TFI International Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
October 24, 2023

There are 6 speakers on the call.

Operator

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to TFI International's Third Quarter 2023 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.

Operator

Callers will be limited to one question and a follow-up. Again, that's one question and a follow-up so that we can get to as many callers as possible. Further instructions for entering the queue will be provided at that time. Please be advised that this conference call will contain statements that are forward looking in nature and subject to a number of risks and uncertainties that could cause actual results to differ materially. Also, I would like to remind everyone that this conference call is being recorded on Tuesday, October 24, 2023.

Operator

I will now turn the call over to Alan Bedard, Chairman, President and Chief Executive Officer of GFI International. Please go ahead, sir.

Speaker 1

All right. Thank you, operator, and thank you, everyone, for joining us this morning. Yesterday, after market close, we release our Q3 2023 results. With weaker demand conditions persisting throughout the quarter, We're proud of our solid execution, which reflects continued adherence to our operating principles. As I mentioned before, our talented team understands the importance of profitability and cash flow, reacting quickly to market shifts and focusing even more intensely on the fundamentals when trade volume weakened.

Speaker 1

We view this underlying focus on profitability and cash flow as Strategically important to the TFI International growth story, allowing us to consistently invest in the business, Pursue M and A always in a disciplined manner and return excess capital to our shareholders whenever possible, which as you know is one of our guiding principles. Taking a look at our 3rd quarter results, we generated operating income of just over CAD 200,000,000,000 reflecting an operating margin of 12.3%. This compares to the prior year's RMB318 1,000,000 with a 17.1 percent margin. Adjusted net income of $136,000,000 compares to $181,000,000 for the year And adjusted EPS of $1.57 was down from $2.01 Regarding net cash from operating activities, we generated $279,000,000 During the Q2 and in terms of free cash flow, which we view as strategically important, we produced nearly 200,000,000 Given the softer market condition, these solid results, along with strong returns on invested capital across all of our business segments, reflect well on the hard working people of TFI and the importance we place on protecting margins, especially when the freight Demand weakens. It's also important to point out that when comparing to the prior year, Our results reflect not only our sales of CFI last August, but the associated $76,000,000 gain on sales along with costs incurred to transition our IP system from EPS, which I will provide long term efficiency advantages.

Speaker 1

In addition, we continue to face modestly unfavorable move in foreign exchange. I'll emphasize the results our reporting are fully burdened, not adjusted for any of these items that affect the year over year comparison. All right. So let's review how each of our business segment performed. P and C, which represents 7% of our Segment revenue before fuel surcharge saw a 7% decline in revenue before fuel surcharge with the number of packages also down 7%.

Speaker 1

Operating income of CAD25 1,000,000 compares to CAD34 1,000,000 in the prior year with a margin of 23% relative to 28% the previous year. Our return on invested capital, while down from 31% a year earlier, came in at still solid 27.6 Overall, our P and C business is operating well given the weaker demand environment and with less contribution from fuel surcharge benefiting from our unique Market exposure and ability to control costs. Moving on to LTL, which is 44% Of segment revenue before fuel surcharge, our revenue before fuel surcharge was down 12%, 24% decline on shipments. Operating income of just over CAD100 1,000,000 was virtually flat year over year. Within LTL, Canadian revenue before fuel surcharge Given difficult market condition with our operating ratio of solid 77.2% compared to 72.8% the prior year.

Speaker 1

Similarly, our return on invested capital for Canadian LTL was 19.6 percent relative to 23.1 percent a year earlier. Within the U. S. LTL, results clearly reflect our margin resilience, especially given an important 5% wage increase to our labor force during the quarter. Revenue per shipment before fuel surcharge remained flat year over year, while our number of shipments were down 7.5%.

Speaker 1

Our revenue before fuel surcharge of 5.71000000 was down from 687 a year earlier, and we were able to keep our operating ratio flat at 90.8 year over year and improve it sequentially. Return on invested capital for U. S. LTL was $15,200,000 compared to the prior year at $25,200,000 Now let's turn to truckload, which is 24 percent of segment revenue before fuel surcharge. And this amidst a very weak market condition with lower demand and weaker rates, We believe that we were able to outperform the broader market, benefiting from our specialized Canadian exposure.

Speaker 1

Our truckload revenue before fuel surcharge was down 21%, reflecting not only the weaker demand, but also the sale of CFI in August 22 and to a lesser extent unfavorable foreign exchange. Truckload operating income was CAD50 1,000,000 relative to CAD97 1,000,000 last year, and our operating ratio came in at 87.5 versus 81.1 a year earlier. So taking a closer look within truckload, although our We were still impacted during the quarter by volume and pricing pressure. This is reflected in our new disclosure of weekly revenue per truck, which declined year over year. As a result of this, as well as a slight FX and WID, revenue before fuel surcharge declined 8% year over year to $325,000,000 Our operating ratio was $87,800,000 relative to $79,900,000 and our return on invested capital was 10.1, down from $12,700,000,000 While taking a look at our Canadian based conventional truckload business, we generated revenue before Fuel surcharge of $79,000,000 almost entirely flat year over year and actually up on a consistent currency basis.

Speaker 1

However, our adjusted operating ratio was 87.8 relative to 75.5 and our return on invested capital, which was 20.6 percent a year earlier came in at 13.8 This reflects a decline in both revenue per mile as well as number of miles partially offset by our ongoing focus on network density and cost control. Wrapping up the business segment discussion. Logistics represents 25% of segment revenue before fuel surcharge. Our solid results this quarter reflect our operational strength and ability to control costs. We generated $416,000,000 of revenue before fuel surcharge, which was down only 2% year over year, benefiting by recent acquisition of GHT, while also facing modest FX headwinds.

Speaker 1

However, on this relatively flat revenue, we were able drive a greater than 40% increase in operating income to RMB41 1,000,000 on a much stronger operating ratio of 9.8%, up a full 300 basis points. Our logistics return to invested capital was 15.5%, down from 21.1% the prior year. Overall, STAHL's performance of our logistics segment benefited from better cost control, the strength of our same day package delivery operation, the GHT acquisition and RT's ability to successfully navigate changing market conditions. Turning to our strong balance sheet and liquidity, which is always a focus at TFI International, we were able to further enhance Our financial position during both during and subsequent to the quarter. First, we generated a free cash flow of nearly €200,000,000 as I mentioned, And we ended September with a funded debt to EBITDA ratio of only 1.39.

