Q1 2025 TFI International Inc Earnings Call
Good day, ladies and gentlemen. Thank you for standing by. Welcome to TFI International's first quarter 2020-25 results conference call.
At this time, all participants are in a listen only mode.
Following the presentation, we will conduct a question and answer session. 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.
Further instructions for entering the queue will be provided at that time.
These we advise that this conference call will contain statements that are forward-looking in nature and subject to a number of risks and uncertainties that would cause actual results to deeper materiality.
I would also like to remind everyone that this conference call is being recorded on April 24, 2025.
Speaker Change: Joining us on today's call are Alain Bdard, Chairman, President and Chief Executive Officer, and David Saperstein, Chief Financial Officer.
Speaker Change: I'll now turn the syllabus to Alain Bdard, please go ahead sir.
Speaker Change: All right. Well, thank you. Thank for that operator and we appreciate everyone being on our call today. After market flows yesterday, we reported our quarterly results amidst continued economic uncertainty and the resulting slowdown in freight volume across the industry. Thank you very much.
Speaker Change: Despite cyclical challenges, we're pleased to have again generated strong free cash law of over a hundred and ninety million, which as you've heard, we say many times is a primary focus of ours.
Speaker Change: Over time, it's this recast that allows us to maintain a strong balance sheet and strategically invest in both organic growth and attractive M&A, while returning excess capital to shareholders whenever possible.
Speaker Change: Taking a look at our consolidated results, we generated total revenue before fuel search hours of 1.7 billion up from 1.6 billion a year earlier, supported by the Daski acquisition a year ago this month.
Speaker Change: Our cash generated by operating activity came in a 194 million down margin lead from 201 million in the first quarter of 2024 in the second quarter of 2024.
Speaker Change: R3 Cashlow, as I mentioned, was a solid 192 million which was up meaningfully from 137 million benefiting from favorable working capital, strong management of capital expenditures and of course the hard work of our talented team members. Thank you very much.
Speaker Change: across the organization who continue to focus on operational excellence, especially during slower times for the industry.
Speaker Change: On next, provide an overview of first quarter resolve for each of our three business segment, beginning with LTL
Speaker Change: LTL was 39% of segmented revenue before fuel surcharge, which was down 13% over year.
Speaker Change: to 679 million, operating income of 47 million compares to 85 million in the year earlier period with margin reflecting typical Q1C's minority, consistent with what we saw the prior year.
Speaker Change: The LTL operating ratio came in at 93.1 versus 89.2 in the first quarter of 2024, and our LTL returned to this at Gavillow's 14.4%.
Speaker Change: Turning to Trot Lowell, we generated 666 millions of revenue before fuel surcharge, or 38% of the segmented total, and this was up from 398 million a year earlier due to the Daski acquisition. Thank you.
Speaker Change: Operating income for truckload was $49 million up from $41 million in the prior year period. Our truckload of R was $93.7 relative to $89.6 a year earlier and our industrial and market are exposed to tariff related uncertainty. [inaudible]
Speaker Change: which was evident during first quarter before the April 2nd announcement.
Speaker Change: However, we saw improvement in our Canadian war while specialized was in line with normal seasonality. Our return of this to capital for Trotto was 6.7 percent.
Speaker Change: Wrapping up the business segment overview, logistics is 22% of segmented revenue before fuel surcharge, or $385 million for the quarter, down from $442 million in the first quarter of 2024.
Speaker Change: Moving right along, the solid free cash to 192 million during the first quarter, help us maintain our strong balance sheet, which is always a focus of ours. We ended March with a funded debt-to-bit ratio of 2.21 1.
Speaker Change: Lastly, turning to our business outlook for the second quarter of 2025, we currently expect CPS in the range of $1.25 to $1.40 based on trends we've seen so far in Q2, and assuming no major change in the macro environment.
Speaker Change: In addition, for the full year, we expect CapEx to be approximately 200 million. And with that operate, David and I would be happy to take question if you could please open the lines.
Speaker Change: Thank you, and we will now begin the question and answer session. To ask a question, you may press a star followed by the number one on your telephone keypad. If you're using a speaker phone, please speak up your handset before pressing any keys.
Speaker Change: To ignore your question, you may press a store followed by number two. [inaudible]
Speaker Change: With that, our first question comes from the line of Ravi Shankar with Morgan Stanley. Please go ahead.
Christy McGarvey: Hey, Greg. Good morning. This is Christy McGarvey. I'm for Ravi.
Speaker Change: To keep you guys very helpful, appreciate that. Can you just unpack a little bit more high end low end of that? I know it's not a massive range, but just how you guys are thinking about that. And then any thoughts on full-year, clearly macro visibility is quite limited, but any sort of scenario analysis you guys are thinking through, particularly on the recession side of things if that comes to fruition, has been my performance.
Speaker Change: Yeah, well, what I could say is that, guys, because of all this uncertainty, the best we could do is to provide a quarterly, you know, kind of guidance, okay, which we just stated between $1.25, maybe at the higher end of $1.40, with what we know today? [inaudible]
Speaker Change: I mean, you have to understand that, you know, when you look at our specialized truckload in North America we've been really affected because our end customers are sitting on the fence waiting to see where this is going to all go, right? Where are we going to go with that? [inaudible]
Speaker Change: So this is why it's very difficult for us to predict the year until we have a much clearer picture of what's going to happen with those tariffs. We know that there's lots of discussion going on. [inaudible]
We also confirm reduced graphics.
Speaker Change: Right? Because we're not using our trucks to the full extent because the volumes are not where they should normally be. So this is why our Capix now are going down from 300 on a normal yearly basis to about 200 million. Right? And you look at our Q1, our Capix was minimal. Right?
Speaker Change: It's always the same. Last year was more, but we'll have the next three quarters. We're going to be going back with more capex to get that $200 million range for the full year. [inaudible]
Speaker Change: Very helpful, appreciate that. And if I could just ask one more, maybe just digging in on the U.S. LTL a bit more. Can you just parse out, to the extent you can, how much of some of the year-over-year pressure we're seeing in operating income is
Speaker Change: In using credit versus, you know, the market, maybe being a bit more challenging and, you know, if it is, in using credit kind of any update thoughts on the trajectory of or improvement there.
Speaker Change: You know what, if you look at a Q1 result, which are very disappointing, I mean...
Speaker Change: You know, we had a very difficult month of January , very difficult month of February , but we made some change in the leadership at that time.
Speaker Change: What I could say is that when I look at April , when I looked at March, I mean, I can see some very important change [inaudible]
Speaker Change: The morale of the troop has never been so good. I mean, the guys are working hard and under the leadership of Cal and Chris and Keith.
No major accounts where we lose money, right? [inaudible]
Speaker Change: So, I feel really good, the guys now are very well focused. [inaudible]
Speaker Change: And that's also based on what we're seeing so far in April . Okay, we see a change over there. The guys are really working hard on the cross side at the same time on the on the revenue side.
Speaker Change: To head this company in the right direction, you know, I've always said that there's no reason why this company cannot be a sub 90 bar and we've not we've not done that so far. I understand I get that after four years of buying the company. We're going to have a meeting.
Speaker Change: But I think that we're on the right track with this leadership, the plan that these guys are working on, I feel really good [inaudible]
Speaker Change: Yeah, and Christian, I would just add that when you look at Q1s or in the USLTL, it's 160 basis points deterioration relative to Q4, which is exactly the same as the seasonal deterioration last year, Q4 to Q1. So you can think about this quarter as the same.
