.

Speaker Change: No.

Speaker Change: T F I, it's all about cash right. So like we said many many many many times that helps us do M&A or buyback shares et cetera et cetera.

Speaker Change: Focus at TFR has always been about cash cash is king and what I could say is that we'll come up with with something more of a guidance at Q1.

Speaker Change: But if you try to pull a little bit of information for me I would say that our we believe 24 is going to be as good as 23, and maybe even better.

Speaker Change: Okay. No that's great and then maybe if I can follow up but all of that cash that you expect to generate this year I mean, earmarking anything for tuck ins and buybacks at all.

Speaker Change: Yes, yes tuck in for sure, but we always do tuck ins right are we always spend or invest at least 200 million to $300 million a year on tuck ins.

Elaine Bedard: We always do tuck in, right? We always spend or invest at least $200 million to $300 million a year on tuck. So, absolutely, I mean... Now in terms of buyback, probably not as much as we did last year, but there again, it depends on what the stock price is, right? So if you look at our Q4, we bought back I think 1.5 million shares. Okay, because we looked at the reaction after we came out and we saw an opportunity, and we said, you know what? We're going to buy 1.5 million shares. We did that in Q4. So, depending on the reaction of the star, we're always there.

Speaker Change:

Speaker Change: So absolutely I mean.

Speaker Change: In terms of buyback probably not as much as we did last year, but they're there again it depends on what the stock price is right.

Speaker Change: So if you look at our Q4, we bought back I think at 1.5, many chairs okay. Because we we look at the reaction. After we came out and we saw an opportunity and we said you know what we're going to buy one 5 million shares we did that in Q4.

Speaker Change: So depending on the reaction of the stock.

Speaker Change: We're always there.

Elaine Bedard: Now, you know, with this Dasky deal, what I could say is that, let's say we close that in April, I would say that our leverage will be under two at the end of June, after the closing of the deal. And then, you know, if nothing major happens, I mean, we'll probably be under 1.5 by the end of the year. Okay, that's great. I appreciate the time, Alain. Pleasure. Our next question is from Ben Moore with Deutsche Bank. Hi, good morning, Alon.

Speaker Change: Now you know with this the ASCII deal what I could say that let's see we closed that in April.

Speaker Change: Uh huh.

Speaker Change: I would say that our leverage will be under two by.

At the end of June after the closing of the deal.

Speaker Change: And then you know if nothing major happens meal will probably be under 1.5 by the end of the year.

Speaker Change: Okay. That's great I appreciate the time.

Speaker Change: I'm not sure because you cannot.

Speaker Change: Yeah.

Our next question has there been more with Deutsche Bank. Please proceed.

Speaker Change: With your question.

Speaker Change: Hi, good morning, a lot. Thanks for taking our questions can you talk more about the.

Ben Moore: Thanks for taking our questions. Can you talk more about the conditions in which you'll pursue a breakup of the company? Your December statement didn't include many details in terms of how you're thinking about doing that. Now, obviously, the market responded favorably to it. But can you talk about conditions under which a split happens or doesn't happen?

Speaker Change: Conditions in which you'll pursue a breaking up the company. Your December statement didn't include.

Speaker Change: Much details in terms of how you're thinking about doing that now obviously the market responded favorably to it but can you talk about conditions in which a split happens or doesn't happen and what does that breakout due for the L. T L business that it's not getting now.

Elaine Bedard: And what does the breakup do for the LTL business that it's not getting now? Yeah, yeah, so what we're doing now is really studying this project, and we believe that makes a lot of sense because if you look at our return on invested capital, right? Although our return on investment capital for our truck loading Q4 was about 10%, right? Then you know which is the lowest within TFI. And now, that compares favorably with my peers, though. I mean, if you look at my peers, except for one, that is a big inter-moral player.

Speaker Change: Yeah, Yeah. So so what we're doing now is really we're studying this project and.

