Q3 2024 TFI International Inc Earnings Call
Speaker Change: Good day, ladies and gentlemen. Thank you for standing by. Welcome to TFI International's third quarter 2024 results conference call. At this time, all participants are in a list and only mode. Following the presentation, we will conduct a question and answer session.
Speaker Change: Colors will be limited to one question and follow-up. Again, that's one question and follow-up so that we can get to as many colors as possible.
Speaker Change: Further instructions for entering the key will be provided at that time.
Speaker Change: Please be advised that this conference call will contain statements that are forward-looking in nature and subject to a number of risks through certainties that can cause ash for results to differ materially.
Speaker Change: Also, I would like to remind everyone that this conference call is being recorded on Tuesday, October 22, 2024. I will now turn the conference call over to Alain Bdard, Chairman Preston and Chief Executive Officer of DFI International. Please go ahead, sir.
Alain Bdard: Well, thank you, operator, and thank you everyone for joining us today's call. Yesterday after Market Close, we reported poorly resolved that reflects industry-wide challenging condition.
Alain Bdard: We generated strong free cashflow, which has always been one of our primary areas of focus. With a year over a year increase of 37% to more than 270 million. This continued strong cashflow. As I've said many times, allows us to opportunity, to consider strategic M&A intelligently invest in the business and return excess capital.
Alain Bdard: Two shareholders.
Alain Bdard: We do this while maintaining a conservative balance sheet and indeed during the quarter we were able to significantly pay down debt as all discussed later on.
Alain Bdard: Let's begin with a review of our consolidated results which has always reflected the skill and artwork of our team members, especially during cyclical challenges for the industry.
Alain Bdard: During these times, we collectively redouble our focus on the important details of the business, striving for added efficiencies through quality of freight, optimizing weight and revenue for shipment, and other important operating fundamentals that have served us well over time.
Alain Bdard: For the third quarter of 2024, our overall revenue before fuel surcharge was up 17% over year to 1.9 billion benefiting from the April acquisition of DASCY.
Alain Bdard: Apring income of 23 million was up slightly from 201 in the prior year quarter. And this equate to an operating margin of 10.7 versus 12.3 a year earlier.
Alain Bdard: Note that last year's operating coming to the higher net gains on sales of assets have for sales of 15 million.
Alain Bdard: We generated a just net income 137 million, up slightly from 136 a year earlier along with a just at EPS of a dollar 60, up slightly relative to a dollar 57.
Alain Bdard: In addition, as reference, we have strong flow with 351 millions of cash from operating activity, well above the 279 million in the year ago quarter.
Alain Bdard: and pre-carsal of 273 million, also well above 198 million of the previous year.
Alain Bdard: Big picture on the quarter are logistic segment performed really well in our truckload operation, their own as did our Canadian LTLNPNC operation.
Alain Bdard: Going forward, the hard working men and women of TFI International will continue to focus on improving operating performance while working to get the most out on recent acquisition.
Alain Bdard: This will be our focus regardless of broader market condition as we see long-term opportunities ahead.
Alain Bdard: So with that, let's discuss LTL which was 40% of segmented revenue before fuel search hours are in the quarter
Alain Bdard: Relative to a year ago, revenue before fuel searchers was up 7% and operating in come was down 24% although this was largely due to hurricanes on last year on asset health for sale in addition.
Alain Bdard: In the year ago quarter we had benefited from an early spike in trade from yellow.
Alain Bdard: which also waited on a year-over-year quarterly performance.
Alain Bdard: for USL-TL, or revenue before fuel surcharge was 531 million relative to 581 million prior year, and operating in calm was 40 million down from 68 million.
Alain Bdard: This performance reflected a 2% drop in tonage, a 3% increase in revenue per shipment excluding fuel and a 35% decline on GFP revenue.
Alain Bdard: Our operating ratio for USLTL was a 92.2 compared to a 90.8-year earlier and our return investor capital was 15.4.
Alain Bdard: Percent.
Alain Bdard: Turning to our Canadian LTL, our revenue before fuel surcharge of 138 million was down 2% while our operating income rose slightly to 33 million. Our number of shipments was up 3% although our weight per shipment decreased 7% and revenue per ship in decreased 5%.
Alain Bdard: Our Canadian LPLR came in at the 76.3 and improvement relative to 77.2 a year ago while our return to the capital was 17.6.
Alain Bdard: Repping up our LTL discussion, PNC operation also saw a slight decline in revenue before fuel surcharge to the $9 million from $12 million with operating income off slightly as well at $24 million versus $25.
Alain Bdard: RPNCR was 78.2, which has up 80 basis points while our return to the capital was 22.2
Alain Bdard: Moving on to truck load, this business segment was 38% of segmented revenue before fuel search charge at 723 million as compared to 402 million a year earlier reflecting the April acquisition of Dasky.
Alain Bdard: Truckload operating income of 72 million was up from 50 million and our OR was 90.3 compared to 87.7 in the third quarter of last year.
Alain Bdard: Taking a look within truck load specialised operation generated revenue before fuel search charge of 648 million of from 325 million and our operating income of 64 million was up from 40 million a year earlier
Alain Bdard: In terms of performance metric for specialized struck load, a revenue before fuel search ours per truck per week was a 5% over the prior year at $404,503, and brokers revenue more than double to 94 million.
Alain Bdard: Our operating ratio was 90.4 compared to 87.8, the prior year in our return vessel capital was 7.9%.
Alain Bdard: Overall, we see room for operational improvement within specialized truck load following the dash key acquisition.
Alain Bdard: Switching to Canadian-based conventional truckload, we produced revenue before fuel search out of 77 million, down slightly from 79 million a year earlier with the brokerage portion increasing 20% to 30 million.
Alain Bdard: Our operating income of 8 million compares to 10 million as mileage and revenue per miles were under pressure Our ore for Canadian truckload was 89.9 and our return vessel cable was 7.7%.
Alain Bdard: Lastly, in our review by business segment, logistic was 22% of segmented revenue before fuel search charge and continues to perform. While revenue before fuel search charge was up just to percent operating come was up 19.
Alain Bdard: Our 3rd quarter logistics operating margin was 11.4 which was up from 9.8 to prior year and returned at the circuit level was 17.4.
Alain Bdard: With that review by segment, I'll next provide an update on our balance sheet. As our reference earlier, we had a very strong free cash flow of 273 million during the quarter.
Alain Bdard: Well above the 198 million a year ago, we use our strong liquidity to pay down.
Alain Bdard: 130 million dollars of debt during the quarter and ended September with an improved fund the debt to a bit the ratio of 207 versus 215.
Alain Bdard: As of the end of June , our solid financial footing is an important aspect of our approach to the business, allowing us to strategically invest regardless of the economic cycle with desk he has a good example while returning significant capital to shoulders whenever possible, which has long been one of our guiding principles.
Alain Bdard: In terms of capital allocations during the quarter-in addition to debt reduction, we completed two small bolt and acquisition and last month our board declared a quarterly dividend of 40 cents per share paid on October 15.
Alain Bdard: I'm also pleased to announce that just yesterday our board of directors both raise our quarterly dividend by 13% and our raise a renewal of our share repurchased program, the NCAA, for an additional year's subject to the approval of the Toronto Stock Exchange.
Alain Bdard: I'll wrap up with an update on our full year outlook that reflects the continuing challenging market condition. Year to date in 2024 our performance has been largely consistent with the prior year and we expect this trend to continue throughout the year end.
Alain Bdard: As a result, we also expect our full year performance to be largely similar to 2023.
Alain Bdard: And now, operator, if you could please open the line, I'll be happy to take questions, please.
Speaker Change: Thank you sir. Ladies and gentlemen, you will not begin the question and answer session. Should you have a question please press the star followed by the one on your touchstone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process please press the star followed by the number two.
Speaker Change: If you are using a speaker phone, please lift the handset before pressing any keys. And just so reminder, colors will be limited to one question and the follow up.
Speaker Change: Our first question comes from the line of a rabbi shanker from Morgan Stanley. Go ahead, please.
rabbi shanker: Thank you, morning, Alain. So obviously interesting times in the industry, just on U.S. L.T.L. Are you able to distinguish?
Ravi Shanker: How much of the earnings pressure there is purely cyclical and will snap back with more re-ordering stuff, versus maybe some evolving industry dynamics in approach the yellow world with new capacity coming in and players you are getting for share, etc.
