Q1 2024 TFI International Inc Earnings Call

Good day, ladies and gentlemen, thank you for standing by welcome to <unk> International's first quarter 2024 results conference call. At this time, all participants are in a listen only mode.

Operator: Good day, ladies and gentlemen. Thank you for standing by. Welcome to TFI International's first quarter 2024 results conference call. At this time, all participants are in a listen-only mode.

Operator: Following the presentation, we will conduct a question-and-answer session. Callers will be limited to one question and a follow-up. Again, that's one question and a follow-up so that we can get to as many callers as possible. 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 in nature and subject to a number of risks and uncertainties that could cause actual results to differ materially.

Following the presentation, we will conduct a question and answer session callers will be limited to one question and a follow up again, that's one question and a follow up so that we can get to as many callers as possible further instructions for entering the key will be will be provided at that time. Please be advised that this conference call will contain statements that are forward looking in.

And subject to a number of risks and uncertainties that can cause actual results to differ materially.

Operator: Also, I would like to remind everyone that this conference call is being recorded on Friday, April 26, 2024. I will now turn the conference call over to Alain Bedard, Chairman, President, and Chief Executive Officer of TFI International. Please go ahead, sir.

Also I would like to remind everyone that this conference call is being recorded on Friday April 26 2024.

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

Alain Bedard: Well. Thank you operator and welcome everyone to today's call are results released yesterday. After the close showed continued performance to start the new year in the context of the parts.

Alain Bedard: Well, thank you, operator, and welcome everyone to today's call. Our results released yesterday after the close show continued performance to start the new year in the context of a particularly weak freight environment. Our self-help opportunities, along with the continued hard work of our many talented team members, have again helped TFI International deliver solid performance, especially during weaker freight cycles. We sharpen our focus on the long-held operating principle that has helped TFI expand rapidly over the years through organic growth and very strategic M&A, while always maintaining a strong financial foundation through our emphasis on profitability and cash flow.

Alain Bedard: Lilly weak freight environment or a self help opportunities along with the continued hard work of our many talented team members.

Alain Bedard: Again L. P F I international delivered a solid performance.

Alain Bedard: Especially during weak freight cycles, we sharpen our focus on the long held operating principle that we have that have helped T. F. I expand rapidly over the years through organic growth and very strategic M&A, while always maintaining a strong financial foundation through our emphasis.

Alain Bedard: Is on profitability and cash flow.

Alain Bedard: We didn't use our excess cash to intelligently invest in returning excess capital to shareholders when possible.

Alain Bedard: We then use our excess cash to intelligently invest and return excess capital to shareholders when possible. Starting with a high-level overview, during the first quarter of the year, we produced operating income of $152 million versus $166 million a year earlier, with an operating margin of 9.4 relative to 10.7. Our adjusted net income of $106 million was down from $116 million in the first quarter of 2023, and our adjusted EPS of $1.24 was down from $1.33. We produced just over $200 million in net cash from operating activities versus $232 million last year, and we generated positive free cash flow of $137 million relative to $196 million.

Alain Bedard: Starting with a high level overview during the first quarter of the year, we produce operating in kind of 152 million versus 166 million a year earlier with an operating margin of 9.4 relative to 10.7.

Alain Bedard: Our adjusted net income of 106 million was down from $116 million in the first quarter of 'twenty to 'twenty, three and our adjusted EPS of $1 24 was down from $1 33.

Alain Bedard: We produced just over $200 million in net cash from operating activities versus 232 million last year, and we generated positive free cash flow of about 137 million relative to 196 million.

Alain Bedard: Taking a step back I'd like to point on these results first they reflect a solid performance given the economy cycle of the U S. L. T O business, which is picking up steam.

Alain Bedard: Taking a step back, I'd like to point out these results. First, they reflect a solid performance, given the economic cycle of the US LTL business, which is picking up steam. The ongoing transformation is rooted in our overreaching focus on service quality and revenue per ship. In particular, we saw tonnage inflect positively in the quarter, leading to a 12% increase in revenue per ship.

Alain Bedard: The ongoing transformation is rooted in our overreaching focus on service quality and revenue per ship.

Alain Bedard: In particular, we saw tonnage inflect positive in the quarter, leading to a 12% increase in revenue per shipment.

Alain Bedard: The second observation is that we see very tangible opportunity ahead to drive much stronger LTL results. There remains much work to do on cost, all while being only in the early innings of our service-driven, sustainable, top-line improvement program. With that overview, let's take a closer look at each of our four business segments.

Alain Bedard: The second observation is that we see very tangible opportunity ahead to drive much stronger L. T L results.

Alain Bedard: There remains much work to do on cost.

Alain Bedard: All while being only in the early innings of our service driven sustainable topline improvement program.

Alain Bedard: With that overview, let's take a closer look at each of our four business segments.

Alain Bedard: PNC now represents 6% of our segment revenue before fuel surcharge. As you know, this market is experiencing softer volume across the industry, and our revenue before fuel surcharge was down 8%, driven primarily by our lower weight per shipment and slightly fewer shipments. Our PNC operating income came in at $18 million, or a margin of 18%, down from $27, or a margin of 24% in the prior year quarter, on lower operating leverage

Alain Bedard: P. N C. Now represents 6% of our segment revenue before fuel surcharge.

Alain Bedard: As you know this market is experiencing softer volume across the industry and our revenue before fuel surcharge was down 8%.

Alain Bedard: Ribbon, primarily by a lower weight per shipment and slightly fewer shipments.

Alain Bedard: Our P&C operating income came in at $18 million or a margin of 18% down from 27 or a margin of 24% in the prior year quarter on lower operating leverage.

Alain Bedard: Our return on investor capital was still a very solid $25.7 million. Moving on to LTL, which is 42% of segment revenue before fuel surcharge. We generated revenue before the fuel surcharge that was down a percent over the past year, while our operating income, despite a lower gain on assets held for sale, actually grew significantly to $67 million, which was up 15%. This reflects a 140 basis point increase in our operating margin. Looking more closely at these strong results, I can email you TL Revenue before fuel surcharge grew 8% year over year on a 9% increase in shipments, and our claim ratio remained low at 0.2%. Return of vested capital for Kenney and LTL was 19.1.

Alain Bedard: Our return on invested capital.

Alain Bedard: It's still a very solid 25, 7%.

Alain Bedard: Moving on to L. T L, which is 42% of segment revenue before fuel surcharge, we generated revenue before fuel surcharge that was down 8% over the past year, while our operating income despite lower gain on assets held for sale actually grew significantly.

Alain Bedard: Can lead to 67 million, which was up 15%.

Alain Bedard: This reflects a 140 basis point increase in our operating margin.

Alain Bedard: Looking more closely at these strong results our Canadian L. T L revenue.

Alain Bedard: Before fuel surcharge grew 8% year over year on a 9% increase in shipments in our claim ratio remained low at 0.2% return on invested capital for Canadian LTI was 19.1.

Alain Bedard: So I need to U S. L. T L revenue before fuel surcharge of 552 million was down 3% over the past year with the decline driven by our by our asset light operation G. F. P.

Alain Bedard: Turning to USLTL, revenue before fuel surcharge of $552 million was down 3% over the past year, with the decline driven by our asset-light operation, GFP. In the core LTL business, we drove tonnage up 7%, weight per shipment up 13%, and revenue per shipment up 12%. In addition, our operating ratio for U.S. LTL improved significantly, up 310 basis points to 92.6, and our return to investor capital was 15.2. Truckload is up next, now 24% of segment revenue before fuel surcharge.

Alain Bedard: In the core L. T L business, we drove tonnage up 7% weight per shipment up 13% and revenue per shipment up 12%.

Alain Bedard: In addition, our operating ratio for our U S. L. T. L. M prove significantly significantly up 310 basis points to 92.6 and a return on invested capital was 15 point too.

Alain Bedard: Truckload is up next now 24% of segment revenue before fuel surcharge. This market remains weak and we produce revenue before fuel surcharge of 398 million, which was down 4% year over year, reflecting a decline in miles with pricing stable in specialized but under some pressure.

Alain Bedard: This market remains weak, and we produced revenue before fuel surcharge of $398 million, which was down 4% year-over-year, reflecting a decline in miles, with pricing stable and specialized but under some pressure in the Canadian Van Division. Looking closer within truckload, our specialized segment generated revenue before fuel surcharge of $321 million, which was down 5% with an operating ratio of 89 versus 85 last year. Return on Invested Capital for Specialized Structural Funds was 9.5 compared to 14.1.

Alain Bedard: And they can eat Indian Van Division.

Alain Bedard: Looking closer within truckload, our specialized segment generated revenue before fuel surcharge of 321 million, which was down 5% with an operating ratio of 89 versus 85 last year.

Alain Bedard: Return on invested capital for our specialized truckload was 9.5 compared to 14.1.

Alain Bedard: Moving on to the Canadian-based conventional truckload business, we slightly grew our revenue before fuel surcharge to $78 million, with an adjusted operating ratio of 91 compared to 81 a year earlier, and our return to investor capital was $10.4, down from $21.3. Speaking of truckload, as you know earlier this month, we closed the acquisition of Dasky, a business very complementary to our own, serving many attractors specialized in industrial and retail markets and providing us with even greater scale.

Alain Bedard: Moving onto the Canadian base conventional truckload, we slightly grew our revenue before fuel surcharge of 78 million with an adjusted operating ratio of 91 compared to 81, a year earlier and our return on invested capital was 10.4 down from 21.3.

Alain Bedard: Speaking of truckload as you know earlier this month, we closed the acquisition of Dash he business very complementary to our own serving many attractive specialize in the industrial end markets and providing us even greater scale.

You'll begin to see the desk contribution in the second quarter and similar to other acquisitions of ours, we see an immediate opportunity to enhance its financial results.

Alain Bedard: You'll begin to see the Dasky contribution in the second quarter, and similar to other acquisitions of ours, we see an immediate opportunity to enhance financial results. Rounding out our business segment review, logistics is 27% of segmented revenue before fuel surcharge and again produced very strong results this quarter, outperforming the industry. Our revenue before fuel surcharge climbed 24% over the prior year, and our operating income grew 27% to $40 million.

Alain Bedard: Rounding out rounding out our business segment review logistics is 27% of segmented revenue before fuel surcharge and again produced very strong results this quarter outperforming the industry.

Alain Bedard: Our revenue before fuel surcharge climbed 24% over the prior year and our operating income grew 27% to 40 million.

Alain Bedard: Our acquisition last summer of GHD continues to benefit our results. For the quarter, our Logistics Operating Ratio was 91, and Returns Vested Capital held steady versus the prior year period at just 19%. Moving right along, I'll provide an update on our balance sheet and liquidity. For starters, we generated free cash flow of $137 million during the first quarter. Adding to our liquidity near the end of March, we closed a $500 million term loan at an attractive rate with transfers due March 25 to March 27.

Alain Bedard: Our acquisition last summer of Ghd continues to benefit our results for.

Alain Bedard: For the quarter, our logistics operating ratio was 91 and return on invested capital held steady versus the prior year period at just 19%.

Alain Bedard: Moving right along I'll provide an update on our balance sheet and liquidity for starters, we generate free cash flow of 137 million during the first quarter.

Alain Bedard: Adding to our liquidity near the end of March we closed a 500 million dollar term loan at an attractive rate with Chaucer's due March 25, two March 27.

We ended the quarter with a funded debt to EBITDA ratio of 1.6.

Alain Bedard: We ended the quarter with a funded debt-to-bidder ratio of 1.6. This very solid financial foundation is a core part of our strategy, allowing for smart investment, cycle in and cycle out. In addition to the post-quarter acquisition of Dasky during the March quarter, we completed the acquisition of Hercules, a well-run LTL carrier that adds to our cross-border capability. We also were proud to declare another dividend during the quarter, with our board director again approving $0.40 per share paid on April 15, a level 14% higher than the prior year quarter.

Alain Bedard: This very solid financial foundation as a core part of our strategy alone for smart investment cycle in and cycle out.

Alain Bedard: In addition to the fourth quarter acquisition that basket during the March quarter, we completed acquisition of Hercules, a well run L. T O carrier that adds to our cross border capabilities.

Alain Bedard: We also we're proud to declare another dividend during the quarter, we our board director again, proving 40 cents per share paid on April 15, 11, 14% higher than the prior year quarter.

Alain Bedard: Wrapping up with guidance today, we introduce our 'twenty 'twenty four EPS outlook range of 675 to $7 and we expect full year free cash flow in the range of 825 to 900 million.

Alain Bedard: Wrapping up with guidance today, we introduce our 2024 EPS Outlook Range of $675 to $7, and we expect full-year free cash flow in the range of $825 to $900 million with net capex of $275 to $300 million. We also plan to pay down $500 million to $600 million of debt, targeting a fund debt to EBITDA ratio under 1.7 by year-end.

Alain Bedard: With net Capex of 275 to 300 million.

Alain Bedard: We also plan to pay down 500 million to $600 million of debt targeting a funded debt to EBITDA ratio of under 1.7 by year end.

Speaker Change: Alright with that operator, if you could please open the line I'd be happy to take questions.

Operator: All right, with that, operator, if you could please open the line, I'd be happy to take questions. 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 keypad. A confirmation tone will indicate your line is in the question queue.

Speaker Change: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

Speaker Change: Confirmation tone will indicate your line is in the question queue. You May press star two if he would 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 keys.

Operator: You may press star 2 if you would like to remove your question from the line. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button. As a final reminder, we ask that you limit yourself to one question and one follow-up. One moment, please, while we poll for your question.

Speaker Change: As a final reminder, we ask that you limit yourself to one question and one follow up one moment. Please while we poll for your questions.

Speaker Change: Our first questions come from the line of Brian I sent back with J P. Morgan. Please proceed with your questions.

Brian Patrick Ossenbeck: Our first questions come from the line of Brian Ossenbeck with J.P. Morgan. Please proceed with your question. Hey, Alain. Good morning.

Brian: Hey, good morning, Thanks for taking the question.

