TFI International Inc. (NYSE:TFII) Q2 2024 Earnings Call Transcript

TFI International Inc. (NYSE:TFII) Q2 2024 Earnings Call Transcript July 26, 2024

Operator: Good day, ladies and gentlemen. Thank you for standing by. Welcome to TFI International’s Second Quarter 2024 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 Instructions] Please be advised that the conference call will contain statements that are forward-looking in nature and subject to a number of risks and uncertainties and that could cause actual results to differ materially. Also, I’d like to remind everyone that this conference call is being recorded on Friday, July 26, 2024. I’ll now turn the conference call over to Alain Bedard, Chairman, President and Chief Executive Officer of TFI International. Please go ahead sir.

Alain Bédard: Well thank you operator, and welcome everyone to our call today. Our results released yesterday after the close, we are again very solid with a year-over-year increase in both revenue and operating income. In all of our segments, our performance is still very lackluster freight environment. Our results reflect the hard work every day of our skilled and dedicated team members, as well as strong management and are many other self-help initiatives that will continue to benefit us going forward. But our overreaching focus as a company is on the long held operating principle that got us here. We are focused on the details, including quality of service that drives volumes. We are focused on freight quality, maximizing weight and revenue per shipment and always striving for cost management through greater efficiencies.

I believe that especially during weaker freight cycles, it is this adherence to the fundamentals that helps us perform. All the while, we maintain a solid financial position that allows us to seek highly strategic M&A opportunities to intelligently invest in the business and to return excess capital to shareholders whenever possible. During the second quarter of 2024, our revenue before fuel surcharge was up 27% to $1.96 billion. We generated operating income of $208 million, up for $192 million in the second quarter of 2023, with an operating margin of 10.6% relative to 12.4%. We also produced adjusted net income of $146 million, up from $139 million a year earlier, along with adjusted EPS of $1.71 up from $1.59 in the prior year. Cash flow generation, as you’ve heard me say in the past is always a focal point of ours.

And during the second quarter, we drove nearly $250 million of net cash from operating activities, well above the year earlier, $200 million. We also generated free cash flow of $151 million, which was up from $138 million. Before moving on to consolidated results I want to summarize how the Daseke acquisition completed on April 1 affected our reporting. Daseke added $329 million to second quarter revenue before fuel surcharge and over $23 million to our operating income, both reflected in our Truckload business segment. In addition, our consolidated corporate level results reflect a non-recurring restructuring charge of $20 million related to the Daseke acquisition which I will touch on in a moment and which we’ve adjusted for the consolidated results I just reviewed, specifically adjusted net income and adjusted EPS.

Let’s talk about overall strategy. Our second quarter results, and in particular, our robust cash flow generation even during this slower stretch of North American freight reflects a number of positive factors. In addition to the hard work of our team and our laser focus on getting the fundamentals of the business right, our financial results should continue to benefit from as I referred to last quarter, the very tangible opportunity to drive even stronger LTL results. We will continue to extract costs while at the same time driving top line expansion through service quality. On both counts, we still have a lot of work to do. Similarly, our recently completed Daseke acquisition brings opportunities on which we’ve always executing to reduce cost and improve performance.

Now turning to our business segment. We’ve now aggregated P&C into our LTL. Over time P&C has become a smaller portion of our overall business especially following the Daseke acquisition. So we will now report as three segments, and we believe that this move will help simplify and add transparency to investor understanding, all the operational details are still in our quarterly report and we can discuss anything you would like during our Q&A. So with that, let’s start with LTL, which was 40% of segment revenue before fuel surcharge during the quarter. We grew our revenue before fuel surcharge 1% year-over-year while our operating income was up 2%, reflecting a slight increase in our operating margin. So within LTL, starting with US-based operation, our revenue before fuel surcharge was $548 million, essentially flat relative to the prior year period, while our operating income climbed to $51 million up from $47 million.

Our US LTL tonnage was up 8%, and our revenue per shipment was up 7%, reflecting our focus on quality of freight and quality of revenue. Our operating ratio for US LTL was [$90.8 million] (ph), 70 basis points better than last year and our return on invested capital was $15.4 million. On the Canadian side of LTL, we generated revenue before fuel surcharge of $144 million, up 12% the past year with operating income of $35 million, up from $34 million. Our numbers of shipment was up 14%, although weight per shipment and revenue per shipment declined 4.5% and 1.2%, respectively. We had [NOI] (ph) of 75.6% and our return invested capital for Canadian LTL was 19.1. Lastly, with LTL, our P&C operation drove $109 million of revenue before fuel surcharge compared to $116 million in the prior year period, with operating income of $24 million relative to $27 million last year.

We have 77.9 on return on invested capital P&C was a very strong 24.2. Turning to Truckload. This business segment was 37% of segment revenue before fuel surcharge. Daseke integration is off to a fast start with a quick reduction in costs resulting to the one-time charge during the quarter. We produced Truckload revenue before fuel surcharge of $738 million as compared to $411 million in the prior year, benefiting from the Daseke acquisition. Our Truckload operating income of $83 million was up from $66 million also worth noting, our Truckload OR came in at an impressive 88.7% given where we are in the freight cycle. An indication we’re executing well and that our unique specialized end-market are proving more resilient. Digging deeper into Truckload within specialized operation, we produced revenue before fuel surcharge of $665 million, up from $335 million, largely due to the Daseke acquisition with operating income of $75 million up from $54 million in the prior year period.

We saw increased productivity with revenue per truck per week, up 2% before fuel surcharge, while growing our truck count more than 70% with the acquisition. In addition, our specialized Truckload OR was 88.7%, as I mentioned, and our retail invested capital came in at 7.3%, which I’ll remind you includes only one quarter of contribution from Daseke, and therefore, should strengthen over the coming year. Turning to the Canadian-based conventional Truckload. We produced revenue before fuel surcharge of $76 million, down just slightly from the past year, while our operating income of $8 million compares to $12 million in the year ago quarter. Our Canadian OR was 89.3%, while our return on invested capital was only 8.9%. In wrapping up our business segment discussion, Logistics was 22% of segment revenue before fuel surcharge and is performing very well.

Our revenue before fuel surcharge was up 22% in the past year and operating income was up 54%. In the second quarter, our Logistics operating margin was 11.4%, which has improved from 9.1% a year earlier, and our return on invested capital was a very solid 20.5. So let’s move on to our liquidity and balance sheet. So during the quarter — during the second quarter, we generated free cash flow of $151 million. That’s up from $138 million a year earlier and we end up June with a funded debt-to-EBITDA ratio of 2.15. This strong financial position is a key start of our approach to the business that allows us to strategically invest regardless of the economic cycle while also returning capital to shareholders whenever possible. Speaking of investment and returning capital during the second quarter, in addition to Daseke we made four other smaller acquisitions and none other small acquisitions subsequent to the quarter.