Speaker Change: Yeah, that's a difficult question, Ravi, so you know, our focus us is really to improve our cost.
Ravi Shanker: Races. So the market condition we know it's been challenging for the last problem.
Speaker Change: is like 18 months. So, we don't control market.
Speaker Change: Conditions are focused on this really to him.
Speaker Change: Rupert Car Spaces, and also improve our service.
Speaker Change: If you look at the last report from Matthew
Speaker Change: I mean, our service, according to this survey, is the worst of the top seven carriers in the US, so it's really a focus of ours. For sure, what we're proposing to our customers is, okay, our proposal is good in the sense that, okay, there's a match between the service that we provide, which is...
Speaker Change: has to improve and the rate also is still a good proposal for our customer because our rate on average is much lower than our peers.
Speaker Change: So, this is why our focus is not...
Speaker Change: Notwithstanding the market condition, we have to improve our service, which
Speaker Change: As a matter of fact, we've started to move more freight away from rail onto the road, but also we have to improve our miss pickup We have you know if you look at our claim ratio, we were going in the right direction, but then whoops comes a Q3 we dropped the ball. [inaudible]
Speaker Change: Alright, so our claims ratio is 0.8% revenue, our Canadian LTO, our claim ratio is 0.2%, which is like the best in class. We used to be at 0.4.5, now we're at 0.8, so guys, let's...
Speaker Change: Not dropped a ball, let's focus on service.
Speaker Change: Let's not miss any pickup, let's be on time with our deliveries, et cetera, et cetera. Now, if you look at this purchase that we did three years ago, three and a half years ago, okay? And you asked me the question, Alain, do you think that you made a mistake with this purchase? Not at all. I mean, the only mistake is that we probably underestimated the time it will take us to turn this thing around. [inaudible]
Speaker Change: Culture, now we're moving.
Speaker Change: The management skill of our guys by training, by providing them, by providing them.
Speaker Change: and the natural information that we could...
Speaker Change: Continue to improve our cost basis.
Speaker Change: Following metrics of service, et cetera, et cetera, things that probably in the past were not the big focus of the management team at the time.
Speaker Change: Alain Bedard, Alain Bedard, Alain Bedard, Alain Alain Bedard, Alain Bedard, Alain Bedard,
Speaker Change: Yeah, Ravi, that's what we're saying. I mean, if you look at what we are, I mean, we're basically flat year over year, okay, as of Q3. So we believe that, you know, we thought that we would do a better job in 2024 than 2023, but with market condition with what we're looking at when we look at Q4, the first forecast that we're looking at. I mean, we believe that, you know, 24 sadly will be a reputation of 23. [inaudible]
Ravi Shanker: Thank you, Alain Piers.
Speaker Change: Thank you. Our next question comes from the line of Walter's Breckland from RVC. Go ahead, please.
Speaker Change: Thank you very much. I pray to Good Morning, Alain.
Walter's Breckland: Yeah, just on that guidance, you know, looking out to next year now, if I look at consensus is up at, you know, come down a bit but it's still at 850, which is almost 40% above your new guide for 2024. I'm just curious if you're comfortable with that. I know there's a lot of operating leverage in your company. So when we do, you know, I know a lot of what to do with that question is dependent on how the economy does, but to the extent that, you know, from your outlook right now and where consensus sits, how do you feel about the consensus level of 850 for next year.
Speaker Change: Very good question, Walter. It's too late for us to really talk about 25. I mean, we're going through our budget season right now. But what I could say though is that we've been under some kind of a freight recession for close to two years now. [inaudible]
Alain Bdard: Right, normally the cycle is between, I don't know, 18 months to 24 months. We don't see some major, major improvement so far in 25. We believe that at some point it will happen. Right. So if we have a normal environment in 2025, not not 2022, but just a normal and free environment. Okay. I think that, you know, getting close to eight bucks a share, EPS like we did in 22 is normal. Because in 22, that was a great year, but we didn't have that ski. We didn't have GHT. There's a few assets that we didn't have at the time. So to say that around $8.
Alain Bdard: In 2025, in the normal environment, I think it's obtainable, you know, which is about the same as what we've done in 2022 in a great environment, but now we have assets that we didn't have at the time, right? The other thing also to consider, Walter, is that we will be reducing our debt like there's no tomorrow, right? So our debt in Q3, we reduce it by 130 million, in Q4, we will reduce that again. The other thing is that we will reduce the debt in Q4, we will reduce the debt in Q4.
Alain Bdard: By at least another 250 to 300 million to get close to our target of reducing our death since the acquisition of the ASK for about 500 million.
Alain Bdard: and then if we don't do anything major until the end of 25.
Alain Bdard: I mean, our death will be reduced to another 500 million during let's say Q1, Q2, by end of Q3 in 25. So our interest costs will do dramatically because if you look at Q3, our cost of financing is like double where it was last year, right? And that will continue to come down as we pay down debt.
Alain Bdard: which is our focus and also hopefully the interest rate will start to drop a little bit and that should help us reduce again.
Alain Bdard: So we said that the 2020-25 in our mind will continue at least 50 cents a share, okay? And if we have a normal environment, our USLTL should perform better, our specialty track load as overall should perform better.
Speaker Change: Can you do an LTO and PNC will perform a little bit better? I mean, we're running 777 here to war right now.
Speaker Change: It's just a top line that we're missing, right?
Speaker Change: on the lower activity.
Speaker Change: Okay, and looking out to 2024 outside of just in terms of capital allocation, when you look at that debt reduction level, you're creating a lot of dry powder for acquisitions and or a buyback, do you have in your mind how much you would allocate in 2025 to buyback and how much you're keeping of that powder dry for, I know you just alluded to a larger acquisition potentially at the end of 2025, how much you be allocating to M&A in 2022. 2025.
Speaker Change: Well, the usual thing that we do a lot every year, we always invest too too.
Speaker Change: 300 million U.S. on tucking in the M&A XLRXLR and you'll see.
Speaker Change: You'll see us doing the same thing in 2025, okay? So that's why I'm saying that our debt will reduce only by so much now. In terms of buying back the stock, we're just waiting to see the reaction, okay, to our Q3 results, the reaction over the next few months. And for sure, if we see an opportunity, I mean so far this year, our buyback was really, really low. [inaudible]
Speaker Change: I think we bought back only 250,000 shares
Speaker Change: in 2023 so far.
Speaker Change: We're ready depending on where the stock price goes.
Speaker Change: We know what the value of TFI is down the road. We know that this...
Speaker Change: Prayed with Session.
Speaker Change: It's going to hand at one point. We just don't know when.
Speaker Change: Well, we know it's got to stop at one point, and we will be very well positioned with all these assets that we've added, like the GHT, like the Dasky, et cetera, et cetera. We're also reducing our costs, both at the Dasky level, at the T-force rate level. So, you know, if there's an upper T to buy back the stock, absolutely, but this is all based on price. Depending on the stock price, I mean, it will be active, or we won't be active. So, let's move on to the next one.
Speaker Change: But, in 2025, for sure, we will always invest between 200 to 200 million on tuckins.
Speaker Change: of some kind. Mostly we're trying to invest in logistics sector in U.S. where we like to make 10 points. Like we're doing now, right? We're not going to invest in logistics business that makes 2 points. That's not for us. We'll leave that to the others. So logistics and LTL. If we could find the right target in the U.S. that makes sense for us, we'll jump on it.
Speaker Change: in 2012.
Speaker Change: Thanks for watching, and I'll see you next time.
Speaker Change: Our next question comes from the line of Scott Group from Wolf Research. Go ahead, please.
Scott Group: Say, thanks Alain. I get the focus on service and costs on the LTL site. Maybe just can you touch on the pricing backdrop, if I look at yields revenue per shipment, both down a little bit from 2nd quarter to 3rd quarter. What's the pricing environment right now? I know you announced a GRI, just talk about pricing broadly.
Speaker Change: Absolutely. So for sure, we're feeling a little bit of pressure on the pricing right now. Although our proposal to customer, you know, if you look at pricing versus service, according to the master report, I mean we're...
Speaker Change: Our proposal is really fair, but you know, you're absolutely right. We're feeling a little bit of pressure right now because don't forget some of our peers that invested.
Speaker Change: on a lot of real estate.
