Q4 2024 TFI International Inc Earnings Call

Speaker Change: Good day, ladies and gentlemen. Thank you for standing by. Welcome to TFI International's fourth quarter 2024 results conference call.

Speaker Change: You're in a row that we've achieved this mark despite the prolonged weak stretch but for the industry.

Speaker Change: This directly reflects our long withstanding focus on optimizing free cash flow. So that we can strategically invest in the business consider attractive M&A and returning excess capital to shareholders.

We did all three during the fourth quarter, while also reducing our debt to further strengthen our balance sheet.

Speaker Change: With that let's have a look at our consolidated results for the fourth quarter. Our total revenue before fuel surcharge grew 9% over the corresponding year prior year period to $1 8 billion, which benefited from our acquisition of dusky.

Speaker Change: Last April.

Speaker Change: <unk> operating income of 160 million was down from 198 million, reflecting an operating margin of $8 eight versus 11 eight.

Speaker Change: Previous year.

Speaker Change: We did have unusually high accident related expenses that were about $9 million higher than the prior year period. Our adjusted net income of 102 million was down from 148 million the prior year and adjusted EPS of $1 19 compares to a $1 71.

Speaker Change: I would also note that the impact of foreign exchange fluctuation.

Speaker Change: Which during the quarter reduced our reported EPS by three cents as every one penny fluctuation of Canadian dollar per U S dollar tends to impact either positively or negatively our annual EPS by about <unk>.

Speaker Change: Okay.

Speaker Change: So again, we produced solid cash flow as I mentioned, the specifically $262 million of cash from operating activity and free cash flow of 208 million. However.

Speaker Change: We're down from the prior year figures of $303 million and 244 million respectively.

Speaker Change: I want to again call out that our ability to produce very respectable cash flow during a prolonged slump for the industry is a direct reflection of our team's effort to focus on the details of the business regardless of market condition.

Speaker Change: This includes concentrating on quality of freight and other efficiencies.

Speaker Change: Let's now turn to a review of our three business segments, beginning with L. T L, which was 40% of segmented revenue before fuel surcharge during the fourth quarter.

LTE our revenue before fuel surcharge of 737 was off 10% and operating income of 70 million, which had an $8 million impact from higher accident related costs versus the prior year period was off 34%.

Our adjusted L. T L operating ratio was 90.3 as compared to $86. One a year earlier and return on invested capital was $16 three.

Speaker Change: So next up is our truckload.

Speaker Change: The 8% of segmented our revenue before fuel surcharge at 693 million, which was up from three three.

Speaker Change: 399 million in the prior year period benefiting from the desk acquisition.

Speaker Change: Truckload operating income came in at $60 million, which was up from $51 million, we produce into war of 91.5 relative to 87.3, a year earlier and our return on invested capital was eight 4%.

Speaker Change: Our third business segment to review as logistics, which was 22% of a segmented revenue before fuel surcharge or $410 million for the fourth quarter down from 472 million the prior year.

Speaker Change: Operating income of 43 million was down from $55 million. This equate to our logistics operating margin of 10.5 relative to 11.6 last year and return on invested capital was 17.1.

Turning to our balance sheet during the quarter, we again benefited from our solid free cash flow of more than 200 million, we reduced debt by 156 million and as a result ended the year with a funded debt to EBITDA ratio of two point 11.

Speaker Change: Yeah.

Speaker Change: In addition to allocating capital to debt reduction, we completed one bolt on acquisitions during the quarter.

Speaker Change: Also during the quarter, our board declared a 13% increase in our quarterly dividend to <unk> 44, 45 per share that was paid on January 15, we also repurchased $42 $4 million worth of shares during the quarter and you'll recall that in October the renewal of TFR International number of course.

Speaker Change: Issuers bid for it or in CIB was approved for an additional year.

Speaker Change: So before I wrap up as you may have seen in our press release, we plan to re domicile T O Fi from Canada to the U S to better align with our shareholder base and commercial presence with that.

Speaker Change: Operator, if you could please begin the Q&A portion of the call and I'll be happy to take questions.

Speaker Change: Thank you and ladies and gentlemen, we will now begin the question and answer session to ask a question you May press star followed by the number one on your telephone keypad and did withdraw your question. Please press star followed by then a break here and again in order to ensure that everyone has a chance to participate we would like your thoughts. Thank you.

Speaker Change: I assume it yourself to asking one question and one follow up your first question comes from the line of Ravi Shanker with Morgan Stanley. Please go ahead.

Speaker Change: Great. Thanks, Good morning Atlanta.

Ravi Shanker: So when you think of where are we on the cycle now and where we ultimately go to let's say $8 of normalized EPS.

Ravi Shanker: How much of the path from where we are today to that level or do you think is idiosyncratic actions that you guys can take.

Ravi Shanker: Is waiting for the cycle recovery.

Unnamed Speaker: Very good question Ravi and you know what I think that our we still have a lot of work to do on cost. If you look at our T Force rate you know our costs are still too high Oh, we're getting also killed because our volume it keeps dropping.

Ravi Shanker: Shipment count is down 6% year over year.

Unnamed Speaker: Although our weight per shipment is about the same.

Unnamed Speaker: Very difficult environment. So we still have a lot of work to do a T force rate on the fleet side to reduce our costs were on the right track there our average age of our fleet of trucks that T Force rate is four two years, which is getting close to normal versus the average age is that we have in Canada, which is a little bit higher.

Unnamed Speaker: But then if I look at my maintenance cost per mile in the U S versus Canada, I mean, there's still a big discrepancy between the two so.

Unnamed Speaker: We still have a lot of work to do on cost at the T Force right. The same is true also of our <unk> acquisition.

Unnamed Speaker: If you look at.

Unnamed Speaker: The trend since we bought dusky in April I mean, Q2 was okay. And then you know we had issues with the revenue for miles that keep dropping because.

Unnamed Speaker: You know the freight recession is still with us and even in Q1 of 'twenty five we're still seeing a very pressure on rates, although it's stabilized, but the number of miles are down and our costs also are too high.

Unnamed Speaker: Ski.

Unnamed Speaker: We were trying to have a lot of equipment and these equipment our specialized equipment. The their use not very often and let's see when equipment. When it's out a win right. So it's not very popular right. Now so we have to reduce our asset base at desk to reduce our cost to reduce our depreciation.

Unnamed Speaker: <unk> expenses.

Unnamed Speaker: To reduce our interest cost as well so we still have a lot of work to do to get to to me on the cost side with no market improvement we have to be closer to a seven to 725 EPS in a normalized cost environment.

Unnamed Speaker: If you look at our logistics I mean, we're down $12 million quarter over quarter year over year. In Q4. This is just volume.

Unnamed Speaker: And hill or the truck manufacturers volumes are down about 20%. This will continue probably Q1 Q2 Q3 of 25.

Unnamed Speaker: When we talk to our customer they see a pick up by the end of 'twenty five.

Unnamed Speaker: So that is also not helping us in in the early days of a 25, but this is just volume and this is it will come back so to make a long story short of a of a.

Unnamed Speaker: Big question is that we still have a lot of work to do on the U S operation to become lean and mean, if I compare that with our Canadian operation I mean, we still have a lot of work to do in the U S.

Got it that's really helpful and apologies if I missed this but did you give us a formal 2025 guidance.

Unnamed Speaker: No I mean, we're like our peers I mean, it's it's really is a very difficult start of the year is very foggy you know so it's difficult for us what I could say is that are you know what we've seen so far in Q1, we're still in a very deep freight recession. The volumes are not there.

Unnamed Speaker: So it's gonna be a difficult twenty-five I think.

Unnamed Speaker: Again.

Unnamed Speaker: We thought you know when we made our plan in October of 24, 425, we never anticipated this kind of situation.

Unnamed Speaker: Which is still you know difficult.

Unnamed Speaker: In terms of volumes.

Unnamed Speaker: Truckload L T O.

Unnamed Speaker: Great. Thanks, a lot.

Unnamed Speaker: Pleasure Robbie.

Speaker Change: And your next question comes from the line of Jordan <unk> with Goldman Sachs. Please go ahead.

Jordan: Yeah, just to come back to U S. L. T L margins deterioration in the quarter would you say that's.

Jordan: I know you talked about cost as well, but is it primarily revenue and then can you maybe go into a little bit more color on some of the specific steps tsi.

Jordan: Is it going to take to our work on U S. LTM margins in 2025, regardless of the volume environment. Yeah. Yeah. Yeah. Yeah, you see the problem that we have Jordan is this is that right now okay, we're losing the small and medium size customers, which I have the best Mark.

Jordan: Right.

Jordan: And some of that has been replaced okay by let's say three P L and corporate account, which doesn't bring the same margin and this was really accelerated in Q4. So so.

Jordan: So that's part of the issues that we have is is is sales. Okay. We have we have to be way more aggressive on the small and medium size accounts.

Jordan: So this is probably number one for us if you look at T Force right. Today. Okay is is revenue problem they'll be twist costs.

Jordan: We've been working steadily on costs since we bought this company and we've invested a ton of capital to improve our asset to improve our training et cetera et cetera, but at the same time, okay. Our volume, okay keeps coming down right. So it's like you're chasing.