Also in June, our Board declared a quarterly dividend that is 14% higher than a year earlier at $0.40 per share that was paid on July 15. Before opening the Q&A, I’ll provide a quick review of our full year guidance, which is unchanged. From what we provided on our last call. Specifically, we look for EPS to be in the range of $6.75 to $7. We expect full-year free cash flow to be in the range of $825 million to $900 million with net CapEx of $275 million to $300 million. In addition, we still intend to pay down $500 million to $600 million of debt this year and we repaid a little over $100 million in Q2. With that, operator, I’d be happy to take questions. If you could please open the lines.

Q&A Session

Operator: Thank you Mr. Bédard. [Operator Instructions] And your first question will be from Ravi Shanker at Morgan Stanley. Please go ahead.

Ravi Shanker: Thank you. Good morning. Alain. We’ve heard from some of your US, trucking peers that they’re seeing better seasonality in 2Q, some signs of project business and some tightening in the market, we see that in the data as well. Would you underwrite that view? And are you getting any more optimistic by the cycle in the back-half? Or do you think it’s still too early?

Alain Bédard: It’s too early, Ravi. I mean what we’re seeing us is that it is still more of the same. It’s still a very, very difficult market right now. If we look at the US, our specialty truckload, I mean we still have pressure on rates per mile, although the guys are doing a good job of having the trucks on the road and moving freight around. But I’d say, that ’24 is going to be a difficult year. This is why we have not changed our guidance. We still think that the guidance that we provided in Q1 is attainable for the year. But when I look at the global, North American market, the US and Canada, I think that Q3 and Q4 will still going to be difficult quarters. ’25 may be a different story, hopefully. But what we’re seeing right now is our focus is to do more or less is to be more efficient.

If you look at what we’ve done so far with Daseke on the Truckload side, I mean, we’re attacking costs like there’s no tomorrow. And that’s how we’re able to bring an 88 OR combined with our, with our own operating Truckload business that was last year an 85, something 85.7 I think. So now, Ravi I think let’s be conservative, okay? I hope I am wrong, right? I hope that things will get better but I don’t have this sense right now.

Ravi Shanker: Understood. And maybe as a follow-up on the LTL side. How are you seeing the environment right now? Obviously, there is some idiosyncratic kind of factors there on the capacity side as well. Do you think the market is tightening enough to support pricing to the cycle? Or are you concerned about too much capacity there, maybe kind of losing the streams a little bit?

Alain Bédard: No, I think that we will win the war us on LTL being more efficient is by reducing our cost. Our costs are way too high, our admin costs are way too high. Our fleet cost is too high. And for us, our focus at TForce Freight is really, really to be more lean and mean, to be more efficient. For sure, we are implementing new technology within this company in terms of linehaul, in terms of billing, master file and all that. But still if I look at my IT costs as a percent of revenue is way too high, and it is also true at Daseke. I mean if you look at our IT at Daseke twice as much as the TFI Truckload IT costs as a percent of revenue. So for us, really, Ravi, the name of the game to our US LTL to break that 90 OR once and for all, is all our costs.

Hopefully, the market stays okay. I mean the market is not — not that strong. I mean if you look at what’s going on right now. I mean our shipment count I’ll say is steady, but it’s not growing. I mean what we are able to do is to grow the weight and grow the revenue per shipment that’s why we are able to do that so far. But we still don’t have our cost down in terms of reducing the miles for our P&D, improving our density. We’re still not there. We still have a lot of work to do.

Ravi Shanker: Understood. Thank you Alain.

Alain Bédard: Thank you Ravi.

Operator: Next question will be from Ken Hoexter at Bank of America. Please go ahead.

Ken Hoexter: Hi, great. Good morning Alain. Just picking on the Ravi’s kind of topic on the backdrop, maybe a little bit more on the LTL side. You mentioned it’s all about cost. But as you get peers opening more facilities, you had a peer this morning talk about more lightweight volumes that are kind of disrupting their network. It looked like your revenue per shipment ex fuel decelerated, it was down sequentially. Maybe talk about the rate environment on the LTL side.

Alain Bédard: Yes. Very good question, Ken. And for sure, I mean, what we’re seeing a lot of RFPs, we’re seeing a lot of pressure, because the market, like I said earlier, is still soft. I mean — so it’s a fact. I mean, we’ve lost a major player a year ago in the industry, but it seems like we are back to square one in terms of volume. So this is why my comment is so important that our focus for us is to keep what we’ve got in terms of volume, try to improve it, try to grow it slowly. But for us the name of the game is we need — we’re too fat. I mean, we’ve got too much cost, okay? If you compare our US costs versus the way we do business in Canada, I mean we are like way too fat. So we have to attack the costs. Our IT costs are too high, our fleet management costs, maintenance costs is too high, et cetera, et cetera.

So this is us. So this is us. I mean, we have to do the job. Now the market — is the market going to help us? I don’t think so, right? Like you could hear from some of our peers. If you look at the best player in the US, I mean, those guys are doing really well. Why? Because they — they’re better — way better than us on managing costs, right? So this is what we’re trying to do. And that’s how we’re going to be able to break that glass ceiling that we have been stuck with 90-something OR. We want to go under this 90 OR. But the way we’re going to win in ’24 and ’25, is by being lean and mean reducing our costs, doing a better job, okay all over the place on our cost. Now what’s also helping us, like I said many times, Ken is finally in ’24, we have financial information by terminal.

So for sure, this is going to be a huge help, okay? But if you have a manager that sits on his hand, well that’s not going to help us. So these guys have to go and they have to be replaced by a manager that wants to do things and wants to reduce costs and be more efficient and manage not just delivery of freight but manage all the cost, the employee costs, the relationship with customers, et cetera, et cetera. So we have a big job to do. Don’t forget, we bought TForce three years ago. Okay? We made a lot of improvement there, but we are still running at just at 90 OR operation, right? 90-point-something, 90.8 in Q2 right? So we have a long way to go to get to the 85. And for us, I don’t see the market ’24, ’25 helping us too much. I think this is all us.

We have to do the job.

Ken Hoexter: Yes. Let me ask a quick follow-up on Logistics, right, which usually, I don’t know if — would you call that, I mean solid results there. Would that be an early indication of some sort of turn? Or would you look at it and say, wow, that’s just benefiting from the weak market? Or is it even last mile, not even an indication of the Logistics side?

Alain Bédard: Again, Logistics results are second to none. I mean when you look at that, we are very proud of what the guys are doing over there. I mean — and they will continue to improve. They will continue to improve and we made a fantastic acquisition a year ago, when we bought JHT. I think we have more to come in that sector, probably hopefully, and for sure, we are in business to make money. We don’t like returns of 2%, 3%, 4%, 5%, 6%. So this is why if you look at our OR, for the first time we broke the 90, okay? We’ve never been under 90 OR in our Logistics. For the first time now, we are under 90. As a matter of fact, even under 89. So we feel good because like I said, on M&A side on the US side, we are looking at two sectors really only right now.