Speaker Change: Okay, so for sure there's a little bit of fight Don't forget that we have a lot of shipments that are moving to truckload right now larger shipments because the truckload guys are you know looking for freight big time they're not that busy We'll see our peers in Q3 coming out very soon but we know that the market for truckload is very light right the demand [inaudible]
Speaker Change: So we are losing that. So for sure we have a little bit of pressure. So this is why our focus is guys We cannot continue to have a service that is subpar, okay. So we have to improve that. And like I said on Q2, we still have our costs that are not as good as they should be. So that's gotta be our focus.
Speaker Change: And we don't control the market, you know, we're just a small player, you know, we're probably number five, number six in terms of volume at 22,000 shipments. We're not big.
Speaker Change: But we know one thing is that this market at one point will start to turn and us we have to be ready with our service.
Speaker Change: in our course.
Speaker Change: Improvement.
Speaker Change: Makes sense. And then just a thought on Walter's question about M&A, you know, what are the sizes of deals you're looking at as you think about 25 and then I feel like it's been a while since you've given us any update. [inaudible]
Speaker Change: I'm the potential.
Speaker Change: To separate the business and the spin, maybe just any thoughts or color there as well. Yeah, yeah.
Speaker Change: Yeah, a very good question.
Speaker Change: Listen, in terms of M&E size, if we look at TFI at the end of 25, okay, in a normal environment.
Speaker Change: Without issuing any paper, no stock, no paper.
Speaker Change: You know, when we talk to our board, we could look into a four to five billion dollar US billion dollar deal in the US, right? On a target, and if the deal is more than that, then we have to resort to paper, which we don't like to do, right? But, you know, it depends on the target, depends on the transaction. In terms of, you know, not mixing a return on the vested capital between 15 and 25 versus a return on the vested capital of 8 to 15, the truckload and the rest.
Speaker Change: For sure, the discussion we're having with the board is that right now TFI's market cap is too small to do some kind of a split Okay, so let's say our market cap is 12 you do a split six six six is too small right so that's why the discussion that I'm having with our board is Alain you gotta do this next transaction and then let's say that you do a four five billion dollar deal the market cap changed from 12 to 15 or 18 whatever it is you know you gotta get closer to 20 to start thinking about splitting into two
Speaker Change: What?
Speaker Change: It makes sense, okay, not to have, you know, return Vestor Capital of 8 to 15 mixed up with return Vestor Capital of 15 to 25.
Speaker Change: So it's just a matter of time we have to get to the certain size
Speaker Change: Scott, and once we get to that size, I mean, you know, I think that this is where we're going to go, we're getting ready.
Speaker Change: You know, we're getting ready. I mean, Steve Brookshodder runs our truckload operation. I mean, he knows where we're going.
Speaker Change: So, you know, as much as we can right now, we are splitting the real estate, okay? We're splitting the assets, so because that takes time, so we're getting ready. Is this something that's gonna happen in 25? I don't think so. Is this something potential? The end of 26 into 27? You know, first we have to do this deal that makes sense for our shareholders, probably late 25 into 26 maybe. And then, okay, then we'll be ready to go to the next step. Thank you for joining us today.
Speaker Change: Thank you, Alain.
Scott Group: Blasher Scott
Speaker Change: Our next question comes from the line of corner Gupta from Skoshia Capital. Go head please.
Speaker Change: Wanting Alain, how are you?
Speaker Change: I'm good, I'm good, you know how about you?
Speaker Change: Thank you. Thanks for taking my question. I just want to clarify on the P4s, Alain. If we look back in the first few years of the abolition, you started to reprise the book.
Speaker Change: Bichia, Bichhappin, you know, recently Vell, then he's trying to optimize the cost, obviously, and he's still kind of, you know, looking at the cost here and trying to figure out, you know, like, you know, with the Matthew survey and obviously the service focus and the cost because you have, what's really required here to move the operating ratio in the U.S. on the L business to, you know, 85% or so. I mean, do you need the volumes only on do you need the volume service cost and all those things? Some together and how should we kind of lay that roadmap in the next couple of years?
Speaker Change: Absolutely, if we would get from 22 to 25
Speaker Change: and the thousands shipments of these, for sure that would help our cost basis.
Speaker Change: But the problem that we have within T4Srate today is that our business is true fakes is not variable enough, okay? So this is why we have to work with our team, our terminal managers, to really adjust on a daily basis our cost versus the volume that we have. [inaudible]
Speaker Change: Okay, that's number one.
Speaker Change: And for sure, down the road, if we can hit the 23, 24, 25,000 shipments, for sure, that's going to help us. But, you know, this is where it's the chicken and the eggs. So if you talk to our sales guy, they say, well, you know, it's tough for us to get more business because the service is maybe not up to par to some of our peers, right? [inaudible]
Speaker Change: So, when we talk to our operation, guys, guys, you know, we got to fix the service. We have to improve the service. Now, you say, yeah, well, if we improve the service, maybe there's a cost to that. No, no, no, no, no, you have to improve the service and reduce the cost at the same time. So, this is quite a challenge. And this is where the talent of your management team comes to play.
Speaker Change: If you look at our management team in Canada, I mean this is a team that's been educated, trained, focused, etc.
Speaker Change: for years and years and years, and if you look at the results, okay, in Canada, we're doing very, very well. Even with the Kindersley acquisition that was not a star, okay, I mean our Canadian operation is still running sub ADOR in a difficult environment. Why? Because
Speaker Change: We have a very, very educated talent team to manage our business.
Speaker Change: And this is the key for us.
Speaker Change: In the US, where the terminal management team...
Speaker Change: Lack this training, lack this education, now they have the tool, now they have the financial information.
Speaker Change: So now they have to act according to it, so that our costs is less fixed and more variable according to the volume. That's number one. Number two, in order to bring our cars down, we need our sales team to understand the mission of trying to get more freight per stop. I mean, I've been like preaching that for three years now.
Speaker Change: and so far it's like I'm preaching to a desert, right? So we haven't done anything good on that. We've done the only thing good we've done with the sales team so far is we move the average weight per ship and from 1075 to 1200.
Speaker Change: So we have a little bit more dollars for shipping. Okay, that's good. Well, 1200 is not the option. The option is not the top where we should be by at least it's a moving the right direction. But by having more freight per stop, at the same time, okay, you split the cost of that stop over two shipments or three shipments instead of one or two shipments.
Speaker Change: So that helps you with your cost basis and you become more competitive. So this is a mission that we've been saying and repeating but it seems to be difficult to accomplish. So this is why you know we're continuing to educate these guys to go. Our GFP is down like there's no tomorrow. This is a diamond wave T-force rate. Now for sure we've lost all the review from the reseller because most of these reseller were cheating in our partner.
Speaker Change: So now we have to rebuild that business with our own account. We cannot deal with the reseller that are cheating.
Speaker Change: Okay? Because our partner does not accept that anymore, right?
Speaker Change: So let's have the sales team focus on our growing RGFP and also growing the number of shipment per stop so that's going to help our cause basis.
Speaker Change: It's not just the market that is, you know.
Speaker Change: It may be not the strongest today. Us, we have a lot of work to do ourselves, okay? I mean, the market is difficult in Canada.
Speaker Change: Okay, it's probably even more difficult in Canada than in the U.S.
Speaker Change: And if you look at what we do over there, I mean, we do pretty good. Why? Because we've got the real, the real strong management team.
Speaker Change: This is what we're trying to build in the US right now.
Speaker Change: Thanks so much. And if I can follow up on Dasky. We talked about 50% accretion next year. I just want to clarify, the 50% accretion next year is incremental to whatever cost improvements you have achieved at the closing of the acquisition and do you expect another upside to that 50% from the debt to your paying or that's included in 50 cents. Thanks for watching.
Speaker Change: No, no, 50 cents, that is based on operation of Daski only. It's got nothing to do with our interest costs, okay? So, the deal we have with the Daski team there, and I haven't seen the plan for 2025, but I would be very disappointed.
Speaker Change: If those guys don't come up with the 50 cents based on the operation because
Speaker Change: You know, we are making some major major improvement right now on the desk key finance team.
Speaker Change: You know, we will be moving all this financial system away from our Dallas headquarters in Tutuano.
Speaker Change: We're going to be moving that to Infinium, so by the summer of 25
Speaker Change: Everything's going to be run like at the car trends.