Jordan: Your T like a dog chasing its dale.

Jordan: So this has got to stop so so we are at a floor of around 20000 shipments. The mission that we give to our sales force is to try to grow organically, but also to try to improve that density.

Jordan: So what I mean by density and I'm like a guy that's always repeating the same thing if you look at our Canadian operation or the density is second to none I mean, it's just fantastic that's why we're doing so well.

Jordan: In the U S. Our density as the ship.

Jordan: It was really bad.

Jordan: So.

Jordan: We have to improve the density so.

Jordan: There is theres two ways to improve density right now.

Jordan: Luke approach number one is to try to do it organically and that's what we've been trying to do for three years since we bought the company in three or four years.

Jordan: Yeah.

Jordan: Option number two okay is down the road. Okay, you Gotta do what we've done in Canada, you Gotta do some M&A.

Jordan: So if you can't get the density from organically. Your sales team then you have to focus down the road, okay and trying to find you know our target something that fits you. Okay that could help you improve your density at one point right. So this is why we've been saying.

Jordan: And that you know one solution down the road, Okay for T force rate on sales and revenue.

It will have to go through a M&A at one point, but in the meantime, let's say during the course of 'twenty five and 26, our focus is to be trying to grow it organically, okay with the people we have and the sales the revenue.

Jordan: And try to squeeze okay. The cars of our let's say fleet operation what we've done so far that's good at T force rate as our Lino.

Jordan: Okay. So now we are using our software that's really good which is called <unk>, which is used by some of my peers and know we are implementing optum in Canada four P. N D. Okay, and we're also starting to look at implementing that P. N D. A.

Jordan: <unk>.

Jordan: Is it could be up to them or another one in the U S again to improve the management of our costs on PND side. So it's like a two avenue for US we got to keep working on the costs and do more with less.

Jordan: Okay, but at the same time the mission to our team sales team is to grow organically and to improve our density.

Jordan: And over time down the road, let's say within the 12 months 24 months whatever.

Jordan: When we're ready when we can find the right fit okay is to add M&A like we do in Canada, all the time.

Jordan: Just as a quick follow up and then sort of I know things are still a little.

Jordan: Certainly challenging to start the year, but putting that sort of let's say no help from the macro or or zero volume growth environment any sense for where your L. P. L. O R could get to in the U S in 2025 or Directionally, what where he's like what do you think it could get to coming off the 97 or so in the fourth.

Jordan: Yeah.

Jordan: Well, what we know Jordan is that Q1 is going to be.

Jordan: Very difficult quarter, right, it's very difficult quarter, but I still believe that our you know we've been running this company since we bought it and in the neighborhood of 90, 190, 290 394 or.

Jordan: Q4 was a disaster for us I mean, we didn't do a good job in managing our labor cost.

Jordan: We had too many issues with accidents and claim if you look at my claim ratio a win all the way to <unk>, 9% of revenue, which is just unacceptable.

Jordan: So.

Jordan: This company even in this kind of freight environment, we have to be able to run that between the 93 in the 95 or I've been saying since we bought the company that will get to a sub 90 or but right now okay. At the level of shipments that we have at 20000, if our sales team does not help us in trying.

Jordan: To grow this density improve this density and grow their shipments count.

Jordan: Working just on the costs.

Jordan: Within 25 with this kind of freight environment I think that overall, we should think that yeah. It's difficult to say because again, it's very foggy Q1, Q2 with everything thats going on but I mean to me is we got to be able to live in a 93 295 war.

Jordan: Even in 'twenty five with this kind of a difficult environment, but Q1 extremely difficult because of all kinds of reasons, okay, but for.

Jordan: For the year 25, even with what we know today, we should be able to play in that 93 to 95, so which is way way above the target that we are well being.

Jordan: Sub 90 or right, but density is that is the name of the game and we've been trying with the sales team to have those guys understand we need to drive less miles we need to pick up more freight per stop it's been quite difficult.

Jordan: Hey.

Jordan: Got.

Jordan: It seems like Oh.

Jordan: <unk> to do in this kind of an environment.

Jordan: But it's it's the only way that we're going to bring this company to a sub 90 or because that 20000 shipments a day when you run a national network in the U S. You are small you are small.

Jordan: In my mind to run it.

Jordan: Just look at the shipments that we do in Canada in Canada, We do close to 10000 shipments a day.

Jordan: Yeah.

Jordan: And we do only 20000 in the U S. So I mean in Canada with 10000 shipments a day, we have huge density that's why our costs are so good in the U S. Our costs are not good because of our density is it's way too low.

Speaker Change: Alright, thanks, so much.

Jordan: Thank you Jordan.

And your next question comes from the line of Ken Huckster with Bank of America. Please go ahead.

Ken Huckster: Hey, great good morning Alain.

Ken Huckster: So on Logcap and it seemed like in the numbers and the LPL length of haul dropped a couple of hundred miles you added trucks, you mentioned that $8 million charge in there.

Ken Huckster: Maybe talk about what's going on at the <unk>. So we can understand the diner.

Ken Huckster: Dynamic and the speed that things are changing and it looked like GP revenue is really shifting down very quick so a lot of dynamics going on here, maybe walk through what changed so quickly.

Speaker Change: Yeah, well <unk> has been has been not doing well since I would say a year and a half ago when our partner on <unk>.

Speaker Change: <unk> said I mean, those customer we can't serve as those guys. Because you know they are not honest and they play games et cetera et cetera. So we had to drop okay. All of those reseller.

Speaker Change: That ups's didn't want us to service so and it. It's now we're down to basically not much in terms of revenue versus where we were two years ago and we've changed the commission structure to our sales team to try to make this thing grow again, but so far we don't have any resolve.

Speaker Change: So that's <unk>, but on the asset side.

Speaker Change: What what we have done if you look at my personal costs year over year I went from 40% to 44% and this is because of all this changes okay. In terms of our service in terms of not managing the labor cost the right way and also the mix of Av.

Speaker Change: <unk> of the revenue, which has deteriorated a little bit okay. Our weight per shipment is about the same but the revenue per hundredweight is down why because where we're replacing small and medium size.

Speaker Change: Count shipments with great margin.

Speaker Change: Versus a three P O and their corporate account with less good margin right. So this is what's happening there and this is where I say that.

Speaker Change: Our sales team as to boy its own weight and start helping us in to try to.

Speaker Change: We'll grow this better business, okay, but at the same time also.

Speaker Change: Okay. We we also have to manage better their claim cost and this is big for us because we were up <unk>, 9% of revenue, which is completely unacceptable.

Speaker Change: Look at our Canadian operation, Okay, we used to be at the point to where a 0.3 and Q4.

Speaker Change: You look at the best in class in the U S.

Speaker Change: So our point to 0.3 or something like that so that's where I point to a nine.

Speaker Change: Also our accidents, Okay reserve to be adjusted with the material, which we took another it.

Speaker Change: So globally is it's a lot of bad news for us in Q4, Okay, but the guys are you know, they're rolling up their sleeves and.

We're at we're attacking and we understand that the market is not going to help US again in 25, I mean, we still think that we're going to be in the freight recession, we don't see anything changing over the course of of 25 and this is why when.

Speaker Change: When I look at the plan that we have for twenty-five running in the 93 to 95 O or for all of 25 would be you know probably the best that we could do with the low density that we have okay and without any M&A.

Speaker Change: 25, I don't think that will have any M&A and twenty-five to help us improve the density okay. So with that in mind. This is where we stand there Ken.

Ken Huckster: Thanks, but just to clarify you added 500 trucks. So right you grew the fleet significantly but why.

Speaker Change: Why does the length of haul dropped 400 miles what did you just change business as that node.

Speaker Change: No no no him because he will have to look at the active trucks can okay. The active drugs.

Speaker Change: L. T L is about $30 to 100 trucks.

Speaker Change: Although trucks is about 4000 trucks, because we're bringing new trucks in and we're not selling the old trucks. Okay. We used to we have about I don't remember exactly the account okay, but we have a lot of old trucks that are you know we're selling now.

Speaker Change: Because the active fleet of UBS or T Force freight L. T. O is about 30 to 100. So there's no movement you have to look at the active fleet.

Speaker Change: Okay.

Speaker Change: The re domicile any tax implications on that is is that just moving headquarters where are you going to be moving is there any follow on implications for that.

Speaker Change: You know what Ken I think this is an evolution of TMI. So if you look at five years ago, We listed Tsi into the New York Stock Exchange and we were able to do that through what they call. It N. G. D S. Okay exception right.

Speaker Change: This exception will disappear the minute that are shares that are owned by U S shareholders. Okay.

Speaker Change: There we go above 50% then this is not going to work. So we have to go to the SEC And then we have also to be U S. GAAP. So it's it's a it's part of an evolution, okay, but at the end of the day. If you look at <unk> today, Okay for Ed Office, we have people working in Canada.

Speaker Change: There are also people working in the U S. We have people in Montreal, and Toronto, Calgary, where people in Chicago, we have people in the end.