It is either an LTL play or a Logistics play for ’25. I mean, because — I mean we’ve been busy in ’24 with Daseke. We are also busy, okay, with small tuck-ins, mostly in Canada okay, because it is easy for us to do small tuck-ins in Canada because we have a bench strength by second to none. But in ’25, we are getting ready. This is why, if you look at my leverage right now, I’m at 2.15, something like that. Our plan is to be by reimbursing debt, like I mentioned on the call, we are going to be at 175 probably by year-end, right? TFI, it’s a cash flow machine, a free cash flow machine.

Ken Hoexter: Yes. I was just wondering if there was just an indication of the market. I get you are doing a great job. Just if it’s telling you –.

Alain Bédard: I don’t think it’s a market, hey, Ken, I don’t think it’s the market. I think it’s our guys that are doing a fantastic job. But we’ll see, I mean, when the — an RFPs comes up, I mean we’ll have a better understanding.

Ken Hoexter: Wonderful. Thanks Alain. Appreciate.

Alain Bédard: Thank you Ken.

Operator: Next question will be from Walter Spracklin of RBC Capital Markets. Please go ahead.

Walter Spracklin: Yeah. Thanks very much operator. Alain. Good morning. If you could touch a little bit on your trends towards your target of US LTL 88, you referenced it in your — earlier in the call. I’m just noticing you’re at about a 92 year-to-date in your US LTL 85-ish for the rest of the year to hit the 88. Is that still an achievable target? And can you talk about what will cause you to do that step down?

Alain Bédard: No, no, Walter. I mean for sure for the year 88, as I see it right now, it is impossible. What we’re trying to do between now and the end of the year is to break the 90, okay in Q2 and Q4, right? When we look at our plan in the fall of ’23, when I listen to our guys, our team, we thought that we would grow our shipment count at the same time as reduce costs. So what we are seeing is we’re not growing our shipment counts. I mean our shipment count is steady eddy, about the same, okay? And we anticipate that probably by year-end, I mean, we’re still maybe going to grow the shipment count a little bit but not much. So really, the name of the game to break the 90 OR is going to be all cost for us, reduction of our cost in the Q3 and in Q4 to finally break this 90 which has been a difficult task for us to do.

And going into ’25 though, if market condition stays about the same as ’24, I think that we’ll be able to be on a yearly basis, okay under the 90 OR. But if you look at what we have done so far, after six months, like you said, we’re 92. So I believe that with our cost control and implementation of better productivity, we’ll be probably in the same market condition in ’25, we’ll be able to show after six months of ’25, under 90, okay? If we keep working at attacking our cost.

Walter Spracklin: Okay. That’s great. And just on the follow-up to the macro just a few small questions here. Like you mentioned you don’t – you are not calling for an upturn. I’m curious if you would at least — do you see it as a bottoming. I know a few of your peers have said they believe at least it is not getting worse. And whether an upturn comes or not, may be delayed, but at least it’s bottoming. And then are you seeing any positive or negative impact from shipper diversions that are avoiding the Canadian rail strike? I know CN and CP have called out some diversions away from their lanes in worrying about a strike. Is that impacting you at all, either positive or negative?

Alain Bédard: You know what, Walter, when they started talking about a strike in Canada 2 months ago, yes, we saw a little bit of that but you know what, us, we run a lot of stuff on the rail, right? So it’s a positive on one side. But it’s also a negative on the other side because if you look at our intermodal LTL the minute these guys started to talk about strike. I mean they start moving our LTL that’s today run on the rail moving on the road. So for us, it is not that good to have a strike with the rail guys. I mean hopefully, these guys could settle and get this thing behind us. Now in terms of — have we hit the bottom? That is probably right. I mean, can we see this thing getting worse? I don’t think so. But I don’t see that major improvement in ’24.

I think it’s going to be more the same, okay, for the rest of the year. And hopefully, okay, things will start improving. Now don’t forget there’s also a US election in November, right? So depending on who takes over, it could also change things in ’25. So we don’t know that. But us, I mean, we are really focused on what we can do ourselves, which is we can’t control the market. The market is the market, so we can’t control the market, but what we can control is our costs and we’re trying to be way better, okay? If you look at our US LTL, we have a lot of work to do there. If you look at our Canadian LTL, we’re doing quite well. If you look at our P&C, I mean, yes we had a little bit of a soft patch in Q1, but we are improving in Q2, and we’ll keep improving in Q3 and Q4 and into 2025.

So if you look at our specialty truckload, I’m really proud of what Steve Brookshaw has done with his team with Daseke’s team there. I mean, like I said on Q1’s call the Daseke thing there, I mean, we’re going to run Daseke sub-90 OR within a year. And I’m still very confident about that. I mean the guys are doing a good job. And like I said, just a simple IT costs, I mean we are going to have to cut the IT cost of Daseke in half to be comparable to our cost to run the business, right? So we got a lot of opportunities. And for sure, it takes a little bit of time but I feel really good about what’s going on right now. When I look at my peers in the truckload sector in the US, I mean, I think everybody is suffering big time. Is that going to change for the rest of the year?

I don’t think so. Is that going to be better in ’25? I think so. Why? Because it’s been going on for more than two years right now. So this thing has to break up one point.

Walter Spracklin: Okay, I appreciate the color Alain as always. Thank you.

Alain Bédard: Thank you Walter.

Operator: Our next question will be from Tom Wadewitz at UBS. Please go ahead.

Tom Wadewitz: All right. Good morning. Alain. And why don’t I ask you a little more on US LTL. What’s the mandate for salespeople in US LTL right now? I mean you’ve talked about kind of bad mix of shipments, too much distance between pickups. You’ve talked about maybe like heavier weight per shipment. When I look at the numbers, it looked like you did see some sequential growth in shipments, but some decline in revenue per shipment. So I guess I was just wondering, yes is it focused on better mix? Is it, hey we’ll give up a little price to get more shipments? Or what’s the focus you got for the salespeople in US LTL right now?

Alain Bédard: Yes, yes. So the focus is, number one is, guys, we have to move the weight per shipment up because we’re paid by that way, right? So when we bought UPS rate, these guys were hauling average weight at 1,075. So now we’re just a little bit above 1,200. But if you look at my peers, the average is probably 1,500. So rule number one, guys, is that we have to slowly get more into the industrial freight okay, versus the retail freight. Okay, fine. So that’s — let’s say, target number one. Target number two for these guys is, you know what, guys, to pick up a shipment. Okay. Let’s try to pick up more shipment per stop versus what we’re doing now. So when you have a discussion with a customer, let’s talk about getting more shipment from this guy when we go there and pick up freight okay?

Target number three is us, we have what we call within TForce a GFP, Ground Freight Pricing. We are the only one that has a partnership with our friend, UPS and then when we have a small shipment, small weight, okay, instead of trying to hold that freight or say we don’t want to hold that rate with TForce rate, Mr. Customer, we have a solution for you, right? This is GFP. Now if you look at my GFP, okay, it is been a year that we went through a lot of issues with GFP because there was some, some customers that were cheating the system at UPS. These guys got caught up. We have to cut them off, blah, blah, blah. So our revenue at GFP is down big time. But now all these issues have been resolved between us and our partner. And now we are ready to go and start growing that.