Speaker Change: And we believe that it makes a lot of sense because if you look at the our return invested capital right.

Speaker Change: Although although our return on invested capital for our truckload in Q4 was about 10, 10% right.

Speaker Change: Are these you know which is the.

Speaker Change: The lowest within TFR.

Speaker Change: And now that compares favorably with my peers, though I mean, if you look at my peers, except for one that is a big intermodal player. Okay. Even in Q4 with a 10 point something return invested capital, Okay, I'm, probably better than everybody, except that that peer that.

Elaine Bedard: Okay, even in Q4 with a 10-point-something return on investment capital, okay, I'm probably better than everybody except that peer that does a lot on the rail. We believe that this makes a lot of sense to be as a standalone. And even more now with Dasky, that's going to give us some size and also that's going to give us some free cash flow over and above what we have within our truckload operation. So it's really the logic of not being a conglomerate like we've always been. Now, you have to understand the history because we started really on the Canadian side. And in Canada, you cannot be a pure play because if you're a pure play, you're always going to be small.

Speaker Change: We do a lot on the rail.

Speaker Change: We believe that Oh. This is makes a lot of says to me as a stand alone okay, and even more now with desk, that's going to give us some size.

Speaker Change: And and also that's going to give us some free cash flow over and above what we have within our truckload operation.

Speaker Change: So it's really the logic of of our you know not being a conglomerate. Okay. Like we've always been no yeah I've done their send the history, because we started really on the Canadian side and any Canada, you cannot be a pure play because.

If you are a pure play you're always going to be small so we've grown this business in Canada as not being a pure play so with package with L. T L with truckload blah Blah Blah Blah and then we started moving into the U S. We started with truckload first okay with a T. A N C. F. I, we sold CFR, So now where.

Elaine Bedard: So we've grown this business in Canada as not being a pure play. So with package, with LTL, with truckload, blah, blah, blah. And then we started moving into the US.

Elaine Bedard: We started with truckloads first with TA and CFI. We sold CFI. So now we're more in LTL and in specialty truckload with the Dasky acquisition. But still, like one of my peers that did the spin-off, I would say two years ago, it makes sense for us to do that sometime in 2025. So we're getting ready for that as of the fall of 2024 because we believe that there's a huge discount on TFI shares today because it's a mix. It's a mix of truckloads.

Speaker Change: You know more in the L. T O N in specialty truckload with the desk acquisition, but still okay. Like one of my peers that did their spin off I would say about two years ago. Okay. It makes sense for us to do that sometimes in 25, so we're getting ready for that.

Speaker Change: Fall of 'twenty, four because we believe that there's a huge discount.

Speaker Change: On T F I shares today, because it's a mix. It's it makes up truckload, it's a mix of L. T L and logistics, we believe L. T O logistic makes lot of sense to be together because profitability is there.

Elaine Bedard: It's a mix of LTL and logistics. We believe LTL and logistics make a lot of sense to be together because profitability is there. You know, if you're trying to mix LTL, you know, with a return on invested capital at 25 and logistics return invested capital at zero, that doesn't make any sense. But that's not the situation at TFI.

Speaker Change: If you're trying to makes L T O.

Speaker Change: Our return on invested capital of 25, and logistics return invested capital, it's zero that doesn't make any sense.

Speaker Change: But that's not the situation that T F I mean, ER or in our logistics is running 88.

Elaine Bedard: I mean, our OR in our logistics is running 88. Our OR in LTL today, combined U.S. and Canada, is about, you know, 90, 88, 90. And we're gonna go down to 88, 85 over time. So I think it makes a lot of sense.

Speaker Change: Our Oh are in L. T O today, our combined U S and Canada is about 90.

Speaker Change: 90, 80 890.

Speaker Change: And we're going to go down to 80 885 over time, So I think it makes a lot of sense. Our return invested capital. Okay is is it's great.