Speaker Change: In Minneapolis. So we are all over the place in North America with our Ed Office crew.

Speaker Change: So to me, it's just like an evolution, okay because.

Speaker Change: No. Our our business is now today about 70% U S domestic 25% Canadian domestic and about three or four or 5% trans border.

Speaker Change: So it's just and with the next M&A, Okay, We just announced a small transaction in our M. D N a.

Speaker Change: That and with the possibility of us doing some some more M&A in the U S. Like we said at one point, we will invest $3 $4 billion, it's going to be in the U S isn't that going to be in Canada.

Speaker Change: So our revenue will creep up to about 80 to 85. So it's just it's just an evolution, but we're not moving it offers we're not moving people from let's say Toronto to I don't know Chicago No. Not every every every member of the T. F. I L. A office is staying where they are.

Speaker Change: So that's why we called <unk> International It was because we're a Canadian and U S.

Speaker Change: Got it I.

Speaker Change: Appreciate the time, thanks a lot.

Speaker Change: So as you can.

Speaker Change: And your next question comes from the line of Wolters <unk> with RBC capital markets. Please go ahead, yes, thanks very much good morning Ali.

Speaker Change: Good morning, Sir.

So maybe just to clarify on the re domicile you will not be delisting in Canada is that right no no no.

Speaker Change: Okay.

Speaker Change: Will it be a full reincorporation or.

Speaker Change: Into the U S.

Speaker Change: That you know Walter because we're only in the early days right. So we still have a lot of work to do on that we have we must get a shareholder approval of that.

Speaker Change: So to me in a simple way I mean, it's just like <unk> International today is a Canadian Corp tomorrow once the shareholder approve it it's going to be a U S Corp. So okay got it.

Speaker Change: Way I understand it so there's no big story, except the fact that now by being a U S Corp.

Speaker Change: You know on the desk acquisition for example, one of our business unit deals a lot with Dod the department of defense. The U S Department of defense.

Speaker Change: And because we are a flooring.

Speaker Change: Owner, Okay that creates a little bit of issues for us.

Okay, well, that's no big deal he'd live with that but the fact that now you are a U S Corp that will help us. Okay. So there's a few things like that you could be part of some index in the U S. Because you know you are U S domicile, but at the end of the day and like I said to our board member yesterday, it's an evolution of <unk>.

Speaker Change: If you look back five years ago, we had no U S shareholder.

Speaker Change: We were just Canadian right today.

Speaker Change: Just under 50% 49, 9% of our shoulder summer of 'twenty four we're a U S. Okay and four 5% were.

Speaker Change: I think European or Japanese or something like that and 45% were Canadian.

Speaker Change: So it's an evolution got it Okay and then my second question really is just on M&A. I know you mentioned Densification is a big objective and M&A can certainly help with that this is a tough environment. So arguably sellers are in a in a.

Speaker Change: Tough spot could you get.

Speaker Change: Would you look at.

Speaker Change: Bolt on or accelerating your bolt on tuck in acquisitions two of them are more significant pace to take advantage of potentially lower than normal acquisition multiples to achieve that density so that when things turn you you.

Speaker Change: Youre building off a larger base.

Speaker Change: Yeah, Yeah, Youre right to Walter I mean for sure, but there's always the question Mike.

Speaker Change: My my you've been with me for a long time, Walter right, you know us really well and me and my saying, it's always been you buy them Bad news and you're selling good news, but you know its been bad news for T. F. I for the last two years right since since 22, when our EPS at $8. I mean, it's just been bad I mean, we went to six some things.

Speaker Change: 15, and now this year with $5 75.

Speaker Change: So with that in mind and all of this everything that's going on in 25 with the fog that we nobody knows where we're going really so a lot of people or could be scared and say hey, I know.

Speaker Change: Don't don't do anything crazy don't spend $1 billion or whatever but I think that you have to be bold okay.

Speaker Change: We have a very strong team in Canada, and we're also building a much stronger team in the U S. In our specialty truckload Steve broke Shaw.

Speaker Change: And with Bob Mcgonigal that Oh.

Speaker Change: Four straight U S and also with rig actually in our logistics right so that.

Speaker Change: You may be right that Walter maybe its not going to be in 26, it could be maybe in 'twenty five okay, but it's it's always to try to balance between being bold and trying to do something sooner than later, okay. Because you may end up.

Speaker Change: Being ahead of the curve, okay in terms of the market improving.

Speaker Change: <unk>.

Speaker Change: I really believe that the U S is the best place to be in the world in terms of business and.

Speaker Change: And I feel really good about this U S economy, and I feel really that those guys. Okay. We will do a great job. The new administration. So I mean to me, it's time to invest in the U S. But then on the other side I've got guys, saying, Oh, well, it's them you got to be careful you know.

Speaker Change: Your debt is at 2.1, you're leveraged at two points. One. So this is why we're trying to reduce our debt by about 500 million at least 500 million during the course of 'twenty five.

Speaker Change: So it's a balance Walter it's it's a balance and.

Speaker Change: We want to get the Q1 behind us because to me Q1 is going to be very difficult when I look at my specialty truckload.

Speaker Change: In the U S. When I look at our U S. L. T O. It's gonna be a very difficult Q1, maybe also Q2, because you know with what's going on.

Speaker Change: We still don't know what are going to be the rules right. So as of March.

Speaker Change: The New administration will talk about tariff.

Speaker Change: As of April 1st there will be a report by the Treasury, that's gonna say whatever I don't know so I think that the rules will be clearer starting this summer of 'twenty five into the fall of 'twenty five but with all of this in security.

Speaker Change: If you're a bull maybe is the right time to do a deal.

Speaker Change: We'll see.

Speaker Change: Okay. That's great I appreciate the color. Thank you. Thank.

Walter: Thank you Walter.

Speaker Change: Okay.

Speaker Change: And your next question comes from the line of Brian Johnson back with Jpmorgan. Please go ahead.

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

Brian Johnson: Good morning, just wanted to ask if you could give a little more detail as to why you think youre seeing some of this mix shift in <unk> right.

Speaker Change: And maybe how much you can quantify just how much more if you're doing versus SMB is this.

Speaker Change: Is this competition. That's the challenge is the service level is it kind of all of the above.

Speaker Change: I think it's all of the above.

Speaker Change: I think it's just the.

Speaker Change: A difficult environment, Okay everybody's looking for freight the perception is that through the Master report is that okay.

Speaker Change: T Force right. This cheap, but the service is average or maybe not as good as they are.

Speaker Change: The average of my peers.

Speaker Change: So I mean, we have to fight and.

Speaker Change: It's a focus of us I mean, there's no. Other issues. Now. This is this is what these are sales guy have to do I mean, we've been working at it for three years and we've not been very successful.

Speaker Change: The only success, we had on the quality of freight is the average weight, which was really low now is a little bit better at 1200.

Speaker Change: That's the only success that we have so far we're trying to work with these guys say hey.

Speaker Change: You know what your responsibilities to bring some freight and.

Speaker Change: So far it's been difficult so.

Speaker Change: No like I was saying to the team.

Speaker Change: Two days ago. The T Force freight team is that guys I mean, I understand that we have this free the environment, but we have to probably better people better leaders I don't know, it's a boy is in their court.

Speaker Change: But it's tough.

Speaker Change: So looking at.

Speaker Change: <unk> it looks like at least on a massive maybe barely profitable.

Speaker Change: During the quarter you made some comments that specialized Tia was pretty tough you have extra equipment.

Speaker Change: Going around so yes, just wanted to see if there was a path to.

Speaker Change: Better profitability or is that something you have to wait for the cycle to turnaround so I guess a similar.

Speaker Change: Question, there how much of that is really in your control versus what the broader economy gives you.

Speaker Change: Yeah. So the revenue per mile. Okay. If you if you look at our revenue per mile Q2, three and four it keeps coming down okay. So it's really not good our revenue per truck.

Speaker Change: Because we have increased the number of miles.

Speaker Change: Stayed about steady so more miles we did per truck Q3, Q4 versus Q2, but less revenue per mile. Okay. Because the freight is scarce right.

Speaker Change: So this is up to the end of 'twenty four going into 'twenty five okay rate per mile discuss some stability, but because of everything that went on with the storm and this and that so number of miles went down in January.

Speaker Change: The killer that we have over there is that we have way too much capital invested trucks and trailers invested in that company and why is that because when we acquired.

Speaker Change: Dusky.

Speaker Change: They had committed to buy a large number of trucks, which we could not walk away. So so that's what we did in Q2 and three and four.

Speaker Change: Is we had to take on these trucks that were have been order. Okay. So now we have way too many trucks in a very difficult environment. So during the course of early 'twenty five we have to start unloading those excess trucks that we have okay and and then we will have.

Speaker Change: A better results in terms of our depreciation expense, which is just.

Speaker Change: Crazy, Okay with the revenue we have in terms of customer in terms of activity. Okay. We're still in a freight recession in the specialty truckload. We are still not active like we should be in a normal environment, but it's been going on for two or three years right.

Speaker Change: So if you look at my peers in the U S. In the van the World Okay.