Alain Bedard: Thanks for taking the time to answer the question. But maybe we could just start with some of the assumptions under the EPS guidance, because I think last quarter you gave us a little bit of a preview before the DAFSCI acquisition closed that EPS would probably start with a 7, so that's still within the range, but we're a little bit lighter than that on the lower end, so I just wanted to see what had changed and maybe what you saw with DAFSCI.

Brian: So maybe you can just starting with them.

Brian: Some of the assumptions under the under the EPS guidance, because I think last last quarter, you gave us literally the preview before the desk acquisition closed it.

Yes, I'll, probably start with a seven so it's still within the range, but yes, there's a little bit lighter lighter than that in the lower end. So just wanted to see yes, you know what had changed and maybe what you saw with gasket initially.

Yeah, well that they ask is really has nothing to do with that are you know what we saw is in the Q1 has been we way worse than we anticipated would be right. Because if you look at our EPS of Q1 versus last year, our EPS is down.

Alain Bedard: Yeah, well, that task really has nothing to do with that. You know, what we saw is that Q1 has been way, way, way worse than we anticipated. Right, because if you look at our EPS for Q1 versus last year, our EPS is down. Why is that?

Why is that well because their truckload in Q1 was just a disaster. Okay. In terms of just look at our peers in the U S.

Alain Bedard: Well, because the truck load in Q1 was just a disaster. In terms of, just look at our peers in the U.S. Or our Canadian peers; it's a very, very difficult market right now for the truck load. This is the reason why, instead of coming out with better than seven, now we have to come to maybe more like 6.75 to seven. I mean, our PNC in Canada had a very disappointing Q1. But we believe that we'll be able to.

Brian: Or our Canadian peers, I mean, it's it's a very very difficult market right now in their truckload. So this is this is the reason why you know instead of coming out with seven better than seven I mean, now we have to come to maybe you know more like 675 to seven I mean, our P&C in Canada.

Brian: As a as a very disappointing Q1.

Brian: But we believe that we'll be able to to change that over the next few quarters and get back on track to where we are normally but our P&C business is really small I mean, when you think about with the desk your acquisition or a P. N. She's gonna represent maybe 4% of our revenue, but T. N C. It's not it's not going to be the issue for us in two.

Alain Bedard: I can change that over the next few quarters and get back on track to where we are normally. But our PNC business is really small. I mean, when you think about the Dasky acquisition, our PNC is going to represent maybe 4% of our revenue. But PNC is not, and it's not going to be an issue for us in 24.

Brian: For I mean, we will get back on track with our P. N C that the problem is the market of our truckload now on the Canadian side I'd.

Alain Bedard: I mean, we'll get back on track with our. The problem is the market for our truckloads. As I've said many times, I mean, we're fighting the driving cancer that we have in Canada, whereby, well, we have competition from our own, from these guys that don't pay, they don't pay any benefits to their drivers. So that is really killing us. If you look at my OR, I'm down 10 points in OR year-over-year, so we don't anticipate that this is going to improve very much unless the market gets way better in terms of the freight environment.

Brian: As I've said many times I mean, we're fighting a driver Inc. A cancer that we have in Canada, whereby well, we we have competition from our from these guys that don't pay us, but they don't pay any benefits of their drivers. So that is really killing us. If you look at my or I'm I'm down 10 point.

Brian: So our year over year.

Brian: So that we don't anticipate that this is going to prove very much unless the market gets way better in terms of the freedom environment.

Alain Bedard: On the U.S. side, I mean, we do pretty well. If you compare us with our peers, okay, we do pretty good, but we still anticipate this freight kind of recession will not change probably before 2025. We have an election year in the U.S.

Brian: On the U S side, I mean, we do pretty well if you look at if you compare us with our peers. Okay. We do pretty good but we still anticipate this freight kind of recession will will not change probably before 25, you know we have an election year in the U S. A I mean.

Alain Bedard: I mean, a lot of our customers are just waiting to see what's gonna happen, et cetera, et cetera. So, that's why we had to adjust a little bit from, let's say, 7 and better to 6.75 to 7. Thanks for that, Alain. I appreciate it. So, the follow-up would be just on T-Force freight, you know, in that backdrop you just outlined with the Great Recession continuing, maybe you can talk about the momentum that seems to be building there, especially with the weight per shipment moving up. Looks like, Thank you.

Brian: A lot of our customers are just waiting to see what's going to happen et cetera et cetera.

Brian: So that's why we had to adjust a little bit from let's see seven and better to 675 to seven.

Thanks for that I appreciate it so the follow up would be just on T Force right now in that backdrop, you just outlined with the great recession, continuing maybe you can talk about the momentum that seems to be building, there, especially with the.

Brian: The weight per shipment moving up looks like some nice.

Brian: Nice movement in yields and volume and just things moving looks like in the right direction. So can that continue even if you do have that sort of backdrop the airlines with the broader U S freight market.

Speaker Change: Well you see.

Speaker Change: Brian.

Alain Bedard: We've been educating our sales team to bring freight that fits the model, right? So we've been saying, guys, don't bring us freight that the average weight is 10.75 pounds, a pound for shipping like it used to. So finally, I mean, don't forget, we bought this company three years ago, right, in May. So it took us, let's say, two years just to try to convince these guys that, you know, because you're paid by the weight, why would you haul light shipping? I mean, this is stupid, right?

Speaker Change: We've been educating our sales team to bring freight that fits the model right. So we've been saying guys don't bring us read that average weight is 10 75.

Speaker Change: Pound for shipping like it was so finally, you know for you I mean don't forget we bought this company three years ago right in May.

Speaker Change: So it took us let's say two years just to try to convince these guys that are you know because you were paid by the week.

Speaker Change: Why would you hold late shipment I mean, this is stupid right, but it change it takes a long time to change. This mentality that pricing also was bad okay and that puts us in a very noncompetitive when the shipments were heavy so we've we had to change that we had to change the culture, we have to change a lot of things.

Alain Bedard: But it takes a long time to change this mentality. The pricing also was bad, okay, and that put us in a very non-competitive position when the shipments were heavy. So we had to change that, we had to change the culture, we had to change a lot of things. Now, we're not done, because we still drive too many miles between each and every stop. That kills our density, and compared to what we have in camp, we still don't pick up enough freight per stop, okay?

Speaker Change: No we're not done because we still drive too many miles between each and every sub that kills our density compared to what we have in Canada, we still don't pick up in our freight per stop. Okay. So this is also part of the major improvement that we needs to happen for T Force right.

Alain Bedard: So this is also part of the major improvement that needs to happen for T-Force freight to come into an 80 to 85 operating ratio down the road, right? So the job is not done. Now, for sure, we understand that the freight environment, even in LTL, is soft, right? Our focus right now is, like we just said, on these three factors, weight, okay, density, et cetera, et cetera, but also, at the same time, we are working very hard at reducing the cost. You know, we say that the tiger is always the last one to survive in the jungle.

Speaker Change: To come into an 80 580 80 to 85.

Operating ratio down the road right. So the job is not done now for sure we understand that the freight environment, even in the L. T. L is soft right. Our focus right. Now is is like we just said on these three factors weight, okay density et cetera, et cetera, but also at the same time, we are working.

Speaker Change: King hard very hard at reducing the cost.

Speaker Change: We we say that the Tiger is always the last one to survive in the jungle and.

Alain Bedard: At T-Force rate today, I mean, we're a bunch of fat cows. Okay, we are way too fat, we have too many clerks, we have too many, because our technology is so advanced that it takes an army of people to service our customers. And this is something that is ongoing right now. Okay, so as an example, we will be improving our freight billing system, our master file, okay, by the end of the year, which is causing us a lot of problems right now with billing our customers, okay? We have too many, too many issues with that.

Speaker Change: T force rate today, I mean, we're we're a bunch of fat cows. Okay. We are way too fat, we have too many clerks, we have too many because of our technology is sold okay that it takes an army of people too to service our customer and this is something that is ongoing right now okay. So as an example.

Speaker Change: <unk>, we will be improving our freight a billing system, our master file okay by the end of the year, which is causing US a lot of problem right now with billing our customers like we have too many too many issues with that and we have too. Many people had the same times. So this new tool that should pose too.

Alain Bedard: And we have too many people at the same time. So this new tool that's supposed to be implemented by year end is going to help us with that. Our new tool on the lino because one of the reasons that we're going to be doing better is that our services are also important. So mis-pickup is improving.

Speaker Change: To be implemented by year end, that's going to help us with that our new tool on the lineup because one of the reason that we're gonna be doing better as our service is also improving so miss pick up is improving we've put more freight on the road, okay versus let's say a year ago on the line, though we use less rail okay. So.

Alain Bedard: We put more freight on the road, okay, versus, let's say, a year ago on the railroad. We use less rail, okay. So rail used to be a big portion of our railroad.

Speaker Change: Rail used to be a big portion of our line, though now the portion of rail is reducing and our own Lino is is picking up speed you know so I think that pretty soon we're going to be doing a probably like 60% off of the line haul miles will be our own guys. You know, let's say within a year or two.

Alain Bedard: Now the portion of rail is reducing, and our own lino is picking up speed, you know. So I think that pretty soon we're gonna be doing probably 60% of the lino miles will be our own guys. You know, let's say within a year or two.

Speaker Change: So in order to again improve service so to me Bryan I mean, we still have a lot of work to do over there, but we know what to do that's the that's the beauty is is we have to execute and we're just starting to see a little bit of improvement.

Alain Bedard: So in order to, again, improve service. So to me, Brian, I mean, we still have a lot of work to do over there, but we know what to do. That's the beauty of it; we have to execute, and we're just starting to see a little bit of improvement in our execution. All right, Alain. Thanks very much.

Speaker Change: All of our execution.

Speaker Change: Alright, thanks, very much I appreciate it.

Brian Patrick Ossenbeck: I appreciate it. Thank you, Brian. Thank you. Our next questions come from the line of Jordan Alliger with Goldman Sachs. Please proceed with your question. Good morning.

Speaker Change: Thank you Brian.

Speaker Change: Thank you our next questions come from the line of Jordan Alger with Goldman Sachs. Please proceed with your questions.

Jordan Robert Alliger: Yeah, Hi morning, just to sort of follow up a little bit.

Jordan Robert Alliger: Just to sort of follow up a little bit. Good morning, Jordan. Morning. You know, I know you mentioned sort of early innings and service improvement, so it'd be good to get a little bit more color on what you feel you've accomplished and what's next to come in terms of getting service, and then... Even though it's early innings, are you at the point in service, again, assuming the freight market cooperates, where you can have sustainability in that growth and tonnage after a first quarter that saw an inflection? Yeah. Well, we believe so. And, you know, if you look back, an example of stupidity is missed pickups.

Jordan Robert Alliger: Morning.

Jordan Robert Alliger: I know you mentioned sort of early innings and service improvement so.

Jordan Robert Alliger: It's good to get a little bit more color on.

What you feel you've accomplished and what's next to come could get serviced and then.

Jordan Robert Alliger: Even though it's early innings are you at the point of service again, assuming the freight market cooperates.

Jordan Robert Alliger: Where you're gonna have sustainability in that growth in tonnage after our first quarter that saw an inflection.

Speaker Change: Yeah, well, we believe so and you know if you look back that are an example of stupidity is miss pick up so.

Alain Bedard: So, you know, if you don't monitor that, you can't, you can't improve. So this is something that we put in place to make sure that we monitor that. Now, we still have about, you know, around 2% of our pickups that we miss today. Okay. Now, depending on the terminal, we have better ones; we have ones that are not so good.

Speaker Change: If you don't monitor that you can't you can't improve so this is something that we put in place to to make sure that we monitored that now we still have about you know around two 2% of our pickup that we miss today, Okay now depending on the terminal that you know we have better once we have them.

Speaker Change: The ones that are not so good but you know the business afraid starts with a pickup so if you Miss the pickup you Miss the revenue. This is the kind of culture that we are changing for example, in California, where we cannot we can't afford to Miss pick up so we're changing that and that improves the service to the customer because then the customer can trust.

Alain Bedard: But, you know, the business of freight starts with the pickup. So if you miss the pickup, you miss the revenue. This is the kind of culture that we are changing, for example, in California, where we can, we can afford to miss the pickup.

Speaker Change: And have a trusting you that you're going to show up and do that pickup right. That's number one number two is our billing system and I've been saying that for for two years. Okay. It's also a major issue of having like sand and the gearbox with our relation with customers. So we are fixing that during the course of <unk>.

Alain Bedard: So we're changing that. And that improves the service to the customer because then the customer can trust you. Can have trust in you that you're going to show up and do the pickup, right? That's number one.

Speaker Change: Four finally, okay and and in terms of the Lino you know if you rail your Lino a freight.

Speaker Change: Trade on the line, though with rail I mean don't expect to be don't expect it's going to be on time I mean, those guys are on time services is maybe not as good as the road.

Alain Bedard: Number two is our billing system. And I've been saying that for years. [inaudible] I mean, those guys, their on-time services maybe not as good as the road. And if you look at my peers in the U.S., I mean, the percentage of freight that's run on the rail is way less than what we do us today. So this is also something that we are working on to improve, and we can't change everything at the same time, but this is an ongoing process in 24 and into 25.

Speaker Change: And if you look at the my peers in the U S. I mean, the percentage of afraid that's run on the rail is is way less than then what we do us today. So this is also something that we are working on to improve and we can't change everything at the same time, but this is an ongoing process.

Speaker Change: In 'twenty four and into 25 so.

Alain Bedard: To your question of growing this company, I mean, for sure, right now, what we've been able to do is at least grow the weight per shipment, which is, you know, a key to success. I mean, again, if you compare my average weight per shipment to my peers in the US, I'm still way too low versus those guys.

Speaker Change: To your question of growing this company I mean for sure right now what we've been able to do is at least grow the weight per shipment which is.

Speaker Change: No okay.

Speaker Change: Key to success I mean again, if you compare my average weight per shipment to my peers in the U S. I'm still way too low versus those guys. If you look at my weight per shipping in Canada that we understand the business and our weight per shipment is is way more than what it is in the U S. So that that is also.