Elaine Bedard: Our return on invested capital, okay, is great. Now USLTL is not as good as it used to be because we had a major investment in the fleet, okay, over a very short period of time. So our return on invested capital with improved profitability should get closer again to 20. So that's the thinking, that's the logic between, you know, having one company, TFI, that is truckload, LTL, and logistics versus having two business units, one is truckload, specialty truckload, not van, specialty truckload, with an OR that's going to be, on average, for five years, like the low 80s, okay, with Huge free cash flow, and I know they are in that neighborhood of the low 80s. Thanks.

Speaker Change: Now U S. L. T. L is not as good as it used to be because we had to me major it investment in the fleet. Okay over a very short period of time, So our return invested capital with improved profitability should get closer again to 'twenty.

Speaker Change: So that's the thinking that's the logic between you know, having one company T. F. I that is truckload L T O and logistics.

Speaker Change: Purses, having two business unit, one is truckload specialty truckload not van specialty truckload with an or that's going to be on average for five years like low eighties, okay with it a huge free cash flow.

Speaker Change: And the same on the other side huge free cash flow and and or in that neighborhood of low eighty's.

Elaine Bedard: And as a follow-up, beyond the 500 to 700 basis points of initial OR improvement for US LTL that you've discussed in the past, you've also talked about an additional 500 to 1,000 BIPs from mix and density improvement. How much would you estimate you've achieved from that so far as we enter 2024? And what's the cadence of achieving the balance of that?

Speaker Change: Thanks, and as a follow up beyond the 500 to 700 basis points of initial alarm proof meant for U S. L. T O that you've discussed.

Speaker Change: In the past you've also talked about an additional 500 to 1000.

Speaker Change: Bps from mix and density improvement how much would you estimate you've achieved from that so far as we enter 2024 and what's the cadence of achieving the balance of that.

Elaine Bedard: Over 24 and 25. And are you still targeting an 85 OR in 2025, which means another 300 BIPs from the 88 from 24? Yeah, yeah, that's a very good question. So what we're saying is 88 times 24. That that is really the goal. We said that this company has to be an 85 and probably less than 85 over time. Now, for sure, this is based on normal market conditions, which we haven't seen in 23. We don't know if we'll see that in 24.

Speaker Change: Over 24, and 25 and are you still targeting 85 or in 2025, which means another 300 bps from the 88 from from 24.

Speaker Change: Yeah, Yeah. That's a very good question. So what we're saying is 88 for 24 that that is really the goal. We said that this company has to be an 85 and probably less than 85 of our overtime now for sure. This is based on normal market condition, which we haven't seen in 'twenty three.

We don't know if we'll see that in 'twenty, four, but let's say that in 'twenty five we abnormal market condition in terms of freight environment I.

Elaine Bedard: But let's say that in 25, we have a normal market condition in terms of the freight environment. I think that we should be well positioned to be under 88 in 25 in a normal market condition. Can we get to 85 over time? I'm convinced. Will that be in 25? I mean, it's still too far away to say that.

Speaker Change: I think that we should be well positioned to be under 88 in 'twenty five in normal market condition can we get to 85 overtime and convince.

Speaker Change: Well that'd be in 85.

Speaker Change: In 25, I mean, it's still too far away to say that but I'm still convinced the guys that are this company. There's no reason for us not to be.

Elaine Bedard: But I'm still convinced, guys, that this company there's no reason for us not to be a low 80 or our company over time over a period of three, four, or five years in the normal freight environment. Great, thanks a lot. Pleasure. Our next question is from Kevin Chiang with CIBC World Markets. Please receive your question. Hey Elaine, thanks for taking my question. I know the call's been going on a long time here, but maybe just a clarification question on the 88 OR in US LPL. Are you assuming shipments are similar to, let's say, the exit rate or the seasonally adjusted rate in the back half of 23, so roughly 23,000 shipments, or do you assume you can kind of get up to that 24, 25,000? or that needed to get to the ADA?

Speaker Change: A low 80 or our company over time over a period of three or four or five years in a normal freight environment.