Speaker Change: It's really difficult I mean us if you look at my or in Q4, I'm above 90 for the first time ever Okay first time ever at our specialty truckload or is above 92, I think we're 91 something.

Speaker Change: [laughter] because desk. He is is like you said, probably running like a 98 or right.

Speaker Change: And the rest of our operation is running sub 90, you are right because that's key.

Speaker Change: And.

Speaker Change: The existing business that we had before we bought dusky. It's about 50 50, a so legacy TFR specialty truckloads about the same size as the asking in terms of revenue, but in terms of profitability is there a night right.

Speaker Change: So you're right that's key.

Speaker Change: In Q4 didn't help us because if you look at my year over year improvement.

Speaker Change: Topline is through the roof.

Speaker Change: But bottom line is a meager two was just a few million dollars. So that tells you that a we didn't do too well, okay in Q4 with our U S operation Okay, but.

Speaker Change: This is a different environment T Force is is a big rock in my shoe no question about it.

Speaker Change: Dusky in our U S. Specialty truckload. This is something that we will be able to fix on the cost side on the equipment side. During the course of 'twenty five and if market conditions improve.

Speaker Change: That should help us, but if market does not improve I mean at least on the cost side with our specialty truckload, we have a path forward by shedding equipment.

Speaker Change: I, you know improving our costs, improving our overhead as well, okay. So our overhead will come down.

Speaker Change: During the course of 'twenty five.

So I feel I.

Speaker Change: I feel that you know Q.

Speaker Change: Q1 is going to be difficult for specialty truckload as well, okay, but I think that we will bring the ore down sub 90 within the next Q.

Speaker Change: Q2, Q3 and Q4.

Speaker Change: Okay. Thanks, very much I appreciate it.

Speaker Change: So you're right.

Speaker Change: And your next question comes from the line of Scott Group with Wolfe Research. Please go ahead.

Speaker Change: Hey, Thanks, My connection is not great hopefully you can hear me Elaine.

Elaine: Yes, no problem Scott.

Elaine: Great I know, Ken asked but any more color on the <unk> apologize such a dramatic change and then.

Elaine: You mentioned a few times sounds Q1 like do you think G forces profitable.

Elaine: And then one more guidance question I know youre, not giving specific guidance yet.

Elaine: As you look at it today do you think you'll grow consolidated earnings this year.

Speaker Change: Tough tough a tough question Scott so far what we know with everything that's going on Okay. We did about $5 75 of EPS in 'twenty four.

Speaker Change: With everything that we know so far same environment everything the same.

Speaker Change: Think that are you know $5 75 to $6, which is what we've done this year, it's still a very very difficult environment and I would say probably first six months of 25 will be more difficult than the first six months of 'twenty four.

Speaker Change: And I think that the last six months should get better once we understand the new rules of the North American market.

Now in terms of are we going to be profitable that T force right.

Speaker Change: No.

Speaker Change: It's very difficult right now.

Speaker Change: So the month of January was not good for Us February still tough.

Speaker Change: We believe that the sum of Q1, that's why we ask our guys to give us a re forecast for Q1, it's tough for me to answer but one thing is for sure is that we're not going to be better than the 97 or in the in our Q1.

Speaker Change: Alright.

Speaker Change: So.

Speaker Change: Going back to your question about the average length of haul.

Speaker Change: For T force rate too.

Speaker Change: To me.

Speaker Change: Maybe I'm wrong, but in my mind, the average length of haul Okay that T force right.

Speaker Change: Is basically about the same so I know Ken was saying that the length of haul has changed big time.

Speaker Change: I don't know if its a mistake, but in my mind, it's about the same so so what I'll do is Scott on that I'll ask David to get back to you just to make sure that we all talk the same thing on that.

Speaker Change: Okay, Yes.

Speaker Change: It almost looked like a typo in the press release, because it was down so much. So maybe that's right it could be because to me. It's a like I said to Ken number of trucks, you get a look at the active trucks and I am DNA, okay. Because it's about the same but in terms of length of haul I mean, it in my mind, it's it's basically the same.

Speaker Change: We have not changed the company.

Speaker Change: It's about the same were about the same as let's say.

Speaker Change: A b F. A b F is about 1100 miles we are about the same.

Speaker Change: Okay, Okay and then.

Speaker Change: On the strategic side when you were talking about.

Speaker Change: <unk> M&A I think in your answer you said like down the road like five times like.

Speaker Change: It seems like it could be helpful. Now in this not ready.

Speaker Change: Or you not or youre, not able to find a partner and then just separately on the re domicile is that what does that mean, if anything for the idea of a spin at some point yeah.

Speaker Change: Okay. So like I said, Scott I mean, you know my philosophy has always been you buy them venues you sound. Good news so its been bad for TFR last two years right. Its been bad for the industry in general has been bad for you for us as well, but we also did some M&A. So we bought desk.

Speaker Change: And those bad time, we bought <unk>, which is going to.

Speaker Change: Be a great asset and we're also buying another one that's going to be under the GHT umbrella.

Speaker Change: In April so were still active in the good you know tuck ins reasonable price et cetera, et cetera, but in terms of the U S. L. T. L. M&A in order to do something you got to do something of size because the problem. We have us is that we're way too small way too small.

Speaker Change: 20000 shipments as the ship is it's bad I mean, you cannot have it's difficult if you want to be a national player in the U S. With 20000 shipments it's too small just think about we do 10000 in Canada.

Speaker Change: I mean, Canada is 110th of the U S.

Speaker Change: So it's it doesn't make any sense so but.

Speaker Change: The timing is right.

Speaker Change: You have to be bold right and it also depends on you know our investors. Okay. It also depends on the board. So me I'm the CEO.

Speaker Change: And for sure I'm, making some proposal.

Speaker Change: But you know sometimes you got board members or people that can say hey are you Crazy I mean, your leverage is 2.1.

Speaker Change: It's very foggy nobody knows where we're going okay. Your earnings in Q4 are down like 30% Okay.

Speaker Change: Are you Crazy I mean, why would you do a deal upsize right.

Speaker Change: So me I'm, saying well guys. Yeah. You got this this is one side of the coin. The other side of acquainted you Gotta be Bowl you Gotta do it now when everything is bad because when everything is bad one day things will get better.

Speaker Change: So as you wait for things to get better you're going to have to pay more.

Speaker Change: So it's a balance like I said earlier.

Speaker Change: Okay, and and you know that's.

Speaker Change: That's why I'm, saying, I'm, saying down the road, okay, but maybe the road, it's not going to be too long or like a like a you know I was talking with Walter.

Speaker Change: We'll see.

Speaker Change: And the spin idea.

Speaker Change: Oh, the spin the spin you know like I said earlier, Scott we need size. So if you look at our market cap today, when we talk to our investors large investors of TMI.

Speaker Change: They liked the idea of the spin, but they say you're too small.

Speaker Change: Two small so you know what.

Speaker Change: If you were a 12 billion dollar market cap Guy and you split the company in two and one is let's see six and the other one is 62626 is small.

Speaker Change: So we think that your idea is really good it makes a lot of sense, but try to get a little bit bigger. So let's say if you do a deal in your market cap is 15, okay. Because you are buying something good at a reasonable price.

Speaker Change: Then it makes it easier to do number one number two it takes time so in the meantime.

Speaker Change: What we're doing Scott, we're not sitting on our hands, Okay, we're getting ready.

Speaker Change: Okay. So we have to work on on systems right. So because they do when you do the split you don't want to be stuck with it.

Speaker Change: A TSA or transition agreement for three years like we had with the would.

Speaker Change: Would you be apps right. So we're making some moves on the real estate side to we're making some move on the asset side. Okay. So let's say we have trucks that are let's say in business, a but they should be in business be because what we used to do in Canada is to have a global.

Speaker Change: Portfolio of all asset mixed up between truckload and Nokia. So now we're all going through the split so we're not sitting on our hands, we're getting ready okay to do that.

Speaker Change: But it's still in the cards, absolutely because it makes a lot of sense. The return on invested capital of our truckload operation is single digit in Q4 single digit eight point something if I remember.

Speaker Change: And then the rest of our business in very difficult environment.

Speaker Change: <unk> environment for Us logistics, Okay L. T O I mean, we're running 15 17, 18% return on invested capital. So it's it's not the same so it's gotta be separate of one point.

Speaker Change: Yeah.

Speaker Change: Thank you guys appreciate it.

Speaker Change: Pleasure Scott.

Speaker Change: Thank you. Our next question comes from the line of Bruce Chan with Stifel. Please go ahead.

Speaker Change: Yes, thanks, operator, and good morning Alain.

Speaker Change: Boy he broke a lot about.

Speaker Change: Yes, great great great too.

Speaker Change: Peak with you.

Speaker Change: You made some comments about the sales team earlier in the call the opportunity in SMB, which I think makes a lot of sense.

Speaker Change: But you've also been trying for three years that you've had a lot of competitors in the space that are getting the step.

Speaker Change: So question is how do I win in these rfps that you're just going to keep slogging. It out you need to hire more do you need to change incentives, especially without improving your sort of efforts.