Alain Bedard: If you look at my weight per shipment in Canada, there we understand the business, and our weight per shipment is way more than what it is in the US. So that is also a trend that we're gonna keep running and improving over the course of the next year or two.

Speaker Change: Trend, we're going to keep running and improving over the course of the next year or two. So this is why we're probably in the second inning of a nine inning game on our own that T Force right. The L. P. L business I mean, we still have to work on the cost like I said, you know our P. N D. We still run to minimize.

Alain Bedard: We're probably in the second inning of a nine-inning game on that T-Force rate LTL business. We still have to work on the cost, like I said, you know, our P&D, we still run too many miles, our density is not as good as it should be, you know, we don't pick up enough freight per stop, etc., etc. So these are all the different levers that we have to, you know, put in place to do what we do in Canada.

Speaker Change: Our density is not as good as it should be you know, we don't pick up enough freight per stop et cetera et cetera. So these are all the different levers that we have to you know put in place do what we do it in Canada. I mean are you know we run in the war in Canada is second to none.

Alain Bedard: I mean, you know, we run an OR in Canada that is second to none. If you look at my OR in Canada, sure, it went from 75, okay, last year to 81. But, you know, an 81 war in Canada and a very depressed market is not bad. Why? Because we have a density that is second to none.

Speaker Change: If you look at my or in Canada sure. It went from 75, Okay last year to 81.

Speaker Change: But you know in 81 of our in Canada, and they're very depressed market. There is not that wide because we have a density that is second to none and this is what we're trying also to build in the U S.

Alain Bedard: And this is what we're trying also to build in the U.S. Do more with less. Got it. And just as a quick follow-up, you know, taking all that together, is it still thought you could do around an 88 OR this year? Well, when I talk to my guys, OK, they are convinced that they could do it.

Speaker Change: And do more with less.

Speaker Change: Got it.

Speaker Change: As a quick follow up taking all that together is it still the thought you could do around an area where they are this year.

Speaker Change: [laughter] well when I talk to my guys. Okay, they're convinced that they could do it I had a little bit of concern when I look at you know the the environment in the market right. Now you know I would never anticipated that 24 was gonna be so rough in the in terms of the freight environment I mean, I'm I'm telling you.

Jordan Robert Alliger: I had a little bit of concern when I looked at, you know, the environment and the market right now. You know, I would never, Jordan, have anticipated that 24 was going to be so rough in terms of the freight environment. I mean, I'm telling you, if you had asked me six months ago, what I think about early 24, I would have said, "Well, I don't know."

Speaker Change: If you would have asked me six months ago, what do you think about 'twenty early 'twenty four.

Alain Bedard: I would never have said that it would be that bad, I mean, look at the truckload guys, some guys are losing money. I mean, this is probably one of the worst markets we've seen in the last 30 years. Thank you. You're welcome.

Speaker Change: I would never I've said that it would be that bad I mean look at the truckload guys. Some guys are losing money I mean, it's this is a this is probably one of the worst market that we've seen in the last 30 years.

Speaker Change: Thank you.

Youre welcome. Thank you. Our next question is come from the line of Ravi Shanker with Morgan Stanley. Please proceed with your questions.

Jordan Robert Alliger: Thank you. Our next question has come from the line of Ravi Shanker with Morgan Stanley. Please proceed with your question. Thanks. Good morning, Alain.

Ravi Shanker: Thanks, Good morning, Atlanta, just on that point on the L. P O side, how much of that box to a T. H O R. As macro so depending on the parking coming backwards. There's idiosyncratic actions I mean best practices some of the Canadian operations or they are putting into the U S operation.

Ravi Shanker: Just on that point, on the LPL side, how much of that path to AT8OR is macro, so depending on the cycle coming back, versus idiosyncratic actions, I mean, best practices from the Canadian operation that you're putting into the U.S. operation, and so how quickly can you implement that idiosyncratic action? Yeah, yeah. When we talk about the business, Ravi, we never talk about So when we say that we believe that we'll get to an 88 OR, this is based on the market conditions that we see right now.

Ravi Shanker: So how quickly can you implement that idiosyncratic action.

Speaker Change: Yeah, Yeah, well when we talk about the business, where I mean, we never talk about the market because we don't control the market. So when we say that our we believe that we will get to an 88 or this is based on market condition that we see right now I mean, nothing is based on the market that may improve down the road, we don't budget for that because we don't control them.

Ravi Shanker: I mean, nothing is based on the market that may improve down the road. We don't budget for that because we don't control the market. What we can control is our costs, our efficiency, and our productivity. And this is what we're trying to do. Now, in terms of the market, let's focus on the freight that fits. Okay, that we can control. Let's focus on heavier freight versus lighter freight, which is something that we're slowly starting to improve. Let's focus on trying to get more freight per sub. That's something that we can control when you have the right discussion with the customer.

Speaker Change: But what we do control is our cost and our efficiency and our productivity and this is what we're trying to do now in terms of the market is let's focus on the afraid that's fits okay that we can control that's focus on ever you're afraid versus you know later freight which is something that's slowly we're starting to improve let's folk.

Speaker Change: So I'm trying to get more freight or something that's something that we can control you know when you're having the right discussion with the customer so but this 88 okay.

Alain Bedard: So, but this 88, okay, that has to be our target for us in 24, is based on, guys, we have to do a better job in terms of managing our costs, better productivity, and getting more weight per shipment. So, if you look at, you know, our revenue is about stable, but our shipment count is down. So, it helps us on the cost side because we get the same dollars, but we have to do a little bit less work because we pick up fewer shipments, right? So, this is the trend. It's based on, guys. We can't control the market, but what we can control is our costs and the freight that we pick up and deliver. I got it.

Speaker Change: Has to be our target for us in 'twenty. Four is based on guys. We have to do a better job in terms of managing our costs better productivity getting more weight per shipment. So if you look at our you know our revenue is about stable, but our shipment count is down so it helps us on the cost side, because we had the same dollars well we have to do.

Speaker Change: Little bit less worried because we pick up less shipments right. So this is the trend is based on guys. We can't control the market, but what we can control is our cost and the freight that we pick up and deliver.

Got it that's helpful and maybe as a follow up you said earlier that you're not expecting an inflection in the cycle under a 2025. So just to understand is your full year guidance for 'twenty four just based on normal seasonality off of <unk> number or are you a carnival or any improvement at all this year.

Ravi Shanker: It's helpful. And, maybe as a follow-up, you said earlier that you were not expecting an inflection in the cycle until 2025. So just to understand, is your full year guidance for 2024 just based on normal seasonality of a 1Q number, or are you accounting for any improvement at all this year? Now the way we see it, Ravi, is that this is going to be not a great year in terms of the freight environment. Okay, I understand. Thanks a lot.

Speaker Change: No the way we see it Ravi is that this is gonna be a not not a great year.

Speaker Change: In terms of the freight environment.

Ravi Shanker: Okay understood. Thanks, a lot.

Speaker Change: Youre welcome thank.

Alain Bedard: You're welcome. Okay. Thank you. Our next questions come from the line of Tom Wadewitz with UBS. Please proceed with your question. All right, yeah, good morning, Alain.

Speaker Change: Thank you our next questions come from the line of Tom why do it with UBS. Please proceed with your question.

Tom: Hi, Yes, good morning Alain.

Thomas Richard Wadewitz: [inaudible] Yeah, let's see. There's a lot going on in transport these days. I wanted to get your sense on acquisitions. You've got very, very good skill at identifying value and taking out costs and making acquisitions. Historically, I think with T-Force, obviously, the market backdrop is tough, but it seems like it's been maybe harder to fix than you might have anticipated, or maybe it just takes longer. Then you've got a pretty tough truckload backdrop, and you've got a big truckload carrier you just bought.

Tom: Good morning, Tony.

Tom: Yeah, let's see there's a lot going on in transports these days.

Wanted to get your sense on acquisitions you've had.

Speaker Change: So very very good skill Ed.

Speaker Change: Identifying value and taking out cost in doing acquisitions.

Speaker Change: Historically, I think with T Force, obviously the market backdrop is tough, but it seems like it's been you know may be harder to fix than you might've anticipated or maybe I'll just take Oh yeah.

Speaker Change: And then you know you've got a pretty tough truckload backdrop in and you've got a big truckload carrier just bought so I guess the question is do you consider slowing the pace of acquisitions, maybe the next year or two and say Hey, we've got a lot to digest and you know maybe even takes longer to kind of separate.

Alain Bedard: I guess the question is, do you consider slowing the pace of acquisitions maybe the next year or two and saying, hey, we've got a lot to digest, and maybe it even takes longer to separate the truckload businesses, or just thinking about how that might affect the pacing of what you do on the strategic front? Very good question, Tom. The UPS freight acquisition was very difficult to do, number one, because it's a carve-out. A carve-out is always difficult because you don't know exactly the cost that you're going to inherit, etc., etc.

Speaker Change: You know the the truckload business as you're just thinking about how that might affect the pacing of what you do on the you know I dunno strategic.

Speaker Change: Strategic front.

Speaker Change: Yeah.

Speaker Change: Very good question I mean, the U P. S freed acquisition was very difficult to do number one because it's a carve out.

Speaker Change: Carve out is always difficult because you know you don't know exactly okay. The caused that you're gonna in there it et cetera et cetera.

And I have to tell you that you know one thing that we were not aware of is that 35% of the freight was bad when we bought the company. So this is Lee.

Alain Bedard: And I have to tell you that one thing that we were not aware of is that 35% of the freight was bad when we bought the company. So this is a little bit of an unknown. And you're right, it's taken us a little bit more time. So it took us two years to unhook from UPS's financial system. So a carve-out is always difficult to do.

Speaker Change: Little bit of some of unknown, okay, and you're right. It it's taken us a little bit more time. So it took us two years to unhook from a U S financial system. You know so it's a carve out is always difficult to do okay. So, but we are you know right now we're completely out of the.

Alain Bedard: But right now, we're completely out of the UPS environment. So we are standalone, and we're making progress over there. Now, the Dasky one, that's a different story because, Number one.

Speaker Change: P S environment right. So we are stand alone and and we're making progress over there now the desk. He wants that's a different story because that's key.

Speaker Change: It's not a cargo it's a standalone business.

Alain Bedard: Number two is their head office cost was through the roof. Okay, to run the Dasky head office, the cost was about the same as to run TFI's head office. Now, that cost at Dasky has been reduced by 75% over the course of the next year or two. So we're going to be down to very little. And the operating companies at Dasky, you could say there are about nine business units that operate. So these operators, I'm looking at the results for 23, excluding the head office. Those guys did a pretty good job in the market environment of 23. I'm looking at 24.

Speaker Change: Number one number two is there a head office costs was through the roof, Okay to Iran. The desk yet offices. The cost was about the same as to run T F I head office.

Speaker Change: Now that costs, a desk has been reduced by 75% okay over the course of the next year or two so we're gonna be down to very little cost and and the operating companies at desk key you could see there was about nine business unit that operates okay. So.

Speaker Change: These operators I'm looking at the results for twenty-three excluding the head office. Okay. Those guys did a pretty good job in the market environment of 23, I'm looking at 'twenty four.

Alain Bedard: And if I look only at the operating businesses, these guys are on plan. They're down versus last year. They're down versus 23, but not by much. So it's a little bit, I mean, they're very, you know, it's not like UPS Raid versus us in Canada and the Canadian LTL, which was day and night in terms of results. I mean, those guys are not as good as TFI,

Speaker Change: And if I look only at the operating business. As these guys are on plan they were down versus last year, they were down versus twenty-three, but not that much. So it's a little bit I mean, they're very.

Speaker Change: You know, it's not like you P S raid versus us and Canada in the kidney and L. T L, which was day and night in terms of results I mean, those guys are not as good as T. F I, okay, but the delta between the operating units and our operating units is not it's not 300000 points of or I mean those guy.

Alain Bedard: But the delta between the operating units and our operating units isn't 300,000 points of OR. I mean, those guys, you know, it's not going to be the same thing. Now, the question is, are we going to do something major in 24? Yeah, you're right, Tom. I mean, we have to keep digesting T-Force Raid, and we have to do the same with Dasky.

Speaker Change: As you know, it's not going to be the same phase now. The question is are we going to do something major in 'twenty four yeah, you're right. Tom I mean, we have to keep digesting a T force right and we have to do the same with dusky I mean, so this is why the M&A side for Us 24.

Alain Bedard: I mean, so this is why the M&E side for us, 24, tuck-ins, yes, in Canada, easy to do. But nothing major except the Dasky transaction. Because, as I said on the script there in the call, we're planning on reducing our debt by between $500 million and $600 million in 2024 to bring our leverage down to something like $1.6 million, $1.7 million. Right now, we're about $1.6 million, and we believe that by year-end, we're going to be back to $1.6 million. So by saying that, I mean, there's nothing major in terms of M&A that's going to happen. Okay, that's that's really helpful.

Speaker Change: For tuck ins, yes in Canada easy to do.

Speaker Change: But nothing major except the desk he transaction because as I said on on on the script there in the call.

Speaker Change: We're planning on reducing our debt by between five to 600 million in 'twenty four to bring our leverage down to something like 1617 right now we're at about one six okay and we believe that by year end, we're going to be back to one six so.

Speaker Change: By saying that I mean, theres nothing major Oh vitamin E. That's going to happen in 'twenty four.

Speaker Change: Okay. That's really helpful. I just had one follow up on the L. T O U S. L T L.

Thomas Richard Wadewitz: I just had one follow-up question on US LTL. How do we think about the improvement in OR and the sensitivity to, you know, the freight market versus what's in your control? You know, I mean, there are a bunch of things that are in your control, but it also feels like, you know, if you're going to get paid a higher price, then it would help to have a tighter freight market. And, you know, there's some sensitivity to, you know, pricing and the freight market within that improvement, too.

Speaker Change: How do we think about the improvement in or and the sensitivity to a too you know freight market.

Speaker Change: Versus what's in your control.

Speaker Change: No I mean, there are a bunch of things that are in your control, but it also feels like you know if youre going to get paid a higher price than it would help to have a tighter freight market.

