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 a follow-up. Again, that's one question and a 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 risk-throughs or entities that can cause ashwars 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 Bedard, Chairman Preston and Chief Executive Officer of DFI International. Please go ahead soon.
Alain Bedard: Well, thank you operator and thank you everyone for joining us today's call. Yesterday after Market Close, we reported quarterly results that reflects industry-wide challenging condition.
Alain Bedard: We generated strong free cash, which has always been one of our primary areas of focus.
Alain Bedard: With a year over year increase of 37% to more than 270 million discontinued long cash flow As I've said many times, allows us to opportunists secretly consider strategic M&A Intelligently invest in the business and return excess capital
Alain Bedard: To shareholders.
Alain Bedard: 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 Bedard: Let's begin with a review of our consolidated results which has always reflected skill in our work of our team members, especially during cyclical challenges for the industry.
Alain Bedard: 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 Bedard: For the third quarter of 2024, our overall revenue before fuel surcharge was of 17% over year to 1.9 billion benefiting from the April acquisition of the ASCII.
Alain Bedard: 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 Bedard: Note that last year's operating coming to the higher net gains on sales of assets had per sales of 15 million.
Alain Bedard: We generated a just net income 137 million, up slightly from 136 a year earlier along with a just at EPS of $1.60, up slightly relative to $1.57.
Alain Bedard: 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, and free cash will up 273 million, also well above 198 million of the previous year.
Alain Bedard: Big picture on the quarter are logistic segment performed really well in our truckload operation, elder-owned as did our Canadian LTLNPNC operation.
Alain Bedard: Going forward, the hardworking 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 Bedard: This will be our focus regardless of broader market condition as we see long-term opportunities ahead.
Alain Bedard: So with that, let's discuss LTL, which was 40% of segmented revenue before fuel search hours are in the quarter.
Alain Bedard: Relative to a year ago, revenue before fuel searchers was up 7% and operating in Trump was down 24% although this was largely due to hurricanes on last year on asset Elf for sale in addition.
Alain Bedard: In the year ago quarter we had benefited from an early spike in freight from yellow.
Alain Bedard: which also waited on a year over a year quarterly performance for USLTL or revenue before fuel searchers, 531 million relative to 581 million the prior year and operating in come was 40 million down from 68 million.
Alain Bedard: 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 Bedard: Our operating ratio for U.S.L. was a 92.2 compared to a 90.8-year earlier and our return in Veswick capital was 15.4.
Alain Bedard: percent.
Alain Bedard: 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 shipment decreased 5%.
Alain Bedard: 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 Bedard: Repping up our LTL discussion, PNC operation also saw a slight decline in revenue before fuel surcharge to $109 million from $12 million with operating income off slightly as well at $24 million versus $25.
Alain Bedard: RPNCR was 78.2, which was up 80 basis point while our return to the Cable was 22.2.
Alain Bedard: Moving on to truck load, this business segment was 38% of segmented revenue before fuel surcharge at 720-23 million as compared to 402 million a year earlier reflecting the April acquisition of DASCY.
Alain Bedard: 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 Bedard: Taking a look within truckload specialized 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 Bedard: In terms of performance metric for specialized struck load, a revenue before fuel surcharge per truck per week was a 5% over the prior year at $404,503 and brokers revenue more than double to 94 million.
Alain Bedard: Our operating ratio was 90.4 compared to 87.8, the prior year in our return vessel capital was 7.9%.
Alain Bedard: Overall, we see room for operational improvement within specialized truck load following the dash key acquisition.
Alain Bedard: 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 Bedard: Our operating income of 8 million compares to 10 million as mileage and revenue per miles were under pressure Our ore for Canadian truck lull was 89.9 and our return vessel cable was 7.7%
Alain Bedard: Lastly, in our review by Business segment, Logistics was 22% of segmented revenue before fuel search charge and continues to perform. While revenue before fuel search charge was up just 2% operating in come was up 19.
Alain Bedard: Our 3rd quarter logistics operating margin was 11.4 which was up from 9.8 to prior year and returned to the South Cable was 17.4.
Alain Bedard: 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 Bedard: Well above the 198 millionth year ago, we use our strong liquidity to pay down.
Alain Bedard: $130 million of debt during the quarter.
Alain Bedard: and ended September with an improved fund the debt to a bit the ratio of 2.7 versus 2.15.
Alain Bedard: 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 that, he has a good example of returning significant capital to shoulders whenever possible, which has long been one of our guiding principles.
Alain Bedard: 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 declare a quarterly dividend of 40 cents per share paid on October 15.
Alain Bedard: I'm also pleased to announce that just yesterday our board of director both raised our quarterly dividend by 13% and our raise a renewal of our share repurchased program, the NCAA for an additional year subject to the approval of the Toronto Stock Exchange.
Alain Bedard: I'll wrap up with an update on our four-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 Bedard: As a result, we also expect our full year performance to be largely similar to 2023.
Alain Bedard: 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.
Speaker Change: Should you have a question please best 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 best the star followed by the number two.