Speaker 1

2nd, subsequent to the quarter, we were able to further strengthen our balance sheet with a private placement of €500,000,000 of fixed rate interest only debt, bringing our overall weighted average interest rate to 4.5% entirely fixed, with an overall weighted average duration of 9.5 year. As I mentioned many times, This financial strength is core to TFI International's strategy, giving us the flexibility to make smart investments regardless of the cycle, While pursuing strategic M and A and returning excess capital to our shareholders whenever possible. Speaking of M and A, during the quarter, we completed 4 additional Takeda acquisition, bringing our year to date total I'm also pleased to announce that our Board of Directors has raised the quarterly dividend by 14% and that the share repurchase program, Our NCIB has been renewed for an additional year. I'll now conclude with our updated full year outlook before opening up to Q and A. Today, we are reaffirming our 2023 EPS guidance provided in July of a range of $6 to $6.50 We're also maintaining our full year free cash flow outlook at €700,000,000 to €800,000,000 including CapEx of €200,000,000 to €225,000,000 In addition, We have already exceeded a combined total of $500,000,000 this year of capital deployed in M and A and share repurchase given our very strong financial position.

Speaker 1

And with that, operator, if you could please open up the line so we can move to the Q and A portion of the call.

Operator

The first question comes from Ravi Shanker of Morgan Stanley. Please go ahead.

Speaker 1

Thanks. Good morning, Alan. Would love to get your thoughts on where you think we are in the cycle right now. Obviously, Very interesting time kind of bouncing on the bottom, but maybe some signs of life. Where do you think

Speaker 2

the upcycle comes in? Is it late 'twenty Early 'twenty four, how powerful is that going

Speaker 1

to be? Just your overall thoughts would be very helpful. Yes. Ravi, What we're starting to see in Q4 is improvement, okay, versus our Q3 numbers in terms of activity, But small, we anticipate that 2024, it's probably still going to be a transition year, Okay. There's a lot of things that are in terms of the politics.

Speaker 1

There's an election in the U. S. There's issues in Europe with war and things like that. So I think that I mean, that's what we're doing now. We're just going through our budget.

Speaker 1

And I think that I'm convinced that 'twenty four will be a better year than 'twenty three for us, okay? But it's hard to have a good feel about How good is this going to be? Is that are we going back to normal 'twenty four? Or it's still going to be more towards kind of a transition Towards better days, if you want to call it like that. Got it.

Speaker 1

That's helpful. And for my follow-up, kind of just Given some of the structural changes in the LTL market in the U. S. And some of the I mean, just with the benefit of 3 months of hindsight and settling down, do you think the whole post yellow situation has played out so far versus your expectations? What do you think happens in the near term, in the medium term?

Speaker 1

Do you think it can kind of set you The fact that there's been some major changes in our industry, And I think that the U. S. LTL industry is very well disciplined, okay? So we went through some Tough times in 'twenty three. The fact that a significant player, okay, that was probably a very low margin Player has gone from the market.

Speaker 1

I think this bodes well for the LTL industry. But notwithstanding that, Ravi, Our focus as of TFI with Peoples Rate is really it's on cost. I mean, yes, Our market share could increase. Our volume will increase slowly. But our major, major focus is We need to be leaner and meaner over there, and that's what we're doing.

Speaker 1

So we're providing the team over there with better Information, financial information, during the course of Q4 and into At 'twenty four, we will be providing what we have in Canada with all our LTL operation and package, Financial information by terminals so that the manager could start doing a better job of managing costs. Because right now, the excuse is, well, I don't know. I don't have the information, so I can't do anything about it, right? So the excuse will be gone. Now, Okay.

Speaker 1

The training and the education about all this financial information at the terminal level will be top priority for Our EVP, Bob McGonigal and Keith, the President of T Force Rate. So just to make a long story short about that, Our focus for us is really we have to be more efficient, we have to do better, we have to do more with less.

Operator

The next question comes from Tom Wadewitz of UBS. Please go ahead.

Speaker 2

Yes. Good morning, Elaine. Wanted to see if you could talk A little bit more about kind of how yellow the business from yellow coming over affected performance in the quarter. I think we were anticipating maybe a sequential lift in price, but I don't know if there's like a significant mix effect within that. And then also just you have kind of a disruptive step up in activity that can cause some inefficiency.

Speaker 2

So I wanted to see if you could provide a bit more perspective Yes. How that affected your results in 3Q?

Speaker 1

Yes. Very good question. So What you could see is that if you look at our average weight per shipment, I mean, it's up, I think, 7%. Okay? So this is thanks to A little bit of change in our shipment, okay?

Speaker 1

So for sure, the fact that the display has disappeared helped us Improve our weight per shipment. In terms of pricing, our pricing revenue per shipment ex fuel is about flat year over year. So we were not really helped with that. Now don't forget, we used to run 23,000 shipments before what happened to YRC. We went all the way to 26, but now we're back down to more like 24.5 to 25.

Speaker 1

And during the quarter, we had also We went through increased costs in a sense because with pickup in volume, we had to bring back people, bring back people, cost money. And then, whoops, Again, okay, we went back closer to 20,500, 25,000 shipments. So then we have to readjust our labor force again. And as I said, the problem we have at T Force rate is when you don't have financial information at the thermal level, The reaction time, okay, with all this variation, the volume is too long, okay? And this is what we will be correcting in the future when we provide those guys with financial information, accurate financial information by the day, okay, by the week.

Speaker 1

So all in all, if you look at our operating ratio, okay, we're about flat year over year in Q3 For U. S. LTL, one thing that we have to keep in mind is that our GSP operation was down on the revenue big time, okay? So but we're coming back. I mean, our sales team is working on that.

Speaker 1

So that should improve

Speaker 3

For

Speaker 1

24. So I guess as

Speaker 2

a follow-up question, do you have any thoughts on how we should What we should consider when we're modeling 4th OR and also when we're modeling a 2024 U. S. LTLOR?

Speaker 1

And you know what, Tom, excuse me, I think that 24 LTL U. S. LTLOR should be Yes. So we should be in that neighborhood of 88, 87, 88 to 90.

Speaker 2

Okay. Great. Thanks for the timeline. Okay.

Speaker 1

Thank you, Tom.

Operator

The next question comes from Ken Hoefer of Bank of America. Please go ahead.

Speaker 3

Great. Good morning, Elaine. Thanks for taking the questions. Good morning. So just maybe a follow-up on that for a second.

