Q4 2023 TFI International Inc Earnings Call

Good afternoon, ladies and gentlemen, thank you for standing 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 callers will be limited to one question and one.

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

Operator: Welcome to TFI International's fourth quarter 2023 results conference. At this time, all participants are on a listen-only conference call. 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 one 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 may be misleading, 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.

Again, that's one question and a follow up so that we can get to as many callers as possible.

Their 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 also.

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 T F I internationally.

Benoit Poirier: Please go ahead Sir.

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 have 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.

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

Benoit Poirier: Our results released yesterday after the close reflects strong performance by our talented team 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.

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: This week.

Benoit Poirier: This approach to the business is apparent in our fourth quarter results and indeed, our performance throughout 'twenty 23, and 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 net 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.

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: And 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.

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 fourth For the full year 2023, we've produced more than $9 per share of free cash flow, which is remarkable given our company's size and again a reflection of the hard work of our team throughout the year.

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.

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's size, which.

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

Elaine Bedard: Now, let's dig in 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%, with pricing a little softer as well, resulting in a 5% decline in revenue before fuel surcharge.

Benoit Poirier: Now, let's dig any.

Benoit Poirier: Deeper into our four business segments.

Benoit Poirier: Starting with P&C, which represent 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: And 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 percent. 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 LPL, which is 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 in net losses on asset health for sale.

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

Benoit Poirier: Return on invested capital for P&C was 28 one.

Benoit Poirier: 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 future surcharge grew 12% year over year and a 12% increase in shipment benefiting from the STG acquisition in 2020. The return on 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 a year ago period, and our return on invested capital for USLTL was 15.1 compared to Poirier at 23.8.

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. <unk>, 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%.

Operating ratio of 91% compares to 90.4 in a year ago period, and our 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.

Elaine Bedard: Next, let's discuss truck low, 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 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: Let's discuss truckload, which is 24% of segment revenue before fuel surcharge.

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: 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.

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 truck load 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: 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 well.

Relative 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 percent. 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 the fuel surcharge and turned in remarkably strong performance during. Revenue before fuel surcharge climbed 24% year over year while operating income jumped 60%. Fifty-five 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 six 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 performers during the quarter.

Benoit Poirier: Yeah.

Revenue before fuel surcharge driving 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 Investor Cal 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, and an overall weighted average duration of 8.3 years.

Benoit Poirier: Our operating ratio was 88.4 wall return invested Cowboys $18 eight 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.

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 this is our recently announced acquisition of Dasky, expected to close during the upcoming second quarter, and one of the 12 announced M&A transactions during 2023. 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, LTL price.

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.

Benoit Poirier: And especially during times of market weaknesses.

Benoit Poirier: Yeah.

Benoit Poirier: An excellent example of our recently announced acquisition of Das He expect to close during the upcoming second quarter and one of the 12 I know, it's an M&A transaction during 2023.

Benoit Poirier: Yeah.

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

Benoit Poirier: While bolstering our.

Benoit Poirier: Capability in the specialized market.

Benoit Poirier: Yeah.

Benoit Poirier: Our other major focus this year is the ongoing turnaround of our L. T L operation.

Benoit Poirier: And longer term, we see the potential opportunity to allow investors to own their separate specialized truckload business.

Benoit Poirier: In addition to a very attractive.

L T L P.

Operator: 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: To ask 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 for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star.

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.

Speaker Change: 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.

Scott H. Group: Hey, Thanks, good morning.

Scott H. Group: Morning, Scott, It's Friday morning.

Elaine Bedard: Alain, it's Friday morning, so I may have missed it. Did you guys provide any earnings guidance? I know you typically do.

Scott H. Group: Friday morning, So I may have missed it did you guys.

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

Elaine Bedard: No, Scott, we have not provided any guidance yet. 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 CPS, diluted APS in 2024. We could say that our EPS guidance will not start with a 6, it will probably start with something like a 7 somewhere. But because we're very cautious about Q1 and the Dasky acquisition, this is why we prefer to, like most of our peers, just stay silent right now about 2024 guidance, and we'll happily give more guidance for 2024 after we come out with Q1. Okay. Fair enough.

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

Scott H. Group: As you know we're looking at this dusky 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 H. Group: You know this year, we did about $6, an 18 said C. P. S. Diluted a you know a T. S. In 24, while we could say that a word our EPS guidance will not starwood. It takes we will probably start with something like a seven somewhere.

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

Speaker Change: Well happily give more guidance okay for 24 after after we come 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 O, but we haven't heard from us since.

Elaine Bedard: And then, you know, 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 desk here 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 the 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 basket numbers, if you exclude that I mean, these guys are running a pretty good operation in 'twenty three when you look at the market condition.

Speaker Change: If you look at our global our specialty truckload or in Q4, we were running at 87 the war us.

Speaker Change: 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 wouldn't understand that yeah, I would say that these guys running the show over there business unit the guy.

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's giving us size. And like we said publicly, you know, Scott... We believe that down the road, this conglomerate discount at TFI that we see today, if we do like what we were just talking about, trying to have TFI into two business units instead of one. I think that this will also create some...

Speaker Change: 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 I'm very very happy with this acquisition that's going.

Speaker Change: To close in Q2, and these guys will all even ALP us all on our own 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 a 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.

Elaine Bedard: Some very interesting issues for our shoulders down the road. So, Dasky helps us create size in our U.S. truckload operation, specialized truckload. We don't want to be in the van world.

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.

Speaker Change: A year and a half ago, we sold CFR to heartland.

Elaine Bedard: A year and a half ago, we sold CFI to Heartland because we didn't want to be in the van. But we really liked specialty truckload, the flatbed operation, the tank, and all that. We are doing 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, road, buildings, schools, etc., etc., and for sure that will help the Dasky operation and our own Canadians' 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: Because you know we didn't want to be in the van.