So third mandate for our sales guy, wake up guys, smell the coffee. It is early in the morning. Let’s sell GFP because we are the only one that can offer to a shipper, okay, a solution that is way more efficient for them and for us and for UPS. So let’s try to grow that. And then last is let’s focus on customers that are close by our terminal. Let’s not try to get a shipment, okay outbound from a guy that’s 85 miles away from my terminal. Let’s try to grow business around the terminal as much as possible so that we reduce our P&D miles. So far, okay, we’ve done a little bit of that. But where we are doing a much better job is on our linehaul okay? So our linehaul now is less on rail, more road, okay? And we have a better service for sure, right?

And we’ll keep growing that so that our sales team, when they talk to a customer, service is less and less of an issue. So if you compare that to three years ago versus today, our service is much improved and that is what we have to keep doing, right? So that’s the mandate for our sales team.

Tom Wadewitz: Okay. Yes, that’s very helpful. Just one quick follow-up. I think people are trying to get their arms around what’s happening with the pricing dynamic and U.S. LTL, right? And I think there’s the underlying assumption that there’s discipline. But it just seems like you wonder because the market is a little soft. And do you think that there is some pressure developing on price in US LTL? Or do you think it’s just like hey, this is normal and freight is a little bit soft, and there’s still good discipline in the market.

Alain Bédard: You know what, Tom that’s a very, very good question, because for sure when we look at guys adding doors, adding capacity, then we say, oh, that doesn’t look too good. But we can’t control that, right? We can control what some of our peers are doing. So this is why when I talk to my guys, hey guys we have to be lean. We have to be on a diet, okay? We have to reduce our cost because if something happens to the quality of revenue in this market, although it is never happened last, if you look at the last 10 years, I mean this industry, the US LTL has always — got price increases, et cetera, et cetera. But there could be some concern where a few players are adding so much capacity that maybe if the market is not growing, okay, there could be pressure on rates.

So how do you win. How do you win with that kind of an environment? Well, we have to become in the US like we are in Canada, because in Canada, we have a lot of competition with some guys that don’t like to make money. Okay like Purolator owned by Canada Post, the focus there is not to make money. So we have those guys here. We have other guys in Canada that trucking is a sideline for them. So they are not really focused about making money in the trucking segment. So we have that kind of competition in Canada, and we are successful. If ever this happens in the US, I think it will be short term, okay? But it still could be happening. And that’s when I’m talking to Bob McGonigal and Keith say, guys, let’s go on a diet. We have to reduce costs.

That’s the only way that we are going to break this 90, okay? Hopefully, the market will help us. But if it doesn’t I mean we have to be really better. So our IT costs at TForce rates are way too high. But don’t forget I mean this is — until a year ago, we were stuck with the TSA moving away from UPS. But that’s behind us now, okay? But we have old tools, old software so that we are replacing, okay I get that. But this is going to end at one point so that we could start reducing our cost. To manage the freight, okay. We have to be a single digit as a percent of revenue. Right now, we are not. We are single digit in Canada. We were not in the US. So we have too many staff, too many people in the offices, and that’s got to be reduced with better tools, better technology, and that’s where we are going.

Now if this market gets softer, if there is some pricing issues because some players are adding too much capacity? I mean, we’ll just have to adjust.

Tom Wadewitz: So you are not necessarily seeing it, but you’re concerned it could happen?

Alain Bédard: It may happen. But at the end of the day, we don’t control what’s going on in the market, right? So this is my — me what I’m saying to my guys, guys what I’m seeing, okay, when I see adding doors, adding doors, I see wow huge investment okay? And the market is not growing. So guys, hey, let’s speed up the diet.

Tom Wadewitz: Yeah. Okay. That all make sense. Thank you for the time Alain.

Alain Bédard: Thank you Tom.

Operator: And next question will be from Brian Ossenbeck at JPMorgan. Please go ahead.

Brian Ossenbeck: Good morning Alain.

Alain Bédard: Good morning Brian.

Brian Ossenbeck: To ask another TForce rate question, but maybe more on the footprint. I think you said that you were looking at potentially M&A in the LTL for next year. I don’t know if that would be for the U.S. and if you can expand on that because you still have a pretty big real estate footprint, there’s still some more terminals out there from YRC that could be sold. So maybe you can elaborate a little bit more on that. Bigger picture, what you think the network could look like in a couple of years’ time? And what are some of the bigger changes we should be focused on there potentially, whether it’s divestitures or potentially some M&A?

Alain Bédard: You know what Brian, I think that TFI in Canada, we’re second to none in LTL. I mean — and we cannot be the Number #1 guy in the U.S. I don’t think it’s possible. But I don’t want to be the Number #6 or Number #7 or Number #8 in terms of volume. So for sure, at one point, okay, we have to take action on the US LTL market because I still believe even with what I just said to Tom about this little bit of a concern I have with this capacity maybe. But I still think that the U.S. LTL is the best place to be, okay? So this is why — and I said to Tom this may be short term, maybe it’s just maybe a year, two years. But I think long term, okay we have to be a larger player in the US LTL market. So this is why. Once we close ’24, once our leverage is down to, let’s say, 175 once we reduce our debt by $500 million, $600 million like is the plan, I think that by year end of ’25, I mean we are well positioned to do more okay into the US LTL, hopefully.

Now, at the same time, also, we’ve said logistics in the US, we are doing really, really well. And we have other opportunities to keep building on that base. So this is why the two sectors, okay, that we are going to be really focused with something that could be interesting for our shareholders in those two sectors. On the Truckload side, I mean, ’25 is the year where we’re going to be digesting all of the Daseke operation in terms of reducing IT, shedding admin costs, et cetera, et cetera. So I don’t see anything upsized for us in 2025 on the Truckload side. But also the idea and I’m going back to what we said when we bought Daseke is that down the road, when we have a certain size, it makes sense to have two organizations, right? Not today because the size — our size is too small I think.

So we need to beef up a little bit in 2025, 2026 because at the end of the day we want TFI to be more of a pure play down the road, okay, being, let’s say, an LTL logistics company on one side and on another side, the truckload sector, which is mostly specialty truckload. I would say that our truckload is at 85% specialty truckload, which is way more resilient than the down road. And you could see that when you look at my peers result, great companies are coming out with results right now that are difficult right?

Brian Ossenbeck: Just follow up very quickly then in terms of the Q4 straight footprint, I thought you are still trying to maybe consolidate or rationalize some of those terminals, maybe you are through that already, but it sounds like you actually want to get bigger over time. So is that just more different markets that you would like to be in different lanes you want to fill out? How should we think about that when at least the current book sounds like you still want to shrink that first, perhaps or maybe I’m is reading that.