Speaker 3

Lots of puts and takes in U. S. LTL This quarter, there was the $5,000,000 I guess you've got the ongoing charge. Maybe you could talk a little bit about when you start Transitioning from the UPS network and then you start eliminating those contractual charges, The ground freight pricing, is that something that continues to fade away? I just want to be able to step back and understand kind of how we should think about The U.

Speaker 3

S. LTL and then your near term target is moving some 90% and your long term target of getting to the as much as 80 Yes. Maybe just talk about what's in the number, what's the clear and then what's the go forward?

Speaker 1

Okay. So the transition from UPS at the latest, I mean, we've done by Q1 of 'twenty four, okay? So what we've done so far It's financial, so we move Oracle to our own Oracle financial system. We did HR as well. We did HR in the summer.

Speaker 1

We also did the fleet in September. So we move from UPS Fleet Management to our own Syntyros system. So the only thing really of reporting that's left is the housing of our edge system. So that's the only thing really left with those guys. So to me, all these transition costs, all these excess costs should be things of the past, probably into 'twenty four.

Speaker 1

But for sure, You won't see anything like that into after Q1 of 'twenty four. Now in terms of our GFP, So last year, we were just flying with that. We're doing really well. This year, okay, starting Q1, I mean, our revenues start to drop. I mean, we had some customers issue, okay, that we had to fix, which we have been fixing and working on.

Speaker 1

And now we're starting to see revenue of GFB slowly picking up again. Our volume at GFP is down, like I said, big time, like 40%, and this is not normal. So we had some issues with some Certain customers, but we're working with them and we're going to fix that. And it's coming. Now in terms of the LTL, like I was saying to Tom, I haven't seen the plan.

Speaker 1

I'm going to be with the guys tomorrow, Okay. And talking about their plan for 2024, but I can't see us coming out with a plan With an OR of 90 plus, okay? I think that the market is still going to be soft, Okay. But we can't blame the markets for that because us, we have a lot of

Speaker 4

work to do on our costs.

Speaker 1

So even if the market stays off like it is now, I think that T Force rate team will definitely improve. So this is why to me, when we have a target for 2024 to be in this 87, 88 Range, okay, I think it's reasonable. But this is me talking before meeting those guys tomorrow. I hope That's their plan because to me that is a reasonable plan. That's a reasonable target.

Speaker 1

We'll see. But the fact that this market probably will stay soft, Okay. Even with the disappearance of a major player, okay, that's The best that we can read so far. If I'm wrong and the market improves, now even better. But The focus and I'm repeating that at T Force rate, we have to be more efficient, we have to reduce our costs, We're going to be providing them financial information now by terminal, which they never had, which we have in Canada.

Speaker 1

So think about it in Canada. Look at our OR in Canada. I mean, in a very difficult market In Canada, we're able to come out in Q3 with less volume with a sub ADUR. Why? Well, because our guys are very disciplined.

Speaker 1

They manage the cost, notwithstanding the market conditions. They do a better job than our U. S. Team. Our U.

Speaker 1

S. Team, they don't have the financial information. They will have that by terminal, And we'll start to see some improvements 'twenty four and on.

Speaker 3

Great. And I'll ask a follow-up, I'll keep going, so you can get a simple order there. But maybe you kind of reiterated your full year target, right? So but yet that's Pretty wide range when we're looking just as we move into Q4. Maybe can you talk a little bit about what gets you to The bottom end versus the top end or is there is your thoughts still some decent rebound into the Q4?

Speaker 3

I mean, you look at that Canadian LTL, I agree, staying in the 70s, Amazing, but yet, it's a duration of 400 basis points. So I don't know if there are thoughts you want to throw out there about what gets you bottom end versus top end of the range given we're close to That you're on number.

Speaker 1

Yes. Good question, Ken. If you look at logistics in Q3, what you see in there is only 6 weeks of our So for sure, I mean, GHG is going to be there for the full quarter. So that's going to help us. I believe that T Force rate will do better in Q4 'twenty three than in Q4 'twenty two, Okay.

Speaker 1

So that's going to help us to get to our target. Now, we're going to work hard, Okay. Because we missed consensus 2 quarters in a row, right, Q2 and Q3. And Out of 25 years, we missed guidance about 5 times. I have been involved with trucking.

Speaker 1

And so I don't like that. So this is why, Believe me, we're going to work very hard to be closer to $6.50 than to $6, Right. First results that I'm seeing from October, okay, are very encouraging. So that's why I feel pretty good of just reaffirming our $6,000,000 to $6,000,000 but we'll probably be closer to $50,000,000 than 6, 6:15 then 6.

Speaker 3

Great. All right. Thanks for

Speaker 1

the time. Appreciate the thoughts. Very good, Chad.

Operator

The next question comes from James Hennigan of Wells Fargo. Please go ahead.

Speaker 1

Hey, good morning. Actually, I just need to sort of follow-up on the broader LTL. Good morning.

Speaker 3

Follow-up on the broader LTL discussion, kind of get a better understanding of the volume and pricing trends you're seeing. It seems like there is surge of rate to

Speaker 1

pull back. Just kind of want to So I mean, The forecast we have for Q4 and into the New Year, I mean, our forecast is based on about 25,000 to 26,000 shipments a day, Okay. That is where we are seeing us going into 'twenty four. So that to me is Should be normal, okay, for the company of our size for the next years to come. And Tom, what was the I mean, Jake, what was your next question?

Speaker 3

Yes. Essentially, The trends you're seeing in October and then you mentioned that there was a spike up in volume and a spike down, just what was driving that during the quarter?

Speaker 1

Well, it's just adjustment from shippers, right? So when YRC closed their doors, I mean, for sure, a customer call you and then there's Action and reaction, and there's been an adjustment. So this is why we went from 23% to close to 26% and back down to 24%, 25% as we speak now. So there again, the story of T Force rate, it's not about volume for now, it's about cost, Okay. So what we're saying to our sales team guys, okay, try to get better freight, okay, 26,000 shipments is Normal for us in 'twenty four, that's our goal.

Speaker 1

Okay, fine. Get better shipment because we keep improving that. And The ops guys have to work on the costs. So that's how we're going to bring, okay, we're not focusing on getting more money from the customer. If we can do that, fine.

Speaker 1

If the market allows us to do it, fine. But our focus is not that. Our focus is really bring the cost down, Okay. Be more efficient. Do more with less.