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

Speaker Change: Down the road 'twenty four 'twenty five 'twenty six a lot of investment will be done in as far as structure Road building schools et cetera et cetera.

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.

Elaine Bedard: Our next question is from James Monaghan with Wells Fargo. Please proceed with your question. Hey guys, I just wanted to ask one of the questions that will be on US LPL 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 said it.

James Monaghan: Hey, I.

James Monaghan: Just wanted to ask one of the questions. You had helped you out today.

James Monaghan: Can you just get a sense of what you're expecting in terms of like Oh are improving across the coming in.

Given the sense that there is some uncertainty.

James Monaghan: Understanding what you might be able to get in like more flattish volume environment versus a place where maybe volumes improved more significantly.

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

Elaine Bedard: I mean, the 24 plan for us is to deliver at 88 OR, right? We're at 91 OR right now, Q4. This is not acceptable, for sure.

Speaker Change: This is not acceptable.

Elaine Bedard: 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, 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%, in Q4 we're down 4%, so we took action in terms of improving our service, okay, like I mentioned in the script there, you know, 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,

Speaker Change: For sure 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 I and our plan is to be a knee in a war for 'twenty four.

Speaker Change: Also part of our plan. Okay is is stop shedding volume right. So if you look at our Q4 volumes down again, 4% right.

Speaker Change: 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 the script there.

Speaker Change: You know our claim ratio is down like there's no tomorrow, we're at 0.5% of revenue so that helps.

Speaker Change: Customer experience with US we've 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 and stop losing.

Elaine Bedard: 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 in 23, yes, YRC is gone, okay, that helped the market, but still. And as 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: Volume Okay. The market has been under pressure are in 'twenty three yes, why she's gone okay that helped the market, but still I mean, the US we are working on improving our service, reducing our cost and being more efficient and our goal like I said, mainly.

Speaker Change: Many times for 'twenty for US too is to run an 88 or globally for our U S. L. T O.

Speaker Change: Got it.

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 of our sales team. We have refocused our people there. We believe that this company should be running, by the end of 2024, between 24,000 shipments a day and 25,000 shipments a day, which is very low compared to when we bought the company. When we bought UPS Freight, they were doing about 32,000 shipments a day. Now, like we said before, a third of those shipments didn't make any sense. Right?

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

Speaker Change: Yeah.

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.

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

Speaker Change: Hey.

No.

Speaker Change: Like we said before.

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

Elaine Bedard: So we had to do a lot of cleanup over the years, afraid that it didn't fit, afraid that it was not for us. But that is mostly done. 99% done now.

Speaker Change: But 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: So now it's time for us to start growing again with the market by improving our service. We have more line haulers on the road now than ever, so we use less rail.

Speaker Change: So we we have more line all is now on the road than ever right.

Speaker Change: So we use less rail.

Elaine Bedard: 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.

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.

A lot of the lane all was done on rail. So now slowly we're moving less on rail and moral wrote that it will help improve our service. The fact that our equipment is in much better shape.

Elaine Bedard: So now, slowly, we're moving less on rail and more on road. That will help improve our service. 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 when we bought the company.

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.

Speaker Change: 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: Now this is done I mean in April of 24. This is going to be the three year anniversary of our acquisition of U B S. Right. So we're done okay with the TSA with UBS.

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 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: So that helps us okay focus more of our O T resources into building the I T or the future instead of the idea of that 19 sixties.

Speaker Change: Thank you very much.

Youre welcome.

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

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

Ravi Shanker: Great. Thanks, good morning.

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

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.

Ravi Shanker: 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 for before we know what the number is and also wanted to confirm that that 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 this is going to be the case. So let's say we take over April 1st. We come out after two or three weeks, and we'll be in a better position to know exactly, okay, is this going to be EPS neutral, okay, or is this going to be like maybe 10, 15 cents for 2024? We said that it's going to be about 50 cents. The minimum for 2025, the Dasky Acquisition. So what I'm saying is that our EPS will probably start with a 7. This is organic.

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

Ravi Shanker: So I just want to me 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.

Ravi Shanker: Four we said that he is going to be about 50 cents minimum for 'twenty 'twenty five the desk your acquisition.

Ravi Shanker: So what I'm, saying that this is like a R. E. T S. Probably will start with a seven this is organic it's got nothing to do with dusky because like we said the skis neutral right.

Elaine Bedard: This has nothing to do with Dasky because, like we said, Dasky is neutral in 2024. The reason is that we're looking at market conditions. We're looking at our truckload operation that is really suffering, not so much in the OR but in the volume, the top line. Because 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.

Ravi Shanker: So in 'twenty 'twenty four.

Ravi Shanker: 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.

Ravi Shanker: <unk> my specialty truckload even more.

Ravi Shanker: 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: Because my OR is very close to what it was in 2022, but we lose so much top line. So this is why to give, you know, guidance right now for 24. When we look at what we've seen so far in January, it's a tough January. I mean, weather-wise, it's been terrible.

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 is diluted ZPS.

Ravi Shanker: That we believe that 24 Z P S diluted EPS.

Elaine Bedard: 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, 72 R in our Q4, but we lose the top line.

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

Ravi Shanker: I mean, we'll we'll quantify that.

Ravi Shanker: After Q1.

Ravi Shanker: 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&C again, we have a wider 70 172, our Q in our Q4.

Ravi Shanker: Well, 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 and before giving a guidance I don't want to make the mistake that I made in 'twenty, three where we were.

Elaine Bedard: We lose 4% of our volume. Now, one of my peers came out in North America with a 7% loss of top line volume-wise. Right?

