Ravi Shanker: Very helpful, Alain. That is understandable. And maybe as a quick follow-up. You mentioned the conglomerate discount earlier in your remarks. Can you just elaborate a little bit more on your thinking there? What does in due course mean? Is that a 2024 event or 2025 event? And kind of how are you looking at the separate businesses kind of together or apart?
Alain Bedard: Yes. You know what, Ravi, it’s not 2024. That’s for sure. I mean, 2024 for us is really the year we take over Daseke, and we deliver on our promise of TForce Fright running an 88 OR, right? So, that’s really the focus. But by the fall of 2024, we start to get ready for 2025, okay? In terms of maybe other deals, okay, significant deals for us. And at the same time, this thing that we call that project, SFI, okay, which is separating the truckload from the rest. We believe that this will create a lot of value. We also believe that this project may not be just for TFI. Maybe some other specialty truckload may join this project to create size, right? So, it’s an open discussion that we’re going to have with other parties, probably late in the fall 2024 to be ready to do something into 2025, Ravi.
Ravi Shanker: Thanks Alain.
Alain Bedard: For short-term. I mean when you look at — I would say between the end of 2025, I mean we should be fixed on that.
Ravi Shanker: Understood. Thank you.
Alain Bedard: Welcome.
Operator: Our next question is from Jordan Alliger with Goldman Sachs. Please proceed with your question.
Jordan Alliger: Yes. Hi, morning. Can you maybe talk a little bit to the factors that continue to impact US LTL profitability on an adjusted basis year-over-year, that $50 million or so in EBIT, which is down versus a year ago? And then, when you think about the shape of 2024 and all the stuff you’re working on in US LTL, when can we return to positive year-over-year EBIT growth in that division?
Alain Bedard: Yes, I think that positive growth year-over-year in the US LTL will happen in 2024, right? So, in 2023, we had to go through this negotiation with the Teamster contract, which increased our costs per hour by about 7%. We made a lot of progress on the cost side, but we kept losing volume year-over-year. So, I think that this is going to be a thing of the past sometimes in 2024. Maybe not Q1, Q2, but down the road in Q3, Q4, we believe that finally by improving our service, we’ll be able to be in a position where we start growing again. And growing topline will help us grow the bottom-line at the same time. The other thing also that is important to notice is our GFP operation in 2023 was affected badly as of Q2 by an issue with some customers, okay, that were not really doing what they were supposed to do.
So, we addressed that late in 2023. So, we should be in a better position to start growing our GFP franchise in 2024 that will help also our LTL operation — US LTL operation. So, it’s a question of service, okay? One also of issues we have that we’re working on fixing is the customer experience with us when it comes to billing customers. So, for years and years, okay, we were going through a system that was not really probably the best in the world. And we have lots of issues that hinders the relationship we have with customers. So, this is also a project that we have for 2024 to finally come up with something that is fair and reasonable for our customers. I mean, this is not something that we encounter in Canada. I don’t think that our peers in the US have the same issues that we do with billing customers.
For sure, our churn — because of that, our churn of customers is way too high compared to probably our US peers, or what we do in Canada. So, this is another thing that the guys are working on. The churning over there at TForce Freight in the mind of the previous management team was normal. For us, it’s not normal. I mean, our churn is way too high compared to what we do us in Canada, or I think what our peers are doing in the US.
Jordan Alliger: Got it. And then, just a quick follow-up along all those lines. Can you maybe talk a little bit, again, on the US LTL? I know revenue per 100 weight, probably due to mix, has been down, but can you talk a little bit about the core pricing, contractual, renewals, and what sort of magnitude you’re getting?
Alain Bedard: I think pricing is pretty good, guys. What’s killing us is the volume. I think, our pricing, our revenue per shipment is up, our weight per shipment finally is up, okay? Because if you look at our weight per shipment, we’re still way behind my peers. I mean, we’re like hauling feathers compared to what we do in Canada or what my peers are doing in the US. But our weight per shipment is up 10% finally, okay. We’re able to do that. But we’re still way, way, way below my peers’ average, right? Peers average is probably like 1,500 pounds and me, I’m still stuck at 11-something. So, we’re heading in the right direction. But again, you’re paid about 100 pounds on a shipment. So, the lighter shipment that you haul, less money you get.