Speaker Change: as last quarter, but we've made changes and we're seeing those changes.
Start to show some green shoes.
Great, really appreciate the thoughts, thank you [inaudible]
Thank you.
Speaker Change: Sorry, your next question comes from the line of Jordan Alliger with Goldman Sachs, please go ahead [inaudible]
Jordan Alligator: Yeah, hi just to follow up LTL questions one can you maybe perhaps . . .
Update some of the operational improvement efficiency plans. [inaudible]
Jordan Alligator: to improve things. And then secondly, how do you think about your pricing strategies now and the industry's pricing strategies given the ongoing softness in manufacturing, etc. Thanks.
Yeah.
Jordan Alligator: Improvement and Technology on our Lionel, but at the same time, okay, we're looking at something similar, probably Optum for our P&D. So, we're going to be starting, okay, this project of Optum, P&D, Operation and Canada first. So, we're going to start the project of Optum for our P&D.
Okay, and then we'll move that to the US.
Jordan Alligator: Sometimes in 25. So that's going to be helping us in do a better job on the planning and on the execution of our P&D operation. And the connection between Lionel and P&D at that time will help us do a better planning for the Lionel.
Jordan Alligator: That's number one. Number two is that our software for pricing and master file management that's been a rock in our shoe for so long. Okay, we've started the implementation of that.
Jordan Alligator: Okay, is growth now? Okay, with our team, our pricing guys are very busy going back to the sales team with a pricing proposal for customers because we've adjusted our approach to customer in the sense that we have to go back to the small median size account. So, we're going to have to go back to the small median size account, and we're going to have to go back to the small median size account.
Jordan Alligator: And these guys, you know, they represent about 2% of our volume more today than they were just three months ago. So we are growing those small and medium size accounts. And for sure, that requires better pricing, better price.
Speaker Change: Okay, strategy for our pricing department, which these guys are working on. Anything you'd like to add on that, David? You know?
Good.
Speaker Change: And your next question comes from the line of Walter Spracklin with RBC Capital Markets, Steve Goheck?
Yeah, thanks very much, Alain, good morning.
Speaker Change: That are a result of that uncertainty and any color around that and a little bit on as well on your market shared you . . . .
Speaker Change: Do you see any of those shifting buying or any of that customer adjustments is leading to them moving to lower price competitors? Are you losing share or are they just? [inaudible]
Speaker Change: Holding back on orders and volumes as a result of current environment, just curious as to what you're seeing kind of in the near term and what those patterns are in terms of your competitive environment. [inaudible]
Yeah.
Speaker Change: You know what Walter? Very good question. You know, think about, if you are a US farmer right now, you don't feel pretty good because your main customer China is just saying we don't want your product. So,
Speaker Change: One of our customers are industrial base, so our customers are manufacturing tractors, their manufacturing agricultural equipment, etc. Those guys don't sell a lot because their customer, the farmer, are insecure right now. They don't know what's going to happen, right? So that's just one small example of what we're going through right now in our US truckload operation, our specialty truckload which is a lot of it is flatbed. We're going to have a look at what we're going to do right now. We're going to have a look at what we're going to do right now.
Speaker Change: Sector in our flatbed operation into one, we were down, you know, like 10 to 15% depending on the week.
Speaker Change: Today in April , still a lot of insecurity or instability, but now we're down to about, you know, high single digit, eight, nine percent, okay? Still down, you over year. Now the only good thing that we're seeing so far is the rate for mile, okay, as improved. [inaudible]
Speaker Change: Okay, strange to say that in a difficult environment normally, okay, you would say that the rate per mile will also be under pressure, but we're not saying that we see our rate per mile improving since...
Speaker Change: I would say probably mid-march, okay, that we're starting to see improvement year-round on the rate per mile. But the activity, okay, the activity is down, okay. So that's what we're seeing in terms of...
Speaker Change: of what the market is doing. Okay, we don't see pressure on rates. Okay, would it be either in Canada or in the US?
Speaker Change: You know, for sure, Canadian guys perform really well except in certain sector like Steel, as we know there's a huge staff on Canadian Steel's
Speaker Change: So our steel market is under pressure for sure in Canada.
Speaker Change: Specialty Truckload Operation, and also now their minds are down, so we have way too many trucks, way too many trailers, and that affects also our depreciation, but that will be corrected during the Q2 and Q3 of 25, because as I said we are lowering our capex.
Speaker Change: to a normal level based on the activity level that we have today. Anything else that we may add on that, David? No? Good.
Speaker Change: Just a second, final question here on M&A. Can you update on what you're kind of budgeting in terms of any total tuck in M&A for the year and just any comment on?
Speaker Change: You know, there was some activity here this morning with NR being taken up by UPS and you're having markets just any update on whether there's opportunities that are popping up now and it's something that you're actively looking at. [inaudible]
Speaker Change: You know what, Walter? I mean, on the M&E side, we just close to a very small deal in Q2.
Okay, that, I mean, very small transaction.
Ken is more buying back TFI, which we did.
Speaker Change: Intu1, which we'll also buy back another half a million shares in April , okay? And cautiously, this is going to be the M&A for us in 25 because we're buying something that we know that is very undervalued, okay? Because you know, we have we have to turn this. [inaudible]
Speaker Change: U.S.L.T.R. ship around to bring that confidence, okay, and we'll do it.
Speaker Change: But in the meantime, okay, nothing major for us in 25 5
Speaker Change: Okay, the two small days that we've done and the buying back up TFI stock. I mean, we want to keep our leverage
Okay, in a conservative fashion. [inaudible]
Speaker Change: We don't want leverage to go higher than 2.5, which we always said. [inaudible]
So right now we're at 2.2. [inaudible]
Speaker Change: So, I mean, this is where Q2 and Q3, we can come up with 75 cents of EPS. This is why, when we look at the trend of April , we feel pretty good about the $1.25 or $1.40, which is going to help bring our leverage down, hopefully in the next few quarters.
Thank you very much for the time.
Walter, Roger, Walter
Speaker Change: And your next question comes from the line of Ariel Roszkowski, city group, please go ahead.
Speaker Change: Hi, good morning. Alain and Dave, thanks for taking the call. This has been more at City On for Ari. Wanted to just ask if you could share some thoughts on your US LTO OR outlook.
Speaker Change: for 2Q and 4-year 25, and similarly your EPS outlook for maybe 4-year 25, considering the 2 Q1 25 and 140.
Yeah, yeah, so-
Speaker Change: You're based on our forecast right now, we believe that sequentially...
Q2 should improve by about...
From...
Speaker Change: Better market, okay, better, better freight, et cetera, et cetera, and also better cost management on cost, on the PND side.
and on the line all side to a certain degree.
Speaker Change: So, I mean from let's say 99, we go down probably into Q2 to 96 or on the way down to closer to 90 or hopefully
Speaker Change: 92, 93, something like that by the end of 25, right? Thank you.
Speaker Change: So that's the trend that the guys are working on and let me tell you that the morale at T-Force Rate is never been as good as what it is today. We've made some changes and the leadership so...
Speaker Change: So our friend Keith had used to run all of T-Force Rate. Now he's focused only on the operating side of it.
Speaker Change: Chris, one of our EVPs at TFI is helping on the commercial side, and Cal, one of our senior EVP is taken over everything else, which is finance, IT, fleet, and the operation for sure working with kids. [inaudible]
Speaker Change: So I feel pretty good where we're at with this change in leadership and also the focus on growing those small, medium-sized accounts that killed us in Q3 and in Q4.