Speaker Change: Yeah, I think we did all of that day.

Speaker Change: We've changed incentive okay. We've changed people. Okay. The focus is still the same and we have not we've not been able to have the results right. So.

Speaker Change: We are working on our service we have improve service at the force right absolutely you know.

Speaker Change: Right now if you look at my Mispick up I'm.

I still have way too many I've got the boat.

Speaker Change: Little shy of 400, a day that we miss pick up but.

Speaker Change: But we used to be double that right. So we are improving now for sure. The mass you report is not helping us in the perception of T Force right why is that.

Speaker Change: Because we came to know that.

Speaker Change: Sadly mascio.

Speaker Change: Was trying to get in touch with us and they could get in touch with us for four years. So they were using information that a stale from 'twenty to 'twenty.

Speaker Change: So maybe this report is not accurate because we never provided them the right information for them to really.

Speaker Change: Get a true picture of T Force rate services right. So hopefully down the road now that we have a communication they will.

Speaker Change: Talk to customers that we service and maybe hopefully that perception that the T Force freight services is not good.

Speaker Change: Will improve and I think the service reality wise as improve right.

Speaker Change: Now our sales team are fighting that okay and are fighting our peers that are you know have better service and in a difficult environment, Okay, where freight is.

Speaker Change: It is not easy to find as a service is key right. So if the customer has the perception that your service not as good as the other guy and the price is about the same well the customer is not stupid he's going to go with the other guy right. So we have to change this perception of service and we also have to work on.

Speaker Change: Improving our service at the same time.

Speaker Change: And we also have to educate our sales team that guys. I mean, our service is improving guys and you got to fight you got to fight right and so far.

Speaker Change: If I look at my corporate then <unk>, we're about flat, okay in 24 year over year.

Speaker Change: So far in 'twenty five were down a little bit on corporate but about flat on three PL.

Speaker Change: But we're down on again on small medium sized account, which is the most profitable business that you can add so I mean, so we're trying organically okay to improve that.

Speaker Change: Because that would help us with our density.

Speaker Change: And like I said earlier in the call.

Down the road, Okay, and that's what we've done in Canada, that's what we've done in Canada for years and years and years is that we beef up our density through M&A.

Speaker Change: Through M&A. So we continue to do that and in Canada, We run either union or nonunion right. So we got our Union network and we also have a nonunion net network and we beef up density in all of these two networks all the time.

Speaker Change: And this is now after trying for three years, okay to grow organically and it's not working okay. So we keep pushing.

Speaker Change: Sales team to to grow this thing.

Speaker Change: But.

Speaker Change: We are now understand that we have to do something okay down the road on M&A.

Speaker Change: To build a nonunion network on their site or to try to grow with some regional unionize LTR to beef up T Force right I mean, but don't forget our approach us on M&A is always the same is that if we do some M&A, we keep business separate.

Speaker Change: Right. We don't we don't like merger, we're not big fans of merger Okay.

Speaker Change: We don't do that right. So we work together, so let's say we own another company I mean, we will work the two companies will work together, but there's no combination theres no merger, we hate that because yeah. The accounting will tell you that you can save a lot of money, but at the end of the day. It's false so we keep the two like we do in Canada.

Speaker Change: <unk>.

Speaker Change: Okay.

Speaker Change: Really helpful color and then just a really quick follow up on that M&A point is the thought still that an asset light operation makes the most sense or are you kind of broadening up the.

Speaker Change: The search a little bit.

Speaker Change: Well asset light as is always the best though so if you look at you know.

Speaker Change: Our Canadian L. T O. It's really really light why is that because we are a heavy intermodal. We all also heavy with third party PND. So.

Speaker Change: Well for sure I mean, if we have an option to buy an asset light a reasonable price. Okay will jump on that one first now we also understand that there's not that many asset light operation. Okay. In the U S on the <unk> side.

Speaker Change: So.

Speaker Change: Then okay. We look at an asset operation so about a year ago, we bought a $100 million revenue asset company non union in the U S. Okay. So so this is this is our first okay of maybe more to come.

Speaker Change: On that site now this company the beauty of this company is that they are also big in the trans border between U S and Canada, right, which has got better yield.

Speaker Change: Better yield than U S domestic or better yield than Canadian domestic.

Speaker Change: So this is a first for us a year ago and down the road. Okay. This is an area that we will be trying to grow.

Speaker Change: And maybe you know if we can find a good brother to T Force right.

Speaker Change: Okay.

Speaker Change: I mean, that's also something that we're going to be looking at if we can find a good brother a good fit.

Speaker Change: But without merging.

Speaker Change: Never say that T F I wants to buy a company and merge it with a or B or C. We don't do that.

Speaker Change: Okay, Great I appreciate the time.

Speaker Change: Pleasure.

Speaker Change: And your next question comes from the line of Tom <unk> of UBS. Please go ahead.

Tom <unk>: Yeah, good good morning Alain.

Speaker Change: I'm wondering Tom wanted.

Speaker Change: I wanted to get a sense I know, we've had quite a bit of discussion on <unk> I think we've had for the last couple of years the rail.

Speaker Change: Framework of idiosyncratic drivers for improvement in <unk> and <unk>.

Speaker Change: Had a fair bit of control.

Speaker Change: It feels like we're kind of waiting for the market to improve and you really need a better freight backdrop to see things get better in <unk> do you think that's fair.

Speaker Change: That's really the most important lever for.

Speaker Change: U S LCL to get better or or are there still levers that are kind of meaningful enough that you can push in your control in U S. L. T O.

Speaker Change: No I think so Tom I think that we still have a lot of work to do on the cost side I think fleet.

Speaker Change: <unk> is a is a big problem for us.

Speaker Change: Since day, one because we are the old trucks blah blah blah blah blah, no we have a normal fleet.

Speaker Change: But our cost is too high.

Speaker Change: So we're starting to see some improvement because we have a new leader, Okay that oversees our fleet management now and this is something that should help us during the course of 'twenty five and beyond that's.

Speaker Change: That's number one number two is like I said earlier on the call.

Speaker Change: The PND.

Speaker Change: Software that we're using dates back about 20 years right. So it was good 20 years ago.

Speaker Change: Okay. So so now in 25, we're gonna be updating that through either a term which is the software that we're using now for our lineup, which helped us big time, Okay. So our line haul cost today, even if we put more freight on the road versus rail our line haul cost per pound or per shipment is less today than.

Speaker Change: It was three years ago with better service because the rail is the rail right. So we put less stuff on the rail more on the road costs about the same and services better but on the PND side, we have a big job to do there because you know.

Speaker Change: We could save a lot of money. So to me it's really the next big focus so fleet. We have the tools. We have the software we have a better leader now we should that should help us and twenty-five PND, it's going to take probably all year, okay to get.

Speaker Change: This new software tested implemented maybe 25% to 26.

Speaker Change: The other thing also that we are implementing now is also it's been a cancer for us billing.

Speaker Change: Master file of customers and all of that so we are implementing as we speak and it's going to take it all the way until the summer of 'twenty five.

Speaker Change: Software that's been used by one of our peers.

Speaker Change: So it has been tested by those guys.

Speaker Change: And that's what we are implementing now so that's going to help us build customer properly.

Speaker Change: Okay, Ivy better control about what's going on better visibility about whats going on et cetera et cetera. So that's also another lever during the course of 'twenty five that should help us on the cost side now if market starts to turn if this economy starts to get better if this freight recession.

Speaker Change: Disappear, let's say 25.

Speaker Change: Even better but for us in 'twenty five we have to stop okay. The degradation of volume.

Speaker Change: And and slowly improve it as much as we can.

Speaker Change: And we have a big job to do on costs on fleet still on P. N D N on billing customer properly so they can pay us properly.

Right, Okay, well, what about there hasn't been much discussion on competitive environment, but if you take a step back a number of the bigger players have added terminals.

Speaker Change: And <unk>.

Speaker Change: Recycled yellow terminals, if you will.

Speaker Change: Expanded and are focused on growth. So do you think that's potentially contributing to some of the pressure on shipments that.

Speaker Change: Other players who have added terminals are taking business and thats.

Speaker Change: Contributing to the pretty significant cycle pressures and lower shipment count is that might be hard to see but do you think that's a factor too.

Speaker Change: Yeah.

Speaker Change: You know economy of one to one to tells you that if you offer more.

Speaker Change: Okay, you will get less.

Speaker Change: Right.

Speaker Change: So if you offer more freight capacity, you'll get less money.

Speaker Change: To me, it's basically the rule of economy.

Speaker Change: So by adding capacity.

Speaker Change: Two D L T L environment.

For sure down the road, you you're going to be.

Speaker Change: <unk> putting pressure.

Unless unless the market starts to grow okay, and if theres growth, maybe not so much but it's still a very weak.

Speaker Change: Weak market for sure what by adding capacity youre, putting pressure down the road on rates the shippers sees that they know that.

Speaker Change: And they will RFP the business and then youre stuck with fixed costs and.

Speaker Change: You know there is a fight fight for freight okay. So this is basic economy. So this is why US our approach has always been guys [laughter] don't add capacity.