Speaker Change: If you are using a speaker phone, please lift the handset before pressing any keys.
Speaker Change: And just a reminder, colors will be limited to one question and 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?
Speaker Change: How much of the earnings pressure there is purely cyclical and will snap back with more re-ording stuff, versus maybe some evolving industry dynamics in a post 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 basis. So the market condition we know it's been challenging for the last probably like 18 months.
Speaker Change: So we don't control market conditions. Our focus is really to improve our cost space and also improve our service. If you look at the last report from Matthew.
Speaker Change: I mean...
Speaker Change: Our service, according to this survey, is the worst of the top seven carriers in the US. So it's really...
Speaker Change: The focus of ours
Speaker Change: For sure, what we're proposing to our customer is, okay, our proposal is good in the sense that, okay, there's a match between the service that we provide, which 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: has been in fact we've started to move more free away from rail onto the road but also we have to improve our miss pick up we have you know if you look at our claim ratio we were going in the right direction but then whoops come as a Q3 we dropped the ball right so our claims ratio is a 0.8% revenue are can eat in LTO our claim ratio is 0.2% which is like best in class we used to 0.4.5 now we're at 0.8 so guys let's
Speaker Change: Not drop the ball, let's focus on service
Speaker Change: Let's not miss any pickup, let's...
Speaker Change: Let's be on time with our deliveries, etc.
Speaker Change: Now, if you look at this purchase that we did three years ago, three and a half years ago, and you ask me the question, Alain.
Speaker Change: 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 the culture. Now we're improving.
Speaker Change: The management skill of our guys by training, by providing them financial information that we could...
Speaker Change: You know continue to improve our cost basis.
Speaker Change: Following metrics of service, et cetera, et cetera, things that probably in the past were another big focus of the management team at the time.
Speaker Change: So that's really helpful. And maybe if I follow up, I just want to clarify, did you say that 2024 is now looking like 2023 level of EPS? We can just kind of clarify the 2024 guide. That would be great. Thank you.
Speaker Change: Yeah, Ravi, that's what we're saying. I mean, if you look at where we are, I mean, we're basically flat year over a year, okay, as of Q3
Speaker Change: So we believe that we thought that we would do a better job in 2024 than 2023.
Speaker Change: But with Market Condition, with what we're looking at when we look at Q4, the first four cows that we're looking at.
Speaker Change: I mean, we believe that, you know, 24
Speaker Change: Sadly, will be a reputation of 23.
Speaker Change: Thank you very much.
Speaker Change: Thank you. Our next question comes from the line of Walter's Breckland from RBC. Go head 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 a 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]
Speaker Change: 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 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.
Speaker Change: In 2025, in the normal environment, I think it's attainable. 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've reduced it by 130 million. In Q4, we will reduce that again. . . . . . .
Speaker Change: by at least another 252,300 million to get close to our target of reducing our death since the acquisition of the ASCII or for about 500 million.
Speaker Change: and then if we don't do anything major until the end of 25.
Speaker Change: I mean, our death will be reduced another 500 million during let's say Q1, Q2, by the 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.
Speaker Change: which is our focus and also hopefully, you know, the interest rate will start to drop a little bit and that should help us reduce again.
Speaker Change: So we said that ski 2025 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 he do an L-T-L and P-N-C will perform a little bit better. I mean, we're running 77-7-7-8 a 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. If you haven't 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'd be allocating to M&A in 2022? 2025.
Speaker Change: Well the usual thing that we do a lot every year we always invest 2 to 300 million U.S. on tucking and Zemin AXRXR 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, you know, 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 gonna hand at one point. We just don't know when
Speaker Change: Well we know it's got a stop at one point and we will be very well positioned with all these assets that we've added like the GHT, like the DASCII, etc. etc., we're also reducing our cars, both at the DASCII level, at the T-force rate level. So if there's an upper T2 by 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.
Speaker Change: But in 2025, for sure we will always invest between 200 to 200 million on tuckins.
Speaker Change: of some kind, mostly trying to invest in logistics sector in the US where we like to make ten points, like we're doing now, right? We're not going to invest in logistics business that makes two 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 US that makes sense for us, we'll jump on it. [inaudible]
Speaker Change: in 2012.
Speaker Change: Appreciate the time as always, and thank you. Thank you, Walter.
Speaker Change: Our next question comes from the line of Scott Group from Wolf Research. Go ahead, please.
Scott Group: Hey, thanks, Alain. I know I get the focus on service and costs on the LTL side. Maybe just can you touch on the pricing backdrop, right? If I look at just yields, revenue, fishermen, both down a little bit from second quarter to third quarter. What's the pricing environment right now? I know you announced the 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, 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. [inaudible]
Speaker Change: A lot on real estate. 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 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, you know, 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. [inaudible]
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 fall 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
Speaker Change: I feel like it's been a while since you're given us any update.
Speaker Change: on the potential 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, in a normal environment.
Speaker Change: Without issuing any paper, right? 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, it 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.