Alain Bédard: Brian, for sure. I mean right now, we are doing a deal with one of our peers with one terminal. So we are selling one terminal to one of our peers. Why is that? Because it makes sense for us, it’s good for them. Okay. We are selling one terminal in California, South California right now to a guy that’s going to demolish the terminal, right? So we have about 35% overcapacity in our doors today at TForce rate. So for sure, it is way too much, right? So we are reducing, reducing, reducing and cashing. So I believe that our real estate will generate probably between $25 million to $50 million of cash between now and the end of the year. So that is going to be used to fund our small M&A that we are doing in Canada and a little bit in the US.

That will also help us reduce our debt, right? So going back to your point, no, we are not adding capacity to our network. As a matter of fact, we are reducing capacity because we know that if we are successful in buying another LTL company, probably these guys also will have overcapacity. Maybe that depends on who it’s going to be. So this is why wait, okay? So we’re taking action now. So as a matter of fact, we bought one terminal, okay. Well, we bought two from the YRC thing there. In Sacramento, we used to have two terminals. Now we move into one. And those two terminals are for sale, and we — one is being sold right now. And Lexington, Kentucky, we move into the YRC terminal. And one of the sales that may happen before the year-end is our old TForce rate Lexington terminal is being sold right now, right?

So we are taking action to be more close to our capacity in terms of real estate because we believe that if we are able to do what we want to do add some LTL revenue into an M&A acquisition, I mean we need to be more leaner in terms of our capacity.

Brian Ossenbeck: Okay, Alain. Thanks for the clarification. I appreciate it.

Operator: Next question will be from Jason Seidl at TD Cowen. Please go ahead.

Jason Seidl: Thank you operator. Good morning Alain.

Alain Bédard: Good morning Jason.

Jason Seidl: Two quick things here. One, I wanted to focus a little bit on the Daseke side. I think heading into your earnings print, we were a little concerned, given what we saw sort of some weaker pricing in the flatbed market. So maybe if you can sort of dive into that. Was that maybe offset by some strength in your specialty business?

Alain Bédard: You know what, Jason, for sure. I mean if you compare year-over-year our revenue per mile, okay, in our specialty operation in the US specialty truckload operation we are down. I mean we are down. There’s no question about that. We’re having price pressure in there. But at the same time, okay, our revenue per truck is up because we do a better job of reducing empty miles and et cetera, et cetera. So I’m really happy with this Daseke acquisition in terms of the operating units. And these guys — Daseke was a roll-up, right? And first thing that we are trying to do is to break all these walls between those operating units within Daseke. So as we speak, there is a weekly call between all of our flatbed operation in North America between US and Canada.

So everybody is on the same call, talking about the market, the environment, the opportunities, et cetera, et cetera. So this is why I feel really, really good that even in a soft market because the market today is softer, we have more pressure on price, on rates per mile today than a year ago, okay? Hopefully, this starts to change, hopefully next year. I don’t see that changing this year. But now we do a better job. We’re more efficient, and we’ll continue doing that.

Jason Seidl: So it sounds like that $0.50 accretion number is still pretty good to use?

Alain Bédard: Jason we are conservative. I think that we will do better than that, but let’s be conservative, right? So as an example, like I was saying earlier, just the IT costs. I mean, we fell off a chair when we look at the IT cost, the consultant, I mean, all these guys taking advantage of the company. I mean we’re reducing that. Darren Levine, which runs our IT for our specialty truckload within TFI now is involved with the Daseke Group. I mean, these guys, like I said, I think, earlier, they used to run Oracle Finance, very expensive Oracle. They pay a way more money than us at TFI. So Oracle will probably be disappear within Daseke, and we are going to move all this to Infineon, use saving. And then down the road, once everybody is on Infineon, maybe we’ll go back to Oracle in two to three years, but it’s going to be more of a TFI Oracle, not a Daseke Oracle that cost of fortune.

We have to pay Deloitte to support us, which is nonsense. So we have a lot of work to do on the admin side. At the same time, okay, we have a lot to do within the business unit to be more efficient in talking to one with the other, right, eliminating those walls between the business units.

Jason Seidl: That sounds good. And if I could just follow up on something Walter was asking about on the potential Canadian rail strike. I mean do you guys already have alternative set up to sort of supplement a line haul because I can’t remember the last time, both Canadian rails went on strike, and this would obviously impact your Canadian LTL linehaul, a big deal.

Alain Bédard: Yes. Yes. For sure, we have a plan Jason. Hopefully this will not happen. And I think that the federal government will get in fast because this is going to be terrible for the Canadian economy. So, for sure we have plans. For sure we know what to do. And so far between you and me adjacent fires is more of an issue for us. Flood and fire, okay, is more of an issue than rail, rail strike. I mean, the fires is becoming a big problem, okay? And flood too.

Jason Seidl: Yes. When I saw news up in Jasper, that was pretty bad. Well and time is always and have your guys stay safe out there for sure.

Alain Bédard: Thank you Jason.

Operator: Thank you. Next question will be from Konark Gupta at Scotia Capital. Please go ahead.

Konark Gupta: Good morning Konark. I wanted to ask you on Daseke. Thanks for sharing some of the details here, and good to see a pretty good quarter from the Truckload business despite all the pressure you’re seeing in the market. Obviously, Daseke seems like it’s progressing well. Can you help us understand like what was the exit June OR run rate at Daseke? And how do you see the bridge to sub-90 OR there? Like what are some of pit-stops, and what are some of the key drivers besides IT, et cetera, to get to some idea.

Alain Bédard: Yes. So I would say that if you look at Daseke’s Q2 number, okay. So most of our guys are running close to 90 OR. So we have one business unit, one business unit right now that loses money. But by the end of August, they will stop losing money because we’re going to shut them down, right, and move whatever good business remains into other business units within the TFI world in the US. And then I’ve got another one that is running a very high OR of 98. So after we have got rid of that one that loses money is going to be the next one. And then I’ve got another one that’s running at 95 OR. So this is why on average, okay, we are closer to a 92, 91, 92, 93 OR globally, okay? But we are going to weed out the losers.

And we’re going to improve the ones that can be improved. But then again, like I said earlier, we need to talk more between the TFI specialty truckload business unit. And that is something that I have started already, okay, because there’s lots of opportunities. Within Daseke I have got one or two business units that are running today sub-90 OR but even those guys running sub-90 OR there, let us say, they are 87, but because market conditions are difficult, normally, they should be running an 80, 82, 83 OR. But we as an example insurance, okay? Daseke is something that was not done well. So we’re improving, okay our insurance costs, the way it is been done. But I’m stuck with one deal that was signed for three years. So I’m going to have to suffer for another three years because of this deal that doesn’t make any sense, but I’m going to have to live with.