And you know it feels like there's some sensitivity to you know did pricing and freight market with within that improvement too. So I don't know how do you think about this year next year. How much is in your control I know our improvement in <unk> versus how much is kind of you know freight market sensitive.

Thomas Richard Wadewitz: So, I don't know, how do you think about, you know, this year, next year, how much is in your control for OR improvement in LTL versus how much is kind of, you know, freight market sensitive? Yeah, so like I said earlier, Tom, I mean, we don't control the market. I mean, the market is, you know, yellow, disappeared; 40,000 shipments disappeared. Now it's been, you know, across all the carriers.

Speaker Change: Yeah, So like I said earlier, Tom I mean, we don't control the market I mean, the market is you know yellow disappear at 40000 shipments disappeared now it's been you know across all the carriers, we don't control the market, but what we can control is the freight that we decided to halt okay.

Alain Bedard: We don't control the market. But what we can control is the freight that we decide to haul. So on that, we're going to be making some major improvements during the course of the next few years. So instead of hauling light freight, like we used to do, anything that is light, we love that. No, no, no, no.

Speaker Change: So on that where we're going to be making some major improvements during the course of the next few years. So instead of hauling light freight like we used to do anything that is late we love that no no no no. So we have to change the focus. So this is why you know we have to to move that 1200 pounds that we have today versus more like.

Alain Bedard: So we have to change the focus. So this is why, you know, we have to move that 1,200 pounds that we have today versus more like 1,500 pounds, like most of our peers in the U.S. Our average weight is. That's number one. So that's got nothing to do with it.

Speaker Change: 15 are in pounds like most of our peers in the U S. Our average weight is.

Speaker Change: That's number one so that's got nothing to do it's just a matter of picking up the right afraid that fits for US number two is and I've said that many times, we have to improve our density because density is the name of the game in the freight environment. So.

Pick up more freight per stop that has nothing to do with the market. I mean, there's just like you'd have to have a sales team focus on okay. We get to shipments for this guy can we get five because we get three can we get four okay and in order to do that what do we have to do right.

Alain Bedard: It's just a matter of picking up the right freight that fits for us. Number two is, and I've said that many times, we have to improve our density because density is the name of the game in the freight environment. Freight is there, I mean, okay, let's pick it up. No, no, no, no, no, no, no, no, no, no, we got to be focused. Try to get more freight from each and every customer that we already go to pick up freight from. Also... Cut the... Cut the zip code coverage. I mean, reduce, and improve the footprint.

Speaker Change: This culture never existed at T force rate or U P. S. Right no. It was should name. Okay. So whatever afraid is there I mean, okay, let's pick it up no no no no no.

Speaker Change: We gotta be focus try to get more freight from each and every customer that we already go and pick up right.

Speaker Change: Also.

Speaker Change: Cut the.

Speaker Change: Cut the the ZIP code coverage I mean, we do is improve the footprint reduce the footprint so that very expensive to do pickups or deliver afraid at 75 miles away from your from your terminal because the guy has to drive about two hours to get there.

Alain Bedard: Reducing the footprint so it's very expensive to do pickups or deliver freight 75 miles away from your terminal because the guy has to drive about two hours to get there. That's not for us. OK, that's not for us. You know, the way we do it in Canada is that we keep our network very tight, and everything that is outside that network, we give that trade to someone else. Now, and we are also unionized, and we're doing that in Canada. Now, in the U.S., it's a different environment, okay?

Speaker Change: That's not for US Okay. That's not for US you know the way we do it in Canada is that we keep our network very tight and everything that is outside the network, we give that trade to someone else now.

Speaker Change: And we also are unionized and we're doing that in Canada now in the U S. It's a different environment. Okay. We get that for now so the way to serve to service is just to say well I'm sorry.

Alain Bedard: We get that for now, so the way to service is just to say, well, I'm sorry, I mean, this zip code, I'm going there only twice a week, as an example, in order to be more efficient. But you see it up front with the customer. And that's what we're trying to do, reduce the miles on the P&D side. And at the same time, like I said, something that we can control is our lineup. Do less. Miles with rails because you can't control those guys.

Speaker Change: This zip code I'm going to only twice a week as an example in order to be more efficient, but you say it upfront to the customer and that's what we're trying to do reduce the miles on the PND side and at the same time like I said something that we can control is our lino do less.

Speaker Change: Miles with the rails, because you can't control those guys I mean, you get it when when you get it right.

Alain Bedard: I mean, you get it when you get it, right? But when it's your road asset, when it's your own people, that is something that you can control and provide the service that you have committed to the customer. And when the freight is on the rail and it's late, you can't say to Mr. Customer, well, I'm sorry. I'm using a rail guy to do the lino, but they don't want to listen to that, right?

Speaker Change: But when it's your road asset when it's your own people that is something that you can control and provide the service that you have committed to the customer and wasn't afraid is on the rail and its slate you can see two mister customer while I'm sorry.

Speaker Change: I'm using a rail guy to do the Lino they don't want to listen to that right. So this is why these are all part of what we have to do with what we are doing now to improve their service and when you improve the service you could you know get.

Alain Bedard: So this is why these are all part of what we have to do with what we are doing now to improve the service. And when you improve the service, you could, you know, get better shipments and better money for your own shipment. Right. Okay. Thanks for the timeline. Thank you, Tom.

Speaker Change: Get better shipment and better money for your own shipment.

Speaker Change: Right. Okay. Thanks for the time line.

Speaker Change: Yeah.

Speaker Change: Thank you Tom.

Speaker Change: Thank you our next questions come from the line of Kevin Chiang with CIBC. Please proceed with your questions.

Thomas Richard Wadewitz: Thank you. Our next questions come from the line of Kevin Chiang with CIBC. Please proceed with your question. Hi, good morning, Alain.

Kevin Chiang: Hi, good morning, Thanks for thanks for taking my question here.

Kevin Chiang: Thanks for taking my question here. Maybe if I could just go back to the guidance. So if I look at Q1 versus the midpoint of your guide, it's about 18% of your EPS you're calling for in the first quarter here. If I go back, and I know there are a lot of moving parts when you go back historically because of your M&A track record, but if I go back the last, let's say 10 years, that's been about the average, about 18% in Q1.

Kevin Chiang: Maybe if I could just go back to them.

Kevin Chiang: Good morning, I'm, just the guidance. So if I look at Q1 versus the midpoint of your guide it's about 18%.

Kevin Chiang: EPS, you're calling for in the first quarters, you're you know if I go back and I know, there's a lot of moving parts and when you go back historically because of your M&A track record, but if I go back to the last lets say 10 years that that's been about the average about 18%.

Kevin Chiang: In Q1, and I guess I'm, just trying to get a sense of maybe the conservatism in your guidance and maybe what you're building in for certain Kpis, just I would've thought you would've seen better momentum as we get through the year, even in a tough rate environment. Because Q1 was tough just with some of the things you've mentioned already with within T Force afraid it sounds like you're doing some.

Kevin Chiang: And I guess I'm just trying to get a sense of maybe the conservatism in your guidance or maybe what you're building in for certain KPIs. I would have thought you would have seen better momentum as we get through the year, even in a tough freight environment because Q1 was tough. Just with some of the things you've mentioned already within T-Force freight, it sounds like you're doing some stuff in T&C.

Kevin Chiang: In P&C. So yeah, maybe you can just frame that a little bit more in terms of.

Alain Bedard: So maybe you can just frame that a little bit more in terms of where you're seeing some of that momentum and maybe what some of the headwinds could be to maybe offset that, to maybe drive maybe a number not above $7 of EPS this year. Right. Yeah. You know what, Kevin? I mean, you're absolutely right.

Kevin Chiang: You know, where you're seeing some of that momentum and maybe what some of the headwinds could be to maybe offset that to maybe drive a you know.

Kevin Chiang: You know maybe not above seven bucks a of EPS this year.

Kevin Chiang: Yeah.

Speaker Change: Right, Yeah, you know what Kevin I mean, you're absolutely right. I mean Q1 is about 18% of our EPS on average okay. So which is about the same but when we look at the environment. When we look at our peers, what we've seen so far I mean, we're very concerned about this free the environment. So this is why you know after discussing with our.

Alain Bedard: I mean, Q1 is about 18% of our EPS on average, okay, so which is about the same. But when we look at the environment, when we look at our peers, what we've seen so far, I mean, we're very concerned about this freight environment. So this is why, you know, after discussing with our people, our team said, guys, let's be very conservative, okay, so that we don't disappoint and come up again with a miss. Okay, in the next quarters, because there's so much.

Speaker Change: People our team said guy.

Speaker Change: Let's let's be.

Speaker Change: Very conservative Okay. So that we don't disappoint and come up again with a with a miss okay. Here in the next quarters, because there's so much I mean, when we look at the best truckload guys in the U S and in the kind of numbers that these guys are coming out with I mean, it's scary. It's scary. So this is why I said guy.

Alain Bedard: I mean, when we look at the best truckload guys in the US and the kind of numbers that these guys are coming out with, I mean, it's scary. It's scary. So this is why I said, guys, we have to be very prudent. We have to focus on free cash flow, okay, which is gonna be quite good in a very difficult year, right? And I think that maybe we could do better than seven, okay?

Speaker Change: So we have to be very prudent we have to focus on free cash flow, okay, which is going to be quite good in a very difficult here right.

Speaker Change: I think that maybe we could do better than seven okay, but when I look at my peers, what I've seen so far in Q1 from those guys. Both on the U S and Canadian side when I look at our you know the environment are when I think about the driver Inc. Situation in Canada, that's not going to change.

Alain Bedard: But when I look at my peers, what I've seen so far in Q1 from those guys, both on the US and Canadian sides, when I look at the environment, when I think about the driving situation in Canada, that's not gonna change. I mean, it's just gonna get worse.

Speaker Change: It's just going to get worse.

Speaker Change: So I said, let's let's be very careful so I mean, hopefully Kevin we'd do better than seven.

Alain Bedard: So I said, let's be very careful. So, I mean, hopefully, Kevin, we'll do better than seven, okay? But right now, that's the best that I could say. I mean, I'm sorry because I said in Q4 that I think that our guidance would be at least starting with a seven. We're not there. I'm sorry because Q1 was so bad for me.

Speaker Change: But right now that's the best that I could say I mean, I'm, sorry, because we said that in Q4 that I think that our guidance will be at least starting with seven we're not there I'm sorry, because Q1 was so bad for me.

Kevin Chiang: Okay, maybe not so bad for us because we're so diversified. I mean, our guys are doing such a fantastic job. But when I look at my peers, I'm saying, oh boy, this is gonna be a bad year. We thought that 23 was a bad year, but when I looked at the start of 24 with my peers' results, I'm saying, oh, maybe 24 is gonna be worse than 23

Speaker Change: Maybe not so bad for us because we're so diversified I mean, our guys are doing such a fantastic job, but when I look at my appears I'm, saying Oh Boy. This is this is going to be we thought that twenty-three was a bad year, but when I looked at the start of 'twenty four with my peers resolves I'm, saying, Oh, maybe 12.

Speaker Change: The board is going to be worse than then.

Speaker Change: 'twenty three.

Alain Bedard: Who knows? I mean, one quarter is not a year, but I mean, this is why we have to be more under-promised and over-delivered. That's always been the motto of TFI, and I appreciate that given all the uncertainty that's obviously facing you in the broader transport space. Maybe just my second question on P&C, you talked about the tough Q1 here, but you're taking steps to obviously turn this around, and maybe we'll see something in the next couple of quarters here.

Speaker Change: Who knows what I mean.

Speaker Change: One quarter does not a year, but I mean, it's this is why we have to be more.

Speaker Change: Ill under promising over delivery, that's always been the more tow of T F I.

Speaker Change: No.

Speaker Change: I appreciate that given all the uncertainty that that's obviously facing you and the broader transport space. Maybe just my second question on P&C. You know you talked about the tough Q1 here, but you're taking steps to obviously turn the surround them and maybe we'll see something in the next couple of quarters here.

Alain Bedard: I did notice average weight per shipment; I think it's the lowest I've seen in a long time in the first quarter; the vehicle count is pretty low. Maybe any color on what's happening there and maybe what are some of the steps you can do to kind of turn that around?

Speaker Change: I did notice you know average weight per shipment I think it's the lowest I've seen in a long time in the first quarter you know, we gotta vehicle count is pretty low.

Speaker Change: Maybe any color on what's happening there and maybe what what are some of the steps you can do to kind of turn that around.

Alain Bedard: Yeah, yeah, yeah, the killer is the freight that we all right now on the PNC side is too light, right? So yes, we have fewer shipments. We have 3-4% fewer shipments. But the killer is the wait, because like LTL, we're paid by the wait.

Speaker Change: Yeah, Yeah, yeah. The the the killer is is the freight that we all right now on the P&C side, it's too late right.

Speaker Change: So yes, we have less shipments we have three or four per cent less shipment.

Speaker Change: But the killers, the weight because like L. P. L. We're paid by the week.

Alain Bedard: So it's a little bit of a change, okay, in perspective. And at the same time, you know, Bob McGonigal that used to run our PNC is now working on the USLT outside, okay? And we also have a new EVP that's in charge of our PNC. And he came up with a plan, okay? And the leadership, Ken Parloumis, I mean, the guy Jimmy used to run it. You know, you have to drink the Kool-Aid. But our friend Jimmy did not really drink the Kool-Aid, so he decided to retire and went to work for GLS.

Speaker Change: So it's a little bit of a change in perspective and at the same time.

Speaker Change: You know Bob Mcgonigal that used to run our P&C now is working on the U S. L. T outside Okay, and we have also in U E V. P. That's in charge of our P&C and he came with a plan, okay and are the leadership, but Ken part of Loomis I mean, the Guy had Jimmy used to run it.

Speaker Change: You know you've got a drinking the Kool aid so a friend Jimmy did not really drink the Kool aid. So he decided to retire and went to work for a G. L. S.

Speaker Change: So now we have a new crew so Mike over that used to run a T Force free Canada Division knows in charge and he's drinking the Kool aid of that new plan again being more picky on the freight and we can't haul feathers. Because when you are paid by the pound feathers are not very heavy.

