TFI International Inc.

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to TFI International for Quarter 2021 Results Conference Call. At this time, all participants are in a lesson-only mode. Following the presentation, we will conduct a question and answer session. Callers will be limited to one question and a follow-up in order to get as many callers as possible. Further instructions for entering the queue will be provided at that time. Before we turn the call over to management, please be advised that this conference call will contain several statements that are forward-looking in nature and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. Also, as a reminder, TFI changes presentation currency at year-end 2020, and all dollar amounts are now in U.S. dollars. Lastly, I would like to remind everyone that this conference call is being recorded online. Tuesday, February 8, 2022. I would now like to turn the call over to Alain Bédard, Chairman, President, and Chief Executive Officer of TFI International. Please go ahead, sir.

Well, thank you very much, operator, and welcome everyone to this morning's call. Yesterday, after the market closed, we released our fourth quarter 2021 results. TFI International completed a very strong year And that will be remembered as a pivotal in our history with the successful acquisition of UPS Freight. Our strong fourth quarter results demonstrate the sound rationale behind this transformational event, which drove much of our outperformance along with continued strong execution across all of our business segments. All four segments generated growth in operating income, contributing to full year adjusted diluted earnings per share of $5.23, which easily exceeded the high hand of our guidance that we provided in October. What we found most compelling is that while UPS Freight, rebranded T-Force Freight, is already playing a large role in our outperformance, We still see much upside ahead as we continue to integrate driving both revenue and cost synergies. It is this ongoing upside combined with our consistent focus on the fundamentals of the business that provides us with confidence that we will continue to successfully navigate the road ahead with TFI International now in the strongest position in its history. This focus of the fundamental for TFI International means that getting it right on the details of our business. It means striving for operational efficiencies and selectively capitalizing on strategic acquisition opportunities. Over time, this approach allows us to generate strong returns on invested capital, optimize our free cash flow, and grow our earnings per share. And with the overreaching goal of creating long-term shareholder value, we also aim to return excess capital to shareholders whenever possible. Importantly, you will notice that before, during, and after the global pandemic, this has been our focus. Regardless of lockdowns, ongoing supply chain disruptions, and labor shortage, and any other changes in operating condition that 2022 may have in store, we are confident that our operating principles will continue to help us succeed. Looking into the new year, in addition to integrating T-Force Freight, we plan to especially focus on improving density, increasing our service level, optimizing our pricing, increasing driver retention, and the concept I mentioned last quarter, Freight That Fits. This means taking on the right freight for our valuable network. Turning to our fourth quarter results, our total revenue climbed by more than 90% year-over-year to $2.1 billion. During the quarter, we continued to strategically price in order to capitalize on rebounding freight volume across B2B and e-commerce. Given our focus on profitability rather than growth for growth's sakes, I'm pleased to report our operating income climbed to $215 million, which was up 84%, and our adjusted fully diluted EPS of $1.57 was up a very healthy 60%. Similarly, we had a longstanding focus on net cash from continuing operating activities, and I'm pleased to report an increase in this measure as well to $190 million. This cash flow strength is strategically important, allowing us to appropriately invest in our business, seek attractive acquisition opportunities in a disciplined manner, and return excess cash to shareholders when possible. Each of our four segments perform well during the quarter, with all four producing an increase in return on investment capital versus the prior year, which is a metric that we track closely. Let's now take a look at each. Beginning with PNC, this segment represents 8% of our total segment revenue and saw a 3% decline in revenue before fuel surcharge versus the year-ago quarter, but a 25% increase in operating income to $36.7 million, with the operating margin up a very strong 540 basis point to 24.5%. This improved profitability was the result of strengthening yields for both B2C and B2B. Our return invested capital for PNC was very strong as well at 25.3%, which was up from 18.2% a year earlier. Turning to our LTL segment, which is 44% of total segment revenue before fuel surcharge was $823 million. as compared to $141 million a year earlier, with the increase largely due to the acquisition of T-force freight. Operating income of $103 million was up from $24 million, and our operating margin of $12.6, as I referred to earlier, has significant upside potential as we continue the important work of optimizing our newly acquired operation. Digging in deeper on the LTL, our Canadian business grew revenue before fuel surcharge 3% and delivered a remarkably strong adjusted operating ratio of 78.3, representing a 440 basis point improvement versus the prior year. Our return invested capital for the Canadian LTL was a strong 17.8, up 420 basis points. Our USLTL business, newly formed with last year's acquisition of UPS Freight, produced revenue before fuel surcharge of $680 million, with an OR that improved another 130 basis points sequentially to 89.4. Our return invested capital for USLTL was once again exceptional, but we will continue to wait until we have a full year's worth of T-force freight performance before reporting this measure. Turning to our truckload segment, which represents 27% of total revenue. Our revenue before fuel surcharge of $506 million was up 16% over the prior year for a quarter, and our operating income of $62 million was up 15%. Our truckload operating margin was unchanged at $12.2. In addition, the newly acquired T-Force Freight Truckload Division continues to operate at a modest loss of $2.4 million, a sequential decline. improvement from a loss of 4.6 last quarter, and we expect continued near-term improvement. So taking a closer look at truckload revenue before fuel surcharge for U.S.-based conventional operation grew 16%, with an adjusted OR of 95.5% and a return on invested capital of 5.3%, flat year-over-year. Our Canadian conventional truckload operation grew revenue before fuel surcharge a very strong 26%. The adjusted O.R. was 88.4 versus 85.2 the prior year, and the return on invested capital was 10.9, down 50 basis point. Lastly, within truckload, our specialized operation grew revenue before fuel surcharge 13%, with an adjusted O.R. of 84.6 and a return on invested capital of 11.2%. up from 9.9 a year earlier. Rounding out our discussion by segment, our logistic business represents 20% of total segment revenue. Our revenue before fuel surcharge jumped 33% to $428 million, with operating income up 24% to $33 million. Logistics operating margin was 7.7 relative to 8.2 the prior year. and return invested capital was a very strong 19.9 up 460 basis point. This overall strong performance was led by our same-day package delivery business in the U.S. and in Canada, and by the addition of U.S. LTL brokers TFWW, which remains a strong performer. Shifting gears, TFI International Balance Sheet remains a source of strength. During the fourth quarter, we produced free cash flow of $121 million, allowing us to end the year 2021 with a debt-to-adjusted EBITDA ratio as calculated in accordance with our debt covenant of 1.51. This low leverage and continued strong cash flow is what allows us to strategically grow the business through prudent internal investment and our long-standing discipline acquisition strategy. Turning to the outlook for 2022, today we are issuing our initial full-year guidance. These initial range assume that operating condition remains relatively stable, and most importantly, reflect our own confidence in our ability to capitalize on the favorable opportunities ahead based on what we at TFI International can control. This includes the compelling opportunities to optimize recently acquired key force rate operation, and as always, our emphasis on strong execution, getting the fundamentals of the business right, including our focus on freight that fits, and our preference for cash flow and profitability over growth for the sake of growth. With this in mind, our initial 2022 outlook calls for full year earnings per share are to be in the range of $6.25 to $6.50, reflecting a potential growth of over 20% at the midpoint. We expect net capex to be in the range of $325 to $350 million for the full year, and we also expect our pre-cash flow to exceed $700 million. Throughout the year, we expect our leverage again defined as funded debt to EBITDA ratio as calculated in accordance with our debt covenants to remain at around 1.5 times. In conclusion, before we open the call for your questions, TFI International finished the year on a very strong note, and we're now in the best position in our history to navigate what's ahead, and capitalize on the many opportunities that are within reach, especially the compelling opportunities to optimize deforce rate. We therefore see continued operating opportunity to create and unlock shareholder value, returning excess capital to shareholders whenever possible. And now, operator, we can begin the Q&A session. If you could please open the lines.