Speaker Change: In terms of profitability and so the guys are on the right track. They focus on the right thing and I think that we're going to start to see some improvement there.
The other way around, we're replacing the big account, the corporate account with the small account, which is completely opposite of what we were doing in Q3 and Q4 of last year.
Speaker Change: And are there any other customer segments similar to SMB that could be at risk of customer attrition and what you might be doing to reinforce customer retention in those segments?
Speaker Change: Yeah, so one of the first thing that the new team has done is that let's say that you go with a GRI of 5% and you have an account that runs an 85 or R and the guy just walked right because he's an 85 or and you you had 5% and the market is soft so the guy walked so you lose an 85 or R account.
Speaker Change: So, what the new team has said is that this is a little bit stupid in this kind of an environment, okay? So, instead of going with a GRI or 5% on an 85 or a count, how about if we just go with a 1 or 2% so that we don't lose this business, right?
Speaker Change: And we don't end up with a major turn which happened to us in Q3 and in Q4. [inaudible]
and we just hacked Smart.
Speaker Change: So, let's be more smart and let's be more focused on keeping those small guys and growing that, which is completely the opposite of sadly we did in Q3 and in Q4 of last year, right?
Acceptable, bye! Bye!
Speaker Change: You know, we would prefer to get closer to 1300 so this is where we made some some small adjustment. [inaudible]
Speaker Change: And at the same time, our GFP, which is terrible, I mean, what we've done there, I mean, we've lost revenue like there's no tomorrow. Okay, we've refocused our sales team, our local sales team, to be part of the solution instead of being part of the problem.
So that's also another area. [inaudible]
Speaker Change: of major change in the approach of our sales team under this new leadership. As GFB, we have to stop degrading the revenue on that and we have to start recapturing growth because if you go back in time, okay, let's say in 22. Thank you very much.
Speaker Change: GFB's revenue was 100 billion in the court and now we're down to what, 33, 33 but I won't know that this is the first quarter in a long time [inaudible]
Speaker Change: Where a GSP is flat sequentially. Yeah, well, we need to grow for sure. We're starting to see
Speaker Change: Yeah, a little bit of the benefit of this refocus in Q1. Yeah, because that's a fantastic product that we have in and I mean nobody has that, except now UPS announced that they will have the kind of similar product, but I mean, well, this is a great product for our customer. It's just like
Speaker Change: I mean, we have to do a better job in selling it and I think that the refocusing on this sales leadership shakeup is going to help us. [inaudible]
Great. Thanks very much.
Speaker Change: And here next question comes from the line of Konark Gupta, Witzkowski-Bentley, go ahead.
Speaker Change: Thanks, Alberto, Morning, Alain David, I hope you are doing well Morning.
Speaker Change: So, Alain, you talked about, and thanks for sharing the guidance, or Q2 actually, it helps, you know, obviously. But in terms of the T-Force, you mentioned the leadership changes in McFrab, but Keith Calcris.
Speaker Change: You know, I understand leadership changes are important but what I'm trying to figure out is how quickly the employee morale is changing but just you know
Speaker Change: Some genius at the top. What wasn't just about the top, you know, like, or is there something else structurally in the business be unions or some of their employees down the value chain where [inaudible]
Speaker Change: Based on an issue in terms of culture or moral, is there a low-handy fruit that you can resolve with more changes down the road in this business?
Speaker Change: You know what, for an art? I mean, it's got to start with the top, right? So the approach that now we have under Cal and Chris is that we want to build the company, right? We want to grow this divorce rate. We want to build the company. We want to build the company. We want to build the company.
Speaker Change: So, and you can't just squeeze cars and keep losing top line because this is not the way that you're gonna grow and have shoulders that's gonna be happy with what's going on, right?
So, the start of this new team is that...
Speaker Change: Guys, let's roll up our sleeve, and let's focus on growing this company again instead of just backpedaling in reducing volume every month, every quarters, okay? And trying to get more money from a $85,000 when already, a $85,000 is great within T-force rate.
So...
Speaker Change: You're right, Konark, that at some terminal levels, okay, well, for sure down the road, okay, we have to make some changes already, okay, we already start to make some changes. I know then certain terminals.
Okay, we made some changes. Thank you.
Now, as I said, [inaudible]
Speaker Change: The last two or three quarters on the call, we have financial information by terminal, okay? So we know which terminals costs are great and we know which terminal costs are an issue, right? So now the guys are really focused and now, like I said, keep...
Speaker Change: Job is not being running the full T-Force rate, he's focused on operation with his regional VPs and get this cost.
Okay, better everywhere. [inaudible]
Speaker Change: At the same time on the commercial side, our friend Chris is motivating the sales team, focus on guys we have to grow the small medium-sized account because we need to have a bigger share of our portfolio of business with the small account versus the 3PL or versus the corporate account.
Speaker Change: We also need to refocus on GFB because now we've been working for years.
Okay, on the GFP. B.
Speaker Change: And like I said, we've been going down every quarter and David just added that for the first time we stop going down. Okay, and now, okay guys, this is the floor, and now we have to start creeping up again, right? Okay.
Speaker Change: So we have a product that is second to none, that nobody has, so there's no reason why we, you know, we've lost revenue. The focus was not there.
Speaker Change: So, the morale is great, the guys they see that it's not just a cost game, it's a global growth in terms of growing the top line at the same time doing a better job on cost [inaudible]
Speaker Change: That makes a lot of sense. Thanks so much. And if I can follow up with respect to the competitive landscape in the USLPL market, are you noticing any big changes there? Like we can clearly see some of the data points.
Speaker Change: We try flagging us on the competitors like Sia, and they're ramping up volumes, we're wanting to down for the market overall.
Speaker Change: I use seeing any changes in terms of, you know, like the dear culture and moral improving, there's an opportunity to kind of regain some of the market share that you may have lost or you did not use any market share at all. Like, you know, what's the dollar market that was soft and you held your market share? You know, you know, what's the dollar market share that you may have lost or you did not use any market share at all.
No, no, we've lost package [inaudible]
Speaker Change: Okay, so this is why another leg on that chair is is the quality of our service [inaudible]
Speaker Change: So, we've talked a lot about mis-pickup, so the goal is, like in Canada, in Canada mis-pickup does not exist for us.
Speaker Change: I mean, in the US, who are mystic up is 1.7% today.
Okay, of our total shipment.
Speaker Change: It's not good, okay? Now the guy will tell you that two years ago nobody looked at that [inaudible]
Speaker Change: A year ago, people woke up and they started looking at it, it was like 4%. Now we're down to 1.7. The goal of the team is to bring that down.
Speaker Change: Closer to zero, like we do in Canada. That's number one. Number two is the quality of our service, okay? So, you know, you could always say I'm 98% on time with a list of 45 different excuses.
Right? This is the pass.
And us, we look at the reality now.
Speaker Change: And our service is improving in the real term, not with all these excuses because we said, forget about the excuses because, you know, we can't we can't [inaudible]
We can't grow the business if we're not...
Providing the service
Speaker Change: which we said that we would provide, okay? So at the same time, we're moving more freight-
Speaker Change: A way from rail onto the road because we control the road whereas we never control the rail, right? So the rail you just live based on what these guys will do, right? So all this is also at the same time providing comfort. Very good.
to our sales team that, hey guys, we're serious.
And be there, walk the top.