Speaker Change: Okay, so let's see our market gap is 12
Speaker Change: He do a split, six, six, six, six, two small
Speaker Change: Right?
Speaker Change: So that's why the discussion that I'm having with our board is...
Speaker Change: You're going to do this next transaction and then let's say that you do a $45 billion deal. The market cap changed from 12 to 15 or 18 whatever it is.
Speaker Change: You gotta get closer to 20 to start thinking about
Speaker Change: Splitting.
Speaker Change: and to two.
Speaker Change: But it makes sense, okay, not to have, you know, return Vester Capital of 8 to 15 mixed up with return Vester 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.
Speaker Change: 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 going to 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.
Speaker Change: Thank you, Alain.
Scott Group: Pleasure Scott
Speaker Change: Our next question comes from the line of Kornar Gupta from Skoshe Capital. Go head please.
Speaker Change: Wanting Alain, how are you?
Kornar Gupta: I'm good, I'm good, you know how about you?
Kornar Gupta: Thank you. Thanks for taking my question. I just want to verify on the P4 delay. If we look back in the first few years of the acquisition, you start the reprise the book.
Kornar Gupta: This should, which happened, you know, recently, well, then he's trying to optimize the cost, obviously, and I think he's still kind of, you know, looking at the cost here and trying to figure out, you know, like, you know, with the material survey and obviously the service focus in 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 or do you need the volume service cost and all those things? Come together? And how should we kind of lay that roadmap in the next level of years?
Speaker Change: Yeah, they'll call out absolutely if we would you know get from 22 to 25
Speaker Change: and shipments of these, for sure that would help our cost basis.
Speaker Change: But the problem that we have within T-Force Rate today is that our business is true fix 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 gonna help us. But you know, this is where it's the chicken and the eggs. So, if you talk to our salesguide, you say, well, you know, it's tough for us to get more business, because the service is maybe not up to part to some of our peers, right?
Speaker Change: So, when we talk to our operation, guys, guys, you know, we gotta fix the service. We have to improve the service. Now, you see, yeah, well, if we improve the service, maybe there's a cost to that. 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. [inaudible]
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 Kindersly Acquisition that was not a star, okay? I mean, our kidney in operation is still running sub-AD or in a difficult environment. Why? Because we have a very, very educated talent team to manage our business.
Speaker Change: And this is the key for us in the US where the terminal management team lacked this training, lacked this education. Now they have the tool, now they have the financial information. So now they have to act according to it, so that our, our cost is less fixed and more valuable according to the volume. That's number one. Number two, in order to bring our cost down, we need our sales team. We need 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 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
Speaker Change: Not the optional, it's not the top where we should be by at least it's a moving the right direction.
Speaker Change: But by having more freight per stop
Speaker Change: At the same time, 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.
Speaker Change: 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-related T-force rate. Now, for sure, we've lost all the revenue from the reseller because most of these reseller were cheating 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, you know, does not accept that anymore, right?
Speaker Change: So let's have the sales team focus on our growing our GFP and also growing the number of shipments per stop. So that's going to help our cost basis. So it's not just the market that is, you know...
Speaker Change: Maybe 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 U.S. right now.
Speaker Change: Okay, that's great color, Alain, thanks so much. And if I can follow up on Daski, we talk about 50 cents accretion next year. I just want to clarify, the 50 cents accretion next year is incremental to whatever costs, improvements you have achieved at the closing of the acquisition and do you expect another upside to that 50 cent from the debt you are paying or that's included in 50 cents.
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. Thank you very much.
Speaker Change: If those guys don't come up with a 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 everything's going to be run like at the conference
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 Dashkey by the end of 24 will be managed by our Canadian team.
Speaker Change: 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 U.S. 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 know, you look at a desk key with TFI Legacy Business, we come up in Q3 with a disappointing $90, or $89, something $90. You are.
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 I've 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 had 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: Let's say thanks for the time and all the rest of the been to season. Thank you. Thank you, Bernard.
Speaker Change: Our next question comes from the line of Jordan Algar from Goldman Sachs. Go ahead, please.
Speaker Change: Hi, good morning, this is Paul Stoddard on for Jill Jordan now and 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 USLPL 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, we can't build a customer properly.
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: 2025.
Speaker Change: So for sure that should improve customer satisfaction because now we should be in a position to build customer properly
Speaker Change: Okay number one and number two it should also help us with our bad death
Speaker Change: or are revenue adjustment or you know all this bad experience.
Speaker Change: that we are providing to our customer because we cannot build customer property. It's so 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 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 2020-25 is the fact that our fleet maintenance
Speaker Change: Okay, we went from 100 shops to 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 Capix 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. [inaudible]
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 we'll 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 shareholders.
Speaker Change: Great, thank you.
Speaker Change: Thank you.
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 Ademurous Calcio and Hector. All good. I just wanted to drill in first on the LPL price thing. So I think you'd previously noted that contract renewals have accelerated to the low single digits. Is that about still the case?