Thank you. Ladies and gentlemen, to ask a question, you will need to press star one on your telephone keypad. To withdraw a question, press star one again. As a reminder, callers will be limited to one question and a follow-up in order to get as many callers as possible. Again, that's star one to ask a question. And please limit yourself to one question and a follow-up. Please stand by while we compile the Q&A roster. Your first question comes from Scott Group from Wolf Research. Please go ahead.

Hey, thanks, Elaine. Can you talk about your expectations for the U.S. LTL margins this year, and then if anything's changing in terms of your longer-term expectations for where the business can operate?

Yeah, well, you know what? The way we look at Q4 is that we were very prudent and conservative, and we're looking at Q1-22 the same way. We've never seen Q1 so far with T-force rate. But what I could tell you, though, is that what we've been able to accomplish so far with the team there, okay, which I think we have a great team in our USLTL, is that all the low-hanging fruits, the easy stuff, okay, it's mostly done now. So the year 2022 for us is really a pivotal year in the sense that we're going to be focused on, first of all, getting the operation with what we call, first we said the freight that fits, but now we need the network also that fits the operation. So we're going to be really focused on improving the density, on improving the number of shipments per stop, on improving also our footprint in the sense that to travel 70 miles to deliver two shipments, it doesn't make any sense. So that's going to be important. a major, major focus of having the operation that fits and the freight that fits the operation as well. So to answer your question, I think that long-term, this company has to be an ADOR. Now, long-term is two to three years from now. I believe that probably by the end of 22, we should be closer to something like an 86 or an 88 than a 90 or a 92. Okay. It's hard to say. The chance we have is that the market, the LTL market in the U.S. is really a great market to be in right now. So that helps us. But we have so much to do on the operational side. Now, for sure, equipment has been delayed. Okay. That's a little bit of an issue because our MPG on old equipment is just the shit. Our maintenance cost on an old truck is 45 cents a mile, which is about 40 cents more than the normal. So these are all things that are being some kind of an handicap for us. But in the meantime, let's see, we're going to be focusing on improving the density. Density, in my mind, is the name of the game in this business. And if you look at what we do in Canada in a not-so-good market, I mean, the reason why we can produce those good results is because we focus on density. We focus on doing more with less, not less with more. In our U.S. operation, I mean, the focus was never really 100% there on that regard, okay? And we're working with Paul and all the team there to really change, and we're going to be focused on trying to get more shipment out of customers instead of trying to get more customers, right? So it's going to be, again, you know, a long thread, okay, to get to the 90 OR. But I think that this – company, this team will do it. I mean, if we're able to be sub 80 in Canada, there's no reason, okay, not to be an ADOR company within the next, I don't know, 24 to 36 months in the U.S., right?

Okay. And then just so I understand, when you talk, you said 86 to 88, is that a, was that a full year 22 comment or more of like a run rate exiting the year? And then maybe just my other question. Run rate, okay.

Exiting the year, Scott, exiting the year, I think that will be, let's say, fourth quarter, I see us maybe between 85 to 88, somewhere like that.

Okay. And then maybe just your margin expectations for some of the other segments within the guidance would be helpful. Thank you.

Yeah, well, you see, if you look at our PNC, I mean, we're second to none in that regard. So I think that PNC, the focus in 22, we've done a fantastic job of, you know, building a very, very strong foundation. Now the focus is going to be more growth in 22 in our PNC. The margin is really solid, second to none. Same story with our Canadian LTL. Our US LTL, I mean, I've said it, I mean, we're going to start working and improving our operation and improving our density. US truckload, you know, we've been a little bit disappointed, okay, with the dedicated truckload division, but I know Greg and the team there are working really hard, and we see that finally, okay, we should end up the year in a in a OR that's going to be closer to 90 than closer to 98 like we have right now. And logistics, I mean, we see a lot of growth there in the U.S. and in Canada with our last mile and even our TFWW, Scott, is really doing really, really well and growing. So all in all, that's why we are able to say, guys, we think that we could do 625 to 650 in EPS in 22. We're very confident. Don't forget, we're also very conservative.

Thank you for the time. Appreciate it.

Pleasure, Scott.

Your next question comes from Tom Waitwitz with UBS. Please go ahead.

Yeah, good morning. Morning. I wanted to see if you could provide – I think the framework on LTLOR is really helpful, so thank you for that – I wanted to see if you could provide a little more thought on how you're doing on repricing the book, kind of how much you've gotten your hands on in terms of raising price in LTL, and also how you think about, I guess, the taking out lower-quality freight. You know, it seemed like you had some sequential decline in tons or shipments that was maybe a bit more than seasonality. So maybe if you could comment on those two levers for where you're at for LTL.

Yes. Yeah, well, absolutely. In terms of the freight that does not fit, I mean, we're not done. I mean, we're not done. I mean, we did phase one. The problem that we have is that we need to replace those shipments. But like you said, okay, quarter over quarter, our volumes are down a bit. Okay, so this is why our sales team has to be on their toes to be in a position to replace everything that does not fit us. So in terms of repricing the business, I mean, we've done a lot, but we still need a lot to do in terms of catching up to the market. So the market is improving every month, every quarter. And us, our base was so low because the quality of our freight was so bad in the sense that we had a lot of small shipments. The average weight per shipment is still too low. I mean, we're around 1,070 pounds per shipment. Most of our peers are closer to 1,300 to 1,400. I mean, on the Canadian side, we're above 1,500 pounds per shipment. So there's still a lot to do in terms of the freight that fits the mix. I would say that we're probably done half of what we should accomplish on that. And then the big story for us in 2022 is, yes, a certain degree with market and freight and all that, but it's all going to be a story afterwards. and 22 of improving the cost of operation or reducing our cost of operation. This is the big thing that's going to help us bring this company closer to an 80 OR than a 90 OR.

Okay. And then for the second question, just wondered if you could offer some thoughts on kind of portfolio and how you think it might change in terms of both divestitures and acquisitions. It seems like There are a lot of, you know, a lot of transports out there that have cash that are interested in doing deals, dedicated to an area where, you know, I think their company is interested. So is that something you consider in terms of pruning a portfolio if it doesn't, you know, doesn't necessarily seem to be something that's going well? Or, you know, is that something you just fix? And then, I don't know, thoughts on, you know, deals this year is are you likely or you still need some more time to do bigger deals again?