What we're saying to the customer, we will deliver it.
Speaker Change: So we are improving in real terms, not just in the fantasy land, okay, we are improving the reality of our service the next day and also on, let's say the multiple day transit time.
Speaker Change: We're not where we should be, okay, but we are improving and that's gonna help us Konark Thank you very much. Thank you very much.
Speaker Change: If I compare the train we have in the US versus the train we have in Canada, I mean this is like day and night [inaudible]
Speaker Change: About in the US, our service is not up to par, and that's also a reason why we have so much sharing. By fixing the service and improving the service which is really a big focus of Keith and his operating team with Cal. [inaudible]
Speaker Change: It's going to help us reduce the churn and start growing the shipment count and this is the goal.
Speaker Change: I get it, for sure. Thanks so much, you're late for the time and all of that. Thank you
Thank you, Konark [inaudible]
Speaker Change: And your next question comes from the line of Daniel Imbro, Witz Evans, please go ahead.
Daniel Imbrowitz-Stevens: Improving service in the near term. Can you provide maybe some examples of what Keith and the team are working on to improve that in the near term?
Speaker Change: Well, yes, you know, the Lionel, okay, it's an issue, right? So if you load the trailers and, you know, you have a Lionel provider, okay, would it be a rail or a third party? [inaudible]
Daniel Imbrowitz-Stevens: That's not delivering the freight on time. Well everything in that trailer is going to be late.
Okay, so the biggest issue. Thank you.
Daniel Imbrowitz-Stevens: is providing the Lionel service. So this is why we're moving away as much as we can, as fast as we can away from the rail because we have no control on rail. I mean, you know, you give them the freight and you hope that it's going to be there on time. [inaudible]
When it's rolled, when it's us. [inaudible]
Daniel Imbrowitz-Stevens: I mean, if we make a mistake, this is something that we can manage and we can't correct. So this is the big thing that the guys are working on. Number one, number two is like I said,
Daniel Imbrowitz-Stevens: Many many times, Miss Pickup is a disaster in a sense that the customer is waiting for you to pick up the freight and you don't show up.
Daniel Imbrowitz-Stevens: That doesn't help your reputation, that doesn't help the churn into your business, so this is why a major emphasis has been put on Miss Pickup.
Daniel Imbrowitz-Stevens: Okay, and also improving our Lionel. The next day service, you know, when the Lionel is only 400 miles, which is next day service.
Daniel Imbrowitz-Stevens: I mean, we're doing quite well. It's when you have to move okay with two or three days connection. There we need to we need to improve and one way that we're doing that is we're moving away from real as much and as fast as we can number one. [inaudible]
Daniel Imbrowitz-Stevens: And number two is also the third party that we're using, you know, they have to deliver based on the commitment, like we have commitment with customers
Daniel Imbrowitz-Stevens: Listen, I mean, what we're seeing so far, okay, in April , there's an improvement in trend.
Daniel Imbrowitz-Stevens: But it's still early in the game, but for sure the focus is there. I mean, we can't, we can't do business without account.
runs at 115 OR
Daniel Imbrowitz-Stevens: because we lost so much medium size account that runs an 85 war.
Daniel Imbrowitz-Stevens: Right? So this is nonsense that we went through in Q3 and in Q4, like I said on my last call of Q4, and this has to change, and this is why we made some change.
Daniel Imbrowitz-Stevens: in T-Force Rate Leadership. I mean, there's no way. And we have to reduce the churn.
Daniel Imbrowitz-Stevens: and this goes back to the operation. We have to meet commitment that we have with customer. So we will start to see.
Improvement, and this is why, like I said earlier...
Daniel Imbrowitz-Stevens: $19.99 in Q1 is really, really bad. Okay, bye.
Daniel Imbrowitz-Stevens: We believe that sequentially we will improve 200 bases point just because of the cycle, but we're also going to reduce at least 100 bases point based on quality revenue, reduced churn, better service.
Daniel Imbrowitz-Stevens: et cetera, et cetera. So this is why we feel that we can say to the market on Q2 .
Daniel Imbrowitz-Stevens: We believe that this company would deliver between $1.25 to $1.40 a BPS.
Okay, this is based on one.
Daniel Imbrowitz-Stevens: Better Results at T-Force Rate, and also US Trotload Operations, Special T-Trotload Operations.
Got it. Thank you, Link.
Thank you.
Speaker Change: Here, next question, comes from the line of Benoit Poirier with Dejardin, please go ahead.
Speaker Change: Welcher, and the management team, and what we should expect from Deseki in the coming quarters.
So that's number one. So.
Speaker Change: It's the level of activity Benoit in Q1 that killed us with our specialty trucks loaded in the U.S. Our miles were down depending on the week up to 15%
Speaker Change: So just a disaster in terms of the fact also that we had excess trucks and excess trailers, right? But that will correct over 25 the excess assets will corrected over 25.
Nine turns of...
Speaker Change: of the culture of the truckload in the U.S., the Specialty Truckload in the U.S.
Speaker Change: You know, it's not an issue like we had at the T-Force rate a few years ago. The trend, what you'll see us do more in the US
Speaker Change: is we will drive less miles and have more revenue, right? That's a goal.
Speaker Change: And so our asset light operation, if you look at the way we report logistics revenue, right? So you'll see in our U.S. Special Teach what load operation. Thank you, Edwin.
Speaker Change: We will grow our asset-light operation and probably, let's say the asset side of our business will stay about the same size, less assets but better revenue, better miles for truck, better revenue for truck and if I remember correctly David, our revenue for truck in Q1 is better in our US specialty truck load. [inaudible]
We have...
Moore Meyers-Bertrock [inaudible]
Speaker Change: That is reversed in Q2 where we have better rate per mile in Q2 in our specialty truck load so far and we have a little bit more miles per truck again in Q2 so far.
Speaker Change: So, the trend is going to improve over time and the desk acquisition I'm telling you, I mean we have a fantastic operating team there. It's just like...
Speaker Change: You know, we have, like I said, to Steve at TFI, Steve Brooksha, as you see, we have very good truckers there. It's just like we have to transform these guys as very good business guy, okay? It's all about making money, right? It's all about the bottom line. [inaudible]
Speaker Change: Yes, we are in business to service customer but we service customer if we make money if we don't make money I mean what's the sense of servicing customers so for example one of our business . . .
Speaker Change: Wiley, okay. Those guys are big into a sector of the industry where, you know, we look at the number of trucks we have there. We have 150 trucks, 600 trailers, it's 600 trailers. Why do we have 600 trailers?
Speaker Change: Well, that's that's that's right. So we have way too many trailers and even the 150 trucks for that segment of our business we have 50 too many trucks right because we are hauling a product that is. [inaudible]
Speaker Change: You know, difficult to hold, where you could be subject to claim, okay? And you know, guys, we can't hold that for two points to the bottom line.
Speaker Change: You know, might as well put our capital into let's say a bank, okay, we're going to get 4% dividend. Why would you invest capital for that? So for sure in that division the 600 trailer will go down to 300 during the course of 25, okay, maybe down to 200. [inaudible]
Speaker Change: And the number of trucks will go down from 1,000 to 100. Where it makes sense. So that's a little bit of a change where Steve is working hard with the team there.
Speaker Change: To turn a trucker's business into a business, right? A trucking company into a business about making money. So, so we said a 96 OR in a Indesky, and you want, it's not acceptable. Everybody knows that. I mean, you know.