So, this is — you don’t have to be a rocket scientist to understand that. And this is why we’ve changed the focus of our sales team to try to change the mix, and we’re heading in the right direction there. Our revenue per shipment ex-fuel is up and that’s the way to go. In terms of pricing, I think our peers are very smart, okay. They understand that everybody is in this business to make money. And that’s just all freight, just for the pleasure of hauling freight. So, that’s the beauty of that US LTL is that our peers are smart. So, we like to compete with peers that are smart, because they’re about making money.
Jordan Alliger: Thank you.
Alain Bedard: Welcome.
Operator: Our next question is from Jason Seidl with TD Cowen. Please proceed with your question.
Jason Seidl: Thank you, operator. Good morning Alain.
Alain Bedard: Morning Jason.
Jason Seidl: I wanted to stay on US LTL for a little bit. Really nice job in the quarter with that claims ratio. Where do you think it can go from there? And sort of what has gotten us to drop a whole point off that number?
Alain Bedard: You know what, Jason, we look at that, I mean, the culture at TForce Freight at the time was this 1.52% of revenue was normal. And we said that, no, guys, this is not normal. I mean, if you look at our peers in the US, if you look at what we do in Canada, I mean, in Canada, we’re 0.1% of revenue, which is acceptable. So, what we did is, we took some of our Canadian folks, okay, and they worked with our US team, and we were able to solve the problem at the source, right? So, this is an experience where our customers experience dealing with us on — at least on the claims side, the experience is way better than it was a year ago. So, we’re trying to do the same thing also. Like I said earlier on the call, the billing, the way we bill customers, I mean, there’s way too many mistakes.
We make way too many correction. And this is something that, in the past, in the mind of the management then, it was acceptable, okay? We just make mistake and we just correct them, okay. But us, we say, no, no, no. That’s not the way to do it. So, now, software that we use, the tools that we have, the people, because there has been a lot of moving parts with people, we lost people that were there, I’m talking 10 years ago. So, this is why we are investing big time in 2024 to improve the experience, okay, customers with us on the billing, customer service and all that. And we should see some major improvements during the course of 2024, and that will help us grow our business, grow our volume. Because if you’re a shipper and you say, well, okay, I could deal with ABC and then I deal with TForce Freight, and it’s a nightmare because those guys, they bill me wrong, they send me a credit, et cetera.
I mean, this is not professional, right? So, this is another aspect of improving service with customers that we’re working on, over and above the delivering of the freight.
Jason Seidl: I think if you guys improve ease of use and also your claims ratio, that should also help you in the pricing department going forward as well.
Alain Bedard: Absolutely.
Jason Seidl: I want to jump on a little bit in near term here, and then a clarification. So, how should we think about the US LTL OR on a sequential basis from 4Q to 1Q, given that a lot of your peers have called out bad weather in January? And then, you mentioned an 88 OR for LTL, is that an exit rate for the year or is that full year total?
Alain Bedard: No, that’s full year, Jason. For sure, Q1 is going to be a tough quarter for us. I mean, we’re not going to be a sub-90 OR in Q1. I don’t think so. But I think that for the year, okay, that’s the plan, that’s the commitment of our team to deliver an 88 OR for the year, but not in Q1. Q1 for sure has been terrible.
Jason Seidl: Got you. I appreciate the color, Alain.
Alain Bedard: Pleasure, Jason.
Operator: Our next question is from Ken Hoexter with Bank of America. Please proceed with your question.
Ken Hoexter: Great. Good morning Alain.
Alain Bedard: Good morning Ken.
Ken Hoexter: So, obviously, significant prices you’ve mentioned on the 0.5% claims, but noted costs are still too high. So, how much is still from the legacy UPS expense that rolls off? And what is still under your control? And then, just — you threw out the 10% increase in weight per shipment. You mentioned last quarter that was something you were very focused on. What do you focus on and how do you change that?
Alain Bedard: Yes, that’s a very good question, Ken. Like we said, I mean, in terms of the claim, I mean, we have nothing to do with, let’s say, what happened two, three years ago. So, all this is behind us. I mean, when we took over the company, I mean, we severed the past. So, our claim today is whatever our claim are based on what the operation is today. Now, in terms of future where we could be and all that, I mean, the company is very well positioned to start growing in terms of volume. I forgot what was your second question, Ken.
Ken Hoexter: Just the first one was just how much of the legacy UPS expenses? Like what do you still control once that goes off? So, when you stop growing from 91, 88, this has nothing to do with the cost rolling off in April. This is just your own internal cost?
Alain Bedard: No.