Yeah, for sure. I mean, we need more times. I mean, we have to deliver on our T-Force freight promise of being closer to an ADOR. There's been a lot of discussion about, you know, why do you guys run a U.S. truckload operation when you have a return on investor capital that's a single digit? I mean, for sure. I mean, I'm getting a lot of questions from investors or board members saying, And I'm saying, guys, I mean, we have to demonstrate, okay, what we can do. And I'm very confident in Greg's team to be able to get this 5.5 return on investment capital closer to 10. Now, one thing is for sure, I mean, if sometimes, if you look at the track record of TFI, if we cannot grow this business in the sector, like we were in the waste business, right? And we sold it to GFL about five, six years ago. Why? Because we couldn't grow it. Now, it's the same story with all of our sector. If you look at our P&C in Canada, it's hard for us to grow through M&A, but we're going to be focusing on growing organically. And with the return on investment capital that we have there, it's second to none. So that makes sense. In terms of M&A... For sure. We're always open. We cannot do anything of size before the end of 2022, maybe from Q3. As soon as we feel really, really good about T-force rate, then we could go to the next step. For sure, we have a plan for the next step because the next big acquisition for TFI, it's already in the plan right now. We know what we'll be doing, hopefully, in the next 12 to 18 months. But in terms of divestiture, I have to give a chance to our truckload guys, you know, to really prove that we, you know, it can be part of the TFI family. Now, in terms of strategy, for sure, when we look at that, if your cost of capital is more than your return invested capital, it doesn't fit, right? So, I mean, right now our focus is really T-force freight and all the migration away from our TSA with UPS and That is really the focus of 22. And in the meantime, our truckload guys are working, you know, diligently to improve what we have now. Because for sure, showing the results that we have today in our Q4 compared to our peers in USTL, you know, we're a little bit concerned.

Great. Thanks for all the perspective. My pleasure.

Your next question comes from Ravi Shankar with Morgan Stanley. Please go ahead.

Thanks. Morning, Alan. Maybe I'll start my follow-up, which is just to confirm that your 2022 EPS guidance does not include any M&A in it, correct?

No. No, no. Everything stays the same, right?

No M&A. Got it. That makes sense. And maybe if I can follow up on your comments on the U.S. TL business. I mean, we certainly saw the results kind of improve there sequentially. And I think in the last quarter you had flagged some issues with the residual TL business within the UPSL TL business that you acquired. It seemed like you made a bunch of progress there. Can you elaborate on that a little bit more? And maybe I did want to ask you about the potential long-term future of that TL business.

Yeah. So, Ravi, are you talking LTL or truckload?

Truckload. I'm talking about the truckload business within the UPS operations.

Yes, yes, yes, yes. Well, let me tell you that we believe that in Q1, we're going to stop losing money with the UPS truckload business that we've acquired. I mean, we still have two major accounts there that are not doing a good job for us. We're losing money on two major accounts. I know that Greg and his team are working hard to fix this issue. I mean, we've been working at it for eight months. You know, this was a business that we got that was terrible, really, really bad, because we had commitments with customers, and we didn't have the trucks, we didn't have the power, so we had to go with third party, and we lost a fortune doing that. Now, in terms of our approach to the market is that, guys, I mean, let's fix race, and that's what we've been doing since day one. So we've lost five or six million dollars in In Q2, we lost $4 to $5 million in Q3, and then we lost about $2.5 million in Q4, and we anticipate that we won't lose any in Q1 of 2022. It doesn't make any sense, okay, to keep hauling freight and lose money in this kind of environment. It's so stupid. But we have to go through that. But at the same time, also, What we did, Ravi, is we moved the over-the-road from our TA operation to CFI. So now TA is also just a dedicated truckload guy. And, you know, we were also disappointed. When we did that, we found out, okay, and, you know, when you do two or three times, you know, you're a dedicated, you're over-the-road, you're intermodal, you do this, you do that, and you got all kinds of allocations. Sometimes you don't see the global picture. of dedicated at TA. Now that we pulled the over the road, we see that we have issues with us all there as well with some customers that don't cover the cost and we don't make any money. So dedicated, okay, right now is our biggest problem, okay, that we have to fix within our USTA. But now our guys were so focused trying to fix that, that even our over the road, okay, we lost a little bit of focus on market environment, right? So if I compare with my peers, even on over the road, my average revenue per mile is way lower than theirs. So this is now after looking at what happened in Q4 with the results of my peers. Now, you know, our teams are saying, oh, here we have another issue that we have to fix with our customer. Because if we run on average, let's see, I don't know, $2.20 a mile and our peers are running at $2.60 or $2.80 a mile. I mean, we are not at market rate. So that's also part of our program early in 22 to fix. So as an example, talking with Greg, as of the month of January, over the road, okay, we got about $9 million more on a yearly basis from existing customers. Okay, so Greg, that's fine. Okay, but we need more than that, right? So this is why we're doing the same thing in February, adjusting rates to the market with our customers.

Conor, thanks for the call, Alain.

Pleasure.

Your next question comes from Conor Gupta with Scotiabank. Scotiabank Capital, please go ahead.

Thanks, operator. Good morning, Alain. How are you?

Good morning. I'm good. How about you?

Pretty good, Alain. Thank you so much for the time. So I want to kind of focus on the package inquiry business as well. I think the 75% OR or 25% operating margin It's probably your best ever, if not maybe closest to the best ever you have seen in that segment. I'm just kind of wondering what kind of drove that performance. Was it more of a pricing story in Q4 or was it more of a cost improvement story? And then what do you think about sustainability in that?

Yeah. So, Karnak, what we did, okay, this was Brian's plan, okay, the summer of 21, is that we're not going to go through the same story again. in 21 peak as in 20 peak, right? So we got rid of, and this is why our year over year revenue is a little bit lower. Why? Because we got rid of e-commerce freight that we made very low margin on it, right? So that was the plan. And I said, Brian, I think it's a great plan. And this is why we're showing a 24% OE in that division, okay? And if you compare that with last year, Okay, we're up about $6 million, $7 million versus last year. So fine. Now, the new plan for 2022, when we're talking to Jimmy and Bob over there, I said, guys, okay, now we are very strong. We don't have freight that doesn't fit in that network. So let's start growing again. Because if you look at the last four or five quarters, you know, we used to grow 15% to 20%. Really, if you look at Q3 and Q4 of 21, we slowed that down a bit, okay, to consolidate our base, to add more trucks, to add more drivers, okay, to beef up our terminal network. So we are opening a new terminal in Winnipeg, as an example, okay, during Q2 of 22. And so some kind of, you know, wait a little bit. And now we're focused on growing again in our PNC. To answer your question, it's a combination. Mostly it's getting rid of freight that did not fit, okay, with low margin that we got stuck in 20, okay, at peak. And now our base is really, really solid, and we're going to start growing again there.

Makes sense. And then if I can follow up, perhaps, you know, lots going on. these days with respect to vaccine mandates. And I'm sure there's no resolution as of now officially. And then, you know, there's some protests going on in Canada as well for that matter. I'm just kind of curious as to your kind of high-level thoughts on what do you think, you know, what's your kind of driver pool like these days? Are you all vaccinated there and you have kind of, you know, good enough number of drivers that you need for the business? Or are you seeing any kind of issues around vaccine mandates as well at TFI? Yeah.