Speaker Change: Great. Thanks, a lot.

Speaker Change: Yeah.

Speaker Change: Pleasure.

Speaker Change: Our next question is from Kevin Chiang with CIBC World markets. Please proceed with your question.

Kevin Chiang: Helen Thanks for taking my question I know the call's been going along every morning catch us.

Kevin Chiang: Good morning.

Kevin Chiang: A clarification question on the 880 R U S M.

Kevin Chiang: Yeah.

Kevin Chiang: Are you assuming shipments or are similar to let's say the exit.

Kevin Chiang: The seasonally adjusted rate in the back half of 'twenty through 'twenty.

Kevin Chiang: 22000 shipments or what do you assume you can kind of get up to that 'twenty, four 'twenty 5000 ship or that needed to get to the EMR.

Elaine Bedard: Yeah, the average shipment for us in 23 and 24, Kevin, is about 23 to 24,000 shipments, right? So we're not going to do that in Q1, okay, but the average for the year should be in that 23-24 range. Okay, that's super helpful.

Speaker Change: Yeah. The average ship in for Us in 'twenty three 'twenty three 'twenty four Kevin is about 23 to 24000 shipments right. So we're not going to do that in Q1, okay, but the average for the year should be in that 'twenty three 'twenty four range.

Speaker Change: Okay, that's super helpful.

Elaine Bedard: And I know this is nitpicky, but just on the TL acquisition, you talked about 50 cents of earnings accretion in 25. It does sound like there's a lot of low-hanging fruit. You know, if I just do quick math, if you drop that OR by like five points, it seems significantly higher than 50 cents. And I'm just wondering, is that conservatism? Is there any noise around purchase price accounting? Is it just macro?

Speaker Change: And I know this is nitpicky, but just on the the the tell acquisition you talked about 50 cents.

Speaker Change: Earnings accretion and 25, it does sound like there's a lot of low hanging fruit.

Speaker Change: Just a quick math, if you drop that a war by like five points. It seems like it could be cigna.

Speaker Change: Significantly higher than 15 I'm. Just wondering is the conservatism is there any noise on purchase price accounting of the.

Do you still or is it just macro just just wondering.

Elaine Bedard: Just wondering maybe the difference between the margin improvement you've talked about and Matt Lauer. Thanks for tuning in. We'll see you next time. Yeah, you know, we're always conservative, Kevin. When we talk about 50 cents and 25, that is, to me, that's a minimum.

Speaker Change: The difference between the margin improvement you talked about.

Speaker Change: That's in the.

Speaker Change: That's release.

Speaker Change: Yeah.

Speaker Change: No.

Speaker Change: We're always conservative Kevin when we talked about 50 cents and twenty-five that that is to me that's a minimum.

Elaine Bedard: When I look at all these different operations, when I talk to all this leadership, those guys that run the show over there in the nine different business units, I'm very confident that these guys, over not three years. Okay, it's not a complex deal like UPS rate. UPS rate was very difficult to do. Dasky is not the same at all.

Speaker Change: When they look at all these different operation when I talked to all of this leadership there those guys that run the show there in the nine different business unit I'm very confident that these guys.

Speaker Change: Over not three years, Okay. It's not a complex deal like U P. S freight U P. S Reddy was very difficult to do.

Speaker Change: That's key is not the same at all I mean, that's key we have great operating team in all the business unit.

Elaine Bedard: I mean, Dasky, we have a great operating team across all businesses, and these guys have done very well in 23 in a difficult market, like us. They've done well. Now, when you look at the global market for Dasky, you say, well, they're not doing that well. Well, the problem is that they have huge costs at the office for consultants, and accounting. I mean, they spent a lot of money during the course of 23 and probably prior for people that came in to help them at the office.

Speaker Change: And and these guys have done very well in 'twenty three in a difficult market like us they've done well now when you look at the global dusky you know you say well, they're not doing that well the problem is that they have huge cost at an office for a consultant.