Speaker Change: Do that right. So this is why I always down the road, what we're trying to do is through some M&A.

Speaker Change: To some education.

Speaker Change: You add capacity, you'll make less money is very simple you have to understand just look at the price of oil add capacity add more oil price of oil goes down right.

Speaker Change: This is just basic.

Speaker Change: Rules, so I would say in Canada why were so good as you know, we're not adding capacity where shrinking shrinking shrinking and.

Speaker Change: And making more.

Speaker Change: Or at least protecting if you look at my L. T O R. Okay.

Speaker Change: I used to be 79, I think in last year, and and 80, something now 80 80 points something right. So we are protecting our margin.

Speaker Change: So youre right I mean, there could be some pressure down the road awfully awfully our peers understand that.

Speaker Change: And don't offer too much capacity because L. T O U S. L. T O is the best place to be.

Speaker Change: In North America today.

Speaker Change: Best place to be because it's it's more.

Speaker Change: It's more it's not like the truckload where.

Speaker Change: Every Tom <expletive> and Harry could be a truckload guys tomorrow.

Speaker Change: So just to make sure I understand your comment so you did not it wasn't clear that there was like a worsening of competitive pressures in <unk>. You don't really think that was the issue is more broader market, but you might be concerned about pressures in the future is that I guess is that where youre seeing it yep Yep, Yeah, Q4, it's hard to say.

Speaker Change: Okay, maybe okay I don't know, but one thing is for sure a long term when you add capacity and the market is not growing you're going to end up with price pressure.

Speaker Change: Makes sense. Thank you for the time line.

Tim: Pleasure Tim.

Speaker Change: Thank you and your next question comes from the line of Denmark for you. Please go ahead.

Denmark: Yes, good morning, Eli.

Justin: Justin Yep.

Speaker Change: Yeah.

Speaker Change: With respect to free cash flow, obviously, you were able to pull close to $800 million in 2024, I would be curious given all the comments that you provided how should we be thinking in terms of the free cash flow generation.

Speaker Change: For 2025, and maybe a little bit more color around capex, given the investment needed.

Speaker Change: Or that's the key that you've committed for.

Speaker Change: Yeah, So so I think.

Speaker Change: Based on what we know so far okay, but anyway.

Speaker Change: T F I will pay as dividend T F I will reimburse okay about.

Speaker Change: $4 million to $500 million of debt Dream twenty-five TFR, we'll also invest about 200 million U S. In M&A.

Speaker Change: So if you do the sum of all that I mean, it's basically.

Speaker Change: About the same.

Speaker Change: Or because our capex will be reduced.

Speaker Change: Why is that because when you do when you drive less miles in your truckload operation.

Speaker Change: Okay, well you can extend the life of the truck.

Speaker Change: So our capex will be less in 'twenty five than they were in 24 because of that depressed truckload environment. The same is true of IL T. L. So L. T. L. For this year, we're buying 400 trucks U S. L. T L I'm talking here instead of buying.

Speaker Change: Five or 600 trucks.

Speaker Change: In 'twenty four.

Speaker Change: And in 'twenty three right.

Speaker Change: Because our average age Okay is four two now the U S. L. T O. So so globally, our capex <unk>.

Speaker Change: Our net capex will probably less.

Speaker Change: $50 million to $100 million year over year.

Speaker Change: Okay, that's great and in terms of M&A just for the follow up you gave a very good color on the timing it seems to be most unlikely in 2025.

Speaker Change: I'm just wondering how much how much it's pushed to the right given maybe the financial situation and do you feel you need to further integrate UBS freight and that's the key before pulling the trigger on the larger one and obviously when we look at the past you have been quite good.

Speaker Change: Monetizing some assets thinking about the Heartland Express waste management. So is it something that might be in the cards are down the road.

Speaker Change: Monetizing assets no except on the real estate side, there, but anyway in terms of our T Force right. I mean, we have a plan and M&A will just ALP T force rate down the road I think so so we will not stop an M&A transaction, because we were not happy with whats.

Speaker Change: On a T force rate I'm not happy at all with what's going on over there.

Speaker Change: The guys are working hard, but we need we need results right. So.

Speaker Change: So M&A could be part of that solution, helping them on the density side at one point maybe.

Speaker Change: And on the desk side I mean.

Speaker Change: We are really busy and reducing head of overhead costs over there.

Speaker Change: Have way too much assets or so this is killing us on depreciation expenses, because we have probably in the neighborhood of 400 trucks too. Many okay. Because we were stuck buying the commitment that <unk> prior owners made.

Speaker Change: And we got all these trucks in 'twenty four and now okay, we have to start unloading.

Speaker Change: The older trucks, okay in a depressed environment. So what the guys have been doing is what they're saying is that I think the market is so bad I don't want to sell it now I just want to wait until this market gets better.

Speaker Change: So this is today right. So me I'm, saying, no hey, guys. I mean, do we do we see the U S market pre owned trucks getting better.

Speaker Change: Not really wow, okay. So let's start unloading their trucks and that's what we're doing now and the beauty of desk is that we're not losing money when we're selling trucks, even in a very depressed the preowned market compare to when we are selling all.

Speaker Change: The.

Speaker Change: P. S. R. T force right trucks, okay, because they have been so so the fleet has been so poorly managed that Oh, if you look at my disposal of equipment in Q4, I've lost money right not much but I still lost money alright, but on that ski when I sell equipment, that's key I don't.

Speaker Change: Overall I don't lose money. So I said guys. Now is the time I don't know when this market is going to get better we know because we all the new trucks for backyard and freight that the production is down 20%. Okay. In Q4 is going to be down 20% in Q1, two and three probably and picking up again in Q4.

Speaker Change: For Q4 25, according to our forecasts on the truck I mean for the first time they will produce they will do a better job in Q4 25 billion in Q4 Q4 25 to 424.

Speaker Change: For the first time so.

Speaker Change: I mean, it's it's it's a global situation what M&A.

Speaker Change: As I said, many many times you buying venues you sound. Good news, it's all bad it's been bad for years and years.

Speaker Change: It's just like we have to be bold, we have to find the right target we have to do the right deal at the right price.

Speaker Change: And you know that's been the success of <unk> over the last 25 to 30 years is buy the right price at the right time.

Speaker Change: You know we bought desk here a year ago in April.

Speaker Change: Q2 was okay, three and four not so good.

Speaker Change: But I feel really good with the Mr Brook Shaw and his team were going to.

Speaker Change: We have a lot of work to do on reducing our overhead costs, reducing our asset base. So that we could bring our expense depreciation expense down.

Speaker Change: And we're going to turn this ship around I mean are running a 90 or in specialized truckload, it's not acceptable okay, everybody knows that I mean, we're not a bad guy we are a specialty.

Speaker Change: So we got to bring this all are down and we're going to get sub 90 for sure. During the course of Oh 25, even in the.

Speaker Change: Difficult still difficult market.

Speaker Change: Thank you very much time on it.

Speaker Change: So as you have been doing.

Yes.

Speaker Change: And your next question comes from the line of Danielle <unk>.

Danielle Stevens: Stevens. Please go ahead.

Danielle Stevens: Hey, good morning, Thanks, taking the questions.

Speaker Change: Good morning.

Speaker Change: And then I want to start maybe back on the U S. L. P. L service side, you mentioned a few times. The claims ratio is unacceptably high are there.

Speaker Change: Yeah.

Speaker Change: These answers because some other things are getting better but this has been softening for a couple of quarters, but love to hear some of the investments you're making to actually improve this claims ratio going forward and could you provide any other update on like on time deliveries and the other service metrics that had been a headwind on the USA will deal done and maybe what you're doing to improve those.

Speaker Change: Yeah. So.

Speaker Change: You know on the claim side, here's here's the story okay. So the reason our where our 0.9 is that we.

Speaker Change: We used to break so much stuff that we have a store in Richmond that we're selling the stuff that we were breaking but now we break less stuff. So we don't have this revenue that goes against the expense I mean that that is the story right now which to me is okay fine, but at the end of the day, Okay. Our clay will come down back will come.

Speaker Change: Back down again, okay in the next few quarters and what we're doing about that is again.

Speaker Change: Is is working with the customer working with the operators and we know what to do is just like the story is that well the benefit that we had by selling older stuff that we were you know breaking I mean that that has gone the stores close we don't have that anymore and now were.

Speaker Change: Just expensing, okay. The stuff that we're breaking now okay or losing now.

Speaker Change: So okay fine that being said what what is the plan to bring that 0.9 down to more acceptable level.

Speaker Change: So we're going back to the source and and we should do a better job on that right. So the guys are all sensitive lies that hey, this is not acceptable.

Speaker Change: This affects our service affects the customer relationship nobody likes to have stuff broken nobody likes to have stuffs loss right.

Speaker Change: Even if you pay for it.

Speaker Change: So that that is where we're going on that and what was your next one second question I forgot.

Speaker Change: The other update on the on time deliveries or other service.

Speaker Change: Yes, yes kind of elusive, yes, yes, yes, yes, well the on time delivery, we are improving absolutely you.