No, vaccination at TFI is not an issue at all. I mean, on the Canadian side, most of our drivers are vaccinated. You know, so crossing the border into the U.S. has never been an issue. We anticipated that. So we work with our people to, you know, to have them, okay, convinced that vaccination, you know, you're free. You do whatever you want. Okay, we get that. But, guys, I mean, to cross the border, we know that at one point it's going to be an issue if you're not vaccinated. So we have a few people, a few drivers that, you know, still say no. Well, what we do with them is we just keep them in Canada so they don't cross the border anymore. But I would say, guys, that the way I look at January, I think January is going to be the best January ever for the company. You know, I mean, the guys are doing a fantastic job. And for sure, there's some small carriers maybe in Canada that are having issues, but TFI, not an issue at all. You know, our biggest issue for us really in January is sick people in the U.S. with COVID. That has been the big thing for us. You know, a T-force rate, a lot of people got sick, you know, in January in the U.S. because of this new variant there. So that was a little bit of an issue. It creates an issue with servicing customers and all that. But that being said, vaccination, not a problem at all.

Thank you so much and good luck for the rest of the year.

Thank you.

Your next question comes from Jordan Alliger with Goldman Sachs. Please go ahead.

Yeah, hi. Morning. Just a quick follow-up on the package in Currie. You mentioned growth again. So I assume – are you referring to – you have some tough comps ahead still on shipments and pricing, but do you expect both those categories to see growth again as we move through 2022, maybe as we move later in the year?

Yeah. Well, absolutely, Jordan. I mean, what we're saying is that we took a step back in a sense, okay, with Q3 and Q4, and there's a growth, okay, in 2021. So – What we're saying is that now we're set up in 22 to really turn the screw of growing organically again, right? Now, if you look at bottom line, you know, at 24% in Q4, you know, this is unbelievable. This is highly remarkable. Can we stick to 25 and grow organically, OE? You know, the guys are working hard on that. But don't forget, we have competition from Puro. We have competition from the U.S. guys like UPS and FedEx. And those guys are not running a 20-point bottom line operation, right? So we may have to sacrifice a little bit the OEs as a percentage, okay, to grow like a 5% to 10%. You know, that's what we'll see. Let's have a look at Q1 and then the rest of the year. But let me tell you that when I look at the numbers that we see so far, I mean, so far so good. Even with everything that's been going on in January with the storm, with the weather, with the Omicron and all that, we feel really good.

Can you just give a quick update on what you're seeing on the logistics segment? I guess most curious about the same-day parcel delivery aspect. Thanks.

Same day, we're doing really well. I mean, the only, you know, rock in our shoe is that our Canadian operation lost all of their volume with the largest e-tailer, right? So those guys, you know, we were dealing with them in the U.S. They walked away from us in the U.S. because, you know, we're all about making money, us. And then slowly, they walked away from us in Canada. So that is a little bit of a step back, but we're replacing that as we speak. On the U.S. side, I mean, we feel really, really good about what's going on. The issues we have right now has been, like I said, weather and this Omicron thing there created a little bit of an issue in January. But, you know, long-term, okay, you'll see us doing really, really well. And don't forget, we run these operations with double-digit EBIT. I mean, we don't run these guys at 2% bottom line. I mean, nothing at TFI. is single-digit OE except, okay, our TFWW, which we bought from Donnelly. And at the time, those guys were 2% to 3% bottom line. So WW is still not a double-digit EBIT guy. Okay, but slowly, you know, we're getting, you know, closer to a 5, 5.5. But the rest of our business is all double-digit OE.

Great. Thanks so much.

Your next question comes from Jack Atkins with Stevens. Please go ahead.

Okay, great. Good morning. Thank you for taking my questions. So, Elaine, I would love to get an update on your ground at freight pricing business that you acquired from UPS. How has that been trending over the course of the last couple of quarters, and what are your expectations for that in 2022?

Well, if you look, Jack, you'll see in our MD&A that the average revenue ex-fuel per shipment is up big time. So we've been correcting, adjusting rates with our customer. But like I said earlier, we're not done. We're not completed with that. I mean, it's an ongoing process, and it will last at least another year because we've got a lot of small shipments still in our network that has to go away, but we can't kick them out. Because we need to replace those small shipments with better shipments. And this is the focus of our sales team. Okay, guys, wake up and smell the coffee. We have to replace those shipments by better shipments, right? It's the same story as if you think back when we bought the CFI, okay, in 2016-17. It took us a year, okay, in our truckload division to clean, you know, the freight that did not fit. In an LTL environment, it takes way more than a year. It takes probably more like two to three years to really clean up and get rid of all the shippers or the shipment that don't fit. So we're not there yet at all. So our sales team is highly focused on improving the number of shipments that we get from customers, as an example. So let's say this shipper gives us two shipments a day. Well, try to get three from this guy. Try to get four from this guy because we're already there, right, to do the first pickup, right? So it's a little bit of change, okay? So we're working on the mix, but also we're working on the productivity and the efficiency and the operation. So this is why during the course of 22, what we believe is that slowly we'll get closer to an 85, 86 by year end, okay? And then into 23, we'll keep on improving those processes to get us closer to maybe in 23, like an 83 or an 84, down to the target that we have of being at least an 80 or a carrier in the U.S. LTL market.

Okay, got it, got it. No, that helps. Thank you. And then I guess kind of thinking about the structural changes that you're trying to implement within your U.S. LTL business, You know, are you contemplating maybe any incentive changes for your sales force or your operations team? We've seen that with some other LTLs in the U.S. in the past, and it's had significant, you know, positive impact.

Yes, absolutely. You're absolutely right, Jack. I mean, we're having a meeting with Paul and his team, I think, next week or the week after next. And for sure, we're talking about that. Absolutely. I mean, we have to change things. okay, the way our salespeople are, you know, their salary and their commission and all that. So I know that Paul is coming up with a proposal on that. You know, it's, you know, the sales team that we have today, the sales leadership, you know, everything has to be questioned about, you know, what we want is the way we judge a sales team is not by the effort, it's by the results, right? So I don't know if you understand what I'm saying, Jack, but me, I don't look at – the guy tells me he works 40 hours a day and he gets no freight. Well, that's not good for me, right? So maybe work less but get more.

Yep. No, totally. It's all about the bottom line. Thanks so much, Elaine. Thank you. It's all about the bottom line. Absolutely.

Your next question comes from Ken Oxford with Bank of America. Please go ahead.

Hey, good morning, Elaine. You mentioned you were very confident but yet very conservative within the model. So maybe just taking a look at that, where do you see the most upside? Is it the LTL margin you talked about? Is it truckload fixing, the pricing in this best-ever truckload market? Maybe talk about where the potential is.

