Walter Spracklin: Okay. Excellent. Thanks very much for the time, Alain.
Alain Bédard: Pleasure, Walter.
Operator: Thank you. Our next questions come from the line of Konark Gupta with Scotia Capital. Please proceed with your questions.
Konark Gupta: Thanks, operator. Good morning, Alain.
Alain Bédard: Good morning, Konark.
Konark Gupta: Good morning. My question is on US LTL a bit here. Like what you’re seeing in your space is that the weights per shipment are coming down for the industry, right? Obviously, it’s a challenging environment. Rates are holding up. But for your business, you guys are looking to increase rate which you have done, obviously, in the last few quarters. So that’s great. But you’re also looking to improve the rates at the same time to keep the quality high. So I’m not — I’m trying to just kind of understand how difficult is it to increase your weight while at the same time keeping the pricing up when the industry is kind of losing the weight. Like, is it more like you need to be more competitive on pricing to get that more weight per shipment or you have to go and tweak some other things?
Alain Bédard: Konark, not necessarily. So, one of the reasons, we were not big in heavy shipment is because we were stupid. Our pricing was bad, right? So, one of the first thing that we had to do was to correct our pricing model, which we did about a year ago, right? Because don’t forget, we were tied up with the UPS system. So, it was difficult for us to have some quality information in that regard. And we took over February of ’23, all the financial information. So, at that point, we were able to work with the team that we have there to adjust the pricing so that we can be competitive, okay, on heavier shipment. And by doing that, and also by having our sales team focusing on that instead of focusing on light freight or retail freight, more industrial freight, heavier freight, then, we were able to slowly move the average weight of our shipment, okay, up closer to our peers because like I said, our peers are not hauling at a thousand pound shipping.
I mean, our peers are running 1,400, 1,500 pound. And this is where we have to be slowly. Now, by doing that, okay, we just have to be competitive to market rates that are there, right? And, that’s what we’ve done. So, if you look at our average revenue per shipping, it’s down a little bit, okay, because we had to match market rates for heavier shipping. But most importantly, okay, is our revenue per shipment, that is, to me, the key, because if you move a shipment for $300 or if you move a shipment for $400 and the difference is only the weight, everything else is the same, I mean, to move the shipment, you move that on the pallet. I mean, this got nothing to do. The only handicap that you could have is that you could have an issue with weight on your linehaul.
But in today’s market, at TForce Freight, we never have an issue with weight. We have issues with volume. Never weight, right? So this is why by moving to heavier shipment that does not affect our cost at all, okay? But it increased our revenue. And that is to be more focused on — for our sales team to be focused on the game. We want heavier shipment. And now we are price competitive, okay, with the market. And we want more shipment per stop. And we want shippers closer to our terminal. That is simple to say, right? That’s what we do in Canada. That’s why if you compare us with the other major LTL carrier that’s public in Canada, I mean, we have different ORs. Why is that? Because our density is probably better than this other guy. It’s not the rate.
Because the rate is market, right? Unless you don’t know the market, I mean, the rate — the market is the market for all of us.
Konark Gupta: Right. That makes sense, Alain. Thanks for the color there. And then, if we can follow-up quickly. There’s a bit of a competitive landscape change I think maybe in Canada, but perhaps in the US as well. I mean, there was a big Canadian player that is going through restructuring recently. Any thoughts here on what kind of opportunities that present to you? Like, is it more like a market share grab opportunity to you? Or would you be interested in some of the assets, like trucks or drivers or lanes?
Alain Bédard: No. The guy that you’re talking about is a Driver Inc, guy. He’s a guy — He’s a Driver Inc. So, he’s under the protection of the court right now, but he’s still running the business. I mean, for sure, he’s probably going to have to downsize and do less. But we’re still fighting this guy and him and others, okay, mostly based in Ontario, and those guys — that’s why my OR in my truckload, my Canadian truckload, is like debris, it’s a disaster. We went — now we’re running 10 points behind last year in my OR. Why is that? Because of these guys, right, that don’t pay benefits to the employees, because they run a Drive Inc. model. So this guy, no, it’s not going to help us at all because this guy keeps running and we’ll see. Maybe he’s going to downsize a bit. But these kind of guys will restart in on a — under a different name, whatever. I mean, because their model is so good in cheating the Canadian system, so to the benefit of the customers.
Konark Gupta: Yeah, that makes sense. Thanks. I appreciate the time, Alain. Thank you.
Alain Bédard: Pleasure, Konark.
Operator: Thank you. Our next questions come from the line of Cameron Doerksen with National Bank Financial. Please proceed with your questions.
Cameron Doerksen: Yeah, thanks. Good morning. Just to kind of follow up on that thought — just on the Canadian dry van truckload, I mean, if we don’t see, I guess, a change in, I guess, the regulation or whatever you want to call it here, does it still make sense for you to have a Canadian dry van operation? Is that something that maybe you don’t want to own anymore?
Alain Bédard: Yeah. You know what, Cameron, we’re asking ourselves a question because we believe that our political leaders will act. Now, it’s been years and years and they keep promising, but they don’t deliver. So you’re absolutely right. That’s the question for us is that do we want to have $200 million of assets in a business that we’re competing with guys that are not fair, are not paying any benefits to their employees. And us, our benefit to our employees keep growing because now we have Mr. Trudeau that gave 10 days of sick leave, they gave three times — three days of PTO, which these guys don’t have to pay for, right? So, it’s a very good question. And for sure you will see our asset base reduce. You will see that — because, I mean, if you can’t beat them, join them.