Speaker Change: Okay, yes, got it. And also just sequentially from a, I mean, you spoke about the kind of 4QOR impacts sequentially, you know, in the 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 fair to still see a, reasonable seasonal step down into 4QOR?
Speaker Change: Well, you know that there is.
Alain Bedard: I think you four should be like I just said better than three and probably something like Alain would do
Alain Bedard: for our USLTL, but we had the difficult start of October because of all the storm that hit the east coast.
Alain Bedard: Now, that's behind us.
Alain Bedard: Okay, so...
Alain Bedard: 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.
Alain Bedard: 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., 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 U.S.L.T.L.A.L. in terms of operating ratio and in plenary closer to two, right?
Alain Bedard: But we won't break the 90 in 2020 for like we thought we would.
Alain Bedard: 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? Well, what's the kind of steady runway 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 I just said
Speaker Change: and 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 per ship and like crazy. 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, okay? And, you know, the excuse that we get some times from the sales team is well service. Okay guys, we must not provide excuse to our sales team.
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: Good evening.
Speaker Change: Our next question comes from the line of Kevin Chang from CIDC. Go ahead, please.
Kevin Chang: 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 Pershipment, it's moved up, I guess, sequentially, three quarters in a row now, you know, weights have been, or average weight pershipment'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 R.P.
Speaker Change: and see in the summer of 23.
Alain Bedard: You know, the management team at PNC made some mistakes, right? 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 Q1 of 24, major disappointment.
Alain Bedard: 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...
Alain Bedard: of our PNC with Chris.
Alain Bedard: 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 competitive.
Alain Bedard: Right?
Alain Bedard: The demand is still not there.
Alain Bedard: So, what the guys have been able to do is keep improving the yield or keep researching the degree, but work very hard on the car side.
Alain Bedard: Alright?
Alain Bedard: So...
Alain Bedard: That's where we are, and we will see some improvement in 2025. We are opening up in you.
Alain Bedard: Center in Edmonton, in early 25.
Alain Bedard: So that should help us reduce our costs with better technologies, etc etc.
Alain Bedard: We're going to be looking at Vancouver, probably 26-27.
Alain Bedard: doing the same thing in Vancouver to improve our technology there.
Alain Bedard: So the guys are working on the cars. 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, you know, move freight very in a very lean and mean way in terms of cost.
Alain Bedard: 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. Put 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 very colouring, 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. Yeah.
Speaker Change: Do you think you need to change the compensations structure to incentivize the sales force to drive towards that improved density to get that cost per shipment lower? Or is it something else to maybe incentivize them to move towards this sales model that should drive better cost efficiency? Let's see.
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 salespeople probably will have to be reviewed and updated in 25 so that people understand. And...
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 pick-up 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 where we started 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, his bonus used to be based on global UPS, and you say, well, we have to change that based on your terminal 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: 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?
Alain Bedard: 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, okay, 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. Right? So my best peers don't give a lot of afraid to the rail.
Alain Bedard: 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, 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]
Alain Bedard: The Mervoir Pier I close to 0%, right, but 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, I would say, like eight months ago.
Alain Bedard: But we still miss about 400 picks up pick up a day.
Alain Bedard: So we have to change that culture of, oh 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...
Alain Bedard: 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. [inaudible]
Alain Bedard: This is a no-no, right? If you look at our Canadian operation, okay, we don't miss pick up in Canada.
Alain Bedard: and we have a union environment too.
Alain Bedard: 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 pickup. 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?
Alain Bedard: 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.
Alain Bedard: When you look at Master Report, some people are saying, well, these guys, I give them a pick-up, they don't show up.
Alain Bedard: And we have all the issues in the world. Well, we play a no excuse 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.
Alain Bedard: Well, I'll pass 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.
Alain Bedard: If you have three, you divide by three, so you become more competitive, okay, by doing that versus your peers.
Alain Bedard: And more competitive you are with better service, and more freight you will get down the road. So it's like an education, a training, a culture that has to change at our T-Force rate. The guys are working hard, but we've got to walk the talk and like we always said, the proof is in the pudding and right now, we still have issues to fix. [inaudible]
Speaker Change: Well, I appreciate the explanation. What did it also, Kean, you called out truckload continuing to steal 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 event?
Speaker Change: The minute the truck to a guy's got busier I mean so when is this gonna 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, one of 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 today than it was six months ago.
Speaker Change: So that helps the disposable income interest rate going down again that helps the disposable income more disposable income than the consumer can spend more, he spends more health size.
Speaker Change: Always appreciate the time, William. Thank you.
Speaker Change: Let your Jesus.
Speaker Change: Our next question comes from the line of Daniel Ambrou from Stevens, so head clean.
Speaker Change: Thank you. Thank you. Thank you.
Speaker Change: I wanted to let you 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 could attract the customer with rates, but if the service is poor, I mean, the guy is going to run and he's going to 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 don't provide the right service, then he's going to walk. [inaudible]
Speaker Change: And you're gonna have lots of turn. So that's one thing that a people's rage we have, right?