Yeah, well, you're absolutely right, Ken. I mean, in the plan that we have for our USTL guys, I think that we will do better than that. I think that our guys – You know, if you don't see that you have a problem, you can't fix it, right? So now I think that our USTL team, when they look at our P's results for Q4, that were fantastic. And our result, I wouldn't say that they're fantastic, right? So we know what to do. And it's not about costs, okay? The big issues we have is more like our costs are in line, okay? The problem we have is getting the right market rate for the service we provide to the customer. So our team was... You know, completely focus on dedicated, fixing dedicated, which was a disaster that we got from, you know, the acquisition of UPS Freight. Okay, fine. But we also overlooked what was going on, the over-the-road thing. So now we know, okay, when we look at our peers, the average revenue per mile, we know that we're too far from where these guys are. So that's one. Number two is, like you said, T-Force Freight. We know. We know what to do. It's just execution time. could be slow, you know, or fast, or between slow and fast, right? So right now, we don't know what's the speed of these operational changes. Are we going to be slow? Are we going to be fast? You know, what we've done so far with the lowing in fruit, I would say that we went really fast on that. Now, on the operation, this affects way more people. You know, it affects terminals. It affects the terminal managers. It affects the you know, everything that we do every day. So this is why I'm not sure. So this is why we're going conservative with T-force freight. Pace of change.

Yeah. So, Lynn, for my follow-up, let's just dig into that for the service centers and the growth, right? You always talk about density. You talked about there were some opportunities where you could blend some of your operations in terms of better utilizing the service centers. Where are you in that process? How many service centers do you have now and And what are you thinking of that process going forward?

We're just starting, Ken. We're just starting. I mean, as an example, we have shut down one terminal in Chicago, and we're going to be subleasing that terminal to another carrier. We shut down two small terminals in West Virginia. Those two small terminals will be sold to another carrier. We just closed a small center in Kensal, Salina. We had 40 shipments a day there. It doesn't make any sense to run an operation of 30-some thousand bills for a small operating terminal of 40 shipments a day. So we're just starting. I'll give you another example. We have a terminal in Rialto in California, a fantastic terminal, a diamond terminal. I don't know how many doors. I don't remember how many doors, but it's probably like 80 to 100 doors. I've got 60 shipments a day. Think about that, 60 shipments a day in a huge terminal. So we're just signing a deal with another carrier that's going to take over about 40 spots for parking equipment, and these guys will also take another carrier will take about 40 doors in the terminal. So that's going to bring about $2 to $2.5 million to the bottom line of the company because right now this site is like empty, right? So we're just starting. In Sacramento, as an example, I got three sites. It doesn't make any sense. Right. So we're working on Sacramento. So our team, we're really focusing on the West Coast right now. So but it will take time. OK, but we're just we're just scratching the surface. I mean, I said it many times. We got twelve thousand doors over there. We don't need twelve. We need maybe, I don't know, six, seven or eight thousand. OK, we have way too many doors. So that that is an opportunity for us for growth. either organically or through M&A, yes. But in the meantime, everything that doesn't make any sense, we're fixing it. Okay, so Rialto, we want to keep the terminal, but we don't want to keep it empty. So, okay, so you find another tenant for now, and then we'll see if we need that terminal five years down the road for our own need. But in the meantime, let's get the $2.5 million a year to help us cover the carrying costs and eliminate the loss that we have on that thermal right now.

Great. Thanks, Mike. Appreciate the answer. It's okay, Dan.

Your next question comes from Walter Sparkling with RBC Capital Market. Please go ahead.

Thanks very much. Good morning, Alec. Good morning, Walter. So you're going to have a pretty good year in terms of free cash flow, your leverage is low, and not likely, if I hear you correctly, going to be looking at acquisitions until perhaps later in the year or early into next year. So does that mean you now deploy that cash into buyback, or is this something you want to kind of raise cash to keep on hand for something perhaps a little little larger, so you can do a larger deal in the fourth quarter or early 23. Just curious where your head is at in terms of buyback versus retaining cash for acquisitions.

Well, buyback is, well, there's always an opportunity. So if you look at what we've done in Q4, we bought back a million shares, right? And the price that TFI stock trades today, okay, well, today, I can't talk about today, but let's say over the last few weeks, for sure we're going to be buying back at least a million shares, okay? If we are traded right now in sub-100 U.S., I mean, for sure we're going to be buying at least a million shares. Now, going to your point, okay, we also feel that our guidance is conservative. So, you know, based on what we've seen so far, I think that we'll probably do a little bit better than the guidance, but we're conservative, right? But if we look at the opportunity for us to do a deal of size, okay, let's say late 22 or into 23, the fact that we do some small M&A, so we'll do probably like $150 to $300 million of Canadian dollars of small M&A, okay, buying back, let's say, $100 million U.S. of stock or maybe a little bit more. It does not preclude us for doing something of size late in 2022.

Okay, that's perfect. And I appreciate the buying back stock when your stock's at a certain level as opposed to when times are good. Moving on to constraints, I mean, driver shortage is still an issue, supply chain shortage. It's still an issue. And we heard a lot in other companies saying that demand was above their volume, right, because you just couldn't get the volume. So how much of that was a factor in the fourth quarter, and how much are you assuming supply chain and driver shortage will be a continued constraint when you put out your guidance for next year or for this year?

Yeah. Well, you see, Walter, the fact that we are already overbooked every day, it's true in the U.S., Okay, it's true in the U.S. It was not true in Canada until I would say mid-November. This is because, you know, I was talking to my Canadian guy. I said, how come this is not in Canada? And it was not in Canada. But I could tell you that what we're seeing in the U.S. for I would say at least the last six months, we're seeing now the same story in Canada since probably early November. So for sure the demand is more than the supply. And that's why I'm saying that probably TFI will have its best every month of January because of that. See, our Canadian team is taking advantage of market condition. And our U.S. team, like I said earlier on the truckload side, we missed a little bit of an opportunity in, let's say, Q3 and Q4. But now we smell the coffee and we're going to take advantage of the market condition. in 22, okay? The supply chain, I don't think it's going to be fixed within the next six months to 12 months. I mean, it's a lot of politics in there. There's lots of changes around the world. So it's going to be a very, very tight market from what we could see in 22 and probably into 23. So let's see what happens. Our guidance is conservative like always, right? So our team is really focusing on doing better than that. But so far, what we could see is that 2022 will be a great year for TMI.

Okay, I appreciate the time as always, and congrats on a good quarter.

Thank you, Walter.

Your next question comes from Kevin Chang from CIBC. Please go ahead.

Hi, Elaine. Sorry, just taking myself off mute here. Actually, I just have one question. If I could just follow up on the P&C margins, 24.5% for Q4. You know, when I look back historically, typically your Q4 margin is a good benchmark to what the following year looks like. You usually lose about 100 basis points as you kind of work through seasonality. So if I kind of just use that rule of thumb, it seems like maybe a low 20s. Margin seems like maybe the baseline you're starting with, and then you kind of talked about maybe growing the absolute earnings and willing to sacrifice a little bit of margin. Just wondering, is that the right way to think about it, that maybe on a full-year basis, PNC is a low 20s margin, and then you'll kind of flex that potentially lower? And if there's a level that we can think of in terms of how low that could go, that would be appreciated.