But us, we cannot join them. I mean, we cannot be a Driver Inc. company in Canada. Because it’s not fair for our employees. It’s completely unfair. So, we’re not going to do that. So, you’re absolutely right down the road, okay, you’ll see us shrinking. Now, at the same time, okay, we’ve got lots of opportunities to buy companies for about the asset price. Why? Because, the small guy with 50 trucks or [$40 billion] (ph) revenue, that guy, he is dying right now. So there’s opportunity maybe to beef up a little bit our truckload division by doing a little bit of small M&As here and there. That makes sense in those guys that are in niche maybe, okay? But overall, our Canadian truckload will shrink because of the Driver Inc. Absolutely. And people will lose job, good paying jobs at TFI because of that Driver Inc.’s unfair competition.
Cameron Doerksen: Okay. That’s helpful. And just staying with truckload, just thinking about the specialized business, which obviously is a much larger piece of the business now with Daseke, what are you seeing, I guess on market conditions there? I mean, it’s historically been a little more stable from a market perspective. But any signs of a bottoming? Are you feeling more optimistic later in the year? Just any thoughts around the market conditions?
Alain Bédard: Yeah. When we talk to customers right now, I mean, everybody believes that, ’24 is going to be some kind of a steady heady year, not a great year, but ’25 and ’26 in the US will be great years. The reason being is that there’s a major election in the US, right? And the country is divided 50-50. So, you don’t know if it’s going to go left or right. So some guys are just waiting to see. As an example, if you take GE Energy, okay, with the windmills, if it’s a candidate one, he’s against windmills. So that business is going to fall, right? If you take the number two guy, well, he likes windmill, he’s more green. So that’s why we have these kinds of customers are just sitting on the fence not knowing where the ball is going to drop, left or right.
So, now the Daseke acquisition in my mind is very well timed because we’re buying that at a very reasonable price, okay, in a very depressed market, right? So the only — I mean, yes, it could still go down a bit, but the probability of going down a bit is way, way less than the probability over the next two, three years to go up like crazy, right? So that is the intention behind, okay, this transaction. And at the same time, like I said earlier, I think the timing, if we do something like a spin-off or whatever, in ’26, I think that the market condition in ’26 is going to probably be maybe not as good as ’22, but way better than ’23, ’24.
Cameron Doerksen: Right. Okay. That makes sense. Thanks for the time.
Alain Bédard: Thank you, Cameron.
Operator: Thank you. Our next questions come from the line of Ben Mohr with Deutsche Bank. Please proceed with your questions.
Ben Mohr: Hi, Alain. Good morning. Thanks for taking a question.
Alain Bédard: Good morning, Ben.
Ben Mohr: Back to US LTL — good morning. Typical LTL industry OR improves from 1Q to 2Q by about 300 basis points. And it’s typically flat 2Q to 3Q and then rises from three 3Q to 4Q, typically about 200 basis points. Wanted to ask you what are the puts and takes to that as a base case? It looks like you’ll need much better than that to get to your guided 88 for 2024. And are you expecting maybe 50 basis points to 100 basis points better each quarter based on your actions, assuming the freight market stays the same and maybe even a little bit better than that into 2Q given the weather in 1Q?
Alain Bédard: Yeah. So you’re absolutely right, Ben. And this is, like I said earlier, I mean, this is a little bit of a concern when I talk to my guys at the US LTL, and I say guys, are you still confident? And they are. And that’s also part of that $6.75 to $7, okay? If the market continues to be difficult, okay, like we’re seeing now, okay, can we get to the 88? We’re still convinced. Okay. But like you said, it’s a tough goal. What I could say so far when I look at April is we are on plan, okay? But our plan keeps improving during the course of the year. So again, I mean, we’ll see. But I mean, our guys are still convinced that we can meet this plan.
Ben Mohr: Appreciate that. And maybe as a follow up again on US LTL, you’ve guided before on a 2024 exit rate of 24,000 to 25,000 shipments a day and averaging 23,000 to 24,000 for this year. With 1Q at about 22,000, that means 2,000 to 3,000 of additional shipments per day to get to that point. Are these all market share gains because we’re assuming zero freight market volume inflection? And if so, are you taking market share from smaller regional players given your service improvement?
Alain Bédard: Yeah, I think on that, I mean the focus is to — also, like I said many times, to get more freight by the shippers that we already deal with, right? So that we don’t add stops and we just add freight, right? So you’re absolutely right that we are running about 22,000 and our goal is to be more like a 24,000 guy at the end of the year. So when — again our service is improving, so we have customers now that, as one example, a large retailer that we used to do very little business with this guy, but now he sees that our service is improving. So it’s not just a matter of us, okay, trying to get more freight is this shipper wants also to diversify is carrier base. So he says, “You know what, now that you guys are doing way better than you used to on the service side, okay, we’ll give you more freight.” And this is one example of, okay, that something that’s going on because we’re not trying to chase volume by cutting rates because this is stupid.
What we’re trying to do is improve our volume slowly by improving our service. So then we have customers that want to give us more, okay, versus two years ago when the service was not good and the only way you could get more freight is by cutting rates to someone else. That’s not the goal of TFI. I mean, we’re not trying to cut rates to get more freight. What we’re trying to do is provide better service. And then the customer sees that because he wants to diversify also his carrier base. He says, “Okay, guys, we’ll give you a little bit more.” And this is what we’re trying to do to get to 24,000.
Ben Mohr: Great. Thanks a lot. Appreciate the time and insights.
Alain Bédard: You’re welcome. Thank you.
Operator: Thank you. Our next questions come from the line of Benoit Poirier with Desjardins Capital Markets. Please proceed with your questions.
Benoit Poirier: Yeah, good morning, Alain.
Alain Bédard: Good morning, Benoit.