Speaker Change: You know well, we'll never be a $99 nine guy. So the goal is to be some things around in 98, when we bought the company we were more like a 90 90 192.

Speaker Change: We are all the excuse in the world to be at 90 90 192.

Speaker Change: Right now we're more like a $95 96.

Speaker Change: In range.

Speaker Change: You exclude everything thats going on with weather issues. So we have improved we're still probably not to the level of our peers are okay, but we are improving.

Speaker Change: And I just gave the specific on MS pickup I mean, our Miss pickup is down 50% versus what it was like a year year or two years ago. So our service is improving.

Speaker Change: Absolutely.

Speaker Change: Got it and then as my follow up I wanted to ask a longer term, maybe a strategic one on the U S. L deal side. It's been a few years now you mentioned, it's been a challenging three years of owning the T force as it were.

Speaker Change: Do we think about the ability to cut cost or add density I guess, how much of those differences in the U S versus Canada or maybe more structural than you appreciated. When you bought this business as you learn and when we think about where our work and get to maybe 90 395 as this year, but has anything changed like where can this business go overtime as you better appreciate the headwinds and just the.

Speaker Change: <unk> of the U S market.

Speaker Change: You know what the market in Canada is not different than the one in the U S and vice versa. What's different is the level of issues when we bought Ups's free.

Speaker Change: Okay. So we could never.

Speaker Change: You know even with all the new deal that we've done.

Speaker Change: We knew that the fleet was not up to par we knew that the real estate was not up to par.

Speaker Change: But.

Speaker Change: This system the financial system, we were not aware because these were ups's system. Okay. So they were connected to the E. P. S environment. So we didn't know anything about that.

Speaker Change: And the tools for L. T L. Because the tools for package at UBS are probably fantastic because these days. These guys do a fantastic job over there, but the tools for LDL were poor. Okay. So this is something that is taking us way more time than we thought so I've talked about the line all okay. So lino.

Speaker Change: Now, we have often which is helping us big time.

Speaker Change: The fleet now we have <unk>, that's a it's been implemented a year ago.

Speaker Change: We had to change leadership that we have a new leadership, so so terrace and the tool and the new leadership will help us reduce maintenance costs.

Speaker Change: <unk> and Master file management, it's been a nightmare for us.

Speaker Change: Okay from day, one now we are implementing a software that's been used by one of our peers by the end of summer this should be done with so it's it's much worse okay.

Speaker Change: Than we thought when we bought the company okay.

Speaker Change: But we're going to get over it I mean, we know what to do okay. The U S market is not that different than the than the Canadian market. The basic rule. Okay. Why are we so good and successful in Canada is because of our density is second to none.

Speaker Change: We drive in the U S right now for our PND 10 miles between each and every stuff. This is not acceptable I mean, we drive less than five miles in Canada why is that because we've educated our sales team everybody in.

Speaker Change: Can eat operation that we want the driver to drive less miles and pick up more free that's the culture, we have again in the U S.

Speaker Change: That culture did not exist, okay, and we've been trying working with the sales team to understand guys. We need more for a close our thermal we need more freight or pick up.

Speaker Change: It's it's what we call density that helps us reduce costs right.

Speaker Change: By doing that Okay, you are way more efficient so what we're trying to do for the first three or four years four or five years that we bought the company is trying to do it organically and we've not been successful so far the only success, we have as we move the rate and the rate, but the weight pushed up the wafer side.

Speaker Change: Wait for shipping Okay from let's say less than 1100 bounds to about 1200 docs that has been a success, but besides that we have not done anything on density. So this is why I'm, saying that down the road. Okay. You try organically to improve your density but.

Speaker Change: At one point and that's been the success of Canada M&A has been the success that we encounter in Canada, both Union and nonunion, Okay is to grow our network.

Speaker Change: That through M&A you build your density.

Speaker Change: Great I appreciate all the color best of luck Glenn.

Speaker Change: Pleasure.

Speaker Change: And your next question comes from the line of area was also at Citigroup. Please go ahead.

Speaker Change: Then more on Ferrari morning, <unk>, Thanks for taking our question.

Speaker Change: Back to the small medium.

Speaker Change: Is it losing accounts in lanes or is it keeping accounts of lanes, but just losing volumes just to try to understand the ease of winning back that business. When you improve service and are there other higher margin customer segments, you could focus on to offset in case small and medium business is still low in <unk> and you were at risk of <unk>.

Speaker Change: Close to that 97%.

Speaker Change: Yeah Yeah.

Speaker Change: That is it's just like the focus of our sales team has not been good. Okay. So so the reason that we lose okay. Because they know our churn is too high right. So yeah, we look at the churn normal churn in the Nel T L invite.

Speaker Change: It could be 5% to 10%, but when you train is way more than that which is the case that T Force rate. Then you know it takes you lose more than what you gain so the net is minus right. So you got to stop their churn you got to stop what you're losing okay. So that.

Speaker Change: You could have a positive when you had the loss because you will always have loss. Okay. So because there's you always have churn, but you have to have less loss than what you can bring in and so far okay on three P M and corporate.

Speaker Change: We're fine the problem is that with small and medium sized account, we lose more than what we gain.

Speaker Change: In terms of customer and also in terms of lane. So it's just like guys roll up your sleeve and and you got to be more aggressive so that we stop losing more than we're gaining.

Speaker Change: Okay, Great appreciate that maybe.

Speaker Change: Maybe just as a follow on from your Investor Day, a few years ago, you were graded provided.

Speaker Change: Estimated or improvement for example, 50 or 100 basis points.

Speaker Change: Yep.

Speaker Change: Just to understand the magnitude of the I think five or so actions, you're you're implementing now the sales culture to maximize shipments per stop.

Speaker Change: <unk> software would be number two billing system number three.

Todd: Sure Todd.

Todd: Little level visibility and compensation tied to that which needs time to gain traction.

Todd: And then the <unk>.

Speaker Change: Hall in sourcing can you provide sort of rough estimates on award improvement basis points ranges.

Todd: For these.

Todd: Yeah. So so on P. N D. It's too early I don't know okay. So so this is difficult to say on fleet.

Todd: On fleet in my mind, Okay. If I look at the plan what we're trying to do I think fleet year over year same miles same same everything our cost has to come down between $20 million to $35 million year over year.

Todd: That's fleet.

Todd: In terms of billing bad debt.

Todd: Claims and this and that.

Todd: To me I mean, this is another $10 million to $15 million debt.

Todd: I'll just throw money at the door.

Todd: You know, we we pick off rate, we deliver afraid and you know we don't know who we have to build.

Todd: Because it's not clear okay, we accept an order in and our people are just saying well I think it's a it's a.

Todd: No. It's b. So we built a and then after six months is not paying because it's not me. Okay. So then you go back to B and B says no. It's not me because it was clear that day that you took the order. So we have that because of all the software old tools that we have that did not control that process, which.

Todd: What happened during the course of 'twenty five until from now until the <unk>.

Speaker Change: The summer July right. So on the line haul side I think we're probably doing a great job, we're probably at 95% of what the optimum the best that we could do on that our objective has been to move more afraid on the road versus rail to improve service and we've done that.

So we run a lot of teams now.

Speaker Change: Okay running our lineup so we're doing a better job on that.

Speaker Change: So online all I don't see that so much. So it's basically the PND, although P. N D I cannot put a number on it it's too early.

Speaker Change: M M.

Speaker Change: And fleet and also bad debt and billing customer properly. So these are the kind of leverage density.

Speaker Change: It's a push we've been pushing with no results with no results. So far so again 25, we'll keep pushing on that and that's why I'm, saying down the road.

Speaker Change: No we're going to have to do something on M&A to help us improve okay that density because again, we buy a company. There is no merger, but we worked together right. So you know like we do in Canada. If I take the example of Ken part Loomis. So what we're saying is that these zip golar camp or let's say in <unk>.

Speaker Change: Kratos and these Zipcode R. Loomis. So so we're not merging the company, but in the Zipcode, Okay. Ken bar is delivering both Kemper and Loomis stuff, but the companies are not combined but we work together. So we improve that density by doing that in those ZIP code because now Ken part of delivers.

Speaker Change: Freight for Kemper and freight four okay Loomis and then in the different regions of Toronto. For example is going to be let's say, a luminous territory, where illumina is going to deliver both Kemper and Loomis afraid right, but we don't merge the company no no no no no we don't do that.

Speaker Change: Great. Thanks, so much.

Speaker Change: My pleasure.

Speaker Change: Thank you and your next question comes from the line of cannot Gupta with Scotiabank. Please go ahead.

Speaker Change: Good morning Ali Thanks for the question.

Speaker Change: It's been a long call so I'll keep it pretty short hopefully.

Speaker Change: I know you're not guiding here for 25, but I think you were alluding to some pressures and headwinds in the specialty truckload the T force and ghd ranked up with them.

Speaker Change: Better part of the.

Speaker Change: Five.

Speaker Change: In terms of the remaining operating segments right. The Canadian LDL can Ian truckload packaging Korea et cetera.

Speaker Change: You see those segments like maybe offsetting the headwinds in the remaining segments perhaps.