Speaker Change: Style Operation, right? So that represents huge saving for us.
Speaker Change: I mean the two Canadian companies that used to be managed by Dasky by the end of 24 will be managed by our Canadian team. Those two companies, one is in Toronto, one is in Winnipeg will be managed by our Canadian team now, which our Canadian team knows more about the Canadian market than the US team in Dallas. So, no, we have a lot of good things that we're...
Speaker Change: Steve, we're trying to steam our working, and for sure, you look at a desk key with TFI Legacy Business, we come up in Q3 with a disappointing $90.000 or $89.000 something $90.000
Speaker Change: Well, it's because the Daski group is still running in like a 96-97 or 95-96-97 depending on the division.
Speaker Change: I mean, our legacy business is running more like an 80, 80, 80, 40 are in a difficult environment, right?
Speaker Change: So, what we have to do is we have to bring those desk-y operating metrics closer to our own, and this is going to be happening during the course of...
Speaker Change: You know, what's left of 24 and into 25. For sure, if you look at the revenue per mile that we have in Q3 versus Q2 on the US flatbed market, I mean the race per mile have dropped again, right? So the market is weaker in Q3 than they were in Q2. Now, okay, so there's so many storms right now that the US have to go through lately. So for sure that that probably is going to help us in Q1 of 25 because they will have to start rebuilding, but we'll have to see. But on the car spaces, on the desky operation, we have a lot of work to do with the team there.
Speaker Change: I expect thanks for the time and all the rest of the things to see. Thank you. Thank you, good hard.
Speaker Change: Our next question comes from the line of Jordan Algar from Goldman Sachs. Go ahead, please.
Speaker Change: Good morning, this is Paul Stoddard on for Joel Jordan now at here. I guess the question that we have is, where can we expect U.S. LTL to go for the remainder of 2024 and how can we expect this for the fourth quarter just given the previous guidance around 90 for the year?
Speaker Change: Yeah, I think Paul is that we'll probably show up Q4, basically an improvement of Q3 and probably closer to a Q2, so we won't break the 90 OR in Q4, 24.
Speaker Change: Got it, thanks. And I guess to follow up on that, when we think about the cost takeout in the USLTL business, I know that service has been a big focus, but there's also been a lot of different initiatives such as getting the financial management systems to the terminal managers, trying to take out and improve the different systems, investing in the different assets. So I guess are there other things aside from service that you can be doing to take out that cost?
Speaker Change: Well, there's one thing that I mean we're implementing early 25 is the master file in the building because
Speaker Change: One major problem that we have with our customers is we can't build a customer property
Speaker Change: Right, and this goes back a long time.
Speaker Change: So we've been looking at all kinds of systems to help us and finally we found the right one, which is the one that's being used by one of our peers.
Speaker Change: that will be implementing early.
Speaker Change: 2020-25.
Speaker Change: So for sure that should improve customer satisfaction because now we should be in a position to build customer properly
Speaker Change: Ok number 1 and number 2 it should also help us with our bad death
Speaker Change: Or are revenue adjustment or all this bad experience?
Speaker Change: that we are providing to our customer because we cannot build customer properties.
Speaker Change: It's unimaginable.
Speaker Change: that you know in 2024 we still have issues building customer but it's a fact.
Speaker Change: So we're changing that. So that's the...
Speaker Change: Additionally to what you just said, that's another thing that we're fixing in 2025.
Speaker Change: Also
Speaker Change: The other major improvement that we see.
Speaker Change: In 2025, is the fact that our fleet maintenance
Speaker Change: Okay, we went from 100 shops, so about 15 shops now. Now, we are really in control of warranty claims.
Speaker Change: We don't have 100 jobs that were completely out of control, so we should see some major improvement.
Speaker Change: We're also the Catholics that we've done over the last two or three years in terms of the age of our fleet. Right now we're running a fleet that's about four years old compared to when we bought the company it was seven years old.
Speaker Change: So, based on that, and with better management and better software that we've implemented also into 24, we should see some improvement on fuel and on maintenance. So, that's something that hopefully will be able to accomplish in 25 hours. I'm really comfortable with the management, the fleet management team that we have now, and we should see some major improvement. So, it's a lot of small things, okay? But there again, I mean, we have to invest in our team, invest in our talent, okay, because we got to deliver that for our customers and our shoulders.
Speaker Change: Great, thank you.
Speaker Change: Good night.
Speaker Change: Our next question comes from the line of can-hexero from Bank of America. Go ahead please.
Speaker Change: Good morning. This is Adam Ruskowski on ECO and Hector. I'll good. I just wanted to drill in first on the LPL U.S. LPL pricing. So I think you'd previously noted that contract renewals had decelerated to the low single digits. Is that about still the case?
Speaker Change: Yes, got it. And also just sequentially from a, I mean, you spoke about the kind of 4QOR impacts sequentially. And last year there was even into October's impact from a cyber-outage. How are you thinking, I guess, just ton of shipments at these depressed levels, is it's fair to still be a, you know, reasonable seasonal step down into 4QOR?
Speaker Change: Well, you know what that is.
Speaker Change: I think you four should be better than three and probably something like Alain with two
Speaker Change: for our USL-TL, but we had the difficult start of October because of all the storm that hit the east coast.
Alain Bdard: Now, that's behind us, okay? So...
Speaker Change: I haven't seen too much, okay, but still, if I look at October, the start of October was a little bit depressing in terms of volume.
Speaker Change: And the reason being is that, you know, we had issues in the Carolinas, we had issues in Georgia, we had some issues in Florida, etc, etc. So, but that's not what's standing that I'm going back to the earlier comment is that we will do better in four than in three on our USLTL in terms of operating ratio and in Plavric closer to two, right?
Speaker Change: But we won't break the 90 in 2024 like we thought we would. Okay? No.
Speaker Change: And I guess, is there a baseline way that you're thinking about potential OR improvement in USLTL next year? Maybe you spoke about some of the focus on service, some of those costs, you know, maybe lower hanging for impacts. Is it reasonable? 250? What's the kind of steady run rate once you can get some of these issues on the control?
Speaker Change: Yeah, I've had seen the plan of our guys for 2025.
Speaker Change: But I would be really disappointed if we don't break the 90 OR in 2025. I mean, with everything that had just said, you know, on the fleet cost, on the labor cost for shipping that the guys are working hard on.
Speaker Change: on improving our service.
Speaker Change: And you know, a big help that we're not getting is from our sales team that...
Speaker Change: They don't seem to understand, and we've been trying to educate them to get more freight per sub. This would be a tremendous help for our costs, for shipping.
Speaker Change: So if we can accomplish that to educate those guys to, hey, we get on average two shipment per stop so we have to move to three, right, on average.
Speaker Change: So by doing that, I mean, immediately it's a creative to your cost. It reduces your cost for shipping like crazy.
Speaker Change: But the focus has never been there, and the mission probably these guys never understood it, but we've been preaching that for a long time, and so far we've not been successful, so that's a key for us of our success in 2025.
Speaker Change: Okay, that's why we'll be correcting once and for all all this mess around our billing and master file of customers in 2025 to eliminate another excuse.
Speaker Change: Okay, for not growing the business.
Speaker Change: Thank you.
Speaker Change: Welcome.
Speaker Change: Our next question comes from the line of Kevin Chung, from CIGC. Go ahead, please.
Kevin Chung: Hi, good morning, Alain. Thanks for taking my question this morning. Morning, Kevin. Maybe just on the P&C front, if I look at revenue per shipment, it's moved up like a sequentially three quarters in a row now, you know, awaits have been or average wait per shipment's also been trending in the right direction, the past couple of quarters. Any color or any comments on what you're seeing in P&C, just given it feels like the underlying backdrop is still pretty challenging but it looks like you're seeing some improvement in your own operations.
Speaker Change: Yes, yes, so what happened Kevin and our PIN?
Speaker Change: and see in the summer of 23.
Speaker Change: He know the management team at PNC made some mistakes, right?
Speaker Change: Because the market was very weak, okay, and we were trying to hold the line and we lost a lot of business, okay? But that is the summer of 23, so the effect of that shows up in Q1 of 24, right? So if you look at our Q1 of 24, major disappointment.
Speaker Change: So, with new leadership there, okay, with Chris taking over and Michael over, okay, that we moved up in terms of taking care of our...
Speaker Change: of our PNC with Chris.