Elaine Bedard: 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. The Consensus

Ravi Shanker: A little bit too optimistic about volume and and we missed two quarters in a row.

Ravi Shanker: The consensus.

Speaker Change: Very helpful. Atlanta 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.

Elaine Bedard: Very helpful, Alain, 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, you know, thinking there, what does in due course mean? Is that a 2024 event or a 2025 event? And kind of how are you looking at the separate businesses kind of together or apart? Yeah, you know what, Ravi?

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

Speaker Change: Yeah, you know what maybe its not 24, that's for sure I mean 24 for US is really the U we take over dusky and and we deliver on our promise.

Elaine Bedard: It's not 2024, that's for sure. 2024, 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 2024, we start to get ready for 2025, okay?

Speaker Change: The 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 okay. In terms of maybe other deals okay are 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.

Speaker Change: And at the same time. This this thing that we call. The you know that that project S. F. I, Okay, which is separating the truckload from the rest.

Elaine Bedard: 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. 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: We believe that this will create a lot of value. We also believe that our you know this project may not be just for T. F. I may be a you know some some other specialty truckload me join this.

Speaker Change: This project is to.

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 of 'twenty four to be ready to do something of into twenty-five Ravi.

Elaine Bedard: Understood. Thank you, sir. Well, our next question is from Jordan Alliger with Goldman Sachs. Please proceed with your question. Good morning.

Speaker Change: Thanks, a landfill that 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.

Speaker Change: Welcome.

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

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, you know, 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 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. So, I think that this is going to be a thing of the past.

Jordan Alger: Yeah, Hi, good morning can you maybe talk a little bit.

Jordan Alger: 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.

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 U S. L. T L <unk>.

Jordan Alger: <unk> reserved return to positive year over year EBIT growth in that division.

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

Speaker Change: So in 'twenty three.

Speaker Change: We had you know we have 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 the pass.

Speaker Change: Is sometimes in 'twenty four maybe not Q1 Q2, but down the road in Q3 Q4, we believe that our fine need by improving our service, Okay, we'll be able to be in a position where we start growing again.

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. We addressed that late in 2023, so we should be in a better position to start growing our GFP franchise in 2024. That will also help our US LTL operation. So, it's a question of service, okay?

Speaker Change: And and growing top line will help us grow the bottom line at the same time. The other thing also that is important to notice is our G. F. P. Operation in twenty-three was affected badly as of Q2 by an issue with some customers okay that.

Speaker Change: We're not really.

Speaker Change: 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.

Speaker Change: Operation U S L T L operation.

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 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. For years and years, we were going through a system that was not really probably the best in the world, and we had lots of issues that hindered the relationship we have with customers. This is also a project that we have for 2024 to finally come up with something that is fair and reasonable for our customers. This is not something that we encounter in Canada.

Speaker Change: 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 to.

Speaker Change: It's 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 also a project that we have for 'twenty 'twenty four to finally come up with something that is fair.

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 now appears in the U S have the same issues as we do.

Elaine Bedard: I don't think our peers in the U.S. have the same issues that we do with building customers. 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. This is another thing that the guys are working on. The churn over there at T-Force rate was, in the mind of the previous management team, normal. For us, it's not normal.

Speaker Change: 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 do in Canada. So this is another thing that the guys are working on that sharing over there at a T force right in the mine.

Speaker Change: The previous management team was normal for us it's not normal I mean, the our churn is way too high compared to what we do us and Canada or I think what our peers are doing in the U S.

Elaine Bedard: Our churn is way too high compared to what we do in Canada or 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: 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 the 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.

Elaine Bedard: I think our pricing, our revenue per shipment is up, and our weight per shipment is finally up 10%. 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 U.S., 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? The peers' average is probably like 1,500 pounds, and me, I'm still stuck at 11.

Speaker Change: Revenue per shipment is up our weight per shipments finally is up okay. Because if you look at our weight for 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. A.

Speaker Change: 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 peers average is probably like 1500 thousand me I'm still stuck up 11 something.

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.

Speaker Change: 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 you hold less money and you get so this is 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 I think that 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.

Elaine Bedard: 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 USLTO is that, you know, our peers are smart. So we like to compete with peers that are smart. They're all about making money. Thank you, www.globalonenessproject.org. Thank you.

Speaker Change: 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.

Speaker Change: So we like to compete with peers that are smart for us because they are all about making money.

Speaker Change: Thank you.

Speaker Change: Welcome.

Jason H. Seidl: Our next question is from Jason Seidl with TD Cowan. Please proceed with your question. Thank you, Alper. Good morning.

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

Jason H. Seidl: Good morning Ali.

Elaine Bedard: Morning, Jason. I wanted to stay on US LTL for a little bit. Really nice job in the quarter with that claims ratio. Where do you think it can go from there and sort of what it has gotten to? www.globalonenessproject.org. You know what, Jason, when you look at that, I mean, the culture at T4Street at the time was that 1.52% of revenue was normal. And we said, "No guys, this is not normal."

Jason H. Seidl: Well I think Jason.

Speaker Change: One of the.

Jason H. Seidl: Stay on U S L gel for a little bit.

Jason H. Seidl: Nice job in the quarter with that claims ratio.

Jason H. 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: Their culture to force right at the time was this 1.52% of revenue was normal.

Speaker Change: He said 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 a 0.1% of revenue.

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

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: We were able to solve the problem at the source right.

Speaker Change: So this is this is a an experience where our customers experience dealing with us on at least on the claim 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 on 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, 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, that's not the way to do it. So now, the software that we use, the tools that we have, the people, because there's been a lot of moving parts with people. We lost people that were there, I'm talking 10 years ago.

Speaker Change: And 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 us we said no no no no no no no that that's not the way to do it so now software that.