Speaker Change: Four points to the bottom line. No, okay, so the guys know. So, let's go.
Speaker Change: Hey, specialty truck low, I mean, look at our van world in Canada running a 9-0-R, okay, if you exclude the gain of on asset.
Speaker Change: and 90 Warren Cata, where we are competing with the driver-ing <expletive> . [inaudible] David Saperstein, David Saperstein, David Saperstein,
Speaker Change: And those guys are able to get to a 91 and our specialty is 94, not acceptable.
Speaker Change: Okay, nobody, Daski is 96 something, right? So we know what to do, we'll keep working at it, and for sure.
I mean we see
Speaker Change: Until that tariff on certainty and fog, whatever you call it, okay, for sure it will be under pressure in terms of
Speaker Change: of Miles in terms of volume. But I think that in six months, three months, six months, okay, well I'm a better visibility and then people will start buying again in the industrial sector that is core to us. [inaudible]
Speaker Change: Yeah, exactly. I think that's so important to remember the context of this quarter. I mean, the specialized and markets are our customers in the specialized and markets. So, the ones specifically affected by the trade situation and the trade uncertainty. So, of course, they're easing off on production and easing off on orders. And as they wait to see how things are going to play out. So, that's the very, very near term. But the long term is we believe in North American industrialization, we believe in North American production. So, that's the end.
Speaker Change: And this is the way that the economy is moving, and that's why we want this exposure.
Yep.
Absolutely.
Speaker Change: That's great caller, and just in terms of follow up quickly guys we've seen a lot of headlines about cargo volume that is expected to be down singethic and cleans the second half.
Speaker Change: given the reduced imports from China, so comments from the ports and RS
Speaker Change: Could be down somewhere 10 to 20%. So I understand that it's pretty foggy out there, but any thoughts about how this could impact TFI and whether this could make the typical sick and ask the pickup, maybe a little bit less pronounced that it has been historically. Let's move on to the next slide.
Speaker Change: Yeah, well that's a very good question and we know that the poor activity will be less because there's less ship coming from Asia to the US in Q2, we know that.
Speaker Change: But if you go back to what we're saying, Benoit, about our specialty truck load, what we're moving is to get nothing to do with Asia.
Speaker Change: It's industrial activity in the U.S. That may be affected a little bit, okay?
Speaker Change: It's more like the retail stuff that probably will be affected. Thank you very much.
Speaker Change: And until that they fix this terrorist situation with Asia, I mean, there could be some pressure in Q2 and in Q3 B.
But in our special teach what loads, I mean...
When we talk to our customer, [inaudible]
Speaker Change: Okay, that's not the reason why they're slow. The reason they're slow is that nobody knows. If you're a farmer in the US today and you're a crop, you don't know who's going to buy your crop because the Chinese are saying, you know what, we're going to buy from Brazil. We're not buying from the US anymore. [inaudible]
Speaker Change: Then you're not going to buy a tractor, you're not going to buy a combine, you're not going to do anything until you have better visibility [inaudible]
Speaker Change: So this is what's affecting our volume today, when we talk to yellow hiring, okay, all this construction material where you have interest rate that are quite high still in the US.
Speaker Change: I know Mr. Trump wants them lowered but so far I mean they're still high right so it affects construction construction is us I mean we're moving building material we're moving all this related to industrial activity. [inaudible]
Speaker Change: It does not affect whatever China shifts to the US that much, for us. [inaudible]
Speaker Change: Maybe a little bit on our LTL side, but not that I know of Benoit. But for sure, I mean...
Q2 Could Be [inaudible]
Speaker Change: For our world, okay, more difficult in the U.S. based on the number of ship.
Speaker Change: That are not coming to the US because of what's going on? Yeah, and I think the best way to try and qualify that is to look at page 4 of the MDNA where we actually list out our end markets by percentage of revenue. You can see the retail's 19% the remainder are various.
Speaker Change: Mostly industrial in markets, and so that can help people get it a sense.
So in the automotive, we have GHD moving trucks, okay?
Speaker Change: We have contracts with, you know, I would say that 90% of our automotive revenue is US-based so it's not Canadian-based and etc., it's mostly US-based.
Speaker Change: You know, stuff that we do at TA dedicated for some customers that we have there.
Speaker Change: Everything that we move from GHT is mostly for the US market out of Canada. Canada is a small plant and a little bit of Mexico as well, but it's mostly for the US domestic market.
Okay, that's very good color. Thanks for the time.
Speaker Change: Your next question comes from the line of Scott Group with Wolf Research, please go ahead
Speaker Change: Hey, thanks, good morning. Just a quick follow-up on specialty truckload. Well, to that 94-a-wire in Q1, how do you think about the progression there into Q2 and the guide and maybe back half of the year?
Speaker Change: David, I embedded in the guide as a 91-92 for specialized in Q2.
Do you think, is there more? [inaudible]
Speaker Change: Self-help there with respect to Dasky, or sort of improvement beyond that, sort of going to be more dependent on.
Psycho Intrugged. Yeah.
Speaker Change: Yeah, Scott, no, first, for sure, there's some improvement on the desk, on the financial side. I mean, all the admin and the IT system, the safety, which is a big issue for us.
because of all the claims. [inaudible]
Speaker Change: Okay, of accidents, et cetera, et cetera. So there's a huge focus on that in the part of...
The guy's over there.
Speaker Change: The culture that an accident is the problem of the insurance company, it's our problem, so safety first.
So these are all changes that should help us. [inaudible]
Speaker Change: We're you know it's working our last leg okay with that business if we can't fix it we're just gonna have to do something else with it [inaudible]
Speaker Change: And it's not part of Daski, right? So the only business unit that we made some changes that was part of Daski was Bulldog, which was very small that we shut it down.
Speaker Change: So, overall, I mean, we know what to do there. The other thing, as I said, Scott many times, we have way too much asset in that business. Thanks to Deskies of previous management team where they were big fans of buying trucks.
Speaker Change: So today we have way too many trucks for the volume. Let's go to the volume.
Okay, we have way too many trailers, so this...
Speaker Change: Excess asset will come out of our books, will reduce our depreciation, and at the same time, we're going ahead with smart capex.
Speaker Change: on our truckload, again, going back to the philosophy that the balance between asset light and asset, okay, in our specialty truckload in U.S. has to change
Okay.
Speaker Change: And this is one also of our goal is to improve or increase, I would say, the asset light revenue.
Speaker Change: And then maybe just last quick one, I saw a few weeks ago, UPS announced a expanded version of their own GFP business maybe on some bigger size shipments. Is there any impact to you from UPS making a bigger push into GFP?
Speaker Change: No, not at all, Scott, not at all, I mean that...
Speaker Change: They've always been in that position, they've always been there, and it's never been big for them.
and probably they're trying to grow it, okay? Okay.
Speaker Change: But at the same time, us, we didn't do our job. [inaudible]
Speaker Change: I mean, you know when you look at that, I mean... [inaudible]
Speaker Change: Now, we're going to be doing our job on GFP and we're going to we're going to grow that business again because for sure if you're UPS and you look at what T-Force Ray has done over the course of the last four years to see what are these guys doing, right?
Speaker Change: We had some issues with some customer that our partner UPS doesn't want to deal with some resellers so that's one of the reason why our revenue drops so much. [inaudible]
Speaker Change: But there's also a fact that we didn't do our job, right? So now the morale is through the roof over there. The guys are really up and running and
Speaker Change: Like David was saying, for the first time, we were flat, quarter to quarter on GFB, but for sure, our focus is to grow this business again and there's no reason why we shouldn't be able to grow that because we have a product that is second to none for small shipment that could be available with UPS. Let's go.