Speaker Change: We have too much strength.
Speaker Change: So customer try us and we fail a bit. Okay, the guy goes away. So by proving service, okay, you reduce the turn by reducing 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 peers are 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, you know, some people are trying to chase right and grow the volume. Our focus is not to chase right is we have to fix our service first and reduce our costs. And then reduce the turn so that we start growing organically. And then reduce the turn so that we start growing organically. And then reduce the turn so that we start growing organically. And then reduce the turn 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 while you're back to zero.
Speaker Change: So you gotta fix the service so that you can reduce the turn of customer.
Speaker Change: Yep, that's helpful. And then as a follow-up, some of Malachi, you mentioned you're paying down to, like crazy in the near term, but you do need to scale up. It sounds like to kind of move forward with this spin. So, curious how your appetite is on M&A at this point and how active the environment is out there given were two years into a down cycle. Are you seeing more sellers come to market? How are multiple changing on the M&A side? Just curious what you're seeing out there when you're talking to pencil targets. So, let's move on.
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 year end.
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 within TFI, you make your money and 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 about in 25
Speaker Change: Notwithstanding anything major by Iran or into 26 will 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. 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. I believe 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 Ryan Ozenberg from J.B. Morgan. Go ahead, please.
Ryan Ozenberg: Hey, good morning, Alain. Thanks for taking the question.
Ryan Ozenberg: So what do you do?
Ryan Ozenberg: I just want to understand a little bit more. We see in the fourth quarter in particular, I think the guidance for flat earnings would imply a decent sequential step up into 4Q 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 counter seasonal to get a nice pickup here into the fourth quarter.
Speaker Change: was because Brian, her Q3 was not good, right, her Q3, if she looked at her specialty truck load.
Speaker Change: I mean, we did a better job in two than in three, and the reason being is that in the US, our specialty truckload 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 into an accident that's going to cost us a fortune. So, my specialty truckload should have done a much better job in two, three, and it will do a better job in two, four. So, if you look at my Q2,
Speaker Change: I was an 83-old, 83 million dollars of a week, and in Q3 I'm down to 70. That's not normal.
Speaker Change: That's not normal, that came from...
Speaker Change: Our U.S. operation from Daski and also a little bit of TA dedicated. I don't see that coming into Q4, so we should go back to closer to a Q2 number in our truckload.
Speaker Change: 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: Okay I appreciate it thanks for the time.
Speaker Change: Pleasure Brian.
Speaker Change: Our next question comes from the line of <unk> from Citi. Please go ahead.
Speaker Change: Hi, great. Thanks. This has been more on ferrario Rosa at Citi, Hey, Thanks for taking our question.
Speaker Change: As you spend a few minutes ago you'd be disappointed if you don't break 90 or 25.
Speaker Change: At your two Q earnings call, you were saying targeting under 90 for the first half of 'twenty. Five do you think maybe just to kind of fine tune. This the under 90 target is now more like second half of 'twenty five or do you think the other 90 could still be a target for first half of 'twenty five.
Speaker Change: Yes.
Speaker Change: [laughter] Yeah. It was a very good question you know like I said I have not seen the plan. Okay for 25 from a from the team over there to force right, but what I would say is this is that we have to break this glass ceiling of 20 or so to me it would be great. If we could do that in the first six months, but.
Speaker Change: 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 of twenty-five with everything breaks you know every thing that we're trying to do accomplish improve service trying to educate the sales team like I said earlier and trying to get more shipments per stop.
Speaker Change: Et cetera, et cetera, I would be very disappointed and for sure I mean, it all relates to beefing up the team improving the talent management talent because you know we.
Speaker Change: We have a team in Canada that is second to none okay. So we have the ATM in Canada. So in the U S. We don't have the 18th.
Speaker Change: So we have to build an 18 and and that's what we're trying to do is improve what we've got continuously.
Speaker Change: Continuously we will provide them with better information, but if a major sits on its hands and you gave them all the time all kinds of information and he does nothing with it then you have the wrong Guy right.
Speaker Change: So it's an ongoing process.
Speaker Change: At that's going on right now the mistake I made guys is when we bought U P. S freight you know.
Speaker Change: I thought that we could bring this company within five years in twos, and 85 War, which is normal I mean, we we do less than 80 in Canada and 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.
Speaker Change: As you know our team.
Speaker Change: Over there the talent that we have the tools that we have the financial information in our focus.
Speaker Change: You know it was not.
Speaker Change: As good as I thought it would would've been.
Speaker Change: So that's why it's going to take us more time.
Speaker Change: Great Great I appreciate that color, maybe as a follow up you've been asked a lot about service and surface improvement on this call maybe just ask it slightly differently. It looks like your customers' perception of your service level is.
Speaker Change: Is roughly where it was.
Speaker Change: This year as last year, roughly the same sort of yeah. Unfortunately at the lower range compared to your LTE elsewhere. Some of them actually improved from 'twenty four 'twenty three 'twenty four why why do you think after all the work very hard work that you and your team's been doing why hasnt that showed it.