Alain Bedard: But don't forget, what we're getting in Q1, okay, is the action that we took in the summer of 23. Because it takes six months to nine months, okay, between the decision that you make and the actual result that you get, right? So, we've taken action in Q1 that will start to show results more in Q2 and in Q3. OK, because it always takes time to implement customers and pricing and things like that.

Speaker Change: Right.

It's a little bit of a change okay, but don't forget what we're getting in Q1. Okay is the action that we took in the summer of 'twenty three because it takes six months to nine months. Okay of decision that you make and the actual result that you get right.

Speaker Change: So so we've taken action in Q1 that will start to show results more like Q2 and in Q3, okay. Because it always takes time to implement our customers and pricing and things like that so that's why I'm, saying that Q1 for P&C was not good right I mean oh.

Alain Bedard: So that's why I'm saying that Q1 for PNC was not good, right? I mean, our OR is, you know, when you look at the OR of our PNC, it's 81 or 82, okay? You say, well, 82 is not bad, but we were 75, right?

Speaker Change: Sure.

Speaker Change: As you know when you look at the or of our P. N C is 81 or 82, okay.

Speaker Change: You say well he was not bad but we were at 75 right. So we got to get back down to under 80, and we have to change the pattern of our freight so we need every afraid there and we'll do that I mean, we have a plan.

Alain Bedard: So we got to get back down to under 80. And we have to, you know, change the pattern of our freight. So we need heavier freight there, and we'll do that. We have a plan. It's going to take us, probably into Q3 and Q4 to see the results of that. But I feel good about PNC.

Speaker Change: Going to take us probably into Q3 and in Q4 to see the results of that so but I feel good about PNC. My biggest problem is really the truckload. Okay that that we have now that ski is adding to that but we believe that maybe not in 'twenty four but in twenty-five this market has.

Alain Bedard: My biggest problem is really the truck load that we have. Now, Dasky is adding to that, but we believe that maybe not in 2024, but in 2025, this market has to change, and with the Dasky Acquisition in our specialty truckload, I think we'll be very well positioned. But there again, if you look at my OR on my specialty truckload, I run an 89 OR, okay? Which is winter, okay?

Speaker Change: The change.

Speaker Change: And with the desk your acquisition in our specialty truckload.

Speaker Change: I think it will be very well positioned but there again, if you look at my or on my specialty truckload I run and 89 or okay, which is <unk>.

Winter, Okay not great.

Alain Bedard: Not great. And we used to be an 84 OR; we're now an 89 OR, okay? But when I look at what's going on in the US, in the truck world, I feel good about 89. No, I don't like to be an 89 guy.

Speaker Change: And we used to be at 84, while we are now in 89 or okay, but when I look at what's going on in the U S. In the truckload World I.

Speaker Change: I feel good about 89.

Speaker Change: No I don't like to be at 89 Guy. So now with the Dashti acquisition like I said to Steve Brookstone other guy in charge I mean, those guys have to be as good as us within a year right. So.

Alain Bedard: So now with the Dasky acquisition, like I said to Steve Brookshaw, the guy in charge, those guys have to be as good as us within a year, right? So, and the market hopefully improves in another year, and with Dasky, we'll be, again, working on doing more with last. That's all.

Speaker Change: And the market hopefully improves in 'twenty five and we'd ask you will you again working on do more with less.

Kevin Chiang: That's all very great, Collar. Thanks for taking my questions, Alain. Have a great weekend there.

Speaker Change: That's all that's all very great color. Thanks for taking my questions I have a great weekend there.

Speaker Change: Likewise, thank you Kevin.

Walter Noel Spracklin: Likewise. Thank you, Kevin. Thank you. Our next questions come from the line of Walter Spracklin with RBC Capital Markets. Please proceed with your question. Thanks very much, Alper. Good morning, L.A.

Speaker Change: Thank you our next questions come from the line of Walter <unk> with RBC capital markets. Please proceed with your question.

Walter: Okay. Thanks, very much operator, good morning Ali.

Walter: So going well there.

Walter: I guess.

Walter: You know going back to some of the self help and corporate activity that you you could look at it and one of the things that you used about in the past with the spin off now.

Alain Bedard: I guess going back to some of the self-help and corporate activities that you could look at, and one of the things that you've mused about in the past was the spinoff now of the truckload division. I'm just curious, is this something that you want to have DASCI fully integrated before you contemplate that? And if so, is a year the typical timeframe that you would see DASCI integrated and, therefore, contemplate something like a spinoff of the truckload division?

Truckload Division I'm. Just curious is this something that you want to have <unk> fully integrated before you contemplate that and if so is the year. The typical timeframe that you would see dusky.

Walter: Integrated and therefore would contemplate something like a spin off of the truckload Division.

Alain Bedard: You know what, Walter? We believe that, you know, if this makes sense, this spin-up down the road, I think it could be done late 25 into early 26, because Dasky, like I said earlier, the 8-9 business units there, they operate really well. There's maybe one or two that are subpar, okay, that we're going to have to work on. The head office of Dasky was the cancer, those guys were costing a fortune, and the results were not there, so, you know, we did some clean-up over there, and we've reduced the salaries of Dasky's head office on a yearly basis by about $12 million, plus Benny.

Walter: You don't want to walk through it we believe that you know if this makes sense to spin up down the road I think it could be done late twenty-five into early 'twenty six because that's key.

Walter: Like I said earlier I mean, the eight nine business unit there they operate really well, there's maybe one or two that are sub par. Okay that we're gonna have to work on the head office of basket was the cancer was those guys were costing a fortune and the results were not there. So you know we did have some clean up over there.

Walter: We've reduced our salaries of desk, yet office on the early pieces of about $12 million plus Bernese.

Alain Bedard: Okay. So, I mean, it's going to take us a year to really improve, but it's not UPS rate. I mean, UPS rate was... You know, there were a lot of things to fix there. Dasky, if you exclude the head office, the operations are pretty good. They could, they will be better, okay, but they are pretty good.

Walter: Okay. So I mean, it's going to take us a year to really improve but it's not U P. S. Right. I mean, you P. S rate was.

Walter: You know there was a lot of things to fix their desk E. If you exclude the head office I mean, the operation are pretty good they could it will be better okay, but they are pretty good now in the market environment that we're going through right now in the U S. Those guys are doing pretty good now for sure will be worse.

Walter Noel Spracklin: Now, in the market environment that we're going through right now in the U.S., those guys are doing pretty good. Now, for sure, we'll be working with them, okay, to improve, but I think that to say that you guys would be ready if you had to do, if you wanted to do something late on 25 and 226. I would say absolutely, yes, we'll be ready. And building in Dasky, because it's a larger revenue item, it does affect our models quite a bit, depending on what kind of OR we're assuming.

Walter: King with them, okay to improve but I think that to say that a are you guys would be ready. If you have to do if you wanted to do something late 'twenty five 'twenty six I would say absolutely, yes, we'll be ready.

Speaker Change: Got it, okay, and and and building in basket because its a larger revenue item. It does it does affect our model is quite a bit depending on what kind of are where we're assuming is there any.

Walter Noel Spracklin: Is there any indication you can give us, given that we haven't had a look at how Dasky looks within your operation, how it is relative to your existing business, but understanding that it's probably a little less profitable?

Speaker Change: Yeah any indication you can give us given that we haven't had a look at what how desk. He looks within your operation how it is relative to your.

Speaker Change: Your existing business.

Speaker Change: But understanding that it's probably a little less.

Alain Bedard: What kind of operating ratio or margin degradation in sequential Q2 in 2024 should we just get our heads wrapped around as we build it into our model and then build the integration synergies after that? Yeah, so what I could say is that if you look at 23 of Dasky's results, if you exclude all the craziness of the head office and all that, you're running 23 Dasky at, you know, a low 90 OR, you know, in the neighborhood of 92, 93, 94 or depending on the, So it's not a disaster.

Speaker Change: Less profitable what kind of operating ratio, we're merging degradation in the sequential.

Speaker Change: The Q2.

Speaker Change: 'twenty 'twenty four should we just get our head wrapped around as we build it into our model and then build the integration synergies after that.

Speaker Change: Yeah. So so what I can say is that if you look at 'twenty three of Das keys resolved. If you exclude all the craziness of the head office and all of that.

Speaker Change: You're running twenty-three desk key you know a low 90 or.

Speaker Change: The neighborhood of 90 to 90 394 or depending on the quarter. So it's not a disaster it's thought.

Alain Bedard: It's not UPS freight where these guys were losing money like crazy. So that is the starting point that we have over there. So you got some pretty good guys. We got one or two operating companies that are running under 90 OR. Okay, but you got one or two guys that are running closer to 100 OR, right? But I would say that 23 average, you think about 93, 94 OR on average, right?

Speaker Change: U P S freight where these guys were losing money like crazy.

Speaker Change: So that that is the starting point, okay that we have over there. So you got some pretty good guys. We got one or two operating companies that are running a little under 90, you are okay, but you get a one or two guys are running closer to 100 door right, but I would say that twenty-three twenty-three.

Okay.

Speaker Change: Think about 90 394 on average right. So that's the starting point.

Walter Noel Spracklin: So that's the starting point, okay? So when we take over, then the ad office will be the big culprit that was dragging the OR, okay, up or down, I mean, in the worst direction, okay? So those guys, I mean, we're shrinking the ad office costs as we speak. So again, you'll see that in our Q2 results. What we could say is that it's not a fixer hopper, okay, like UPS rate was. I mean, we have a good solid base business there. We have good people; we have good teams.

Speaker Change: So when we take over and then they add office was the big culprit that was dragging our there or okay up up or down I mean in the in the worst of the erection. Okay. So those guys I mean, where we're shrinking the head office costs as we speak so.

Speaker Change: It is again, you'll see that in our Q2 results are what we can say that a it's not a fixer upper okay. Like E. P. S. Right was I mean, we have a good solid base business. There we have good people with good teams and and but if I compare with our own use.

Alain Bedard: But if I compare them with our own US operation, they have made some improvements, okay? So, but I mean, we know what to do. We'll work with the guys. Okay. Thanks very much for the time, Alain.

Speaker Change: Operation.

Speaker Change: They have some improvement okay, so, but I mean, we know what to do.

Speaker Change: And we'll work with a guy.

Speaker Change: Excellent thanks, very much for the time I like.

Speaker Change: It's a pleasure Walter.

Konark Gupta: Thank you. Our next questions come from the line of Konark Gupta with Scotia Capital. Please proceed with your questions. Thanks, Alberto. Good morning, Alain.

Speaker Change: Thank you. Our next question is come from the line of Qunar Gupta with Scotia Capital. Please proceed with your questions.

Konark Gupta: Thanks, operator, good morning Ali.

Konark Gupta: What didn't go down.

Konark Gupta: Morning.

Alain Bedard: Thank you. Morning. My question is on US LTL a bit here. You know, like, what you're seeing in your space is that, you know, the weights per shipment are coming down for the industry, right? Obviously, it's a challenging environment.

Konark Gupta: As us on U S. L T L. A bit here you don't like what we can see it in New York piece of that Oh, the weight per shipment.

Speaker Change: Coming down yes.

Speaker Change: Industry right, obviously, it's a challenging environment, our grades are holding up.

Konark Gupta: Rates are holding up. But for your business, you guys are looking to increase rates, which you have obviously done in the last few quarters. So that's great. But you're also looking to, you know, improve the rates at the same time to keep the quality high. So I'm not, I'm trying to just kind of understand, you know, how difficult it is to increase your weight while at the same time keeping the prices up when the industry is kind of losing weight.

Speaker Change: Part of your business you guys are looking to increase that you havent done obviously in the last few quarters. So that's great, but you're also looking to improve the rates at the same time to keep the quality high so I'm I'm not I'm trying to just kind of I understand you know how difficult is it to increase your weight.

Speaker Change: While at the same time, keeping the pricing up when the industry is kind of losing the weight you know like I said is it more like you need to be more competitive on pricing to get that more of a weight per shipment or are you happy by doing some other things.

Konark Gupta: You know, like, is it more like you need to be more competitive on pricing to get that more weight per shipment, or do you have to go and tweak some of those things? You know, Konar, not necessarily.

Speaker Change: No of course not.

Speaker Change: Not necessarily so one of the reason to US we were not big in and heavy shipment. It was because we were stupid our pricing was bad right. So so one of the first thing that we had to do was to correct our pricing model, which we did about a year ago right.

Alain Bedard: So one of the reasons we were not big in heavy shipment is because we were stupid. Our pricing was bad, right? So, one of the first things that we had to do was to correct our pricing model, which we did about a year ago, right? Because, don't forget, we were tied up with the UPS system, so it was difficult for us to have some quality information in that regard. And we took over on February 23, all the financial information.

Because don't forget.

Speaker Change: We were tied up with the U P. S system. So it was difficult for us to have some some quality information in that regard and.

Speaker Change: And we took over February of 'twenty three all the financial information. So so at that point, we were able to work with the team that we have there to adjust the pricing. So that we can be competitive okay on heavier shipping and by doing that and also by having our sales team focusing on that.

Alain Bedard: So at that point, we were able to work with the team that we have there to adjust the pricing so that we could be competitive, okay, on heavier shipping. And by doing that, and also by having our sales team focus on that instead of focusing on light freight or retail freight, more industrial freight, heavier freight, then, you know, we were able to slowly move the average weight of our ship. Okay, we'll go up closer to our peers, because like I said, our peers are not hauling a thousand pounds.

Speaker Change: Stead of focusing on light freight or retail freight more industrial afraid every your freight than you know we were able to slowly move the average weight of our shipment okay up closer to our peers because like I guess it appears right not hauling at a 1000 pound.

Alain Bedard: We have to be competitive with market rates that are there, and that's what we've done. So if you look at our average revenue per shipment, it's down a little bit because we have to match market rates for heavier shipping, but most importantly, our revenue per shipment. That is, to me, the key because if you move a shipment for $300 or if you move a shipment for $400, and the difference is only the weight; everything else is the same.