Yeah. You see, Kevin, there's two things that will affect us, okay, in 2022. B2B. So we're still not back to where we were. So B2B for us is even more profitable than B2C, right? Because the coincidence of delivery versus pickup is better on B2B than B2C. So that's why we're saying in 22, if B2B comes back, because don't forget, we still have lockdowns in Ontario, same thing in Quebec. So we're still not out of the wood B2B versus where we used to be pre-COVID. So that could help us a little bit in 2022. The other thing also in 2022 is that we're going to be focused on highly profitable growth. The potential is there. And we made these investments in drivers and in trucks. If you look at our truck fleet in our PNC, I think that we added about 100 trucks year over year. So now we're in a position to to really take advantage of the potential of this market e-commerce B2C growth, but it's got to be at a profitable rate. So going back to your forecast is that, yeah, we should think that TFI's P&C is going to run about the 20, but that, based on B2B versus B2C, it's still difficult to predict that. So let's wait and see what Q1 is going to come about. What I could tell you so far when I look at our month of January is the guys are really doing a fantastic job.

That's helpful. If I could just ask one clarification question. Just in your guidance, does that assume, your EPS guidance that is, does that assume the million share buyback you mentioned in Walter's question? Or is there any buyback in there at all?

No, no, no, no. There's no buyback in there. There's no M&A. There's no buyback. It's just that, you know, everything stays the same. But don't forget, everything stays the same, okay? You know, our leverage in the guidance, we're saying it's going to stay around 1.5. But if we don't do any buyback, if we don't do any M&A, my leverage is going down around 1.

That makes sense.

Right?

That makes a ton of sense, Alain. Thank you very much. Congrats on your quarter there.

Okay. Thank you, Kevin.

Your next question comes from Brian Osenbeck from JP Morgan. Please go ahead.

Hey, good morning, Elaine. Thanks for taking the question. I wanted to come back to the U.S. LTL. You talked about density and going back for more shipments, but specifically on the operation, lowering the operating costs for LTL. Is it primarily through the top line and through density? You talked about not getting the trucks on time, which sounds like it's a pretty decent-sized headwind. So maybe you can just elaborate on what are the main drivers of lowering that operating cost? Is it something specific? With those terminals, you're pairing off, or is it driven through density or maybe a combination of both?

Yeah, right. It's really a combination. And what I'm saying to those guys is that, guys, drivers, they like to drive. And, you know, why are they drivers is because they like to drive. Me, I like to pick up freight, right? So we have a disconnect in terms of, so what we want to do is have our P&D guys drive less miles and pick up more freight. So how do you do that, right? So first of all, first step is every stop that you have, okay, with your drivers, you try to pick up more freight per stop, right? So it's something that's never been really monitored at UPS rate. So get more out of every stop. That's number one. Number two is we have guys driving 150 miles. That doesn't make any sense. Because if this guy drives at 40 miles an hour, that means that he's driving about three to four hours a day. So when he's driving, he's not picking up freight. And when he's driving, he's spending money. He's burning fuel. He's burning tires. And as I said earlier, my old trucks cost me 45 cents a mile in maintenance. So our intention, Brian, is to improve the efficiency of our network by picking up more freight and driving less miles. And this is what we do in Canada, right? Our LTL, why are we so efficient? It's just because of that, not because we're a bunch of magicians. No. No. I mean, we do more with less. So the intention is to drive less miles and pick up more freight. That takes time, though, Brian. I mean, you don't do that within a month in a huge network like, you know, the T-Force freight network. So it's going to be a combination of that. And for sure, if you're running an old truck at 45 cents a mile maintenance and five miles or four and a half miles MPG versus the newer truck, which costs you five cents, and have an MPG of 8, I mean, that also is detrimental to your profitability. So, yes, we had some headwinds to that. We were supposed to get 1,000 trucks in 21. You know, we got 300. By the end of 21, we got only 300. We will get 500, probably, new trucks by the end of Q1, 22. But we also have another 1,000 trucks coming for 22, and it seems like the truck manufacturers... are in a better position to complete the order because we went with four different suppliers. Well, three major ones and a smaller one, right? So new equipment is going to help us reduce the operating costs of the equipment. But more importantly, Brian, our focus is do more with less. Travel less miles and pick up more freight. So get more shipments out of the existing customer base. Don't drive 150 miles to service a shipment. And this is a change, right? This is a change. So it fits with our approach of freight that fits. Why would you travel for two shipments 150 miles? No. So reduce the zip code. Use a little bit more agent where it makes sense. It's what we do all the time in Canada.

Okay, great. That's really helpful. Just one quick follow-up. You mentioned synergies a few times with T-Force Freight. Is that a reference to starting to change some of the footprint you mentioned earlier with leasing out some of these facilities? Can you start to run maybe more final mile from these now that you've got a better handle on the real estate portfolio?

Yes, yes, absolutely. I'll give you an example. In California, for instance, our T-Force Freight team there used to, you know, use third party. And now they're using our T-Force logistics division at about 65% of the cost that they used to pay, okay? So there are some synergies, okay, slowly between the family, right? But real estate is a big opportunity for us. It's an opportunity for growth, okay? It's an opportunity for M&A down the road. But it's also an opportunity for, to get rid of the real estate that does not fit, like those two small terminals I was talking about in West Virginia, or the small terminals that we were renting in Salina, Kansas. That doesn't fit. There's no future there. So we're trying to make a deal with a carrier there that's got a larger footprint than us for those 40 shipments, okay, that was part of the Salina. So it's a global... change in what we do. And the chance we have, Brian, is that the team there at T-Force Freight, they're really drinking the Kool-Aid. They're part of the solution. We don't have these kinds of pushback that sometimes you may have with an acquisition. So those guys are part of the solution. The team there, they're part of the solution. So this is why it makes it much more easier for us to work with them and apply our I would say like the TFI Canadian LTL recipe for success.

Okay, great. Thanks for all that, Elaine. Appreciate it.

Pleasure, Brian.

Your next question comes from Cameron Darkson with National Bank. Please go ahead.

Thanks very much. Good morning.

Morning, Cameron. Good morning.

So just one question from me. I guess my view is probably this is a non-issue, but in your press release, you do have, I guess, a disclaimer in there around the internal controls and possible deficiencies as it relates to, I guess, becoming a U.S. reporter. So can you just maybe go over what all of that is about? And like I said, I think it's probably a non-issue, but just maybe a bit of explanation would be good.

Yeah, so Cameron, I'm not a SOX specialist, okay, but what I could say is this, is that the work is not done, the work is not complete, but what we see so far, okay, based on, because we've hired Pricewaterhouse to help us on that, we've hired also another firm, MNP, to help us on that, to do the testing and test all these controls and all that, and also under the supervision of KPMG and our internal audit department, is that because TFI is so decentralized, I mean, what the guys are telling me is that they have to test about, I would say, like around 900 different controls, which is huge. So this is why we're still in the testing and remediation phases right now. So this is why we said, let's be transparent. So let's put a note in there, a paragraph that says, We don't know. I mean, we'll know, okay, when we come out with our annual filing, okay, if we have an issue or not. But one thing I could tell you, though, Cameron, is if there's a small issue, okay, we'll fix it. I mean, we spend a lot of time and energy, okay, to solve this SOX compliance thing there. And a lot has to do with documentation, which is different than what we used to do at TFI, right? So... It's an education. It's making sure that everything is what it should be for SOX compliance. But we said, guys, because we're not filing our MD&A now, we're not filing our annual stuff now, so let's put this paragraph in there just in case. And then if it's an issue when we file, then we'll just say, hey, guys, we're committed. We're going to work on that. We know, and if you maybe talk to David, which he's way more aware than me on that, we know that initial, okay, IPO filers in the U.S., about U.S. base, a new IPO, there's about 50% of them that have some weaknesses, okay, the first year. We also know that foreign filers, okay, on average, okay, have 75% of them have weaknesses the first year. So it's no big deal because TFI's team, okay, is committed to fixing everything that needs to be fixed or not, and it's our first year, right?