Speaker Change: Proof of that.
Speaker Change: 23% to 24 and do you think we should see some dramatic improvement on any of those things would damage. The shortage on time pickups deliveries from 'twenty four 'twenty five.
Speaker Change: Yeah.
Speaker Change: Well like I said earlier on the call I mean, it's 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.
Speaker Change: Now our claims.
Speaker Change: <unk> is going in the wrong direction, so guys, let's refocus on that.
Speaker Change: So that does not help us okay with.
Speaker Change: The evaluation that are our customers are doing of us in terms of service claim as 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 one number two yes, you don't show up for pickup.
Speaker Change: Nobody likes that because then you're stuck with the free on your dock right and then you have to either call someone else or hopefully T force ratios up tomorrow.
Speaker Change: Our customers don't like that right.
Speaker Change: So 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 not improved okay and this is why like I was saying earlier.
Speaker Change: You know, there's an evolution and.
Speaker Change: The bonus.
Speaker Change: Program that we have with our sales team and our management team. So it shows that the program that we have right now in 'twenty four is not good because you know we're not getting the resolve that were supposed to get right. So we will have to improve the bonus plans. So that these guys.
Speaker Change: This bonus is aligned to what we want them to perform so being improved service.
We don't break their cause stuff don't lose it show off or pick up et cetera et cetera.
Speaker Change: And then the guys will have to take that seriously because then the incentive bonus is gone.
Speaker Change: Right.
Speaker Change: But that's an evolution because where we were with the bonus system. When we bought the company. It was just.
Speaker Change: On an unacceptable alright, so it's been an evolution.
Speaker Change: But I mean this this report this mass you'll report this is a major disappointment for me.
Speaker Change: And I'm gonna be with the team.
Speaker Change: Tomorrow as a matter of fact and for sure we'll be talking about that that guidance I mean, we're still at the bottom of the pack.
Speaker Change: If not improve.
Speaker Change: Great I appreciate the time as always lumpy.
Speaker Change: Pleasure.
Speaker Change: Our next question comes from the line of Cameron that Kim from National Bank Financial go ahead. Please.
Cameron Kim: Yes. Thanks, Good morning, just a couple quick ones for me.
Cameron Kim: I wanted to ask you about I guess the free cash flow.
Cameron Kim: Maybe you've sort of provided some updates you on your EPS outlook for 2020 up or is there any.
Cameron Kim: Change on the free cash flow you still think it can be within the original range that you were expecting.
Speaker Change: Well free cash flow I mean, it's probably going to be the same same as last year last year. We did about 775, so I think that the range.
Speaker Change: That is reasonable is between $7 $50 million to $800 million of free cash.
Speaker Change: For 24, where we had capex of 300 net capex of 300.
Speaker Change: Okay perfect.
Speaker Change: And I know, it's still early and Youre in your planning process here, but I mean, I guess, how are you thinking about I guess, the capex requirement for 2025, and you've you've invested quite a bit in making your for your fleet younger should we see an easing of of spending on Capex in 2025.
Speaker Change: Yes, yes, you'll see some easing of Capex number one reason is because the length. The life of a truck has been extended because the market is so weak that we don't run as many miles so let's say normally in a normal environment. A truckload 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 the capex in that sense so probably.
Speaker Change: You should see 2025 Capex same business.
Speaker Change: More like $2 50, instead of 300.
Speaker Change: Okay. That's perfect I'll, it's been a long call. So I'll leave it there thanks very much for the time.
Speaker Change: Thank you Kim.
Speaker Change: Our next question comes from the line of Ben <unk> from Bezeq and capital markets go ahead. Please yes.
Speaker Change: Good morning, Eli.
Speaker Change: And by the way.
Speaker Change: Yeah.
Speaker Change: There was some great comments about we read a lot about have your freight that was earlier moving toward LDL that has moved to T. L. I'm. Just you mentioned some points about that the fact that we need to see eventually a recovery of the deal what are the first thing the freight industry.
Speaker Change: Needs to see in order to get to a more normal rate environment is kind of bankruptcy. The first thing indicator that you look at that could L. T L and eventually L. P L.
Speaker Change: No I don't think so bankruptcy I mean, we saw that in Canada with pride.
Speaker Change: No.
Speaker Change: 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.
Speaker Change: Right.
Speaker Change: So no bankruptcy, it's minimal at its really you know the freight will start moving once the consumer kiln expense more.
Speaker Change: This is very simple our north American economies based on consumer.
Speaker Change: Alright, so the consumer right now is disposable income is not where it was a few years ago.
Speaker Change: So I mean with lower interest rates lower a lower inflation in.
Speaker Change: Prove our salaries, okay that is going on right now.
Speaker Change: Down the road he will spend more.
Speaker Change: And hopefully you spend less on trips and flying all over the place like he did in 'twenty three 'twenty four and spends more at home. So that will help freight trade will help us right.
Speaker Change: Yes.