Speaker 1

Got it. And then

Speaker 3

on Canadian LTL, you're doing much better than sort of the long term guidance you had given at the Investor Day. And it seems like we're going to draw a seat or in terms of it. So like how should we think about like essentially was that number conservative or is that actually sort of how you

Speaker 1

Well, I think Canadian now, Kjell, if you look at that, Q3 with volume and pressure on the Canadian market, we were able to Come up with a sub ADOR. And don't forget that we also made an acquisition in the Canadian LTL market, The Kindersley Group, and these guys are 2% bottom line guys, right? It's going to take us a year to bring those guys closer to 15% bottom line guys, Right. So I mean, to me, we've always been more focused on bottom line than top line. So, Kindersley is going to help us with the volume.

Speaker 1

So this is why when you look at our Canadian volume, Q3 over last year, our volume is up because of Kindersley, Right. But that's good in terms of volume, but the profit margin is really, really like 2% with these guys. So it's going to take us a little bit of time. But I think that the Canadian market Canadian LTL market is way more difficult than the U. S.

Speaker 1

One in terms of market condition, quality of revenue, etcetera, etcetera. So this is why When you look at also our Canadian LTL, a lot of our freight is intermodal, okay? So probably like 40% of our revenue runs on rail. So to be able to come up with a sub ADUR using the rail, this is like close to America. Got it.

Speaker 1

But again, I'm always emphasizing this is that our Canadian team has information, Okay. To act and react, okay, every day. And this is what's lacking in the U. S. Those guys I have the excuse today of not knowing anything about costs.

Speaker 1

The only thing that now they know is their labor cost per shipment, Okay. Since October of last year.

Operator

Thank you.

Speaker 1

Welcome.

Operator

The next question comes from Jordan Alliger of Goldman Sachs. Please go ahead.

Speaker 3

Yes, hi, morning. You guys made some pretty good call improvement. Morning, looking at things like cost per shipment, which was down quite a bit year over year and Flapped sequentially despite the labor increase. I'm just curious if you could provide a little more color on where you think you've made some of that progress and how do we think about cost per shipment from here?

Speaker 1

Thanks. Yes. So those guys today with the increase in salaries to our union Labor Force, okay. We are a little bit ahead of our target. So our target should be In a neighborhood where we're right now about 5% or 6%, more than that, but the target for 'twenty four drops again, Okay.

Speaker 1

So the guys will have to do a better job. So how can you do a better job, it means you have to act and react, Okay. In a much faster way. We're also providing our team for the line of a software of the 21st century, right? So this is going to be up and it's in the trial, Okay.

Speaker 1

Face is right now. And based on what the guys are saying is that this is going to be fully implemented in 2024. So there again, with better information, better tools to our line haul guys, I mean, they'll be in a position to shape costs. So I can't really tell you what our labor cost per shipment is, but what I could tell you is that Even with more paying our employees more, our labor cost shipment today is less than a year ago.

Speaker 3

Got it. And then just as a follow-up, I know we've talked about yield and mix and what have you. I don't recall you touching on sort of like core pricing ex the effects of Fuel and mix and just as contracts have come up, what you're seeing, especially since the yellow bankruptcy? Thank you.

Speaker 1

Well, I think that for Q1 and Q2 of 'twenty three, we were starting to see a little bit of pressure on race in the U. S. LTL market. Now with the fact that this thing happened, okay, with YRC, the pricing pressure has alleviate. I'm not saying that GRI and all this is going to be great in 'twenty three, 'twenty four, but at least the pricing pressure because of Tubular's capacity in the market started to alleviate in Q3, and I think it's going to be a thing of the past, Okay.

Speaker 1

For Q4 and into 'twenty four. Thank you.

Operator

The next question comes from Kevin Chan of CIBC. Please go ahead.

Speaker 3

Hi, Elaine. Thanks for taking my question here. Maybe just looking at the U. S. LTL division, I guess after 2024, it feels like the 87, 88 OR that you think you can get next year is burdened With a higher wage rate in the 1st year of your new deal rate, I think it's 5% than it's gotten now.

Speaker 3

Just as you kind of roll through that wage, It feels like you have a good line of sight to get to that 85. Maybe it's more of a 2025 story. Is that kind of the right way to think about the OR cadence, just As wage growth steps down, do you continue to get yield growth and I presume you can get cost declines?

Speaker 1

Yes. Yes. Well, absolutely, Kevin. Because it's a huge hit. I mean, when you have to give 5% more to your employee right there, Okay.

Speaker 1

And inventory cost is a big components of our cost, right? So you're absolutely right. I mean that 5% It was really a big hit for year 1. But then when you get to our new contract with year 2, 3 and 4, I mean, we're not talking about 5%, right? So I think it's about 2%, something like that because overall the contract is just under 3 over 5 years, Right.

Speaker 1

So that's a huge headwind for us now, okay, because all these costs, we have to manage them, we got to Try to pass on more to on terms of pricing, okay, which we haven't done because if you look at our average revenue per shipment, I mean, we're flat year over year. So really, this increased cost per hour, we have to swallow it within our operation. So again, it's by Being more efficient that we're able to come up with an OR that's about stable year over year with 5% more money to our employees, right? So time is on our side, okay, for sure, because down the road, we will not raise the salaries by much as 'twenty 3. And we're still going to be working on reducing the miles, reducing the hours, having a better planning, Talking about my line operation, that's going to help big time.

Speaker 1

I mean, It's new tools with AI that's really going to help our line haul division to be in a better position to forecast because Every day, it's a different story, right? So I'm convinced, okay, that 'twenty four We'll see major improvement versus 'twenty three in our U. S. LTL operation, okay? So that's why I'm convinced that we could get to the 87, 88, 11, and then we're on track to be closer to 85 in 2025.

Speaker 1

Our goal has always been to be Closer to 80, but we got to go step by step.

Speaker 3

That's helpful. And maybe just Maybe just my last question here. You've talked about normalized earnings for your company, and I think you mentioned this on the Q2 call, kind of between 8% to 10%. I know you're looking at 2024 being a transitionary year, but does that get you within that range? Do you think you can get to the bottom end of that 8% to 10% normalized earnings in 2024 even if it's Transition year

Speaker 5

or is it still a

Speaker 3

pretty challenging market out there?

Speaker 1

Our truckload is really killing us, right? If you look at the Star in the U. S, okay, the best Truffle Company in U. S, they had a very difficult Q3. Us, we're the same.

Speaker 1

Really for us in 'twenty four is how is our truckload, Okay. Specialty truckload is going to come back. To me, if our truckload is coming back slowly, okay, to a more normal environment, I think that 2024, we should be in a position to get closer to 8 than 650, right? So truckload is a big story for us this year. LTL, U.