Speaker Change: We used the tools that we have the people because there's been a lot of.

Speaker Change: 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 and grow our volume. If you're a shipper and you say, 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, etc. This is not professional.

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

Jason H. Seidl: 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.

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

Speaker Change: Absolutely.

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 O 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 in.

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

Elaine Bedard: Is that an exit rate for the year, or is that a full year? No, that's a full year, Jason. 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, 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, has been terrible.

Speaker Change: No that's full year Jason.

Speaker Change: You know for sure Q1 is gonna 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 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.

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

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

Elaine Bedard: I appreciate the call. 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 with your question.

Kenn Hoekstra: 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? 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 are you focused on, and how will you change that?

Kenn Hoekstra: So obviously signal you can drive that you've mentioned on the on the 0.5% 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 throw up a 10% increase in weight per shipment you mentioned last quarter that was something you were very focused on what.

Kenn Hoekstra: 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 in two or 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: That's a very good question, Ken. Like we said, in terms of the claim, we have nothing to do with what happened two or three years ago. All of this is behind us. When we took over the company, we separated the past and the future. Our claim today is whatever our claims are based on what the operation is today. Now, in terms of the future, where we could be, and all that.

Speaker Change: Is whatever our claim or based on what the operation is today no.

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.

Elaine Bedard: The company is very well positioned to start growing in terms of volume. I forgot what your second question was. Oh, no, just the first one was just how much of the legacy UPS expenses, like what do you still control and what goes off. So when you talk about going from $91.88, does that have nothing to do with the cost rolling off in April? Is this just your own internal cost? No. And then the second part of that was the wait for shipment focus. Oh yeah, excuse me.

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

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

Ken: So so when you're going from 90 188. This has nothing to do with the costs Rolling off in April. This is just no no your own internal cost okay.

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

Elaine Bedard: The wait for shipment is something that we've been working on. For day one, because we said, look at our peers. Nobody is hauling a 1,000-pound shipment on average.

Ken: For a day one.

Ken: Because we said look at our peers.

Ken: Nobody is holding a thousand 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 has been, with the previous owner, on retail only, right? So this is what we're trying to change with our sales team. I mean, 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 the 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.

Ken: Well because our focus has been with the previous owner on retail only right. So this is what we're trying to change what our sales team is hey, guys.

Ken: I mean retail is good but.

Ken: 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.

Ken: Our weight per shipment that our peers are because you are paid by the pet right.

Ken: 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 did 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. Okay, of our labor shipping 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.

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

Ken: So that's another focus in terms of.

Ken: Reducing our costs.

Ken: Of our of our shipping labor shipment costs right. So reduced the Mas focused closer to your terminal and stopped delivering a let's say a ship and 70 miles away from your terminal because this doesn't make any says now.

Elaine Bedard: Now, all this takes time. We bought the company about two and a half years ago, and we got in there.

Ken: All of this is it takes time 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.

Elaine Bedard: There was a sales team, but the sales leadership has changed. A year ago, we started making some changes in the sales leadership. We're beefing up the team now with some members of the TFI team in other sectors. We should start to see some improvement in 2024 in terms of growth.

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

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, then 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.

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

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 it always is.

Ken: Normal age versus two years ago, we had a fleet that was way too old with an M. P. G. There was way too low.

Elaine Bedard: So all this is Alper Yars' 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.

Ken: So all this is is that appears to improve service.

Ken: Right.

Speaker Change: A quick follow up on on the spin just want to understand why you chose to 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 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 $500,000, $600,000 U.S. in revenue X fuel. So it's really small.

Speaker Change: Yeah, Yeah, because you know at the end of the day.

Speaker Change: If you look at.

Speaker Change: Yeah.

Speaker Change: Well we have.

Speaker Change: PNC is very small right, it's only $5 million to $600 million U S of revenue ex fuel. So its really small so after truckload has gone what what are we left with it's really an LTA 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 guy, Ken, in Q4. He came out with an 88 award. 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% what are my peers or is 100.

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

Elaine Bedard: That peers got LTL in logistics. He says 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. All right. But if you return vested capital, it's about the same.

Speaker Change: Is is L. T O. That's great. There's logistics it is running 100 door.

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

Speaker Change: So if you're running let's see your L. T O N 95 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.

Elaine Bedard: So, if you look at my Q4... excluding DHC acquisitions, I'm flat.

Speaker Change: So if you look at my Q4.

Speaker Change: Excluding 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. For sure, but smart. We're not in the business to do logistics at 2%. Wonderful. Elaine, appreciate the time. Thanks. Pleasure again.

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

Speaker Change: We're very different and and our logistic 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%.

Speaker Change: Yeah.

Speaker Change: Wonderful I appreciate the time thank you.

Speaker Change: Pleasure again.

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

Elaine Bedard: Our next question is from Walter Spracklin with RVC Capital Markets. Please proceed with your question. Thanks very much. Good morning, LA. Good morning, Walter.

Walter: Good morning Walter.

Walter: So.

Walter Spracklin: 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 P&C in Canada as having been 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 – we put something out on that, but I'd love to hear your thoughts on how you see the P&C 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: Coming back to the the spin and you mentioned that conglomerate describe discount and I know in the past you've kind of talked about your P&C and Canada's having been yep, you know already consolidated and not a lot of room for you to grow by acquisition.

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

Walter: [laughter].

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

Walter: 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. There's not much we could do in terms of M&A. So, if you go back to the Waste in 2014-15, we could not grow the Waste at the time. We had a fantastic business that was called Matrek, and we couldn't grow it.

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

Speaker Change: And we couldn't grow it.