Speaker Change: We're shipping I mean, our peers are running 14 1500 pounds and this is where we have to be slowly now by doing that okay. We we just have to be competitive to two market rates that are there right and that's what we've done. So if you look at our average revenue per shipment is down a little bit.

Speaker Change: Okay, because we have to match market race wherever you're shipping, but most importantly, okay is our revenue per shipment that is to me. The key because if you move a shipment for $300 or if you move of shipments for $400.

And the difference is only the weight everything else is the same I mean, two movies a ship in it you moved out on the pallet I mean this is this has got nothing to do with the only hill and they kept that you could have is that you could have an issue with weight on your line, though but in today's market.

Alain Bedard: I mean, to move a shipment, you move that on the pallet. This has got nothing to do with it. The only, you know, handicap that you could have is that you could have an issue with weight on your lino.

Alain Bedard: But in today's market, at T-Force weight, we never have an issue with weight. We have issues with volume, never weight, right? So this is why moving to heavier shipment does not affect our costs at all, okay, but it increases our revenue. And that is, you know, to be more focused on for our sales team to be focused on the game. We want heavier shipment.

Speaker Change: Forest way, we never have an issue with the way we have issues with volume never wait right. So this is why by moving to have your shipment.

Speaker Change: That does not affect our costs at all okay, but and increase our revenue.

Speaker Change: And that is you know to be more focused on for our sales team to be focused on the game. We want have your shipment and and now we are price competitive okay with the market and we want more shipments per stop and we won't ship shippers closer to our terminal.

Alain Bedard: And now we are price competitive, okay, with the market. And we want more shipments per stop. And we want shippers closer to our terminal. That is simple to say, right? That's what we do in Canada. That's why, you know, if you compare us with the other major LTL carrier that's public in Canada, we have different awards. Why is that?

Speaker Change: That is simple to say right. That's what we do in Canada. That's why you know if you compare us with the other major L. T O carrier that's public in Canada.

Mean.

Speaker Change: We have different of ours.

Speaker Change: Why is that because of our density is probably better than than this other guy it's not the right because the rate in this market.

Konark Gupta: Because our density is probably better than this other guy. It's not the rate, because the rate is the market, right? Unless you don't know the market. I mean, the market is the market for all of us. Right. No, that makes sense, Alain. Thanks for the color there.

Speaker Change: Unless you unless you don't know the market I mean, the way the market is the market for all of us.

Speaker Change: Yeah.

Speaker Change: Right that makes sense. Thanks for the color there and then if I can follow up quickly on the there's a bit of a competitive landscape change are you know I think maybe in Canada, but perhaps in the U S as well and they've got there was a big Canadian player that is going through restructuring.

Alain Bedard: And then, if we can follow up quickly, there's a bit of a competitive landscape change. You know, I think maybe in Canada but perhaps in the US as well. There was a big Canadian player that is going through restructuring recently. Any thoughts on what kind of opportunities that present to you?

Speaker Change: <unk>.

Speaker Change: Any thoughts on you know what kind of opportunities that present to you like is it more like a market share grab opportunity do you or would you be interested in some of the assets like trucks and drivers.

Konark Gupta: Like, is it more like a market share grab opportunity for you? Or would you be interested in some of the assets, like trucks or drivers or Alain? No, no, the guy that you're talking about is a driving guy, you know. He's a man; he's a driver.

Speaker Change: Oh no no the the the guy that you're talking about is it is a driver and guy.

Speaker Change: <unk>.

Speaker Change: He is a guy he's a drive ring so he's under the protection of the court right now, but are you still running the business I mean for sure he's probably going to have to downsize and do less but we're we're still fighting this guy and him and others, Okay, mostly based in Ontario.

Alain Bedard: So he's under the protection of the court right now, but he's still running the business. I mean, for sure, he's probably gonna have to downsize and do less, but we're still fighting this guy and him and others, okay, mostly based in Ontario. And those guys, that's why my OR and my Canadian truckload are like... It's a disaster. Now we're running 10 points behind last year in my OR. Why is that? Because of these guys, right, that don't pay benefits to their employees because they run a profit model.

Speaker Change: And those guys that's why my or in my truckload My Canadian Truckload is is like debris. It's a disaster. We went now were running 10 points behind last year in my or why is that because of these guys right that don't pay benefits to their employees.

Speaker Change: Because they run their driving model. So this guy no. It's it's not going to help us at all because this guy keeps running.

Konark Gupta: So this guy, no, it's not gonna help us at all because this guy keeps running. And we'll see, maybe he's gonna downsize a bit. But these kind of guys will restart under a different name, whatever, I mean, because their model is so good at cheating the Canadian system. So to the benefit of the customers. Yeah, that makes sense. Thanks. I appreciate the time, Alain. Thank you.

And Oh, we'll see maybe he's going to downsize a bit.

Speaker Change: But are these kind of guys will restart in the on the.

Speaker Change: Under a different name whatever I mean, because their model is so good in cheating the Canadian system.

Speaker Change: So to the benefit of the customers.

Speaker Change: Yeah that makes sense. Thanks appreciate the time thank you.

Speaker Change: That's your score going on.

Cameron Doerksen: Thank you. Our next questions come from the line of Cameron Doerksen with National Bank Financial. Please proceed with your question. Yeah, thanks. Good morning.

Speaker Change: Thank you. Our next question is come from the line of Cameron <unk> with National Bank Financial. Please proceed with your questions.

Cameron: Yes, I think so good good good morning, I'm, just kind of follow up on that.

Alain Bedard: Just to kind of follow up on that thought. Just on the Canadian drive-in truckload, I mean, if we don't see, I guess, a change in, I guess, the regulation or whatever you want to call it here, does it still make sense for you to have a Canadian drive-in operation? Is that something that maybe you don't want to own anymore?

Cameron:

Cameron: Just on the on the Canadian dry van truckload I mean, if we don't see I guess a change in I guess, the regulation or whatever you want to call. It here does it still make sense for you to have a Canadian dry van operation is that something that maybe you don't want to own anymore.

Cameron Doerksen: You know what, Cameron? We're asking ourselves a question because we believe that our political leaders will act. Now, it's been years and years, and they keep promising, but they don't deliver. So, you know, you're absolutely right. That's the question for us, is: do we want to have $200 million of assets in a business where we're competing with guys that are not fair, are not paying any benefits to the employees? And us, our benefits to our employees keep growing, because now we have Mr. Trudeau who gives 10 days of sick leave, and they give three days of PTO, which these guys don't have to pay for, right? So it's a very good question, and for sure, you will see our asset base decrease. You will see that because, I mean, if you can't beat them, join them. But us, we cannot join them.

Speaker Change: Yeah, you know what the Cameron, we're asking ourselves the question because we believe that our political leaders will will will act now it's been years and years and they keep promising but they don't deliver so you know you're absolutely right. That's the question for US is that we want to.

Speaker Change: $200 million of assets in the business that we're competing with guys that are not fair or not paying any benefits to their employees and us are benefit to our employees keep growing because now we have Mr. Trudeau. The gate 10 days of sick leave they gave three times three days a P. T O, which these guys don't.

Speaker Change: Don't have to pay for right.

Speaker Change: So it's a it's a very good question and then for sure you will see our asset base will reduce you will see that because I mean, if you can't beat them join them, but us we cannot join them I mean, we cannot be a driver in company in Canada.

Alain Bedard: I mean, we cannot be a driving company in Canada because, you know, it's not fair for our employees. It's completely unfair.

Speaker Change: Because you know, it's not fair for our employees it's completely unfair.

Alain Bedard: So we're not gonna do that. So you're absolutely right, down the road, you'll see us shrinking. Now, at the same time, we've got lots of opportunities to buy companies for about their asset price. Why? Because, you know, the small guy with 50 trucks or $40 billion revenue. That guy, he's dying right now.

Speaker Change: So we're not going to do that so youre, absolutely right down the road, okay, you'll see us shrinking now.

Speaker Change: At the same time, Okay, we've got lots of opportunities to buy companies for about the asset price.

Speaker Change: Because you know the small guy with 50 trucks or $40 billion revenue that guy He's dying right now so there's opportunity maybe to.

Cameron Doerksen: So there's opportunity maybe to beef up a little bit our truckload division by doing a little bit of small M&A's here and there that make sense for those guys that are in niches maybe. Okay, but overall, our Canadian truckload will shrink because of the driving, absolutely. And people will lose jobs, good paying jobs at TFI because of that driving unfair competition. Okay, that's helpful.

Speaker Change: Beef up a little bit our truckload division by doing it with a small M&A here and there that makes sense in those guys are niche maybe okay, but overall, our Canadian truckload will will will shrink because of their driving absolutely and people will lose job good paying jobs at T F I become.

Speaker Change: <unk> of that driving unfair competition.

Speaker Change: Okay No that's helpful.

Alain Bedard: And just staying with truckload, just thinking about the specialized business, which obviously is a much larger piece of the business now with ASCII, what are you seeing, I guess, in market conditions there? I mean, it's historically been a little more stable from a market perspective, but, you know, any signs of a bottoming out? Are you feeling more optimistic, you know, later in the year? Just any thoughts around the market conditions? Yeah, when we talk to customers right now, I mean, everybody believes that, you know, 24 is going to be, you know, some kind of a steady, heady year, not a great year. But 25 and 26 in the US will be great years.

Just staying with truckload just thinking about the specialized business, which obviously is a much larger.

Speaker Change: Piece of the business now with ASCII, what are you seeing I guess on market conditions. There I mean, it's just historically being a little more stable from a market perspective, but you know in any signs of a bottoming. If any are you feeling more optimistic.

Speaker Change: Later in the year, just any thoughts around the market conditions.

Speaker Change: Yeah, when we talk to customers right now I mean, everybody believes that you know 24 is gonna be you know some kind of.

Speaker Change: Steady Eddie year, not a great year, but 25 and 26 in the U S will be great years. The reason being is that there's a major election in the U S right and in the countries is divided 50 50. So you know you.

Cameron Doerksen: The reason is that there's a major election in the US, right? And the country is divided 50-50. So, you know, you don't know if it's going to go left or right. So some guys are just waiting to see. As an example, you know, if you take GE Energy, okay, with the windmills. But if it's candidate one, he's against windmills, so that business is going to fall, right? If you take the number two guy, well, he likes windmills. He's more green.

Speaker Change: You don't know if it's going to go left or right. So some guys are just waiting to see as an example, you know if you take G energy, okay with the windmills.

Speaker Change: If it's a candidate one he's against windmill, so that business is going to fall right. If you take the number two guy well he likes windmill ease more green. So that's why we have these kinds of.

Alain Bedard: So that's why we have these kinds of candidates. Customers are just sitting on the fence, not knowing where the ball is going to drop, left or right. Now, the Dasky acquisition, in my mind, is very well-timed because we're buying that at a very reasonable price, okay, in a very depressed market, right? So the only... I mean, yes, it could still go down a bit. But the probability of it going down a bit is way, way less than the probability over the next two, three years of it going up like crazy, right? So that is the intention behind, okay, this transaction. And at the same time, like I said earlier.

Speaker Change: Customers are just sitting on the fence not knowing where the ball is going to drop all left or right.

Speaker Change: So.

Speaker Change: No. The Danske acquisition in my mind is very well timed because we're buying that any very reasonable price. Okay. In a very depressed market right. So the only I mean, yes, it could still go down a bit.

Speaker Change: But the probability of going down a bit is way way less than the probability over the next two to three years to go up like Crazy right.

Speaker Change: So that's that is the intention behind okay, just transaction and at the same time like I said earlier.

Cameron Doerksen: I think the timing, if we do something like a spin-off or whatever in 26, I think that the market conditions in 26 are probably going to be maybe not as good as 22, but way better than 23. Right. Okay, that makes sense. Thanks for the time.

Speaker Change: I think the timing if we do something like a spin off or whatever in 26, I think that the market condition in 'twenty say, it's going to probably be maybe not as good as 22, but way better than 'twenty three 'twenty four.

Speaker Change: Right, Okay that makes sense thanks for the time.

Ben Moore: Thank you, Cameron. Thank you. Our next questions come from the line of Ben Moore with Deutsche Bank. Please proceed with your questions. Hi, Alain. Good morning.

Speaker Change: Thank you Kevin.

Speaker Change: Thank you our next questions come from the line of band more with Deutsche Bank. Please proceed with your questions.

Alain Bedard: Hi, Good morning, Thanks for taking our question back to U S. L. T. L. Good morning, typical L T L industry or improves from one <unk> to Q2, Q by about 300 basis points and it's typically flat to Q3, Q and then rises from three <unk> to four acute.

Alain Bedard: Thanks for taking our question. Back to US LTL. Good morning.

Ben Moore: Typical LTL industry OR improves from 1Q to 2Q by about 300 basis points, and it's typically flat from 2Q to 3Q, and then it rises from 3Q to 4Q, typically about 200 basis points. Wanted to ask you, what are the puts and takes on that as a base case? It looks like you'll need much better than that to get to your guided 88 for 2024, and are you expecting maybe 50 to 100 basis points better each quarter based on your actions, assuming the freight market stays the same, and maybe even a little bit better than that into 2Q given the weather in 1Q? Yeah, yeah. So you're absolutely right, Ben.

Speaker Change: Typically about 200 basis points I wanted to ask you. What are you what are the puts and takes to that as a base case, it looks like you'll need much better than that to get to your guided 88 for 'twenty 'twenty four and are you expecting maybe 50 to 100 basis points.

Speaker Change: Better each quarter based on your actions assuming the freight market stays the same and maybe even a little bit better than that into two key given the weather in <unk>.

Speaker Change: Yeah, Yeah, so you're absolutely right Ben and this is like I said earlier I mean, this is a little bit of a concern when I talk to my guys at the U S. L. T O and I say guys are you still confident and they are and and that's also part of that.

Alain Bedard: And this is, like I said earlier, I mean, this is a little bit of a concern when I talk to my guys at the USLTL. And I say, guys, are you still confident? And that's also part of that, you know, $675 to $7, okay? If the market continues to be difficult, okay, like we're seeing now, okay, can we get to the 88? We're still convinced, okay. But like you said, it's a tough goal.