Thank you.
Okay, thank you guys, appreciate it.
Thanks, shot.
Speaker Change: And your next question comes from the line of Ken Hoexter with Bank of America, these go ahead.
Speaker Change: Hey, Alain and David, thanks for taking my question. This is Adam Roszkowski, offer Ken Hexter.
Speaker Change: It is going back to USLTL. How much time do you think before you start seeing material improvement in the claims ratio? Is that 0.9% this quarter?
Speaker Change: Flat, and a little worse year over year. Anything that's happening right now that's started to move the new format. And I asked because it sounds like the small business year you were winning is being done more or less at price. So just any kind of thoughts on the service. Thank you.
Speaker Change: No, I would say that, but on the claims side, okay, for sure we're at 0.9% of revenue which is terrible.
Bye.
Speaker Change: and there's a lag, okay, there's a lag, so when I talk to the team there, they say, you know what, we'll do a better job in Q2, we're still paying for mistakes or issues that were not addressed in 24, right?
Speaker Change: So there's a lag, so you should see us improving .9 is completely unacceptable. If you look at our Canadian operation, if I remember correctly, we're about .2 [inaudible]
Speaker Change: Okay, which is best in class. I mean, if you look at our US fears, best in class are about 0.2. And this is the goal. This is where we have to be. But, you know, we used to be in a way better position at T-force rate if you go back maybe a year, a year and a half ago. . . .
We win as low as 0.4.5 [inaudible]
Speaker Change: Now we're back to an unacceptable level, 0.9. You should see us improve during the course of...
Speaker Change: of 25. In terms of the new business that we're bringing in, okay, the small meeting size, it's not based on price.
Speaker Change: Okay, our price is competitive, our price reflects the market, okay, and we're not trying to gain, okay, shipments on the back of...
Speaker Change: Stupid pricing and losing money about it. The problem that we had in Q2 3, sorry Q3 and in Q4 is we were losing the small, medium size. [inaudible]
Quality Freight [inaudible]
Speaker Change: And we've replaced that with Guy's major account that are sloping you.
Okay.
Speaker Change: and you lose money with those guys, so this is a major change.
Speaker Change: Okay, of the sales team there under the management of Chris and Cal . . .
and on the commercial side. [inaudible]
Speaker Change: and you should see some benefit. Like I said earlier, cyclicality we should improve 200 basis point from the disastrous 99. [inaudible]
Speaker Change: And then we believe that our improvement also will also reduce another 100 basis point.
Speaker Change: to closer to a 96 OR in Q2 and walking closer, okay slowly to at least a 90 OR at one point and then break that famous glass ceiling for us that's been the 90 OR.
Speaker Change: Thanks for the color. I guess then, just on maybe the pace of contractual pricing renewals. I mean, you've previously noted pricing at the lower service end of the USLTL space has been competitive. So any update on just the kind of quarterly contractual pricing renewals run rate, particularly as you have started to make these shifts over these past couple months.
Speaker Change: I think that everything is normal on that side, David. I mean, what we're seeing? Yeah, we're seeing, look, the renewals are taking place in the mid-single digits, right? The problem is our revenue per shipment is down because the mix has deteriorated in the way that we've described with the shift from SMB to larger customers. But the renewals are in the mid-singles.
Got it, thanks for the time.
Pleasure.
Brian Osenbeck: And your next question comes from the line of Brian Ossenbeck with JP Morgan, please go ahead.
Hey, good morning, guys. Thanks for taking a question.
Brian Osenbeck: Service improvements or is this going to be better density and then if we're better service with some of the information you got with the terminals.
Brian Osenbeck: Maybe you can help provide some I don't know cutover from a systems or perspectives from the.
Brian Osenbeck: The actual operations that would help kind of catalyze.
Brian Osenbeck: This service gain or the sheer gain rather as opposed to just looking from the outside and thinking well. That's just it looks like more competition in a pretty tough market. So anything there would be helpful.
Speaker Change: Well you know when you when you look back at this company T Force right I mean, we had issues with mix everywhere right. So if you look at our lineup.
Brian Osenbeck: Our mix was.
Brian Osenbeck: Way too much rail miles versus truck models.
Brian Osenbeck: We've been addressing that to improve the service.
Brian Osenbeck: The other thing also that was not good in the mix was the small and medium sized account versus the <unk> versus the corporate account, okay that was.
Brian Osenbeck: Our mix is not normal right because we win the easy way with the <unk> and the corporate account et cetera et cetera. Instead of so the mix that we have today right is not normal so let's say that the normal mix of small medium sized account is 45% of your business we're not.
Brian Osenbeck: There at all right. So that's why we are having a tough time so yes.
Brian Osenbeck: Our peers is probably a better mix than us.
Brian Osenbeck: <unk>.
Brian Osenbeck: I would say and this is why for US Okay. It's got to be a focus of rebalancing the mix on the line haul okay like I've talked earlier and at the same time also.
Brian Osenbeck: Trend that we were going in 'twenty four was really really bad because we were just making the balance even worse than what it was prior so the guys are working and it's showing results. Okay. As we are seeing it now okay. The small medium size account part of our business is increasing.
Brian Osenbeck: Ted.
Brian Osenbeck: The way it used to be let's say two or three quarters ago being reduced so it's a question of balancing now versus our peers, okay and what were seeing is that.
Brian Osenbeck: Sometimes what is good for us maybe it is not that good for one of my peers. So it's just to focus on the right stuff, Okay and for sure like I said, many many times down the road.
Brian Osenbeck: We have to improve that density so again as well everybody wants to improve density what might density because this is where I'm situated maybe is not the same as one of my peers, which is 40 miles away from me.
Brian Osenbeck: So it's just having the right focus and we've been working at it for a long time, but on the sales side. Okay. We went the opposite way of improving we went the wrong way now were correcting that on the sales side and on the upside I mean, this pick up we're doing a better job today than a year ago.
Brian Osenbeck: Not doing the job that we're supposed to do right and on the just on time, yes on the short haul where there but on the long haul which is a lot of our freight is long haul.
Brian Osenbeck: We're not there so we have to keep improving that with our hub.
Brian Osenbeck: With our line haul provider and as much as we can reduce the rail miles as.
Brian Osenbeck: As fast as we can so that we are in control of what's going on because when you get that the rail you have no control right. So that will also help us reduce the churn. So when you reduce the churn you stopped losing customer and losing freight from customer so that was.
Brian Osenbeck: Less pressure on your sales team, Okay, that's always running like a dog that's running.
Brian Osenbeck: Two a sale running.
Brian Osenbeck: We're running in circles trying to chase a sale.
Speaker Change: So all of that bank is part of that global strategic plan that we established with Cao Chris and Keith over there and like David was saying earlier I mean, we're going to see some improvement there.
Speaker Change: Okay. Thanks, Helane I appreciate that and then just.
Speaker Change: Quick question on cross border activity I don't think it's necessarily a huge part of your business, but just wanted to see given all the.
Brian Osenbeck: Volatility in it.
Speaker Change: Headlines and on and off again tariffs if you see big.
Brian Osenbeck: Big Big surge, there and then and then dropped and I guess to the extent that you.
Brian Osenbeck: You've got any visibility.
Brian Osenbeck: Bedded in the guidance there for <unk>. Thank you.