Elaine Bedard: And people said, well, this is probably worth $500 million. And then we said, no. We're going to sell it. And we sold it to GFL for $800 million. So, if you look at our PNC, it's a diamond. It produces a ton of free cash. It's a gem.

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

We're going to sell it and we sold it to G. F. L for 800 million at that time.

Speaker Change: So.

Speaker Change: If you look at our P N C. Its a diamond.

Speaker Change: 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. The same story is that we can't grow, except organically.

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

Speaker Change: But he same story is we can't grow right, except organically. So for sure right now Walter our plan is is to keep growing organically, our P&C, where we're trying to do you know we're having some discussions with players right now to try to do more for them.

Elaine Bedard: 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, we have to deliver that famous 88 award.

Speaker Change: A M. Okay versus you know what the situation is but our real focus is like I said on the call for 24 is our.

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

Elaine Bedard: And we have to do this Dasky Deal and get ready for 2025. We believe that this will create a lot of value for our shareholders if we could strike this deal in 2025. We also believe that maybe this spinoff is not just going to be about the TFI asset.

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

Speaker Change: And get ready.

Speaker Change: 425, because we we believe that this will create.

Speaker Change: 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 spinoff is not just going to be about the T F I assets.

Elaine Bedard: Maybe other assets will be part of that deal because we have a value proposition that is second to none for 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 going to be 24 because I'm too busy at 24 with everything that we're doing and our team is saying. But our P&C team; they're really focused. I think that in 24 hours, we will start growing organically. It's not easy, okay?

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: Right. 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.

Speaker Change: But our P&C team, they're really 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 my 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.

Speaker Change: Market is soft hopefully 'twenty for you now.

Speaker Change: Things will start to get better.

Walter Spracklin: 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.

Speaker Change: B that the timing works and this is a 24 deal or is it possible that this.

Speaker Change: It happens in '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 were a very difficult deal to do because it was a carve out. And the company was not making any money. The OR was about $110,000.

Speaker Change: But you know what Walter that the big difference between when we bought UBS freight and we're buying desk E. U P. S. REIT was a very difficult deals 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.

Elaine Bedard: The fleet was a disaster, etc., etc. DASKi is a different story.

Speaker Change: <unk> is a different story I mean desk key will run a sub 90 or within within six to 12 months in my mind.

Elaine Bedard: I mean, DASKi will run a sub 90 OR within six to 12 months. OK. The operating groups there are very, very, very good. I mean, there are 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 a very complex one. So with that in mind, okay, what I'm saying is that once we do Dasky 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.

Speaker Change: Hey.

Speaker Change: 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.

Speaker Change: They're two U P S rate, which was a very complex one.

Speaker Change: 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.

Speaker Change: Okay financially even before we do the spinoff we are in position to do it.

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. Okay, it will be very short, the same market conditions as we have today. If the market condition changes in 2024 late or into 2025, that's going to make it much easier. 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 in late 2024 into the LTL or into the logistics world in the U.S., we're in. Thanks very much for the time. Bless you, Walter.

Speaker Change: Okay, and and I think that to bring those guys to a sub 90, you are not going to take five years.

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 the esky, yes, we're working on the spin off but if if a good opportunity comes up it comes along late 'twenty four into the L. T L or a into the logistics world in the U S where it.

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

Speaker Change: Especially Walter.

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

Jason H. Seidl: Our next question is from Jason Seidl with TD Cowan. Please proceed with your question. Hey Alper, thanks for taking my follow-up. 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 are we? Number one. Number two. What types of special...

Jason H. Seidl: Hey, Thanks for taking my follow up along those lines you you made a comment about potentially growing.

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

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

Elaine Bedard: Additive to make that a more attractive asset, and 3. 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... There's not much in terms of size, right?

Speaker Change: Well, Jason you know what first of all it's gotta be U S.

Speaker Change: Because in Canada.

Speaker Change: There's not much in terms of size right. So it's got to be U S.

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.

What we like in specialty is we're a big fan of tanks, we're a big fan of.

Speaker Change: My bad.

Speaker Change: And dump operation right. So so that is really our focus we're not big fan of reefer. Okay. So so this is really our focus and if you look at desk E. I mean, thats a perfect fit for us.

Elaine Bedard: All right. And in terms of, do we have to do PNC? Yes, no, no, no, no, no. I mean, PNC in my mind is maybe something may happen down the road, but right now, our focus is really, like I just explained, let's deliver our US LTL, let's do the Dasky deal, and if an opportunity comes along, okay, in late 24, into LTL or Logistics in the U.S., we're ready to look at it. Why is that?

Speaker Change: Alright.

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

Speaker Change: In late 'twenty four into L. T L R.

Speaker Change: Logistics in the U S. We are 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 U.S., and 100 in Canada. And the operation is very well run. There are a few things that will work with the boys over there.

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

Speaker Change: 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 ore under 90. It makes sense, Elaine. Thank you for your time.

Speaker Change: It makes sense Helane. Thank you for your time again.

Helane: Especially with pleasure Jason.

Elaine Bedard: Pleasure. Our next question is from Tom Wadowitz 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.

Helane: Our next question is from Tom <unk> with UBS. Please proceed with your question.

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

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

Elaine Bedard: Um, you've had, I mean, obviously, the yellow situation provided a lift. Yeah. 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 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.

Tom: <unk>.

Tom: 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: Yes.

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

Elaine Bedard: 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, 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?

Tom: Two the improvement into things being on track.

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

Tom: 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 I know you guys LPL.

Tom: You know what my experience with revenue Rolling revenue, our T Force, where it 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 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.

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

Tom: Hello.

Tom: 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 our 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 in 24.

Tom: Now we've made some changes okay. We've improved claims okay. Like we said we are improving our line all okay. Adjusting time, because we do more on the road that on the rail.