But there is a lot of good stuff within the Daseke Group of companies. So yes we bought this company, and we are going to be under 90 OR within the year like I said of acquisition, and admin cost is as it was a big thing. I mean the overhead was costing them a fortune. The head office is costing us a fortune in rent and this and that. IT like I said earlier, and these are all things on the admin side that we are going to be reducing probably 200 to 300 basis points globally. And then sharing best practice, okay, also will help us. So I feel really, really good. Because if you look at what we’ve done, okay, global TFI in the US in Q2, specialty truckload. I mean we are running just a sub 89 OR, right? This is with Daseke. Now you are going to say, well, last year, you were at 85 OR absolutely, okay?

But even our legacy business of TFI okay, without Daseke in Q2, we are not running at 85 more. We’re running probably at 86.5. I don’t have the numbers close to me because the market is way more difficult this year than a year ago. So this is why when you add Daseke okay with one quarter only, and we are able to combine the two into one and come up with an 88 OR, I say Mr. Brookshaw and your team, you guys have done a fantastic job.

Konark Gupta: That’s great Alain. I think it seems like you guys are on a very, very good path on Daseke for sure. Okay. And just a quick follow-up on the LTL side. I know you laid the ground with some factors about how the rates could evolve and what you’re probably planning to do on the cost side? I wanted to ask you about the competitive dynamics here that could unfold over the next year or two. One of the biggest and actually, the biggest LTL player in the market is looking to divest the freight business, FedEx. I wanted to know how do you perceive that as a competitive dynamic change situation, if at all it happens.

Alain Bédard: Well, you know what, Konark. If this happens at FedEx, I mean we would be the happiest guy in the world. I mean I think that would be great for the market. I think that this is a great company, FedEx Freight. And being stand-alone, I think it would be fantastic. We have a relationship with them. We work with them into areas of BC mostly the Vancouver area. We also work with them in Saskatchewan. We’re having discussions with them if we could — if we can help them elsewhere in Canada. So I think that having this spin-off if everything happens, I think it is going to be good for the market overall. And I think it’s going to be really good for us at TFI.

Konark Gupta: Thanks so much. Perfect. Thank so much Alain. Good luck thank you.

Alain Bédard: Thank you. Thank you Konark.

Operator: Next question will be from Jordan Alliger at Goldman Sachs. Please go ahead.

Jordan Alliger: Hi. Just a follow-up question again on LTL. I know Alain in the past, you talked a lot about service on LTL. And I don’t know if I’ve heard as much about it today, service being like a critical COG in that revenue per hundred way to at some point inflect positive. So can you maybe talk a little bit about LTL service where you are? And thank you.

Alain Bédard: Yes. Yes, that’s a very good question because without service, it is difficult for you to grow the business. It’s also difficult to you to guard and protect. So absolutely. This is a balance between cost and service. So what we’ve been trying to do is improve the service at the same time, reducing costs. And for sure when you take the culture of a company that’s been really lazy and not being focused like some of my peers are in terms of cost and service. It doesn’t change overnight, right? So what we’ve been able to do is to change the culture, hey guys, we can improve service and reduce costs at the same time. So where we’ve been very successful is on the linehaul. Why? Because we were able to move away from rail to a certain degree, okay?

So 4% of our miles today are non-rail, they’re more on the road with our own people. So that improves the service. So yes, you’re scared because, oh, cost of the road is going to be more than the rail. Well we were able to do that at kind of a breakeven. So guys and say, guys, we have improved service, and there’s not been an effect on cost, okay? So we have not moved cost up. Those 4% miles now makes a lot of sense. They are on the road. On the P&D side, well, there again what we’re trying to do is, okay, reduce the miss a pickup, because are you crazy you can’t miss a pickup because then you missed the opportunity of the revenue. So the culture there was wow, I got to bring back my guys, okay? Or we are not set up because, if you think about an LTL company, the focus is on delivery, right?

Because that’s the first thing you do in the morning. The guy leaves and does this delivery. And then if he has time left, then he does the pickup. And me, what we are doing in Canada is we changed this philosophy. The Canadian philosophy is that, yes, we have to deliver the freight in the morning. But your role number one is to pick up freight. Why? Because if you don’t pick up freight then you don’t have the revenue. So we are changing that culture also on our US LTL. I said guys, priority number one is to pick up everything that we can but we have to make sure that we also deliver the freight. So there is a balance there between service and costs, right? But again we have better tools today to manage all this. And with financial information, we have better managers dispatcher has to be involved, and it is a team effort, right?

So we are improving service definitely. And at the same time, we are reducing costs, but not enough. And like I said, A lot of our reduced cost has to come from admin, okay? Our admin cost is too high, but that’s got nothing to do with the operation, right? So our labor cost per shipment is better okay? And we continue to improve that. But that’s also a team effort. So we need our salespeople to understand that we need more freight per stop. We need to travel less miles to pick up freight because we don’t want to go 90 miles away from our terminals to do one pickup, et cetera, et cetera. So it’s a global effort, but Jordan, I mean service is priority number one, okay, because you can’t grow the business without the service.

Jordan Alliger: Great. Thank you.

Alain Bédard: You’re welcome.

Operator: Next question will be from Daniel Imbro of Stephens. Please go ahead.

Daniel Imbro: Hi, thanks. Good morning. Thanks for taking my question. Alain, I want to point to a follow-up on U.S. LTL. You talked about being lean, and obviously, that’s showing up in EBIT per shipment kind of up sequentially despite the revenue per shipment being down. I just want to understand the back half outlook. So was your expectation that this mix headwind continues on the US LTL for revenue per shipment, but that you can just offset it by finding more efficiencies and being leaner in the back half. So revenue — sort of EBIT per shipment could keep growing?

Alain Bédard: Yes, absolutely. Because you know what we don’t control the market. And I think that the market has been soft in 2024, and I don’t see it getting stronger. So the only way — the only way that we can be successful is we have to do the job ourselves on the cost side, right? So I’m saying the same thing again and again I mean the admin cost of TForce freight is like 500 basis points too much compared to what we do in Canada. So this got to be a focus of ours. Our IT costs is about 2 times to 3 times more than what we have as an IT across in Canada. So that’s the focus now. Don’t forget, IT, we could not really work on IT, because until year until, let’s say, summer of last year, we were stuck with a lot of spend on IT because we had to walk away from UPS on the TSA, but that’s behind us now.

So we have to keep reducing this cost. So the market is going to help us in Q3 and Q4 hopefully, but I’m not sure about that. What I can be sure of is that Bob and Keith, okay, and their team, they have to be focused on doing more with less.

Daniel Imbro: That makes a lot of sense. And maybe to follow up more directly is on LTL pricing. If we strip out this mix noise, I guess first should that mix headwind continue to worsen in the back half? It sounds like yes. When do you think that will turn the corner when you look at the business? And if you exclude mix, I guess, how are contracts like-for-like repricing today? Or are they still pricing at a similar level of increased excess mix shift as they have been the last few quarters?