Okay, no, that's a great explanation. And just, you know, as far as SOX compliance costs, I mean, obviously you've probably incurred costs throughout 2021. Is this anything material going forward, the additional G&A costs that you're going to need to spend to be compliant?

You know, well, you know, in our cost of 21, you've got a few things that are exceptional for sure. And this would probably amount with, you know, all the legal and advisor and all that for a 21. You could say there's probably between 10 and 15 million that will not re-happen in 22. In 22, this SOX thing there will probably cost us a few million dollars, Cameron, to get compliance. or to do whatever testing needs to be done and change whatever needs to be changed. I mean, the guys are working. It's really taken very seriously by our team.

Okay. No, that's great, Keller. I appreciate it. Thanks very much.

It's a pleasure, Cameron.

Your next question comes from Pascal Majors from Shishkuna. Please go ahead.

Yeah, thanks for taking my questions. Looking at the T-Force freight deal, it's a large deal, it's a complex deal, and call it nine, ten months in, it certainly looks like it's a very successful deal. As you go forward and think about doing bigger deals on a larger base, how do you keep the quality of those acquisitions as good as they have been historically for your company, especially as they need to get bigger to move the needle? Thank you.

Thanks. It's a very good question. And, you know, the proof is in the pudding at TFI. So if you go back 20-some years ago, most of our deals were small. And every two to three years, we made a significant bigger deal. And we've built a culture at TFI of doing that, right? So it's not something new for us. What's new to us, like you just said, is that this deal is really huge. Okay, we've never done a deal of this size. And for sure, it takes a lot of our energy to work with the local team. Now, this is why I've also said that, you know, before we do anything of size, we need to be sure that, you know, we are 100% under control, okay, with our T-force rate. And this is why we don't see anything of size probably before the end of 22 and into 23 because we're – You know, some of the guys I remember about 15 years ago, they said, well, Alain, he's like a deal junkie. No, we're not a bunch of deal junkies. I mean, we do deals where it makes sense for our shoulders, where we can create value, okay, for our shoulders long-term. So I understand your point. You know, the next one is going to have to have size as well, you know, to move the needle. And it's all part of our plan. We already have some targets here. that we're working on to make it happen when the time is right. So time could be right at the end of 2022, or maybe if we're not convinced, we'll wait until 2023.

Thank you for that, Elaine. And if I could just squeeze one kind of housekeeping one in there. I know you don't guide quarterly, but you've made some comments on one hand, The T-Force Freight business having a really difficult 1Q seasonally, a story came working to improve on that. On the other hand, you've talked about having the best January ever for the business. You've certainly come off a great forequarter for the company. Can you just help us directionally about what 1Q might look like so there aren't any surprises when you report in April?

Well, we like surprises. They're good surprises, though, right? So, I mean, you have to understand that TFI's approach has always been, you know, under-promise and over-deliver. I mean, that's the story of 20-some years of success at TFI. So what we're seeing so far, okay, when I talk about our month of January is that it's going to be a spectacular January for us, yes. But we're also very conservative. So I think last year we did about 79 cents EPS in Q1. So for sure, we're going to be above $1. Are we going to be $1.25? You know, it's still too early to say. But T-force rate is a big part of our success, right? So they've never made money in January, those guys. They never made money in December. Well, this year, you know, they made a little bit of money in December. Okay, so fantastic. Great. So it's still too early. That's why we're cautious about our guidance. We're conservative because we still have not gone through a Q1 with T-force rate. We know that April normally is a great month for those guys. March should be good. But January is a big issue. And don't forget, like I said earlier, we had a lot of sick people in the U.S. with COVID, right? A lot of sick people. January was bad for that. January was also bad with the weather, right? So, I mean... We have to be conservative.

Thank you. You're welcome.

Your next question comes from Benoit Poirier with Desjardins. Please go ahead.

Good morning, Alain. Good morning, Benoit. Yeah. Based on our discussion with investors, Alain, a lot of people, as you know, are worried about the potential trucking cycle rollover. And I'm sure you're airing the same concern. What are you answering to these concerns and any signs of slowdown on the horizon? And how is the dynamic different from the past cycles in your view, Alex?

I think this is a perception and it's a mistake. It's a huge mistake. And I understand that you could think about that because the guys are doing so well that you could say, well, You know, that's probably the peak, and from there, it's going to start going down. Well, there's a huge change. Well, first of all, the supply chain is a big problem, as we all know. The fact that it's hard for you to add truckers. I mean, everybody knows that, you know, in the U.S., and even in Canada to a certain degree, you cannot add drivers. It's a fight. It's a big fight. So, you know, when... If you look back at all these cycles over the last 30 years, we shot ourselves in the foot because the customer was busy, so we were adding capacity, and then there's a slowdown, and there's too much capacity, and then the rate just went to the shit. That issue right now, it's difficult. I mean, so it's difficult for a trucker to add capacity. He can't find the drivers, and he can't find the truck. So it's a huge change in these stupid cycles, okay, that we've seen. If you look at the LTL market, both in Canada and the U.S., if you look at the PNC market, both in U.S. and in Canada, I mean, you've got disciplined players in there, you know? U.S. LTL, you've got disciplined players. You know, the stupid LTL guys... They're less and less. The Canadian LTL market is still not there yet, but it's getting better. It's just that the logistics, the last mile, it's the same story. It's hard to find people. So to me, I think it's a big mistake to think that, oh, they're at peak and the only way these guys are going to go is down over the next, I don't know, maybe a year or two. But Also, Benoit, it creates opportunity for us. Like I said earlier on the call, I mean, our stock, the price that it was yesterday or a week before, it creates also an opportunity for us to buy back, right?

Yeah, no, that's great call there, Alain. And just looking at your CapEx, you've been guiding for $325, $350. I would be curious, where are you going to be at the end of 2022, Alain? in terms of fleet replenishment and what could be spent in 2023 and beyond what could be the sustainable level longer term. It seems that there's some money that is put toward replenishing USDL, but down the road, I would expect, given your asset-light model, there's an opportunity to reduce the capex beyond 2023. So if you could try to give some color, that would be awesome.

Yeah, you see, the big capex, the big abnormal capex that we're doing is for our US LTL operation. So normally in the US LTL, we should be buying, let's say, between 600 and 650 trucks a year, normally. Right now, we're trying to buy 1,000. Okay, why? Is even with our plan, if we get the 500 that we were supposed to get in 21, and we get the 1,000 that we're hopefully going to get in 22, and this is in our plan, okay, at T-Force rate, LTL, at the end of the year, we're going to still be driving 2012, 2013 trucks. So that tells you that the same effort that we're doing in 22, we'll have to do the same thing in 23, To bring the average age of this division to normality, it will take us 22 and 23. After that 23, okay, there may be some small reduction. But to your model, I think that you should work with, right now for 22 and 23, the same number.