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

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

Elaine Bedard: 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 need. So it's, again, a cultural change that, guys, 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 of our sales team and focusing on the right thing and also reducing the churn with our customers. Our churn rate is too high.

Tom: That's there okay that we don't need so it's again a cultural change are that our guys. Okay. Retail freight is good industrial afraid is better because it's February we get more money close close customers to our terminal is better right than than customer.

Tom: Is that 100 miles away from our terminal.

Tom: 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?

Tom: Our press release, we were successful on.

Tom: Okay, because that was a major issue of dealing with T force rate as claim 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?

Tom: Now we have to improve continuously improve our service and this is gonna be the goal, but if you ask me today, Okay to get there either war, Okay. How are you going to get to there.

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.

Tom: I'd say, 80% of that will be saving money being more efficient doing more with less and hopefully our sales team and our sales leadership start to deliver some some growth year over year in terms of the shipment count.

Tom: Yeah.

Right Okay.

Tom: 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 up in U S. LCR would you also expect revenue per hundredweight to be up in second half for 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? And then just wondered if you could give a little more kind of detail on how much of Linehaul 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 haul for about 56 or 57% of all miles. So rail is doing probably like 35%, and third parties are doing the rest. In terms of trying to be, where are we gonna be in 24?

Tom: 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.

Speaker Change: We're doing our own line off for about 56 or 57% of all miles.

Speaker Change: 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 the revenue per 100 weight is to improve that. Our revenue per 100 weight is down a bit. We think that the market conditions will support some growth in 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 up.

Elaine Bedard: We're down a bit because our weight was also up at the same time. However, 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, okay, like my peers, their service is up to par, right? It's easy to get more money.

Speaker Change: Year over year.

Speaker Change: 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.

Speaker Change: But again I mean, if the service is there okay like my peers their service 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, price increases from customers. But that's not the situation at T-Force right now. So we are working on improving service, and once you improve service, then you're in a way better position to start moving rates up versus the market. I'm convinced that T-Force freight today versus my peers, same shipment, same destination, etc., etc., etc., same way. 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 start moving rates up okay versus market.

Speaker Change: I'm convinced that T force rate today versus my peers same shipment same destination et cetera et cetera, the same way.

Speaker Change: We are we have to give a discount to our customer because our service is not comparable but we're gonna get closer in 'twenty four with everything that we're doing.

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

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

Speaker Change: Pleasure.

Speaker Change: Our next question is from Brian <unk>.

Elaine Bedard: Our next question is from Brian Ostenbeck with KP 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 really tough on that. And 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, how fast you can improve the pricing, how much... trust the level of service, maybe a little bit more.

Brian: It's my life on them.

Brian: Service points on you gave the Hong Kong.

Brian: Improvements can you talk about how that trended well.

Speaker Change: We last year and Oh.

Speaker Change: Those improvements were because it sounds like the multiple more reasonable volumes.

Speaker Change: It has implications in terms of how fast you're going to see.

Speaker Change: How much customers plus the level of service.

Speaker Change: Maybe just a little bit more complex.

Speaker Change: 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 happened 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, this is something that we started about three or four months ago.

Speaker Change: But this is something that we started improving about a year and ethical win 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.

Elaine Bedard: 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, etc.

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.

Elaine Bedard: 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.

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.

Elaine Bedard: This is something we've just hired new folks in our pricing and billing department, I would say, like six months ago. This guy took it over, and that's going to be part of our improvement for 24. 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 rebuilding and all that. But in terms of the system, this is 24 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 think that for 22,000 shipments, we will probably issue around 35,000 invoices because we bill, we credit, we re-bill. It's just a nightmare.

Speaker Change: I would say like six months ago.

Speaker Change: This guy took it over.

Speaker Change: And and that's going to be part of our improvement for 'twenty for there 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: Nate Smith as much as possible mistakes and all of that and credits and rebuilding and all that.

Speaker Change: 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 I mean 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 this is not something new this has been going on.

Elaine Bedard: This is not something new. This has been going on for years and years and years, but it's never been addressed. Got it. So, on the other side of...

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

Speaker Change: So on the other side of it.

Elaine Bedard: US Health Teal, 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. Yeah. Talks and whatnot.

Speaker Change: So all of the big themes going into this year I think was just getting the terminal level information down to the yeah yeah.

Speaker Change: Yeah Yeah.

Speaker Change: And whatnot.

Elaine Bedard: So I don't think we talked about that as much. Yeah. Yeah. I think it makes sense in terms of how that's progressing. Yes. And if you're starting to see that, that's going to take a little while to get moving as well. All right. Very good question.

Speaker Change: It's about that as most of them yet.

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

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

Speaker Change: Mhm.

Speaker Change: 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. It's all about managing costs better, managing labor costs better, etc, etc. 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. We will take some time some managers will make it maybe some managers who will say you know what this is not for me and they will have to replace some of the managers by yeah.

Elaine Bedard: We're just doing that now. It will take some time. Some managers will make it. Maybe some managers will say, "You know what? This is not for me."

Elaine Bedard: And then we'll have to replace some of the managers. But a manager at a T-Force terminal in 24 now has got to manage costs, manage employees, manage the fleet, manage the service, etc., etc. He's got to be a real manager.

Speaker Change: Our manager at a T Force terminal in 'twenty four now has got to manage costs manage employees.

They 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:

Speaker Change: Got it thanks, very much and I appreciate it.

Speaker Change: Pleasure.

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.

Elaine Bedard: Our next question is from Konar Gupta with Scotia Capital. Thanks, Alper. Good morning, LA. Good morning. Good morning. Good morning, Ali.