Speaker Change: That's great comment and for the follow up question you mentioned some color about the M&A size close to four 5 billion towards the end of 2025 early 2026 I was wondering if you could share more details about <unk>.
Speaker Change: Segment that you would tap is it more related to LPL or could you do something in special ICL them or there are any comfort level in terms of leverage and a milestone you would like to to achieve before pulling the trigger on something more sizable.
Speaker Change: So our preferred okay. How many target is in the U S number one and number two it's always been like I said L. T. All we have to do more I mean, we're a small player in the L. T O in the U S. We're the dominant player in Canada. So we will probably never be the dominant player in the U S. But we have to be.
Speaker Change: More of like a maybe a number three or number four another number six and number 722000 shipments a day, where we're too small.
Speaker Change: So for sure L. P L down the road.
Speaker Change: And and logistics I mean us we love logistics because the return on invested capital is is huge normally.
Speaker Change: Although we don't like logistics, making two points I mean, we're not in that league, we're not in that business, but if you look at our logistics are you know, we're running a 90 or 88 or something like that so that's really interesting. So logistics that makes money, but not logistics that makes two points logistic that makes money.
Speaker Change: And that we can grow with I mean, that's all we love that.
Speaker Change: You know if we could find the let's see and L. T O that's asset light, okay down the road.
Speaker Change: That would be fantastic because if you look at our L. T L in Canada because of our intermodal divide trend that Clarke and all these guys.
Speaker Change: We run a very asset light model in into our Canadian L. T. L. A sector right. So if we could find a nice business in the U S that could be asset light as an example.
Speaker Change: That would be interesting for us right.
Speaker Change: Yeah, Yeah. Because then then you don't have to worry that Oh, yeah, but I'll, let you run a union shop, and then you buy a nonunion shop, and our Union will try to unionize a nonunion shop I mean, that's that's always the concern, but if it's asset light.
That concern does not exist right.
Speaker Change: Although to me.
Speaker Change: We run Union shops, and nonunion shops in Canada.
Speaker Change: The Union does not unionized, the nonunion shop, but in the U S. It's a big concerned Oh, if you buy let's say, a nonunion shop or the union will try to unionize it.
Speaker Change: I mean, we run the Hercules right now it's small it's only 100 million in revenue.
Speaker Change: And we just bought it a few months ago.
Speaker Change: And it's still non union right. So.
Speaker Change: But asset light nonunion.
Speaker Change: Probably would be a good target of ours, you know down the road, we'll see.
Speaker Change: Okay, and just in terms of comfort level for the leverage a L E N E.
Speaker Change: Are there.
Speaker Change: Well there is gonna be under in the U S. We have to keep the leverage under three okay. So this is why I said, you know three or four or $5 billion, 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.
Speaker Change: [noise] of leverage we could go all the way up to three.
Speaker Change: Why is that because we could delever quite fast if you just look at.
Speaker Change: Oh, there's desk your acquisition that we bought in April we took on $500 million of debt additional to the debt that we had.
Speaker Change: And you'll see us down 500 million by year end.
Speaker Change: That's great color. Thank you very much for that sorry about it.
Pleasure, but anyway.
Speaker Change #100: Our next question comes from the line of Bruce Chan from Stifel Go ahead. Please.
Speaker Change #101: Again, our next question comes from the line of Bruce Chan from Stifel Go ahead.
Speaker Change #102: Hi can you hear me.
Yes, good morning, Okay, Great Hi.
Speaker Change #102: Hi, Helane this is Andrew <unk> on for Bruce.
Speaker Change #103: You mentioned mcandrew.
Speaker Change #103: Impact you're expecting in the first quarter from the relief effort from the Hurricane.
Speaker Change #103: Especially given the basket exposure, we were just kind of wondering if there.
Speaker Change #103: If you're expecting anything here in the fourth quarter as well or is that more of a <unk> event for you al. Thank you.
Speaker Change #104: Yeah very good question. So far what we know is that a right now it's a cleanup phase that these guys are going through right now so it's more like the waste guys that.
Speaker Change #104: Taking a busy with the situation there. So we don't know the cleanup phase is that gonna be a week is that gonna be a month. Okay. So once the cleanup phase is done then they start reinvesting rebuilding et cetera et cetera. So this is why.
Speaker Change #104: Maybe maybe we'll see some benefit.
Speaker Change #104: In Q4.
Speaker Change #104: But who knows we don't know, but one thing is for sure. If it's not a Q4 is going to be Q1.
Speaker Change #105: 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 freight spend given your experience with the big Brown machine and UBS do you think the spend would be a bigger hurdle smaller hurdle or comparable from anthem and unbundling standpoint.
Speaker Change #105: Over the course of time do you expect this spend to be a net positive or a net negative for the group. Thank you.
Alain Bedard: Well I think it's going to be a net positive, but it's not easy to do I mean don't forget.
Alain Bedard: To do the spin off of a division like UBS has done with us it's not a very easy process. We've done at US we know how to do it okay, but it's not easy to do could tell you that so no I think it's good for the Fedex shoulders. Okay.