Speaker Change: Counting.

Speaker Change: I mean, he spent a lot of money on during the course of 'twenty three and probably prior four people that came in to help them and that office right.

Elaine Bedard: As an example, they've implemented Oracle Finance, same as us. Okay, us; we're doing it ourselves. Over there, they did it with the consultants, and that cost them, I don't know, if I remember, three, four million dollars. I mean, us at TFI, we did it ourselves. We didn't invest money to help us do that. I mean, we've done it ourselves, right? So that's why I'm saying those guys are the operating guys are really, really sharp. So, if market conditions turn sometime in 2024 late or maybe into 2025, there's lots of construction that needs to be done in Canada and in the U.S. I mean, the infrastructure, the road, the schools, the housing, etc., etc.

As an example, the implemented Oracle finance same as us.

Speaker Change: US we're doing it ourselves over there the they've done it with the consultant.

Speaker Change: That caused them a I don't know if I remember three or $4 million.

Speaker Change: I mean, that's at T. Five we've done it ourselves I mean, we we didn't invest in consulting.

To help us do that I mean, we've done it ourselves right. So that's why I'm, saying those guys or the operating guys are really really sharp.

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Speaker Change: So if market conditions turn sometimes in 'twenty four late or maybe into 'twenty. Five you know theres lots of construction that needs to be done in Canada and in the U S. I mean, the infrastructure the road the schools.

Speaker Change: The housing et cetera, et cetera. So that's why I believe that our timing is fantastic for that skis acquisition. The same as our timing for selling CFR was great. I mean, we you know where we were in a good position when we sold CSI fantastic I think we're at a.

Elaine Bedard: So, that's why I believe that our timing is fantastic for Dasky's acquisition, the same as our timing for selling CFI was great. We were in a good position when we sold CFI. Fantastic. I think we're in a fantastic position with this acquisition of Dasky, step one. And then it positions us well to do what we want to do in 2025 with probably other parties and to create a great specialty truckload public company in the U.S. that's got size, okay, with the TFI asset and maybe other assets. That makes a ton of sense. Great color, that's what I'm looking for.

Speaker Change: Fantastic position with this acquisition of ski step one and then it positions us well to do you know what we want to do in twenty-five with probably other parties in and to do a great.

Speaker Change: Our specialty truckload public company in the U S. That's got size.

Speaker Change: With the T F I asset than maybe other assets.

Speaker Change: That makes a ton of sense.

Speaker Change: Great color best of luck in 'twenty four.

Elaine Bedard: Thank you. Our next question is from Cameron Dorickson with National Bank Financial. Please proceed with your question. Yeah, thanks. Good morning.

Speaker Change: Thank you.

Speaker Change: Our next question is from Kamran dorks.

Kamran Dorks: National Bank financial Please proceed with your question.

Kamran Dorks: Yeah. Thanks, Good morning, maybe maybe just two quick ones from me I guess, maybe first on the logistics are you know you alluded to this a little bit but you know the GHT acquisition. It looks like it was a real positive in Q4 I'm just wondering about the sustainability of the of the logistics margins in 'twenty 'twenty four and you know what it is or is there.

Elaine Bedard: Maybe maybe just two quick ones from me, I guess, first on the logistics. You alluded to this a little bit, but, you know, the JHT acquisition looks like it was a real positive in Q4. I'm just wondering about the sustainability of the logistics margins in 2024. And, you know, is there any, I guess, seasonality in there that either helped Q4 or, you know, maybe the question is really more about what we should expect as far as the sustainability of margins and logistics. You know what, Cameron? I think that our logistics sustainability is under 90 OR. We've always played in the 90, 91, 92 OR so far.

Kamran Dorks: I guess seasonality in there that either helped our Q4 or.

Kamran Dorks: Maybe a quick question is really more about what we should expect as far as the sustainability of margins in logistics.