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

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

Elaine Bedard: Just wanted to understand on Q1, I know you were 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's Q1? 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 Q4 so far, but what I could say is, again, I think our free cash flow for Q4 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, nine bucks 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 weak again in Q4, based on what we can see now. January for sure has been tough.

Qunar Gupta: <unk> toward a $10 per share.

Qunar Gupta: Yeah.

Speaker Change: Uh huh.

Speaker Change: Okay. So.

Speaker Change: 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.

Speaker Change: 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.

Speaker Change: We'll be more precise when we get into Q1 numbers are but I think that our 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 in Q1.

Elaine Bedard: Are we going to do better in Q1 than in Q1-23? I would say, Yes. But will that be better by a lot? Probably not, because January has been quite difficult for us, and if you listen to our peers, everybody's saying the same thing. We had snow in Nashville. Our terminal was closed for a few days. I mean, this is the first time I've ever seen, never heard that before.

Speaker Change: How are we going to do better in Q1 'twenty four than in Q1, 'twenty three I would say.

Speaker Change: Yes, okay.

Speaker Change: Will that be better by a lot probably not because January has been quite difficult for us.

Speaker Change: 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 you know.

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, buyback shares, etc., etc. The focus at TFI has always been on cash.

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.

Speaker Change: Buyback shares et cetera, et cetera, the focus at T. F. I 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.

Elaine Bedard: 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. I know that's great, and then maybe if I could follow up 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: 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 color and then maybe if I can follow up but all of that cash that you expect to generate this year.

Speaker Change: 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-in. The Ultimate Parody Site!

Elaine Bedard: 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.

Speaker Change: So absolutely I mean, no 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. So if you look at our Q4, we bought back I think at 1.5, many chairs okay because we.

Elaine Bedard: So if you look at our Q4, we bought back, I think, 1.5 million shares. OK, 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: 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, with this Dasky deal, let's say we close that in April. I would say that our leverage will be under $2 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, Elaine.

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

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

Speaker Change: At the end of June after the closing of the deal.

Speaker Change: And then you know if nothing major happens I mean, we 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.

Elaine Bedard: Pleasure. Our next question is from Ben Moore with Deutsche Bank. Hi, good morning, Alon.

Speaker Change: Yeah.

Speaker Change: Our next question is from Dan Moore with Deutsche Bank. Please proceed with your question.

Dan Moore: Hi, good morning, a lot. Thanks for taking our questions can you talk more about the conditions.

Elaine Bedard: Thanks for taking our questions. Can you talk a bit 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?

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

Dan Moore: 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 the breakup 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. So what we're doing now is really studying this project, and we believe that it makes a lot of sense, because if you look at our return invested capital, right? Although our return invested capital for our truck loading Q4 was about 10%, right? which is the lowest within PFR. 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.

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

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 period that.

Elaine Bedard: Okay, even in Q4 with a 10 point something return on invested 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 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 be as a standalone, okay and even more now with desk eat 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.

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.

Speaker Change: 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 T. A N C. F. I, we sold CFR. So now we are.

Elaine Bedard: So we've grown this business in Canada as not being a pure play. So, with package, with LPL, with truckload, and then we started moving into the US. We started with truckload first with TA and CFI.

Elaine Bedard: 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, Okay, on TFI shares today because it's a

Speaker Change: You know more in the L T O and in specialty truckload with the desk acquisition, but still okay. Like one of my peers that did their spin off I would say what 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 you know if you're trying to makes L. T O.

Elaine Bedard: It's a mix of truckload, 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: Our return invested capital of 25, and logistics return invested capital 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 90, 88, 90. We're going to go down to $88, $85 over time. I think it makes a lot of sense.

Speaker Change: Our Oh are in L. T O today combined U S and Canada is about you know.

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 it its great.

Elaine Bedard: Our return on invested capital is great. US LTL is not as good as it used to be because we made a major investment in the fleet over a very short period of time. 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 a And the same on the other side, huge free cash flow, and I know we are in that neighborhood of the low 80s. Thanks.

Speaker Change: Now our 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.

Speaker Change: Having one company T F. I that is truckload L T O 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 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?

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

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

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, that's a very good question. So what we're saying is 88 times 24. 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 at 85, and probably less than 85 or over time now for sure. This is based on normal market condition, which we haven't seen in 'twenty three.

Speaker Change: 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.

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.

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 I'm convinced.

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.

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.

Elaine Bedard: pleasure. Our next question is from Kevin Chiang with CIBC World Markets. Please receive your... Hey Elaine, thanks for taking my question. I know the call's been going on long here. 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 23,000, so roughly 23,000 shipments, or do you assume you can kind of get up to that 24,000, 25,000? or that needed to get to the ADA.

Speaker Change: Sure.

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.

The call has been going along every morning, Kevin.

Kevin Chiang: Good morning.

Kevin Chiang: Just a clarification question on the 880 R L.

Kevin Chiang: Yeah.

Kevin Chiang: Are you assuming shipments or similar to let's say that.

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

Kevin Chiang: 18000 shipments or or do you assume you can kind of get up to that 'twenty, four 'twenty 5000 ship or that needed to get to that.

Kevin Chiang: Sure.

Kevin Chiang: Yeah, the average ship in for Us in 'twenty three 'twenty three 'twenty four.

Elaine Bedard: The average shipment for us in 2024, Kevin, is about 23,000 to 24,000 shipments. We're not going to do that in Q1, but the average for the year should be in that 2023-2024 range. Okay, that's super helpful.

Kevin Chiang: 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. But 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 it conservatism? Is there any noise around purchase price accounting? Is it just macroeconomics?

Speaker Change: And I know this is nitpicky, but just on the the the <unk> 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 dropped out or by like five points. It seems like it could be.

Speaker Change: Significantly higher I'm just wondering if there is a conservatism is there any noise around purchase price accounting of the deal still or is it just macro just just wondering maybe the difference between the margin improvement you talked about.