Brian Osenbeck: Yes, very good question, Brian on the truckload side, we follow every day the number of loads that goes to the board.
Brian Osenbeck: So what's happening now is that there is no issues with volume. The problem. We have is that there's nothing coming back to Canada right now.
Brian Osenbeck: So it's an issue the backhaul is killing US right now on the truckload side on the RTL side, Yes, we are a big player on the trans border afraid between U S and Canada, we see some some softness there.
Brian Osenbeck: Some softness from our partner.
Brian Osenbeck: With TST.
Brian Osenbeck: We see some softness from.
Brian Osenbeck: From our own operation with T Force rate U S encana.
Brian Osenbeck: Nothing very important.
Brian Osenbeck: I would say probably were down about 10%, 15%. So far again. This is based on a lot of in security.
Brian Osenbeck: <unk> of it is based on what I don't know where I'm going.
Brian Osenbeck: So I'm just waiting to see what's going to happen next.
Brian Osenbeck: So a little bit on the <unk> side, not so much in on the truckload side everything that comes from Canada to the U S.
Brian Osenbeck: Float is normal I mean aluminum.
Brian Osenbeck: I think we're doing more aluminum now than we used to do six months ago.
Brian Osenbeck: Steel is down no question about that steel is down.
Brian Osenbeck: Out of Ontario, but aluminum auto, Quebec, I mean, we're still running like crazy, even with the 25% tariff and we know why I mean.
Brian Osenbeck: Canada manufacturers, what 4 million tons, a year U S manufacturers, not even 1 million tons, a year and the market is right now from Canada is 75% of the U S. I think and nothing has changed and if you remember what the president of our core saying I mean.
Brian Osenbeck: Alumina has to come from Canada, unless there is another market that could be but Canada is very close to the U S.
Brian Osenbeck: The cars like the automotive industry, it's varies like the truck. It's all integrated right. So yeah Mega long story short of your question.
Brian Osenbeck: It's not that significant so far but we could do better okay and this is going back to what David was saying about this sector of our business that relates to industrial a lot of our customers a sideline waiting to see what's going to happen.
Speaker Change: Yeah, and Brian just a question about how it's taken into consideration in the guide.
Brian Osenbeck: As most.
Brian Osenbeck: <unk> said in his opening remarks.
Brian Osenbeck: <unk> is based on the first three weeks of April and what we've seen in actual results and what we've done is we've extrapolated that taking into consideration the.
Brian Osenbeck: The trends that typically occur between April may and June and so we have extrapolated that and.
Brian Osenbeck: In an appropriate way of taking that into consideration and so what we're saying is if things continue in Q2 the way that they started this is what we'll do.
Brian Osenbeck: And.
Brian Osenbeck: If there are some major change.
Brian Osenbeck: In the macro.
Brian Osenbeck: Related to trade then that will have an implication.
Brian Osenbeck: <unk>.
Brian Osenbeck: Okay.
Brian Osenbeck: Thanks, very much guys.
Brian Osenbeck: Sure Brian.
Speaker Change: Your next question comes from the line of Bruce Chan with Stifel. Please go ahead.
Yeah.
Speaker Change: Highlighted David this is Matt by last controversy. This morning, Thanks for taking a quick one from US here just on the P&C side of the House U S market is getting a bit more competitive on the BDC side I don't see a smaller portion of the business would you be able to get a sense of what percentage of that is now and maybe comment on what you are seeing some increase.
Speaker Change: Price competition in that market or is it stable.
Speaker Change: Yeah very good question on package or B to C is growing okay, because our b to b is not growing.
Speaker Change: And for sure B to C is one stuff one shipment normally right. So it affects our <unk>.
Speaker Change: Our density if you want to call it like that so it's a little bit of a headwind for us okay.
Speaker Change: But.
Speaker Change: If you don't beat them you can't you have to join them right. So so this is where we have no other option than to grow our share of B to C. Okay versus our b to b in our P&C in Canada.
Speaker Change: Now and also the pricing is very aggressive because theres a lots of guys that have done.
Speaker Change: A major investment in Canada on B to C and a lot of this b to C business is managed by.
Speaker Change: The large player, Okay, which is which is Amazon in Canada as well now.
Speaker Change: Thing is also talking about Amazon, if they decided to shut down their Quebec operation. They went with all kinds of small guys.
Speaker Change: Maybe they are talking to a big player okay to help that well could see that down the road.
Speaker Change: We'll have to see that.
Speaker Change: Keep in mind, though that because of our density in our P&C and <unk> in Canada.
Speaker Change: <unk> is a is a is a tailwind for us and the Canadian government with the Mr. Cardinal now in charge, although theres an election at the end of the month, but still Mr. Carney decided to get rid of the carbon tax which is lowering the fuel costs in.
Speaker Change: In Canada <unk>, Quebec.
Speaker Change: I mean.
Speaker Change: I would say late to the party.
Speaker Change: But that as also an influence on fuel costs for for us. So we reduce our fuel costs, but it also reduced our fuel surcharge and because of our density. Okay. This now is a little bit of a headwind for us.
Speaker Change: But this is something that we're going to have to manage because carbon tax in today's environment in North America I think this is dead.
Speaker Change: Its going nowhere so our guys are working around this okay.
Speaker Change: But there again I mean this is.
Speaker Change: Part of all this change in the macro environment. The tsi is adjusting to.
Speaker Change: Excellent great color. Thank you.
Speaker Change: Welcome.
Speaker Change: And your next question comes from the line of Cameron Datsun National Bank Financial. Please go ahead.
Speaker Change: Yes, thanks, good morning.
Speaker Change: Really just one question from me I, just wanted to talk a little bit about free cash flow, you've sort of indicated that you're going to be pretty light on capex for for 2025 I'm. Just wondering obviously, there's a cloudy outlook here with the business, but I'm just wondering if we look at 2020 for free cash flow kind of in that $7 million to $800 million range is that.
Speaker Change: Could that be a reasonable expectation for 2025, given the fact youre going to have lower capex.
Speaker Change: Cameron I think that.
Speaker Change: Maybe David you could comment on that but I think that.
Speaker Change: While we will generate in 2005, what we know so far okay based upon what we know we should be in the same kind of ZIP code okay.
Speaker Change: That's the plan so far now for sure Q1 free cash flow was through the roof, because we have very little capex right.
Speaker Change: But going into Q2, three and four will have more capex.
Speaker Change: Absolutely, but will also generate more cash right. So this is why.
Speaker Change: What can we add to that David and I would say that we were really strong in free cash flow because of the capex in Q and Q1, but also because of working capital there was a release of cash.
Speaker Change: That was over $30 million from working capital. So those are the three variables that drive your free cash in the year Camry. The most important one is earnings that's the most important one okay. So that underpins it all in and.
Speaker Change: Yes.
Speaker Change: We've given the guidance based on the visibility that we have at this time for that.
Speaker Change: And then the other two are capex and working capital.
Speaker Change: Okay and on working capital I mean, how does that trend I guess through the remainder of the year.
Speaker Change: Well so working capital is an interesting one working capital.
Speaker Change: Provide the release of cash when conditions deteriorate, so as revenue declines.
Speaker Change: And in particular as fuel price declines because fuel is the most working capital intensive thing that we have because remember our DSO was 39 days across the company, but we pay the fuel providers seven day, okay. So when you have.