Kamran Dorks: Yeah.

Speaker Change: Yeah, you know what.

Speaker Change: Cameron I think that our logistics our sustainability is under 90 or you know we've always played in the knee 90, 90, 192, or so far I mean, you saw us at 88, something in Q4, I think you'll see us below 90 for 'twenty 'twenty four now G. H T for sure 'twenty two.

Elaine Bedard: I mean, you saw us at 88 or something in Q4. I think you'll see us below 90 in 2024. Now, GHT, for sure, 2024 is going to be a little bit of a slow year for them because the build rate of Packard and Freightliner, Daimler-Chrysler, will be a little bit less in 2022. 24, but 25-26, I mean, GHT is just going to be booming big time.

Speaker Change: <unk> four is gonna be a little bit of a slowest year for them.

Speaker Change: Does the build rate, okay of pay card and Freightliner, Daimler Chrysler Daimler Chrysler dealer, Okay, we'll be a little bit less in 'twenty, four but 25 26, I mean G. H T. As Gus it's just gonna be booming big time, so to answer your question I think that the new.

Elaine Bedard: So to answer your question, I think that the new normal for our logistics is going to be sub-9 EOR, okay? And I would say that 25-26, it probably will get even better with the existing business that we have today. Okay, perfect. And then just secondly, on the conventional, the Canadian conventional truckload, obviously some challenges there on the OR. How much of that was kind of driven by M&A that you did during the year where you're still working through the improvements with those tuck-ins? No, Cameron, this is a Canadian problem that we have, right? So we are losing volume. Okay, because the market is soft and we have unfair competition with the driver-ink situation in Canada. I mean, this is a disaster that we have in Canada and nobody's doing anything about it, right?

Speaker Change: Normal for logistic is gonna be sub 90, or okay, and and I would say that 25 26, he probably will get even better.

Speaker Change: Existing business that we have today.

Speaker Change: Okay, Perfect and then just secondly on the conventional the Canadian conventional truckload, obviously, some some challenges there on the on the or how much of that was kind of driven by M&A that you did during the year, where you're still working through the improvements with those tuck in acquisitions.

Speaker Change: No. Kevin. This is this this is a Canadian problem that we have right. So we are losing volume okay. Because the market is soft and we have unfair competition with the driver Inc. Situation in Canada. I mean, this is a disaster that we have in Canada, and nobody's doing anything about it right.

Elaine Bedard: So, I don't know if you guys are familiar with the Driver, Inc. thing there, okay, but Driver, Inc. is, you know, it's unfair competition to all the regular, you know, company trucking companies in Canada. So, we are suffering, we're losing volume to those guys because it's unfair competition. The driver, Inc., okay, has probably got a 20 to 35 cents advantage, minimum, versus us because they're not paying any benefits to their drivers.

Speaker Change: So I don't know if you guys are familiar with the driver being thing in there. Okay. But driver Inc. Is is you know we it's unfair competition to all of the irregular.

Speaker Change: Company trucking company in Canada. So we are suffering we're losing volume to those guys.

Speaker Change: Because it's it's unfair competition the driver Inc. Okay, Scott probably at 20 to 35 cents advantage minimum versus us because they're not paying any benefits to their drivers.

Elaine Bedard: Right. Okay, no, that's a good explanation. Hey, Cameron, that's the problem we have in Canada.

Right right Okay.

Speaker Change: Okay. No. That's that's a good that's a problem we have in Canada, a Cameron that's the problem. We have in Canada now that will get fixed if if volume comes back to a certain degree, but it will be a long term problem for us okay as long as nobody in Ottawa, Okay or in Quebec.

Elaine Bedard: Now, that will get fixed if volume comes back to a certain degree, but it will be a long-term problem for us, okay, as long as nobody in Ottawa, or in Quebec or Toronto does anything about it. Right. Okay, no, that explains it.

Speaker Change: Or.

Speaker Change: Does anything about it.