Speaker 1

S. LTL The volumes in Canada, if we could start to see a little bit of growth there, and M and A too. I mean, for sure, GST will help us big time to get closer today, right? And we have other things In the pipeline, that could be also interesting for 2024. So I mean, Let's talk about 'twenty three, get to 'six 50 in 'twenty three.

Speaker 1

And then guys, we got to get closer to page In 'twenty four. No, we did 'eighteen in 'twenty two. But okay, so I mean, That's a nice target to be an aid in 'twenty four.

Speaker 3

I agree. That's it for me, Ally. Thank you for taking my questions.

Speaker 1

Thank you. Thank you.

Operator

The next question comes from Brian Ossenbeck of JPMorgan. Please go ahead.

Speaker 3

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

Speaker 1

Good morning, Brian.

Speaker 3

Hey, so I just wanted to follow-up on the M and A and maybe get your thoughts on capital deployment and sort of the rationale and timing behind The private placements, what are some of the best opportunities to pull a capital? You see right now, there's some bigger deals maybe getting a little more Interesting. The freight recession lingers and then few announcements in the last time you said you had enough stores. Enough stores now in US LPLs, maybe

Speaker 1

you have those Yes. You know what, Brian, I mean, The reason we did that $500,000,000 placement is because it's not because we don't know what to do, right? It's just we're just getting ready to do something, right? So if you look at what we've done this year, I mean, we've done about 100,000,000, right, of investment, okay, in

Operator

terms of M and A.

Speaker 1

I think that we're going to do more than that in 2024. So this is why we got set up With this private placement, just in order to get a little bit more dry powder for us to be in a position to do the good things that we want to do in 2024. In terms of our pipeline, Pipeline is really strong in terms of M and A. Hello.

Speaker 3

And any Just a quick follow-up, any thoughts on the YOLO bankruptcy auction? Anything seems like you have enough doors in the U. S. Now, but I wanted to see if there's any particular assets that looked of interest to you. And then maybe just as a quick follow-up at the same time, can you just give us a sense on how density It is tracking in T Force Freight.

Speaker 3

So it's a big part of the story here. Some comments on stops per truck or miles between stops. Now you have a big step up in volume in the 3rd quarter. Thank you.

Speaker 1

Yes. You know what, Brian? We've said it many times. I mean, our focus in the U. S, okay, has always been logistics and LTL.

Speaker 1

And to a certain degree, specialty truckload, if there's something that makes a lot of sense for us to do. In terms of improvement, okay, at T Force Freight, Our miles per stop between each and every stop has improved, okay? This is helping us reduce the costs, Okay. But we're still a far cry from what we do in Canada. So as an example, if we do, let's say, the Canadian story is we do about 5 miles between each and every stop.

Speaker 1

In the U. S, we used to be doing double digit miles over 10, right? So now With less volume than 2 years ago when we bought the company, okay, our average mile per sub is not 5 in the U. S, But it's not 10 anymore. So it's single digit now.

Speaker 1

So slowly, okay, we're doing more in terms of having drivers And when they drive less, well, they cost less money because they don't spend on fuel, There's less risk of accident because they're not driving, they're picking up freight, right? So we are on the right track, okay? But we're still far from the efficiency that we have in Canada. But this is work that needs to be done between our sales team and our ops team so that the sales team really understands what we're looking for. So T Force Rate used to be a sales oriented company When it was owned by UPS?

Speaker 1

When it's owned by TFI, it's not a sales oriented company. It's an operational oriented company. So the operation talks to sales about what they want, what they need to improve density. It's not the other way around where sales no, this is a customer, this is the shipment, and now you got to take care of that. No, no, no, no, no.

Speaker 1

This company is moving into a knobs driven environment. And it's the operation that works with sales and say, hey, this is what we want. This is the area. This is the kind of freight we need, okay? And don't bring me something that I don't want, Right, because I'm not Jack, I'm all trading, I still have none anymore.

Operator

The next question comes from Scott Group of Wolfe Research. Please go ahead.

Speaker 4

Hey, thanks. Good morning, Elaine. Just want to follow-up on the M and A discussion. So It sounds like more M and A next year. Should we be thinking about a sort of a larger, more transformational deal?

Speaker 4

Is this more Just more of the tuck in deals. And how do you balance M and A with the potential for a big buyback? Just like the Saks are basically back to like pre yellow Levels right now. So how do you balance out the U. S.

Speaker 4

Buyback?

Speaker 1

Yes. Yes. Well, Buyback, we really love buyback. So I'll give you an example. We just renewed our NCIB, Scott, right?

Speaker 1

And we have an order to buy 1,000,000 shares depending on the price. So this is the focus depending on the price. We're there. We renew our NAND CIB and we're going to be now. If there's a major transaction, okay, And I think that if you look at our history, normally you have something of size in 'twenty four.

Speaker 1

We did a lot of nice tuck ins In 'twenty four, we're probably very close to being done for 'twenty I mean 'twenty three. We're probably close to being done in 'twenty three. We got this $500,000,000 placement just to get ready to be in a position, okay, in a better position. Our leverage is 1.39 right now. We should be closer to 1.2 At the end of the year, so we have a lot of dry powder on our line of credit with our bankers.

Speaker 1

Now we have cash. We have, what, $300,000,000 $400,000,000 of cash at the end of the year, okay? So we're well positioned to do something of size in 'twenty four. Now it's always the same story with TFI. There's always one, not just one file that we're working on.

Speaker 1

There are always more than 1. So I think that the possibility of doing something of size In 'twenty four, I would put that at 65%, 75%.

Speaker 4

Okay. And then, the other times that you've actually gotten weather whether you've Sold assets or spun assets, is that something you're thinking about right now? Are there assets potentially worth monetizing?

Speaker 1

No, not in 'twenty three or 'twenty four, Scott. Maybe that's something that may happen in 'twenty five, Depending on what happens in 'twenty four. We'll see.

Speaker 4

And then just lastly, you made a comment earlier that you're not sure if the if it's the right environment for big LTL, GRIs there something like that? And I know the GRI you announced earlier this month was a bit lower than last year's GRI. We just had Saia announce their GRI this morning, and it's actually a point bigger than last year. So maybe just I want to understand why you think it's not an environment more supportive for LTLGRIs and pricing.

Speaker 1

Scott, you can't compare ODiSIYA with T Force rate, right? So our reputation is not the same. So we have to gain reputation. We have to improve our service. We have to improve our costs, but we also have to improve our service.