Speaker Change: When you have decreasing revenues from lower activity and decreasing fuel that releases a lot of cash from the working capital and that's part of what we experienced in this quarter and then you have the reverse of course, which we saw for example, during the pandemic as things ramped up activity ramped up fuel prices ramped up.
Speaker Change: You had a drain so.
Speaker Change: And the way that I would think about working capital.
Speaker Change: Is it really an offset to some extent to the earnings meaning when when earnings are climbing higher typically that's a drain on working capital.
Speaker Change: So youll have increased cash flows from the operations being offset somewhat by working capital needs and then when conditions deteriorate. If the reverse youll have earnings coming down partially offset by a release of working capital.
Speaker Change: Over and above that because of the carbon tax in Canada. Okay.
Speaker Change: Eliminated fuel costs in Canada as drop Okay, and thats going to help us again, because our customer pays us in on average 40 days 39 days and we pay fuel every week.
Speaker Change: <unk>.
Right Okay.
Speaker Change: Total sense I appreciate the color thanks very much.
Speaker Change: Pleasure Kevin.
Speaker Change: And your next question comes from the line of Elliot Alper with TD Cowen. Please go ahead.
Speaker Change: Okay. Great. Thanks, guys. This is elliott on for Jason Seidl, maybe just one on the logistics side can you discuss maybe the moving pieces.
Speaker Change: Within that segment in the first quarter or was that primarily the truck moving business driving the weakness and should we expect that to persist given the tariffs or are there any businesses within that segment, helping offset some of the broader weakness.
Speaker Change: Well, if you look at the Oems I mean, the Oem's volumes I mean, Pat and.
Speaker Change: Daimler our two major customers.
Speaker Change: We produce 20% to 30% less trucks today than they used to a year ago. So for sure. This affecting our business at DHT Big time. So if you look at our revenue in our logistics I mean, the drop in revenue comes mostly from that right.
Speaker Change: On the logistics side in Canada, we're doing really really well.
Speaker Change: On our logistic side in the U S a little bit of a weakness in Q1.
Speaker Change: But the guys are addressing that and we believe that if you look at the year 'twenty five.
Speaker Change: <unk>.
Speaker Change: The truck moving business at Ghd I mean, we.
Speaker Change: We should do we should do really really well I mean, so the Canadian side USA will improve.
Speaker Change: No issues that truck moving according to the discussion, we're having with the OEM.
Speaker Change: In Q4, we should do better in Q4 25 than we did in Q4 24. In Q4 24 was really the first quarter that we started to see a drop in in that business. Okay and it continue in Q1. It will continue in Q2 and Q3 and according to our guys Q4.
Speaker Change: For <unk> for the first time, we will do a better.
Speaker Change: Better revenue in Q4 year over year, 25, or <unk> 24, 26, if you listen to the OEM is going to be a boom year, okay and to a certain degree 27 because of all the changes unless Mr. Trump administration make some changes and the requirement.
Speaker Change: Environmental requirement on the truck manufacturers.
Speaker Change: When you say, it's going to be a boom year and 27, maybe.
More clients.
Speaker Change: We'll see.
Speaker Change: I appreciate it thank you.
Speaker Change: Pleasure.
Speaker Change: Okay.
Speaker Change: Sorry. Your next question comes from the line of Matthew Majors Susquehanna. Please go ahead.
Speaker Change: Yeah.
David Saperstein: David Mr. Bedard, good to hear you guys both on together today.
Speaker Change: About a year ago, Mr. <unk>, we talked about.
Speaker Change: Kind of what you want to see through and you talked about digesting <unk> and potentially <unk>.
Speaker Change: Another big acquisition.
Speaker Change: The spinoff plans that were maybe more prominent in the near term when we discussed that a year ago can you give us an update on.
Speaker Change: No.
Speaker Change: What you'd like to accomplish in your role here before you feel like you've done everything you wanted to do just given everything that's changed in the last 912 months or so.
Speaker Change: Yes, yes.
Speaker Change: Yes.
Speaker Change: Hey, listen I mean, like I said 25, we can't do anything upsize on M&A right.
Speaker Change: We had to walk away from a transaction that was a great transaction for both parties the seller and us and we have to walk away because of all of this environment, okay, but that doesn't change the plan. The plan is for sure. If it's not going to be 25 is going to be 26.
Speaker Change: We need to do another acquisition of size.
Speaker Change: In the U S.
Speaker Change: And.
Speaker Change: That's number one and the spinoff okay. In our mind is still makes a lot of business sense, but there again I mean, there's always been a question of size. So when you have a market cap that is now down to six or $7 billion U S. I mean, any spinoff is doesn't make any sense.
Speaker Change: Also in the global environment. So we have to wait so it's not going to happen in 'twenty five.
Speaker Change: Probably in 2006, we will have to see depending on where we're going okay.
Speaker Change: But it makes a lot of sense to have our truckload division stand alone. Okay. Because the return on invested capital is not the same okay. The liquidity is not the same so it makes a lot of sense and I think everybody agrees that this is the way to go.
Speaker Change: The timing, Okay, we thought that a year ago, the timing would be within two years.
Speaker Change: And within two years it would be like 26, I don't think its going to happen in 2006, I think it's more like maybe 27 issue okay.
Speaker Change: The market has been tough for truckload guys. Okay. If you look at our peers. They have been suffering badly 'twenty three 'twenty four and even 25, Okay. I think it's going to be a tough year, maybe things will start to improve in 'twenty six and then it makes lots of sense for us.
Speaker Change: If we have the size, okay, Here's don't forget our truckload operation running today 90, some odd percent, 93% 94 globally with <unk> I.
Speaker Change: I mean, we don't want to do a spinoff with a 93 or a company I mean, we got to bring that ore down to any closer to an 85, which is best in class. Okay. And this is this is the goal okay for 'twenty five 'twenty six and after we get to that goal then maybe it makes sense, but again.
Speaker Change: If our market cap is still $6 billion at the time.
Speaker Change: It's going to be tough to do so there is still a lot of.
Speaker Change: Thanks to do before we do this kind of spinoff, but we're getting ready for it I mean, we're taking action okay everyday that we can to be in a position. When it's time to say go I mean, we are in a position to go right. There is some assets that needs to be transfer there is some.
Speaker Change: Technology that needs to be address et cetera, et cetera, which we are working on okay in order to be ready when the right time comes.
Speaker Change: And in terms of M&A of a sizable deal.
Speaker Change: Kind of have to wait 26, because we have to.
Speaker Change: We have to show to the market that.
Speaker Change: We've been talking about for three or four years now we bought <unk> four years ago, and we used to do okay and then in 'twenty four we just did worst right. So we got to turn this thing around.
Speaker Change: Before doing anything upsize in the U S until until we don't turn the T force rate back to a closer to a 90 <unk> or under nine you are which I think is feasible.
Speaker Change: Don't forget that we run in AUR in Canada today in our in our Canadian Lps, which is unionized right. So there's no reason union no union, none or no. It's just US okay, we have to do a better job.
Speaker Change: Thank you for that.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: I am not showing any further questions at this time I would like to turn it back to Mr. Alain Bedard for closing remarks.
Alain Bedard: Alright, well. Thank you operator, and thank you everyone for joining us today and for your ongoing interest in TFR International's. So we look forward to keeping you updated as we move through 'twenty five and as always please reach out if you have any additional questions. They save enjoyed the day and thanks again.
Speaker Change: Okay.
Speaker Change: Thank you presenters, ladies and gentlemen. This concludes today's conference call. Thank you all for joining you may now disconnect.