Alain Bédard: Yes. Yes. I think the pricing is not so bad right now. It’s okay. I mean it’s not very strong. But then again, I mean, I don’t foresee Q3 and Q4 in terms of the market condition to improve? Are they going to get better? I don’t think so. Are they going to get worse? I don’t think so. I think it’s going to be more steady heady. Us, the only way we’re going to break this 90 OR, once and for all, we have to grow our GFP, which is an asset that nobody has and also we have to reduce our costs. That’s the only way we’re going to break this 90 OR.

Daniel Imbro: Helpful color. Best of luck.

Alain Bédard: Thank you Daniel.

Operator: Next question will be from Benoit Poirier at Desjardins Capital Markets. Please go ahead.

Benoit Poirier: Good morning Alain. And congrats for the strong execution overall.

Alain Bédard: Thank you Benoit.

Benoit Poirier: Yes. Just looking at your comments with respect to M&A skewed towards Logistics and also LTL in 2025. Could you maybe remind us about your comfort level in terms of leverage? And what are kind of the M&A and look that you would be looking in 2025?

Alain Bédard: Good question, Benoit. So if we don’t do anything upsize, okay, let’s say, until Q3 of ’25, our leverage is going to be under one, okay? So we’re going to end up the year probably at 1.75. And after three quarters of ’25, our forecast is that we’re probably going to be at between 0.5 and 0.75. So this is why it’s never going to happen. This is why something of size will happen. Now we bought Daseke for $1.1 billion last year. Well, no, this year. Okay. We made the deal last year, but it’s this year. So I think that for TFI, easily, we could do a deal between $2 billion and $3 billion of costs for TFI. And I think that you’ve noted about a year ago and your note is that — I mean, you can’t stop TFI. Why is that on M&A because they generate so much cash, right?

And you are right. That is the proof. The proof is in the pudding right now, right? So we bought this company for $1.1 billion, and in Q2, we reduced our debt by $100 million and we will reduce our debt for the year by about $500 million to $600 million and bring the leverage down to 1.75. I think TFI is probably one of the best story that is not known is how big TFI is on the free cash flow. And what’s the opportunity that creates with a free cash flow machine like TFI, right? So this is why. I think that if you look at the end of ’25, because what we’re talking about is probably more like in the summer, ’25 to the fall of ’25, if we are successful because M&A you can try, but we’ve been very good at that. But until you get the deal done, you are never sure that the deal is going to get done, right?

So we feel good that we’re going to be very well positioned late ’25 to do a deal of size, that could be up to $3 billion and if ever there is also part of that in paper, well, then it could be maybe up to $4 billion or $5 billion. We’ll see.

Benoit Poirier: Okay. That’s great color. And just in terms of follow-up question, you made great comments about the overall market environment. And also some comments about OR expectation for U.S. LTL. When looking at 2025, I know it’s still early, but how much should be — do you need the economy to be supportive in order to achieve $9 of EPS next year? I’m just curious about any key levers or moving parts, including the $0.50 of EPS accretion from Daseke.

Alain Bédard: Yes. Well, there is one thing that’s easy to say, Benoit, is that when our leverage goes down, my interest cost also goes down. So if you look at Q2, my interest cost went through the roof, right, okay? So one easy thing that’s going to happen without doing anything, right by reimbursing the debt, okay? So if we reimburse $500 million, $600 million, okay, that will not exist next year. That’s already after tax, $20 million, $25 million, and we’ll continue to reducing that. So overall, in ’25, if we don’t do anything of size we are probably going to generate $40 million after tax, okay just on reduced interest, right? So that’s very easy to do because the only thing we have to do is pay down the debt right with our free cash flow.

So that’s going to help us. I think that our specialty truckload by moving, our friend Daseke from, let’s say, a 95 OR, okay, 93 to 95. They were back down to under 90. Well, we said $0.50 for 2025 for the contribution for Daseke, I think we’ll do better than that, okay, from what I’m seeing. Now if the market is helping us, well, maybe it could be better than $0.50 or maybe it’s going to be like $0.75 or to $1. But don’t forget that if you look at my other specialty truckload, I mean, normally, in a good year, we used to run specialty truckload at TFI around 80 OR, okay? Now we’re in 88 OR. So if we go back to more of a normal market, the 88 OR, will come down to 83 OR, and if the market is really good, we’ll probably go down to 80, maybe sub-80 OR.

Now that we have Daseke in the family because we have less competition now, right? And then you look at our TForce Freight, the market stays the same. Market does not really improve too much. But us, we’re so fat on the cost side, the admin cost side, the IT costs, I mean, and all of that. To me, we have to reduce all the admin costs between now and a year from now, at least by 200 basis points right? So this is all going to flow to the bottom-line. And this is the way that we are going to get not $7 EPS like we will probably hit in this year, ’24. I mean we have to do better than that even if the market is not too supportive in ’25.

Benoit Poirier: That’s a very good color, Alain. Thank you.

Alain Bédard: Pleasure Benoit.

Operator: Thank you. Next question will be from Cameron Doerksen at National Bank Financial. Please go ahead.

Cameron Doerksen: Hi, thanks. Good morning.

Alain Bédard: Good morning Cameron.

Cameron Doerksen: I want to come back just to the Logistics segment. Obviously, segment that’s doing quite well. I just wondered if you could talk a little bit about the trends in kind of the individual businesses within Logistics. I mean it is a bit of a grab bag of different businesses in there. And obviously, some of the 3PL businesses are doing, it is a tough market. But just any color you can provide on how some of the other businesses doing in there? And then what is the key driver here of the improvement?

Alain Bédard: Yes. So within our Logistics, Cameron, okay sector number one is our last mile operation, okay? So last mile operation is US and Canada. It is a combination of both countries. And those guys are really, really doing well, right? So those guys are sub-85 OR right? Because we are not stupid. We are not in business to practice delivery, right? So we service customers, we reduce our costs, we are very lean and mean. So that’s number one. Then number two is we have our brokerage operation, okay, which the biggest player in there is our TForce worldwide operation. Now these guys have suffered a big time okay? So the revenue is down. These guys used to be a $600 million, $700 million company. Now we are down to about $550 million.

And also the margin have suffered as well. So that sector is not doing as well as the rest. And the rest of our brokerage operations are also suffering, okay on the revenue side but not so much on the profitability side. So revenue is down profitability is about stable with the rest of our kind of brokerage operation. And the third is what we call our specialty services where we move all kinds of stuff, right? So JHT being the largest player in that sector, okay? But we have other sector. And this is running a great operation for us right? So it is really a combination of those three sectors. So our last-mile is doing really, really well. Our equipment moving sector as well doing well. The only small weakness we have is in our brokerage operation.

But when you do the sum of all this, I mean we keep improving, okay in terms of profitability. So like I said earlier for the first time, we broke the 90 OR right? So we are just a little under 89. We believe that ’25 is going to be even better than ’24, okay? Globally for us. And even ’26 is going to be better than ’25. When we look at our forecast, about our last-mile operation, our equipment moving operations, et cetera, et cetera. And the potential of adding into that sector because we are looking at some small transaction that would beef up this sector. Hopefully, this year maybe into next year, we feel good. I mean if you look at our return on invested capital, it’s above 20%, like our P&C is above 20%. So this is really a sector that we love but if it is 2% bottom line, we’re not a big fan of that.