Right. Okay that explains it thank you very much.

Elaine Bedard: Thanks very much. Pleasure. Thank you. Our next question is from Benoit Poirier with Desjardins. Please proceed with your question. Hey, good morning, LA.

Speaker Change: Pleasure cover.

Speaker Change: Okay.

Speaker Change: Thank you. Our next question is from Brandon Wap or air with Desjardins. Please proceed with your question.

Brandon Wap: Hey, good morning L. A.

Brandon Wap: But anyway. Thank you.

Elaine Bedard: Just in terms of capital deployment, you provide good color about the buyback M&A we might see in 2024. I would be curious to hear your take on CAPEX, what kind of numbers we should expect. And also in terms of M&A, your appetite to get exposure to claims down the road through M&A, given your focus on cash and assets like this. Yeah, yeah. So CAPEX, excluding Dasky, should be the same in 24 than in 23. So if you look at CAPEX, net CAPEX, we're talking about something in the neighborhood of 300 million. Okay. So excluding Dasky, we're talking about the same kind of number.

Brandon Wap: Yeah.

Brandon Wap: In terms of capital deployment and you provided good color about the buyback.

Brandon Wap: We might see in 'twenty 'twenty four I would be curious to hear you about capex, what kind of numbers, we should expect and also in terms of M&A your appetite to get exposure to play down the road are through M&A, given your focus on cash and asset like business.

Speaker Change: Yeah, Yeah. So it was so capex, excluding a desk he should be the same 24, then in 'twenty three so so if you look at our Capex net capex, where we're talking about something in the neighborhood of 300 million okay.

Speaker Change: So excluding desk, where we're talking about the same kind of number.

Elaine Bedard: Right. So, I mean, our free cash flow is gonna be great again, I think in 24. So, like I said earlier, Benoit, I don't think that we're gonna do a lot of buybacks unless, unless there's an opportunity for the stock price. So really, the focus is going to be, you know, do the Dasky deal, fine, bring the leverage down back to something like a 1.5 by the end of the year, all right, and do maybe some small nice tuck-ins here And you know, if there's a transaction that makes sense for us late in the year or into early 25 in terms of either LTL or... Logistics?

Speaker Change: Right.

Speaker Change: So I mean, our free cash flow is going to be.

Speaker Change: Great again, I think in 24, so like I said earlier, but anyway I don't think that we're going to do a lot of buyback unless unless there's a there's an opportunity on the stock price.

Speaker Change: So really the focus is going to be you know do the desk you deal fine bring the leverage down back to something like a 1.5 by the end of the year.

Speaker Change: Okay, and do maybe some small nice tuck ins here and there spend maybe two to 300 million like we always do.

Speaker Change: And you know if there's a transaction that makes sense for us late in the year.

Speaker Change: Or into early 'twenty five.

Speaker Change: In terms of either L. T O R.

Speaker Change: Logistics well for sure we will look at it.

Elaine Bedard: Well, for sure, we'll look at it. Hello. There are no further questions at this time. I'd like to...

Speaker Change: Hello, Thank you.

Speaker Change: There are no further questions.

Elaine Bedard: I'd like to hand the floor back over to Alain Bedard for any closing remarks. All right. I want to thank everyone for joining us this morning. We're excited about the year ahead, and we're glad you were able to join us today. If you have any follow-up questions, as always, please don't hesitate to reach out. Enjoy the weekend, everyone, and thank you again. Bye, www.globalonenessproject.org. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: Like that.

Speaker Change: I'd like to hand, the floor back over to Alain Bedard for any closing comments.

Benoit Poirier: Alright, I want to thank everyone for joining us. This morning, we're excited about a year ahead, and we're glad you were able to join us today.

Benoit Poirier: If you have any follow up questions as always please don't hesitate to each out enjoy the weekend, everyone and thank you again.

Benoit Poirier: Hi.

Benoit Poirier: Yeah.

Speaker Change: This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.