Speaker 1

Because for years years, we were writing the truth, right? So this is why us, we in Canada, we could do these kinds of things, Okay. We could be the leader, okay? But Scott, I'm sorry, but in the U. S, we have to be followers today.

Speaker 1

We have to follow OD and Saia. And can we be in the same league as those guys? No. I mean, we were not as good as them. We'll be, but we're not today.

Speaker 1

So this is why when we talk to our teams, these guys, let's be cautious on that, Okay. And Saia and OD are the big guys. You do really well, fine. We still have lots of work to do in terms of service, in terms of costs. And maybe next year, we'll be in the same league.

Speaker 1

Maybe it's going to take us another year or 2, but we're not there, Scott. So we cannot be as aggressive on pricing As these guys are. Us, we have to be very aggressive on our cost.

Speaker 4

Makes sense. Thank you, Elaine, for the thoughts.

Speaker 1

Thank you, Scott.

Operator

The next question comes from Konark Gupta of Scotia Capital. Please go ahead.

Speaker 5

I just wanted to I'll circle back on people's rates yield ex fuel in the 3rd quarter. It seemed to have come down sequentially. And I'm just curious, the yellow bankruptcy situation Definitely created a more subtle balance between demand and supply. The LTL market is already pretty consolidated, right, and concentrated. So I'm just curious, like, what would have contributed to that yield decline in Q3 versus the 1st 6 months of this year?

Speaker 1

Well, I think that if you look at the revenue per shipment, I mean, it's flat. The yield is lower because the shipments are heavier. So There's a little bit of a trade off, okay? So really, Conor, us, what we look at is, Hey, what's the revenue per shipment? And our goal is always to increase the weight because we are being paid by the weight.

Speaker 1

Now when you increase the weight, you got to reduce a little bit the rate, okay? So it's a balancing act, okay? And like I said Okay. With Scott, early on, I mean, we're not perfect. I mean, we're it Still need some improvement.

Speaker 1

Our pricing team, it's we lack a lot of discipline in the past, Okay. That we're trying to correct, but that takes time with customers. So we want our customers to have a great experience when they deal with T Force rate. And we had a lot of issues in the past with the service. Our equipment was so bad, Okay.

Speaker 1

I think that for the first time in the MD and A, we're showing the age of our trucks at Key Force rate. So Now we're down to about 4.6 average age versus when we bought the company, we're closer to 8. I mean, that's issues with service for sure,

Speaker 2

I mean, with all

Speaker 1

trucks. So slowly, I mean, we're Going to get to better quality of revenue, but we have to improve our service. We have to improve our customers' experience with us. And this is why it's a little bit of a balancing act, okay? This is like when you're trying to buy, Let's see, a car, okay.

Speaker 1

So you can't sell a car that is not at Bentley at Bentley's price.

Speaker 5

Right. No, it makes sense. Thanks for the color. I just can follow-up on the operating ratio. So I heard you saying 87% to 80 or 90% ish almost right next year for you.

Speaker 5

That's healthy. You guys are at 90 So that's a decent improvement clearly. But I think previously you kind of alluded to probably a flow of 85%. I'm just wondering like is it market for sale or is it market driven that you are not expecting 85 in the next Do you hear maybe or is it something else in that equation that has changed?

Speaker 1

No, no. You know what, Konar, it's really it's a soft patch for the volume right now, right? So for sure, the fact that YRC is gone has improved, Okay. But that market is still in an overcapacity situation in the U. S.

Speaker 1

Not big, but still is, right? So this is why we have to be careful. We say 90 for us in 2024 Should not be our target. It's got to be closer to 87, 88, okay? Keep improving that.

Speaker 1

And as I said it, With minimal improvement on volume, because our targeted volume is to be closer in the 25 to 26 range Shipments per day, right? So a little bit of improvement in volume, a little bit of improvement maybe on the pricing, okay, with the GRI, fine, But the big improvement has to come from the operation in terms of the line haul costs, in terms of our P and D costs, in terms of our that's how we're going to get to 88, 85, and hopefully, one day get closer to 80. Now we also have to live with the environment, right? So what we've seen so far is in Q3, one of my peers came out nonunion with an 85 OR, Okay. So us, unionize in a difficult environment because T Force rate has been abandoned, okay, not really invested a lot by the previous owner because that was not the focus.

Speaker 1

So we're going through a lot of improvement and changes. So to me, when you look at the U. S. At a 90 something OR for us in Q3 in a soft market, yes, YRC is gone, okay, that helps. But still, I mean, my GFP logistics operation is down big time.

Speaker 1

Okay. That's going to come back In 'twenty four, but still, I mean, I'm really proud of what the guys have done so far at T Force Freight. We bought this company 2 years ago, okay? At the time, it was losing money. Today, it's

Speaker 5

That's great, Alain. Thanks so much for the color and all the rest of the 2024.

Speaker 1

Thank you, Coran. We're going to need that for sure.

Operator

The next question comes from Dustin Majors with Susquehanna. Please go ahead.

Speaker 3

Thanks for taking my questions here. There's been a lot of talk on U. S. LTL, Understandably, given how much you've improved and driven value from that business. But can you go back to the Truckload segment a little more in detail?

Speaker 3

How comfortable are you that this kind of $100,000,000 adjusted EBITDA level is close to the bottom? Should we see some negative seasonality into the Q4? And are we at a floor there where we feel pretty good About where we're bottoming and it's really just a question of how long it takes us to get better and how quickly that can happen? Thank you.

Speaker 1

Very good question. I think that if we're not at the floor, we're very close to the floor, okay? The truckload world, our specialized truckload, okay, is very disappointing in a sense because We're coming out with an 87, 88 award. But then we take comfort when we look at the van world in the U. S.

Speaker 1

Where most of the guys are coming out with a 95, okay, in Q3. So what we've seen so far. So It's very disappointing when I talk to Steve, okay, Brookshaw, the guy, our leader over there. And the feel is that I don't think it's we're going to see some major improvement in Q4. And it's probably going to take us all the way to somewhere in 'twenty four before we start to see improvement, okay, in the specialty truckload.

Speaker 1

But Again, I haven't talked to the team there. I'm going to be with the truckload team next week to see what the plan is for 2024. But I would My feeling right now is that 'twenty three has been difficult, okay, for truckload. And we're probably at the floor, But we're going to stay on the floor probably for at least the next 6 to 12 months. Maybe I'm wrong.