Speaker Change: It was 675 to $7. Okay is that and you know if the market continues to be difficult. Okay. Like we're seeing now okay can we get to the 88, we're still convinced okay, but like you said, it's it's a tough it's a tough go what.

Ben Moore: What I can say so far, when I look at April, is that we are on plan, okay. But our plan keeps improving during the course of the year. And so again, I mean, we'll see. But I mean, our guys are still convinced that we can meet.

Speaker Change: I can say so far when I look at April as we are on plan okay.

But our plan our plan keeps improving during the course of the year and so again I mean, we'll see but I mean.

Speaker Change: Our guys are still convinced that we can meet we can meet this flat.

Alain Bedard: I appreciate that. And maybe as a follow-up, again on USLTL, you've guided before on a 2024 exit rate of 24,000 to 25,000 shipments a day and averaging 23,000 to 24,000 for this year, with one Q at about 22,000. That means 2,000 to 3,000 additional shipments per day to get to that point. Are these all market share gains because we're assuming zero freight market volume inflection?

Speaker Change: I appreciate that and maybe as a follow up again on U S. L. T L. You've guided before on the 'twenty 'twenty four exit rate of 24000 to 25000 shipments a day and averaging 2200 24000 for this year.

Speaker Change: With one SKU at about 22000 that means two to 3000 of additional shipments per day to get to that point are these are all market share gains because we're assuming zero freight market.

Volume inflection and if so.

Ben Moore: And if so, are you taking market share from smaller regional players, given your service improvement? Yeah, I think on that. I mean, the focus is also, like I said many times, to get more freight by the shippers that we already deal with, right, so that we don't add ship stops, and we just add freight. Right. So you're absolutely right that we are running about 22. And our goal is to be more like a 24 year old guy at the end of the year.

Speaker Change: Are you taking market share from the smaller regional players because then your servicing business.

Speaker Change: Yeah, I think on that I mean, the the focus is to also like I said, many times to get more freight by the shippers that we already deal with right. So that we don't add stops.

Speaker Change: Stops and we just add freight right. So you're absolutely right that we are running about 22 and our goal is to be more like a 24, a guy at the end of the year. So when again where were our service is improving so we have customers now that are you know as one example.

Alain Bedard: So again, we're, our service is improving. So we have customers now that, you know, as one example, a large retailer that we used to do very little business with this guy. But now he sees that our service is improving. So it's not just a matter of us, okay, trying to get more freight. This shipper, you know, wants to also diversify his carrier base. So he says, you know what? Now that you guys are doing way better than you used to on the service side, you know, okay, we'll give you more freight. And this is one example of, okay, that something that's going on, because we're not trying to chase volume by cutting rates because this is stupid.

Speaker Change: A large retailer that we used to do very little business with this guy, but now he sees that our service is improving so it's not just a matter of US okay trying to get more freight is this shipper you know what's also to diversify is carrier base. So he says you know what now that you guys.

Speaker Change: We're doing way better than you used to on the service side you know Okay. We'll give you we'll give you more free and this is one example of okay that something that's going on because we're not trying to chase volume by cutting rates. Because this is stupid what we're trying to do is improve our volume slow.

Ben Moore: What we're trying to do is improve our volume slowly by improving our service. So then we have customers that want to give us more, okay, versus two years ago, when the service was not good. And the only way you could get more freight was by cutting rates to someone else. That's not the goal of TFI.

Fully by improving our service. So then we have customers that want to give us more okay.

Speaker Change: This is two years ago when the service was not good and the only way you could get more afraid as by cutting raised to someone else. That's not the goal of T. F. I mean, we're not trying to cut rates to get more afraid. We're trying to do is provide better service and then the customers sees that because he wants to diversify.

Alain Bedard: I mean, we're not trying to cut rates to get more freight; what we're trying to do is provide better service. And then the customer sees that because he wants to diversify his carrier base, he says, Okay, guys, we'll give you a little bit more.

Speaker Change: I also is scary a base. He says okay, guys will give you a little bit more.

Ben Moore: And this is what we're trying to do, to get to 24. Thanks, Alain. I appreciate the time and insight. You're welcome.

Speaker Change: And this is what we're trying to do.

Speaker Change: To get to 24 right.

Speaker Change: Thanks, a lot I appreciate the time and insights.

Speaker Change: You're welcome thank you.

Benoit Poirier: Thank you. Thank you. Our next questions come from Alain and Benoit Poirier with Desjardins Capital Markets. Please proceed with your question. Yeah. Good morning, LA.

Speaker Change: Thank you our next questions come from the line of Ben Wyatt Korea with Desjardin capital markets. Please proceed with your questions.

Yeah, Good morning Ali.

Speaker Change: Right right yeah, Okay, just to come back on the U S. E. L. M. Following the comments about the the volume and really the focus on putting more weight per shipment is dealing with the same shippers any thoughts about your real estate footprint whether you.

Alain Bedard: Just to come back on USPL and following the comments about the volume and really the focus on putting more weight per shipment, dealing with the same shippers, any thoughts about your real estate footprint, whether you see opportunity to streamline given the kind of volume rebound that you see out there for USPL? Well, you see, Benoit, this is an ongoing thing with us. I mean, as an example, we have a lease in York, PA, that's going to be switched over to another carrier.

Speaker Change: C. A fortunate to streamline given the kind of the volume rebound that you see out there for us so yeah.

Speaker Change: Well see but anyway. This is an ongoing thing with us I mean as an example, we have a lease in New York, that's gonna be switched over to another carrier. We have a terminal okay that is being sold to another carrier right now okay. Because you know we havent net.

Alain Bedard: We have a terminal, okay, that is being sold to another carrier right now. Okay, because, you know, we have a network that we use on the real estate side, about 65% of that. So we could say, well, we're going to fill it with growth with this and that, but that's going to take time, right? So the one we bought from our scene in Lexington is way smaller than ours.

Speaker Change: Word that we use on the real estate side about 65% of that so we could say well, we're going to fill it with the growth with this with that but that's going to take time right. So this is why we are shrinking our footprint as much as we can as fast as we can so as an example, we bought a terminal from wire sea.

Speaker Change: It's a matter of fact, we bought two one in Sacramento one in Lexington. So the the one we bought from or it seemed like she is way smaller smaller than ours. Okay. So we're gonna be moving into that new terminal for us in June but at the same time, we're selling okay not to a strategic truckers, but to someone else.

Benoit Poirier: Okay, so we're gonna be moving into that new terminal for us in June. But at the same time, we're selling, okay, not to a strategic trucker, but to someone else, the Lexington terminal. Okay, so we should be in a position to sell this terminal for, let's say about $20 million. So we are adjusting our footprint all the time.

Speaker Change: The Lexington terminal okay. So so we should be in a position to sell this terminal by let's say about $20 million. So we are adjusting our footprint.

Speaker Change: All the time I mean.

Alain Bedard: I mean, you know, TFI, real estate is really the key, one of the keys to our success, right? And we know, we still have lots to do. So in Sacramento, for example, we have two terminals; we're moving into one. This is gonna be done in about a few weeks.

Speaker Change: T F I'm real estate is really the key one of the key of our of our success right.

Speaker Change: And we know we still have lots to do so in Sacramento. For example, we have two terminals. We're moving into one this is gonna be done in about a few weeks. So we're gonna be saving probably the first forecast we have about $1 million in Sacramento by having one terminal instead of two.

Alain Bedard: So we're gonna be saving probably the first forecast we have about a million dollars in Sacramento by having one terminal instead of two. And then we're going to be selling those two terminals. So, the question has always been, guys, do more with less.

Speaker Change: And then we're gonna be selling those those two terminals.

Speaker Change: So the question has always been guys do more with less right on the real estate side I know with the trucks with the M. P. G with the idling everything at T. F is based on that premise you gotta do more with less.

Benoit Poirier: On the real estate side, with the trucks, with the MPG, with the idling, everything at TFI is based on that premise. You've got to do more with less. Okay, that's great. And just a quick follow-up, Alain, when I look at your leverage ratio buyback, you were not active this quarter, obviously, with the acquisition made last December, but how would you look at the buyback these days? And what kind of leverage would you like to see before stepping in?

Speaker Change: Okay. That's great and then just a quick follow up.

Speaker Change: When I look at your leverage ratio buyback you you were not active this quarter, obviously with the acquisition made last December but how would you look at the buybacks. These days and what kind of leverage would you like to see before stepping in.

Alain Bedard: Well, you know, buybacks for us, it's always been a way to improve, okay, and to give more cash to our shoulders. So, it depends on the stock price, right? So, for sure, I mean, we've not been active.

Well, you know buyback for us, it's always been a way to improve okay and to give more cash to our shareholders. So it depends on the on the stock price right. So for sure I mean, we've not been active depending on the reaction depending on where in the market.

Benoit Poirier: Depending on the reaction, depending on where the market goes, I mean, absolutely, we could reactivate this buyback. Now, as you know, there's been a change in Canada with Mr. Trudeau and all these other guys about the capital gain tax. So, we anticipate that maybe, you know, the small investors could divest of their shares in Canada before that June mark. We anticipate that maybe, you know, we don't have a lot of options outstanding at TFI, but we have about $700,000. So, maybe those Canadian guys will take advantage of exercising those options earlier because of that new tax rule.

Speaker Change: Those I mean, absolutely we could reactivate. This this buyback now as you know.

Speaker Change: There's been a change in the Canadian with Mr. Trudeau and all these other guys about the capital gain tax. So we anticipate that may be no. The small investors could divest of their shares in Canada before the June Mark we anticipate that maybe are we have we don't have.

Speaker Change: A lot of options outstanding at T. F I, but we have about six 700000, so maybe those Canadian guys. We will take advantage of.

Of exercising those options earlier because of that new tax rule.

Alain Bedard: So we may jump in and buy back maybe half a million shares. Our leverage is forecasted to be around two at the end of Q2, and around 1.6, 1.7 at the end of the year. So for sure, I mean, to do a buyback at, let's say, $150 US or $160 US, we would sit on the fence for now. But if the stock goes down to, I don't know, let's say, 125 US or 135 US, we would sit on the fence for sure. I mean, we'll be looking at it very closely. Or let's say 180 Canadians, 175 Canadians, yeah. Okay, thank you for the call, Alain. Pleasure, Benoit.

Speaker Change: So we may jump in and Neil buyback, maybe half a million shares.

Speaker Change: Our leverage is.

Speaker Change: Is forecasted to be around two at the end of Q2 and around 1617 at the end of the year. So for sure I mean to do to do a buyback at a at a let's say $150 U S or $160 U S. We would sit.

Speaker Change: On the fence for now, but if the stock goes down to I don't know, let's say 125 U S. A 135 U S for sure I mean, we'll we'll be looking at it very closely.

Speaker Change: Okay.

Canadians are 175 Canadian Yep.

Speaker Change: Okay. Thank you for the color on that.

Speaker Change: Yeah.

Speaker Change: That's your bedroom.

Alain Bedard: Thank you. Our next question has come from the line of Adam Roszkowski with the Bank of America. Please proceed with your question. Hi, Alain.

Speaker Change: Thank you our next questions come from the line of Adam Ross Koski with Bank of America. Please proceed with your questions.

Speaker Change: Hi, Helane on for Ken extra today, Thanks for taking my question.

Alain Bedard: On for Ken Hoexter today. Thanks for taking my question. Contract renewals trended in USLTL were about 5%, which was a little below peers.

Speaker Change: So apologies if I missed this quarter you noted.

Speaker Change: Track renewals trended in U S LTR to trend at about 5% that was a little below peers.

Alain Bedard: Could you provide an update on one cue? And then any update on just month-to-date April trends in that business? Thanks.

Speaker Change: Could you provide an update Q1and then any update on just month to date April trends in that business. Thanks.

Speaker Change: [laughter].

Alain Bedard: Yeah, business is doing fine in April. Okay, so it's trending in the right direction. In terms of renewals, absolutely, we could not do as well as our peers. Like I said, because our service is not up to par with our peers. Our best peers, okay, have better service than us, okay, but we keep improving. So next year, it could be a different story.

Speaker Change: Yeah business is doing fine in in April Okay. So it's trending in the right direction.

Speaker Change: In terms of our renewals absolutely we could not do as good as our peers.

Speaker Change: Like I said, because our service is not up to par to our peers, our best views, Okay, a better service than us okay, but we keep improving so next year it could be a different story, but for now I mean, we had to go on a lower basis.

Alain Bedard: But for now, I mean, we had to go on a lower basis. Because, again, if you look at our Q1, okay, yes, our revenue per 100 weight is not growing 7% like some of our peers. But the beauty of what we were able to accomplish, though, is that our revenue per shipment is up big time, okay, with, you know, some major improvement on the weight side. So this is more of our focus right now, guys, picking up the right freight that fits us, which is heavier freight.

Speaker Change: Like again, if you look at our Q1, okay, yes, our revenue per hundred weight is not growing 7% like some of our peers, but the beauty of what we were able to accomplish though is that our revenue per shipment is up big time, Okay. With the you know some some major improvement on the.

Speaker Change: The weight side. So this is more of our focus right now is guys, let's pick up the right afraid that fits us which is a heavier freight okay. Yeah. We were in the business to move rates up as much as we can but let's be cautious because you know we still have some issues to fix right on.

Alain Bedard: Okay, yeah, we were in the business to move rates up as much as we could. But let's be cautious, because you know, we still have some issues to fix, right, on our service. So it's a step-by-step kind of thing. I mean, you cannot turn the dial from, let's see, 50 to 100 overnight.

Speaker Change: Our service so it's a it's a step by step kind of thing I mean, you cannot turn the dial from let's say 50 to 100 overnight.

Alain Bedard: That's helpful. I saw the US LTO claims ratio was up maybe 20 bps from 4Q. I guess first, I guess you'll be targeting sort of gradual improvements as you're still in the early innings of service improvement here. And then one follow-up on the 65% of the network is underutilized right now. So is that implying maybe 35% excess capacity in the LTL network? And how do you look to the maybe right side?