Perhaps this looked like a flattish year from earnings perspective, yeah.

Speaker Change: I feel pretty good about our logistics, okay. So our logistics are going to do well except for G. H T. The first probably nine months, Okay, we're gonna be behind.

Speaker Change: Last year, because of but logistic I feel really good PNC.

Speaker Change: The team there, Mike and Chris they've done a fantastic job. If you look at my Q4, well you can say well because of the Canada post strike, yes, a bit but don't forget we're mostly beat to be us right.

Speaker Change: So I feel good about Canadian L. T. L. I mean, the Kinder is the acquisition will turn into.

Speaker Change: A good or environment, because right now it's a drag on our Canadian or so the Canadian truckload driver, Inc. Is killing US. Okay. So it continues but I think that the federal government now is taking action, reducing the permit are the work permits and all of that so maybe this is going to help.

Speaker Change: So the big rock in my shoe, Okay, and it's been like that for a few years is T force right and we're working on it.

Speaker Change: Our specialty truckload in Canada, we're doing well.

Speaker Change: Doing really well specialty truckload in the U S. We will do better in 'twenty five we have a rough start of 25, we've got too much drugs to much assets.

Speaker Change: You know that we're stuck with because of commitment of the previous management team there that we had to take on.

Speaker Change: And then also the revenue per mile has been difficult for us in Q3 and in Q4. So far in Q1 revenue per truck is is okay. The revenue per mile is okay. The revenue per truck is down because the miles are down because of weather issues that will disappear.

Speaker Change: In the course of the year.

Speaker Change: The freight is still not the greatest environment, Okay, hopefully with the new administration in the U S things will start to accelerate this this freight though.

Create demand.

Speaker Change: So, yes, I feel really good about certain part of my business. My biggest problem is is really a T force right. The U S. I mean, it's been that for four four years, that's the only reason that I keep.

Speaker Change: Up at night.

Speaker Change: <unk> is really a T force right the U S.

Speaker Change: Okay. That's helpful color. Thanks, and then maybe just a quick follow up on being domiciled link any timelines do you want to kind of suggest here in terms of the application process. The shareholder approval and this thing can be wrapped up.

Speaker Change: I think the timeline is between nine and 12 months and again, okay. If I may add to that I mean, we have today within the T. F. I head office, we have employees in Canada and in the U S. We have employees in Montreal, Toronto, Calgary, Chicago, Miami et cetera et cetera.

Speaker Change: And it's not because the domicile of tier four tier five international will move from Canada to the U S.

Speaker Change: Not moving people, we're not moving people from Canada to the U S. I mean, we're not doing that where it's not stupid I mean, so I mean, it's business as usual, okay and in US a T. F. I, we hired the best talent, where the talent is so if the talent is in Chicago, we hire in Chicago It was Italian as <unk>.

Speaker Change: Throwing away Iron Toronto right. So I mean that is always been the nature is just like by doing that now we'd become.

Speaker Change: A U S domicile.

Speaker Change: But.

Speaker Change: Every responsibility of <unk> at office remains where the responsibility is today.

Speaker Change: Okay makes sense. Thanks, so much for the time alright. Thank you.

Speaker Change: It's a pleasure cannot.

Speaker Change: And your next question comes from the line of Kevin Chiang CIBC. Please go ahead.

Kevin Chiang: Hey, Elaine.

Speaker Change: I'll leave it to one than I am.

Speaker Change: Appreciate all the color you've provided on this on this call.

Speaker Change: I think in answer to an earlier question you said.

Speaker Change: Absent any.

Speaker Change: Revenue recover you saw a path to at least kind of just seven or 725 bps, what's your self help levers.

Speaker Change: I know I know youre refraining from providing guidance, but when we think of.

Speaker Change: That level of earnings growth without a macro recovery you have a sense of how long it can get there. It sounds like you have a lot of irons in the fire for 25. So is that something we can think of.

Speaker Change: The North Star for 2026, as you kind of work through some of these initiatives or.

Speaker Change: It's a longer than last shorter than that.

Speaker Change: Oh for sure Kevin is going to take us some time I mean, you know the cost issue that we have at our T force rate is still a drag because our volume or too low or too low. So you know at 20000 shipments a day. It's just that it's just very difficult, but you know we have levers that we're going to be working.

Speaker Change: Now in terms of our logistics I mean, it's it's a little bit of a market condition as soon as okay.

Speaker Change: This GHT situation corrects itself by the end of the year, Okay, we're gonna be doing about $200 million of OA.

Speaker Change: Our logistics Division now this year will probably be down to 150 160, because of what's going on with the truck the truck manufacturing.

Speaker Change: I think our Canadian operation, we'll do as good as they did in 'twenty five and 24, Okay. It's really we need a major improvement because if you look at my T Force rate Q4 year over year, I'm down like $30 million right.

Speaker Change: I mean this is this is this is like a nightmare for me right. So I mean, we have to take the bull by the ore now Okay Q1, because of everything that I've said because of all the fog and in all of this we can't we don't know where we're going to end up with a with Q1, so far very difficult for.

Speaker Change: Our T force rate and our.

Speaker Change: And are.

Speaker Change: U S.

Speaker Change: Specialty truckload operation I think that the truckload operation will improve during the course of the year and it's we have a big job to do at the T Force rate U S. L T O.

Speaker Change: That's helpful color I'll leave it there and best of luck as you got through 25 here.

Speaker Change: Oh, yes, we're going to need a lot of work, but you know what the old saying the harder you work the luckier you can get.

Speaker Change: I hear you. Thank you.

Kevin Chiang: Okay Kevin.

Speaker Change: Thank you and your next question comes from the line of Cameron <unk> with National.

Speaker Change: Financial Please go ahead.

Speaker Change: Yes. Thanks, good morning, I'll stick to one question as well and you kind of mentioned earlier in the call just around uncertainty around tariffs and what that might mean for volumes. I was wondering if you can just talk a little bit about your cross border exposure I know you've got.

Speaker Change: Got a decent amount of automotive work I'm not sure how much of that is cross border just any I guess.

Speaker Change: Additional color you can provide on where do you see the risks might be.

Speaker Change: Some sort of big blanket tariffs applied to Canadian imports into the U S.

Speaker Change: Yeah, Great question Kamran I mean.

Speaker Change: We are a lot of aluminum us okay. So for sure aluminum is going to be part of the tariff I mean, Mr. Trump has already said that our aluminum tariff is going to be 25%. So we know that okay, but we lived through that also in 18 right.

Speaker Change: So I don't think that this is going to affect the volume for aluminum but.

Speaker Change: We don't know when we talk to customers.

Speaker Change: Uh huh.

Feel good well, we don't know right at this this is why I'm, saying, we are going through some fog right now because I think that by the summer, we'll know [laughter], but right now we don't know.

Speaker Change: Steel, we believe that our you know Canada produce a lot of steel for the U S market. Some of it is specialize so I don't see issues too much with that we.

Speaker Change: We haul some of that.

Speaker Change: Some of it is more like commodity steel, which like a stelco for example, so that could be a problem. Okay with tariff. So this is mostly you know FX, Ontario.

Speaker Change: It will affect us a little bit but the problem is always the domino effect of all these truckers that are all in this project that we don't US today that now are out of work could they start to rock the ship and attack some of our customers that you know we service today.

Speaker Change: So it's still difficult to say right.

Speaker Change: But because we're mostly a specialty truckload guy.

Speaker Change: You know, it's it's not as easy as a van kind of world right.

Speaker Change: No.

Speaker Change: What we know so far at Cameron.

Speaker Change: We shouldnt be doing too bad now the trans border revenue was about 4% of global Tsi revenue.

Speaker Change: 4%.

Speaker Change: So it's big but it's not that big right.

Speaker Change: So we'll have to see that's why we cannot provide guidance I mean, even in my U S peers.

Speaker Change: They are having a tough time give guidance because of all this unknown is inflation coming back in the U S or in Canada, Okay, who knows.

Speaker Change: Interest rates are they going to stay high like they are in the U S. You know the 10 year U S. Bond is 4.5 or about that so that is high right. So is this gonna stay Mr. Trump was interest rates to come down, but so far.

Speaker Change: It's not happening right. So all of this is creating a lot of.

Speaker Change: Issues and not knowing where we're going but to me is it's foggy.

Speaker Change: It's going to clear up it's going to clear up I think it's going to clear up in the summer and then we know the rules and then we'll just adjust.

Speaker Change: Okay that makes sense.

Speaker Change: Right at the time, thanks very much.

Speaker Change: Pleasure Kamran.

Speaker Change: Thank you and that is the end of our question and answer session I would like to turn it back to al in the dark for closing remarks.

Speaker Change: Okay, Yes, all right well. Thank you very much operator, and we appreciate everyone joining today's call and I want to thank you.

Speaker Change: For your interest in <unk> International So I look forward to providing additional updates as we move through the new year and please if you have any additional questions be sure to reach out enjoy the day, everyone and thank you again.

Speaker Change: Bye thank you.

Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you all for participating you may now disconnect.

Speaker Change: Yeah.

Speaker Change: [noise].