Speaker 1

Maybe things will improve faster than that. But us, always very conservative, okay? And fuel is an issue. Fuel surcharge is an issue. When you have a soft market, okay, shipper take advantage of you, okay, by trying to squeeze you on fuel surcharge as well as rates, Right.

Speaker 1

So this is what we're going through now. It's not so much the rate, okay? It's the activity level that's down for us in our truckload. Our revenue per truck per week is down. Our miles are down, okay, because the activity is down.

Speaker 1

The rate is not so bad, but it's the fuel surcharge squeeze that we're getting from shippers that is affecting us more Then the rate the base rate, right? So there's 2 things: activity, okay, number 1, revenue per truck,

Speaker 3

So higher fuel is helpful next year and its profit improvement is not purely A function of the bid season for you, it really can involve utilization as well. Is that fair?

Speaker 1

It's fair. Yes, absolutely. So utilization is too low, okay? So that's number 1. And number 2, rates are about okay, not so bad because We hold on to the rate, okay, and we get less volume because we hold on to our rate, But then we'll also get squeezed on fuel surcharge.

Speaker 1

So instead of getting the fair fuel surcharge because the market is up, we get a discounted fuel surcharge from the ships today, right? So before things start to get better for us, we need more volumes so that the market condition starts Change with the shipper, okay? And it's kind of a cycle thing, right? So some people are dropping from the market right now because They come to the shippers with fuel in price and then, oops, they lose their fuel card because they can't pay their fuel bill. So I mean the demand is still weak and the offer is still more than the demand, But you're going to see some truckers slowly getting out of the business, okay, because they get with the shippers with stupid pricing.

Speaker 1

So that's what I'm saying. We're on the floor. Okay. Are we going to stay on the floor for 3 months? Absolutely.

Speaker 1

Is that going to last for 9 months? I don't know. But one thing is for sure, I don't think that we're going to see worse condition than what we have today. And also Listening to what the way our peers are looking at the market, and I think it's basically the same best as you guys were on the floor. It's just that how fast can we get up from the floor.

Speaker 1

It's hard to say. Thank you.

Operator

The next question comes from Elliot Alper of TD Securities. Please go ahead.

Speaker 3

Great. Thank you. This is Elliot on for Jason Seidl. Maybe over on the logistics side and the DHT acquisition. I guess, How's the integration going so far?

Speaker 3

How does their margin profile maybe compare to your core logistics margin? Maybe how we should think about that in Q4? I know they're a pretty niche Player in the auto space, curious if they're being affected by the auto strikes as well.

Speaker 1

Yes, very good question. So no, they're not affected by the auto strikes at all, okay, number 1. Number 2 is their profile of margin It's similar to ours, right? So they're not in the business of 2%, 3% bottom line because we're not big fan of that. We're not big fan of 2%, 3%.

Speaker 1

So they're close to ours. And I think that GHT will do better than the average TFI, okay, logistics earnings in 2024, 2025. We see probably in 2024 a little bit of a dip in volume, Okay. At GHT versus 'twenty three, well, we see a major improvement for 'twenty four according to the forecast that I've seen so far. In terms of the integration, I mean, this is so new to us.

Speaker 1

I mean, we're just learning, okay, with the team there. I mean, JHT is a fantastic company. It's a great acquisition for TFI Group of Companies. As a matter of fact, after this call, I'm going to be with the management team of GHT to talk about their plan for 2024. And I think that even with less volume, I think that GHT will do as well in 'twenty four as they did in 'twenty three.

Speaker 1

So very happy with this transaction. And this is the kind of deal that's going to help us create value for our shareholders Long term.

Speaker 3

Got it. And then maybe separately on the logistics. You know as a whole, I mean, you had some organic operating income growth, I believe, in the quarter. I think you called out some strength in the same day package business. Any other color there on this would be helpful.

Speaker 3

Thanks.

Speaker 1

Yes. You know what, our logistics arm, Our last mile operation in the U. S. Is doing really well. I mean, our volume is about stable year over year In a more difficult market, we're down a bit in Canada because one of our customers, We just cut them off because of issues with credit.

Speaker 1

So this is why in Canada, our volumes are down a bit, Okay. Year over year in Q3, but we have new business coming on stream for Q4. So probably Q4, we're going to be flat year over year in terms of volume, again, in a softer market, okay, in 20 versus 2022. So we're doing well on the medical side of things. The e commerce, for sure, I mean, E commerce is not as good today as it was 2 years ago.

Speaker 1

So it's a little bit of a fight, but we have a fantastic team over there That's doing a great job. So volume is about stable, but profit is up. If you look at year over year, I mean, JHC is helping. U. S.

Speaker 1

Logistics is also helping. Our volume is down at WW, Quite considerable, okay, because of market condition, but the bottom line is down just a few points. So All in all, our logistics is performing really well. And I think that we're going to do them better in 'twenty four.

Operator

The next question comes from Cameron Doerksen of National Bank Financial. Please go ahead.

Speaker 2

Yes, thanks. Good morning.

Speaker 1

Good morning, Cameron. So maybe just a quick couple of

Speaker 2

questions on the Packaging Courier business. Just wondering if you can a little bit about the outlook as we head into kind of the peak volume period for that business. I mean, what does it look like this year, year over year? And then maybe secondly, Just on the margin, some pressure year over year. I mean, how much of that is, I guess, maybe a little bit lower volume environment, How much is also perhaps the benefit from or the lack of benefit from fuel surcharge revenue?

Speaker 1

Right, right. Absolutely, Cameron. I mean, our volume is down 7%, right? So if you look at our piece count and all that, If I remember correctly, I mean, we're down about 7% on revenue. We're down $8,000,000 And basically, we're down $8,000,000 on OE Q3, year over year.

Speaker 1

And some of that is attributable to less volume, okay? Our cost is about stable, okay, but the volume is just killing us. And because we're so dense, because we're so good, okay, When fuel is expensive, we make a little bit of money on fuel. When fuel is not expensive like it is now, that profit is gone, right? So that is a little bit of a headwind for our Canadian LTL in our package.

Speaker 1

When fuel is low, I mean, we don't make we don't have a little bit of profit from fuel. When fuel is high, We do well on fuel because of our density, which is very different than our U. S. LTL operation, because we never make money on fuel in the U. S.

Speaker 1

LTL, right, today. Now that's going to also help us because our NPG, because of the new equipment, is doing way better, okay? There's about a 17%, 18% saving on our new trucks versus the old trucks that we used to run. So over time, I mean, we when Jewel was going to go back a little bit higher, that should help us in U. S.