Speaker Change: I mean we've corrected the situation so from Q2 and in Q3 you see the trend but the market in Canada is still very, very, very, very competitive.
Speaker Change: Right?
Speaker Change: The demand is still not there.
Speaker Change: So, what the guys have been able to do is keep improving the yield or keep us during the degree, but work very hard on the car side.
Speaker Change: Alright?
Speaker Change: So...
Speaker Change: That's where we are, and we will see some improvement in 2025. We are opening up in you.
Speaker Change: Center in Edmonton, in early 25.
Speaker Change: So that should help us reduce our costs with better technologies, etc etc.
Speaker Change: We're going to be looking at Vancouver, probably 26, 27
Speaker Change: doing the same thing in Vancouver to improve our technology there. So, the guys are working on the cost. We're having some discussion with some partners of ours to move some freight from, let's say, one of our peers to another of our peers with better service and better rates. So, the guys are really working hard to move freight very in a very lean and mean way in terms of cost. [inaudible]
Speaker Change: Our service is great. Our coverage is adequate. So it's just like some mistakes that were made in 23, in the summer of 23, puts us back a little bit into one and in two, but the team is rebuilding the business base and adjusting in a very difficult environment.
Speaker Change: That's a great color and very helpful. Maybe just follow a question, just on a common you made earlier around the US LTL or T-Force Freight Sales Initiative to get from two shipments to three shipments, sounds like that might be, that conversion has been a little bit more difficult than you anticipated. Do you think you need to change the compensation structure to incentivize the sales force to drive towards that improved density to get that cost per shipments lower? Or is it something else to maybe incentivize them to move towards this sales model that should drive better costs?
Speaker Change: and Astrophysion 3.
Speaker Change: Yeah, that's a very good question Kevin, we've been working at the compensation of not just the sales team
Speaker Change: Okay, but the thermal managers and all that so it's an evolution from the UPS days to what we are today and 2025 I've not seen their plan yet, but for sure I mean the compensation package of our thermal managers okay of our sales people probably will have to be reviewed and updated in 25 so that people understand [inaudible]
Speaker Change: Clear what the mission is, right?
Speaker Change: So, if you go back to what you just said about the sales team, they must understand that we need more freight per stop and for them to understand they understand money, right? So, you're right, if the compensation is based on getting more freight per stop, hopefully they will start to understand that this is mission critical and this is what you have to do, guys.
Speaker Change: Not open up New Accounts. Let's try to get more business with the existing account that we already deal with. They know us.
Speaker Change: Okay, they know our strength, they know our weakness, they accept that, because they do business with us, so let's try to grow with existing customer and not try to chase customer all over the place. And, you know, that is one way that's going to help the operation to reduce our cars. But there again.
Speaker Change: Also, we have to look at our thermal managers incentive programs so that they understand that we must not miss pickup.
Speaker Change: Because...
Speaker Change: A Miss Pickup is you Mr. Revenue.
Speaker Change: You know, the pickup is the generation of the revenue. If you miss the pickup, you don't get the revenue, so you need the reviews, don't miss pickup, right?
Speaker Change: This is a show.
Speaker Change: You know, again, it's an evolution because, you know, where we start three years ago and where we are going to be in 2025, our incentive program, our bonuses will be way more Alain
Speaker Change: Okay, to what we want these guys to perform on, versus 24 or 23, because this is an evolution. You know, when you talk to a thermal manager that used to be, as bonus used to be based on global UPS, and you say, well, we have to change that based on your thermal now. It's difficult to do. So you need some kind of an evolution, right? So step one, you say, well, you guys are not part of the big brown machine now. Okay, you're part of TFI. Well, step one, okay, this is what we're going to do. Step two, and that takes time to adjust.
Speaker Change: That's very helpful. Thank you very much, Alain Bdard. I'll exit this year. Thank you. We need luck.
Speaker Change: Thank you. Our next question comes from the line of Jason Seidl from TD Cowan. Go ahead, please. Thank you, Robert. Good morning, Alain. Good morning, Jason. I wanted to talk a little bit about the service on the USLTL side. You said obviously you're disappointed in the little bit of a step down. I was wondering what you guys are doing to make corrections to that. And your commentary on a low single-digit price increases. Does that assume that you get improvement in the service or would improve in your service provide potential upside to that number?
Speaker Change: No, I think that the improvement of our service will provide us down the road some potential improvement on the quality of our rates, the quality of our pricing. What are we doing to improve service? Number one is, as I said, we are moving as much as we can more afraid from rail to road to improve the service, because we know that if you give your line of afraid to a third party, you're dependent on the service of that third party. So my best peers don't give a lot of afraid to the rail.
Speaker Change: because they want to provide good service to their customers. So more afraid we give to the rail, the more dependent on the service of the rail, okay, versus your customer and the service that you provide to the customer. So we've started, okay, in 24 to do that, okay, but, you know, we still give the rail more than 30% of our freight today. So it's still too much. So the goal is to bring that down closer to 20% so some of our peers are around 20% [inaudible]
Speaker Change: The Marapira is close to zero percent, right? So we've got to go step by step. So that's number one. Number two, it's a culture of not-let's say fair thing, kind of thing, right? So guys, you cannot miss pick-up. So we started to monitor that, would say like eight months ago.
Speaker Change: But we still manage about 400 picks up pick up a day.
Speaker Change: So we have to change that culture of, yeah, well, it's kind of normal. We were overwhelmed with a customer, so we've missed 50 pickups today. Well, no, you have to adjust ourselves. So what are we going to do about that? Well, you know, because you're a union shop, you cannot sub...
Speaker Change: It's called a third party. Well, maybe we can't. Maybe we can have this discussion and change this mentality of abandoning the customer, okay, because you were overwhelmed by another customer in terms of volume, so you cannot serve as two or three customers. So that's not good for your service image, right? So we have to work with our guys to have them understand that this is not acceptable. You cannot miss pickup.
Speaker Change: This is a no-no, right? If you look at a Canadian operation, okay, we don't miss pick up in Canada.
Speaker Change: and we have a union environment too.
Speaker Change: So, I mean, why are we missing so many? Because it's not part of our emergency culture that no, no, no, we cannot miss pickups, so we, you know, but until eight months ago, nobody was monitoring that. So now we monitor it. So now we know, okay, who's missing the pickup?
Speaker Change: So, that's another area where you lose the revenue and you have customers that don't like you, right? Because you didn't shop, right? So, we have to change that because this is something that's not helping us. When you look at Master Report, some people are saying, well, these guys, I give them a pick-up, they don't shop.
Speaker Change: and we have all the issues in the world. Well, we play a no-excus game, so we got the change that culture, we have to show up and be there to pick up the freight, because that's a revenue generation, right? So these are all things that down the road.
Speaker Change: We'll help us on our, on our cost basis, getting more freight per sub, this is, you don't have to be a rocket scientist to understand that. This is what we're trying to say to our sales guy guys, if you have two shipments, you divide the cost of that pickup by two.
Speaker Change: If you have three, you divide by three, so you become more competitive, okay, by doing that versus your peers.
Speaker Change: and more competitive you are with better service than more freight you can you will get down the road. So it's like an education, a training, a culture that has to change at our T4s rate. The guys are working hard but we got to walk the talk and like we always said the business into putting it right now okay I mean we we still have issues right to fix.
Speaker Change: Well, I appreciate the explanation. What did it also, Keanon, you called out truckload continuing the steel some LTL freight. I guess two things. One, did you see a sequential increase in that? And two, when would you expect that to improve? Is this like a back half of the 25 of it? [inaudible]
Speaker Change: From the minute the truck those guys got busier, I mean, so when is this going to happen? I don't know. Okay, hopefully in 25, but we know. I mean, those guys are not busy. I mean, we haven't seen any peers so far.
Speaker Change: Except one, and those guys are not really big into the day-to-day truck old world. But we know the market is really weak. And now, for sure, I mean, this world disappear once these guys become busy.
Speaker Change: Now when this can happen, maybe late 25, early 25, I don't think so, summer 25 will have to see. But don't forget that interest rates have come down a bit and they will come down more. And this should improve, okay, the customer, you know, disposable income for customers, because you know, inflation is less than 8 and it was 6 months ago.
Speaker Change: So that helps to disposable income, interest rate going down, again that helps disposable income, more disposable income than the consumer can spend more, he spends more health size.