Elaine Bedard: Just wondering maybe the difference between the margin improvement you've talked about. Yeah. You know, we're always conservative, Kevin.

Speaker Change: That's in the press.

Speaker Change: That's release.

Speaker Change: Yeah.

Speaker Change: No.

Speaker Change: We're always conservative Kevin when we talked about 50 and 25 that is to me that's a minimum.

Elaine Bedard: When we talk about $0.50 and $0.25, that's, to me, that's a minute. 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. It's not a complex deal like UPS Freight. UPS Freight was very difficult to do.

Speaker Change: When they look at all these different operation when I talked to all of this leadership 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.

Elaine Bedard: Dasky is not the same at all. We have a great operating team in all our businesses. These guys have done very well in 2023 in a difficult market like us. They've done well. But when you look at the global market for Dasky, you say, they're not doing that well. The problem is that they have huge costs at the office for consultants and accounting. They will spend a lot of money during the course of 2023 and probably prior for people that come in to help them in the office. As an example, they've implemented Oracle Finance, same as us. The difference is that we do it ourselves. Over there, they did it with a consultant.

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

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 and an office for a consultant.

Speaker Change: Counting.

Speaker Change: 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.

Speaker Change: 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.

Elaine Bedard: That cost them, I don't know, if I remember correctly, three, four million dollars. I mean, us at TFI, we did it ourselves. I mean, we didn't invest to help us do that. I mean, we did it ourselves, right?

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 into ourselves I mean, we we didn't invest in the consultant.

Speaker Change: 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.

Elaine Bedard: 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. The infrastructure, the roads, the schools, the housing, etc.

Speaker Change: So if market conditions turn sometimes in 'twenty four late or maybe into 'twenty five.

Speaker Change: 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.

Speaker Change: The housing et cetera, et cetera. So that's why I believe that our timing is fantastic for the <unk> 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: That's why I believe that our timing is fantastic for Dasky's acquisition, same as our timing for selling CFI was great. We were in a good position when we sold CFI, and it was a great transaction. I think we're in a fantastic position with this acquisition of Dasky, step one. 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 with the TFI asset and maybe other assets. That makes a ton of sense. Great, great color.

Speaker Change: Fantastic position with this acquisition of Naskhi 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.

Elaine Bedard: That's a look. Thank you. Our next question is from Cameron Dorickson with National Bank Financial. Yeah, thanks. Good morning. Maybe just two quick ones from me.

Speaker Change: That makes a ton of sense.

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

Speaker Change: Thank you.

Our next question is from Cameron Dork.

Cameron Dork: National Bank financial Please proceed with your question.

Cameron Dork: 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.

Elaine Bedard: I guess, maybe 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 in 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.

Cameron Dork: 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 any I guess seasonality in there that either helped our Q4 or.

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

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 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, Freightliner, Daimler-Chrysler will be a little bit less in 2024. 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: They build the right okay.

Speaker Change: Picard 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 normal for logistic is gonna be sub.

Elaine Bedard: So, to answer your question, I think that the new normal for our logistics is going to be sub-90 OR, 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, Nick, the conventional, the Canadian conventional truckload, obviously some challenges there on the OR. How much of that was kind of driven by the M&A that you did during the year where you're still working through the improvements with those tuck-and-axes? 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-inked situation in Canada. I mean, this is a disaster that we have in Canada, and nobody's doing anything about it, right?

Speaker Change: 90 or okay.

Speaker Change: And I would say that 25 26, he probably will get even better.

Speaker Change: With 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.

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 here, but Driver Inc. is unfair competition to all the regular trucking companies in Canada. So we are suffering, we're losing volume to those guys because it's unfair competition. The Driver Inc. has got probably 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: <unk> company.

Speaker Change: Company trucking company in Canada. So we are suffering we're losing volume to those guys. 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. That will get fixed if volume comes back to a certain degree, but it will be a long-term problem for us as long as nobody in Ottawa or in Quebec or Toronto does anything about it. Right. Okay. No, that explains it.

Speaker Change: 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.

Speaker Change: Or.

Speaker Change: Does anything about it.

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: Right. Okay that explains it thank you very much.

Speaker Change: Pleasure cover.

Okay.

Speaker Change: Thank you. Our next question is from Brandon <unk> with Desjardins. Please proceed with your question.

Brandon: Hey, good morning L. A.

Brandon: 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 you about CAPEX, what kind of numbers we should expect, and also, in terms of M&A, your appetite to get exposure to planes down the road through M&A, given your focus on cash and assets like this. 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. So, excluding Dasky, we're talking about the same kind of number.

Brandon: Yeah.

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

Brandon: We might see in 2024.

I'd 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 playing down the road are.

Brandon: 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: <unk>, excluding desk, where we're talking about the same kind of number right.

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 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 1.5 by the end of the year, all right, and do maybe some small nice tuck-ins here and there, spend maybe And you know, if there's a transaction that makes sense for us late in the year or into early 25 in the US in terms of either LTL or...

Speaker Change: Right.

Speaker Change: So I mean, our free cash flow is going to be 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, Okay and do maybe some small nice tuck ins here and there spend maybe two to 300 million like we always do and.

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

Speaker Change: Or into early 'twenty five in the U S.

Speaker Change: In terms of either L T L or.

Elaine Bedard: Logistics, well, for sure, we'll look at it. Hello, thanks. There are no further questions at this time. I'd like to, I'd like to hand the floor back over to Alain Bedard for any closing comments.

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

Speaker Change: Hello, Thank you.

Speaker Change: There are no further questions at that time.

Speaker Change: Like that.

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

Elaine Bedard: 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. Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

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 reach 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.