But if we could get an OE of around 10 points sure, we will look at that.

Cameron Doerksen: Okay. No, that is really helpful to get that detail. And maybe just a second question for me, just more of a curiosity. I’m just wondering about the decision to move P&C into the LTL segment. I mean I would have thought it might make more sense to moving into Logistics, just given that you already have a package delivery business within Logistics. So just wondering about the rationale there.

Alain Bédard: Yes. you know what Cameron, yes, I never thought about that. But at the end of the day, really P&C is a network operation whereas our last-mile operation is not a network. So last-mile is in Logistics, but it is not a network, right? So we don’t run network in our last-mile. Whereas in our P&C we run a last-mile. What am I missing? We run a network, right? So that’s why it makes sense to be part of LTL because LTL is also a network.

Cameron Doerksen: Okay. That make sense. Appreciate the questions. Thanks very much.

Alain Bédard: Okay, Cameron. Pleasure.

Operator: Thank you. Next question will be from Bascome Majors at Susquehanna. Please go ahead.

Bascome Majors: Alain, as you look forward, you’ve mentioned the potential spin-off that you publicly disclosed about eight months ago a couple of times on the call. How do you feel today eight months further into both, I guess, a few months in integrating Daseke, eight months further into the cycle about both the fundamental industrial logic and the call it, valuation arbitrage logic of that decision as you look forward? And between that and integrating Daseke, do you think those are some of your final big moves for the business before you start to move further into retirement? Or is these kind of $2 billion, $3 billion, $4 billion, $5 billion deals that may come up in the next couple of years you think those come under your umbrella as well. Thank you.

Alain Bédard: Yes. You know what that’s a very good question, and that’s the kind of discussion I had with the Board yesterday, and I told the guys listen, I don’t know. I have to do this deal okay, the spin-off down the road. So this is why I said, guys, I’m in at least for another five years. So sorry to say for the guys that want to take over CEO’s position at TFI, at least another for another 5 years because this is going to have to happen under my watch, right? And it is not going to happen now. Why? Because like you just said, we have to digest Daseke. And I think that Steve and his team are doing a fantastic job, and it will take us at least a year but so ’25 will go by, right? And then in ’25, if we are successful trying to add revenue, okay, in the sector that we love in North America, then we will be well positioned to do something maybe late ’26 into ’27 and that is the time line.

But don’t forget that at the same time, Bob and his team at TForce Freight, okay, I have a big job to do, okay, into generating a little bit more revenue, but even more importantly, way more OE than what we’re doing now.

Bascome Majors: Thank you for that.

Alain Bédard: Pleasure.

Operator: Next question will be from Kevin Chiang at CIBC. Please go ahead.

Kevin Chiang: Good morning. Alain, maybe just one clarification question. I don’t know if you mentioned this earlier, you talked about a sub-90 OR in US LTL without improving — without the need for an improving macro, I know you were initially targeting 88 this year, that’s a little bit more difficult. Should we be thinking of that being kind of shifted into 2025? Was that kind of the messaging there?

Alain Bédard: Yes. Absolutely, Kevin. I mean part of this commitment from our team, okay to get an 88 OR in ’24 was based on cost and also based on improving the shipments count. The shipments count is not happening, right? So we are flat. Shipments were flat. We have improved the quality of the shipment, yes. Okay. No doubt about that. And we have also improved the cost to a certain degree, but not enough, right? So what we are saying is that, guys, okay. So let’s change the thinking that — let’s say, the volume will stay about steady or maybe improve a little bit, but that’s not going to help us. So we got to double the effort and to be faster and being more efficient and reducing costs. And we’ve got to be mentally ready to be on a diet, okay, at TForce Freight diet in terms of costs, right?

So we got to do a better job of doing more with less I mean, we’ve been doing that in Canada for a long time. If you look at — if we can run Canada with a sub 80 OR like we’re doing now, as a matter of fact, we’re what, 75 OR, I think in Canada, even with the Kindersley acquisition, that Kindersley those guys they were not making a lot of money. But Kindersley in Q2 now is running at 95 OR, which is, wow from not making money to being a 95 OR after two quarters, I mean Kevin and his team in here have done a fantastic job. So I’m just saying that the Canadian LTL team are doing really, really well and we still have lots of work to do to improve, okay? But in the US, I mean, don’t forget, more and more, Bob, okay, is involved with Keith and trying to bring this TI culture of doing more with less.

Now we have also Tim involved to the fleet management. I’m feeling really good about this young guy that’s going to help us reduce our maintenance costs even more. Because don’t forget, we’re making a lot of investment in CapEx for TForce Freight. But so far the return has not been where it should be. So we brought [Toki] (ph), another team member in there to — that’s got the TFI culture. He’s a TFI guy. And I feel really good that that is going to help us be more efficient. The same thing on fuel, right? So with the fact that now Daseke is part of the family. Well, we should have a better deal on fuel. And down the road, this should benefit TForce Freight as well, right? So it is a global effort with everything that’s going on, okay, this soft market.

And if you believe that this soft market will disappear in six months, I hope you’re right. But us, we’re getting ready that it may not happen, right? So guys don’t hope for the market, start now, every day be more efficient, do more with less.

Kevin Chiang: That makes sense. And just maybe in your P&C division, just wondering if you’re seeing any benefits or disruption from Chinese e-commerce. I mean there’s been a lot of headlines around that in the past, I guess, past a little bit here. Is that something you’re seeing within your P&C network up here in Canada?

Alain Bédard: Not yet. Not yet. The biggest issue we have in Canada has always been the same e-commerce guy that’s moving more and more of shipments in-house and the guys that are serving him or used to serve him, okay, are losing the volume and now they become very aggressive right? So this is why we had a really soft patch in Q1, when we look at our P&C results in Q1, it was a disaster. But don’t forget, Q1 ’24 reflects the decision that was made in the summer of ’23. And we made some mistakes there. So Chris took over that. And we are doing a much better job and we will keep improving Q3 and Q4 but it is a tough market. So if you look at our revenue per shipment in our P&C, we’re down a bit, okay? There’s more pressure over there because the biggest e-commerce in Canada is moving freight in-house, and we got some of our peers that are stuck with their pants down.

Kevin Chiang : Right. That make sense. I’ll leave it there, have a great weekend Alain. I appreciate taking my questions.

Alain Bédard: Thank you. You’re welcome.

Operator: Thank you. And at this time, Mr. Bedard, we have no other questions. Please proceed.

Alain Bédard: All right. Thank you very much, operator, and thanks everyone for joining us today, keep you updated as we move through the year and we look forward to our next call. And in the meantime, please don’t hesitate to reach out with any additional questions. So enjoy the weekend, and we’ll be in touch. Thank you.

Operator: Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. At this time, we do ask that you please disconnect your lines.