Speaker Change: Always appreciate the time, Alain. Thank you.
Speaker Change: Larger Jason
Speaker Change: Our next question comes from the line of Daniel Amber from Stevens. Go ahead, please.
Speaker Change: Take a more, Alain Bedard, Alain Bedard, Alain Bedard.
Speaker Change: I wanted to continue on the USLTL pricing discussion. You mentioned that obviously one of the headwinds was service stepping back, but also that some of the competitors had added capacity. Can you maybe rank order which of those sequentially worsened through the quarter when you look at maybe the step down from the first half mid-singles to low-singles? And then it's curious as you're talking to customers and you're making these improvements to service, do you think your pricing will have to step further down to get customers to try and come back to T-Force again? Or how are those customer conversations going as you navigate the costs for service changes?
Speaker Change: Yeah, yeah, so I think that, you know, you need the service. This is step one to try to convince a customer, right? So, you know, you can attract the customer with rates, but if the service is poor, I mean, the guy is gonna run and he's gonna go somewhere else because, you know, yes, service is very important. Price is very important. Number one, but service is also key, right? So when you're trying to get more freight, the guy will say, yes, how's your service? Well, my service is great. Okay, I'll give you a chance. And then if you, if you don't provide the right service, then he's gonna walk. Okay.
Speaker Change: And you're gonna have lots of turn. So that's one thing that a people's rate we have, right?
Speaker Change: We have too much strength.
Speaker Change: So customer drives and we fail a bit, okay the guy goes away. So by proving service, okay, you reduce the turn. I reduce the turn, you improve your volume, right? So this has been key to us in terms of our peers.
Speaker Change: The fact that some of our peasants invested heavily in real estate, I mean, we haven't seen anything so far, but I'm just saying that the market is really soft, so people are trying to chase right and grow the volume. Our focus is not to chase right, we have to fix our service first and reduce our costs. And then reduce the trend so that we start growing organically.
Speaker Change: Because if you get 3,000 shipments more a day, but you lose 3,000 because of the turn, well you're back to zero.
Speaker Change: So you gotta fix the service so that you can reduce the terrain of customer.
Speaker Change: That's all full and then as I follow up to some of the balance sheet, you've mentioned you're paying down debt by crazy in the near term, but you do need to scale up a sound like to kind of move forward with this spin. The curious how your appetite is on a minute at this point and how active the environment is out there, given we're two years into a down cycle, or you're seeing more sellers come to market, how are multiple changes on the aminaseide, just curious what you're seeing out there when you're talking to mental targets.
Speaker Change: Yeah.
Speaker Change: So, yes, reducing the debt for us is key, right? Because our debt is, or leverage is about two points, something. Okay, we want to be under two by Iran.
Speaker Change: Okay, so that's the focus of ours and also to get ready for something of size down the road in 25 into 26 maybe
Speaker Change: In terms of M&A, I mean, we've always been very patient, you know, we have a saying with NTF, are you make your money in the buying, never on the selling, so...
Speaker Change: For sure, you know...
Speaker Change: If you look at our last trade, those are really a creative to us. The desk you want will be very a creative to us. Down the road once we do all the adjustment that needs to be done over there.
Speaker Change: and 25, notwithstanding anything major by Iran or into 26, we'll do another $2,300 million US of investment into some targets.
Speaker Change: Our pipeline is solid, we have lots of opportunities, it's just that we have to be patient. You know, if you go back to 24, we walked away of one deal because we couldn't agree on the valuation. And that's it. I mean, we're very, very patient. And for sure the environment, because the freedom environment has been so weak, the environment for M&A is good for us, right?
Speaker Change: But, again, because of the desk, he transaction, step one for us right now is to reduce the debt by year and to go with a leverage on the two, keep reducing the debt, if something good shows up in Q1 and in Q2, in our logistics sector, maybe some tokens in Canada on the specialty truck load where we're so strong, yes, we'll continue to do that. And get ready for something of size, hopefully, that we could have something good for our shoulders by year and 25 into 26.
Speaker Change: Great, appreciate the color and death load.
Speaker Change: Thank you!
Speaker Change: Our next question comes from the line of Brian Ozenberg from J.B. Morgan. Go ahead, please.
Brian Ozenberg: Thank you, Alain. Thanks for taking the question.
Brian Ozenberg: So what do you do?
Brian Ozenberg: I want to understand a little bit more of the we see in the fourth quarter in particular I think the guidance for fly earnings would imply decent sequential step up into Pork you and historically it's sort of been flat to down a little bit so maybe you can walk through some of the assumptions or maybe there's some M&A or something else in there that would make that a little bit
Speaker Change: Was because Brian, her Q3 was not good, right? A Q3, if you look at her specialty, she's rock-loaded.
Alain Bdard: I mean, we did a better job in two than in three and the reason being is that in the US, our special tea truck load operation was affected badly with some major accident from the Daski team where, you know, the sculpture of having a student driver, okay, created a mess in our accident levels. So this has been corrected, I mean, we don't really like, you know, students driving our truck and getting to an accident that's going to cost us a fortune. So my special tea truck load should have done a much better job in two, three and they will do a better job in two, four. So if you look at my Q2,
Alain Bdard: I was an 83-old, 83 million dollars of a wee and in Q3 I'm down to 7. That's not normal.
Alain Bdard: That's not normal, that came from...
Alain Bdard: Our US operation from Daski and also a little bit of TA dedicated.
Alain Bdard: I don't see that coming into Q4 so we should go back to closer to a Q2 number in our truckload.
Alain Bdard: The same story is through logistics will probably be the same as Q3.
Speaker Change: Why is that? Because GHT is starting to suffer from...
Speaker Change: You know our customers pack our then freight liners reduce construction right because the market is weak So JST will perform not as good as you know the first three quarters of the year so logistics will be down a bit in Q4 versus Q3 and Q2 but if you look Q2 Q3 we were stable about 50 million dollars of OE on logistics right so but will be down a bit into Q4 but we believe our LTL US LTL and Canadian LTL and parcel will do better
Speaker Change: in Q4 versus Q3. So we did about £100 million in Q3 and we did about £110 and 2. So I think that will be closer to 2 and 2-3 and Q4. So all in all, you should see us improve Q4 versus 3 being closer to 2.
Speaker Change: Okay, I understood thanks for that and then just one follow up and talk about capacity additions.
Speaker Change: maybe some additional pricing pressure in USLTL, but we've got the remainder of the yellow assets coming up for a bit of known the past. You said you wanted to be bigger player in the market, but I don't know if that necessarily means here in the near term. Some of you give an update on terms of the footprint for a T-Force rate, and if you're looking at the latest round of auctions to be a potential area, we pick up a little bit more. And optimize a little bit better. Thanks.
Speaker Change: So Brian, I mean, in that auction we were bidding on one site very small site, very small transaction less than a million dollars, okay, and that would be replacing a site that we are tenant.
Speaker Change: So basically, nothing of importance to us.
Speaker Change: We keep adjusting our portfolio.
Speaker Change: So during the course of Q3 we sold one of our terminal to one of our peers.
Speaker Change: and we saw another terminal that we have in San Diego in California to wait.
Speaker Change: Kind of difficult for her.
Speaker Change: So we keep adjusting in terms of number of doors that we have trying to get rid of least terminals and buying terminals. So that's where the yellow one where we put in the bid. But you know, we have the terminal capacity to do 40,000 shipments a day and we do only 22.
Speaker Change: So, I mean, and it's going to take us probably a long time unless we do some M&A on the union side which there's not that many, okay, to do anything with the real estate or we keep adjusting, right? So that is always been the plan is to grow organically from the 22,000 shipments a day slowly into the 23, 24, but that basis is always on service, and trying to grow with existing customer because they know you, right? [inaudible]
Speaker Change: So that's where we're at. So we're not going to be very active on the auction block with RRC. It's only one terminal, very small terminal that we're in there for. And the rest is we've got already way too much really state that we are adjusting whenever possible.
Speaker Change: Okay, appreciate it, Alain. Thanks for the time.
Alain Bdard: Pleasure Brothers.
Speaker Change: Our next question comes from the line of Ariara Rosa from Seedy Group. Go ahead, please.