Okay. That's a very good caller. Thank you very much, Alain. Congrats again. Thank you, Benoit.

Your next question comes from Bruce Chen from Stiefel. Please go ahead.

Yes, thanks, guys. This is Casey Deacon for Bruce this morning. I just wanted to just quickly, you know, thank you for all the guidance on the numbers and the cost drivers, but can you talk a little bit, Elaine, about what you think on tonnage for the LTL operations, especially in the U.S.? ? what you think cadence there looks like. And I know it's back and forth a bit on getting rid of the bad freight and trying to find better freight. Right.

Yeah. Yeah. Well, what we've seen so far is the fact that for sure, if you look at our bill count, we're down a bit. If you look at our tonnage, okay, we're also down a bit, okay, year over year. So, you know, once we get through Q1, I think that also with our approach with our sales team, our sales leadership of not looking at just what the effort, but the results, I think that we're going to start growing because our peers are all growing. I mean, good peers, you know, the market, the demand is there. But then us, our problem is we got so much cleanup to do in terms of, you know, getting rid of that shipment, getting rid of that customer. getting rid of that lane, okay, that, you know, at the same time, okay, you don't see really the results of our sales team because we have to replenish, okay, the 30-some thousand bills a day that we do, right? And I think that all during 22, the cleanup of all that will continue. So you won't see us growing organically big time in 22 in terms of volume and You'll see us improving the quality of the revenue. You'll see us improving, okay, with the cost base. But in terms of growing organically as our peers are doing, not sure about that in 22. In 23, it's got to be a must. But in 22, the first six to nine months, I think it's still, you know, replace this and look at that and this doesn't make any sense and get more of this guy. And it's going to be more of a kind of, churn still okay and at the same time though we're focusing on you know making sure that we deliver only something that fits our network okay and and something that fits us in terms of weight so as an example our average weight per shipment is still way too low compared to our peers so our sales team understands that now so they are focused on you know getting the heavier shipment that makes sense and you know and getting or reducing the number of low-weight shipments that we're getting. And we have a solution because we have GFP, us, okay, the partnership we have with UPS. So if it doesn't fit us, our LTL, maybe it fits our friends at the UPS package. And that GFP, we're growing that, okay, with our partner UPS. Makes sense for them, makes sense for us.

Sure. No, that's helpful. Thank you. And then the last thing I have for you guys is kind of on the maintenance. Are you seeing anything like your customers when you're looking at picking up a good freight or picking up a good customer contract? Is there pushback on the equipment? Are there breakdowns on that old equipment that's kind of hampering your ability to win?

For sure. You know, the fact that we run an old fleet is not helping us. It's not helping us with our drivers. It's not helping us with our customers. This is why day one, when we go in there, we say we have to improve that ASAP. Now, because of this supply chain mess and it's tough to get the trucks in, okay, but you're right. I mean, it's not easy, okay, because it affects the service, right? So you've got an old 2008 truck and it breaks down, well, the service is going to suffer, right? So this is why good carriers and our peers, they don't run old trucks like we do, us, today, right? Because when the truck breaks down, the service breaks down as well. And also the driver is mad. It's normal. So we're addressing that as we are replenishing our Okay, our truck fleet with newer trucks, right? So by the end of 22, we're still driving 2012, 2013. Think about that. We're in 2022. So we're still driving 10-year-old trucks. But today we drive 2006, 2007. Think about that. I mean, we're in 2022. So we are improving. Okay, but 22 is not going to be enough. So we have to keep improving in 23. so that we don't have service issue because the truck is, you know, a problem.

All right. Well, thank you. Thanks for all the clarity.

Pleasure.

And your last question for today comes from Tim James with TD Securities. Please go ahead.

Thank you. Good morning, Alain. Congratulations on a great quarter. Just going back to a question recently, you were commenting on some of your peers being in a position of growth while TFI is doing some cleanup. Now, would you agree that this has and really is a great time, in fact, to be doing that cleanup as opposed to trying to push growth? I would think it's actually very opportune to be in that position.

Yes, it is. It is because we're lucky in a sense that the market conditions are great, okay, that our peers are busy growing their business, whereas us, we're doing the cleanup. It would be nicer if we would be in a position to grow organically as we speak. But if you have to be in a cleanup position, I agree with you. This is the best timing to be in a position of having to do some cleanup, right, because some customers – deals don't make any sense. So, yes, for sure, we've got guys that just walked away. But where are they going to go? Well, there's always, you know, maybe a solution. Fine. Some of them cannot find a solution. So, you know, I agree with you. It's the best timing. It's just sad that us, because we're stuck in doing all this cleanup, okay, well, we can't grow organically too much because, you know, if we add 1,000 sheep,

I apologize. Alain Bédard's line was disconnected. Just one moment, please. This is the operator. We'll just take a moment. Please stand by. Thank you. Ladies and gentlemen, you can continue to hold if you'd like in case Mr. Bedard returned the call. Thank you.

What did you say, Caroline?

Mr. Bédard, I believe you're back online. They're going to connect you. Okay. You're now back online, Mr. Bédard.

Sorry about that. I don't know what happened here.

So where did I get off? Hello?

Tim James here. Can you hear me?

Yes, yes, yes. I hear you now.

Okay. No, thank you. Yeah, no, you covered off my question just regarding the kind of timing and the industry backdrop and that it's actually not a bad time to be in this cleanup mode. No, not at all. Maybe I'll move on to my follow-up question if I could. And I just want to return to the idea around potential businesses or when you consider divesting certain operations. And you indicated that when you feel you can't grow a business, then it would be considered for sale. When you say grow, do you mean in terms of revenue or earnings? I mean, could a low or declining revenue business but that has improving efficiencies and opportunities for margin expansion and therefore in turn earnings growth, could that still be a fit for TFI?

Yeah. So, so on that, yeah. When I say when we can't grow is let's say we cannot do M&A. Okay. So given you are a waste division that we sold five, six years ago is I was unable to grow it. Okay. Organically, yes, to a certain degree. But really, through M&A, it was impossible. And we were just sitting on a fence in terms of size. So, I mean, it's always a global look that we take. So, some of the investors are asking about our USTL. For sure, we could grow that. For sure, we could do some M&A. But right now, the problem we have is that our return on investment capital is below our cost of capital. So... The story when we talk to our USTL guys is that, guys, we have to move that up. And we have the opportunity right now because the market for USTL, when we look at our peers, is just on fire. And us, I mean, we now understand the opportunity for us to improve those results, and then we'll be in a much better position, okay, down the road. For sure, there's always can we grow it organically or can we grow it through M&A? If you look at TFI's history of growth, it's always been done mostly through M&A because it's way faster and we have the talent to do it. I mean, it's not all companies that could grow through M&A successfully, right?

Okay, that's great. Thank you very much, Ellen. Pleasure.

And there are no further questions at this time.

All right, so thank you very much, operator, and my thanks to everyone for listening in this morning. As always, we appreciate your interest in TFI International and look forward to keeping you posted on our progress throughout the year. Please feel free to reach out with any remaining questions. Stay safe and have a terrific day. Thank you again. Bye.