Speaker 1

As well. Well, that's the story. The way we see Q4, Cameron, into the volume for our P and C, Volume will not improve year over year. The market is too soft. And us, we're focused on bottom line, like we've said many, many times.

Speaker 1

So I mean, this is why, guys, let's protect the margin and let's not fight this fight with Customers that don't want to pay the fair price.

Speaker 2

Okay. That's helpful. And maybe just a quick follow-up just on, I guess how we should think about CapEx for 2024. Obviously, you haven't set your budget yet, but just kind of framework, is there anything, I guess, your direction that you can tell us about CapEx as we look into next year?

Speaker 1

I would say about the same as this year, Cameron, so far, what I could Thank you, Alf. Okay. So for sure, we did a lot of CapEx in T Force Freight that was well warranted, And we will continue to make sure that the average age of our fleet keeps going down closer to 4 versus 4.7 it is right now. Our trailer fleet is needs some improvement too. So it's underway.

Speaker 1

So I would say overall for TFI, CapEx should be in the same league as what we've seen in 2023.

Speaker 2

Okay. That's great. Appreciate the time. Thanks.

Speaker 1

Thank you, Chairman.

Operator

The next question comes from Bruce Chan of Stifel. Please go ahead. Hi, good morning. This is Andrew Cox on for Bruce.

Speaker 1

Okay. Good morning.

Operator

Sorry, I just wanted to get any Rapidly as you'd like, I do kind of want to know if there's any impact of the tens of thousands of teachers becoming available on the market. It's been easier to add post Yellow, and do you feel you need to manage the target of 26,000 shipments per day next year? Thanks.

Speaker 1

No, we don't need to add any management, that's for sure. And Your question is really a good question, and we can't really answer that. So those managers have not been trained in managing costs, Right. So that's what we're going to do in 2024. Once we provide them the financial information, we're going to train them.

Speaker 1

Now if you ask me what's going to be the success ratio of those managers that have never done that, hard to say. So we know one thing for sure is that it's not going to be 100%. So we have guys that Are going to make it and probably we have guys that are not going to be able to make it and pass the test of being able to manage costs. It's a transition year for these guys over the course of 'twenty four. And to tell you what the That ratio is going to be, I don't know, okay?

Speaker 1

One thing we know is that they've never done it before. So we'll see how good these guys could be. Now, listen, I mean, if you look at T Force rate 2 years ago And T Force rate today in terms of the executive. Paul, the President, has retired. The pricing guy, David Myers, has gone away.

Speaker 1

Eileen, the sales leader, Has been replaced, okay. So the fleet managers, okay, is new. So at the top level, we have a lot of new blood there, new Bruin Suri, right? And If we need to do the same kind of adjustment in the people at the terminal level, That's what we'll do.

Operator

Okay. That's very helpful. Thank you. Can I just ask a bit about the volume churn? There were some Intra quarter swings throughout the quarter, and I just wanted to know if that if you think that was more a function of just normal seasonality or is this more a function of Yellow Freight Finding a home, we've heard from other executive teams that there's been kind of waves of yellow freight go from 1 carrier to the next depending on service levels.

Operator

Just wanted to A sense of whether that's functionality of seasonality or finding a home for Yellow Freight? Thank you.

Speaker 1

I think that we've said it. I mean day 1, the shippers, okay, they go wherever they can. And then they start reacting. And that is probably, I don't think that is seasonal so much as just shippers trying to find a home where they feel that Thank you.

Operator

The next question comes from Benoit Poirier of Desjardins Capital Markets. Please go ahead. Benoit, your line is open. Please go ahead.

Speaker 3

Okay. So sorry, sorry, I was on mute. So just looking back at U. S. LTL, to get toward the 80%, 85% OR longer term, Just wondering if you need to get rid of railroads similar to the best in class players in the U.

Speaker 3

S. And What about the pricing and the service these days?

Speaker 1

Yes. Good point, Benoit. So for sure, okay, we will do more with the rail, okay, because the service with rail is always an issue. And the customer cannot blame the rail they talk to you, right? So there's again, I mean, we have to bring our cost of our own Fleets down, okay?

Speaker 1

So then there's no real benefit to move freight on rail. So this is There's 2 things that's going to happen. The improved fleet that now our guys are working, better trucks, okay? That's number 1. Number 2, better management, okay, for our LYNO provider, I mean, our LYNO team With this new software that we are implementing now that's going to be fully implemented by the end of 'twenty three, That's also going to help us.

Speaker 1

For sure, I mean, if you look at our Canadian operation, we run road and rail. And the only reason we want rail is because some customers want it cheap, but they know that their service is never going to be the same. And we have to fight with the rail because the service is not there. But we see to Mr. Customer, you want a cheap deal, Well, you're going to live with cheap service, right?

Speaker 1

U. S, it's a little bit different because Customers are not really always saying I want it on the rail. And then the rail is not successful. They don't deliver. And then so it's a transition, okay?

Speaker 1

And like you said, the best of class in the U. S. LTL World, don't use too much rail. So yes, it's a trend that you're going to see us moving slowly, Okay. Away from rail as much as we can and to service us through our own team directly.

Operator

This concludes the question and answer session. I would like to turn the conference back over to Alain Bedard for any closing remarks.

Speaker 1

Well, thank you. Thank you, everyone, for being on this morning's call. We appreciate your interest in TFI International. And as always,

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Key Takeaways

  • TFI reported Q3 operating income of just over CAD 200 million with a 12.3% margin (down from 17.1% a year ago) and adjusted EPS of $1.57 versus $2.01, as weaker freight demand and FX headwinds weighed on results.
  • The company generated CAD 279 million in net cash from operations and nearly CAD 200 million in free cash flow, enabling disciplined M&A, a 14% dividend increase, and renewal of its NCIB share repurchase program.
  • Segment performance was mixed: LTL revenue fell 12% (shipments down 24%) yet held operating income flat, while parcel and truckload saw 7% and 21% revenue drops, respectively, putting pressure on margins.
  • Logistics revenue dipped only 2%, but operating margin expanded by 300 bps to 9.8% thanks to cost controls and the GHT acquisition, delivering a solid return on invested capital.
  • TFI reaffirmed full-year 2023 EPS guidance of $6.00–$6.50 and free cash flow outlook of CAD 700–800 million, while projecting a transitionary market in late 2023 and modest improvement in 2024.
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Earnings Conference Call
TFI International Q3 2023
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