Speaker Change: Got it that's helpful. Yeah, I saw that the U S. L. T. O claims ratio was up maybe 20 bps from.

Speaker Change: For Q I guess first I.

Speaker Change: You'll be targeting sort of gradual improvements as you're still in early innings of service out of room in here and then one follow up on the I think you said, 65% sort of network is underutilized right. Now so is that implying maybe 35% excess capacity in the LTE network and how do you look to maybe right size.

Alain Bedard: What are you targeting kind of over the next couple of years? What's the normal level of sort of excess that you target? Thanks. Yeah, normal excess, I would say it's not 35, it should be like 15, right? So we still have lots of work to do on that. So every time that we are renewing a lease, okay, we're adjusting the size. And then when it comes to real estate that we own, okay, so we did some swap with other strategic, one of our peers, we did some swap, we are selling terminals, we're adjusting, like I said, as an example, in Lexington, we're switching from 150 doors or 125 doors terminal, to more like more of a 60 kind of doors terminal, because we don't have the volume, we don't have the volume to sustain 120 door terminal over there.

Speaker Change: What are you targeting kind of over the next couple of years, what's a normal level of sort of excess that you target. Thanks.

Speaker Change: Yeah normal access it I would say, it's not 35, it should be like 15, right. So we still have lots of work to do on that so every time that we are renewing elyse. Okay. We're adjusting the size and then when would when it comes to real estate that we own. Okay. So we did some swap with <unk>.

Speaker Change: Other strategic.

Speaker Change: One of our peers, we did some swap we are selling terminals. We're adjusting like I said, that's an example of the Lexington were switching from 150 doors of 100 and twenty-five doors terminal to more like more of a 60 kind of doors terminal because we don't have the volume we don't have the volume to sustain 120 door terminal over there. So this is.

Alain Bedard: So this is ongoing, okay, we've made some major improvements since we bought UPS freight, okay, but we still have a long way to go. Now, at the same time, you know, once you start slowly growing the volume back, okay, so we are 22,000 today; when we bought the company, we were 32,000 shipments a day. So we say, well, by the end of the year, hopefully, we'll be to 24. And then we'll start growing that slowly. Okay, not by cutting rates, because this is not the solution, but by improving service and having our customers say, well, because you guys are doing a better job. Now we can give you more, right?

Speaker Change: Ongoing okay. We've made some major improvements since we bought the U P. S freight okay, but we still have a long way to go now at the same time you know once you start slowly growing the volume back. Okay. So we are 22000 and today when we bought the company we were.

Speaker Change: 32000 shipments a day, so we say oil by the end of the year or fleet will be 224, and then we'll start growing that slowly okay not by cutting rates. Because this is not the solution by improving service and having our customers, saying well because you guys are doing a better job now what could give you more.

Speaker Change: Right.

Alain Bedard: So slowly, that gap of 35, by growing slowly, the company will shrink, and by all the actions that we're taking in terms of when we renew the lease, when the terminal is too big, we're taking action. It's gonna take some time to get to maybe 15% capacity from 35. It could take us two to three to four years, depending how fast we can go, but we're gonna get there. That's very helpful.

Speaker Change: So slowly that GAAP of 35 by growing slowly the company that's it will shrink and by all the actions that we're taking in terms of when you when we renew a lease when the terminal is too big we're taking action.

Speaker Change: It's going to take some time to get to maybe a 15% you know capacity.

Speaker Change: From 35 could take us two to three to four years, depending on how fast we can go but we're going to get there.

Speaker Change: That's very helpful. Thank you.

Speaker Change: Yeah.

Badmore: Thank you. Our next question is coming from the line of bad more with Deutsche Bank. Please proceed with your questions.

Benjamin H. Mohr Mok: Thank you. Our next question is coming from the line of Ben Moore with Deutsche Bank. Please proceed with your question and follow-ups. One is ground freight pricing, the GFP in the quarter, roughly a soft $67 million, about 14% of your US LTL revenue, ex-fuel. I wanted to ask what you're doing to set that back on a growth course. How should we think about that trending through the rest of the year, maybe like 15% of US LTL revenue ex-fuel to 20%, 22% as a steady state next year? How should we think about that cadence throughout the year?

Brad Moore: Hi, Thanks, so much for bringing me back <unk> to ask the question I appreciate the time.

Brad Moore: Just a couple of follow ups, one is the ground freight pricing the GSP in the quarter, yes, roughly a soft 67 million about 14% of your U S. L. T. L revenue ex fuel I wanted to ask what are you doing to set up back on on a growth course, how should we think about that trending through the.

Brad Moore: The rest of the year, maybe like 15% of U S. L. T. All X X revenue ex feel to 20%, 22% as a steady state next year, how should we think about that cadence throughout the year.

Alain Bedard: Yeah, yeah. So this is a major disappointment for us. I mean, our GFP revenue is down big time. And for sure, there were some issues that we had with some of our customers that were not acting properly because we are a reseller for UPS, so everything that doesn't fit us and fits UPS, we switch it to UPS. And we had some issues with some customers, so that's why this revenue came down big time. And the team is rebuilding that slowly. I mean, for sure, we're not on plan on that at all.

Speaker Change: Yeah, Yeah. So so this is a major disappointment for us I mean, our G. F. P revenue is down big time.

Speaker Change: And for sure there was some some issues that we have with some of our customers that are we're not acting properly because we are a reseller for U P. S. Right. So everything that doesn't fit us, okay and fifth U P. S. I mean, we switch it to the U P S.

Speaker Change: And we had some issues with some customers. So that's why this revenue came down big time and the team is rebuilding that slowly I mean for sure. We're not on plan on that at all but there again I mean, we have to work with our partner, which is UBS on that and you know it's it's a five.

Benjamin H. Mohr Mok: But there again, I mean, we have to work with our partner, which is UPS, on that. And it's a five-year contract. We're three years down. We have two years to go.

Year contract, we were three year down we have two years to go so for sure. We will have to start a discussion with our partner on that on that regard. Because this is this is a great business for you P. S. Right. It's also a great business for us and we would like to grow it but when you have a partner here it takes too.

Alain Bedard: So for sure, we will have to start a discussion with our partner on that regard. Because this is a great business for UPS, right? It's also a great business for us, and we would like to grow it. But when you have a partner, it takes two to dance, right?

Speaker Change: To dance right.

Benjamin H. Mohr Mok: Got it, appreciate that. Final question: how should we think about the timing of the full capture of your volume wins versus your pricing gains as a result of your service improvement? Are you aggressively pursuing price at the same time you're pursuing new business wins, or is there a lag to the pricing? And how much is that lag, like one to three quarters?

Speaker Change: Got it appreciate that a final question.

Speaker Change: What's.

Speaker Change: How do you how should we think about the timing of the full capture of your volume wins versus your pricing gains as a result of your service improvements are you aggressively pursuing price at the same time, you're pursuing new business wins or is there a lag to the pricing.

Speaker Change: And how much is that lag like one to three quarters out and try to compare the runway for new business wins versus the runaway for pricing gains.

Alain Bedard: I'm trying to compare the runway for new business wins versus the runway for pricing gains. Yeah, it's all about, you know, you can't ask more money from a customer if the service is not there. As a matter of fact, if the service is not there, the customer, if he stays with you, will ask for a reduction in rates, right? So step number one, okay, in order to get better rates from customers is service.

Speaker Change: Yeah. It's all about you know you can't you can't as more money from a customer if the service is not there as a matter of fact, if the service is not there the customer if he stays with you will ask for a reduction in rates right. So that's step number one okay in order to get better rates from.

Speaker Change: Or is service and service has never been really good at U B S freight or T Force right and that's what we're working on okay right now so biggest.

Alain Bedard: And service has never been really good at the UPS rate or the T-Force rate. And that's what we're working on. Okay, right now. So, the biggest issue with customers is if you're late, and the reason you're late is because your line-all is late, and the reason your line-all is late is because you use the rail, well, you got a big problem. So how do you solve that?

Speaker Change: The biggest issue okay with customers is if you were late and the reason you relate is because your line. One is late and the reason you're lino as late because you use the rail well you gotta be problems. So how do you solve that by trying to as the rail to be on time and good luck.

Benjamin H. Mohr Mok: So you gotta start moving more freight on the road, less freight on the rail. Now, you can't do that when your fleet average age is eight years, right? Because you got old trucks. And old trucks break down all the time. They're always in the shop.

Speaker Change: So you got to start moving more freight on the road less freight on the rail now you can't do that when you're a fleet average age is eight years.

Speaker Change: Right, because you've got old trucks and old trucks, they break down all the time, they're always in their shop.

Alain Bedard: So, that's why we put in a program, okay, as soon as we were able to buy the company. But the first year, we were delayed because of COVID, because the guys could not deliver, etc, etc. So now our average age of our fleet is getting close to normal at 4.7. Still too old, but we're on the right track. And by year end, we're going to be closer to four than we are today.

Speaker Change: So that's why we put in a program okay. As soon as we were able to buy the company, but the first year, we were delayed because of COVID-19, because the guy who could not deliver et cetera et cetera. So now our average age of our fleet is getting close to normal at four seven.

Speaker Change: Still do well we're on the right track and end by year end, we're going to be closer to four than than we are today.

Benjamin H. Mohr Mok: OK. So then, putting more freight on the road, also, you need the proper trailer to do that. So the mix of 228s, double 28s versus 53s, our mix was completely off.

Speaker Change: So then putting more afraid on the road also you need the proper trailer, okay to do that right. So that makes up to 20 eights doubled 20 AIDS versus 50 trees are it makes it was completely off.

Alain Bedard: So, again, we have to change the Lionel fleet from, let's see, 228s to 53s, which we are doing now. 150 trailers in 2019 from the bankruptcy of YRC. Those are 50 trees to help us accelerate the transition from 228 to 50 trees on the line home, right?

Speaker Change: So again, we have to change the lineup fleet from let's say 28 to 50 threes, which we are doing now is a matter of fact, we're buying.

Speaker Change: 150 trailers 2019 from the bankruptcy of why our C. Those are 50 trees to help us accelerate okay.

Speaker Change: Their transition from 228 to 50 threes on the lineup right. So again to provide better service.

Benjamin H. Mohr Mok: So again, to provide better service. The key is service. Once you have good service, the customer will give you more freight. Okay, if you ask. And you are in a position to ask for more money, to be closer to the market, because when your service is bad, let's say the market for this rate is $100, customers will not pay you $100 because your service is so poor. You will try to discount the price because you're bad, right?

Speaker Change: Key is the service once you have good service their customer will give you more freight okay. If you ask for it and you are in a position to ask for more money to be closer to the market. Because when you have service is bad that's in the market for this freight is $100 customer will not be 100 dollar.

Speaker Change: Because he was service is so poor you will try to discount the price because you're bad right.

Alain Bedard: So by moving service up, you get closer to the market rate, right? And so this is the direction that we're going at T-Force rate because our starting point was so bad, old fleet, poor service, using the rail, okay, and we're changing that slowly. And it improves our service. The other thing also that was bad for us was missed pickup. So we didn't really care about missed pickup.

Speaker Change: So by moving service up you get closer to the market of the market rate right and so this is this is the direction that we're going out T force right because our starting point was so bad.

Speaker Change: <unk> fleet.

Speaker Change: Poor service using the rail, okay, and and we're changing that slowly.

Speaker Change: And it proves our service. The other thing also that was bad for US is this pickup so we didn't really care about misspeak up no no no no we do care because our pick up is the start of your revenue. If you don't pick it up you'll never get the revenue.

Benjamin H. Mohr Mok: No, no, no, no. We do care. Because a pickup is the start of your revenue. If you don't pick it up, you'll never get the revenue. And worse than that, so when you have, let's see...

Speaker Change: And worse than that so when you have lets say.

Alain Bedard: In a city like LA, 150 miss pickup, then the guy shows up the next day; well, the freight is gone because the customer could not wait; he gave it to someone else. So you get the double whammy of missing the revenue and incurring the cost because you show up there and the freight is gone. So these are all things that you have to work on to improve the quality of service. So, I mean, T-Force right now is managed by a crew of LTL people.

Speaker Change: In a city like L. A 150 mispick up.

Speaker Change: Then the Guy shows up the next day, well afraid is gone right because the customer could not wait he gave it to someone else. So you got the double whammy of missing the revenue N and incurring the costs.

Speaker Change: Cause you show up there in the Frito has gone. So these are all things that you have to work on to improve the quality of service.

Speaker Change: So.

Speaker Change: I mean T force right now is managed by our accrual of L. T L people.

Alain Bedard: So this is like if you are a general contractor and you give a plumbing job to an electrician. I mean, the results are not going to be so good. Deforce rates' focus was not leadership with the LTL team.

Speaker Change: So this is like if you are you know a general contractor and you gave a plumbing job to an electrician.

Speaker Change: I mean, the results are not going to be so good so.

Speaker Change: T Force rates focus was not leadership with L. T. L team now it is.

Benjamin H. Mohr Mok: Now it is. I really appreciate the additional color. Thank you for your time. It is a pleasure. Thank you. We have reached the end of our question and answer session. I would now like to turn the call back over to Alain Bedard for any closing remarks. Well, thank you, operator, and thank you, everyone, for being on today's call. So we look forward to keeping you updated as we move through the year. And please don't hesitate to reach out if you have any additional questions. Have a terrific weekend and stay safe. Thank you. Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.

Speaker Change: Really appreciate the additional color. Thank you for your time.

Speaker Change: Pleasure.

Speaker Change: Thank you we have reached the end of our question and answer session I would now like to turn the call back over to Alain Bedard for any closing remarks.

Alain Bedard: Well. Thank you operator, and thank you everyone for being on today's call. So we look forward to keeping you updated as we move through the year and please don't hesitate to reach out if you have any additional questions Abby terrific weekend and stay safe. Thank you.

Speaker Change: Thank you. This does conclude today's teleconference. We appreciate your participation you may disconnect. Your lines at this time enjoy the rest of your day.

Operator: BF-WATCH TV 2021,...

Speaker Change: Oh.

Speaker Change: [music].

Speaker Change: Hum.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Hum.

Speaker Change: Yeah.