Depends on the evaluation 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 <unk> industry.
Speaker Change #106: Alright, Thanks, Helane, that's all I had.
Helane: Thank you.
Speaker Change #108: Our next question comes from the line of Kim <unk> from Bank of America.
Speaker Change #109: Hey, good.
Kim: Good morning, I guess almost good afternoon.
Speaker Change #111: 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.
Speaker Change #111: Are you talking about a normalized 634, four or Bloomberg has you would 618 year over year I'm, just trying to get clarity on the fourth quarter target. I know you said it was more like second quarter, which was I think $1 71. So I'm just trying to clarify that for some investors yeah. Yeah right now what we're saying is that probably is going to be more of the same so that's for the year.
Speaker Change #111: So I don't remember what we did last year I think it was six something 618 620, okay. So I think that that's where we're going to end up the year.
Speaker Change #112: Okay, because that would be a significantly weaker I guess to clarify that that would be a weaker fourth quarter than I think.
Speaker Change #112: I guess, the normalized 34, that's floating out there as well, okay. So youre comparing against the 618.
Speaker Change #112: Yeah.
Speaker Change #113: And would you be able to state then to clarify what what your first three quarters has been just because theres a lot of normalization going on.
Speaker Change #114: Hey, you know what can't 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, okay. If you take what we have I think at the end of <unk>.
Speaker Change #114: Q3 are tucked it just hold on for a second.
Speaker Change #114: Oh that are worth $4 55, so.
Speaker Change #114: Yes.
Speaker Change #114: So so $4 55, plus a $1 16, but $1 63, yeah yeah.
Speaker Change #114: Yeah, which is which is basically what we've done in Q3, but I think that will do a little bit better than four then in three like I was just saying in both our specialty truckload.
Speaker Change #114: A little bit less on the logistics, a little bit better on the L. T. L. N P N C, but to be conservative what we're saying is that okay, let's let's say that 23 and 24 are the same like 618 620.
Speaker Change #115: Okay, perfect and then when.
Speaker Change #116: When you talked about the kind of 91 ish or for the fourth quarter.
I guess youre looking at improvement sequentially for the U S. L. T. L. Can you talk about what what got you. There what gives you the confidence I mean, it sounded like you were concerned and should we be concerned with where pricing is that it sounded like the renewals or low single digit. So I'm trying to match the kind of pricing concerns service concerns with how you how you show improvement.
Speaker Change #117: No I think its southern market, it's not that the market. The problem that we have that we have to improve versus Q3 as our cost I mean, we had way too much cost in our claim if you look at our claim in Q3 at 8% of revenue I mean this is completely unacceptable.
Speaker Change #117: And I think that we're going to do a better job in Q4, that's number one number two again our fleet costs.
Speaker Change #118: Of course.
Speaker Change #119: Is it are improving in Q3.
For sure they will keep improving on on Q4.
Speaker Change #119: So labor cost per ship and we took a little bit of a setback in the first two weeks of October but September okay, our labor cost per ship and what's the best the best so far in the year. So we did really really well in September but then the first two weeks of October it's a little bit step behind let's step back.
Speaker Change #119: But I think that were on the right track in terms of doing a better job on our labor cost per ship in Q.
Speaker Change #119: Q4 versus Q3.
Speaker Change #119: Because we were heading in the right direction, except the first two weeks of October because of all these storms.
Speaker Change #119: The excuse that we have right now, but I'm looking at the third week of October so far and we're back on track to where we should be so I think that will do a better job on the L. T L. OE in Q4 versus.
Speaker Change #119: Q3.
Speaker Change #120: Okay, St volume are saying, while it's great to see.
Speaker Change #120: So it's really focusing on those costs.
Speaker Change #120: Yeah, and improving performance yeah, yeah, yeah, Okay. Yeah. Thanks for the clarification I appreciate it.
Speaker Change #121: Pleasure Ken.
Speaker Change #121: Thank you.
Speaker Change #122: No further questions at this time I'd now like to turn the call back over to Mr. Doss for any final closing remarks.
Speaker Change #123: Thank you so well thank you very much operator, and thanks, everyone for being on this morning's call and for your interest in Tia Flying International There's always if you have any follow ups. Please don't hesitate to reach out enjoyed today and we look forward to speaking again on our next quarterly call. So thank you.
Speaker Change #122: All the best.
Speaker Change #122: Thank you.
Speaker Change #124: Ladies and gentlemen, this concludes your conference call for today, we thank you for participating in Africa. Please disconnect your line.
Speaker Change #124: [noise].
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Speaker Change #124: [laughter].
Speaker Change #124: Oh.
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Speaker Change #124: Okay.
Speaker Change #124: Yeah.
Speaker Change #124: No.
Speaker Change #124: Okay.
Speaker Change #124: Okay.
Speaker Change #124: Okay.
Speaker Change #124: Yeah.
Speaker Change #124: Yeah.