Ariara Rosa: Hi, great thanks. This has been more on for Ariel Rosa at City. Hey Alain, thanks for taking our question. You just measured it a few minutes ago. You'd be disappointed if you don't break 90 OR in 25 at your 2Q earnings call. You were saying targeting under 94 the first half of 25. Do you think maybe just to kind of fine tune this. The under 90 target is now more like second half of 25, or do you think the under 90 could still be a target for first half of 25.
Ariara Rosa: It's a very good question, you know, like I said, I've not seen the plan, okay, for 25 from that team over there at T4's raid, but what I would say is this is that we have to break this glass ceiling of 24.
Ariara Rosa: So to me it would be great if we could do that in the first six months
Ariara Rosa: But...
Ariara Rosa: I don't know, I don't know, but I would be very concerned if we don't do that at least on the second part of 25.
Ariara Rosa: with everything that we're trying to do, accomplish, improve service, trying to educate the sales team like I said earlier, in trying to get more shipment per stop, etc. etc. I would be very disappointed. And for sure, I mean it all relates to beefing up the team, improving the talent, the management talent because...
Ariara Rosa: You know, we have a team in Canada that is second to none.
Speaker Change: Okay, so we have the ATM in Canada.
Speaker Change: So, in the US, we don't have the 18th.
Speaker Change: So we have to build an A-team, and that's what we're trying to do is improve what we've got, you know, continuously, you'll provide them with better information, but if a manager sits on his hands and you give him all kinds of information and he does nothing with it, then you have the wrong guy, right? [inaudible]
Speaker Change: So, and it's an ongoing process that's going on right now. The mistake I made, guys, is when we bought UPS, freight, you know.
Speaker Change: I thought that we could bring this company within five years into an eighty-five war, which is normal. I mean we do less than eighty in Canada in a union environment.
Speaker Change: My mistake was, it's not that we're not going to get to 85, it's just, it's going to take us more time because our team over there, the talent that we have, the tools that we have, the financial information, the focus, you know, was not as good as I thought would have been.
Speaker Change: So that's why it's going to take us more time.
Speaker Change: Great, appreciate that color. Maybe as a follow-up, you've been asked a lot about service and service improvement on this call, maybe just to ask.
Speaker Change: It's likely differently. It looks like your customer's perception of your service level is roughly where it was this year and last year, roughly the same. So, unfortunately, at the lower range compared to your other public LTLs where some of them actually improved from 23 into 24. Why do you think after all the work, very hard work that you and your team's been doing? Why hasn't that shown an improvement? From 23 to 24, and do you think we should see some dramatic improvement on any of those? Is it damage, the shortage, the on-time pickups deliveries?
Speaker Change: from 2425.
Speaker Change: Yeah.
Speaker Change: Well, like I said earlier on the call, I mean, it's a disappointment to me when you look at the claims where we were heading in the right direction and then path, I mean, over the last nine months a year, now our claims cost is going in the wrong direction. So guys, let's refocus on that. So that does not help us with the evaluation that our customers are doing in terms of service. Sclaim is a problem, right? Because when you break the guy's stuff, he doesn't like you, right? So that's number one where we have not improved. So this is why we are at the bottom of the pack.
Speaker Change: Number 1, Number 2, if you don't show up for pickup.
Speaker Change: Nobody likes that, because then you're stuck with the freedom on your dark, right? And then you have to either call someone else, or hopefully, T-4 straight-shoes up tomorrow.
Speaker Change: Customers don't like that, right? So this is under our control and we have to do a much better job at it.
Speaker Change: So this is why we have an art improve.
Speaker Change: And this is why I was seeing earlier.
Speaker Change: You know, there's an evolution in...
Speaker Change: The bonus program that we have with our sales team and our management team. So it shows that the program that we have right now in 24 is not good because...
Speaker Change: You know we're not getting the resolve that we're supposed to get right so we will have to improve the bonus plan so that these guys bonus is aligned to
Speaker Change: What we want them to perform, so being...
Speaker Change: and Prove Service.
Speaker Change: Don't break the stuff, don't lose it, show off for pickup, etc.
Speaker Change: And then the guys will have to take that seriously because then the incentive the bonus is gone.
Speaker Change: But that's an evolution, because where we were with the bonus system when we bought the company was just, I mean, unacceptable, right? So it's been an evolution, but I mean, this, this report, this Matthew report is, it's a major disappointment for me, and I'm going to be with the team tomorrow. That's my effect, and for sure we'll be talking about that, that guys. I mean, we're still at the bottom of the pack. We have no proof.
Speaker Change: Great, appreciate the time as always, Alain.
Speaker Change: Pleasure!
Speaker Change: Our next question comes from the line of camera-inders tin from National Bank Financial. Go ahead, please.
Speaker Change: Yeah, thanks, good morning, just a couple quick ones for me.
Speaker Change: I wanted to ask you about, I guess, the free cash flow. You've sort of run some updates here on your kind of EPS. It'll look for 2020. Yeah, it's already in a change on the free cash flow. You still think you can be within the original range that you're expecting.
Speaker Change: Well, pretty casual. I mean, it's probably going to be the same as last year. Last year we did about 775, so I think that the range.
Speaker Change: that is reasonable between 750 to 800 million of free cash.
Speaker Change: 24, with CapExup 300, that CapExup 300.
Speaker Change: Okay, perfect.
Speaker Change: And I know it's still early on you're in your planning process here, but I mean, I guess how are you thinking about, I guess the catbex requirement for 2025, and you've even tested quite a bit in making your fleet younger? Should we see some easing of spending on catbex in 2025?
Speaker Change: Yes, yes, you'll see some easing of capex. Number one reason is because the life of a truck has been extended because the market is so weak that we don't run as many miles, so that's in normal in the normal environment. A truck load truck is good for four years, and now it's going to be more like four and a half years. So that delays a little bit of the capex in that sense. So probably...
Speaker Change: You should see 20, 25 CapEx, same business, more like 250 instead of 300.
Speaker Change: Okay, that's perfect. I'll leave it there. Thanks very much for the time.
Speaker Change #100: Thank you, Kim.
Speaker Change #101: Our next question comes from the line of Benoit for Yais from Digital Dean Capital Market. Go ahead please. Good morning, Alain.
Alain Bdard: Good morning, Bdard!
Speaker Change #102: Yeah, there was some great comments about we read a lot about heavier freight that was earlier moving toward LTL that has moved to TL I'm just and you mentioned some points about that the fact that we need to see eventually a recovery of the TL what are the first things the freight industry needs to see in order to get a more normal freight environment is kind of bankrupt see the first thing in the case. The first thing that you look at that could help TL and eventually LTL.
Speaker Change #103: No, I don't think so, bankruptcy, I mean, we saw that in Canada with pride, you know, a lot of people thought that pride in Canada would disappear but they have not disappeared, right? Because the banks kicked the can down the road, right? So, no, bankruptcy, it's minimal, it's really, you know,
Speaker Change #104: And the freight will start moving once to consumer.
Speaker Change #104: Kill Spence War.
Speaker Change #105: This is very simple. North American economy is based on consumer.
Speaker Change #105: Right?
Speaker Change #105: So the consumer right now is disposable and calm is not where it was a few years ago.
Speaker Change #105: So, I mean, with lower interest rates, lower inflation improved.
Speaker Change #105: Salaries, okay?
Speaker Change #105: It's going all right now.
Speaker Change #105: Down the road, he will spend more.
Speaker Change #105: and hopefully spent less on trips and flying all over the place, like he did in 2324.
Speaker Change #105: and Spence More at Home.
Speaker Change #105: So, that will have freight, freight will have bus, right?
Speaker Change #106: Yeah, that's great comment. And for the full up question you mentioned some color about the M&A size that close to 4,5 billion towards the end of 2025, early 20,26. I was wondering if you could share more details about segments that you would tap is it more related to LPL or could you do something in specialized DL and are there any comfort level in terms of leverage and my stone you would like to achieve before pulling the trigger on something more sizable.
Speaker Change #107: Yeah, so I prefer...
Speaker Change #108: Okay, M&E Target is in the US number one and number two, it's always been like I said LTL, we have to do more, I mean we're a small player in LTL in the US
Speaker Change #108: We're the dominant player in Canada, so we will probably never be the dominant player in the US, but we have to be
Speaker Change #108: A more of maybe a number three or number four, a number six or number seven, that 22,000 shipments a day were too small.
Speaker Change #108: So, for sure, LPL down the road.
Speaker Change #108: And logistics, I mean us, we love logistics because the return vessel capital is huge normally.
Speaker Change #109: Although we don't like logistics making two points, I mean we're not that league, we're not that business.
Speaker Change #109: But if you look at the logistics, you know, we're running a 90-hour 88 hours, something like that, so that's really interesting.
Speaker Change #109: So logistics!
Speaker Change #109: That makes money.
Speaker Change #110: Well not logistics, that makes two points. Logistics that makes money and that we can grow with.
Speaker Change #109: I mean, that's all we love that.
Speaker Change #109: You know, if we could find a, let's see, an L-T-L that's asset light.
Speaker Change #109: Okay, down the road, that would be fantastic because if you look at our L-T-L in Canada because of our intermodal, the by-trend, the Clark and all these guys, I mean, we run a very asset-light model into our Canadian L-T-L sector, right? So if we could find a nice business in the US that could be asset-light, for an example, that would be an interesting for us, right?
Speaker Change #109: Because then you don't have the worry that oh yeah but Alain you run a union shop and then you buy a non-union shop and the union will try to unionize a non-union shop I mean that's always the concern but if it says at light that concern does not exist, right?
Speaker Change #109: Although, to me, we run union shops and non-union shops and canada and you know.
Speaker Change #109: The Union does not unionize the non-union shop, but in the US it's a big concern or if you buy a non-union shop or the union will try to unionize it.
Speaker Change #109: Matt, I mean, we run early killies right now. It's small. It's only 100 million in review.
Speaker Change #109: and we just bought it a few months ago.
Speaker Change #109: And it's still not union.
Speaker Change #109: So, but as at light, non-union is probably would be a good target of ours, you know, down the road, we'll see it.
Speaker Change #111: Okay, and just in terms of comfort level for the leverage, Alain, Alain, Alain, Alain, Alain, Alain, Alain, Alain.
Alain Bdard: You know, leverage is going to be under, in the US, we have to keep the leverage on the tree. Okay, so this is why I said, you know, three, four, five billion dollars, maybe we could do that without paper. If we have to go above that, then we have to issue paper, which we don't like to do, right? So we don't like to do in terms of leverage, we could go all the way up to three. Why is that? Because we could deliver quite fast. If you just look at, you know, this dash key acquisition that we bought in April , we took on 500 million dollars of debt, additional to the debt that we had, and you'll see us down 500 million by year end.
Speaker Change #112: That's great color. Thank you very much for this, Alain.
Speaker Change #113: Thank you very much.
Speaker Change #114: Our next question comes from the line of Bruce Chan from people. Go ahead, please.
Speaker Change #115: Again, our next question comes from the line of Bruce Chan from Stiefel. Go ahead, please.
Bruce Chan: Hi, can you hear me?
Bruce Chan: Yes. Okay, great. Hi, Alain. This is Andrew Cox on Forbruce. We mentioned some, some, some impact expecting in the first quarter from the relief efforts from the hurricane, you know, especially given the DASCY exposure, we were just kind of wondering if they're, if you're expecting anything here in the fourth quarter as well, or is that more of a one cue event for you all? Thank you.
Speaker Change #117: Yeah, very good question. So far, what we know is that right now it's a cleanup phase that these guys are going through right now. So it's more like the waste guys that are, you know, taking our busy with the situation there. So we don't know the cleanup phase. Is that going to be a week? Is that going to be a month? Okay. So once the cleanup phase is done, then they start reinvesting, rebuilding, et cetera, et cetera. So this is why maybe maybe we'll see some benefit in Q4. But who knows? We don't know. One thing is for sure, if it's not Q4, it's going to be Q1. So we're going to see some benefit in Q1. So we're going to see some benefit in Q1.
Speaker Change #118: Okay, that makes sense, Alain, thank you. And then just as a follow-up, I wanted to get your thoughts on the impact of a potential FedEx-free spin given your experience with the big brown machine and UPS. Do you think this spin would be a bigger hurdle, smaller hurdle or, you know, comparable from an unbundling standpoint? And, you know, over the course of time, do you expect this spin to be, you know, a net positive or a net negative for the group? Thank you. Thank you.
Speaker Change #119: Well, I think it's gonna be a net-barsative, but it's not easy to do. I mean, don't forget.
Speaker Change #119: to do the spin-off of a division like UPS has done with us.
Speaker Change #119: It's not a very easy process. We've done it us. We know how to do it. Okay, but it's not easy to do. I could tell you that. So, you know, I think it's it's it's good for the FedEx shoulders. Okay. Depends on the valuation of the free division, but I think it's I think it's a good move. I think it makes a lot of sense. I think it's also going to be good for the LTL industry. I think it's going to be good for the FedEx.
Speaker Change #120: Alright, thanks Alain, so I had...
Speaker Change #121: Thank you.
Speaker Change #122: Our next question comes from the line of Can Hextur from Bank of America. Go ahead, please.
Can Hextur: Hey, Alain, good morning, I guess almost good afternoon. It's just a couple of clarifications on some numbers, just some confusion. And I know you've kind of hit this a couple of times, but just when you answered Ravi at the beginning, you said flat earnings year over year, and then you kind of clarified a couple of things throughout the call. Were you talking about a normalized 634 or Bloomberg has you at 618 year over year, just trying to get clarity on the fourth quarter target. I know you said it was more like second quarter, which was I think about $1.71, so just trying to clarify that for some investors. Yeah, yeah, right now what we're saying, Ken, is that probably is going to be more of the same. So that's for the year. So I don't remember what we did last year. I think it was 6 something, 618, 620.
Speaker Change #124: Okay, so I think that's where we're gonna end up the year.
Speaker Change #124: Okay, because that would be a significantly weaker, I guess, to clarify that, that would be a weaker fourth quarter than I think, you know, I guess the normalized 634 that's floating out there as well. Okay. So you're comparing against the 618, and would you be able to state then to clarify what your first three quarters has been just because there's a lot of normalization going on? Okay.
Speaker Change #125: I don't have this number, I'll have to get back to you on that or David will have to get back to you on that. But overall, if you take what we have, I think at the end of Q3, just hold on for a second.
Speaker Change #125: 455, so...
Speaker Change #126: So 455 plus $1.60, right?
Speaker Change #126: which is basically what we've done in Q3. But I think that we'll do a little bit better in 4 and in 3 like I was just saying about our specialty truck load, you know, a little bit less on the logistics, a little bit better on the LTL and PNC.
Speaker Change #126: But to be conservative, what we're saying is that, let's say that 23 and 24 are the same, like 618, 620.
Speaker Change #127: Okay, perfect. And then when you talked about the kind of 91ish OR for the fourth quarter, you know, I guess you're looking at improvement sequentially for the USL TL. Can you talk about what get you there? What gives you the confidence? I mean, it sounded like you were concerned. And should we be concerned with where pricing is headed? And I like the renewals are losing the leaders. So I'm trying to mesh the kind of pricing concerns, service concerns with how you show improvement.
Speaker Change #128: No, I think it's not a market, it's not the market, the problem that we have, that we have to improve versus Q3's our costs.
Speaker Change #128: I mean we had way too much cause on our claim if you looked at our claim and you
Speaker Change #128: 3.8% of revenue. I mean, this is completely unacceptable.
Speaker Change #128: Okay, and I think that we're gonna do a better job in Q4. That's number one number two. Again, our fleet, cause
Speaker Change #128: is improving in Q3 but for sure they will keep improving on Q4.
Speaker Change #128: So...
Speaker Change #128: Labour cost for shipping, we took a little bit of a setback in the first two weeks of October, but September, okay, our Labour cost for shipping was the best.
Speaker Change #128: The best so far in the year, so we did really, really well in September but then with the first two weeks of October it's a little bit a step behind a step back.
Speaker Change #128: But I think that one of the right track in terms of doing a better job on our Labour Council for Shipman Q4 versus Q3 because we were heading in the right direction except the first two weeks of October because of all these storms.
Speaker Change #128: That's the excuse that we have right now, but I'm looking at this third week of October so far and we're back on track to where we should be. So, I think that we'll do a better job on the LTL OE in Q4 versus Q3.
Alain Bedard: Alain Bedard, Alain Bedard.
Speaker Change #130: So it's really focusing on those costs and improving performance here. Thanks for the clarification.
Speaker Change #131: Blow your can.